Art Law Report

Art Advisors are Not Always Fiduciaries—Lawsuit over Cady Noland "Log Cabin" Dismissed

Posted by Nicholas O'Donnell on December 14, 2016 at 2:25 PM

The ongoing saga between Yves Bouvier and Dmitri Rybolovlev over Bouvier’s sale to the Russian billionaire of Leonardo’s Salvator Mundi (and a recent preemptive suit by Sotheby’s against the original sellers of the work to Bouvier) has cast unusual scrutiny over the often-private relationships between art dealers, art advisors, and their clients.  Chief among the issues between Bouvier and Rybolovlev is whether Bouvier’s resale to Rybolovlev at an allegedly markedly higher price than Bouvier purchased it for constitutes self-dealing by a trusted agent, or the time-tested adage of buy low, sell high.  This is a question of great significant for obvious reasons: in private sales the collector is often relying on the expertise of the art professional.  In any fiduciary relationship, however, it is axiomatic that the fiduciary agent (like an attorney or a trustee) cannot enrich himself at the expense of the beneficiary.  Whether Bouvier is indeed a fiduciary is a fiercely debated question for another day.

A recent dismissal in New York of a case about Cady Noland’s Log Cabin provides some welcome guidance on the contours of these relationships in the eyes of the law.  The finding that the defendant owed no exceptional duty to the plaintiff is a significant pushback against the expansive view of agency that Rybolovlev, among others, has advocated.  The decision clarifies that interaction with an expert does not elevate that expert to a position of undivided loyalty.  Rather, the terms of the relationship must be on of special trust and confidence.  The duties of actual fiduciaries are not changed by this decision, but it will help professionals and collectors understand who is, and who is not, filling that role. 

In June of last year, Scott Mueller of Ohio sued the Michael Janssen Gallery Pte., Ltd., Michael Janssen himself, Wilhelm Schurmann, and Marisa Newman Projects, LLC in the U.S. District Court for the Southern District of New York.  Mueller alleged that he had purchased Log Cabin from Schurmann through the Janssen Gallery and Newman Projects, as facilitated by Mueller’s dealer Brett Shaheen.  Pursuant to the purchase agreement for the Noland work, Mueller wired $1.4 million to the Janssen Galleries in Singapore. 

Noland is well known for being particular about the condition of her work and the assertion of her rights under the Visual Artists Rights Act of 1990, 17 U.S.C. § 106A (VARA).  She is one of the best-known successful proponents of her right of attribution, namely, the artist’s right to prevent being attributed to her (even when she created it) if the condition does not satisfactorily reflect the artist’s contribution in her own subjective determination. 

The Log Cabin contract contained a provision inspired by Noland’s meticulous supervision of her right of attribution.  It provided for a buyback option if as a result of the work’s “prior treatment” by Schurmann, Noland did any of the following:

(i) affirmatively refuses to acknowledge or approve the legitimacy of the Work;

(ii) seeks to disassociate her name from the Work; or

(iii) claims that her moral rights, rights under the Visual Artists Rights Act or other similar legislation have been violated[.]

The work had apparently been installed outside a museum in Germany during the period that Schurmann owned it.  After the payment was made, Mueller alleged that Shaheen notified Noland of the sale and advised her that some of the logs had been replaced when they rotted.  Noland quickly “denounced” the restoration work, and sent a handwritten note to Mueller that said:

“This is not an  artwork” and objecting to the fact that the sculpture was “repaired by a conservator (sic) BUT THE ARTIST WASN’T CONSULTED.”  (Emphasis in the original.)

After some back-and-forth, Mueller asserted his buyback clause.  The Janssen Gallery returned $350,000 of the purchase price in August of 2014, and another $800,000 in December of 2014. 

Mueller sued in June of 2015, asserting breach of the purchase contract, unjust enrichment, and conversion.  The Complaint was later amended to add claims for breach of fiduciary duty.  Of the defendants, only Newman Projects ever appeared in the litigation, and moved to dismiss the two claims against it—unjust enrichment and breach of fiduciary duty—in March 2015. 

That motion has now been allowed.  The unjust enrichment claim was quickly dispensed with because of the existence of the purchase contract.  Unjust enrichment is an equitable claim designed to prevent someone from benefitting unfairly from the goods or services provided by the plaintiff.  Generally speaking, however, where a contract spells out those duties and remunerations, a claim for breach of that agreement is the remedy.

The far more topical discussion was the breach of fiduciary duty claim.  The opinion broke it down methodically.  The first question is of course whether a fiduciary duty exists in the first instance.  The court held that Newman Project’s status as an “independent art advisor” was not enough on its own, citing Mandarin Trading Ltd. v. Wildenstein, 17 Misc. 3d 1118(A), at *4, 851 N.Y.S.2d 71 (Sup. Ct. N.Y. Cty. 2007) (“[A]llegations of superior knowledge or expertise in the art field are per se insufficient to establish the existence of a fiduciary relationship.”).  Moreover, the court felt that the Amended Complaint’s allegations did not establish “the existence of a ‘special relationship of confidence and trust’” as required.  Merely relying on information provided by one party, even if of exceptional importance, does not make the advisor a fiduciary. 

Even if such a special relationship could be inferred from the Amended Complaint, the court was not persuaded that it had been breached because there were no allegations of self-dealing or personal enrichment in conflict with Mueller’s interest.

Of interest is that none of the other defendants have yet been served, apparently.  The court noted this, but concluded that enough time had passed that the case should be closed.  Mueller may re-filed the case against them if he wishes within the statute of limitations.  It remains to be seen if he will press the point.

Topics: Cady Noland, Visual Artists Rights Act of 1990, VARA, conversion, breach of fiduciary duty, Yves Bouvier, Log Cabin, Dimitry Ryobolovlev, unjust enrichment, 17 U.S.C. 106A, Brett Shaheen, Janssen Gallery, Michael Janssen, Scott Mueller, Marisa Newman Projects, Wilhelm Schurmann

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