Wednesday, March 11, 2015

art collector lacks remedy against foundation's claim of inauthenticity

Bilinski v. Keith Haring Foundation, Inc., 2015 WL 996423, No. 14cv1085 (S.D.N.Y. Mar. 6, 2015)
Keith Haring was a “prolific artist and social activist whose work responded to the New York City street culture of the 1980s.”  Plaintiffs alleged that they owned Keith Haring artwork, and that defendants interfered with the exhibition and sale of their art, reducing the value of their property. The court dismissed all of plaintiffs’ many claims.
The Foundation is a nonprofit established by Haring; other defendants were individual officers and directors, an entity that operated an authentication committee for the Foundation, Haring’s estate, and the president of Artestar, a company that represents the Foundation in licensing and consulting.  Haring bequeathed the majority of his works to the Foundation, as well as “any copyrights relating hereto” and trademarks. The Foundation’s collection of Haring works was valued at approximately $25 million as of 2011. It earns income by selling pieces from its collection; individual pieces can fetch millions of dollars.
The Foundation operated an Authentication Committee to review artwork attributed to Haring and issue opinions regarding the authenticity of submitted works, which was dissolved in 2012. The dissolution increased the value of previously-authenticated works. “Many auction houses require a certificate of authentication as a condition of sale, but will sell Haring artwork without a certificate with the tacit approval of the Foundation.” Private sales may occur at reduced prices without authentication or Foundation approval. 
Plaintiffs owned 111 pieces of Haring work they believed to be authentic, tracing title through a personal friend of Haring. In 2007, the Foundation rejected 41 of Bilinski’s works as “not authentic,” but did not provide a reason and stated that the determination by the Committee could “change by reason of circumstances arising or discovered ... after the date of this opinion.” Bilinski gathered additional evidence of authenticity, including a signed statement of origin from Haring’s friend.  In 2008, the Foundation accused Bilinski in writing of selling or making “available for sale items you are representing to be original works by Keith Haring when you have been duly warned they are not,” and warned Bilinski that legal action could follow if she did not cease this activity. The Foundation refused to respond to her attempts to address the issue.
In 2010, Bilinski brought her works to Sotheby’s. A Sotheby’s representative indicated his belief that the works were authentic, but reported that he could not do anything to help her because of the Foundation. The Gagosian Gallery reacted similarly.  Bilinski asked the Foundation to reconsider, and it refused.  Another auction house told Bilinski that the works appeared to be authentic and it would be willing to produce an auction. Bilinski also commissioned a forensic analysis of two of the works, which concluded that the two paintings “could be considered as having been produced in the mid–1980s.”
In 2013, plaintiffs participated in an exhibition featuring their Haring works that was scheduled to run from March 7–10. On March 8, the Foundation filed suit and sought a TRO, referring to the works as “fakes, forgeries, counterfeits and/or infringements.” The motion for a TRO referred to the show as “fraudulent.” That same day, the Foundation and the organizers of the exhibition agreed to the removal of all but ten works, and to remove and destroy all copies of the brochure and/or catalog. In a press release, the Foundation described the lawsuit as an “effort to stop the display of fake Haring works at the exhibition.” The Press Release reports that the organizers of the Miami Exhibition “agreed to remove all fake Haring works from the exhibition immediately and to destroy the offending catalogue that illustrated most of the fake works.” One plaintiff lost the sale of artwork to a museum in London as a result of the press release and litigation.
The antitrust claims of course failed.
The Lanham Act claims based on the complaint and press release also failed because they weren’t “commercial advertising or promotion.”  Allegations that the complaint and press release were published “with the intent of preventing sales of the [the plaintiffs’] works ... and of increasing the value of Defendants’ artworks at their expense” failed to allege a sufficient connection between either document and a proposed commercial transaction.  (Although the Lexmark Court didn’t resolve the commercial advertising issue, this seems in some tension with its general recognition that defaming a competitor can be enough to be false advertising, even without a direct promotion of competing goods.)
Plaintiffs’ state law tort claims also failed. The court exercised its supplemental jurisdiction from concerns of convenience and judicial economy. “Under New York law, statements made in the course of legal proceedings are absolutely privileged if pertinent to the litigation,” even if made with actual malice. The statements in the underlying complaint were privileged, because they were directly relevant to the central dispute. 
The statements in the press release, however, weren’t privileged.  The fair report privilege protected substantially accurate reports of any judicial proceeding, but application of that privilege was inappropriate at the motion to dismiss stage if a reasonable jury could conclude that the report “suggest[ed] more serious conduct than that actually suggested in the” judicial proceeding.  The press release characterized the parties as having agreed to remove “fake” Haring works.  But there was no such admission by the exhibition organizers, and a reasonable jury could find the privilege inapplicable.
Defamation/conspiracy to defame claims failed because no reasonable jury could conclude that the press release was of and concerning them, rather than the organizers of the exhibition. Any defamation was of the organizers; any implication only disparaged their property.
Tortious interference with business relationships: the complaint failed to identify the London buyer or allege that the defendants knew of the business relationship at the time they filed their lawsuit or issued the press release.
Trade libel: assuming the plaintiffs sufficiently alleged defamation of their goods, they still failed to allege special damages, which had to be itemized.  Again, the complaint didn’t name the London buyer or the sales price. Plaintiffs argued that the requirement that the lost customers be identified may be relaxed when disparaging comments are disseminated widely and the nature of the plaintiffs’ business prevents the identification of lost customers. But none of those cases excused the failure to identify the lost sales associated with the London Museum, and they weren’t solid authority for this situation. Intentional infliction of economic harm/prima facie tort: again, plaintiffs failed to plead special damages. 
Unjust enrichment: The allegations that the value of defendants’ Haring works was increased by preventing others from selling the works, and that certain individual defendants were enriched through the salaries and fees paid by the Foundation, weren’t sufficient.  The benefits allegedly acquired didn’t flow directly to the defendants at plaintiffs’ expense; they were indirect and hypothetical. Also, the connection between the alleged harm to the plaintiffs and the compensation paid to individual defendants was too attenuated to support an unjust enrichment claim.

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