Davis v. Carroll

• Decision Date: 29 March 2013
• Docket Number: No. 09 Civ. 1088 (JPO).,09 Civ. 1088 (JPO).
• Citation: 937 F.Supp.2d 390
• Parties: Earl DAVIS, Plaintiff, v. Joseph P. CARROLL and Joseph P. Carroll Limited, Defendants. Joseph P. Carroll and Joseph P. Carroll Limited, Counterclaim Plaintiffs, v. Earl Davis, Counterclaim Defendant.
• Court: U.S. District Court — Southern District of New York

937 F.Supp.2d 390

Earl DAVIS, Plaintiff,

v.Joseph P. CARROLL and Joseph P. Carroll Limited, Defendants.

Joseph P. Carroll and Joseph P. Carroll Limited, Counterclaim Plaintiffs,

v.Earl Davis, Counterclaim Defendant.

No. 09 Civ. 1088 (JPO).

United States District Court,

S.D. New York.

March 29, 2013.

Christopher Jules Klatell, David Barry Goldstein, Rabinowitz, Boudin, Standard, Krinsky & Lieberman, PC, Michael Lee Hertzberg, Michael Lee Hertzberg, New York, NY, for Plaintiff.

Jeffrey Adam Udell, Melanie Joan Sacks, Olshan, Grundman, Frome, Rosenzweig & Wolosky, LLP, New York, NY, for Defendants.

MEMORANDUM AND ORDER

J. PAUL OETKEN, District Judge:

This case arises from scandal in the elite world of New York's fine art galleries. Plaintiff Earl Davis entrusted artworks produced by his father, the influential American modernist painter Stuart Davis, to Salander O'Reilly Galleries (“SOG”). Unbeknownst to Davis, SOG was caught in a vast web of unethical and illegal dealings that ultimately resulted in a criminal conviction. Before SOG's house of cards collapsed, its principal, Lawrence Salander, engaged in a series of major transactions with Defendant Joseph P. Carroll. Over four months in 2006, Salander purported to sell 44 artworks to Carroll—including eight Stuart Davis works, which are at the heart of this dispute. Davis has sued to recover those works. He argues that Carroll should have been alerted to signs of foul play and that Carroll's due diligence reflected the very sort of commercial indifference to legal rights that New York law refuses to tolerate. Carroll retorts that he had every reason to trust SOG and that his due diligence was more than adequate.

Davis has moved for summary judgment. He has also moved to strike Carroll's art industry expert and to sanction Carroll for spoliation or perjury. For the reasons that follow, Davis's motion for summary judgment is granted, his motion for sanctions is denied, and his motion to strike is granted in part and denied in part.

I. Background¹

Jurisdiction of this action is based on diversity of citizenship pursuant to 28 U.S.C. § 1332(a)(1). Plaintiff is a citizen of New Jersey and Defendants are citizens of New York. The amount in controversy exceeds $75,000.

A. The Parties

Plaintiff Earl Davis is the only son of Stuart Davis (1896–1964), one of America's most celebrated modernist artists. Davis is the owner, through gifts received from his parents, of a large number of Stuart Davis paintings, works on paper, drawings, and sketches. Many of these works have not previously been sold. During the time period relevant to this case, Davis occasionally signed agreements on behalf of, and identified himself on provenance statements as, the “Estate of Stuart Davis.” ²

Defendant Joseph P. Carroll is an international museum curator, philanthropist, and private art dealer. He has been in the business of buying art for resale for nearly 35 years and includes American modernism among his areas of focus. Carroll purchased, sold, and consigned artworks from, to, and through New York art galleries during the 1990s and 2000s. Defendant Joseph P. Carroll Limited is a corporation formed under New York law. It is a legal entity through which Carroll conducted business for over twenty years; Carroll is its president and sole stockholder. Carroll Limited has been essentially dormant since 2010.³ From 1990 to 2000, Carroll purchased over 1,000 works of art.

Lawrence Salander (a non-party) was the principal of Salander–O'Reilly Galleries (SOG) (also a non-party), which was considered one of the preeminent art galleries in Manhattan until late 2007. In November 2007, SOG's creditors commenced an involuntary case against it under Chapter 7 of the Bankruptcy Code and Salander filed for voluntary bankruptcy. In March 2009, SOG and Salander were indicted in New York County on 100 felony counts, including multiple counts of Grand Larceny in the first degree, for a series of fraudulent schemes perpetrated against, amongst others, Davis. On March 18, 2010, Salander and SOG pleaded guilty to approximately 30 felony counts, including a count of Grand Larceny in the first degree charging that they stole property from Davis valued in excess of one million dollars.

B. Davis's Consignment of His Stuart Davis Works to SOG

Stuart Davis died in 1964. His wife, Roselle Davis, died in 1994. During their lives, they gifted to their son, Earl Davis, many Stuart Davis works, including the works at issue in this case (collectively “the Eight Disputed Works”). In the late 1970s or early 1980s, Davis met Salander at a Christie's auction. Soon after, in response to an open invitation from Salander, Davis proposed that they work together on a catalogue raisonné and Salander agreed.⁴ As part of this deal, Salander undertook to bankroll the project and provide other forms of support.

In the early 1980s, Davis consigned to Salander his first Stuart Davis works. ⁵ Davis recalls that he “gradually became more comfortable with [Salander] and came to trust him increasingly.” By around 1987, Davis had consigned a numberof works for display at shows and possible sale. Davis and Salander agreed to four or five exhibitions over the course of the 1980s; each time, Davis generally took back most of the works that did not sell. In this stage of their relationship, Salander sold Stuart Davis works that Davis provided to him for exhibitions and that Davis left on inventory for sale.

In December of 1990, Davis and Salander signed an agreement providing that SOG would be the worldwide representative of the work of Stuart Davis for five years. At the end of this contract, Davis and Salander “had an ongoing oral understanding” that lasted through late 2007. Throughout this period, Davis was denoted in some of these agreements as “The Estate of Stuart Davis” because he owned a majority of his father's works. Ultimately, from the mid-1980s through 2007, Davis consigned the majority of the Stuart Davis artworks that he owned to SOG. At times, more than fifty of his Stuart Davis artworks were consigned to SOG.

Throughout this period, the terms of Davis's oral deal with SOG included an understanding that the gallery would contact him for an updated pricing before selling any art work or indicating an asking price. Thus, the gallery would regularly contact him, inquire about his asking price for a particular work that he had consigned, and then later inform him whether it was sold at or above that price or did not sell at all. In 2003, Davis discovered that SOG had sold one of his consigned works— Drawing on Canvas for Punchcard Flutter—without informing him. Davis later learned that SOG had, in fact, been “doing it all the time.” But as of late 2005 and early 2006, Davis did not know of this practice by SOG. Davis did not file any U.C.C. financing statements to publicize his consignment interest in works delivered to SOG.

C. Carroll's Acquisition of the Eight Disputed Works

1. Events Leading Up to the 2006 Exchanges

Carroll first met Salander in 1991 and completed his first art transaction with Salander in 1998. Between January 1998 and December 2005, Carroll and SOG engaged in a number of art transactions. Carroll estimates that, in total, Carroll Limited purchased approximately 120 works of art from Salander or SOG and sold approximately 40 works of art to SOG. He adds that “almost all of Carroll Limited's purchases from SOG between 1998 and 2007 involved groups of art exchanged for both art and money.” One such deal, which was finalized on January 26, 1998, involved Carroll exchanging 33 artworks—three watercolor/crayon works, 17 Middletown watercolors, and 13 drawings—for three paintings owned by SOG.

In 2000 and 2001, Carroll purchased five Stuart Davis works from SOG. Carroll states that, at the time, he believed that SOG owned these works. He explains that the provenance statements “indicated that the works had been transferred from ‘The artist; to present owner,’ which [Carroll] understood to be SOG.” When asked about these transactions in his deposition, however, Carroll stated that “[SOG] at this point represented the estate. Whether [the art] was owned by the estate or owned by [SOG], I don't know.”

Davis disputes these statements by Carroll and argues that Carroll knew in 2000–2001 that the Stuart Davis works he purchased from SOG were owned by Davis or by the Davis Estate, and not by SOG. Davis notes that some of the documentation produced as part of the 2000–2001 deal listed “Estate of the Artist” as the provenance, not “to present owner.” Further, whereas works that Carroll sold to SOG were listed as “owned by” Carroll, the Davis Works were listed as “sold by” SOG. In subsequent documents related to these works, Carroll cited publications that listed Earl Davis as their owner and, when Carroll resold two of these works in June 2002, he prepared documents listing the provenance as “The artist and his estate, 1916–2000/(Sold through [SOG]/The Honorable Joseph Carroll New York 2000–).”

Separate and apart from the question of ownership of the works exchanged in 2000–2001, Carroll knew in 2000 and remained aware in the fall of 2005 that SOG represented the Davis Estate. The relationship between Davis and SOG was common knowledge in the art world.

In these and other transactions, Carroll created his own documentation and did not rely exclusively on the documentation provided by SOG. Whereas Davis describes this habit as evidence that Carroll distrusted the quality and accuracy of SOG's documentation, Carroll describes it as part of his standard practice designed to secure certain legal rights and to account for the apparent absence of “centralized protocol” at SOG for generating documentation.

Davis and Carroll sharply dispute the course of events involved in a transaction between Carroll and SOG in late 2005 that, in Davis's view, put Carroll on notice that SOG was dealing in fakes and was short on cash.

As...