Second Circuit Affirms Dismissal of Collectors’ Claims Against Keith Haring Foundation
12/10/2015This blog has previously covered the case of Bilinski v. Keith Haring Foundation, Inc., a federal lawsuit filed last year in the Southern District of New York. Collectors of artworks they believe to be by famed artist Keith Haring, sued the artist’s foundation claiming that it had improperly denied authentication, thereby damaging the value of their holdings. This past spring, a federal judge dismissed the plaintiffs’ claims in a decision that explored some of the complex legal issues posed by artist foundations and authentication boards. The Second Circuit has now affirmed that ruling.
Our previous post contains full details, but in short, the Haring Foundation’s mission is to build an understanding of Haring’s art. The Foundation owns many Haring works as well as his copyrights and trademarks. Until a few years ago, owners of artworks could apply to the Foundation’s Authentication Committee for review of a particular work, and the Committee would then issue an opinion on whether the work was an authentic Haring. (The Haring Foundation dissolved its Authentication Committee in September 2012; indeed, many artists’ foundations have in recent years have disbanded their authentication boards.) On the other side of the lawsuit, the plaintiffs are a group of nearly two dozen collectors who collectively owned 111 works they believed to be authentic Harings but whose works had been denied authentication; the plaintiffs attempted to change the Committee’s mind by providing additional provenance information, but to no avail.
The lawsuit was precipitated by events back in 2013, when many of the plaintiffs’ works were included in an art show called “Haring Miami.” The Foundation sued the show’s organizers for an injunction; when the case settled, the Foundation issued a press release characterizing the settlement as an agreement to remove “fake” works from the show. The plaintiffs then sued on claims including antitrust claims, defamation, unjust enrichment, tortious interference with prospective business relations, and false advertising. Another group of plaintiffs with similar claims later joined the suit. (See S.D.N.Y. Docket No. 14-cv-1085.)
In March, Judge Cote granted the defendants’ motion to dismiss all claims. And a unanimous appellate panel upheld the trial court’s dismissal. With regard to the defamation claim, the appellate court agreed with the trial court that the statements made in the press release could not be the basis of a defamation claim against the work’s owners because the statements did not concern the works’ owners at all; rather, they were aimed at the organizers of the Miami show. The court rejected plaintiffs’ argument that the press release, when read in conjunction with the legal filings it referenced, impliedly accused the owners of misconduct; rather, the court observed that disparagement of a person’s property does not necessarily disparage the owner of that property unless it accuses the owner of disreputable conduct. The court also noted that any statements the Foundation made in its court filings in the previous litigation were privileged and could not form the basis for a tort claim.
As for the plaintiffs’ claim of product disparagement and prima facie tort, the court held that those claims were not sustainable because both require a plaintiff to plead “special damages,” and the plaintiffs here could not do so. One of the plaintiffs had alleged that he lost out on the opportunity to sell a work when an unidentified London museum cited the Haring Miami press release as its reason for backing out of a possible purchase. The court held this was insufficient, since the complaint did not attribute a specific dollar amount to that alleged lost sale, nor did it identify the lost buyer. The plaintiffs also attempted to argue that they pled the loss of an entire market, but the court held that this is only sufficient where “loss has resulted from the conduct of a number of persons whom it is impossible to identify,” where many buyers and potential buyers in the art business wish to remain anonymous. But the court held that that did not mean it would be impossible (after discovery) to identify specific lost buyers. The court also ruled that the plaintiffs had not adequately shown that the press release was the cause of their damages; rather, the plaintiff’s complaint alleged that it was the lack of authentication that made their works unsaleable. Finally, the court concluded that the plaintiffs had done no more than estimate their damages by asserting a general range (between $500,000 to $1 million per work for the 111 works at issue); greater specificity was required in order to adequately plead special damages.
Ongoing Legal Issues with Authentication
This blog is always interested in legal issues involving authentication, and this suit is no exception, because it illustrates the double-edged sword of authentication.
On the one hand, authenticators have a lot of power in the market (here, plaintiffs said they had thorough evidence of the authenticity of their works, but without the Foundation’s imprimatur, the works were unsaleable). Authenticators are often not transparent about their process (here, plaintiffs claimed the Foundation never examined their works in person and did not adequately consider the evidence the plaintiffs provided); and may even have conflicting interests (the plaintiffs alleged that the Foundation was motivated by its desire to control public perception of the artist’s oeuvre, prevent a glut of works on the market, and protect the value of the Foundation’s own collection). Litigation like this case arguably at least airs these complex factors and provides a check on the unique power of authentication experts.
On the other hand, the public and the art market benefit when experts can opine on the authenticity of a work without fear of litigation or liability. Given the recent trend of many artists’ foundations disbanding their authentication boards, market confidence can suffer when buyers and sellers have nowhere to turn for a definitive answer about a work’s authenticity.
Some have advocated for a legislative intervention on the subject of art authentication. Last year, a bill was proposed in the New York state legislature that would have required plaintiffs to meet a heightened pleading standard when suing an authenticator on authentication-based claims; imposed a heightened standard of proof by clear and convincing evidence (rather than simple preponderance); and created a mandatory fee-shifting mechanism by which an authenticator recovers his or her attorney’s fees and other costs if the authenticator ultimately prevails in defeating a lawsuit. This past summer, however, the state Senate passed a diluted version of that proposal (the modified version eliminated the higher standard of proof and left the award of legal fees up to the judge’s discretion). At any rate, no further legislative action will be taken until 2016.
The market is also exploring technological solutions to authentication problems. Science is playing an increasing role in authentication; for example, just recently, questions were raised about the authenticity of several works thought to be by Jackson Pollock, on the basis of chemical analysis of some of the pigments used. And few weeks ago, the New York Times reported that innovators at SUNY-Albany are working on a way to infuse artworks with synthetic molecules of DNA that would penetrate the work at the molecular level, and could be read by a scanner available to anyone in the art industry wanting to verify information about the work. More than three dozen prominent artists, archives, foundations and museums have signed up to test the technology, which could be ready as early as next year. But of course, it will be some time before more than a fraction of the market is covered by this technology.
So for now, the art market continue to grapple with the thorny issue of how to balance the market’s need for authentication opinions with the fact that the art market is, in many respects, self-regulating, and litigation (even unsuccessful litigation like the Bilinski case) can serve a genuine role in encouraging transparency and debate. Meanwhile, in many cases, a buyer’s best options for managing authenticity risks are pre-purchase diligence and negotiated sales contracts with appropriate representations and warranties.
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