Case Review: Frank Kolodny v. James Meyer, Fred Dorfman, and Dorfman Projects LLC (May 2014)

By Jill A. Ellman*

2014-07-07A complaint filed in the Southern District of New York by Frank Kolodny on May 8, 2014, contains allegations for violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and fraud in connection with the sale of artwork stolen from the studio of artist Jasper Johns, a major twentieth-century painter and sculptor.  As alleged in the complaint, the works were sold by Fred Dorfman and Dorfman Projects LLC; Kolodny purchased one of these sculpture in 2009.

In the past three decades, Johns has achieved great standing in the art marketplace. His work has been sold to private collectors and institutions in the high millions, with private sales valued at over 100 million USD.
The plaintiff, Frank Kolodny brought the lawsuit against defendants James Meyer, the former studio assistant of Jasper Johns, as well as Fred Dorfman, a well-known specialist in twentieth century art, and his gallery, Dorfman Projects LLC (collectively, the “Dorfman Defendants”).  Kolodny claims that the defendants falsely represented to prospective buyers, including Kolodny himself, that Meyer received twenty-two individual pieces created by Jasper Johns as a gift and produced accompanying fraudulent documents.

The complaint alleges that Meyer and the Dorfman Defendants engaged in an enterprise affecting interstate and foreign commerce, thus violating  RICO.  Specifically, from September 2006 to February 2012, the plaintiff contends that the defendants participated in a pattern of racketeering with the common goal to profit from the stolen artwork and used similar methods in order to perpetrate their fraud upon prospective buyers.  If successful with his RICO claim, Kolodny may be awarded  triple damages in the form of civil penalties.

In addition to the RICO and conspiracy to commit RICO violations and common law fraud, Kolodny also asserts causes of action for aiding and abetting fraud (against the Dorfman Defendants),  and breach of warranty concerning title and provenance of the artwork sold by the Dorfman Defendants to Kolodny under N.Y. U.C.C. § 2-313(1) and §13.01 of the New York Arts and Cultural Affairs Law. Kolodny seeks compensatory damages, punitive damages and attorneys’ fees.  By way of background, the complaint describes that from 1985 to 2012, Johns employed Meyer as his assistant to support him in creating his art and aiding Johns with record keeping in his studio.  Meyer had complete access to inventory numbers for each of Johns’ completed works.  In 2012, Johns learned that Meyer was stealing from him and selling incomplete artworks without authorization. (See “James Mayer Arrested and Indicted in Jasper Johns Art Theft.”)  The Dorfman gallery sold the stolen works for $6.5 million, and Meyer collected a commission of $3.4 million.  Meyer was later indicted on criminal charges, including the interstate transportation of stolen goods and wire fraud.  The Dorfman Defendants were not named in the criminal action.  The indictment against Meyer was unsealed to the public in August 2013.

Kolodny asserts that the Dorfman Defendants could not have possibly believed Johns generously gifted artwork valued at $6.5 million.  Thus, he contends that the Dorfman Defendants ignored significant red flags in agreeing to sell Meyer consignments: not only did the artwork lack an exhibition history, but Meyer insisted that the sale of any artwork remain confidential and prohibited the buyer from selling, loaning or exhibiting the artwork for an eight-year period.  Instead of conducting proper due diligence regarding the provenance of the stolen artwork, Kolodny asserts that the Dorfman Defendants  understood the risk they faced and demanded an exorbitant commission in the form of 50% of the sale proceeds, exceeding the standard amount of commission paid to dealers for consigning artwork from private collections.  Moreover, the Dorfman Defendants purportedly assisted in perpetrating the fraud by fabricating documents attesting that the stolen artwork was indeed gifted to Meyer.

Apparently in April 2009, the Dorfman Defendants contacted art dealer Francis M. Naumann to discuss an available Jasper Johns drawing. Naumann on behalf of his client, Kolodny, decided to purchase the drawing for the value of $400,000 after being reassured by the Dorfman Defendants that very few similar works existed and would appear on the market. When Kolodny purchased the drawing, he agreed to keep it in his collection, neither selling nor loaning it for an eight-year period, because Meyer, as an employee of Johns, represented that Johns would be offended if he learned that his employee sold his “gift.”
According to Kolodny, in connection with the sale, the Dorfman Defendants and Meyer sent Kolodny an affidavit attesting to the authenticity of the artwork.  The affidavit also represented that Meyer owned the drawing and had the authority to sell it.  In addition, the Dorfman Defendants represented that the drawing would appear in an upcoming Jasper Johns catalogue raisonné, attesting to the drawing’s authenticity.  As requested by Kolodny, thedefendants forwarded an image purporting to be a page from Johns’ studio ledger indicating that the drawing was in Johns’ archive.  Because the drawing was stolen and will not appear in an upcoming Jasper Johns catalogue raisonné as represented, Kolodny claims that his drawing is unsaleable and valueless.

Kolodny is an unfortunate, potential example of a bona fide purchaser who believes that he has taken the extra-precautionary steps and exercised due diligence in securing an artwork, but who may have been duped in the process regardless of any appropriate safeguards that he took.  By bringing a RICO claim, Kolodny hopes to materially increase his potential damage award.  This case may be compared to lawsuits brought by plaintiffs who were allegedly defrauded in connection with the sale of works sold by the Knoedler Gallery and its agents.  See, e.g.,  De Sole v. Knoedler Gallery, LLC  et al., Case No. 12 cv 2313 (S.D.N.Y. Sept. 30, 2013).  Unlike here, the De Sole plaintiffs were sold a fake, unauthentic work (the De Sole plaintiffs believed they were purchasing a work created by the artist Rothko).  Similar to this case, the De Sole plaintiffs also brought claims under RICO and common law fraud, which were upheld by the Southern District in September 2013.  In particular, the Southern District found that the plaintiffs’ RICO and fraud claims to sell fake artworks were adequately pleaded because the plaintiffs showed evidence that the Knoedler defendants were aware of the misrepresentations regarding the provenance and authenticity of the purchased artworks.

Kolodny’s RICO and fraud claims may likewise survive a motion to dismiss if the Southern District finds that his allegations establish that the Dorfman Defendants engaged in a scheme to defraud potential buyers.  For example, the fact that the Dorfman Defendants went out of their way to represent that the Johns work would appear in an upcoming catalogue raisonné, sought affidavits attesting to the fact that Meyer owned and had the right to sell the work, and produced a page from Johns’ studio ledger indicating that the drawing was in Johns’ archive, may all be indicators that the Dorfman Defendants were aware of their misrepresentations to establish a sufficiently pleaded RICO or fraud claim, rather than mere negligence.

Kolodny is represented by Judd B. Grossman, Esq. of Grossman LLP.  Adam D. Mitzner, Esq. of Pavia & Harcourt LLP has made an appearance on behalf of the Dorfman Defendants.

Sources:

About the Author: Jill A. Ellman, Esq. is an associate at Tressler LLP focusing in the area of professional liability insurance coverage.  She maintains an active interest in art law.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.

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