A decision was recently rendered in the longstanding lawsuit between Ron Perelman’s investment group, MAFG Art Fund, LLD, and the Gagosian Gallery. As the value of art continues to climb, more transactions will involve investment groups rather than individual collectors, and this decision touches on some interesting issues in that regard.
The suit arises out of convoluted claims involving a series of art purchases made by the investment group in exchange for cash and credit given to the group for consigning other art to the gallery. One of plaintiffs allegations was that, based on the Gallery’s superior knowledge of art, the Gallery had a fiduciary duty to accurately value the price of works involved in the exchange transactions, and that the Gallery breached its duty. The Court, however, pointed out the extensive art collection and art investment experience touted by the plaintiff in its complaint; the fact that they were engaged in the business of art investments; that they alleged they had “staffs to work out paperwork;” that they were represented by counsel; and that they were owned by the renowned businessman, Ronald Perelman. Based in part on this “arm’s length” transaction, the Court dismissed the breach of fiduciary duty count.
The other point of interest concerned plaintiff’s claims that the Gallery fraudulently represented the value of certain artwork. Generally, even when a party possesses unique and superior knowledge, statements concerning value of art are “non-actionable opinion.” Here, however, plaintiffs alleged that the Gallery repeatedly represented the value of the art was based on market data and sales information, and that the Gallery’s statements about those existing facts were knowingly false. Although the Gallery tried to establish through the use of redacted invoices that plaintiffs received higher credits than the valuations provided by the Gallery, the Court refused to consider such proof on a pre-answer motion to dismiss and allowed the lawsuit to proceed into discovery.
Apparently the Judge urged the litigations to settle the matter “at a cocktail party in the Hamptons” so we will see whether the case actually goes forward. Please write to Mike Bono for more information.