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Center for Art Law Case Law Updates

Sotheby's Inc. v. R.W. Chandler, LLC et al., 1:16-cv-09043 (S.D.N.Y. 2016) In 2013, three New York art dealers arranged through Sotheby's an $80 million private sale of "Salvator Mundi", a rediscovered painting by Leonardo da Vinci. Shortly thereafter, they learned that the buyer, Swiss art dealer Yves Bouvier, resold the painting for $127.5 million to Russian art collector Dmitry Rybolovlev. The dealers, hoping to recover the difference, sought legal action against Sotheby's on the basis of fraud. Rybolovlev, represented by Daniel J. Kornstein, also reportedly questioned the role of Sotheby's in the valuation of the painting. The question at hand revolves around whether Sotheby's representative Samuel Valette knew about Rybolovlev's interest in the artwork. The complaint alleged that weeks before the Sotheby's sale, a meeting was organized by Samuel Valette for inspection of the painting at a Central Park apartment owned by a Rybolovlev family trust.

Sotheby's (represented by Marcus Asner and Arnold & Porter) filed a preemptive lawsuit explaining that the discrepancy in prices represents a distinction between fair market values and retail replacement values for insurance purposes, which are typically higher. The case was dismissed with prejudice in February 2017. Complaint is available at https://www.unitedstatescourts.org/federal/nysd/465541/1-0.html?mc_cid=6822f462dc&mc_eid=8a2eda70d8.

McKenzie et al v. Fishko et al, No. 1:12-cv-07297 (S.D.N.Y. 2015) Defendants' motions for summary judgment were granted in the case between Plaintiff, an art collector who alleged fraud and breach of contract, among other causes of action, against Defendants, Forum Gallery and its owners. According to the complaint, Forum Gallery was employed to represent Plaintiff and make purchases on his behalf. McKenzie "allege[d] that Defendants breached their obligations by manipulating or otherwise falsifying the prices to which the discounts were applied, thereby increasing Defendant's' profits". However, McKenzie failed to allege sufficient facts in support of these claims. After the court granted Defendants' motion for summary judgment on most claims, the case was voluntarily dismissed in 2015. Read Memorandum and Opinion and order at http://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2012cv07297/402393/136/.

The State of Georgia v. William Lowe, d/b/a Lowe Galleries, Inc., The Lowe Gallery, or Bill Lowe Gallery, 123031191 (Ga. April 2017) Gallery owner Bill Lowe plead guilty to using money he should have paid to artists for his own needs. Lowe used the proceeds from consigned art sales for personal uses, such as making mortgage and property payments. The stolen funds amounted to over $500,000. In court, Lowe stated, "I acknowledge that artists relied upon me to receive payment from the proceeds of sales from the artwork." He went on to say that he was "glad" to make the artists "whole again". His sentence includes a 10-year probation to one count of felony theft by conversion, 750 hours of community service, and restitution to the amount of $256,514.92, which was placed in an escrow account to be paid out to the artists. Read Indictment at https://www.scribd.com/document/279817223/Fulton-County-grand-jury-indictment-of-Bill-Lowe?mc_cid=6822f462dc&mc_eid=8a2eda70d8.

MCH Swiss Exhibition Basel Ltd. et al v. Adidas America, Inc. et al, 1:17-cv-22002 (S.D.Fla. May 2017) Plaintiff Art Basel filed suit against Adidas for trademark infringement concerning the use of its mark ART BASELĀ® on at least 1,000 pairs of sneakers. Adidas produced and distributed a high volume of the infringing sneakers during the annual art fair organized and marketed by Plaintiff without asking for or receiving permission. Art Basel claims the infringement has damaged it by diminishing the value of its licensing partnerships, as well as the value of its incontestable trademark, and that Adidas' actions were intentional, committed with full knowledge of Art Basel's rights. Plaintiff looks to recover injunctive relief, Defendant's profits, damages, and reasonable attorney's fees.

Crile v. Commissioner of Internal Revenue, 9713-10, 29044-11 (US Tax Court, 2 Oct. 2014) The United States Tax Court ruled that art-related expenses, such as relevant travel, materials, and equipment, are tax-deductible as professional expenses. The IRS claimed that the artist and Hunter College professor Susan Crile owed $81,000 in unpaid taxes, arguing her art was "an activity not engaged in for profit." This Tax Court's ruling reaffirmed the artist's victory over the IRS, by finding that she was in "the trade or business" of being an artist. Read Memorandum of Fact and Opinion at https://www.ustaxcourt.gov/InOpHistoric/CrileMemo.Lauber.TCM.WPD.pdf?mc_cid=6822f462dc&mc_eid=8a2eda70d8.

The Center for Art Law strives to create a coherent community for all those interested in law and the arts. Positioned as a centralized resource for art and cultural heritage law, it serves as a portal to connect artists and students, academics and legal practitioners, collectors and dealers, government officials and others in the field. In addition to the weekly newsletter (http://cardozo.us2.list-manage.com/subscribe?u=78692bfa901c588ea1fe5e801&id=022731d685), the Center for Art Law subscribers receive updates about art and law-related topics through its popular art law blog (http://itsartlaw.com/blog/)and calendar of events (http://itsartlaw.com/events/). The Center for Art Law welcomes inquiries and announcements from firms, universities and student organizations about recent publications, pending cases, upcoming events, current research and job and externship opportunities. To contact the Center for Art Law, visit our website at: www.itsartlaw.com or write to itsartlaw@gmail.com.

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