Simon-Whelan, as putative class representative for art buyers, alleged that the Foundation and various defendants violated state and federal antitrust laws by conspiring to restrain and monopolize trade in the market for Warhol works. He also alleged individual unjust enrichment, Lanham Act, and fraud claims. The Lanham Act claim was based on the defendants’ denial of the authenticity of a work he owned, and the fraud claim was based on allegations that he was fraudulently induced to submit his artwork to the defendants’ authentication board and sign a convenant not to sue in connection with such submissions.
Defendants authenticate Warhols in two ways: first, the board rates individual works as by Warhol, not by Warhol, or “no opinion.” Second, a work may be informally authenticated by being included in the Warhol Catalogue Raisonné, an allegedly comprehensive listing of all authentic Warhol artwork in existence. According to Simon-Whelan, the board has “denied the authenticity of works that were previously owned by the Estate and stamped with serial numbers from the Estate, routinely denies the authenticity of a certain percentage of Warhols, particularly when several from the same series are submitted, has denied authentication as a means of retaliation, has approached owners of Warhols to "lure" them into submitting their works for authentication, and changes its authentication policies when the change suits the Board's financial interests.” The result is to create scarcity and inflate the value of the Warhols owned by the Foundation. Defendants’ submission agreement contains a covenant not to sue in return for authentication services.
Simon-Whelan’s website (you can download an image of the portrait there, which raises interesting issues of its own) recounts the saga of an untitled painting he calls Double Denied. It’s a Warhol self-portrait he bought for $195,000 in 1989, “one of several created in August 1965 at Warhol’s direction from an acetate personally created and chosen by Warhol.” Warhol, of course, was known for not doing his own work and for merging art and business. The idea of an authentic Warhol is something of a travesty, or at least a deep irony. But authenticity has value in the age of mechanical reproduction, and so we continue on: Simon-Whelan alleged that the painting had previously been authenticated by the Foundation and Warhol’s estate, including by individual defendants, and had passed through several major dealers, each of whom had vetted provenance. In 2001, Fremont, an individual defendant, urged Simon-Whelan to submit his painting to the board, and the board told an interested buyer that it wouldn’t stand by the prior authentications. So Simon-Whelan submitted the painting, at which point the board stamped the painting “Denied.” (The stamp was on the back of the painting, but allegedly bled through the canvas and was visible on the front.) After compiling more documentation, Simon-Whelan resubmitted it, but was denied again. He alleged that the denial was fraudulent, and that he was ultimately forced to sell his Warhols at a fraction of their value through third parties. Moreover, excluding his painting from the catalogue allegedly served as a representation that it was fraudulent, depressing its price.
The court held that Simon-Whelan’s allegations of fraud and wrongdoing in connection with the solicitation of his agreement with the board were sufficient to state a claim to invalidate the exculpatory anti-suit provisions of the agreement. Intentional wrongdoing can’t be insulated by such an agreement.
The court found that Simon-Whelan had plausibly alleged a conspiracy in restraint of trade, and that he had standing as a person who desired to compete in the market to sell Warhols. But he hadn’t alleged injury from the alleged price-inflationary aspects of the conspiracy, and allegations of injury from his purchase of Double Denied would be time-barred anyway. So only the antitrust monopolization and market restraint allegations survived, based on the two rejections of his painting.
Simon-Whelan also alleged false advertising in violation of the Lanham Act. Defendants argued that the submission agreement included an acknowledgement that a “Denied” stamp could be affixed to the painting; that the denial was a mere statement of opinion; and that there wasn’t “commercial advertising or promotion.” If the submission agreement was procured by fraud, it was unenforceable, so that didn’t help. And defendants’ letters denying authenticity might be found to be more than statements of opinion; it was possible they could reasonably be seen as stating or implying provable facts about the painting’s authenticity.
The problem was “commercial advertising or promotion.” Even though Simon-Whelan alleged that the catalogue is used for authentication, he didn’t allege that the defendants use the catalogue in connection with commercial offerings of their goods and services. He did, however, sufficiently allege fraud under Rule 9(b).