Monday, February 17, 2014

“In essence, plaintiffs’ breach of contract cause of action alleges that, with the benefit of hindsight, it appears to have entered into a bad bargain”

I finally got around to reading the decision on the motion to dismiss Ron Perelman’s lawsuit against Gagosian Gallery.  I had gotten the impression from the headlines in the press (see for example here, here, here) that it was something of a victory for Perelman, but it turns out to have been a pretty decisive victory for Gagosian.

The court threw out the breach of contract and unjust enrichment claims, as well as the breach of fiduciary duty claim:  “plaintiffs’ allegations make clear that they were experienced and sophisticated business investors who entered into negotiated, arm’s-length transactions with defendants, which does not give rise to a fiduciary relationship. … Moreover, plaintiffs’ reliance on the fact that Perelman and Gagosian were friends for 20 years, ‘socialized together,’ were ‘business acquaintances,’ had ‘worked together’ previously  and invested together, to establish a fiduciary relationship is unpersuasive.”

All that’s left is the “fraud” claim, which alleges that, as part of a complicated “exchange” transaction, the gallery “knowingly” “overvalued” the works Perelman got back.  Apparently the gallery put in some evidence that this was not the case, but “these Invoices are not the type of conclusive documentary evidence upon which the Court generally relies on a pre-answer motion to dismiss.”  So the claim survived for now.

For background on the case, here is Felix Salmon in 2012 correctly observing that “you don’t become a fiduciary because you’re friends, or because you’re knowledgeable, or any of those other reasons.”  He said the suit was “utterly ridiculous, and will almost certainly get thrown out of court.”  Close.