Morgan Art Found. v. McKenzie
| Docket Number | 18-CV-4438 (AT) (BCM) |
| Decision Date | 15 December 2021 |
| Parties | MORGAN ART FOUNDATION LIMITED, Plaintiff, v. MICHAEL MCKENZIE, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Now before the Court is defendant Michael McKenzie's unopposed motion to compel the testimony of non-party witness Osvaldo J. Gonzalez. (Dkt. No. 444.) For the reasons that follow, the motion will be granted.
This action is one of several, pending in various jurisdictions concerning the late artist Robert Indiana, the legal rights to his intellectual property and artistic legacy, and related disputes. The plaintiff here is Morgan Art Foundation Limited (MAF), an art dealer, which acquired the exclusive right to reproduce, fabricate, and market a variety of Robert Indiana artworks - including his well-known LOVE image and sculpture - through a series of agreements executed by the artist during his lifetime. MAF alleges that McKenzie, an art publisher doing business as American Image Art (AIA) infringed its intellectual property rights and committed related torts by publishing new artworks based on works protected by MAF's agreements with Indiana, including but not limited to "unauthorized reproductions of the LOVE image," which McKenzie "falsely claimed to be authentic Robert Indiana works[.]" See First Am. Compl. (Dkt. No. 47) ¶¶ 12-13. James Brannan, as personal representative of the Estate of Robert Indiana (the Estate), also alleges that McKenzie has fabricated unauthorized works and falsely claimed them to be authentic Indiana works. Those allegations, among others, were until recently before the American Arbitration Association (AAA) in a matter captioned Brannan v. McKenzie, AAA Case No 01-19-0001-9789 (the Arbitration).[1]
Gonzalez is a disbarred criminal defense attorney and a former friend and employee of McKenzie.[2] According to a May 21, 2021 witness statement that he submitted on McKenzie's behalf in the Arbitration, Gonzalez began working for McKenzie in or around April 2019 to handle "art sales," but was unable to pursue such sales because of the "accusations of forgeries and unauthorized works" by the Estate, which "flatlined" the "Robert Indiana Brand." See Zerner Decl. (Dkt. No. 446) Ex. C ¶¶ 2, 14-15.[3]
The relationship between McKenzie and Gonzalez came to an abrupt end in August 2021, when the two men had a falling out (according to Gonzalez, the issue was what type of fuel Gonzalez put in McKenzie's vehicle) and Gonzalez contacted MAF's counsel, as well as counsel for the Estate in the Arbitration, to provide information for use against McKenzie in both proceedings. Zerner Decl. ¶¶ 4, 12 & Ex. D; see also Nikas Ltr. dated Aug. 30, 2021 (Dkt. No. 417) (). On August 31, 2021, Gonzalez executed a declaration under penalty of perjury, see Zerner Decl. Ex. B (Gonzalez Decl.), accusing McKenzie of (among other things) "forging Robert Indiana artworks," instructing another AIA employee to do the same, removing "multiple truckloads" of Indiana artworks from his property in Katonah, New York in advance of a court-ordered inspection by MAF's attorneys in this action, and planning to "conceal the artworks through a sequence of transfers that would hide their true ownership." Gonzalez Decl. ¶¶ 10-18. Gonzalez also attests that McKenzie never intended to honor the term sheet executed with the Estate to settle the Arbitration, and that he plans to "continue selling forged Indiana artworks" regardless of the outcome of this action or the Arbitration. Id. ¶¶ 5-8, 17.
On September 10, 2021, the parties submitted the August 31 Gonzalez declaration in connection with their joint request for a discovery and briefing schedule to govern MAF's anticipated sanctions motion against McKenzie. (Dkt. No. 421.) After a conference on September 13, 2021, the Court extended the fact discovery deadline to November 12, 2021, authorized the parties to conduct limited sanctions-related discovery, including a deposition of Gonzalez, directed MAF to file its sanctions motion by November 16, 2021, and scheduled a sanctions hearing for January 4, 2022. (Dkt. No. 422.)
On October 1, 2021, Gonzalez appeared for deposition, without counsel, but refused to answer numerous questions, invoking his Fifth Amendment right to silence with respect to virtually every inquiry regarding the matters discussed in his August 31 declaration. See Zerner Decl. ¶ 20 & Ex. A (Gonzalez Dep. Tr.). Asked about the extent of his privilege assertion, Gonzalez confirmed that he would "be asserting the Fifth Amendment to any and all questions . . . related at all to Michael McKenzie," Gonzalez Dep. Tr. at 7, including all questions concerning his recent declaration, id. at 11-12, 20, and all questions related to certain photographs he had sent to MAF's counsel "of artwork on the Katonah property." Id. at 14. Gonzales also invoked the Fifth Amendment when asked to disclose his oral communications and produce his written communications with counsel for MAF and/or the Estate, Zerner Decl. ¶ 20; Gonzalez Dep. Tr. at 29, and again when asked whether he had recently "talked to the FBI[.]" Gonzalez Dep. Tr. At 30.
On October 13, 2021, McKenzie filed his motion to compel Gonzalez to testify pursuant to Fed.R.Civ.P. 37(a), supported by the Zerner declaration and a memorandum of law (McKenzie Mem.). (Dkt. No. 445.) McKenzie argues principally that Gonzalez has knowingly waived whatever Fifth Amendment rights he may have had with respect to "all subjects discussed with counsel for [MAF] and counsel for the Estate and addressed in his sworn declaration in this case dated August 31, 2021 and all matters relevant to those subjects," as well as all matters related to the few questions he did answer at the October 1 deposition (including his recent communications with MRZ, his status with the New York bar, and his communications with auction houses, galleries, and/or the press about McKenzie. McKenzie Mem. At 8-10.
Gonzalez was personally served with McKenzie's motion papers on October 28, 2021 (Dkt. No. 451), making his opposition, if any, due seven days later. (See Dkt. No. 437.) When he failed to respond, the Court extended his time to do so, sua sponte, until November 19, 2021 (Dkt. No. 452.) On November 16, 2021, the parties reported that Gonzalez had contacted them and agreed to testify, and on that premise the Court extended the due date for MAF's sanctions motion to December 10, 2021, and rescheduled the hearing on that motion to January 19, 2022. (Dkt. No. 455.) However, Gonzalez did not follow through on his agreement to testify. On November 23, 2021, the Court received a letter from Gonzalez dated November 18, 2021, reporting that McKenzie had filed a complaint against him with the Lawyers' Fund for Client Protection (Lawyers' Fund), in which he (McKenzie) indicated that he would also pursue criminal charges against Gonzalez with the Westchester County District Attorney. Gonzalez Ltr. dated Nov. 18, 2021 (Dkt. No. 457), at 1. Gonzalez requested "an extension of time to sort out [his] position with respect to these new circumstances," but assured the Court that he remained "willing to testify and not invoke the 5th Amendment on almost all the issues germane to the litigation in itself." Id.
The next day, the Court directed McKenzie to file a supplemental brief addressing (1) "whether and when he filed a claim against Gonzalez with the Lawyers' Fund and/or made a complaint about Gonzalez to the Westchester County District Attorney," and (2) "the impact of the claim and/or complaint on [Gonzalez's] prior waiver of his Fifth Amendment rights with respect to the matters to which he attested in his declaration," together with copies (to be filed under seal, at the "ex parte" level) of his Lawyers' Fund claim and any complaint he made about Gonzalez to the District Attorney. Order dated Nov. 24, 2021 (Dkt. No. 459), at 1-2. The Court also granted Gonzalez an additional seven days - after the supplemental materials were served on him - to file any opposition to the motion to compel. Id. at 2.
On December 1, 2021, McKenzie filed his supplemental brief (McKenzie Supp. Mem.) (Dkt. No. 460), together with a second Zerner declaration (Second Zerner Decl.) (Dkt. No. 461), attaching the claim that McKenzie submitted to the Lawyer's Fund and related correspondence between MRZ and the Lawyers' Fund.[4] He also served his supplemental papers, together with the November 24 Order, on Gonzalez by email. (Dkt. No. 462.) In his supplemental brief, McKenzie argues principally that his recent claims against Gonzalez do not "change the analysis" set out in his moving brief. McKenzie Supp. Mem. at 1.
On December 7, 2021, the Court received another letter from Gonzalez, dated December 2, 2021, explaining that in his complaint to the Lawyers' Fund McKenzie sought "to be compensated $160, 000 he paid for Legal Fees paid to me [sic]," on the ground that McKenzie "was unaware of my suspension from Law practice[.]" Gonzalez Ltr. dated Dec. 2, 2021 (Dkt. No. 468), at 1. In fact, according to Gonzalez, attorneys John Markham and Bridget Zerner of MRZ were aware of his bar status "from very early on," as was McKenzie's prior attorney, John Simoni. Id. In any event, according to Gonzalez, he worked for AIA as President of the Sales Division and as McKenzie's "personal assistant," but "did no legal work." Id. Gonzalez requests that MRZ "be recused from this matter" because Markham and Zerner will be...
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