Hoffman v. Arts

• Citation: 774 F.Supp.2d 826
• Decision Date: 07 March 2011
• Docket Number: Civil Action No. 3:10–CV–0953–D.
• Parties: Marguerite HOFFMAN, Plaintiff,v.L & M ARTS, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

774 F.Supp.2d 826

Marguerite HOFFMAN, Plaintiff,

v.L & M ARTS, et al., Defendants.

Civil Action No. 3:10–CV–0953–D.

United States District Court, N.D. Texas, Dallas Division.

March 7, 2011.

Bart Wulff, Shackelford Melton & McKinley, Dallas, TX, Deirdre N. Hykal, Mary Eaton, Roger Netzer, Willkie Farr & Gallagher LLP, New York, NY, for Plaintiff.Kurt A. Schwarz, Gordon M. Shapiro, Stephanie Collett Sparks, Jackson Walker LLP, Thomas E. Kurth, W. Alan Wright, Haynes & Boone, Vance Loren Beagles, Vance Loren Beagles, Weil Gotshal & Manges, Dallas, TX, Howard S. Zelbo, Jonathan I. Blackman, Melissa K. Marler, Michael Jacobsohn, Cleary Gottlieb Steen & Hamilton LLP, Howard B. Comet, Weil Gotshal & Manges, New York, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, Chief Judge.

In this removed action arising from the alleged breach of a confidentiality agreement under which a valuable painting was sold by a recognized patroness of the arts, and the subsequent public auction of the painting at a well-known art auction house, the court must decide whether plaintiff has stated claims on which relief can be granted and whether the court can exercise in personam jurisdiction over one defendant. For the reasons that follow, the court grants two defendants' motions to dismiss under Fed.R.Civ.P. 12(b)(6), grants in part and denies in part two defendants' Rule 12(b)(6) motions, grants one defendant's Rule 12(b)(2) motion to dismiss for lack of in personam jurisdiction, and grants plaintiff leave to replead her claims that are being dismissed under Rule 12(b)(6).

I

This suit is brought by plaintiff Marguerite Hoffman (“Hoffman”) against defendants L & M Arts (“L & M”), Sotheby's, Inc. (“Sotheby's”), Tobias Meyer (“Meyer”), David Martinez (“Martinez”), and Studio Capital, Inc. (“Studio Capital”) arising from the private sale and subsequent public auction of a Mark Rothko painting that Hoffman once owned. Hoffman sues L & M, Martinez, and Studio Capital for breach of contract, Sotheby's and Meyer for tortious interference with contract, and Sotheby's for unjust enrichment. ¹

Hoffman, a Dallas resident and patroness of the arts, once owned Mark Rothko's 1961 oil painting, Untitled (“the Rothko painting”).² Her ownership was well known because the Rothko painting had been the subject of some media coverage and had been displayed in the Dallas Museum of Art as part of a special exhibition of works from her collection.

Hoffman decided to sell the Rothko painting in early 2007 during a time when she faced uncertain financial circumstances following her husband' s death. She could have sold the painting at public auction, taking advantage of the publicity to obtain a higher price. But she opted for a private, confidential sale to avoid the embarrassment of disclosing publicly that she was selling the painting.

To ensure utmost privacy, Hoffman worked through intermediaries to arrange a confidential sale. She was eventually able to interest an undisclosed buyer. L & M, who had helped Hoffman acquire major contemporary art works in the past, acted as agent for the undisclosed buyer, while Greenberg Van Doren Gallery (“Greenberg”) acted as Hoffman's agent.

Hoffman informed L & M that preservation of confidentiality was a critical component of any sale. The first agreement of sale, dated February 27, 2007, contained the following proviso: “It is the specified wish of the seller that the sale and terms of the sale remain confidential. Any breach in confidentiality prior to payment in full will be considered by the seller grounds for terminating this agreement. It is requested that confidentiality be maintained indefinitely.” Am. Pet. ¶ 31.³ Before the sale was finalized, however, another art world professional heard that the Rothko painting was for sale and contacted Hoffman. Hoffman was alarmed that a third party had discovered that the painting was for sale. When she learned from L & M's principal, Robert Mnuchin (“Mnuchin”), that his undisclosed buyer had told a third party about the sale, she decided not to go forward with the transaction.

The undisclosed buyer remained interested in negotiating with Hoffman, however, and his agent, L & M (through Mnuchin), expressly promised Hoffman that the Rothko painting would “ ‘disappear’ into his undisclosed buyer's ‘very private’ collection.” Id. at ¶ 36. Hoffman remained unwilling to sell, and she refused to consent to the sale unless the undisclosed buyer made a written and binding commitment in the purchase agreement to “make maximum effort to keep all aspects of this transaction confidential....” Id. at ¶ 37 (ellipsis in original). The undisclosed buyer agreed to this condition, and agents of Greenberg and L & M signed a letter agreement (“Letter Agreement”) on April 24, 2007. See Martinez/Studio Capital June 30, 2010 App. 2.

The Letter Agreement specified that, among other requirements, the buyer would pay to the seller the net price of $17.6 million, make a confidential cash contribution of $500,000 to the Dallas Museum of Art, and (together with the seller and all agents involved) “make maximum effort to keep all aspects of this transaction confidential indefinitely.” Id. “[T]he buyer [also] agree [d] not to hang or display the work for six months following receipt of the painting.” Id.

Hoffman later discovered that the undisclosed buyer was either Martinez or Studio Capital, a Belize company that Hoffman alleges is controlled by Martinez for the purpose of maintaining the secrecy of his purchases and sales in art. The sale was kept secret until, 35 months later, Martinez (or Studio Capital, acting under Martinez's direction) consigned the Rothko painting to public auction at Sotheby's. Numerous media sources reported on the sale of the Rothko painting, including one art blogger, who wrote the following:

Three market sources have told me that the Rothko consigned for sale at Sotheby's comes from Mexican financier David Martinez.

* * *

If Martinez, or a related holding company, is the owner, it has been a hasty marriage.

In 2007 the painting was exhibited at the Dallas Museum of Art in a Fast Forward: Contemporary Collections for the Dallas Museum of Art. The show included works owned by three major area collectors who have promised works to the museum: the Hoffman, Rose and Rachofsky collections.

Am. Pet. ¶ 45 (ellipsis in original). And Sotheby's website and catalog reported that the Rothko painting was exhibited at the Dallas Museum of Art as well.

Hoffman alleges that, based on this public information, the art community would have been able to deduce that she had sold the Rothko painting and that, in deliberately publicizing the sale, Martinez, Studio Capital, and L & M breached the provision of the Letter Agreement that required “maximum effort to keep all aspects of this transaction confidential indefinitely.” Hoffman asserts that, in exchange for confidentiality, she sacrificed a substantial premium when she sold the Rothko painting, and that she sold the painting for far less than she would have been able to obtain through a public sale. ⁴ According to Hoffman, Martinez was able to purchase the Rothko painting at a discount in exchange for taking on the burden of the confidentiality provision. Hoffman characterizes the alleged breach of contract by Martinez and Studio Capital in publicizing the painting's availability for purchase as “pocket[ing] the premium that [she] had forgone to protect her family's privacy.” Am. Pet. ¶ 27. As evidence of Mnuchin's recognition that Martinez had dishonored the contract, she points to Mnuchin's communication to her after the alleged breach expressing concern for the work's public display. Hoffman sues L & M for breach of contract as a party to the Letter Agreement.

Hoffman sues Sotheby's and Meyer (the Worldwide Head of Contemporary Art and Principal Auctioneer for contemporary art at Sotheby's) for tortious interference with contract, and sues Sotheby's for unjust enrichment. Hoffman alleges that Sotheby's and Meyer are liable for their roles in encouraging Martinez to breach the confidentiality provisions in the Letter Agreement. She asserts that Meyer was under great pressure to obtain “brand-name masterpieces” for Sotheby's spring contemporary art sale and that Meyer had “long coveted” the opportunity to auction this particular Rothko painting. Hoffman avers that Meyer persuaded Martinez to relinquish the Rothko painting for auction with full knowledge of Martinez's contract, and she alleges that Meyer continues to induce the breach of Martinez's contract.

Martinez and Studio Capital move under Rule 12(b)(6) to dismiss Hoffman's breach of contract claim.⁵ Meyer moves to dismiss Hoffman's action under Rule 12(b)(2) for lack of personal jurisdiction. Sotheby's and Meyer also move to dismiss Hoffman's tortious interference and unjust enrichment claims under Rule 12(b)(6). L & M joins and supplements the motions of the other defendants and seeks dismissal under Rule 12(b)(6).⁶

II

In deciding defendants' Rule 12(b)(6) motions, the court evaluates the sufficiency of Hoffman's amended petition by “accept[ing] ‘all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.’ ” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007) (quoting Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir.2004)). To survive the motions, Hoffman must plead enough facts “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, –––U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). “The plausibility standard is not akin to a ‘probability requirement,’...