Equinox Gallery Ltd. v. Dorfman

306 F.Supp.3d 560

EQUINOX GALLERY LIMITED, Plaintiff,

v.Fred DORFMAN, individually and d/b/a Dorfman Projects, Dorfman Projects LLC, and Fred Dorfman, Inc., Defendants.

17 Civ. 230 (GBD)

United States District Court, S.D. New York.

Signed January 25, 2018

Lindsay Elizabeth Hogan, Judd Benjamin Grossman, Grossman LLP, New York, NY, for Plaintiff.

Mark Scott Pincus, Pincus Law LLC, Gerald J. Di Chiara, New York, NY, for Defendants.

MEMORANDUM DECISION AND ORDER

GEORGE B. DANIELS, United States District Judge

This civil RICO action, brought by Plaintiff Equinox Gallery Limited ("Equinox Gallery") against Defendant Fred Dorfman and two business entities he exclusively owns and controls, Dorfman Projects LLC and Fred Dorfman, Inc. (collectively, "Defendants"), arises out of an alleged scheme to sell stolen Jasper Johns artwork to unsuspecting buyers. (Compl., ECF No. 1, at 1, 6.) Plaintiff asserts federal claims against all Defendants under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., as well as claims for fraud, breach of warranty, and unilateral mistake, for allegedly selling to Plaintiff one such painting stolen from Johns' art studio by his longtime studio assistant, James Meyer. (Compl. ¶ 1, 103–265.) Defendants move to dismiss the complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure and to strike Plaintiff's request for punitive damages. (Mot. to Dismiss, ECF No. 21; Defs.' Mem. in Supp. of Mot. to Dismiss ("Defs.' Mem."), ECF No. 23, at 1–2.)

Defendants' motion to dismiss is GRANTED as to Plaintiff's claim for breach of warranty and DENIED in all other respects.

I. BACKGROUND

Since its incorporation in 1976, Defendant Fred Dorfman, Inc., which is solely owned and operated by Defendant Fred Dorfman, has been recognized in the fine-art community for its expertise in presenting contemporary artists to a wide audience of collectors, galleries, and dealers.¹ (Compl. ¶¶ 21–22.) According to Plaintiff, however, more recently it has been involved in a criminal racketeering scheme to sell nearly forty pieces of art stolen from renowned contemporary artist Jasper Johns' studio by one of Johns' longtime and trusted studio assistants, James Meyer. (Id. ¶ 1.)

For many years, Jasper Johns has maintained an art studio in Sharon, Connecticut. (Id. ¶ 35.) In 1985, James Meyer became one of Johns' studio assistants. In that position, he helped Johns create artworks and assisted with various administrative and record-keeping tasks. By virtue of his role as studio assistant, Meyer had unfettered access to the studio and its books and records, including a ledger that contained a description and inventory number for each of Johns' completed artworks. (Id. ¶¶ 37–38.) He also had access to Johns' unfinished works and was responsible for maintaining a file drawer holding such works and others that Johns' had not yet authorized to be placed into the art market. In addition, Meyer was responsible for destroying pieces that Johns was not satisfied with or otherwise did not want included among his body of finished works. (Id. ¶ 39.) In the 1990s, however, Meyer began stealing artwork from the studio, taking drawings that Johns had wanted discarded—sometimes straight from the trash—as well as some of Johns' unfinished works. (Id. ¶¶ 40–41.)

Sometime in 2003, Meyer and Fred Dorfman were introduced.² For the next three years, Dorfman embarked on a campaign to convince Meyer to allow him to represent the latter as an independent artist. What Meyer did not know, however, was that Dorfman never intended to represent him or his interests, but rather sought only to use him to gain access to Jasper Johns' artwork. (Id. ¶¶ 43–44.) Indeed, from 2003 through 2006, other than two pieces that he bought for himself, Dorfman never sold any of Meyer's art to any other galleries or collectors. Instead, Dorfman repeatedly asked Meyer if he had access to Johns' discarded and/or unfinished works and pressured him to obtain as many of them as he could so that the pair could sell them for profit. (Id. ¶ 44.) In or about the fall of 2006, Meyer finally acquiesced and began delivering discarded and unfinished artwork from Johns' studio—some of which he had already previously stolen—to Dorfman to sell to his contacts in the art world. (Id. ¶¶ 45–46.)

The alleged scheme was well planned and carefully executed to ensure its longevity. For instance, to convince prospective buyers that the stolen works were authentic, that Meyer had good title, and that Johns had authorized their sale, Dorfman had affidavits prepared for Meyer's signature attesting that Johns had given him the various works as gifts.³ (Id. ¶ 47.) Dorfman also provided counterfeit labels that were sometimes affixed to the back of stolen artwork to create the impression that their sale had been authorized by Johns. (Id. ¶¶ 159, 224–25.) Through his business entities, Dorfman also provided written assurances to prospective buyers certifying, falsely, that the purchased artworks would be included in the Jasper Johns catalogue raisonne and recorded in his studio archives when they were prepared.⁴ (Id. ¶ 48.) In some instances, Dorfman even provided buyers with false records, including fictitiously-assigned inventory numbers so as to give the appearance that the artworks were finished and authorized for sale. (Id. )

In addition, Meyer sometimes fabricated other documents purportedly taken from the studio's ledger of registered artworks, describing the artwork, listing its fictitious inventory number, and stating falsely that the work had been gifted to Meyer. On occasion, Meyer even placed these fake pages into the ledger, photographed them in that setting, and then provided them to Dorfman so that they could be transmitted to prospective buyers. (Id. ¶ 56.) Further, and to ensure that Johns never learned of the scheme, Dorfman imposed confidentiality and re-sale restrictions prohibiting buyers from disclosing the sale, including by reselling, exhibiting, or loaning the works to others for at least eight years following the sale. (Id. ¶ 49.)

In mid-December 2007, Dorfman, by and through his business entities, contacted an art adviser seeking prospective buyers for a particular piece of stolen Jasper Johns artwork.⁵ As with all the other stolen Johns artwork that Dorfman sold, he represented to the art adviser that Johns had gifted the piece to Meyer. According to the complaint, even though he was speaking with the art advisor, Dorfman knew that the art advisor was working on behalf of Plaintiff, a prospective buyer. Plaintiff is an art gallery located in Vancouver, British Columbia. (Id. ¶¶ 18, 59–60.) Dorfman provided the art advisor with images and additional details about the work, who in turn shared them with Plaintiff. The art adviser also helped Plaintiff negotiate and consummate the sale. (Id. ¶ 61.) Despite it being an authentic Jasper Johns painting, even containing his signature, Plaintiff asserts that it would have never bought the painting had it known the truth of its provenance. (Id. ¶¶ 62–63.)

As with all the other stolen Johns paintings he sold, Dorfman had an affidavit prepared attesting to Meyer's ownership of the artwork and its authenticity. (Id. ¶ 64.) Meyer executed the affidavit on January 11, 2008, and had it notarized by Dorfman's wife. (Id. ¶¶ 64–65.) On or about the same date, a separate confidentiality agreement was drafted for Plaintiff's signature, requiring Plaintiff to "keep the Artwork private and ... not sell or loan the Drawings to anyone or any institution within the first ten (10) years of his ownership." (Id. ¶ 66.) Plaintiff accepted the terms of the sale and on January 15, 2008, was invoiced a bill for $800,000 to purchase the Johns artwork.⁶ (Id. ¶¶ 67, 69, 72.)

Following the sale to Plaintiff, Dorfman and his business entities sold at least another fourteen stolen Johns artworks to unsuspecting purchasers. In doing so, Dorfman continued assuring prospective buyers that the artworks were given to Meyer as gifts. (Id. ¶¶ 79–80.) For instance, on January 20, 2010, Dorfman forwarded an email (the "January 20, 2010 email") from Meyer to the same art adviser who connected Dorfman with Plaintiff, indicating the stolen works "were given" to Meyer. On February 2, 2010, Dorfman forwarded another email to the art advisor from Dorfman's wife (the "February 2, 2010 email") providing additional information about the Johns artworks, and indicating that the art advisor has "no reason to believe that the work is anything but in [Meyer's] rightful possession." (Id. ¶¶ 81–82.) The February 2, 2010 email went on to confirm that the stolen artwork "was a gift from Jasper" and that the art adviser can "justifiably rely on [Meyer's] sworn statement." (Id. ¶ 82.) Later, in September 2011, Dorfman drafted a false certification "to be shared with Plaintiff," which indicated that the artwork it purchased would be included in Johns' catalogue raisonne and recorded in his studio's archives. (Id. ¶ 98.)

Where necessary, Meyer and Dorfman took other steps to conceal their scheme and ensure its survival. For instance, in January 2010, one victim sent an image to Jasper Johns' studio of a piece that it purchased from Dorfman. (Id. ¶¶ 85–86.) Meyer promptly contacted Dorfman and sought his assistance in having the artwork returned to the studio. To cover their tracks, Meyer asked Dorfman to "wipe" it with "glass cleaner" to eliminate fingerprints and send it "with no return information" so its origin could not be traced. Dorfman acquiesced, responding to Meyer as follows: "Tell me exactly what you want and how you want it and [y]ou will get it." (Id. ¶ 86.)

In total, of the eighty-three individual pieces Meyer stole from Johns' studio, forty-two were provided to Dorfman, of which thirty-seven were sold for a profit exceeding $9 million. (Id. ¶ 50.) As the mastermind behind the scheme, Dorfman and his business entities pocketed...