Recently Settled Lawsuit Involving $100 Million Picasso Sculpture Highlights Many of the Pitfalls of Art Sales
07/11/2016A recent settlement involving several major art-world players raises some important points about contracting in art transactions.
The dispute centers around a work by famed artist Pablo Picasso. Buste de Femme (Marie Thérèse) is a plaster bust sculpture of Picasso’s onetime mistress, Marie-Thérèse Walters. Until recently, it had been in the collection of octegenarian Maya Widmaier-Picasso, the daughter born of Pablo and Marie-Thérèse’s affair. The characters in this present-day dispute over the bust include, among others, Maya; two of her children, both of whom have been active in the art market; art dealer Larry Gagosian; New York’s Museum of Modern Art (MoMA); prominent art dealership Connery Pissarro Seydoux, S.A. (“CPS”); the Qatari government; and art collector Leon Black (who made headlines in 2012 when he set a then-record for the highest price paid for a work of art sold at auction with his $120 million purchase of Munch’s The Scream).
This case involves the sale of the same Work to two different buyers. In January 2016, one purported buyer, the Gagosian Gallery, commenced a lawsuit in federal court in New York, claiming it had purchased the Work from Maya; Gagosian sought to quiet title to the Work and requested a declaratory judgment and injunctive relief. See Docket No. 16-cv-214 (S.D.N.Y.). The defendant was the other purported buyer, an entity called Pelham Europe, Ltd. (“Pelham”), which is controlled by a member of the Qatari royal family and acquires works for the museums of Qatar. Pelham, for its part, had already commenced proceedings against Maya in France and Switzerland over the Work, and in November of 2015, filed a petition in the Southern District of New York seeking discovery related to those actions. See Docket No. 15-mc-370 (S.D.N.Y.).
Gagosian’s New York complaint alleged that Gagosian had a longtime relationship with both Maya and her daughter Diana, and had assisted them with previous sales of Picasso works as well as with mounting a major exhibition in 2011 at the Gagosian Gallery. The complaint further alleges that the 2011 exhibition led to multiple offers to purchase the Work for over $100 million, although Maya did not wish to sell it at the time. According to Gagosian, however, in 2015, Maya expressed interest in selling the work, and in response, Gagosian offered her $105.8 million; she accepted, and he claims he took title to the work on October 2, 2015, and thereafter arranged for it to be loaned to the Museum of Modern Art in New York for an exhibition there. In the meantime, Gagosian had already lined up a buyer for the Work, and, according to the complaint, would “become obligated to transfer title of the Work to that buyer” as soon as the MoMA exhibition ended in February 2016. However, the complaint continued, Gagosian learned in late October 2015 that another buyer—Pelham—was claiming that it entered a contract with Maya (through CPS) to buy the Work nearly a year earlier, in November 2014, for about $42 million. According to Gagosian, Maya had initially granted CPS authority, for a two-month period, to sell the Work on her behalf, but once her daughter Diana reminded Maya of the previous offers to sell the work for more than $100 million, Maya declared the Pelham sale void and returned the partial payment Pelham had made.
For its part, Pelham filed third-party claims against Larry Gagosian (individually), Maya’s daughter Diana, and Leon Black (the buyer Gagosian had lined up for the resale of the Work). Pelham’s version of the story was, essentially, that Maya’s son Olivier had assisted Maya in arranging the sale of the Work (through CPS) to Pelham, but that when Diana learned that the sale had not been handled through her longtime “ally” Larry Gagosian, Diana pressured her mother to repudiate the sale and instead go through Gagosian. Their allegations include a suggestion that the invoice reflecting the sale from Maya to Gagosian may be a “back-dated fabrication,” as well as allegations that Gagosian knew about Pelham’s claim on the Work long before October 2015 and coordinated with Diana to structure the Black transaction so as to thwart that claim. Pelham sought, among other things, possession of the Work; an order that neither Gagosian nor Black had any title or interest in the Work; and damages for claims including conversion and tortious interference with the Pelham contract.
The competing title claims also interesting in that, from the start, the value of this unique Work was hotly contested. Gagosian’s complaint sought to paint Pelham’s purchase price (about $42 million) as so ludicrously low as to be implausible or exploitative. In response, Pelham called Gagosian’s purchase price of $105 million “grossly-inflated” and carefully laid out exactly why it and CPS had agreed on the lower price. Pelham also took pains to point out that its lower price took into account the fact that Maya had allegedly expressed a desire to not merely have the Work go to the highest bidder, but wished for it to go to a museum and that it not be reproduced (conditions to which Pelham had agreed). Many art lawsuits involve some type of post-hoc questioning of the value of an artwork—was a buyer overcharged? Was a work being sold at bargain-basement prices?—and this one was no exception.
This case has a little bit of everything, from family politics (including issues involving Maya’s mental capacity and her children’s rival dealings) to international comity (given the various court proceedings in multiple countries) to the public’s interest in one of the world’s most famous artists (for example, one commentator expressed a hope that the Work might remain to be enjoyed at the MoMA indefinitely while the case was pending). But now, as it turns out, those issues will never be hashed out in court; in late May, the court indicated that the parties had reached a settlement. For a couple of weeks thereafter, it was unclear which party had prevailed in obtaining the sculpture itself, but in mid-June, the parties announced that Black would be the one to keep the Work, while Pelham would receive an undisclosed amount of financial compensation.
While we’ll never know the complete truth of the facts that led to this lawsuit, looking at the early court filings can yield some helpful insights for those involved in the oft-convoluted and opaque world of art deals. For example, this case illustrates why parties to an art transaction may wish to specify in writing exactly when title to the work will pass to the new owner. Parties are free to negotiate on this point, but formalizing that understanding can help avoid disputes about when the ownership of the work changes. Here, Gagosian alleged that his contract with Maya specified that title would pass to him following the third payment installment, which he made on October 2, 2015, while Pelham’s contract provided that Pelham had no rights in the work until payment was completed (which undisputedly never occurred, since Maya repudiated the deal before Pelham paid the full price). Pelham suggested that it was suspicious that both Gagosian’s and Black’s contracts provided for title to pass before payment was even complete.
The dispute also serves as a reminder about the complications that can arise when an art transaction is being negotiated through intermediaries and agents. Agency issues pervade the case. Indeed, Pelham’s claim to the painting stems from the 2014 arrangement through which Maya authorized CPS to negotiate with Pelham on her behalf. And there were likewise issues regarding whether Maya’s children were acting as her agents in the two competing deals. For example, Pelham argued at one point that Diana had essentially acted as an agent of Gagosian, not her mother, and thus her knowledge of the prior Pelham contract should be attributed to Gagosian for purposes of deciding whether Gagosian was really a “good-faith purchaser” with no prior knowledge of the earlier deal. And in one of the European proceedings, Pelham countered arguments about Maya’s mental capacity to enter the Pelham deal by noting that Maya’s son Olivier had assisted her in the deal. The many agency issues underscore that parties to complex art deals generally should reduce to writing some record of who is representing or negotiating on behalf of whom, and the scope of their authority to bind others to a deal. This becomes even more vital when there may be capacity issues at stake.
Finally, it’s interesting that in early court pleadings, Pelham repeatedly emphasized the fact that the Gagosian deal lacked any warranties regarding Maya’s ability to convey clean title to the Work; Pelham argued that such warranties are “extremely common” in high-end art deals and that the absence of such provisions was “telling” and suggestive of a scheme. We’ll never know whether that argument might have been persuasive to a court, but it’s worth noting that the “industry norm” in the art market may be evolving in favor of more thorough contracting, and the absence of such thorough contracting may well
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