Galerie Furstenberg v. Coffaro

• Decision Date: 14 November 1988
• Docket Number: No. 88 Civ. 355 (LLS).,88 Civ. 355 (LLS).
• Citation: 697 F. Supp. 1282
• Parties: GALERIE FURSTENBERG, Plaintiff, v. Philip COFFARO, individually, and in his capacity as an officer, agent and/or director of C.V.M. Art Company, Ltd., Gallery 25 Ltd., Heritage Graphics, Inc. and/or d/b/a Combined Graphics, Thomas Wallace, individually, and in his capacity as an officer, agent and/or director of Geneva Graphics Limited and/or International Fine Arts Ltd. and/or as an agent of C.V.M. Art Company, Ltd., Carol Convertine, individually, and in her capacity as an officer, agent and/or director of Convertine Fine Art Ltd., Julien Aime, Andrew Levine, individually, and in his capacity as an officer, agent and/or director of A.D.L. Fine Arts Inc. and/or d/b/a Combined Graphics, T.R. Rogers, a/k/a Tom Reed, a/k/a Reed Rogers, individually, and in his capacity as an officer, agent and/or director of T.R. Rogers Inc. and/or Rogers on Rodeo Inc., Melton Magidson, individually, and in his capacity as an officer, agent and/or director of Magidson & Associates, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

697 F. Supp. 1282

GALERIE FURSTENBERG, Plaintiff, v. Philip COFFARO, individually, and in his capacity as an officer, agent and/or director of C.V.M. Art Company, Ltd., Gallery 25 Ltd., Heritage Graphics, Inc. and/or d/b/a Combined Graphics, Thomas Wallace, individually, and in his capacity as an officer, agent and/or director of Geneva Graphics Limited and/or International Fine Arts Ltd. and/or as an agent of C.V.M. Art Company, Ltd., Carol Convertine, individually, and in her capacity as an officer, agent and/or director of Convertine Fine Art Ltd., Julien Aime, Andrew Levine, individually, and in his capacity as an officer, agent and/or director of A.D.L. Fine Arts Inc. and/or d/b/a Combined Graphics, T.R. Rogers, a/k/a Tom Reed, a/k/a Reed Rogers, individually, and in his capacity as an officer, agent and/or director of T.R. Rogers Inc. and/or Rogers on Rodeo Inc., Melton Magidson, individually, and in his capacity as an officer, agent and/or director of Magidson & Associates, Inc., Defendants.

No. 88 Civ. 355 (LLS).

United States District Court, S.D. New York.

October 5, 1988.

As Amended November 14, 1988.

COPYRIGHT MATERIAL OMITTED

Thomas Ré & Partners, New York City (Alan A. Beaven, of counsel), for plaintiff.

Rosan & Rosan, P.C., New York City (Robert Rosan, of counsel), for defendant Melton Magidson.

Arnold J. Ross, New York City, for defendant Philip Coffaro.

Capetola & Doddato, New York City (Frank A. Doddato, of counsel), for defendants Thomas Wallace and Andrew Levine.

Hans J. Hachmann, New York City, for defendant Julien Aime.

Berger & Steingut, New York City, (Robert Weiner, of counsel), David Paul Steiner, Los Angeles, Cal., for defendant T.R. Rogers.

OPINION and ORDER

STANTON, District Judge.

Galerie Furstenberg is a French corporation which sells works of art and purportedly holds the exclusive rights to certain drawings and etchings by Salvador Felipe Jacinto Dali. It alleges that defendants (art merchants and retail outlets) advertised, distributed and sold counterfeit Dali reproductions since December 1980. Plaintiff sues under RICO, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-68 (1982 & Supp. IV 1986), alleging predicate act violations of mail and wire fraud, 18 U.S.C. §§ 1341, 1343 (1982), and the federal trademark laws, 15 U.S.C. §§ 1111-27 (1982), and also alleges state law claims.

Defendants move pursuant to Fed.R.Civ. P. 9(b) and 12(b)(6) to dismiss the complaint, and pursuant to Local Rule 39 for security for costs. Defendant Rogers also moves, pursuant to Fed.R.Civ.P. 12(b)(2), to dismiss the complaint for lack of personal jurisdiction over him. Plaintiff moves for judgment against defendant Convertine Fine Art, Ltd.

For the reasons stated below, defendants' motion to dismiss is denied in part and granted in part; plaintiff's motion for entry of judgment against Convertine Fine Art, Ltd. is denied; and the determination of defendants' motion for security is held in abeyance pending further submissions.

BACKGROUND

Galerie Furstenberg "has long been a specialist in the publication and sale of early editions of Dali's works" and "is the foremost publisher of Dali copper etchings in the world." (Complaint ¶ 10) Its names six defendants¹ in this action: Philip Coffaro (president and majority shareholder of C.V.M. Art Company, Gallery 25 Ltd., and Heritage Graphics, Inc., doing business as Combined Graphics), Thomas Wallace (a salesman for C.V.M. Art Company and majority shareholder of International Fine Arts Ltd. and Geneva Graphics Limited), Julien Aime (who is claimed to have provided fraudulent certificates of authenticity), Andrew Levine (a shareholder of A.D.L. Fine Arts Inc., doing business as Combined Graphics), T.R. Rogers (president and majority shareholder of T.R. Rogers Inc. and Rogers on Rodeo Inc.), and Melton Magidson (president and majority shareholder of Magidson & Associates, Inc.). (Id., ¶ 11-17, 26)

Taking as true Galerie Furstenberg's allegations, defendants created counterfeit versions of Dali's artwork by (1) reproducing a Dali work so it would appear to have an authorship it lacks, (2) printing the photograph of an authentic work and then reproducing it by photomechanical means, or (3) engraving an existing Dali subject on a copper plate and reproducing it in multiple form. The complaint identifies eight Dali drawings or etchings which defendants illicitly reproduced and to which Galerie Furstenberg allegedly has exclusive rights. (It also has possession of two of the originals):

1. "The Fisherman" or "Le Pecheur"

2. "Pegasus" or "Pegase"

3. "La Femme, Le Cheval et La Mort" which defendants sold as "Chevalier Du Mort"

4. "Femme a La Fontaine" which defendants sold as "The Fountain of Destiny"

5. "Frontispiece" which defendants sold as "Lover and Don Quixote"

6. "Apollinaire"

7. "Le Nu a La Jarretiere" which defendants sold as "Dancing Maidens" and "Dancing Rose"

8. "Femmes Poules" which defendants sold as "Gala"

Summarizing the complaint, once the counterfeits were made defendants solicited customers by telephone and direct mailings, misrepresenting Dali's involvement in the works, their investment value, their ability to be resold, and defendants' willingness to provide a refund if their authenticity were questioned. Defendants also issued fraudulent certificates or guarantees of authenticity of the works. Defendants' sale of these counterfeit reproductions to unsuspecting art investors earned them a $32.5 million profit.

Galerie Furstenberg contends that defendants' actions unjustly enriched them and constitute fraud, as well as violations of the RICO and federal trademark statutes and New York laws against misrepresentation, unfair competition, and deceptive advertising. As relief, plaintiff seeks nearly $100 million in treble damages on its RICO claims, $32.5 million on its state law claims, $15 million in punitive damages, and injunctive relief.

DISCUSSION

I. Claim One: Section 1962(c) of RICO

Galerie Furstenberg's first claim is for violations of § 1962(c) of RICO. Section 1962(c) provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of an unlawful debt.

To plead a violation of § 1962(c) a plaintiff must allege "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co. 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985) (footnote omitted). Section 1964(c) of RICO allows for civil enforcement of its provisions:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefore in an appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.

Defendants argue that Galerie Furstenberg does not have standing to sue under RICO. In addition, defendants contend that Galerie Furstenberg has failed to satisfy this circuit's pleading requirements of a RICO enterprise and has failed to allege with particularity the mail and wire fraud predicate act violations.

A. Standing

Defendants argue that the requirement that "the racketeering activities injure the plaintiff in his business or property," Sedima, 473 U.S. at 495, 105 S.Ct. at 3284, precludes Galerie Furstenberg's RICO claim. "Unless plaintiff can demonstrate that it has been injured by the predicate acts of mail and wire fraud, which constitute the alleged pattern of racketeering activity distributing, advertising, offering for sale, and selling counterfeit artwork, it cannot recover under RICO." (Defendants' Memorandum, p. 10) They urge that those who bought the counterfeit artwork are the only possible victims of the mail and wire fraud violations.

A recent decision of the Second Circuit, Sperber v. Boesky, 849 F.2d 60 (2d Cir. 1988), suggests otherwise. In Sperber the court addressed the question "to what extent are damages caused only indirectly by the predicate acts recoverable? (By damages caused only `indirectly,' we mean `racketeering' injury, `competitive' injury or injury caused by the total effect of the pattern of racketeering in the enterprise.)" Id. at 63. In answering this question the court looked to Justice Marshall's examples, in his Sedima dissent, of plaintiffs who could recover: the targets of the racketeering enterprise, its competitors, and the racketeer's customers. Because the Sperber plaintiffs, who were purchasers of common stock of six companies, contended they had been injured because Boesky's reputation and unlawful activities — none of which otherwise affected the six companies — had inflated stock prices in general, they met none of these definitions and their injury was too remote to recover.

By contrast, here Galerie Furstenberg was a direct competitor of defendants. As such, it alleges that defendants' sale of counterfeit Dalis "deprived plaintiff of its rightful ownership of, and interest in, its property rights and/or the exclusive rights granted to plaintiff by Dali, and of the opportunity to earn profits from the exercise of those rights" as well as "injured, undermined, and compromised plaintiff's professional reputation in the art community." (Complaint, ¶ 31) This alleged injury is cognizable under RICO. See Sperber v. Boesky, 849 F.2d at 63 (recognizing Congress's concern for the "competitors and investors whose businesses and interests were harmed ... or whose competitive positions decline because of infiltration in the relevant market") (quoting Sedima, 473 U.S. at 519, 105 S.Ct. at 3301 (Marshall, J., dissenting)).

B. RICO Enterprise Requirement

Defendants next contend that plaintiff fails properly to plead a RICO enterprise...