De Sole v. Knoedler Gallery, LLC

• Decision Date: 30 September 2013
• Docket Number: Nos. 12 Civ. 2313(PGG), 12 Civ. 5263(PGG).,s. 12 Civ. 2313(PGG), 12 Civ. 5263(PGG).
• Citation: 974 F.Supp.2d 274
• Court: U.S. District Court — Southern District of New York
• Parties: Domenico DE SOLE, and Eleanor De Sole, individually and as assignee of Laura De Sole, Plaintiffs, v. KNOEDLER GALLERY, LLC d/b/a Knoedler & Company, Anne Freedman, Glafira Rosales, Jose Carlos Bergantinos Diaz, Michael Hammer, and Jaime Andrade, Defendants. John D. Howard, individually and as assignee of Jaime Frankfurt, LLC, Plaintiff, v. Ann Freedman, Glafira Rosales, Knoedler Gallery, LLC, d/b/a Knoedler & Company, Michael Hammer, 8–31 Holdings, Inc., Jose Carlos Bergantinos Diaz, and Jaime R. Andrade, Defendants.

974 F.Supp.2d 274

Domenico DE SOLE, and Eleanor De Sole, individually and as assignee of Laura De Sole, Plaintiffs,

v.KNOEDLER GALLERY, LLC d/b/a Knoedler & Company, Anne Freedman, Glafira Rosales, Jose Carlos Bergantinos Diaz, Michael Hammer, and Jaime Andrade, Defendants.

John D. Howard, individually and as assignee of Jaime Frankfurt, LLC, Plaintiff,

v.Ann Freedman, Glafira Rosales, Knoedler Gallery, LLC, d/b/a Knoedler & Company, Michael Hammer, 8–31 Holdings, Inc., Jose Carlos Bergantinos Diaz, and Jaime R. Andrade, Defendants.

Nos. 12 Civ. 2313(PGG), 12 Civ. 5263(PGG).

United States District Court,

S.D. New York.

Sept. 30, 2013.

Gregory A. Clarick, Emily Reisbaum, Isaac Berkman Zaur, Clarick Gueron Reisbaum LLP, Aaron Hayes Crowell, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, for Plaintiffs.

Nicholas A. Gravante, Jr., Boies, Schiller & Flexner, LLP, Mark Allen Robertson, Charles David Schmerler, India DeCarmine, Fulbright & Jaworski L.L.P., Silvia L. Serpe, Paul W. Ryan, Serpe Ryan LLC, New York, NY, Benjamin Daniel Battles, Luke William Nikas, Philip J. Iovieno, Boies, Schiller & Flexner LLP, Albany, NY, Anastasios Sarikas, Office of Anastasios Sarikas, Astoria, NY, for Defendants.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, District Judge.

In these actions, Plaintiffs claim that paintings that they purchased from Defendant Knoedler Gallery, LLC (“Knoedler”)—on the representation that they had been created by Mark Rothko and Willem de Kooning—were forgeries. In addition to Knoedler, the named defendants include 8–31 Holdings Inc., Knoedler's sole member; Michael Hammer, Knoedler's managing member and the owner of 8–31 Holdings, Inc.; Ann Freedman, Knoedler's former president; Jaime Andrade, a former Knoedler employee; Glafira Rosales, a Long Island art dealer and the alleged source of the forged paintings; and Carlos Bergantinos Diaz, Rosales'“longtime companion.” Plaintiffs claim that Knoedler sold nearly forty paintings it acquired from Rosales, all of which were represented to be works created by well-known abstract expressionist artists, but which were in fact forgeries. Plaintiffs further allege that as early as October 2003, Knoedler and Freedman had reason to doubt the authenticity of these paintings, but nonetheless continued to sell the works Rosales produced until 2007.

Plaintiffs' complaints assert claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and state law causes of action for fraud, breach of warranty, and unilateral and mutual mistake.

Defendants in both actions have moved to dismiss all claims against them.

BACKGROUND

I. FACTS

A. The Knoedler Gallery, Ann Freedman, and Glafira Rosales

Defendant Knoedler Gallery, LLC was founded in 1846, and for more than a century, it was one of New York City's most respected art galleries. ( Howard Cmplt. ¶ 7) Defendant Ann Freedman began working at Knoedler in the 1970s, and in 1995 she became its president and a director of 8–31 Holdings, Inc. Defendant Michael Hammer is the owner and chairman of Knoedler, and also the president and owner of 8–31 Holdings, Inc. ( De Sole Am. Cmplt. ¶¶ 14, 15; Howard Am. Cmplt. ¶ 7)

In the mid–1990's, Defendant Jaime Andrade, a Knoedler employee, introduced Defendant Glafira Rosales to Freedman and others at Knoedler. ( De Sole Am. Cmplt. ¶ 23; Howard Cmplt. ¶ 4) Rosales was a Long Island art dealer who claimed to have access to a collection of previously unknown “masterworks” by certain abstract expressionist artists. ( De Sole Am. Cmplt. ¶ 23) Rosales initially claimed that these paintings belonged to a friend. ( De Sole Am. Cmplt. ¶ 24)

Rosales later explained to Freedman that, as a child in Mexico, she had met a couple who were European Jewish émigrés. ( De Sole Am. Cmplt. ¶ 24) The husband made frequent business trips to the United States between the 1940's and 1970's. ( De Sole Am. Cmplt. ¶ 24) During his visits to the U.S., the husband purchased artworks directly from a number of now well-known abstract expressionist artists, including Mark Rothko, Jackson Pollock, Franz Kline, Clyfford Still, Robert Motherwell, and Barnett Newman. ( De Sole Am. Cmplt. ¶ 24) The couple died in the early 1990s, leaving these works to their children. ( De Sole Am. Cmplt. ¶ 24) According to Rosales, the children—a daughter and son—lived in Mexico and Switzerland, were not interested in art, were interested in selling the paintings, and wished to remain strictly anonymous. ( De Sole Am. Cmplt. ¶ 24) Rosales referred to the deceased collector and his son as “Mr. X” and “Mr. X, Jr.” ( Howard Cmplt. ¶¶ 3, 41)

Rosales also told Freedman that the deceased collector had corresponded with the various artists, but that these letters had been “disposed of” after his death. ( De Sole Am. Cmplt. ¶ 26) Rosales reported that the collector's son “remembers seeing artists in his father's home” and “remembered seeing his parents pay in cash to one of the artists.” ( De Sole Am. Cmplt. ¶¶ 26–27)

At some point in 2000, Rosales told Freedman that the son of the collector had “confirmed” that his father—in purchasing these paintings—had relied on the advice of Alfonso Ossorio, another abstract expressionist artist, who was a friend and colleague of the artists whose works the collector had purchased. ( De Sole Am. Cmplt. ¶¶ 29–30) Rosales explained that all correspondence between Ossorio and the collector had likewise been thrown out after the collector's death. ( De Sole Am. Cmplt. ¶ 30) In or around 2001, Knoedler employees and retained experts attempted to verify Rosales' story regarding the connection between the collector and Ossorio. ( De Sole Am. Cmplt. ¶ 31) Knoedler did not find any evidence corroborating the link between the collector and Ossorio. ( De Sole Am. Cmplt. ¶ 31) In December 2001, Rosales told Freedman that “Gerzo” was a “family” name connected to the collector, but not his name. ( De Sole Am. Cmplt. ¶ 32) Knoedler then investigated—without success—whether there was a connection between Ossorio and a well-known Mexican artist, Gunther Gerzso. ( De Sole Am. Cmplt. ¶ 32)

B. Levy's 2001 Purchase of the “Green Pollock”

In late 2001, Freedman and Knoedler sold a purported Jackson Pollock— Untitled 1949 (the “Green Pollock”)—to Jack Levy for $2 million. ( Howard Cmplt. ¶ 43) Knoedler had purchased this work from Rosales in March 2001 for $750,000. ( De Sole Am. Cmplt. ¶ 40)

Freedman and Knoedler represented to Levy that Mr. X had acquired the work through Ossorio, who lived near Pollock on Long Island. ( Howard Cmplt. ¶ 44) The sale to Levy was conditioned on a favorable review of the work's provenance ¹ and authenticity by the International Foundation for Art Research (“IFAR”). ( Howard Cmplt. ¶ 45)

In October 2003, Levy obtained the IFAR report. ( Howard Cmplt. ¶ 46) The report states that “IFAR believes that too many reservations exist to make a positive attribution to Jackson Pollock.” ( Howard Cmplt. ¶ 46) The report also states that it is “inconceivable” that Pollock sold this work through Ossorio. ( Howard Cmplt. ¶¶ 47–48) As a result of the IFAR report, the sale of the alleged Pollock was cancelled, and Knoedler refunded the purchase price to Levy. ( Howard Cmplt. ¶ 51) After receiving the negative IFAR report concerning the alleged Pollock, Knoedler did not submit any additional works obtained from Rosales to IFAR for analysis.² ( Howard Cmplt. ¶ 54) On December 15, 2003, at Freedman's direction, the IFAR report was faxed to Hammer. ( De Sole Am. Cmplt. ¶ 44) In the fax cover sheet accompanying the report, Freedman discussed the fallout from the IFAR report, including the effect that the report would have on a partner's willingness to continue to invest in the Green Pollock. ( De Sole Am. Cmplt. ¶ 45) A handwritten note on the reverse side of the fax cover sheet contains the following phrases in quotation marks: “discreet sources are my stock in trade,” “don't kill the goose that's laying the Golden egg,” and “I'm not going to change my way of doing business. If you are not [comfortable]—step away.” ( De Sole Am. Cmplt. ¶ 45) Plaintiffs have not alleged who wrote these notes.

After the IFAR report was issued, Rosales, Freedman, Andrade, and Knoedler changed their story about the origin of the works Rosales had obtained. ( De Sole Am. Cmplt. ¶ 47) These defendants substituted David Herbert—a deceased art world figure and Andrade's long-time companion—for Ossorio as the “advisor” or “agent” who had assisted Mr. X in buying these works.³ ( De Sole Am. Cmplt. ¶ 47) ⁴ Andrade claimed to have introduced Rosales to Herbert before his death in 1995. ( De Sole Am. Cmplt. ¶ 47; Howard Cmplt. ¶ 27)

C. The De Soles' December 2004 Purchase of a “Rothko”

In the fall of 2004, the De Soles called Freedman and Knoedler to arrange a meeting to discuss the possible purchase of a painting by Sean Scully. ( De Sole Am. Cmplt. ¶ 50) At a November 2004 meeting, Freedman told the De Soles that she did not have any Scully works available, and she instead showed them a work allegedly created by Mark Rothko. ( De Sole Am. Cmplt. ¶ 51) Rosales had brought this work to Knoedler. ( De Sole Am. Cmplt. ¶ 74) After this meeting, Freedman also met twice with Jim Kelly, the De Soles' consultant and agent. ( De Sole Am. Cmplt. ¶ 53) Freedman unequivocally, repeatedly, and consistently represented to the De Soles and Kelly that the purported Rothko was authentic. ( De Sole Am. Cmplt. ¶ 54)

At these meetings, Freedman also represented to the De Soles and to Kelly that the anonymous seller of the Rothko was Knoedler's client, that the seller and his father were personally known to Knoedler, and that the father had obtained the work directly from Rothko, with the advice of David Herbert. ( De Sole Am. Cmplt. ¶ 55) Freedman also told the De Soles and Kelly that Christopher Rothko, Rothko's son, and numerous Rothko experts, including Dr. David Anfam (who had prepared the catalogue raisonné for Rothko's work)...