Wrangling over Rothko

Mark Rothko, Untitled (1961)

At least four years of legal wranglings over the sale of this Mark Rothko painting appear to have come to an end with little to show except substantial legal costs for all parties.

At the heart of the dispute, a confidentiality clause, which is now anything but.

By way of background, back in 2007, Marguerite Hoffman (the Plaintiff) sold this Rothko painting for $17.6 million to David Martinez (Second Defendant), via his company Studio Capital, Inc. (Third Defendant), under the terms of a letter agreement.

The agreement was signed by now defunct New York gallery L&M Arts (First Defendant) acting on behalf of Studio Capital. The relevant clause of the agreement provided that: “[a]ll parties agree to make maximum effort to keep all aspects of this transaction confidential indefinitely. In addition, the buyer agrees not to hang or display the work for six months following receipt of the painting.”

Following the 2007 sale, Studio Capital kept the painting in storage, eventually consigning it to Sotheby’s for sale in 2010. Sotheby’s auctioned the painting on 12 May 2010, and sold it for over $31 million.

Not long after, Hoffman sued L&M, Martinez and Studio Capital for damages for breach of the confidentiality clause of the letter agreement, on the basis that when she sold the Rothko painting privately, she had done so at a substantial discount in exchange for the promise of strict confidentiality, forfeiting the additional millions of dollars that the painting would have brought if sold at public auction.

Earlier this year, a Dallas jury decided that Hoffman had proved her breach of contract claim against L&M, Martinez, and Studio Capital, and awarded compensatory damages of $500,000 – far below the $22.4 million claimed by Hoffman – which the court subsequently slightly increased to $1.2 million.

As a result, the defendants filed motions for judgment as a matter of law. This is a US cause of action which argues that the evidence used to support an issue is legally insufficient and no reasonable jury could find for a party on that issue. [US lawyers: please feel free to correct this very basic summary.] 

Essentially, the court was asked whether:

(i) a reasonable jury could have found that L&M was acting as agent for Studio Capital and Martinez when it entered into the letter agreement, and that, accordingly, Studio Capital and Martinez were bound by the letter agreement;
(ii) a reasonable jury could have found that L&M breached the letter agreement;
(iii) a jury could reasonably have found that L&M’s breach of the confidentiality clause caused Hoffman damages; and
(iv) the damages Hoffman had elected to recover were legally barred under Texas law.

In respect of the first point, Studio Capital and Martinez claimed that there was no evidence that they ever communicated to L&M or to Hoffman any intent to confer any authority on L&M to enter into the letter agreement on their behalf, and that the undisputed evidence was that this did not occur. (Rather, Studio Capital and Martinez argued, L&M did not act as their agent, but, consistent with art industry practice, as an intermediary, purchasing the Rothko painting from Hoffman and then reselling it to them.)

On the second point, L&M argued that no reasonable jury could have found that the goal of the confidentiality clause was not met. And, on the third, L&M maintained that a reasonable jury could not have found that Hoffman suffered any damages as a result of their breach of the confidentiality clause because she had failed to adduce sufficient evidence of causation.

The final point was [from my point of view!] a complicated issue of the type of damages allowed for the breach of a contract under Texas law.

Earlier this month, the US District Court for the Northern District of Texas (Dallas Division) handed down its ruling on the motions.

Unfortunately for Hoffman, the court agreed with Studio Capital and Martinez. It found that there wasn't legally sufficient evidence for a reasonable jury to have found that Studio Capital or Martinez conferred any actual or apparent authority on L&M to enter into the letter agreement on their behalf. The court, therefore, went on to dismiss the action against them with prejudice.

The court did find that a reasonable jury could have found that L&M breached the confidentiality clause, and, further, that L&M’s breach of the confidentiality clause caused Hoffman's damages in the form of the lost benefit of her bargain. However, as a further blow to Hoffman, even though the jury had offered Hoffman two measures of damages and the judge had ultimately decided the appropriate sum of damages to be awarded, the court held that she was not entitled to recover under the measure of damages that she had elected.

The result of this ruling is that the Hoffman's claim against Studio Capital and Martinez is effectively over and she is barred from filing another case against them on the same claim. Moreover, Hoffman must file a new motion against L&M to alter or amend the judgment in order for the court to award her damages under an alternative measure of damages.

Four year of litigation and no additional millions to show for it....distressing.

Time Warner in copyright dispute over photographs

Legendary photographer Alfred Eisenstaedt (1898 – 1995) captured many iconic images during his long and distinguished career - a large proportion of which he spent working for Life magazine.

Eisenstaedt was also, reportedly, very generous - regularly giving copies of his prints to his friends, family and the subjects of his photographs.

Some of these photographs are now the subject of a legal dispute between Time Warner, the owners of Life magazine, and the family of Eisenstaedt's sister-in-law and friend, Lucille Kaye.

DNAinfo New York reports:

The dispute began in April 2013 when Kaye's family planned to auction off some of the work through Sotheby's.  

Time Warner interceded, claiming that under contracts it signed with Eisenstaedt before his death, it has rights to all the photographs and negatives he took between Jan. 1, 1929 and July 26, 1994. The media titan said that under the terms of the agreement, that includes the disputed photographs.  

But [John] Catterson, who represents Kaye's family, said Eisenstaedt had given the photos — which include the Hitler-Mussolini meet-up — to her.  

"The actual photographs we're talking about were photographs in Miss Kaye's apartment at the time she died in 2012," Catterson said.  

"They had been gifted to her well before [Eisenstaedt] died," he added..."

...In 2012, Kaye died at 92 without any children. She left her possessions, including the photographs worth an estimated $50,000, to her nieces and nephews in South Africa, and made Catterson the executor of her estate.  

In April 2013, Kaye's family decided to auction some of the photos through Sotheby's. They later decided to pull the items from sale, but not before Sotheby's included them in a catalog.  

Time Warner spotted the listing and contacted Sotheby's, claiming ownership.  

Subsequently, Sotheby's refused to return the photos to Kaye's family until they resolved the dispute with Time Warner.  

Catterson filed the April 9 petition in Manhattan Surrogate's Court to have a judge determine ownership and to order the return of the photographs to Kaye's family.  

[Time Warner's lawyers say that] under its agreements with Eisenstaedt, Time Warner does own the copyright to his works and pays his estate 50 percent of all revenue from the licensing of his works.  

However, Catterson [claims] that Kaye's family owns the disputed prints because Eisenstaedt gave them to her before he signed any contracts with Time Warner.  

He also notes that under one of the contracts, Time had a right to all the photographs in rooms located at the Time & Life building and in Eisenstaedt's Jackson Heights' apartment. Catterson said in the filing these photos were kept at Kaye's apartment and there is no evidence they were in Time & Life or Eisenstaedt's apartment.  

He added that Time Warner has no proof of ownership since it has not kept an inventory of Eisenstaedt's photography and cannot "articulate which, if any, of the photographs are part of the collection assigned to Time in the agreements."

Sounds like a very interesting dispute from this initial report. It would be good to get a look at Catterson's petition and any responses from Time Warner. If anyone has access, please pass them on!


Source: DNAinfo New York, 21 April 2014

Government of Taiwan Sued for Allegedly Breaching Contract with Artist

The president of Taiwan as well as another local official for Kinmen County, have been sued by an expatriate Chinese artist for breach of contract.  The complaint also names an unknown number of John and Jane Does.  The case was filed in U.S. District Court for the Southern District of New York.  Artist Weiming Chen, now a resident of the United States, claims that the President of Taiwan succumbed to political pressures from mainland China that caused the Taiwanese government to breach its contract with Chen.  The artist alleges that on January 17, 2012, he entered into a contract with the government of Taiwan to create a 32-meter tall sculpture on Kinmen island, a few miles off mainland China.  The island was under military administration for many years and is historically significant as the site of intense battles between Taiwan and mainland forces.  The statue was to face the mainland and was to echo the spirit of New York's Statue of Liberty as well as the Goddess of Democracy statue formerly situated in Tiananmen Square in Beijing.  The original Goddess was fabricated out of foam and papier-mâché by students during the protests which took place in the spring of 1989 and was demolished by the military during the infamous suppression on June 4, 1989.  Replicas of the Goddess are now situated around the world.

The colorfully-worded complaint was filed on July 5, 2012 and requests millions of dollars in punitive damages for civil conspiracy, breach of contract, and interference with business relations.  The artist also seeks the right to build the statue.  The Taiwanese government has yet to respond to the artist's allegations.