Friday, May 15, 2009


Back in November I mentioned a NY state court decision that I said "could have far-reaching implications for the auction houses." Judd Tully wrote about the case in the February Art+Auction, noting that it had "sent a chill down the collective spines of the major auction houses."

Christie's motion for reargument of the decision has now been denied (or, more accurately, the motion was granted, but the court stuck to the original decision). The court held that the fact that Christie's "never dealt with [the plaintiff]" is irrelevant: "lack of privity is not a viable defense to a fraud claim." It added:

"Christie's argues that if the fraud claims against it from a third party are sustainable, such liability could stretch out in perpetuity. It asks where or, more precisely, when that would end. Could it be liable under a theory of fraud not only for decades but for hundreds of years? While not unmindful of the validity of this line of inquiry, that question is not currently before the Court. The nexus between Christie's and Orsi is not only close, but also limited and finite."

One aspect of the decision that I did not mention in my initial post was that it also let stand plaintiff's claim for damages in the amount of $2,000,000 (the current value of an authentic Basquiat painting), rather than limiting him to $185,000 (what he paid for the painting). The court reaffirmed that holding as well, on the ground that UCC Section 2-721 "was intended to correct the traditional remedies available for fraud, and those remedies were therefore extended to coincide with those available for non-fraudulent breach [of contract]."

Justice Cahn wrote the initial decision. Justice Kornreich wrote the new one, so that's two separate judges sending chills down auction house spines. I suspect the next stop will be the Appellate Division.