Koch v. Christie's Int'l PLC, K. Pub. Ltd.

• Decision Date: 04 October 2012
• Docket Number: No. 11–1522–cv.,11–1522–cv.
• Citation: 699 F.3d 141
• Court: U.S. Court of Appeals — Second Circuit
• Parties: William I. KOCH, Plaintiff–Appellant, v. CHRISTIE'S INTERNATIONAL PLC, A U.K. public limited company, Christie, Mason & Woods, Limited, A U.K. private limited company, Christie's Incorporated, a New York corporation, Defendants–Appellees.

699 F.3d 141

William I. KOCH, Plaintiff–Appellant,

v.CHRISTIE'S INTERNATIONAL PLC, A U.K. public limited company, Christie, Mason & Woods, Limited, A U.K. private limited company, Christie's Incorporated, a New York corporation, Defendants–Appellees.

No. 11–1522–cv.

United States Court of Appeals,Second Circuit.

Argued: May 2, 2012.

Decided: Oct. 4, 2012.

Edward M. Spiro, Barbara L. Trencher, Adam L. Pollock, Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C., New York, NY, and Irell & Manella LLP, Newport Beach, CA, for Plaintiff–Appellant William I. Koch.

Jonathan J. Lerner, Maura Barry Grinalds, Robert A. Fumerton, Patrick G. Rideout, Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY, for Defendants–Appellees Christie's International PLC, Christie, Mason & Woods, Ltd., and Christie's Inc.

Before: SACK and RAGGI, Circuit Judges, and KOELTL, District Judge. ^*

JOHN G. KOELTL, District Judge:

For wine, timing is critical. The same is true for causes of action.

This case requires us to clarify the operation of “inquiry notice” in the context of a civil action pursuant to the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and common law fraud claims under New York law. This analysis is necessary to determine whether the wine-related causes of action in this case were stale when brought. The claims relate to alleged fraud in inflating the value of bottles of wine by falsely attributing them to Thomas Jefferson's wine collection.

Plaintiff-appellant William I. Koch appeals from the judgment of the United States District Court for the Southern District of New York (Jones, J.) that dismissed his claims against Christie's International PLC; Christie, Mason & Woods, Ltd.; and Christie's Inc. (collectively, “Christie's”) because they were time-barred. The District Court dismissed the claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Koch v. Christie's International PLC, 785 F.Supp.2d 105 (S.D.N.Y.2011).

The essence of Koch's allegations against Christie's is that Christie's promoted as authentic a cache of wine that was ostensibly bottled in the late eighteenth century and was linked to Thomas Jefferson. Koch alleges that these “Jefferson wines” were in fact counterfeit, and that Christie's knew or was reckless in not knowing of the wines' dubious authenticity. Koch purchased four bottles of the now-discredited Jefferson wines from third-party dealers in November and December of 1988, allegedly relying on promotional representations made by Christie's. In January of 2008, Koch and Christie's agreed to toll the statute of limitations with respect to any claims against Christie's arising out of the Jefferson wine sales. Koch then filed this lawsuit in March 2010.

Koch argues that the District Court erred in describing and applying the legal standard with respect to the doctrine of inquiry notice, under which, in some circumstances, a court imputes to a plaintiff knowledge of facts sufficient to trigger the running of the statute of limitations where the plaintiff could have discovered those facts by a reasonably diligent investigation. Koch further argues that, in any event, the Supreme Court's decision in Merck & Co. v. Reynolds, ––– U.S. ––––, 130 S.Ct. 1784, 176 L.Ed.2d 582 (2010), changed the law with respect to what knowledge is required to trigger accrual in cases arising under RICO. Koch also argues that the District Court erred in dismissing his New York state law claims as time-barred because the standard for inquirynotice under New York law is different from the standard under federal law in RICO cases, and his claims should survive under the New York standard.

Because we find no error in the District Court's conclusion that Koch's claims were time-barred, we AFFIRM the judgment of the District Court.

BACKGROUND

For the purpose of reviewing the grant of a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, we accept as true the facts alleged in the Complaint, drawing all reasonable inferences in favor of the plaintiff. See, e.g., Muto v. CBS Corp., 668 F.3d 53, 56 (2d Cir.2012). We provide a summary of the relevant allegations here.

The origins of this case lie with one Hardy Rodenstock, a “well-known wine connoisseur” and German national. In the mid–1980s, Rodenstock claimed to have discovered a cache of wine in a bricked-up wine cellar in Paris. The bottles bore the initials “Th.J.,” as well as various late eighteenth century vintages and the names of wineries from the period. Rodenstock pronounced the bottles authentic and linked them to Thomas Jefferson who had served as the United States Minister to France in the late 1700s prior to becoming the third President of the United States and whose zeal for wine is well-documented in the historical record.

The Complaint alleges that Rodenstock had a longstanding and symbiotic relationship with Christie's and specifically with J. Michael Broadbent, a wine consultant for Christie's and the former head of its wine department. Christie's, as alleged in the Complaint, is “one of the world's largest auction houses .... [and] describes itself as ‘firmly at the front of the international wine auction market.’ ” Broadbent was the head of the wine department at Christie's in 1985, when Christie's first sold a bottle of “Th.J wine” from the Rodenstock cache, namely a bottle of “1787 Th.J Lafitte.” ¹

In the run up to the first sale of Th.J. wine by Christie's, Broadbent contacted the Thomas Jefferson Foundation at Monticello. In the course of Broadbent's correspondence with Monticello historian Cinder Goodwin in November 1985, Broadbent noted at one point that there was “no actual proof” of the Th.J wine's connection to Jefferson. Goodwin, for her part, said she was skeptical, but would reserve final judgment.

Despite this, the 1985 Christie's Catalogue, in text allegedly written by Broadbent, discussed in detail Jefferson's interest in wine in connection with the Th.J Lafitte. Christie's publicized and marketed the bottle of Th.J. Lafitte in its 1985 Catalogue and publicly released a Sale Memorandum that also connected the wine to Jefferson and that represented that the Jefferson wine was in fact from the late eighteenth century. In December 1985, Christie's sold the “1787 Th.J. Lafitte” at auction for approximately $156,000, reportedly the highest price ever paid for a bottle of wine. Christie's then issued a December 9, 1985 press release that again tied the wine to Jefferson and again touted the wine's authenticity.

Shortly after the December 1985 sale, Rodenstock began corresponding with Monticello about the status of the Jefferson wine and suggested holding a wine tasting from the Th.J. cache at Monticello. Monticello's director declined, citing “doubts about the Jefferson connection.” The correspondence culminated in an April 1986 letter to Rodenstock that included a research report (the “Monticello Report”) prepared by historian Goodwin on December 12, 1985. The Monticello Report examined Jefferson's financial records, including records of his wine purchases, correspondence, initialed personal property, and existing wine collection, and concluded that “no solid connecting evidence could be found” between Jefferson and the Th.J. wine. The Report did not become public at that time. However, in October 1985, The New York Times published an article discussing the Th.J. wine and airing the doubts of Monticello Jefferson scholars. Another Times article that ran the day after the auction noted the “scholarly doubt” as to the authenticity of the Th.J. wine.

In 1986, Christie's placed another bottle from the Th.J. cache up for auction. Again, the Th.J. bottle was featured in the 1986 Christie's Catalogue. The description of the bottle in the Catalogue noted that “it is assumed that the wine ... was once the property of Thomas Jefferson,” and that “there is a very strong case to be made for the authenticity of the engraving and provenance.” The bottle ultimately sold on December 4, 1986, for approximately $56,000. In 1987, Christie's sold another half-bottle from the Th.J. cache at an annual trade show in Bordeaux, France.

In November 1988, Koch purchased a bottle marked “1787 Branne Mouton Th.J.” for $100,000. Koch allegedly purchased the bottle from Rodenstock who used the Chicago Wine Company and Farr Vintners as intermediaries. Koch alleges that he purchased the bottle in reliance on “glowing endorsements of the wines and Rodenstock,” made by Christie's “with the intent to influence wine collectors like [Koch] to purchase Rodenstock's wines” and that “reasonably led [Koch] to believe that the wine offered by Rodenstock was authentic.” The next month, Koch purchased three more bottles of Th.J. wine for $211,804.40. Koch purchased these bottles from Farr Vintners acting as Rodenstock's agent. The bottles were marked, respectively, as: “1787 Lafite Th.J.,” “1784 Lafite Th.J.,” and “1784 Branne Mouton Th.J.”

In deposition testimony in a related case in Illinois state court,² Koch admitted that, in the early 1990s, he read several articles detailing the “real doubts” that existed with respect to the authenticity of the Th.J. wine. One news report from the period described the Th.J. wine issue as “the wine world's biggest scandal.” During this period, Koch also learned of a lawsuit by a German wine collector against Rodenstock. The lawsuit alleged that the Th.J. wine was counterfeit. Koch hired attorneys in 1993 to investigate and assess the provenance of the Th.J. wine. These attorneys sent him several of the articles relating to testing of the Th.J. wine that had been conducted for the purpose of the German lawsuit, some of which had confirmed the wine as authentic and some of which had indicated that it was counterfeit. Koch received legal advice concerning a potential action against Rodenstock in 1993 and sought the advice of counsel again in 1995...