Accent Delight Int'l Ltd. v. Sotheby's

Decision Date08 December 2020
Docket Number18-CV-9011 (JMF)
Citation505 F.Supp.3d 281
Parties ACCENT DELIGHT INTERNATIONAL LTD., et al., Plaintiffs, v. SOTHEBY'S, et al., Defendants.
CourtU.S. District Court — Southern District of New York

Douglas Edward Lieb, Kaufman Lieb Lebowitz & Frick LLP, Ogilvie Andrew Fraser Wilson, Scout Katherine Katovich, Daniel Joseph Kornstein, Ananda Venkata Burra, Andrew K. Jondahl, Zoe Antonia Salzman, Emery Celli Brinckerhoff Abady Ward & Maazel LLP, New York, NY, for Plaintiffs.

Marcus Aaron Asner, Sara Lynn Shudofsky, Carmela T. Romeo, Mitchell Russell Stern, Benjamin C. Wolverton, Laura Daphne Pacifici, Arnold & Porter Kaye Scholer LLP, New York, NY, Kathryn Linde Marshall, Neal Kumar Katyal, Hogan Lovells US LLP, Washington, DC, for Defendants.

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

The question presented here — which has spawned surprisingly little and, in this Circuit at least, conflicting law — is whether a party seeking to discover materials relating to a private confidential mediation must satisfy a heightened standard of need. The question arises in a lawsuit between Plaintiffs Accent Delight International Ltd. and Xitrans Finance Ltd. and Defendants Sotheby's and Sotheby's, Inc. (collectively "Sotheby's") over Sotheby's role in an alleged scheme by Yves Bouvier, an art dealer who is not a party to this case, to defraud Plaintiffs of approximately one billion dollars in connection with the purchase of a world-class art collection, including Leonardo da Vinci's Christ as Salvator Mundi. In a private mediation subject to an agreement of confidentiality, Sotheby's settled separate litigation with the original sellers of Salvator Mundi , and Plaintiffs here now move to compel disclosure of materials relating to that mediation. For the reasons that follow, the Court holds that a heightened standard does apply to that request and that Plaintiffs fail to satisfy it. Accordingly, the motion is denied.

BACKGROUND

The Court has issued many opinions in connection with Plaintiffs’ claims against Sotheby's and Bouvier, in this and a related case, familiarity with which is presumed. See, e.g. , Accent Delight Int'l Ltd. v. Sotheby's , 394 F. Supp. 3d 399 (S.D.N.Y. 2019) (largely denying Sotheby's motion to dismiss Plaintiffs’ claims in this case); see also In re Application of Accent Delight Int'l Ltd. , No. 16-MC-125 (JMF), 2016 WL 5818597 (S.D.N.Y. Oct. 5, 2016) (granting discovery for use in certain foreign proceedings pursuant to 28 U.S.C. § 1782 ), aff'd sub nom. In re Accent Delight Int'l Ltd., 869 F.3d 121 (2d Cir. 2017), and aff'd sub nom. In re Accent Delight Int'l Ltd. , 696 F. App'x 537 (2d Cir. 2017) (summary order); In re Accent Delight Int'l Ltd. , No. 16-MC-125 (JMF), 2017 WL 6568059 (S.D.N.Y. Dec. 22, 2017) (authorizing earlier Section 1782 materials to be used in separate proceedings in Switzerland and the United Kingdom); In re Accent Delight Int'l Ltd. , Nos. 16-MC-125 (JMF) & 18-MC-50 (JMF), 2018 WL 2849724 (S.D.N.Y. June 11, 2018) (authorizing earlier Section 1782 materials to be used in a separate Swiss criminal proceeding, and granting in part and denying in part another Section 1782 petition), aff'd , 791 F. App'x 247 (2d Cir. 2019) (summary order).

In brief, Plaintiffs (and their principal, a Russian billionaire named Dmitry Rybolovlev) hired Bouvier in or about 2003 to assist them in purchasing a world-class art collection. See ECF No. 66 ("Am. Compl."), ¶¶ 13-15. Plaintiffs allege that, over the next twelve years, although Bouvier purported to act as their agent, he was also, improperly and secretly, acting as a dealer, buying the art himself and selling it to Plaintiffs at a higher price. See id. ¶¶ 16-19. Christ as Salvator Mundi , one of only about fifteen authenticated paintings by da Vinci that exist today, is one of the artworks at issue. See id. ¶¶ 166-88. Plaintiffs allege that, in May 2013, Sotheby's facilitated the sale of the painting from a group of sellers (the "da Vinci Sellers") to Bouvier for $83 million. See id. ¶¶ 166-73. Based on Bouvier's false representations about the true purchase price, however, Plaintiffs paid Bouvier $127.5 million — "a markup of 53.62%." Id. ¶¶ 172, 175. Plaintiffs allege that Sotheby's "assist[ed]" Bouvier in this fraud and that, when they began to develop suspicions, Sotheby's "help[ed]" Bouvier in his efforts "to justify the fraudulent price" he had charged Plaintiffs. Id. ¶¶ 175, 182-85.

As it happens, Plaintiffs are not the only ones who, upon learning about Bouvier's markup, felt aggrieved about Sotheby's role in the Christ as Salvator Mundi transaction. On November 21, 2016, Sotheby's filed a separate lawsuit against the da Vinci Sellers seeking a declaratory judgment that it did not breach its obligations to them in connection with the sale of the painting. See Sotheby's Inc. v. R.W. Chandler, LLC , No. 16-CV-9043 (ALC), 2016 WL 6893781 (S.D.N.Y.). As Plaintiffs allege in their Amended Complaint here, "Sotheby's claimed" in that lawsuit — which was assigned to the Honorable Andrew L. Carter — that it had been "unaware of Bouvier's relationship with Rybolovlev when it arranged for Rybolovlev to view" the painting. Am. Compl. ¶ 186. With the assistance of a private mediator, former District Judge Barbara Jones (the "Mediator"), Sotheby's and the da Vinci Sellers "quickly" resolved their disagreement and entered into a confidential settlement. Id. ; see ECF No. 201 ("Defs.’ Letter"), at 1. Notably, the mediation (the "Mediation") began even before Sotheby's filed its lawsuit. In September 2016, Sotheby's, the da Vinci Sellers, and the Mediator signed an engagement letter providing that the Mediation "was a settlement negotiation deemed private and confidential." Defs.’ Letter 1. At no point did Judge Carter order mediation or address the confidentiality of the parties’ private mediation. (Indeed, from a review of the docket, there is no indication that Judge Carter was even aware that the parties were engaged in the Mediation.)

In May 2020, Plaintiffs in this case served the da Vinci Sellers with subpoenas seeking their confidential settlement agreement with Sotheby's and other documents relating to the Mediation, which Sotheby's then sought to quash. See ECF No. 182, at 1-2. The Court, after reviewing the settlement agreement in camera , granted Sotheby's motion to quash as to the settlement agreement, ECF No. 190, but declined to do so as to the remaining requests, subject to any objections Sotheby's might raise, ECF No. 189. Thereafter, the da Vinci Sellers "produced their mediation statement, as well as other documents, but Sotheby's blocked the Sellers’ production of communications that, according to the DaVinci Sellers, are ‘otherwise responsive’ and ‘directly relate to the mediation.’ " ECF No. 200 ("Pls.’ Letter"), at 2. Plaintiffs now seek the blocked materials as well as Sotheby's "own mediation statement and communications about the mediation" (together, the "Mediation Materials"). See id. In total, Plaintiffs seek approximately 250 withheld documents, including communications (along with attachments) between Sotheby's counsel and counsel for the da Vinci Sellers and communications (along with attachments) between Sotheby's counsel and the Mediator. See id. ; Defs.’ Letter 1.

DISCUSSION

The threshold question for purposes of determining whether Plaintiffs are entitled to the Mediation Materials is whether such materials are subject to the heightened standard adopted by the Second Circuit in In re Teligent, Inc. , 640 F.3d 53 (2d Cir. 2011). In that case, the Court affirmed denial of a motion to compel disclosure of materials relating to a mediation conducted subject to a court order providing for confidentiality of the mediation process. See id. at 56-57, 62. "A party seeking disclosure of confidential mediation materials," the Court held, must meet three requirements: It "must demonstrate (1) a special need for the confidential material, (2) resulting unfairness from a lack of discovery, and (3) that the need for the evidence outweighs the interest in maintaining confidentiality." Id. at 58.

The Court tethered this heightened standard to the importance of confidentiality to "the mediation and other alternative dispute resolution processes":

Confidentiality is an important feature of the mediation and other alternative dispute resolution processes. Promising participants confidentiality in these proceedings "promotes the free flow of information that may result in the settlement of a dispute," In re Grand Jury Subpoena Dated Dec. 17, 1996, 148 F.3d 487, 492 (5th Cir. 1998), and protecting the integrity of alternative dispute resolution generally, see e.g., In re Cnty. of Los Angeles, 223 F.3d 990, 993 (9th Cir. 2000) ; Clark v. Stapleton Corp., 957 F.2d 745, 746 (10th Cir. 1992) (per curiam); Sheldone v. Pa. Tpk. Comm'n, 104 F. Supp. 2d 511, 517 (W.D. Pa. 2000) ; Fields-D'Arpino v. Rest. Assocs., Inc., 39 F. Supp. 2d 412, 417 (S.D.N.Y. 1999) ; Folb v. Motion Picture Indus. Pension & Health Plans, 16 F. Supp. 2d 1164, 1170-80 (C.D. Cal. 1998), aff'd 216 F.3d 1082 (9th Cir. 2000) ; Bernard v. Galen Grp., Inc., 901 F. Supp. 778, 784 (S.D.N.Y. 1995). We vigorously enforce the confidentiality provisions of our own alternative dispute resolution, the Civil Appeals Management Plan ("CAMP"), because we believe that confidentiality is "essential" to CAMP's vitality and effectiveness.

Id. at 57-58. More specifically, the Court explained that it drew the heightened standard for disclosure of confidential mediation materials "from the sources" on which the lower court had relied, including "the Uniform Mediation Act ..., the Administrative Dispute Resolution Act of 1996 ..., and the Administrative Dispute Resolution Act of 1998 ...." Id. at 58 (footnotes omitted). "Each of these" sources, the Court reasoned, "recognizes the importance of maintaining the confidentiality of mediation communications and provides for disclosure in only...

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