McKenzie v. Brannan
| Decision Date | 01 February 2023 |
| Docket Number | 2:20-cv-00262-NT |
| Parties | MICHAEL MCKENZIE, Plaintiff, v. JAMES W. BRANNAN, et al., Defendants. |
| Court | U.S. District Court — District of Maine |
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case, which comes before me on remand from the First Circuit concerns two agreements governing the use of the late artist Robert Indiana's “HOPE” imagery: one entered into in 2008 (the “2008 Agreement”) and one entered into in 2019 (the “2019 Term Sheet”). The parties here disagree as to whether the latter agreement, the 2019 Term Sheet, is a binding, enforceable contract, and, if so whether it extinguished an arbitration provision contained in the 2008 Agreement.
In July of 2020, the Plaintiff, Michael McKenzie, sued Defendant James Brannan, personal representative of Indiana's estate, and Maine Attorney General Aaron Frey in this Court seeking an order declaring that the 2019 Term Sheet is binding and specifically enforceable, as well as injunctive relief enjoining the arbitration pursued by the Defendants under the terms of the 2008 Agreement. Compl. ¶ 5 (ECF No. 1).
Without getting to the merits of the Plaintiff's suit, Judge Woodcock held that an arbitrator, not the Court, must decide whether the enforceability of the 2019 Term Sheet is an arbitrable issue. See McKenzie v. Brannan, 496 F.Supp.3d 518, 533 (D. Me. 2020).
Thus, the case was stayed and the issue of arbitrability was sent to the American Arbitration Association (“AAA”) panel in New York. See id. at 541. After reviewing the question, the AAA panel determined that the dispute was arbitrable, meaning that the panel, not this Court, would proceed to the merits issues. Order (ECF No. 63). In light of the AAA's decision, and with the consent of the parties, this Court dismissed the Plaintiff's Complaint without prejudice. Order (ECF No. 67).
Immediately thereafter, the Plaintiff appealed this Court's order directing the question of arbitrability to the AAA as well as the subsequent order of dismissal. Notice of Appeal (ECF No 69). The First Circuit, confining itself to the “who decides question,” reversed and vacated the orders below. McKenzie v. Brannan, 19 F.4th 8, 16 (1st Cir. 2021) (internal quotation marks omitted). Specifically, the First Circuit determined that “the court-not the [arbitration panel]-holds the decision-making power to decide whether the parties intended to arbitrate this dispute.” Id. The First Circuit then remanded the case back to the district court to “tackle the fact-intensive question (whether the parties agreed to arbitrate arbitrability of the merits dispute), which will require resolution of the intertwined concepts driving this case: whether the 2019 Term Sheet is a superseding contract that terminated the 2008 Agreement and extinguished its arbitration provision ....” Id. at 20.
I held a bench trial from July 20, 2022, through July 22, 2022, to determine these issues (ECF Nos. 130, 133, and 138). Based on the evidence and arguments presented, I make the following findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure.
FINDINGS OF FACT[1]
1. Robert Indiana was a painter, sculptor, and visual artist who, prior to his death on May 19, 2018, lived on the island of Vinalhaven, Maine. J. Stipulation of Facts ¶¶ 1-2 (ECF No. 115).
2. Michael McKenzie is an art publisher who does business as American Image Art (“AIA”). J. Stipulation of Facts ¶ 8.
3. On or about August 11, 2008, McKenzie and Indiana both signed an agreement (the “2008 Agreement”), which granted McKenzie the right to produce and sell certain two- and three-dimensional artworks based upon Indiana's HOPE design. J. Ex. 1, at 1; J. Stipulation of Facts ¶¶ 11-12.
4. The 2008 Agreement contained the following terms:
5. Following Indiana's death, Defendant James Brannan-a Maine attorney- was appointed as the personal representative of Indiana's estate (“the Estate”). J. Stipulation of Facts ¶¶ 3, 7.
6. Robert Indiana's last will and testament named Star of Hope, Inc. (“Star of Hope”) as the sole beneficiary of Indiana's estate. Star of Hope is a Maine charitable corporation formed at Indiana's direction during his lifetime. Its stated mission includes the promotion of Indiana's artistic legacy. J. Stipulation of Facts ¶ 5.
7. On May 18, 2018, Morgan Art Foundation Ltd. filed an action in the U.S. District Court in the Southern District of New York against Michael McKenzie, AIA, Robert Indiana, and another party (the “SDNY Action”). After Indiana's death, James Brannan, as personal representative of the Estate, became a defendant in that case. J. Stipulation of Facts ¶ 15.
8. On August 3, 2018, McKenzie and AIA filed cross-claims against Brannan in the SDNY Action. J. Stipulation of Facts ¶ 16.
9. On October 9, 2018, the court in the SDNY Action ruled that the claims between McKenzie/AIA and Brannan should proceed in arbitration pursuant to the 2008 Agreement's arbitration clause, and an arbitration was commenced in New York (the “New York Arbitration”). See J. Stipulation of Facts ¶ 14, 17.
10. The Maine Attorney General has oversight authority over Maine charitable institutions and non-profits, including Star of Hope. J. Stipulation of Facts ¶ 20.
11. In his oversight capacity over Star of Hope, Maine Attorney General Aaron Frey expressed concern that mounting costs of the SDNY Action and the New York Arbitration could impair the future of Star of Hope and urged the parties to mediate their disputes. J. Stipulation of Facts ¶ 21.
12. On November 25 and 26, 2019, McKenzie and Brannan attended a mediation conducted by Patrick Coughlan in Portland, Maine (the “Portland Mediation”). J. Stipulation of Facts ¶ 22. Also present at this mediation, as is relevant here, were personnel and legal counsel representing the Estate, Star of Hope, and the Maine Attorney General. J. Ex. 6. McKenzie's attorney, John Simoni, was not present at the mediation, but was available by phone. J. Stipulation of Facts ¶ 22; Trial Tr. Vol. I, at 38:1-6 (ECF No. 145).
13. On the evening of November 25, after the first day of the Portland Mediation, McKenzie sent an email to the mediator about Kevin Lipson, one of the attorneys for the Estate, with the subject line: “Kevin Lipsom [sic] is a lying swindling dirtbag holding this up to make money.” J. Ex. 7, at 1. In the email, McKenzie voiced his concern that Lipson was going to derail the settlement process by refusing to acquiesce to the authentication of a sculpture entitled BRAT, which McKenzie had sold to Johnsonville, a sausage company, as a Robert Indiana piece. J. Ex. 7, at 1; Trial Tr. Vol. III, at 475:24-476:24 (ECF No. 147). McKenzie accused Lipson of trying to drive up legal fees and “swindle[ ]” Star of Hope. J. Ex. 7, at 1. McKenzie threatened that “if BRAT is not authenticated with apologies . . . by 12 [p.m.] tomorrow, I will . . . immediately begin a separate litigation directed personally, jointly and severally against the lawyers for [the Estate].” J. Ex. 7, at 2.
14. The next day, the second day of the Portland Mediation, McKenzie sent two more emails about the BRAT authentication and Lipson's alleged attempts to derail the settlement process. J. Ex. 8; J. Ex. 9.
15. On November 26, 2019, near the conclusion of the Portland Mediation, Brannan and McKenzie signed a term sheet titled “Confidential and Binding Term Sheet Between Michael McKenzie, individually, and as agent of American Image Art (together ‘AIA') and the Estate of Robert Indiana (the ‘Estate')” (the “2019 Term Sheet”). J. Stipulation of Facts ¶ 23; J. Ex. 2.
16. As is relevant here, the 2019 Term Sheet contained the following provisions:
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