Ronald Perelman can pursue a claim that art gallery owner Larry Gagosian used his position of trust to force the billionaire to buy a Jeff Koons sculpture of the cartoon character Popeye for US$4 million, a judge ruled.
New York State Supreme Justice Barbara Kapnick allowed the fraud claim to go forward because, she said, an experienced investor may reasonably rely on a dealer’s knowledge of the market.
Gagosian sued Perelman in New York state Supreme Court in Manhattan in September 2012, accusing him of reneging on an agreement to buy two works of art for more than US$23 million and offering less money and other works of art in exchange.
Perelman sued Gagosian and his gallery the same day, accusing both of concealing material information and manipulating art prices. The gallery dropped its suit the following month and asked Kapnick to throw out Perelman’s complaint last year.
Kapnick, in a ruling dated yesterday, dismissed claims of breach of contract, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, unjust enrichment and deceptive business practices, while ordering Gagosian to face a single fraud claim.
The suit and others like it have put a spotlight on the behind-the-scenes sales negotiations at galleries, particularly Gagosian Gallery Inc, which represents artists including John Currin, Takashi Murakami and Pablo Picasso at galleries in Europe, Asia and the US.
Gagosian has been an art adviser and mentor to Perelman for more than 20 years, and the two have been friends and business partners outside the art world, visiting each other’s homes, attending the same social events and investing in the Blue Parrot restaurant in East Hampton, New York, according to Perelman’s complaint.
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.”
Perelman, who is ranked 67th in the Bloomberg Billionaires Index with a net worth of US$14.1 billion, accused Gagosian of taking advantage of his position of trust to force him to buy Popeye, a granite sculpture of the cartoon character by Jeff Koons, for US$4 million.
Perelman said in his suit that Gagosian failed to tell him that the dealer’s contract with Koons entitled the artist to 70 percent of any amount over the original sale price of US$4 million if the gallery resold the work — and 80 percent of any sale if Gagosian bought the sculpture back before it was finished, delivered and paid for.
Perelman said Gagosian bought the sculpture from the Sonnabend Gallery for US$4 million about 2 1/2 weeks after executing its sales contract with MacAndrews & Forbes, thereby restricting Perelman’s ability to sell or trade the sculpture at fair market value.