Grossman LLP | Court Allows Most of Buyer's Claims to Proceed In Lawsuit Over Koons Sculpture
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  • Court Allows Most of Buyer's Claims to Proceed In Lawsuit Over Koons Sculpture
    Over the summer, we reported on a lawsuit against the David Zwirner Gallery filed by a disgruntled collector who had paid $2 million for a Jeff Koons sculpture that the gallery never delivered.  This week, a New York state court rejected Zwirner’s attempt to dismiss the suit; allowing several of the claims against Zwirner to proceed.

    The plaintiff, a UK-based entity called Blue Art Limited, alleges that in June 2014, it agreed to pay Zwirner $2 million for the Koons work.  At the time, the plaintiff alleges, Zwirner (the exclusive representative for Koons with regard to this series of sculptures) represented that the work was “in the process of being manufactured,” and over the next year, the plaintiff paid for the work in installments, amidst Zwirner’s “assurances” that the work was almost complete.  But, says the plaintiff, the work has still not been delivered, and Zwirner has refused to provide a refund.  (Zwirner says it has offered to deliver the work, although it only did so after this action was initiated).  There was no delivery date specified in the sale agreement, but the plaintiff claims that Zwirner orally promised delivery would be within a year, and was in any case obligated to—and failed to—deliver the work “within a reasonable amount of time,” and alleges that Zwirner knowingly misrepresented when the work would be done.  The plaintiff also alleges that, due in part to Zwirner’s actions with regard to other works in the same series, the value of the work plaintiff purchased has decreased.

    The plaintiff asserted claims for breach of contract, breach of warranty, and fraud.  Blue Art also added a claim under a provision of New York’s Arts and Cultural Affairs Law dealing specifically with the sale of artwork that exists in “multiples.”  See N.Y. A.C.A. § 15.15.  In the amended complaint, plaintiff says Zwirner promised to deliver the “second of a represented total of four casts,” but that instead he was offered the last of the casts, and that Zwirner failed to disclose certain information about the sculpture, including the precise dimensions, the number of casts produced (including purported “prototypes”), whether and how the purchased sculpture was numbered, and the existence of prior editions of the same sculpture.  (See Docket No. 653810/2016, Sup. Ct. N.Y. Co.)

    Zwirner filed a motion to dismiss the complaint, arguing, among other things, that this is simply a case of non-actionable buyer’s remorse.  The court, however, has now sided with Blue Art on most of the claims, dismissing a few as duplicative but permitting the rest to proceed.  Zwirner had argued that there was no breach of contract based on the purportedly late delivery, urging that Blue Art waived any purported oral one-year deadline, meaning that it was up to Blue Art to provide notice of a “reasonable time” in which to perform, which it did not do.  The court, however, was unconvinced, noting that Zwirner did not deny making oral promises about the delivery date, and concluding that in any case, the issues of whether a two-year delay in delivery is “reasonable” and whether Blue Art had “waived” its right to a one-year delivery were factual issues unsuitable for decision at this early motion-to-dismiss stage.

    Zwirner had also argued that there was no breach with regard to delivery of the “correct cast” of the sculpture, explaining that Zwirner has offered to deliver a sculpture labeled “2 of 3,” and seeking to debunk Blue Art’s factual assertions that in fact there were four sculptures in the series, and that the true number “2 of 3” was put up for auction in 2015 instead of being delivered to plaintiff.  Zwirner disputes Blue Art’s version of how the sculptures in the edition were numbered and handled, arguing that one was merely a prototype, not actually in the edition, and further that the contract did not literally require the sculptures to be numbered or delivered in the same order they were produced.  Zwirner further urged that even if there had been some promise to deliver Blue Art the “second” sculpture fabricated, Blue Art waived that requirement by continuing to make payments with full knowledge of the facts surrounding the 2015 auction.  The court was unsympathetic to Zwirner’s characterizations of the facts here, holding that “the parties’ conflicting claims with respect to sequencing of the casts pose material issues of fact” that must await discovery before the court can properly resolve them.  The court suggested that, should Blue Art succeed on this claim, rescission might well be the proper remedy; the court seemed particularly swayed by Blue Art’s allegations that the true “No. 2 of 3” was improperly labeled as “No. 3 of 3” and put up for auction a full “year before Blue Art’s long-awaited ‘No. 2 of 3’ was completed.”

    Zwirner had also argued that there was no breach as to the sculpture’s dimensions, noting that the buyer knew the sculpture was not yet fabricated, and that any difference between the dimensions given in the contract and the ultimate dimensions of the piece that is now ready for delivery are immaterial.  The court disagreed, citing the rule of U.C.C. § 2-601 that a buyer of goods is entitled to a “perfect tender” and may reject non-conforming goods.

    As to the plaintiff’s allegations of violations of NYACAL, which were based primarily on Zwirner’s alleged failure to accurately disclose certain facts about the purchased work as required by statute (see N.Y. A.C.A. § 15.01 & 15.10), Zwirner argued that the required disclosures may be made any time prior to delivery, and, since delivery has not yet occurred, Zwirner could not have violated the statute.  Zwirner further argued that the disclosures in any case had been made in correspondence with the plaintiff.  The court, however, rejected these arguments.  As to timing, the court declined to read the statutory requirements as permitting a seller to delay the disclosures “until the minute before the artwork is delivered,” citing the legislative purpose of NYACAL of protecting the consumer.

    The court did agree with Zwirner that the plaintiff’s fraud claims should be dismissed.  It reasoned those claims were simply duplicative of the plaintiff’s contract claims, observing that they hinged on the same allegations, and that even without the fraud claims, plaintiff would still be able to recover the same damages (including treble damages, which are available under NYACAL).  The court also dismissed the plaintiff’s promissory estoppel claim as duplicative of the contract claims.

    The court ordered Zwirner to file an answer to the complaint later this month.  We’ll continue to monitor developments, but the court’s opinion on the motion to dismiss already contains some important points about NYACAL’s purpose in protecting art buyers, as well as a reminder about a buyer’s right under the U.C.C. to “perfect tender” (and conversely, the right to reject non-conforming goods).  It will be interesting to watch as the court applies existing case law and statutory language to the unique context of sculpture multiples; indeed, the briefing in the case so far has already raised questions about, among other things, how multiples should be numbered and what a buyer is entitled to know about that process; how multiples are created (for example, the plaintiff has argued that Zwirner’s NYACAL disclosures are inadequate in part because they do not accurately state the name of the foundry that fabricated the sculpture, noting particularly that Koons has been known to use specialists outside his studio and that thus it’s not necessarily a given that the work was fabricated by Koons or his LLC); and how buyers and sellers should account for the fact that dimensions of works in an edition may vary.

    The case also raises more general issues that often arise in art disputes.  For example, Blue Art claims in part that Zwirner “orally” promised delivery by a deadline that appears nowhere in the contract itself.  And for its part, Zwirner sought to eliminate certain claims on the basis that Blue Art had purportedly “waived” certain requirements of the contract—sometimes, Zwirner claimed, through text messages or an overall course of conduct—but the court was unwilling to find such a waiver (at least at this early phase of the case).  In other words, both parties are, in some respects, seeking to show that the other party agreed to additional or different terms than their original deal; such dilemmas serve as a reminder to all who deal in artwork that if there are to be deviations from or adjustments to an art deal after an agreement is signed, those should be clearly and carefully memorialized in writing to avoid disputes later.