Meyer v. Seidel

• Docket Number: 21-2221
• Decision Date: 21 December 2023
• Parties: RON MEYER, Plaintiff-Appellant, v. SUSAN SEIDEL, SUSAN SEIDEL INC., JAMIE FRANKFORT [*] , Defendants-Appellees, DOES 1 through 5, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

1

RON MEYER, Plaintiff-Appellant, v. SUSAN SEIDEL, SUSAN SEIDEL INC., JAMIE FRANKFORT ^[*] , Defendants-Appellees, DOES 1 through 5, Defendants.

No. 21-2221

United States Court of Appeals, Second Circuit

December 21, 2023

Submitted: April 13, 2022

Appeal from a judgment of the United States District Court for the Southern District of New York, Vernon S. Broderick, Judge dismissing plaintiff's 2019 complaint against defendants-appellees art dealers for fraud, negligent misrepresentation, breach of warranty, and rescission in connection with the 2001 purchase by plaintiff of an allegedly forged painting. The district court granted defendants' motions to dismiss pursuant to Fed.R.Civ.P 12(b)(6) on the ground that all of plaintiff's claims are barred by the applicable statutes of limitations, including any claims that did not accrue until plaintiff had sufficient notice to inquire into and discover them, holding that plaintiff had inquiry notice as early as 2011. The court also ruled that the complaint failed to state a fraud claim on which relief can be granted; and it denied plaintiff's request for leave to amend, ruling that amendment would be futile in light of the running of the statute of limitations. On appeal, plaintiff contends principally that the district court erred in relying on materials outside the complaint--and in drawing inferences against him from those materials--to conclude that he was on inquiry notice as to the forgery more than two years prior to bringing this action; and given that that erroneous time-bar ruling was the basis for the court's denial of leave to amend the complaint on the ground of futility, plaintiff asks, if we find the complaint flawed, that we remand to permit him to file an amended complaint. We conclude (1) that the district court properly dismissed the claims of negligent misrepresentation, breach of warranty, and rescission as time-barred, claims to which, under New York law, the discovery rule does not apply; and (2) that the complaint's pleading of the fraud claims did not meet the Iqbal standard. However, we conclude that in deciding these Rule 12(b)(6) motions, the district court erred in ruling that the fraud claims were time-barred on the ground that evidence beyond the complaint showed that Meyer had inquiry notice of those claims as early as 2011. And as that ruling was the basis for the court's conclusion that amendment to the complaint would be futile, we vacate so much of the judgment as denied plaintiff's request for leave to amend the complaint with respect to his claims of fraud. See Meyer v. Seidel, 2021 WL 3621695 (S.D.N.Y. Aug. 16, 2021).

Affirmed in part; vacated in part and remanded.

GREENBERG GLUSKER FIELDS CLAMAN & MACHTINGER, Los Angeles, California, (Bertram Fields, Los Angeles, California; Paula Howell Anderson, Shearman & Sterling, New York, New York, of counsel), for PlaintiffAppellant.

GROSSMAN, New York, New York (Judd B. Grossman, New York, New York, of counsel), for Defendants-Appellees Susan Seidel and Susan Seidel Inc.

DONTZIN NAGY & FLEISSIG, New York, New York (Matthew S. Dontzin, David A. Fleissig, William H. LaGrange, New York, New York, of counsel), for Defendant-Appellee Jamie Frankfort.

Before: KEARSE, SULLIVAN, and ROBINSON, Circuit Judges.

KEARSE, CIRCUIT JUDGE

Plaintiff Ron Meyer appeals from a judgment of the United States District Court for the Southern District of New York, Vernon S. Broderick, Judge, dismissing his complaint filed in 2019 against defendants Susan Seidel and Susan Seidel Inc. (collectively "Seidel"), and Jamie Frankfort, who are dealers in paintings and other fine art, for fraud, negligent misrepresentation, breach of warranty, and rescission in connection with Meyer's purchase in 2001 of a painting that was represented to be the work of abstract-expressionist painter Mark Rothko but that is now believed to be a forgery. The district court granted defendants' motions to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) on the ground that all of Meyer's claims are barred by the applicable statutes of limitations, including any claims that did not accrue until he had sufficient notice to inquire into and discover them, holding that Meyer had inquiry notice as early as 2011. The court also ruled that the complaint's fraud allegations failed to meet the standards of Rule 12(b)(6) and Fed.R.Civ.P. 9(b); and it denied Meyer's request for leave to amend, ruling that amendment would be futile in light of the running of the statute of limitations. On appeal, Meyer contends principally that the district court erred in relying on materials outside the complaint--and in drawing inferences against him from those materials--to conclude that his claims are time-barred because of inquiry notice as to the forgery more than two years prior to bringing this action; and given that that erroneous time-bar ruling was the basis for the court's denial of leave to amend the complaint on the ground of futility, Meyer asks, if we find the complaint flawed, that we remand to permit him to file an amended complaint.

We conclude (1) that the district court properly dismissed the claims of negligent misrepresentation, breach of warranty, and rescission as time-barred, claims to which, under New York law, the discovery rule does not apply; and (2) that the complaint's pleading of the fraud claims did not meet the standard set by Ashcroft v. Iqbal, 556 U.S. 662 (2009) ("Iqbal"). However, we conclude that in deciding these Rule 12(b)(6) motions, the district court erred in ruling that the fraud claims were time-barred on the ground that evidence beyond the complaint showed that Meyer had inquiry notice of those claims as early as 2011. And as that ruling was the basis for the court's conclusion that amendment to the complaint would be futile, we vacate so much of the judgment as denied Meyer's request for leave to amend the complaint with respect to his claims of fraud.

I. BACKGROUND

This action was commenced by Meyer on October 15, 2019, in state court in California against Seidel and Frankfort, and against several "Does" who have not been identified and are not parties to this appeal. On the basis of diversity jurisdiction, upon representations that Meyer was a citizen of California, and that Seidel and Frankfort were citizens of New York, the action was removed by Seidel to the United States District Court for the Central District of California. Seidel and Frankfort then moved for dismissal of the action on the grounds of, inter alia, lack of personal jurisdiction or, in the alternative, for a change of venue. The California federal court granted the venue motions, transferring the action to the Southern District of New York.

A. The Complaint

Meyer's complaint, whose factual allegations are taken as true for purposes of motions to dismiss under Fed.R.Civ.P. 12(b)(6), alleged as follows.

Seidel and Frankfort were dealers in paintings and other fine art who held themselves out as having expert and specialized knowledge and experience with respect to the evaluation and authenticity of works of art, including but not limited to the works of art they offered for sale.

(Complaint ¶ 2.) Meyer was a California film industry executive (see id. ¶ 1); and "Frankfort and Seidel were well aware[ that Meyer] had no ability to distinguish an authentic work by Rothko from a 'forgery'" (id. ¶ 5).

On or about March 1, 2001, Frankfort, who was then an art dealer in California, informed Meyer that Seidel had for sale a painting by Rothko (the "Painting"). "Frankfort recommended Seidel to" Meyer as "a reliable and expert art dealer." (Id. ¶ 4.) Meyer was "informed . . . that the Painting was owned by another art dealer who had consigned it to Seidel for sale." (Id.) "With Frankfort's knowledge, Seidel offered to sell the Painting to [Meyer]." (Id. ¶ 5.)

6. To induce [Meyer] to purchase the Painting, and with the knowledge and approval of Frankfort, Seidel made the following false and material misrepresentations to [Meyer]:

a. That the Painting was the work of Mark Rothko. In fact, as Seidel knew, or certainly should have known, no part of the Painting was the work of Rothko. It was, in fact, a complete "forgery."

b. That the Painting would be included in the Catalogue Raisonne of Rothko's works then being compiled, which meant to [Meyer], as it would to any reasonable person in [Meyer's] position, that the Painting had been accepted by experts on Rothko's work as a genuine work by Rothko. In fact, as Seidel knew when she made this false representation, the Painting had never been accepted for inclusion in the Catalogue Raisonne of Mark Rothko's works. c. That the Painting was actually signed by Mark Rothko and had been acquired directly from Rothko by the seller's family. In fact, as Seidel knew, the Painting was not acquired directly or indirectly from Rothko by the seller's family or by anyone else, and Rothko did not paint any part of it, never signed it or owned it, did not sell or transfer it to anyone and was entirely unaware of its existence.

7. At the time Seidel made the foregoing misrepresentations to [Meyer], defendants knew they were false and had no reasonable basis for believing that any such representation was true.

(Complaint ¶¶ 6-7.)

The complaint alleged that on or about March 1, 2001, in reasonable reliance on these misrepresentations by "Seidel, known to and approved by Frankfort," Meyer agreed to purchase the Painting for $900,000 plus a 5% commission of $45,000. (Id. ¶ 8.) Meyer paid the agreed sums and received the Painting in March 2001; he hung it in his home, where it remained until 2019.

11. In January, 2019, [Meyer] learned for the first time that, contrary to the representations of Seidel, known to and approved by

...