Cowles v Gagosian

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Cowles v Gagosian 2012 NY Slip Op 33156(U) August 22, 2012 Supreme Court, New York County Docket Number: 650152/12 Judge: Charles E. Ramos Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [*FILED: NEW· YORK COUNTY CLERK 09/20/2012 I 1] INDEX NO. 650152/2012 NYSCEF DOC. NO. 90 RECEIVED NYSCEF: 09/20/2012 I· SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRES NT: PART Justice I Index NUmber; 650152/2012 COWLES, JAN vs. INDEX NO. _ _ _ __ GAGOS/AN, LARRY MonONDATE _ _ __ SEQUENCE NUMBER· 002 DISMISS . MonON SEQ. NO. _ __ The foil wing papers, numbered 1 to _ _ , were read on this motion tolfor _ _ _ _ _ _ _ _ _ _ _ __ Notice of Motion/Order to Show Cause - Affidavits Answe+ g Affidavits - Exhibits Exhibits _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ __ . Replying Affidavits _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ Upon t~e foregoing papers, It Is ordered that this motion Is ...... -.. -. .... I No(s}._ _ _ _ __ I No(s). _.....;...._ __ I No(s). _ _ _ __ ..-____ Is decided In accordance with lccomtianv1n9 ";;morandum decision antS order. w o i= en ::J ..., e o w It: It: w W "'" It: .. >- ..... -'~ ....JZ ::J o· "'" < en I(J W e; w w It: (!) Z It: ~ 5Q 0 W ....J en -' < 0 tJ "'" Z W ~ - o Ii= a:: o 0 ::IE "'" Dated: I C{{ t z{/ u ----1~------~, J.S.C. CH RLES E. RAMOS I 1. CHECK ONE: ~ .. ;................................................................. D CASE DISPOSED 2. CHECK AS A'PROPRIATE: ...........................MOTION IS: D GRANTED 3. CHECK IF AP~ROPRIATE: ................................................ I I 0 ffoENIEO SETILE ORDER DOONOTPOST l5"NON-FINAL DISPOSITION o GRANTED IN PART D OTHER o SUBMIT ORDER D FIDUCIARY APPOINTMENT DREFERENCE [* 2] SUJREME COURT OF THE STATE OF NEW YORK C09NTY OF NEW YORK: COMMERCIAL DIVISION --l---------------------------------------X JAN COWLES, Plaintiff, Index No. 650152/12 -againstGAGOSIAN, GAGOSIAN GALLERY, INC., and THOMPSON DEAN, LA~RY Defendants. I --~---------------------------------------x I chJrles Edward Ramos, J.S.C.: I \ Defendants Larry Gagosian (LG) and Gagosian Gallery, Inc. (GJgosian) (together, defendants) move to dismiss certain causes ! of action in the amended complaint (complaint) of plaintiff Jan I C011es, pursuant to CPLR 3211 (a) I (7). Background1 I This action for conversion and replevin arises out of the al~eged wrongful taking and sale of a work of art by the iconic Ame:rican artist Roy Lichtenstein. The plaintiff, Jan Cowles, is a long time collector of fine ar8 works, and at ninety-three years old, has been incapacitated I I fo~ several years. I re~resented Since her deterioration, Mrs. Cowles has been by Lester Marks, who acts as her duly appointed atdorney-in-fact. I Defendant LG is a major international art I de~ler with galleries in New York and throughout the world. I According to the complaint, Mrs. Cowles' son, Charles I I Co~les, himself an art dealer and gallery owner in New York City, I I 1 The allegations are taken from the Amended Complaint, and ar~ assumed to be true for the purposes of this motion. [* 3] suffered large financial losses in 2008 and as a result, was in a desberate financial condition. Unbeknownst to Mrs. Cowles, in october 2008, Charles cosigned to Gagosian for sale two major art works from Mrs. Cowles's personal collection, and secreted the sales proceeds. At issue in this action is one of the art works cosigned to Gagosian, entitled the Girl in Mirror, by Roy ! Li~htenstein (the Work), which is an epoxy enamel on metal, and is InUmbered as one from eight in the same edition. In ~irror I I Another Girl in the same edition had been sold in 2007 for over $4 I mi~lion. Mrs. Cowles alleges that in the current market, it is i I worlth more than $5 million. I In an effort to sell the Work, Gagosian shipped it to London I i fo~ an exhibition at Frieze, an art fair, in the middle of I Octlober 2008. Around the same time, a Gagosian employee prepared a dondition report stating that the Work is in "excellent co~dition overall" (Amended Complaint, ~ 18). A few days later, Gadosian shipped the Work back to its gallery in New York, I acdompanied by a customs invoice which valued it at $4.5 million i (~ended Complaint, ~ 19). In June 2009, Gagosian again shipped 'I th~ Work overseas to Switzerland for viewing at a prestigious art fai!r, and back to its gallery in London (Amended Complaint, ~CJI I 18-.19) . I I According to the complaint, LG became acutely aware of chJrles's desperate financial condition, and saw an opportunity I I to Iturn a huge prof it for Gagosian and make a quick sale by 2 [* 4] I cOalXing defendant Thomas Dean into making an outrageously low I offer to purchase the Work. In an email dated July 15, 2009LG writes to Dean: "Seller [Charles] now in terrible straights and needs cash. Are you interested in making a cruel and offensive offer? Come on, want to try?" (Exhibit A, annexed to the Baum Aff.). On August 3, 2009, Gagosian purported to sell the Work for only $2 million to Dean, and retained an astounding $1 million in combission, despite representing to Charles at the time of the I codsignment that it would not be sold for less than $3 million, I I wi~h Charles to receive no less than $2.5 million, and Gagosian I to !receive a commission of $500,000 (Amended Complaint, 'lI'lI 1516) II' In October 2009, Gagosian shipped the Work to Dean, with an I ac~ompanying condition report which noted that it was in "overall ! goqd condition." From the time she discovered that the Work had been sold I wi t!hout her knowledge and consent, Marks, on behalf of Mrs. i Co~les, has demanded detailed accounts of the transaction. Upon i in~estigation, Marks learned that LG purportedly represented to Cha1rles that multiple buyers declined to purchase the Work I bedause it was badly damaged, and ultimately convinced Charles to I ac~ept the below-market sale price of $1,000,000 for that reason I (Amended Complaint, 'lI 27). Gagosian maintains in this litigation thJt the Work sold for a relatively low amount because it was I I indeed damaged. Mrs. Cowles disputes that the Work was damaged, 3 [* 5] anJ points to several invoices and condition reports that Ga~OSian had prepared in an effort to sell the Work which noted its good condition. Mrs. Cowles served an amended complaint in February 2012, as~erting causes of action against defendants for conversion, reJlevin fraud, breach of fiduciary duty and unjust enrichment, I ' and includes a request for punitive damages. Discussion I. Fraud and Breach of Fiduciary Duty Defendants move to dismiss the cause of action for fraud on th, grounds that it arises from a breach of contract, and Mrs. coJles fails to adequately allege that Charles justifiably relied I on ~n alleged misrepresentation as a matter of law. to ~efendants, According Charles is himself an art dealer and had access to the l same information and resources concerning the condition of ! th~ Work, and could have verified the truth of LG's statements. The Court rejects the argument that Mrs. Cowles is ! , attlemptlng to convert a breach of contract cause of action into I I on~ sounding in tort. The fraud cause of action is not premised I upob Gagosian's breach of a contractual duty to pay Charles or I I MrS. Cowles the sales price. Rather, it is based upon I aillegations that Gagosian improperly induced Charles to agree to a delow-market sale premised upon misrepresentations concerning I th~ condition of the Work and its present value. Whereas LG I or~ginally promised Charles to sell the Work for no less than $3 4 [* 6] million with a $500,000 commission, LG fabricated that the Work had been damaged in order to justify a below-market sales price, while doubling Gagosian's own commission, netting $1 million out of ~he $2 million sale price. Such allegations sufficiently state a cause of action for fraud (see Cristallina v Christie, Woods Intl., 117 AD2d 284, 292-94, 297 [1 st Dept 1986]). Court is also not persuaded that the element of re~sonable reliance is lacking as a matter of law. Where a I SOJhisticated plaintiff enjoys access to critical information but fa~ls to take advantage of that access, New York courts are i pa~ticularly i i (D~agon disinclined to entertain causes of action for fraud Inv. Co. II LLC v Shanahan, 49 AD3d 403, 404 [1 st Dept I 20d8]). I However, where the facts allegedly misrepresented were wiJhin the exclusive knowledge of the defendant, or where one pa~ty's superior knowledge of essential facts renders the I, tr~nsaction without disclosure inherently unfair, a sophisticated pl~intiff's reliance on the defendant's misrepresentations is not I unrieasonable as a matter of law (DDJ Mgt., LLC v Rhone Group I L.D.C., 15 NY3d 147, 155 [2010]). Ultimately, the question of I whJt constitutes reasonable reliance is fact-intensive and I ! codtextual (Id.) Mrs. Cowles alleges that defendants concealed every aspect of !the dishonest transaction from Charles, including Gagosian's I own $4.5 million valuation of the Work, the information given to I Dean concerning Charles's desperate financial situation, the 5 [* 7] reason behind the very low offer, and the extent of Gagosian's I combission. In addition, defendants never disclosed Gagosian's owJ condition reports, which noted that the Work was in "eJcellent condition overall" (Amended Complaint, IJ[ 42). I The contention alone that, because Charles is himself a I I ga~lerist who should have verified the condition of the Work and I no~ rely upon defendants' representations, is not dispositive. An linspection of the Work would not have permitted Charles to ! I asdertain the material aspects of the transaction that defendants coJcealed, and which allegedly rendered the sale unfai~. Because I det1ermining whether Charles was entitled to rely upon defendants' I redresentations turns on resolving factual issues, it is not suJted for disposition on defendants' motion to dismiss aimed at i thJ sufficiency of the pleadings. Mrs. Cowles also sufficiently alleges a cause of action for i br~ach of fiduciary duty. A legal duty, and thus, tort liaibility, can be imposed by law on "professionals, common , , capriers and bailees" irrespective of their contractual duties, fo~ failure to exercise reasonable care. "In these instances, it is bOliey, not the parties' contract, that gives rise to a duty of icare" (Sommer v Federal Signal Corp., 79 NY2d 540, 551 I [l~92]). In addition, misfeasance, or defective performance, has trJditionallY been regarded as a tort rather than a breach of I I contract (Id.). 6 [* 8] i Gagosian, as an agent acting on behalf of its consignor, had I a fiduciary duty to act in the utmost good faith and in the interest of Charles, its principal, throughout their relationship (C~istallina, 117 AD2d at 292). I bu~er, LG purportedly disclosed to the Dean, that Charles was in "terrible straights" and invited I hi~ to make a "cruel and offensive offer" in order to take I I ad~antage of Charles and capitalize on his misfortune, while I co~cealing information that was material to his interests. al~egations These describe conduct that would constitute a breach of I fiduciary duty, and ultimately present a factual question as to wheither Gagosian acted in a manner commensurate with its skill I and expertise, and properly discharged its duty of care (see crilstallina, 117 AD2d at 292-94). II. I Unjust Enrichment I ! Defendants move to dismiss the cause of action for unjust enr,ichment on the ground that the extent of Gagosian's commission is a component of the consignment agreement with Charles. AlJhough the existence of a valid and enforceable contract go~erning a certain matter will preclude recovery for unjust I en~ichment claims that arise out of a similar matter, here, there is la bona fide dispute as to the existence of an enforceable I contract (see Nakamura v Fujii, 253 AD2d 387, 390 I 1998]). [pt Dept Moreover, even in the absence of a dispute as to the I en~orceability of the consignment agreement, Mrs. Cowles I su~ficiently alleges that Gagosian earned its fifty percent 7 [* 9] I I. . cOmnll.SS10n by its dishonest brokerage of the Work at Charles's exp1ense. These allegations sufficiently state a cause of action for unjust enrichment (Balance Return Fund Ltd. v Royal Bank of can1ada, 83 AD3d 429, 431 cpt Dept 2011]). Puni ti ve Damages I i to I I I. Defendants move to strike the demand for punitive damages as ~he causes of action for conversion, fraud, and breach of fid!uciary duty for failure to allege wrongful conduct that I I amornts to a pattern, or that it was directed at the public gen1erally. Where the transaction at issue is a private one, punitive i daJageS are only available where there is a showing of conduct eXhlibiting a conscious disregard of rights or a high degree of morlal turpitude (Hartford Acc. & Indem. Co. v Village of i i I Hempstead, 48 NY2d 218 [1979]; Mountain Creek Acquisition LLC v I Intirawest u.s. . Hold~ngs, Inc., 96 AD3d 633 cpt Dept 2012]). Assuming the allegations as to defendants' misconduct as true for th~ purposes of this motion, the Court concludes that the complaint pleads the requisite allegations of recklessness and I conlscious disregard of rights, and in this instance, the I det'ermination as to whether puni ti ve damages are warranted should I be Ileft for the trier of fact (Nardelli v Stamberg, 44 NY2d 500, I 5031 [1978] ["Whether to award puni ti ve damages in a particular I casle, as well as the amount of such damages, if any, are I pri~arily questions which reside in the sound discretion of the 8 [* 10] ori,ginal trier of facts"] i see also Cristallina, 117 AD2d at 297; Bi+OP v 59 West 12'" Street Condominium, 66 AD3d 401, 401 [1" Dep1t 2009]). Accordingly, it is I I. ORDERED that the motion to dismiss the amended complaint den~ed; I J.S and it is further ORDERED that defendants are directed to serve an answer to thel amended complaint within 20 days after service of a copy of thils order with notice of entry. i Dat1ied: August 22, 2012 /y r I ENTER:Al s. c. CHARLES E. Rj~\r~IOS 9