By way of background, in September 2012, Perelman, an American businessman with a mere net worth of around US$14.1 billion, sued Gagosian Gallery Inc. and its founder and owner, Larry Gagosian alleging that they had "concealed material information from [Perelman] and used their dominant position in the contemporary art world to manipulate the price of a certain artwork in transactions with [Perelman] in gross violation of the fiduciary duties owed to [Perelman]."
Perelman brought claims for breach of contract, breach of fiduciary duty, fraud, breach of the covenant of good faith and fair dealing, unjust enrichment and deceptive business practices.
On the same day Gagosian sued Perelman, accusing him of reneging on an agreement to buy two works of art. In October 2012, however, the Gagosian parties dropped their suit and subsequently filed a motion to dismiss all of Perelman’s claims.
Unfortunately for Gagosian, while New York State Supreme Justice Barbara Kapnick dismissed the majority of the charges (in her decision of 31 January 2104), she ruled that the fraud claim may stand.
The judge said that while the plaintiffs, Perelman’s MAFG Art Fund and MacAndrews & Forbes Group LLC, are “experienced and sophisticated” business investors, the allegation that Gagosian and his gallery had “superior and unique” knowledge of the art world is enough for the fraud claim to survive.
“Plaintiffs allege that Gagosian has enormous power to influence, and even set, the markets for the artists he represents because of his impressive roster of artists and his access to and knowledge of the largest private art collections in the world,” Kapnick wrote. “Even though the plaintiffs are sophisticated art collectors and investors, the court cannot say, as a matter of law, that plaintiffs’ alleged reliance on defendants’ representations regarding the art market and intrinsic value of particular works of art was per se unreasonable or unjustified.”The full decision can be found here.
Gagosian has 30 days (from 31 January) to file and serve an Answer to the fraud claim.
Perhaps most interesting is the power and influence that one individual is said to wield in the art world - and the other scary insights into the art world that the case provides. Details can be found in the initial complaint and amended complaint.
Source: Businessweek, 4 February 2014