Egerique v. Chowaiki

Decision Date24 April 2020
Docket Number19 Civ. 3110 (KPF)
PartiesALEJANDRO DOMINGO MALVAR EGERIQUE, Plaintiff, v. EZRA CHOWAIKI, DAVID BENRIMON FINE ART LLC, LINDA BENRIMON, PIEDMONT CAPITAL LLC, AVICHAI ROSEN, DAVID BENRIMON, and JOHN DOES 1-10, Defendants.
CourtU.S. District Court — Southern District of New York
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

Plaintiff Alejandro Domingo Malvar Egerique is understandably upset. He was deprived of two valuable artworks of which he was the rightful owner, and the person responsible for that deprivation was ultimately convicted of fraud charges in this District. Unsatisfied with the results of the criminal prosecution and a related bankruptcy proceeding, Plaintiff has decided to take matters into his own hands, bringing a civil lawsuit under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, against a wide swath of individuals (collectively, "Defendants") he blames for his losses. In relevant part, Plaintiff alleges that: (i) Ezra Chowaiki, the convicted art dealer, used his art gallery to engage in a pattern of fraudulently acquiring and selling artwork; (ii) David and Linda Benrimon, through their art gallery David Benrimon Fine Art LLC ("DBFA"), engaged in a pattern of selling artwork that they had no legal right to sell; (iii) the Benrimons, through DBFA, engaged in the unlawful collection of debt; (iv) Avichai Rosen, through his enterprise, Piedmont Capital LLC ("Piedmont"), also engaged in the unlawful collection of debt; (v) Defendants conspired to facilitate each of the previously mentioned RICO violations; and (vi) Defendants committed analogous state-law claims of fraud, conversion, and replevin.

Because of the sanctions and stigma attendant to them, civil RICO claims are notoriously — and appropriately — difficult to plead. Chowaiki has moved to dismiss the claims against him, and the remaining Defendants, David and Linda Benrimon, DBFA, Piedmont, and Rosen (collectively, the "Benrimon Defendants"), have separately moved to dismiss the claims against them. The Benrimon Defendants have also moved for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure. For various reasons outlined herein, Plaintiff has not pleaded viable RICO claims in this case. Accordingly, Chowaiki's motion to dismiss is granted in part and denied in part; the Benrimon Defendants' motion to dismiss is granted in part and denied in part; and the Benrimon Defendants' motion for Rule 11 sanctions is granted in part and denied in part.

BACKGROUND
A. Factual Background1
1. The Parties

Plaintiff is a citizen and resident of Spain, and the owner of two works of art, le Gueridon by Pablo Picasso (the "Picasso"), and Composition avec Profil deFemme by Fernand Leger ("the Leger"). (Compl. ¶¶ 3, 4). Plaintiff acquired both works of art at a sale at Sotheby's in London on February 6, 2007. (Id. at ¶ 4). The Picasso was purchased as Lot 0152, and the Leger was purchased as Lot 0235. (Id.).

Because Plaintiff alleges several RICO enterprises involving different permutations of the defendants, a word about each Defendant is in order. During the relevant time period, Ezra Chowaiki was the Chief Executive Officer and one of the owners of Chowaiki & Co. Fine Art Ltd. (the "Gallery"), an art gallery in New York City. (Compl. ¶ 5). On or about November 13, 2017, the Gallery filed a voluntary petition under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. See In re Chowaiki & Co. Fine Art Ltd., No. 17-13228 (MKV) (Bankr. S.D.N.Y. Nov. 13, 2017) (the "Bankruptcy Case"). Six months later, on May 3, 2018, Chowaiki pleaded guilty to a single count of wire fraud, in violation of 18 U.S.C. § 1343, in this District, relating to his theft of several pieces of artwork. See United States v. Ezra Chowaiki, No. 18 Cr. 323 (JSR) (the "Criminal Case"). As part of Chowaiki's plea and sentencing, Chowaiki agreed to forfeit to the UnitedStates 26 works of art that were the proceeds of his crimes. (Id.). The Picasso is one of the forfeited works. (Id.).

DBFA is an art gallery in New York City. (Compl. ¶ 6). David Benrimon is the Director and Chief Executive Officer of DBFA. (Id. at ¶ 7). Linda Benrimon is the Executive Director of DBFA. (Id. at ¶ 8). She is also the daughter of David Benrimon and the spouse of Avichai Rosen. (Id.). As Director and Executive Director of DBFA, respectively, David and Linda Benrimon buy and sell art for DBFA. (Id. at ¶ 19). Piedmont, of which Rosen is a principal, is a boutique investment manager specializing in strategic investments in alternative asset classes, including artwork. (Id. at ¶¶ 9-10).2 As noted above, the Court refers to DBFA, David and Linda Benrimon, Avichai Rosen, and Piedmont as the "Benrimon Defendants."

2. Plaintiff Consigns the Picasso and the Leger to Chowaiki and the Gallery

Immediately after purchasing the Picasso and the Leger from Sotheby's in February 2007, Plaintiff installed them in his home in Spain, where they remained for eight years. (Compl. ¶ 34). On April 27, 2015, Plaintiff's brother, Benito Malvar, at Plaintiff's instruction and authority, and on Plaintiff's behalf, consigned the Picasso and the Leger to the Gallery. (Id. at ¶ 35). Plaintiff sent the two pieces of art to the Gallery that month (id. at ¶ 34), and they arrived in early June 2015 (id. at ¶ 36). After the consignments expired, Plaintiff —through his brother and through Chowaiki's agent — repeatedly demanded the return of the artwork. (Id. at ¶ 37). Chowaiki promised by telephone and email to return the artwork, but never did so. (Id. at ¶¶ 37, 105).

Instead, Chowaiki converted the artwork for his own purposes. In January or February of 2017, Chowaiki, through the Gallery, sold and shipped the Leger from New York to Glowside Investment Trading, the listed address of which was 115 George Street, 4th Floor, Edinburgh, Scotland, United Kingdom. (Compl. ¶ 106). Chowaiki received money from that sale that was never shared with Plaintiff. (Id.). More troublingly, Glowside Investment Trading does not exist, and no such entity maintains an office at the address given in Edinburgh or elsewhere. (Id. at ¶ 107). Further, as described below, Plaintiff alleges that Chowaiki also sold the Picasso without Plaintiff's knowledge or authorization.

3. The Alleged Schemes

Plaintiff's Complaint outlines several frauds or schemes that, he alleges, constitute predicate acts sufficient to support his RICO claims. To set the stage for its legal analysis, the Court describes those schemes in the remainder of this section.

a. The Latamie Acts

The first scheme concerns the sale of Andy Warhol artwork in which DBFA is alleged to have been involved. On February 2, 2012, DBFA — or Benrimon Contemporary LLC, a related art gallery — sold a painting and a set of ten Mao Zedong prints, all by Warhol, to Marc Latamie and DM Fountain,Inc. ("DM"), Latamie's corporate entity, for $1,750,000. (Compl. ¶ 24). The Warhol painting was delivered to Latamie and DM. (Id.). However, neither DBFA nor Benrimon Contemporary LLC delivered the complete set of ten Mao Zedong prints to Latamie or DM. (Id.).

Cribbing from a state-court complaint filed by Latamie and DM against Benrimon Contemporary LLC, DBFA, David Benrimon, and son Leon Benrimon, Plaintiff alleges that, in connection with the Warhol transaction, Latamie and DM negotiated with, inter alia, several members of the Benrimon family. (Compl. ¶ 25). David and Linda Benrimon, in particular, repeatedly promised Latamie and DM that they (the Benrimons) would deliver the Warhol prints to the purchasers, despite the fact that Benrimon Contemporary LLC never had ownership, custody, or control over these prints. (Id. at ¶ 26). Plaintiff also alleges that David and Linda Benrimon, through DBFA, sold and delivered to others the very same Warhol prints that they supposedly sold, but failed to deliver, to Latamie and DM. (Id. at ¶ 27).

b. The Pledge Agreement Acts

The second scheme alleged by Plaintiff involved David and Linda Benrimon, through DBFA, acquiring works from Chowaiki and the Gallery — works they knew Chowaiki and the Gallery did not own — at deeply discounted prices. In support of this claim, Plaintiff alleges the following facts:

On September 19, 2017, David and Linda Benrimon, on behalf of DBFA, agreed to acquire three works of art in a bulk transaction from the Gallery. (Compl. ¶ 45). These were the Picasso; Takashi Murakami's Jellyfish Eyes(Black I) (the "Murakami"), which belonged to Thomas Morgan; and Pablo Picasso's Le Clown ("Le Clown"), which belonged to Andrew and Kristen Neumann. (Id.). David and Linda Benrimon structured this transaction with Chowaiki so that Piedmont would "lend" Chowaiki and his Gallery money that, by design, would not be repaid, using the works of art as "collateral" for the "loan." (Id. at ¶ 44).

Plaintiff cites several emails between David Benrimon and Chowaiki confirming the loan transactions. (Compl. ¶ 47). He also cites the loan documents comprising the transaction, which include: (i) a "Note" for a loan of $300,000.00 from Piedmont to the Gallery, to be repaid in 30 days, together with $50,000.00 interest, for a total uncompounded annual interest rate of 202.18%; (ii) a "Pledge Agreement" in which Piedmont is given the Picasso, the Murakami, and Le Clown as security for repayment of the loan; (iii) a "Shtar Isko"3 in which the $300,000.00 loan creates a 50%-50% partnership between Piedmont and Chowaiki; and (iv) a "Release and Settlement Agreement" in which the parties agreed that, in light of the Gallery's failure to repay the $300,000.00 loan plus $50,000.00 in interest when due on October 19, 2017, all title and ownership of the three artworks passed to Piedmont. (Id. at ¶ 48). Plaintiff alleges that while Piedmont was listed as the lender in the documents, the transactions were negotiated by David and Linda Benrimon, on behalf of,and from, DBFA,...

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