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How Private Are Private Art Sales?

Two lawsuits recently filed by major collectors underscore the often convoluted nature of the business dealings of the contemporary art world and raise questions about the extent to which private sales of ­multimillion-dollar artworks can actually remain private.

NEW YORK—Two lawsuits recently filed by major collectors underscore the often convoluted nature of the business dealings of the contemporary art world and raise questions about the extent to which private sales of ­multimillion-dollar artworks can actually remain private.

At the core of both suits are complaints that news of substantial private sales was leaked—to other art professionals or to the public—resulting in undesirable or embarrassing consequences for the sellers. In one case, a collector claims he was “blacklisted” by artist Marlene Dumas after she learned of his resale of one of her works, and has sued the dealer who informed the artist (ANL, 4/20/10). In the second case, a Dallas collector who privately sold a major Mark Rothko painting three years ago, subject to a confidentiality agreement, was dismayed to see the work offered at a major contemporary art sale this past spring, effectively outing her as having sold it. She filed suit against not only the consignor, but also the New York gallery that brokered the original sale, Sotheby’s and one of its executives.

In the case of the Dumas painting, Miami real estate developer and art collector Craig Robins sued David Zwirner and his Chelsea gallery last April in the U.S. District Court for the Southern District of New York, alleging breach of contract and fraud. According to his suit, in December 2004 Robins sold a Dumas painting, Reinhardt’s Daughter, 1994, through Zwirner and asked the dealer to keep the sale confidential. “According to Robins, the Confidentiality Agreement was intended to prevent Dumas, who opposed the Secondary Market sales of her work, from learning of the deal. Dumas did not sell to collectors who ‘churned’ her work in the Secondary Market,” court papers state. Robins asserted that the artist put him on a “blacklist,” and that Zwirner was to blame.

Zwirner claimed in his court statement that he did not inform anyone about the sale until it was completed, and that he and Robins had never agreed to keep the sale of the work confidential. In his suit, Robins alleged that Zwirner reneged on an oral agreement to sell him three works by Dumas from the recent exhibition “Against the Wall” (March 18–April 24). He sought a preliminary injunction from the court that would bar Zwirner from selling the three works while the litigation was pending. But in late May, district judge William H. Pauley III denied the injunction request, noting that in fact Zwirner had offered Robins another work from the show. Robins called the offer of the other work a “glaring sarcastic insult” in a court filing.

Dumas’s former dealer Jack Tilton confirmed the existence of both a blacklist and a “grey list,” the latter of which included Robins, according to court documents. “The two lists were functionally equivalent—persons on either roll were theoretically forbidden by Dumas from purchasing her works,” according to court papers.

But the hearings also revealed that Zwirner himself was on the blacklist for “actively selling numerous pieces by Marlene … in the secondary market.” According to the ruling, “names were added to the lists by recipients who contacted Dumas to inform her of sales in the secondary market. … many of the names on the Dumas Blacklist are accompanied by the informant who disclosed the identity of a seller in the Secondary Market.”

Pauley ruled that “given that Zwirner did not even represent Dumas in 2005, and was himself on the Dumas Blacklist, it is difficult to conceive how Zwirner intended to violate his agreements with Robins.” He also expressed the view that the claims “offer an unflattering portrait of the art world—a realm of self-proclaimed royalty full of ‘blacklists,’ ‘greylists,’ and astonishing chicanery. … As the facts of this case make clear, some in the art world desire a market that is neither open nor honest.”

In response to the ruling, Zwirner issued the following statement: “We are grateful for Judge William H. Pauley III’s just decision to deny the injunction. … As we have stated all along, the lawsuit brought against the gallery by Craig Robins is entirely frivolous and without merit. It is based on wishful thinking and agreements that simply never existed.”

Zwirner’s statement continues, “The job of a primary market gallerist is to promote the artistic career of his artists. This case confirms that in the course of doing that job, a gallerist has a right to sell the art to whomever he chooses to sell it.”

Robins’s attorney Aaron Richard Golub told ARTnewsletter the order was “merely a denial of a preliminary injunction and the case is still alive.” Zwirner said the gallery will seek permission from the judge to file a motion to dismiss the case.

Red Rothko Sale an ‘Embarrassment’ to Collector

Last month, days before a large untitled 1961 deep red Mark Rothko painting—featured on the cover of Sotheby’s catalogue for its May 12 evening sale of contemporary art—was set to go on the auction block, Dallas collector Marguerite Hoffman sued the consignor of the painting, David Martinez, whose name was not publicly disclosed in the catalogue, for breach of contract, among other charges. Also named in the suit were Martinez’s Belize-based holding company, Studio Capital; Sotheby’s and its worldwide head of contemporary art, Tobias Meyer; and gallery L&M Arts, New York, which brokered Hoffman’s sale of the painting to Martinez in 2007.

According to court documents filed with the U.S. District Court for the Northern District of Texas, Hoffman had acquired the work with her late husband, Robert through L&M?arts, then known as C&M arts. (In 1997 the painting had sold for $1.87million at Christie’s, New York). Hoffman resold the work in 2007 to Martinez with the stipulation that he “make ‘maximum effort’ to keep confidential ‘all aspects’ of the transaction. Martinez made the promise because [Hoffman] was unwilling to sell it to him unless he did so.”

Hoffman relied on intermediaries including L&M Arts to help facilitate the private sale. “L&M acted as agent for Martinez as buyer, although at the time of the sale Martinez’s identity was not disclosed,” according to her complaint.

Hoffman’s complaint notes that Sotheby’s posted a large color photo of the painting on its Web site and stated that it was included in the 2007 exhibition “Fast Forward: Contemporary Collec­tions for the Dallas Museum of Art,” and featured that information in the catalogue. The “Fast Forward” show was a special two-part exhibition of more than 300 works from the modern and contemporary holdings of the Hoffman, Rachofsky and Rose families, who together had donated their collections and future acquisitions to the museum in 2005. The painting’s exhibition history sparked questions about how a major work thought to be part of a museum donation had ended up on the auction block. Regarding the gift, Dallas Museum of Art spokesperson Jill Bernstein told ARTnews­letter in an e-mail that the museum “understood—indeed embraced—the idea that the collections would continue to evolve throughout the lifetime of the donors; individual works were not identified.”

However, according to her complaint, Hoffman, “in short, had been outed.” The complaint also notes that her decision to sell the work “was a reluctant one made in difficult personal circumstances,” following her husband’s death in August 2006. The high-profile consignment at Sotheby’s was “precisely the disclosure and embarrassment she had been determined to avoid,” according to her suit. At Sotheby’s sale, the work soared past its $18million/25million estimate to fetch $31.4million.

Hoffman’s claims include breach of contract against L&M and Martinez, and tortious interference with contract against Sotheby’s and Meyer.

Sotheby’s spokesperson Diana Phillips told ARTnewsletter, “It is regrettable that through this lawsuit Ms. Hoffman is seeking to ascribe blame to parties that are, in fact, entirely blameless. Sotheby’s is confident that the outlandish claims against it and Mr. Meyer will be dismissed.” Attorneys for Martinez and for L&M Arts did not respond to requests for comment.

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