Martin Hilti Family Trust v. Knoedler Gallery, LLC, Nos. 13 Civ. 0657(PGG)

• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
• Writing for the Court: PAUL G. GARDEPHE, District Judge
• Citation: 137 F.Supp.3d 430
• Parties: The MARTIN HILTI FAMILY TRUST, Plaintiff, v. KNOEDLER GALLERY, LLCd/b/a Knoedler & Company, Ann Freedman, Michael Hammer, 8–31 Holdings, Inc., Glafira Rosales, Jose Carlos Bergantinos Diaz, Jesus Angel Bergantinos Diaz, Pei–Shen Qian, Per Haubro Jensen, Jaime Andrade, and Hammer Galleries, LLC, Defendants. Frances Hamilton White, Plaintiff, v. Ann Freedman, Glafira Rosales, Knoedler Gallery, LLC, d/b/a Knoedler & Company, Michael Hammer, 8–31 Holdings, Inc., José Carlos Bergantinos Diaz, Jaime R. Andrade, Jesus Angel Bergantinos Diaz, and Pei Shen Qian, Defendants. The Arthur Taubman Trust, Eugenia Taubman, and Nicholas Taubman, Plaintiffs, v. Knoedler Gallery, LLC, d/b/a Knoedler & Company, 8–31 Holdings, Inc., Ann Freedman, Michael Hammer, Glafira Rosales, and José Carlos Bergantinos Diaz, Defendants.
• Decision Date: 30 September 2015
• Docket Number: 13 Civ. 3011(PGG).,Nos. 13 Civ. 0657(PGG),13 Civ. 1193(PGG)

137 F.Supp.3d 430

The MARTIN HILTI FAMILY TRUST, Plaintiff,
v.
KNOEDLER GALLERY, LLCd/b/a Knoedler & Company, Ann Freedman, Michael Hammer, 8–31 Holdings, Inc., Glafira Rosales, Jose Carlos Bergantinos Diaz, Jesus Angel Bergantinos Diaz, Pei–Shen Qian, Per Haubro Jensen, Jaime Andrade, and Hammer Galleries, LLC, Defendants.

Frances Hamilton White, Plaintiff,
v.
Ann Freedman, Glafira Rosales, Knoedler Gallery, LLC, d/b/a Knoedler & Company, Michael Hammer, 8–31 Holdings, Inc., José Carlos Bergantinos Diaz, Jaime R. Andrade, Jesus Angel Bergantinos Diaz, and Pei Shen Qian, Defendants.

The Arthur Taubman Trust, Eugenia Taubman, and Nicholas Taubman, Plaintiffs,
v.
Knoedler Gallery, LLC, d/b/a Knoedler & Company, 8–31 Holdings, Inc., Ann Freedman, Michael Hammer, Glafira Rosales, and José Carlos Bergantinos Diaz, Defendants.

Nos. 13 Civ. 0657(PGG)
13 Civ. 1193(PGG)
13 Civ. 3011(PGG).

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

Signed Sept. 30, 2015.

137 F.Supp.3d 440

James A. Janowitz, Rebecca Marie Siegel, Stephanie Rachel Kline, William Laurence Charron, Pryor Cashman LLP, New York, NY, for Plaintiff.

Charles David Schmerler, India Decarmine, Fulbright & Jaworski L.L.P., Mark Allen Robertson, Sarah E. O'Connell, Norton Rose Fulbright US LLP, Silvia L. Serpe, Eric B. Einisman, Paul W. Ryan, Serpe Ryan LLC, Nicholas A. Gravante, Jr., Boies, Schiller & Flexner, LLP, New York, NY, Luke William Nikas, Boies, Schiller & Flexner LLP, Albany, NY, for Defendant.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, District Judge:

In these actions, Plaintiffs claim that certain paintings they purchased from Defendant Knoedler Gallery, LLC ("Knoedler") are forgeries. In addition to Knoedler, all Plaintiffs name the following as defendants: 8–31 Holdings Inc. ("8–31"), Knoedler's sole member; Michael Hammer, Knoedler's managing member and the owner of 8–31 Holdings, Inc.; Ann Freedman, Knoedler's former president; Glafira Rosales, a Long Island art dealer who brought the forged paintings to Knoedler; and Jose Carlos Bergantinos Diaz, Rosales's "longtime companion." The Martin Hilti Family Trust ("Hilti") and Frances White also name as defendants Jaime Andrade, a former Knoedler employee; Jesus Angel Bergantinos Diaz, Carlos's brother; and Pei–Shen Qian, a Chinese artist based in Queens who allegedly created the forged paintings.¹ Hilti

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also asserts claims against Hammer Galleries, LLC.²

Plaintiffs claim that Knoedler sold nearly forty paintings it acquired from Rosales, and that all of these paintings—allegedly created by well-known American Abstract Expressionist artists—are forgeries. Plaintiffs contend that Defendants knew as early as October 2003 that these paintings were not authentic, but nonetheless continued to sell them to unsuspecting buyers.

Plaintiffs assert claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and state law causes of action for fraud, fraudulent concealment, aiding and abetting fraud, fraud conspiracy, deceptive trade practices and false advertising, breach of warranty, and unilateral and mutual mistake.

Defendants Knoedler, Freedman, Hammer, 8–31, and Hammer Galleries LLC have moved to dismiss all claims against them under Federal Rule of Civil Procedure 12(b)(6).

BACKGROUND³

I. FACTS

A. Rosales' Initial Contact with the Knoedler Gallery

Prior to its closing, the Knoedler Gallery was one of the oldest and most reputable art galleries in the world. (Amended Complaint ("Am. Cmplt.") (Hilti Dkt. No. 46) ¶ 48; Am. Cmplt. (White Dkt. No. 37) ¶ 33) In April 2000, Frances Hamilton White and her then husband purchased a purported Jackson Pollock painting from Knoedler and its president, Ann Freedman, for $3.1 million. (Am. Cmplt. (White Dkt. No. 37) ¶ 1) On November 6, 2002, the Martin Hilti Family Trust purchased a purported Mark Rothko painting from Knoedler for $5.5 million. (Am. Cmplt. (Hilti Dkt. No. 46) ¶¶ 1, 7) In November 2005, the Taubmans purchased a purported Clyfford Still painting from Knoedler for $4.3 million. (Am. Cmplt. (Taubman Dkt. No. 39) ¶ 1) All of these paintings are forgeries. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 1; Am. Cmplt. (White Dkt. No. 37) ¶¶ 1, 5, 43, 94; Am. Cmplt. (Taubman Dkt. No. 39) ¶¶ 4, 140, 145, 148) The paintings Plaintiffs purchased from Knoedler were supplied by Glafira Rosales, a Long Island art dealer. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 63; Am. Cmplt. (White Dkt. No. 37) ¶¶ 6, 37; Am. Cmplt. (Taubman Dkt. No. 39) ¶ 75)

In the early–to–mid–1990's, Defendant Jaime Andrade, a Knoedler employee, introduced Defendant Glafira Rosales and Jose Carlos Bergantinos Diaz to Freedman and others at Knoedler. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 72; Am. Cmplt. (White Dkt. No. 37) ¶ 24; Taubman Am. Cmplt. ¶ 23) Knoedler and Freedman did not investigate Rosales and Diaz's background, although Diaz had previously been associated with the sale of forged art work. (Taubman Am. Cmplt. ¶ 31)

The first series of art works Rosales brought to Knoedler included a number of purported Richard Diebenkorn paintings. The paintings had allegedly been acquired

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from the Vijande Gallery in Madrid, Spain. (Am. Cmplt. (Hilti Dkt. No. 46) ¶¶ 74–75; Am. Cmplt. (White Dkt. No. 37) ¶ 25; Am. Cmplt. (Taubman Dkt. No. 39) ¶ 24) In reality, the "Diebenkorns" had been created by Qian, with the knowledge and assistance of Rosales and the Diaz brothers. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 76; Am. Cmplt. (White Dkt. No. 37) ¶ 25) Shortly after Rosales brought these paintings to Knoedler, representatives of Diebenkorn's family and estate—the leading experts on Diebenkorn's work—viewed two of the works and told Freedman that these paintings did not appear to be authentic. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 77; Am. Cmplt. (White Dkt. No. 37) ¶ 25; Am. Cmplt. (Taubman Dkt. No. 39) ¶ 25) Between 1994 and 1998, however, Knoedler and Freedman—whom Hammer had made president of Knoedler in 1994—sold all of the purported Deibenkorns to various buyers without corroborating Rosales's provenance story or disclosing the doubts expressed by the Diebenkorn family and estate. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 78; Am. Cmplt. (White Dkt. No. 37) ¶ 25; Am. Cmplt. (Taubman Dkt. No. 39) ¶¶ 23, 26–27)

In 1996, Rosales told Freedman that she had gained access to a collection of paintings by leading American Abstract Expressionist artists, including Mark Rothko, Robert Motherwell, Jackson Pollock, Willem de Kooning, Barnett Newman, Clyfford Still, Franz Kline, Sam Francis, and Lee Krasner. (Am. Cmplt. (Taubman Dkt. No. 39) ¶ 28; Am. Cmplt. (Hilti Dkt. No. 46) ¶ 12; Am. Cmplt. (White Dkt. No. 37) ¶ 6) According to Rosales, this collection of Abstract Expressionist masterworks was owned by a Mexican friend—the son of a deceased art collector—whose identity she had sworn to keep secret. (Am. Cmplt. (Taubman Dkt. No. 39) ¶ 28) Rosales told Freedman that, as a child in Mexico, she had met a European couple who—decades ago—purchased numerous works directly from now-famous Abstract Expressionist painters. (Am. Cmplt. (White Dkt. No. 37) ¶ 27) Rosales referred to the deceased collector and his son as "Mr. X" and "Mr. X, Jr." (Am. Cmplt. (White Dkt. No. 37) ¶ 27; Am. Cmplt. (Taubman Dkt. No. 39) ¶ 28)

Rosales stated that Mr. X—who was either of Swiss or Mexican descent—had acquired these paintings "directly from the artists" and "off the record" in New York City, either between the 1950s and early 1960s, or between the late 1940s and 1964, during business trips Mr. X made to the United States in connection with his sugar business. (Am. Cmplt. (Hilti Dkt. No. 46) ¶¶ 13, 64–65, 82) After Mr. X and his wife died in the early 1990s, their two children inherited the paintings. The children were not interested in art, however, and wanted to sell the paintings, and to do so anonymously. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 82; Am. Cmplt. (White Dkt. No. 37) ¶ 27; Am. Cmplt. (Taubman Dkt. No. 39) ¶ 28)

Rosales had no documentation concerning Mr. X's acquisition of the paintings or any other materials corroborating her story or the purported provenance⁴ of the works. (Taubman Am. Cmplt. ¶ 28) Rosales claimed that Mr. X's daughter (also unidentified) had destroyed all of the paperwork concerning the paintings after Mr. X and his wife died. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 68) In any event, Mr. X purchased the paintings with cash. (Am. Cmplt. (White Dkt. No. 37) ¶ 28) Mr. X's collection had never been displayed, and the paintings had been stored and

137 F.Supp.3d 443

wrapped in a "sealed" container in Mexico. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 14, 69)

In reality, Rosales and Jose Carlos Bergantinos Diaz had purchased the paintings at issue from Pei–Shen Qian, a Chinese painter then living in Queens. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 17–18, 55; Am. Cmplt. (White Dkt. No. 37) ¶ 6; Am. Cmplt. (Taubman Dkt. No. 39) ¶¶ 19–20) Jose Carlos Bergantinos Diaz met Qian in the late 1980s in New York City, where Qian was selling his own art. (Am. Cmplt. (Hilti Dkt. No. 46) ¶ 19; Am. Cmplt. (White Dkt. No. 37) ¶ 22; Am. Cmplt. (Taubman Dkt. No. 39) ¶ 19)...