Getty Museum Sued Over Negotiations Regarding Famed Italian Art Collection
01/25/2017A new lawsuit was filed in New York federal court in mid-January against the famed Getty Museum over a series of negotiations regarding an Italian collection of classical art. The plaintiffs are entities who claim they spent considerable time and effort preparing the collection for sale, laying the groundwork for a deal, and facilitating delicate communications between the Getty, Italian officials, and the collection’s owners; but were later frozen out of those other parties’ dealings, leaving the plaintiffs empty handed.
The plaintiffs are led by Phoenix Ancient Art, S.A., an antiquities dealership based in Geneva. Phoenix’s co-plaintiffs include an entity called Electrum (Phoenix’s exclusive agent in the U.S.) and another entity, Regulus, that was purportedly involved in a “joint venture” with Electrum in connection with the deal at issue. Their complaint first sets the scene by reviewing the Getty’s “history of legal troubles,” including actions by the Italian government, which has in the past accused the Getty of purchasing dozens of artworks that had been looted and smuggled out of Italy. According to the plaintiffs, these past problems resulted in an “embargo” of sorts, whereby the Italian government for years ignored or refused the Getty’s requests for loans of Italian art. The Getty ultimately returned many, but not all, the suspect works to Italy. The complaint also notes other unfavorable attention the Getty has received in recent years; for example, they describe a 2006 investigation by the state of California, which found that the Getty had improperly expended various funds, as well as a 2010 lawsuit by the Armenian Orthodox Church, which accused the Getty of harboring stolen manuscripts (the suit was ultimately settled and the Getty recognized the Church’s claim to the works).
The complaint then introduces the Torlonia family, a line of Italian nobles who, during the 18th and 19th centuries, amassed a stunning collection of hundreds of pieces of classical sculpture and other artworks. The collection has mostly been kept out of public view for decades, despite pressure from the Italian government on the current Torlonia family members to make the collection publicly available. According to the plaintiffs, they learned through other dealers that parts of the Torlonia collection might be up for sale. At some point, the plaintiffs (through Phoenix’s agent, Electrum) began working with the Torlonia family to catalogue the collection, a daunting task that allegedly included years of work photographing and researching, as well as developing relationships with both the family and relevant Italian authorities. The plaintiffs’ ultimate goal was not just to help with the cataloguing in preparation for a sale, but to be involved in brokering that sale; thus, they say, they kept their research “under reasonable security measures” and treated as trade secrets their knowledge of the collection, and their relationships with key players connected to the collection.
In the spring of 2013, Electrum representatives met with Getty director Timothy Potts, and mentioned that Electrum was helping to catalogue an unnamed significant collection that might be of interest to the Getty. Plaintiffs allege that Potts expressed enthusiasm for the idea of possibly acquiring an interest in the collection, and agreed orally to keep the opportunity confidential, at which point plaintiffs disclosed the identity of the collection and some of their photographs. Shortly thereafter, Potts (on behalf of the Getty) signed a “Non-Disclosure and Non-Circumvention Agreement” with Electrum and Phoenix, which, plaintiffs say, related to access to the Torlonia family and its collections as well as “relationships with Italian officials, knowledge, trade secrets, and . . . knowledge regarding appropriate deal structures” that could be used to bring the works to the public. In the contract, the plaintiffs say, the Getty agreed to keep confidential information that would be exchanged between the parties, to return the information upon request, to use that information only “for the purpose of evaluating the possible transaction,” and not to contact the Torlonia family or any related party directly, instead routing all communications exclusively through Electrum and Phoenix.
After this agreement was reached, the plaintiffs shared with the Getty various catalogue materials and other trade secrets the plaintiffs had developed. Potts continued to meet with Electrum and its partner, Regulus (whose role, according to plaintiffs, was to “provide important guidance regarding its trade-secret deal structures” that could be used to “allow foreigners to purchase rights to” the collection). By early 2014, the Getty had allegedly identified dozens of specific sculptures it “was interested in acquiring or controlling.” Thereafter, the plaintiffs say, they facilitated correspondence and meetings between the Getty and the current leader of the Torlonia family, to lay the groundwork for a deal.
At some point, however, the Getty stopped communicating with the plaintiffs over the Torlonia works. The Torlonia family, concerned that the Getty had apparently lost interest, began considering gifting the collection to Italian authorities. Plaintiffs conveyed this news to the Getty, which told the plaintiffs that the Getty had decided to abandon its pursuit of the collection; according to plaintiffs, this decision by the Getty was in part motivated by the Getty’s history of conflict with the Italian government and its concern that the Italian government would make it difficult to work with the collection. Plaintiffs claim that they had the knowledge, “professional judgment,” “exclusive relationships,” and deal-structure expertise to overcome these difficulties, and accordingly tried to continue to bring the Getty together with the Torlonia family and relevant authorities to pursue a deal; to that end, they conveyed to the Getty a new proposal at a lower price, but the Getty “feigned a lack of interest.” Thereafter, the plaintiffs allege, they continued to try to broker negotiations between the Getty, the family, and the Italian government. But the Getty had begun communicating with the family separately, cutting the plaintiffs out of the interactions while still using plaintiffs’ carefully compiled catalogue, relationships, and possible deal structures.
In March 2016, the plaintiffs learned through the New York Times that the Torlonia collection would soon be on public display, first in Italy and then eventually abroad, thanks to a deal between the family and the Italian Culture Ministry that contemplates an initial exhibition and ultimately a museum dedicated to the collection. According to the complaint, this deal was reached due to the Getty’s breach of several of its duties to plaintiffs, including, allegedly, the Getty’s sharing of the catalogue and trade-secret deal structures for public-private partnerships. When plaintiffs contacted the Getty, the Getty apparently admitted it was actively discussing with the curator of the planned Italian exhibition (who had previous ties to the Getty) the possibility of the Getty exhibiting some of the works in the future. The plaintiffs further cite an Italian official who believes that the work plaintiffs did was essentially plagiarized and incorporated into the new deal between the family and the Culture Ministry.
The plaintiffs have sued the Getty, its Trust, its director (Potts), and two other individuals (the Russos, dealers in antique coins, who allegedly first told the plaintiffs that portions of the Torlonia collections were for sale, and at times acted as agents for the Torlonia family). In terms of legal claims, the plaintiffs allege, among other things, that the Getty has breached some of its contractual duties to the plaintiffs, including by refusing to return confidential information sent to it by the Plaintiffs and by interacting directly with the Torlonia family. They also advance a claim that the Getty breached the implied covenant of good faith and fair dealing, by acting to deprive the plaintiffs of potential commissions. The complaint also includes a claim for tortious interference with contract, against Potts and the Russos individually, alleging, among other things, that these individuals caused the Getty to breach the non-circumvention agreement. There are also fraud claims, which focus on the Getty parties’ purported misrepresentations that they would keep plaintiffs’ information confidential; that they would not communicate with the family except through plantiffs; that they would compensate plaintiffs for facilitating a deal; and later, that the Getty was not interested in the collection. The complaint also advances an unjust-enrichment claim regarding the benefits (including information and relationships) defendants allegedly received from plaintiffs without compensation, and claims for unfair competition, conversion, and trade secret misappropriation based on the defendants’ allegedly improper use and retention of plaintiffs’ confidential information.
A reading of the complaint on its face suggests that the plaintiffs may face an uphill battle on some of these claims. For example, plaintiffs’ complaint seeks $77 million in damages, a figure that appears to represent the commission plaintiffs say they agreed to—a 22% commission on a potential deal worth at least $350 million. But it doesn’t seem that there was any written agreement on the subject of the plaintiffs’ entitlement to any commission, which may make it harder for plaintiffs to prevail on claims that hinge on their purported loss of a commission (particularly given that New York has a statute of frauds requiring any contract “to pay compensation for services rendered in negotiating . . . a business opportunity” to be in writing, see N.Y. G.O.L. § 5-701(10)). Some of the claims regarding the implied covenant of good faith may be similarly challenging in that courts are often loath to imply contractual obligations that were not expressly included in a contract. And the plaintiffs’ fraud claims appear to be at least partially duplicative of some of their breach-of-contract claims. While the complaint’s claims regarding trade secrets may have some appeal, plaintiffs might struggle to show that the defendants here (as opposed to, say, the Torlonia family or the Ministry of Culture, which are not parties to this suit) benefited from the use of those secrets.
Moreover, as a factual matter, it’s not clear that the Getty reached any deal regarding the collection, with or without plaintiff’s help; rather, it appears that ultimately, the Torlonia family reached a deal with Italy’s Culture Ministry, and that at most, the Getty has discussed exhibiting some of the works at the Getty at a later date. As the Getty has said in press statements, “Plaintiffs cannot plausibly demand payment for a deal that never occurred.” The Getty has also stated that it has “no plans at this time” to display at the Getty any of the works at issue here.
In the “small world” of those who deal in high-end art and antiquities, relationships and expertise are incredibly important—and awfully hard to value. As another commentator has observed, this case involves a group of plaintiffs who apparently “did a great deal of unpaid work on the hopes of getting a commission,” and were ultimately disappointed to receive nothing in exchange for their contributions. The plaintiffs now assert that their disappointment was the result of the Getty’s misconduct and breach of its legal duties, while the Getty is apparently taking the position that the disappointment is simply due to the fact that no deal ever came to fruition. (Meanwhile, the litigation is likely to mean the Getty is now facing a public rehashing of its previous ethical issues. And interestingly, another media outlet has noted that Phoenix does not have a pristine record either when it comes to accusations of handling illicitly obtained antiquities. Given the art world’s increased focus on looted art and artifacts, parties are finding that missteps and inadequate diligence can haunt the legacy of a museum or gallery for years.)
We’ll continue to keep an eye on this case, but in the meantime it serves as a helpful reminder regarding entities in the art market who may act as “middlemen” between the ultimate buyers and sellers of art. It is not uncommon in the art market for complex negotiations and deals to involve such intermediaries; but when this happens, all parties can avoid expensive litigation by entering clear written agreements that spell out the understandings, expectations, and obligations between them.
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