Foundation v. Reversible Destiny Found., Inc.

• Decision Date: 27 August 2018
• Docket Number: 17-CV-7748 (AJN) (BCM)
• Parties: ARCHITECTURAL BODY RESEARCH FOUNDATION, Plaintiff, v. REVERSIBLE DESTINY FOUNDATION, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

ARCHITECTURAL BODY RESEARCH FOUNDATION, Plaintiff, v. REVERSIBLE DESTINY FOUNDATION, INC., et al., Defendants.

17-CV-7748 (AJN) (BCM)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 27, 2018

REPORT AND RECOMMENDATION TO THE HONORABLE ALISON J. NATHAN

BARBARA MOSES, United States Magistrate Judge.

The primary issue in this case is whether plaintiff Architectural Body Research Foundation (ABRF) or the estate of Madeline Gins (the Estate) is the rightful owner of a "conceptual work of art" created by Gins, who died in January 2014, and her husband Shusaku Arakawa, who predeceased her. Gins's will, which was admitted to probate in February 2014, leaves the bulk of her estate - including the disputed work, if it was hers to bequeath - to defendant Reversible Destiny Foundation, Inc. (RDF). In this action, filed in October 2017, ABRF sues RDF, the Estate, and its executors, seeking orders requiring the "immediate[ ] return" of the work, a declaration that ABRF is its "sole and exclusive owner," and damages for copyright infringement. The copyright claim furnishes the sole independent basis for subject matter jurisdiction in this Court.

Now before the Court is defendants' motion, made pursuant to Fed. R. Civ. P. 12(b)(1), to dismiss all of ABRF's claims for lack of subject matter jurisdiction. (Dkt. No. 19.) Defendants rely on the "probate exception," which "precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court." Marshall v. Marshall, 547 U.S. 293, 312 (2006). For the reasons that follow, I respectfully recommend that Your Honor:

1. DISMISS all claims against the Estate, pursuant to Fed. R. Civ. P. 17(b), for lack of capacity to be sued; 2. GRANT defendants' Rule 12(b)(1) motion with respect to plaintiff's conversion, replevin, and declaratory judgment claims, and DISMISS these claims WITHOUT PREJUDICE; and

3. GRANT the Rule 12(b)(1) motion with respect to plaintiff's copyright infringement claim, and DISMISS that claim WITHOUT PREJUDICE; or, in the alternative,

4. DISMISS the copyright infringement claim WITHOUT PREJUDICE pursuant to Fed. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief can be granted, and grant plaintiff leave to amend within 30 days.

I. BACKGROUND

A. The Mechanism of Meaning

The work in dispute is one of two major versions or "editions" of an ambitious project, created by Arakawa and Gins over several decades, entitled The Mechanism of Meaning. Each edition comprises approximately 80 painted panels and other elements, see Compl. (Dkt. No. 1) ¶¶ 2, 5, 16-17, and each evolved over time. See id. ¶¶ 16-17, 42-43.

More than 30 years ago, in 1987, the artists executed a Deed of Gift (Deed) to ABRF, a non-profit foundation formed by them that year.¹ The Deed, annexed to the Complaint as Exhibit 1 (Dkt. No 1-1), transferred to ABRF "all right, title, and possession, including literary rights including copyright," to the works "more fully described in Schedule A." Schedule A, in turn, identified the property being transferred as "The Mechanism of Meaning," and went on to describe, in some detail, 82 individual painted panels, each of them 5 feet 8 inches by 8 feet. Id. at ECF page 3. The Deed did not mention the existence of more than one edition of the property being gifted.Nor did it list any physical components of the gift other than the panels described on Exhibit A, even though The Mechanism of Meaning was an "ongoing work," Compl. ¶ 16, which existed "in different mediums, including a series of publications, drawings and paintings." Id.

In 1989, ABRF sold one edition of The Mechanism of Meaning (referred to herein as the Sezon Edition) to the Saison Foundation, acting on behalf of what is now known as the Sezon Museum of Modern Art in Japan, for $3 million. Compl. ¶¶ 5, 17. According to the Sales Agreement between ABRF and the Saison Foundation, signed by Gins, ABRF conveyed "1 set of the 'Mechanism of Meaning,'" including "81 paintings, 45 drawings, and 1 architectural model." Compl. Ex. 7. The Sezon Edition, completed in 1988, was "the second of the two large editions" of The Mechanism of Meaning created by Arakawa and Gins. Compl. ¶¶ 17, 40-42.

At issue here is the ownership of the other "iconic" edition of The Mechanism of Meaning, see Compl. ¶ 5, which remained in the artists' possession and is now, according to defendants, an asset of Gins's Estate (referred to herein as the Estate Edition). During their lifetimes, Arakawa and Gins continued to modify the Estate Edition and treated it, at least for some purposes, as their personal property, including the associated intellectual property. For example, the couple personally loaned the Estate Edition to the Guggenheim Museum (Guggenheim) in 1996, for an exhibition which opened in 1997. The Loan Agreement, which ran between the artists and the museum, described the loaned work as "The Mechanism of Meaning (84 paintings)" and did not mention ABRF. See Declaration of Ronald D. Spencer, Esq. (Dkt. No. 20), ¶¶ 21-23 & Ex. G. The Guggenheim catalog for the exhibition listed - and included images of - 82 "panels," all from "the artists' collection." Id. Ex. G, Ex. H, at ECF pages 2 ("all works are in the artists' collection"), 4-56 (images of panels), 57-58 (list of panels). The last two panels "dat[ed] from 1996." Id. at ECFpage 57. The catalog also included the notation: "All Arakawa and Madeline Gins works ©1997 Arakawa and Madeline Gins." Id. at ECF page 2.²

Although ABRF was exempt from income tax, it was required to file both federal and state informational returns. Most of the returns were signed by Gins and/or Arakawa. None of them listed any edition of The Mechanism of Meaning (or, for that matter, any other artwork) as part of ABRF's assets. Nor was there any mention of the sale of the Sezon Edition in 1988. See, e.g., Declaration of David R. Baum (Dkt. No. 42), Ex. 4 (federal and state return for 1988); id. Ex. 5 (federal return for 1989, the year in which the Sezon Edition was sold); Spencer Decl. ¶¶ 29-32 & Exs. I-L (federal and state returns for 2005 and 2006).

Beginning with the 1997 returns, ABRF reported, in its attached "Statement of Program Service Accomplishments," that the Guggenheim had exhibited "models and drawings of the Foundation's work." See, e.g., Baum Decl. Ex. 1 (portions of federal return for 1997); Spencer Decl. Ex. J (federal return for 2005). These Statements did not mention the paintings, which (at least according to the Guggenheim catalog) were the heart of The Mechanism of Meaning - and belonged to the artists themselves.

B. Death of the Artists

Arakawa died intestate on May 12, 2010. Compl. ¶ 5; Spencer Decl. ¶ 33. Thereafter, acting in her capacity as his administrator, Gins signed estate tax returns reporting that Arakawa owned artwork valued at more than $27 million at the time of his death, including "Mechanism ofMeaning Paintings" appraised at $4,980,000 by the firm of O'Toole-Ewald Art Associates, Inc. (O'Toole-Ewald). Spencer Decl. ¶¶ 34-37 & Exs. M-N.

Gins died testate on January 8, 2014. Compl. ¶ 5. On February 27, 2014, her will was admitted to probate in the Surrogate's Court for the County of New York, which issued letters testamentary appointing defendants Ronald Spencer, Michael Govan, and Stephen Gins as her executors. Compl. ¶¶ 8-11, 27; see also Spencer Decl. ¶¶ 4-5 & Ex. B; Reply Declaration of Ronald D. Spencer, Esq. (Dkt. No. 45), Ex. A. Spencer is an attorney at Carter Ledyard & Milburn LLC, Compl. ¶ 9, who began representing Gins in 2010. Transcript of Deposition of Ronald D. Spencer, Esq. (Spencer Dep. Tr.) (Dkt. No. 42-10), at 20:12-17. Govan was the organizer of the 1997 Guggenheim exhibition, see Spencer Decl. Ex. H, at ECF page 2, and is now the director of the Los Angeles Museum of Art. Compl. ¶ 10. Stephen Gins is a brother of Madeline Gins. Id. ¶ 11.

At the time of her death, Gins resided in a townhouse at 124 West Houston Street in Manhattan, which also served as the couple's long-time studio and art storage space. See Spencer Decl. ¶¶ 10-11; Declaration of Johanna Post (Dkt. No. 27), ¶ 7; Spencer Dep. Tr. at 128:10-130:24. ABRF's offices were located in the same building for "many years," but were "shut down in 2008," Post Decl. ¶¶ 6-7, for reasons described below.

Sometime in 2014, Gins's executors caused her extensive art collection - including the Estate Edition of The Mechanism of Meaning - to be removed from the townhouse and placed in a climate-controlled art storage facility, where it remains today. Spencer Decl. ¶¶ 11-13, 19, & Exs. C-D. There is no evidence that the Estate Edition was segregated or labeled in any way that suggested it was not Gins's personal property. According to Spencer, the works in the townhouse "sometimes" bore labels, but the labels "didn't identify who owned the work." Spencer Dep. Tr. at 130:10-20.

On April 8, 2015, the Estate filed a List of Assets-Inventory (Inventory) in the Surrogate's Court, reporting that the Estate included $9,642,934 in "Miscellaneous & Trust Property" consisting of "Artwork created by the decedent, her deceased spouse Shusaku Arakawa, and others." Reply Declaration of Judith M. Wallace, Esq. (Dk. No. 47), Ex. B, at 1, 9. The $9.6 million figure was based on an appraisal by O'Toole-Ewald, dated March 26, 2015, which the Estate did not file in the Surrogate's Court but did produce in this action. Wallace Reply Decl. Ex. C. According to the appraisal, the fair market value of "Mechanism of Meaning Paintings" was $4,980,000 "before blockage discount," and $1,245,000 "after blockage discount." Id at 22.³

Gins's will provided for three cash bequests and "left the balance of her estate to RDF." Compl. ¶ 27. RDF was formed by Arakawa and Gins in March 2010, shortly before Arakawa's death, "as a new foundation to promote the work and philosophy of Arakawa and Gins that focused on architectural design as a tool to extend life, and to explore...