Grossman LLP | Decision In Dali Forgery Case Favorable For Art Buyers
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  • Decision In Dali Forgery Case Favorable For Art Buyers
    A recent unpublished opinion from a Michigan state appellate court touches on recurring and important themes in recent art-law cases:  the degree to which buyers may rely on a dealer’s representations about a work of art, and the degree of pre-sale diligence required by buyers. See King v. Park West Galleries, Inc., No. 314188 (Mich. Ct. of App., Dec. 2, 2014).

    In 1999, the plaintiff and her husband, while enjoying a cruise vacation, attended a shipboard art auction conducted by the Park West Galleries, Inc.  At the auction, plaintiff bought a complete set of prints of Salvador Dali’s Divine Comedy, purportedly signed by Dali, for $165,000.  The works—along with a certificate of authenticity and an appraisal—were sent to her after her return from the cruise, and she kept them for about ten years.  In 2009, she began taking steps to sell the works, at which point she learned that some of Park West’s other customers had accused Park West of forging signatures.  Further inquiries, including consultation with the Fine Art Registry, confirmed that her prints were likely inauthentic.

    She sued Park West on a variety of state-law claims, but eventually the suit was narrowed to claims of fraudulent concealment and breach of warranty.  Park West then sought summary disposition, arguing among other things that her claims were time-barred and she was not entitled to tolling of the six-year statute of limitations based on fraudulent concealment because she had not done enough diligence to discover the forgery.  The trial court ultimately sided with defendants.  (See Oakland Circuit Court Docket No. 2011-117393-CZ (Dec. 26, 2012)).

    On appeal, Michigan’s intermediate appellate court reversed.  In order to qualify for tolling of the statute of limitations, the plaintiff had to show (1) that the defendant had taken affirmative steps to prevent or hinder the plaintiff from learning about her claims, and (2) that the fraud be of such a nature that “even through reasonable diligence” she did not discover the claims within the statutory period.  The appellate court ruled that she had done both.  The “affirmative act” by the defendants was providing a certificate of authenticity and an appraisal; the court emphasized the importance of the certificate as a “legal document that certifies that the artwork, and signatures, are exactly what they are represented to be,” thereby creating an express warranty by an art merchant to a non-merchant buyer under Michigan law.  As to plaintiff’s diligence, the court concluded that at the very least there was a genuine factual issue as to whether she had been reasonably diligent in relying on the dealer’s documentation, and that issue should be decided by a jury for purposes of her breach-of-warranty claim.   For purposes of the fraud claim, the court went even further, stating that under Michigan case law, a party who has a viable claim of fraud owes no duty of diligence to discover the claim.  The plaintiff’s claims will now proceed to trial.

    Notably, the plaintiff was not a sophisticated art dealer or collector, nor was she advised by someone with art expertise (other than the defendant).  This situation stands in stark contrast to some other recent cases, where courts have more closely scrutinized the diligence undertaken by plaintiffs who were experienced and knowledgeable about art, yet claimed to rely heavily on representations by the seller.  It also is important to keep in mind that, although many cases involving inauthentic art raise similar types of state-law claims (including warranty claims, fraud claims, rescission claims, and the like), governing statutes and case law can vary from jurisdiction to jurisdiction when it comes to adjudicating these claims.  This case also highlights the importance of provenance research; it was a prospective buyer of plaintiff’s collection who tipped off the plaintiff that her works had come from a gallery whose integrity had been questioned before.

    In sum, the contours of art buyers’ diligence responsibilities, and the related question of what constitutes “reasonable reliance” on an art dealer’s representations, are still complex and fact-intensive inquiries that are being hashed out in courts across the country.  At a minimum, many of these issues can be avoided with the assistance of legal counsel at the transactional stage, and not merely post-closing after problems arise.