The Making of the Moral Rights Case: The Factual and Legal Background of the 5Pointz Trial

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[Observing 5Pointz Trial], courtroom art by Elizabeth Williams (Nov. 3, 2017).

By Laura B. Richardson*


5Pointz, the world renowned “graffiti mecca” as it was once known, has become the subject of a legal battle which has culminated in a jury trial in the Eastern District of New York. Cohen v. G&M Realty L.P., 2017 U.S. Dist. LEXIS 50943 is a case brought by twenty-one graffiti artist plaintiffs against the defendant property owners of the 5Pointz buildings, for the destruction of 49 aerosol artworks (numbers of plaintiff-artists and works have been changing between 2013 and 2017). The artists are suing for infringement of their rights under the Visual Artists Rights Act 1990 (“VARA”), 17 U.S.C. § 106A, which protects rights of living artists whose visual art works are of recognized stature.


In 1971, Jerry Wolkoff, a real estate developer from Brooklyn who started his own residential development company in his late teens, purchased an industrial complex in a “gritty” industrial neighborhood at 45–46 Davis Street, Long Island City, Queens, New York. The property extended across a 200,000 square-foot factory complex. Twenty years later, Wolkoff authorized the site to become the “Phun Phactory,” where graffiti artists were permitted to paint on the walls. The Phun Phactory was an effort by Pat DiLillo in the early 1990s to discourage illegal graffiti vandalism and create a legal space for local street artists to execute and display their work. 

In 2002, Jonathan Cohen (known by his tag name “Meres One”), a graffiti artist born in 1973 in the South Bronx and raised in Queens, New York, met with Wolkoff and offered to curate urban a.k.a. aerosol a.k.a graffiti works at the Queens complex. He proceeded to rename and develop the site, now known as 5Pointz, into an artistic hub. According to Cohen, Wolkoff welcomed graffiti art on his property with three rules: no pornography, no religion, and no politics to be painted at the site. Cohen was also aware that Wolkoff would one day develop the property, and that the buildings, and the paintings on their walls, would become history.

With Cohen’s curation, both the quality of artwork at 5Pointz and 5Pointz’s reputation grew significantly until it reached the level of an internationally celebrated open-air aerosol art exhibition. Between 2002 and 2013, numerous tourists and aerosol artists from all over the world visited 5Pointz to witness and paint at the iconic venue. With the increased tourism and artistic community presence, the surrounding neighborhood improved considerably.

“Save 5Pointz”

In the wake of a real estate boom in Long Island City beginning in 2010, Wolkoff was ready to capitalize on the rising property value and indicated his intent to redevelop the 5Pointz site into high-rise apartment towers. On August 21, 2013, the City Planning Commission, the responsible body for urban planning related to the growth and development of New York City, issued the permit for the demolition of the 5Pointz buildings and for the rebuilding on the site of two towers containing 800 luxury rentals and 200 affordable units. The City Planning Commission did require, as a condition for issuing the building permit, that the new residential complex include 3,300 square feet of exterior art panels “to be used to maintain artist street wall art in the area.”

In the petition filed on October 10, 2013, seventeen graffiti artists, including Cohen, sought to enjoin the demolition and to preserve 5Pointz for street artists. In addition, artists filed requests for landmark status evaluation by the New York City Landmark Preservation Commission (the “Commission”). The Commission, created in 1965, is responsible for protecting and regulating New York City’s architecturally, historically, and culturally significant buildings and sites. On August 20, 2013, it denied the request to designate 5Pointz as a landmark because the feature of interest—the artwork—had not been in existence for at least thirty years. Cohen also sought funding to acquire the 5Pointz site in order to “create the first aerosol art museum in the world” (Jonathan Cohen Direct Examination October 30, 2017).

Street Artists Go to Court

On October 10, 2013, artists, represented by Jeannine Leigh Widmer Chanes, sought a federal court order to preliminarily enjoin the destruction of the buildings, invoking their Visual Artists Rights Act 1990 (VARA) rights. On October 17, 2013, the Eastern District Court issued a temporary restraining order against the property owner, enjoining Wolkoff from altering the building in any way whilst the Court considered the plaintiffs’ motion. On November 12, 2013 the Court lifted the restraining order and denied the plaintiffs’ request for preliminary injunctive relief. Judge Block indicated that a written opinion would follow, and on November 20, his opinion explained that going to the issues of both irreparable harm and the balancing of the hardships, “the transient nature of the plaintiffs’ works” was the “ineluctable factor which preclude[d] either preliminary or permanent injunctive relief.”

Between November 12 and November 20, Wolkoff apparently denied artists access to 5Pointz and on November 19, he ordered 5Pointz whitewashed overnight, without any notification to the artists. In his deposition on Friday, November 3, 2017 Wolkoff admitted that he hired and paid in cash a crew of painters, who began covering 5Pointz with white (and blue and black) paint at 4 a.m.. Some of the murals were covered in their entirety, while others were partially obscured by whitewash, with ghosts of the mutilated art peeping from under the quick job of reclaiming 5Pointz by its legal owner. The compound structures were not actually demolished until months later in August 2014.

The artists subsequently sued, seeking damages for the destruction of visual works of art at 5Pointz, in violation of their rights under the Visual Artists Rights Act 1990.

In the defense’s opening statement on October 17th of the inaugural jury truly to hear a VARA case, Wolkoff’s attorneys characterized the whitewashing as a humanitarian act, “ripping off the Band-Aid” and covering the works so as to save the artists from the distress of seeing their art sit on the walls waiting for demolition for several months.

Moving up in the World

Graffiti and aerosol art has rapidly evolved from a type of illicit activity in its formative years to a hip and popular contemporary form of visual expression, legitimized both by the aesthetics and skills of the artists as well as the art market forces that have voted with increasing sales and popularity of this form of art. Street artists have been recognized by gallery owners and goers, with an increased number of exhibitions, as well as increased instances of infringements against street artists on behalf of fashion designers and corporations (McDonalds, Cavalli, Vince).

The 5Pointz case is important for its symbolism, where artists who have “street cred” and undeniable talent, are testing the limits of the established order separating the rarified world of “high art” from the fringe, which is likely to be relevant to the great “cross-section of society” referenced in the formulated legal language.

Moral rights of artists did not come naturally to the American jurisprudence. The Visual Artists Rights Act 1990, 17 U.S.C. § 106A (“VARA”) was enacted in response to the United States’ accession to the 1886 Berne Convention, which requires that member states protect copyright authors’ numerous moral rights. (Berne Convention for the Protection of Literary and Artistic Works, 1886, Article 6bis (1)). VARA grants the author of a “work of visual art” only the right to paternity and to prevent intentional distortion, mutilation or other modification of the work that would be prejudicial to their reputation; and, in the case of works of “recognized stature,” the right to prevent their destruction (17 U.S.C. §106A(a)).

One of the main issues, and indeed a deciding factor, in the pending 5Pointz case is whether the graffiti art murals are of “recognized stature”. This is a high bar to reach for a form of art born on the streets of poor urban neighborhoods and practiced predominantly by first and second generation immigrants. There has been relatively little case law on the statutory interpretation and application, but the standard for “recognized stature” that has been formulated and applied by the 2nd and 7th Circuit courts in previous cases has required: 

“(1) that the visual art in question has “stature,” i.e. is viewed as meritorious, and

(2) that this stature is “recognized” by art experts, other members of the artistic community, or by some cross-section of society.”

(Martin v. City of Indianapolis 192 F.3d 608 (7th Cir. 1999)); (Carter v. Helmsley-Spear, Inc., 861 F. Supp. 303 (S.D.N.Y. 1994) affirmed in part, vacated in part, reversed in part, 71 F.3d 77 (2d Cir. 1995)).

This case, having survived multiple motions for dismissal, has entered its trial stage on October 17th, 2017 before Senior District Judge Frederick Block at the Eastern District of New York Federal Courthouse in Brooklyn. With no precedent to follow, the case has been characterized by the Judge as “an odd ball cup of tea,” and it is uncertain whether the works of aerosol art will meet the standard of recognized stature required for a successful VARA claim. Years ago, in the early days of graffiti, which was regarded as mere vandalism or tagging, there likely would not have been a viable legal argument that graffiti could be a work of visual art of recognized stature. Just as the 5Pointz venue did, the 5Pointz case demonstrates the progress and evolution of graffiti into an established and legitimate form of art that requires vast technical skill and has aesthetic and cultural merit.

Regardless of the outcome, this case is a cautionary tale for artists as well as real property owners who permit graffiti art on their property to contemplate moral rights waivers as a safeguard against similar litigations. Given that the United States does not afford robust moral rights protections, VARA rights can be waived.

Closing arguments and jury instructions are scheduled for November 6, 2017.

* * *

5Pointz Chronology

1971– Jerry Wolkoff purchases property at 45–46 Davis Street Long Island City, Queens, New York.

1993 – The site is established as the “Phun Phactory” and Wolkoff grants artists permission to paint on building.

2002 – Jonathan Cohen becomes curator of 5Pointz.

2002-2013 – 5Pointz becomes internationally recognized “open air aerosol art museum” and “mecca of graffiti art” as top street artists flock to New York to paint at 5Pointz and tourists visit from all over the world to experience the murals at 5Pointz.

2010 – Real estate boom and sharp increase in property value in the Long Island City area.

August 21, 2013  New York City Landmark Preservation Commission denies granting 5Pointz landmark status.

August 21, 2013 – The City Planning Commission issues building permit authorizing the destruction of the 5Pointz buildings and the building of two-high rise towers containing 800 luxury rentals and more than 200 affordable units.

October 10, 2013 – Plaintiffs file complaint and motion for preliminary injunction to prevent the destruction of the premises, invoking their VARA rights.

October 17, 2013 – Court issues a temporary restraining order against the property owner.

November 12, 2013 – Court issues an order denying plaintiffs’ request for preliminary injunctive relief to prevent the destruction of their paintings.

November 19, 2013 – Whitewashing of building occurs overnight.

June 17, 2014 – Plaintiffs file the Cohen Complaint. In it, four claims are pled: (1) VARA, (2) intentional infliction of emotional distress (“IIED”), (3) conversion, and (4) property damage. 

August 2014– Demolition of whitewashed 5Pointz buildings.

June 3, 2015 – Maria Castillo and other artists (“Castillo Plaintiffs”) initiate a separate lawsuit against the defendants (“Castillo Matter”). As in Cohen, the Castillo Plaintiffs adduce the same four claims in their pleadings.

October 17, 2017 – Trial begins in Federal court, J. Block presiding.

* * *

*About the Author: Laura B. Richardson is serving as the Fall 2017 Postgraduate Legal Fellow with the Center for Art Law. She obtained her LLB from King’s College London in 2016 and is currently an LLM candidate at NYU School of Law with a specialization in Competition, Innovation and Information Law. She can be reached at


Post Co-Authorship and Past Congeniality: Creative Relationship Spoils

By Colby A. Meagle*

Screen Shot 2017-06-28 at 10.51.01 AMSynergy is the sharing of talent and ideas, the combining of two or more minds in order to produce a product superior to anything one is capable of creating alone. Partnerships may look like a constructive arrangement, one where everyone benefits, and maybe that is the case at the beginning, but what happens when the relationship falls apart? What is the consequence of that fleeting love affair, or late night bar fight? In the context of art law and partnerships dissolving, who gets custody of the “kids”, a.k.a. the artwork? Artists are romanticized for their passionate relationships that include both personal and work related matters. But all too often these fiery affairs go up in flames and the issues of authorship and ownership are brought front and center. The following is a review of three recent legal battles that have highlighted these difficulties, as well as a brief discussion on the prominent applicable laws that underlie the arguments.

Cases & Controversies

In a pending case Chan v Schatz, authorship is in dispute.  Generally, to determine if work has been co-authored courts look at the intention of the parties to create a joint work. If the intent is lacking, it is likely not a joint work, but they also consider if there were substantial contributions made to the work, and the extent of control exerted over the work (Aalmuhammed v. Lee). Artist Eric Chan, well known for his abstract paintings and sculptures, is in the midst of a divorce from Heather Schatz. The split has prompted him to take precautionary actions by filing suit for a declaratory judgment naming him the sole creator of his works, therefore excluding Schatz from a co-authorship claim. He, represented by Lindsay Elizabeth Hogan of Grossman LLP, and she, now represented by Andrew Berger of Tannenbaum Helpern Syracuse & Hirschtritt LLP, were married in 1992. The suit encompasses 1139 works created during the span of their quarter century marriage.

While Chan and Schatz lived and worked together Schatz appears to have provided assistance in managing the studio. While Chan admits Schatz occasionally provided advice, and suggested concepts for pieces, he maintains in his complaint that, “her contributions were not themselves fixed independent creative expressions.” Furthermore, Chan “never intended that [his wife] would be his co-author,” rather, throughout the entirety of the relationship his understanding was that he was unequivocally the sole author of his works. This is despite the fact that the work was and is displayed under the joint name “ChanSchatz,” which he claims was merely a homage to his relationship and love for his wife.

However, Schatz feels differently. She asserts that her contributions were significant, as proven by the use of the joint name and their long history of working together publicly. As such, Schatz feels entitled to be credited as a co-creator of the work. So, while Chan maintains there was no intent for co-authorship, Schatz claims that her contributions were material.  

Chan is seeking to resolve this controversy by approaching the court for a declaratory judgment “that he is the sole author of all of the Chan Works” (Chan Complaint). A ruling in his favor would grant him status as the only author, and to full intellectual property rights over the art. Conversely, if the court side with Schatz, then the rights and credits will be shared between the two now-estranged lovers. The case is to be tried to a jury, with amended complaints due in July, 2017.

Another couple that frequently appears in the public eye, Marina Abromović and Frank Uwe Ulay, have also faced their fair share of legal issues. Following their tear-jerking reunion at Marina’s retrospective, Ulay filed suit as a citizen of Holland in Dutch courts in retribution for a breach of contract relating to joint works created before the duo’s split in 1988. Ulay was eventually awarded twenty percent of the net sales of their work by Amsterdam courts, in accordance with the contract they signed in 1999, along with legal fees and backdated royalties ( Abramovich v Ulay highlights how important it is for artist couples to document their arrangements. Without the contract, Ulay would have faced a more difficult legal battle in the pursuance of receiving fair compensation for his contributions.

Payment was not the only issue addressed in the Dutch filings:  attribution for future displays and documentations was also resolved. The question of whose name comes first may seem insignificant, but to many artists it is of the utmost importance, marking one as superior or more influential if named first. The courts decided that works from 1976 to 1980 be listed as by “Ulay/Abramović” and those from 1981 to 1988 as “Abramović/Ulay.” It is possible that the courts considered, based on the evidence presented, whose artistic vision was dominant in creating the work during those times to determine this order, although their reasoning for this specific division was not explicitly stated. Regardless, the suit is evidence that even the seemingly minute details, such as the name order, can cause conflict, and should be considered when drafting a partnership contract.

Artists involved in romantic relationships are not the only ones at risk of authorship and credit-related legal issues: friends and acquaintances can face similar  difficulties. Moi v Chihuly Studio, inc., is instructive. In his complaint, Michael Moi alleges that renowned glass artist Dale Chihuly not only took credit for work they created together but refused to pay him at all over a period of fifteen years. Plaintiff Michael Moi worked as studio assistant to Chihuly from 1999-2014. His contributions included helping in the creation of paintings, which he claims to have co-authored, as well as forging Chihuly’s signature– under the direction of the artist — on numerous pieces. The visual works he helped produced were consequently sold to the benefit of and attributed only to Chihuly. During his time working for Chihuly, Moi was “repeatedly and consistently” promised future compensation, and Moi relied on their friendship as assurance that this was true, and that he would eventually be paid. However, the complaint puts forth that, at no point did Moi receive the promised payment. Chihuly denies the claims, stating that he has long employed studio assistants, and that the suit is merely an attempt to extort him. Moi is seeking the recovery of damages for the missing payments and proceeds of his work under the Copyright Act and the Visual Artists Rights Act (VARA).

The lack of an employee contract is important here, because without it Moi may not have any claims to the intellectual property. Under the typical contract for work or contributions to work, the creator remains the author, and the owner/contractor of the work retains all the economic rights to the work, including its copyrights. Thus, a pivotal point in the case for his claims under the Copyright Act, may be whether he was a partner and co-author of the work, or an employee of the studio.    

Conflict Foresight/Preparation

How might disputes over authorship between collaborators (spouses or business partners) have been avoided? One possibility was to have a private agreement detailing the nature of their working relationship, including exactly who would be credited as the author of the works. The agreements could also have covered various other issues of copyright ownership for the works, along with ownership of the physical pieces if a split were ever to occur. The value of the initial challenges forming these contracts would far outweigh the difficulties the pairs now face in resolving their disputes.

Artists Jack Beal and Sondra Freckelton provide an example of this forward-thinking precautionary action. Sondra was a successful sculptor in the 1970’s before she transferred into watercolor painting. Her husband Jack Beal was an American realist painter until his death in 2013. The two included a written agreement in their marriage certificate to provide that they would have an equal partnership in both marital and artistic endeavors. Sondra felt that this agreement was extremely important to maintaining her valued independence as artist, as well as to ensuring that her husband and his career would not overshadow her own.

However, the reality is that most artists, and people in general for that matter, are not anticipating the demise of a relationship upon its commencement. For this reason, contracts are rarely drafted, and often one partner could even feel insulted by the other for asking for official documents to be created – seeing it as a testimonial to the relationship’s inevitable demise. So while the creation of a contract in every working relationship is ideal, the frequency of their actual existence is much smaller. Even if one does manage to make a contractual agreement, there may still be issues of enforcement depending on the contract’s nature and terms, as evident by the Abromović – Ulay suit.

That is not say that one can’t go overboard with preparation. One couple made Internet news, when their specific contract request went viral. The couple was getting married and in need of a wedding photographer. The odd part is, they wished to include a clause in their contract stipulating that if they ever got divorced they would receive a full refund for their photographs, as they would no longer need them. Needless to say, they had quite a difficult time finding someone willing to accept such an agreement ( So, while planning is encouraged, it is possible to go too far. One should find a happy medium, somewhere between a fully stocked fallout bunker and never getting a flu shot, perhaps the contract equivalent of a first aid kit.       

Distribution of Assets: Tangible and Intangible

When relationships end, many artists may be surprised to learn that in most states, artwork is considered marital property unless provided otherwise in a prenuptial agreement. This means that during a divorce, artwork is part of the property that is divided 50/50.

In relation to works created by one or both partners, the first step is to make an accounting of all the works made and sold during the marriage and their location. It is worth remembering that works in progress should be included. This step should be taken seriously since in the case of an accidental omission, one could face charges for fraud, and the other spouse could either keep the omitted work or all the profits from its sale. The work must also be assigned a value, perhaps a touchy subject. But if both sides can agree, it can be much simpler and faster to have a single appraisal completed than arguing over whose is correct.

Copyright should also be kept in mind during the distribution of assists. Although the work may be going to both parties, the copyright remains with the original creator and must be transferred separately to the new owner. This becomes important if the spouse who holds the work but did not create it wishes to sell the work or license it, as they will need the corresponding rights. The transfer of which must be explicitly detailed in the allocation of the artworks during the proceedings. It is also important to note here, that in the case of co-authors, each author has equal copyright rights.   

Lastly, there are issues that may arise under VARA (the Visual Artist Rights Act of 1990). VARA provides some protection to the artist’s work regardless of ownership. It allows, among other rights, “the right to prevent distortion, mutilation, or modification that would prejudice the author’s honor or reputation”. This means that in the case of a rather heated divorce you shouldn’t plan on keeping your spouse’s work only to burn it in a fit of rage or revenge, to do so would be a violation of their rights and you could face charges (not equal in value to the fun of your bonfire).


In summary, matters of heart and business are complicated, throw art into the mix and you have a recipe for calamity. Whether it is determining who receives credit for the work, or who ultimately gets to keep the work, small steps along the way in contractile prep paired with a little legal advice can lead to less headache, if not less heartache in the long run.

Select Sources:

  1. Complaint, Moi v. Chihuly Studio, inc., (Wash. Super. 2017).
  2. Complaint, Chan v. Schatz, 1:17-cv-03042 (S.D.N.Y. Apr. 26 2017)
  3. THE VISUAL ARTISTS RIGHTS ACT OF 1990, 136 Cong Rec E 3716
  4. 17 U.S.C.S. § 101 (LexisNexis, Lexis Advance through PL 115-37, approved 6/2/17)
  5. Ben Quinn and Noah Charney, Marina Abramović ex-partner Ulay claims victory in case about joint works, Sep. 21, 2016, available at
  6. Nichole Martinez, What Happened to Art in a Divorce? [Hint: Get an Art Appraiser], Nov. 8, 2016, available at
  7. Daniel Grant, Love and Marriage, Artist Style, Dec. 17, 2010, available at
  8. Christies, How deep is your love?, last visited Jun. 12, 2017, available at
  9. Noah Charney, Ulay v Marina: how art’s power couple went to war, Nov. 17, 2015, available at,
  10. Columbia Law School, Keep Your Copyrights, available at,
  11. PetaPixel, Wedding Photographer Asked for Refund Guarantee in Case of Divorce, (2017), available at
  12. Aalmuhammed v. Lee, 202 F.3d 1227 (9th Cir. 2000)

*About the Author: Colby Meagle is a 2019 J.D. candidate at Pepperdine University School of Law. Prior to law school, she received her B.A. in Arts Administration and B.F.A from Elon University in 2016. She can be reached at

Disclaimer: This article is intended for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely upon the information in this article and should consult a licensed attorney.


Case Review: Maestracci v. Helly Nahmad Gallery Inc. (2014)

By Madeleine Werker*

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Amedeo Modigliani, Seated Man with a Cane (1918)

At the core of Maestracci v. Helly Nahmad Gallery Inc., case filed in 2014 is the battle for ownership of an Amedeo Modigliani painting, Seated Man with a Cane (1918) (the “Painting”) valued at 25 million USD. The release of the Panama Papers in April 2016 revealed new information about the Painting, which could assist in settling the ownership conflict in court.

According to the complaint, Seated Man with a Cane was first exhibited at the 1930 Venice Biennale, where the so-called self-portrait was listed as number 35 in the catalogue. It belonged to Oscar Stettiner, a Jewish art dealer in Paris. Stettiner fled Paris in 1939 during the Nazi occupation of France, leaving his gallery and his artworks behind. After the war, in 1946, Stettiner attempted to retrieve the work by filing a French civil claim for “a Modigliani portrait of a man”, among other items, without success. Stettiner died in France in 1948 never having found the Painting.

In their filings, Plaintiff(s) allege that in 1941, Stettiner’s gallery was taken over by Nazi-appointed administrator, Marcel Philippon, who held four public auctions of the gallery’s inventory. In July 1944, the painting, listed as Selt Portrait of the Artist, was sold at the French auction house, Drouot, to John Van der Klip for 16,000 francs.[3] Although the painting was thought to have been resold in a series of unknown transactions, a May 2016 letter from Van de Klip’s descendants confirmed that the Modigliani stayed in the family and was passed down “by descent to the present owners” until the 1996 Christie’s London auction, where it was sold to the International Art Centre (“IAC”) for 3.2 million USD.[3]

At the time of the sale, the painting had not been flagged as a potential Nazi-looted artwork. The Christie’s catalogue entry noted that the painting had been sold in an anonymous sale in Paris between 1940 and 1945, and mistakenly attributed provenance to known French collector Roger Dutilleul. Christie’s cited the painting as number 16 from the 1930 Venice Biennale, not number 35.[4] This later complicated the painting’s identification.

In 2008, the Painting resurfaced and was relisted in the Sotheby’s New York catalogue (valued at 18-25 million USD). The 2008 catalogue listing cited the painting’s owner as the IAC and attributed provenance “possibly” to Roger Dutilleul and to Stettiner. The catalogue also re-listed the work as number 35, not 16, from the 1930 Venice Biennale. Two letters subpoenaed from Sotheby’s in April 2016, as part of the ongoing lawsuit, show an executive at Sotheby’s addressing Helly Nahmad Gallery as the painting’s consignor.

The Painting failed to sell at the 2008 auction and disappeared until the release of the Panama Papers led to its retrieval from the Geneva Freeport.

In 2009, Mondex Corporation, a Toronto firm that specializes in recovering Nazi-looted art, began putting together the painting’s history. Founder James Palmer then contacted Philippe Maestracci, an Italian citizen and Stettiner’s only heir, who agreed to have Mondex pursue the research on his behalf. Before this, Maestracci was not aware of his grandfather’s connection to the painting.

This pursuit led Maestracci to the US federal court where he sued the Helly Nahmad Gallery for the Painting in 2011. The Nahmads, a wealthy family of art dealers long believed to be in possession of the painting, denied ownership,[9] instead maintaining that the IAC owned the Painting independently after purchasing it in 1996. Maestracci later withdrew the amended federal court complaint over jurisdictional issues.

In February 2014 the Stettiner estate re-filed its suit against David Nahmad, Helly Nahmad (both the gallery and the individual), and the IAC with the New York Supreme Court.[11] In November 2015, when a New York State Supreme Court judge ruled that France-based Maestracci lacked standing to pursue the case in the United States, Maestracci amended his claim to make George Gowen, the New York administrator of Stettiner’s estate, the sole plaintiff in the case. The November filing alleged that the IAC was a “shell company” set up by the Nahmad family “to conceal and confuse their identities, and hide revenues…stemming from their art dealings.”[11]

Until recently Maestracci’s claim has not seen much success, but this all changed in April 2016 with the release of the Panama Papers, leaked documents from the Mossack Fonseca law firm, which linked various wealthy individuals to offshore companies. Originally published on April 3, 2016, the papers revealed the location and ownership of the painting that Maestracci sought to reclaim. The documents confirm the link between the Nahmads and the IAC.[12] Mossack Fonseca set up the IAC as a Panama-based company for the Nahmads in 1995. David Nahmad, has been the company’s sole owner since January 2014.

David Nahmad relies on two key points in denying Maestracci’s claim to the painting. First, according to Nahmad, the price fetched for the painting in 1944 was too low, even in an anonymous sale during wartime. Second, Nahmad cites Stettiner’s 1946 claim in which he referred to the painting as a self-portrait of the artist in a notation taken by a court bailiff.[14] Nahmad believes this proves that the work in question is, in fact, a different painting. Nahmad supported his position with the assertion that the family loaned the painting out a number of times, including to the Jewish Museum in 2004. Nahmad, who is Jewish, insists he would never accept Nazi-looted art. He has told Radio-Canada, “I could not sleep at night if I knew I owned a looted object”.[16] For now, the Nahmads are prepared to take their defense to the courts. However, Ezra Nahmad has said that if Maestracci “can provide concrete proof that this piece of art truly belongs to him, then [he] will gladly give it to him.”[15]

The New York State Supreme Court case, George Gowen v. Helly Nahmad Gallery Inc., 650646/2014, is ongoing. The last set of motions was filed in March 2017.

Select Sources:

  1. Maestracci Affidavit, Exhibit A: Nature of Action, ¶ 16 (NYSCEF DOC. NO. 9).
  2. Livengood Letter, Ex 72, 3 (NYSCEF DOC. NO. 941).
  3. Maestracci Affidavit, Exhibit G: Christie’s Listing (NYSCEF DOC. NO. 25).
  4. Maestracci Affidavit, Exhibit A: Nature of Action, ¶ 30 (NYSCEF DOC. NO. 9).
  5. Sotheby’s Letters 2-11-10 and 4-28-10 (NYSCEF DOC. NO. 768,769)
  6. Maestracci Affidavit, Exhibit B: Sotheby’s Catalogue, ¶ 32-33 (NYSCEF DOC. NO. 9).
  7. Golub Affidavit, ¶ 3 (NYSCEF DOC. NO. 918).
  8. Motion Sequence No. 7, 22 (NYSCEF DOC. NO. 378).
  9. Maestracci Notice With Summons, 2 (NYSCEF DOC. NO. 1)
  10. Verified Amended and Supplemental Complaint (NYSCEF DOC. NO. 489).
  11. Verified Amended and Supplemental Complaint, ¶ 2 (NYSCEF DOC. NO. 489).
  12. Maestracci Affidavit, Exhibit M: Panama Registry (NYSCEF DOC. NO. 69).
  13. Exhibit 1: Letter from Geneva Ministere public (NYSCEF DOC. NO. 917).
  14. Julian Sher, Modigliani masterpiece seized in wake of Panama Papers (CBC: Apr 11, 2016) available here; Schub Affirmation, ¶ 31 (NYSCEF DOC. NO. 929).
  15. Amah-Rose Abrams, David Nahmad Denies Modigliani Painting Is Nazi Loot (Art Net: June 13, 2016) available here; Fern Sidman, Ezzy Nahmad: “If the Gentleman Can Prove Rightful Ownership, I Will Gladly Give Him the Painting” (The Jewish Voice: May 4, 2016) available here.

About the Author: Madeleine Werker received her J.D. from the University of Ottawa, Canada in 2017. Before law school, she obtained her Bachelor of Art in Art History and Cultural Studies from McGill University in Montreal.

In Matters of Probate: Trust but Verify

by Marine Leclinche*

Manet Chanteuse de Cafe Concert, La

Édouard Manet “La chanteuse de café concert” (1879)

When Anne Marie Rouart, the widow of Denis Rouart – a descendent of the French artist and art collector Henri Rouart – died on December 18, 1993, she left behind a tremendous collection of art. The French masters Manet, Morisot, Degas, Monet, Renoir, and de Corot were each included. Many of the works were also painted by Berthe Morisot, from whom the Rouart family is directly descended. By Rouart’s last will dated  October 7, 1992, she left the entire meubles meublants (furniture and decorative pieces) of her apartment in Neuilly-sur-seine, Paris, to her nephew, Yves Rouart. The rest of the art collection was left to the Académie des Beaux-Arts in Paris, which created a Rouart Foundation and transferred to the Marmottan Museum the principle artworks of the Rouart collection. As of today, four paintings remain untraceable.

This article strives to provide an overview of the long process that ensued to recover some of Mrs. Rouart’s long lost paintings, which involves both French and American Law. The Rouarts’ story, despite its complications and its link with fascinating characters, such as the Wildenstein family, is not unique, and serves as a good reminder for art collectors to carefully plan their estates.

The blurry aftermath of the estate of Anne-Marie Rouart

In November 1997, nearly four years following Rouart’s death, the principal artworks originating from the succession were taken to the Marmottan Museum in Paris, as per her will. Nevertheless some paintings left to Yves Rouart and to the Académie were unaccounted for. Part of the problem, according to journalists, was that only about forty artworks were on display at her Paris apartment, while many more were placed in different safes, including one at the Wildenstein Institute (a non-profit organization founded to do art research and edit catalogue raisonné and located in Paris). After Rouart’s death in 1993, the executors assembled her entire collection at her apartment to allegedly develop an inventory in situ. Once there, they apparently took down from the walls all the paintings on display. The removal of the paintings, either knowingly or not, affected the status of the paintings and the final accounting (to the detriment of Yves Rouart’s inheritance) because once the works were unaffixed from the wall they were no longer meubles meublants under article 534 of the French Civil Code. The paintings bequeathed to Yves Rouart became indistinguishable from those bequeathed to the Académie.

In 1997, Yves Rouart initiated a civil action before the Court of First Instance in Nanterre after he read the inventory and realized the actions taken by the executors. While Yves Rouart was trying to identify the artworks that were stored at the Wildenstein Institute, he realized that about forty additional art objects were missing from the accounting. He decided to also sue for theft, concealment and breach of trust in a Paris Criminal Court.

The saga of the missing Rouart art turned out even more incredible when the names of two famous art experts and members of the Académie des Beaux Arts in Paris became linked to the mystery. Guy Wildenstein, son of the art dealer Daniel Wildenstein, and Olivier Daulte, son of the Swiss art publisher François Daulte, were serving as the executors of Rouart’s estate.

In France, a testator can nominate as many executors as he or she wants to be responsible for the administration of the estate. Several forms of will are admissible under French law: a holograph (handwritten) will, a formal notarial will (testament authentique), a mystic will (when given to the notary in front of two witnesses in a closed and sealed envelope), and an international will (subject to the UNIDROIT Convention Providing a Uniform Law on the Form of an International Will, Washington DC, 1973). Under French Law, children of decedents have a natural right to inherit property from their parents by way of a forced heirship system (réserve hériditaire). The executor’s mission is unpaid except if a liberality (a legal deed made inter vivos or testamentary disposition in which a person transfer to another a good or goods belonging to his estate) is made as a gift or bequest (Rouart’s collection was mostly bequeathed to the Académie). The executor assumes contractual responsibility when he or she accepts the mission. This law of testamentary transfer is valid across France. In the United States, however, each state has specific surrogate law governing its law of probate. In New York for example, under Section 2307 of the New York Surrogate’s Court Procedure Act, executors are entitled to collect a fee ranging between 2 and 5% of the total amount of estate money that the executor receives and pays out. If there are several executors, the fee must be apportioned among them, based on the services rendered by each of them. A decedent’s will may also address the subject of bonds and augment the compensation that an executor may collect for his or her troubles.

The Swiss lead

In 1998, Yves Rouart was able to retrieve some of the missing works in Europe, however there were still a number of them unaccounted for. In April, when François Daulte (1924-1998), world renowned art historian and curator from Lausanne, Switzerland died, his heirs Olivier Daulte and Marianne Delafond (a curator at the Marmottan Museum) made an interesting discovery. They found artworks in his Swiss bank safe that they did not know about. Indeed, once the Estates Office in Lausanne published a notice in the press for potential creditors, Yves Rouart warned the Office of his suspicions concerning several artworks. The safe was then opened in the presence of a bailiff and twenty-four artworks originally from Rouart’s estate were discovered, substantiating Yves’ claims. Among them were a landscape by Corot titled Road descending from the town of Volterra, two portraits of Manet by Degas, the Cathedral of Strasburg by Eugène Delacroix, a Tahitian woman by Gauguin, six paintings by Manet, nine by Berthe Morisot, two by Renoir, one by Toulouse-Lautrec and the copy of an Italian painting. Terms of the settlement were not made public but thereafter, the criminal proceeding that Yves initiated in 1997 was dismissed and the parties withdrew before the Nanterre Court of First Instance in December, 2000.

Oddly enough, the Académie, which was bequeathed a large part of Rouart’s collection, neglected to file a complaint in France when it first discovered that some artworks were missing back in 1993. However in 1998, the Académie claimed ownership to the newly found artworks from Daulte’s Swiss vault.

Following the Daulte safe find, from 1998 until 2011, five paintings remained missing. However, old photos of Rouart’s apartment proved that they were on display before her death and thus subject to Yves claims. These included three Manets (La Chanteuse de café-concert, Le Portrait de Mme Manet mère, and Le Jardin de Bellevue); one Corot (La Bohémienne rêveuse); and one Morisot (Chaumière en Normandie). The Morisot was later found in the safe of the Wildenstein Institute.

In 2000, Yves Rouart and the Académie started negotiations. Fifteen artworks were given back to him, making him the owner of forty-eight artworks from the original transaction. Further discovered works were to belong to the Académie.

The Wildenstein twist

In 2011, Guy Wildenstein was accused of underestimating inheritance taxes after the 2001 death of his father Daniel in France. Investigators believed that a complex scheme was created shortly after Daniel Wildenstein’s death, enabling his heirs to hide arts and assets under the ownership of secretive trusts and move artworks between New York and Switzerland. Guy Wildenstein claimed that he was told “that the assets weren’t owned by the family but by independent trusts, and thus need not be disclosed to tax authorities.”

In January 2011, police investigators from the Central Office for the Fight against Trafficking in Cultural Goods (OCBC) seized thirty artworks that were reported stolen or missing by previous owners, during a search of the mysterious vault of the Wildenstein Institute in Paris. While Guy Wildenstein was in custody and interrogated by the Juge d’Instruction (Investigating Magistrate), he admitted that there was no inventory of the vault, which contained dozens of artworks that he did not own.

Yves Rouart, then represented by Serge Lewisch, filed a new criminal complaint against X. Under French law, a complaint against X enables a plaintiff to first file a complaint against an unnamed person: “X”, when the identity of the perpetrator is unknown. The claim, made before the Paris First Instance Court, was for concealment of theft, since Chaumière en Normandie by Berthe Morisot was found in the safe of the Wildenstein Institute after it had been missing for decades. An inquiry was launched to determine how the paintings ended up at the Wildenstein Institute. The aim was to nullify the 2000 transaction between the Académie and Yves Rouart because of the indirect involvement of the Académie in the concealment of the paintings by the executors and their fathers, after having benefited from Yves’ dispossession of his meubles meublants.

Under French law, the negotiations that lead to a transaction, such as an agreement with a museum, must be interpreted under article 2044 of the French Civil Code. In his complaint, Yves Rouart’s attorney argued that the transaction between his client and the Académie should have been be invalidated because of the dol from which his client was victim. A dol can either be a false representation, a lie or a fraudulent misstatement. Under former French law, lack of consent such as a dol, is subject to a five-year limitation period from the discovery of the defect. Guy Wildenstein attempted to counter-argue that if any artworks were found they should belong to the Académie and not to Yves Rouart, according to the 2000 deal. This argument was rejected by the Judge d’Instruction and Guy Wildenstein was eventually charged with abus de confiance (breach of trust) under article 314-1 of the French Criminal Code.

On May 2016, after a new search was launched by Swiss prosecutors in the context of the “Panama Papers” scandal, Swiss police officers and police investigators from the OCBC searched the Freeports of Geneva in relation to the Wildenstein lawsuits (Challenges, Oct. 20, 2016). Geneva Freeports are known for holding dozens of masterpieces that are exempted from custom duty and value-added tax, so long as they are not taken out of the Freeport. However, the artworks can still be sold and bought within the Freeport.

In this context, the search of the Geneva premises of Natural Le Coultre (Yves Bouvier, the owner of the company, had already been investigated in a lawsuit for fraud and concealment opposing him to the Russian billionaire Dimitri Rybolovlev), a worldwide artworks transportation company, lead to the discovery of several paintings, but according to the police report, none of them belonged to the Rouart family. Nevertheless, some unnamed Manets were found, and according to the French magazine Challenges, Yves Rouart declared that he was convinced that they were his aunt’s. This was because the Wildensteins owned very few Manets and almost none of them are currently in circulation. Most were owned by museums, while some belonged to private art collections. According to Paul-Albert Iweins, the lawyer of the Académie des Beaux Arts, the Académie now supports the investigations instigated by Yves Rouart and “is very interested by the discovery made in Switzerland” (Challenges, Oct. 20, 2016). The relationship between Yves and the Académie seems to have pacified over the years.

As for the criminal part of the lawsuit, on January 12, 2017, Guy Wildenstein was cleared of the charges of tax fraud and money laundering. However, the acquittal was granted on technical grounds. Olivier Géron, president of the 32nd chamber of the Paris Criminal Court, stated that “a tribunal cannot conclude on the existence of fraud without direct evidence” (Le Monde, Jan. 12, 2017). In addition, there were faults in French tax fraud legislation. Indeed, prior to 2011, there were no laws requiring the disclosure of assets held in a trust. The next day, the newly-created Parquet National Financier (PNF), headed by the Financial District Attorney and placed under the authority of Paris Attorney General, announced its intention to appeal the general acquittal of the Wildenstein heirs.

The Wildenstein trusts

The Wildenstein family created several trusts over many years. The offshore Delta Trust in the Bahamas, created in 1998 by Guy’s father, held almost 2,500 artworks valued around $1 billion before he died (NY Times, Sept. 30, 2016). The Royal Bank of Canada Trust Company (RBCTC Bahamas) was the trustee of the Delta Trust and started to reveal information to the Paris Court of Appeal (in 2016) after they discovered that $250 million of paintings owned by the trust were moved out of the US without their approval. RBCTC Bahamas claimed they reported the paintings to American tax authorities after the discovery of the move. The only role of the trust seemed to have been to sell off paintings to generate revenue for the family, especially for Guy Wildenstein, the beneficiary.

One argument made in defense of Guy Wildenstein, to explain the non disclosure of these trusts to French authorities, was that the trustees rather than the Wildensteins were the owners of the paintings. This was despite the fact that the family, as stated above, made “critical decisions about art sales and demands for distribution of money(NY Times, Sept. 30, 2016.) The French fiducie inspired by the Anglo-American concept of trust was introduced in French law in 2007. The fiducie is “a contract by which a company (the Settlor or constituant) transfers goods or rights to another person (the Trustee or fiduciaire) who holds these separate from his own property with the remit to manage the property for the benefit of one or more Beneficiaries.” The difference between the French fiducie and the common law trust is that, according to article 2012 the French Civil Code, the fiducie is expressly established by law or contract, whereas a trust is not necessarily contractual. According to article 2011 of the French Civil Code, the independent management of the trust was not respected by the Wildenstein family.

French Tax authorities are hoping to recover about $600 million in taxes in a civil lawsuit related to the family inheritance of Daniel Wildenstein (is this different from the tax case? or the same). Guy Wildenstein will also have to explain how “he came into possession of paintings seized by police at the Wildenstein Institute in Paris” (Artnet news, Jan. 12, 2017) and why this particular vault did not have any inventory, counter to their general practice of cataloging the contents and listing their owners (a second vault was found and had a complete inventory).


 For now, most of the Rouart mystery remains. Some of the artworks are still missing and the roles of Wildensteins and Daultes in this case are unclear. Nobody seems to know when and how the paintings were transferred in Switzerland (no export certificate was issued), or why Olivier Daulte, as the executor of Mrs. Rouart’s estate, did not contact Yves Rouart or the judge in charge of the complaint directly after the discovery of the twenty-four paintings in the safe of his father.

The art market is notoriously opaque and it seems, as demonstrated by the Rouart case, that no one is immune from falling under the spell of the wealth (economic, aesthetic or intellectual) that is contained in artworks. Regardless of the jurisdiction, when valuable art is bequeathed it is beneficial to appoint multiple independent executors and leave specific instructions not only as to what is to be done with the artworks but what are the artworks in the bequest. It is important to keep in mind that during estate proceedings, valuable property can and does go missing. Estate planning with updated lists of property, its locations, and information concerning the last appraisal and its value, are de rigueur to lower the risk of loss (accidental or purposeful).

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* About the Author: Marine Leclinche is a Spring 2017 Legal Intern with Center for Art Law. She is a LL.M candidate at Benjamin N. Cardozo School of Law. She graduated in Intellectual Property law in France (Université Paris II Panthéon-Assas, Master 2 Droit de la propriété littéraire, artistique et industrielle, Class of 2016), and now focuses on art and fashion law. She can be reached at

Disclaimer: This article is intended for educational purposes only. 



5 Charged with Selling Non-Genuine Native Goods: A Violation of the Indian Arts and Crafts Act

*By Lillia McEnaney

Center for Art Law previously reported In Brief that, in March 2016, the U.S. Attorney’s Office in the District of Alaska charged a handful of individuals with violating the 1990 Indian Arts and Crafts Act (IACA). Following is an in depth background of the case and a discussion of relevant statutes

The Indian Arts and Crafts Act

Screen Shot 2016-08-05 at 4.07.08 PM.pngPassed in 1990, the Indian Arts and Crafts Act is a federal truth-in-advertising law that prohibits the sale of goods that incorrectly claim to be Native produced. In the United States, there are 1.9 individual Native people who are members of the 567 state and/or federally recognized tribes. If an artist or an art dealer fraudulently claims that any of their wares were produced by an individual or group of Native Americans, they are in direct violation of IACA.

The current law is based off a 1935 Act of the same name that aimed to “promote the development of Indian arts and crafts.” This original legislation also created the Indian Arts and Crafts Board (IACB). The IACB’s purpose is to enforce IACA and ensure the “genuineness and quality” of Native works on the art market. Today, the IACB has the power to refer complaints to the FBI or to the Secretary of the Interior for investigation. After reviewing the investigatory report issued by either the FBI or the Secretary of the Interior, the IACB may recommend to the Attorney General that charges be filed against individuals who violate the IACA. Additionally, the IACB can create and register trademarks that are authentically Native American or Alaskan. In 2000, Congress amended the IACA to improve its enforcement procedures.

If found guilty, an individual who violates the IACA may face up to a $250,000 fine or imprisonment for no more than five years. If found guilty of more than one charge, that person may be fined up to $1,000,000 and imprisoned for up to 15 years.

Past IACA Cases & Criticism

A 2011 Government Accountability Report showed that the IACB received approximately 650 violation complaints between 2006 and 2010. The report indicated that 150 of these complaints suggested substantial IACA violations and 117 cases needed additional investigation. After receiving a complaint, the IACB can either pass the information to the FBI, to the Secretary of the Interior, or recommend to the Attorney General that charges be filed. Despite the fact that a violation of Indian Arts and Crafts Act is a federal matter, none of these cases have ever filed in federal court.

In total, only five people in five separate cases have been found guilty of violating the IACA between 1990, the year  Congress passed the IACA, and 2010. Two of these cases were dismissed and violators in the remaining three were sentenced to either probation or up to 13 months’ jail time.

Few Indian Arts and Crafts cases result in prosecution because the IACB focuses on preventative education rather than practical enforcement of the law. Reportedly, one of the Board’s most common methods of investigation is to send a form letter to suspected offenders. The letter detailed the guidelines put forth by IACA and described the penalties of violation. 

Additionally, the U.S. Government Accountability Office (GAO) suggested that reliable and objective data on the size of the market for Indian arts and crafts is sparse. Limited market data makes it even more difficult to propose a plan to stop this practice  because it is not always easy to tell the difference between a fake and an authentic piece, even for experts. Wayne Bobrick of Wright’s Indian Art in Santa Fe has said that “[t]here are some things that are obvious, but if they do it well enough, anyone can be fooled.” Additionally, though it is most common for non-Natives to claim to be Native, it is also common for some Native Americans to buy imported goods and pass them off as their own, authentic work, according to Tony Eriacho, a Native artist and activist. Taking these factors into account, the GAO also determined that conducting a more thorough and complex study would be costly and would most likely produce similarly biased results.

One substantial criticism of the IACA is that the Act does not protect artists that do not belong to federally recognized tribes. Currently, there are approximately 250 tribes in the United States that are not recognized by the Bureau of Indian Affairs or by their respective state’s government. Artists that belong to any of these communities are not protected by the Indian Arts and Craft Act, and are not even able to market their arts and crafts as “Indian-made.” This has massive implications, as many non-federally recognized Natives are no longer able to sell their authentic wares in fear of criminal prosecution. Lack of representation here is, of course, just one of many legal disadvantages that unrecognized tribes currently face.

Case Study: Five Charged with Selling Non-Genuine Native Goods

In May 2014, a team comprised of the Department of Justice, the IACB, and the Alaska Attorney General’s Office Consumer Protection Unit began an investigation of four Alaskan business owners under the accusation of violating the Indian Arts and Crafts Act. The investigation was prompted by complaints filed by summer tourists in Alaska. The tourists were allegedly told that various bone carvings that were for sale were made by Alaskan Native peoples. This inspection, spearheaded by the DOJ, is the result of an investigation conducted by the United States Fish and Wildlife Service (USFWS) that previously found these businessmen guilty of misrepresenting their goods. An undercover USFWS agent paid $1,985 for the non-genuine pieces at the store.

The people charged include “Vinod ‘Vinny’ L. Sippy, 38, d.b.a. Diamond Island, Icy Strait, and Gemstone Heaven; Juneau resident and business operator Norma M. Carandang, 60, d.b.a. Northstar Gift Shop; Puerto Rican resident and Ketchikan business owner Gabriel T. Karim, 33, d.b.a. Alaskan Heritage; Skagway resident and business owner Rosemary V. Libert, 56, d.b.a. Lynch and Kennedy Dry Goods, Inc.; and Libert’s seasonal employee, a resident of Huntington Beach, California, Judy M. Gengler, 65.” They are charged with, according to the DOJ, “the illegal misrepresentation of bone art carvings as made by Alaska Natives or Indians, when in fact they were made by local non-native carvers.”

When brought before the court, Sippy pleaded guilty, while Carandang pleaded not guilty. Because Sippy pleaded guilty, the arraignment also served as his sentencing. He “agreed to pay a $3,500 fine, make a $3,500 donation to the IACB, distribute a public apology letter and he will serve five years of probation.”

At the time of writing, the case was pending in the U.S. District Court for the District in Alaska.

UPDATE: On September 2, 2016, Ms. Libert was found not guilty of misrepresenting Native produced art in federal court on Friday. See Libert Letter to the Editor of the Skagway News.


In the 21th century, enforcement of IACA and regulating markets is becoming more difficult due to the growing online economy. E-commerce websites such as Etsy and eBay have “rapidly outpaced the law.” Though IACA protective mechanisms are strong, its Board may need  to reimagine the way in which the law is enforced in today’s digital economy.

The enforcement of IACA relies heavily on the public. When purchasing Native goods, purchasers should make sure to ask their art dealer for the artist’s information and for a written certificate for authenticity. If this cannot be provided, purchasers should consider giving this information to the IACB through a formal or informal complaint. Consumer information plays a vital role in the enforcement of the IACA and in maintaining a fair market for Native communities.


*About the Author: Lillia McEnaney is an undergraduate at Hamilton College where she is studying Archaeology and Religious Studies and was recently appointed a Casstevens Research Scholar. Lillia is a research assistant in Hamilton’s Religious Studies Department, the Blog Intern for the Council for Museum Anthropology, the Webmaster for Art/Place Gallery, a 2016 Summer Intern for the Smithsonian’s National Museum of the American Indian, and an intern for the nonprofit organization SAFE/Saving Antiquities for Everyone. Lillia may be reached at:

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

Fine Art Storage Services v. Insurance Companies: A Cautionary Tale

By Scotti Hill*

Hindsight is 20/20, however, art storage facilities are supposed to be forward looking to make sure that property entrusted to them for safekeeping remains protected and unaltered while in their custody. Elements such as temperature, humidity and pest control are vital to preserve artworks from any damage or total loss. Certain mediums like paper, canvas, plaster, metal, and clay are of course particularly vulnerable to temperature and humidity fluctuations.

Christie’s Fine Art Storage Services (CFASS), an owned subsidiary of Christie’s auction house, has been named a defendant in multiple lawsuits for damage, incurred during 2012’s hurricane Sandy, to artworks housed at its Brooklyn facility. In late October 2013, three insurance companies: XL Specialty, Axa and Starnet, mounted suits against CFASS, for gross negligence, breach of bailment, negligence, breach of contract, negligent misrepresentation, and fraudulent misrepresentation stemming from CFASS failure to prepare for the storm’s onslaught.

The Storm of the Century

In the fall of 2012, weather prognostic reports warned of a superstorm headed for New York. Ultimately, artworks in many studios, galleries and storage facilities were severely damaged when Sandy, a tropical storm that was updated to a hurricane, hit the tri-state area on October 29, 2012.

The Red Hook area of Brooklyn, where CFASS’ storage facility is located, was labeled a high-risk flood area, securing the New York City Office of Emergency Management’s rating of a “Zone A evacuated flood zone.” With media reports circulating about the impending storm, CFASS, as alleged in the complaints, began reassuring clients that appropriate measures were being taken to protect their property from damage.

Unfortunately, certain works of art stored at CFASS were damaged during the hurricane. In the aftermath of the storm, some pieces were unsalvageable, others resulted in complete loss, while others still were sent to conservators for restoration. In such cases, damaged artwork claims require owners to report losses to insurance companies, who would seek compensation from the entity responsible for the damage.

The damages incurred to such an enormous concentration of wealth in one space resulted in significant losses for insurers. In a few instances when the insurance companies reviewed the circumstances that resulted in such unprecedented level of claims and sought to mitigate their expenses by refusing to pay claims resulting from gross negligence. After all, with 27,000 people per square mile, New York is the most densely populated city in the United States, with damage or full compensation for losses to multimillion-dollar property having the potential to increase premiums or drive out many of the insurance carriers.

The Waiver of Subrogation and Limitation of Liability Clause

In lawsuits resulting from damages to art stored at CFASS, the point of contention is the manner by which liability is allocated in CFASS’ storage contracts. Some contracts between the storage facility and its clients required clients to obtain an art insurance policy.  In other instances there may have been waivers of subrogation or a limitation of liability clause.

A waiver of subrogation relinquishes an insurer’s right to assert claims against the company responsible for the damage. Alternatively, a limitation clause generally limits the companies liability based on the weight of the goods.

According to U.C.C. § 7-204(2), a warehouse is bound by a reasonable duty of care when storing property in its space, however such clause cannot negate the elementary duty of care required. In the case of New York State law,  NY UCC § 7-204 (2014) (a), “a warehouse is liable for damages for loss of or injury  to  the  goods  caused  by  its failure to exercise care with regard to the goods   that  a  reasonably  careful  person  would   exercise   under   similar  circumstances.  Unless otherwise agreed, the warehouse is not liable for  damages that could not have been avoided by the exercise of that care.

Does Gross Negligence Alter Waivers of Subrogation and LLC’s?

In XL Speciality Ins. Co. v. CFASS, filed on October 29, 2013, petitioners sought reimbursement for a $700,000 payment to the damaged gallery, Chowaiki & Co. In this case, the New York supreme court granted CFASS’ motion to dismiss the complaint due to the adequate consideration provided by both XL Specialty Insurance Corporation and their client Chowalki. Similarly, in Starnet Ins. Co. v CFASS, filed on October 28, 2013, the estate of LeRoy Neiman brought suit to recover damages resulting from harm to 277 artworks. Plaintiffs in AXA insurance sued on behalf of Jacqueline Piatigorsky’s trust seeking $1.5 million, in which case the trust alleges that CFASS failed to alert them to a lack of safety measures and personnel in place to protect their art from damage.

Petitioners’ claims of gross negligence were based on evidence that art was left in staging areas on the warehouse’s ground floor and that despite a reassuring email stating otherwise, no action was taken to protect this property from imminent danger. In its March 17, 2016 decision to reverse the lower court’s dismissal of petitioner’s complaint, the court in XL Specialty noted that in 2011, CFASS took extra precautions, such as moving art above the ground floor and hiring extra personnel, to prepare for the arrival of hurricane Irene, a storm that largely avoided the city.

In all suits, Petitioners argue that CFASS’s gross negligence arose when, despite assurance that they would do so, they failed to raise artworks from the ground floor of the warehouse, leaving them in the direct path of flooding. Such failure to act, therefore constituted a material breach to the storage contract, as both the parties and their respective insurance companies reasonably relied on CFASS to safely house the art and provide accurate and reliable status updates about its condition. So far, CFASS points to the liability waivers and labels Sandy an ‘Act of God’ in rebuffing claims of negligence.   

While the plaintiffs in each case allege gross negligence, breach of contract and bailment, and fraudulent and negligent misrepresentation, the lower courts have maintained that subrogation waivers often negate claims for gross negligence. In response, the plaintiffs in each suit argue that the subrogation provision unfairly excuses CFASS gross negligence. Judge Saliann Scarpulla, who presided over each of the three cases, refuted this claim, arguing that instead of exempting CFASS from liability, the provision simply requires “one of the parties to the contract to provide insurance for all the parties.” Board of Educ., Union Free School Dist. No. 3, Town of Brookhaven v. Valden Assocs., 46 N.Y.2d 653, 657, 389 N.E.2d 798, 416 N.Y.S.2d 202 (1979); Abacus Fed. Sav. Bank v. ADT Sec. Servs., Inc., 18 N.Y.3d 675, 684, 967 N.E.2d 666, 944 N.Y.S.2d 443 (2012).

In all three cases, the New York Supreme Court, New York County, initially upheld the validity of such provisions in judgments in favor of CFASS. On appeal, however CFASS’ motion to dismiss XL Specialty’s complaint was reversed. Holding that the contract’s waiver of subrogation was unenforceable, the New York Supreme Court, Appellate Division, held “provisions purporting to exempt the bailee from liability for damage to stored goods from perils against which the bailor had secured insurance, even when caused by the bailee’s negligence have been held to run afoul of the statutory scheme of UCC Article 7.” XL Specialty Ins. Co. v. Christie’s Fine Art Storage Servs., Inc., 137 A.D.3d 563, 566, 27 N.Y.S.3d 528, 530 (N.Y. App. Div. 2016).

With the relief of knowing that one of their main grievances has been acknowledged Axa and Starnet are hoping that appeals will generate similar reversals in their cases.


The immeasurable cultural significance of art renders its destruction not only economic, but also sentimental. The unfortunate events surrounding the CFASS lawsuits provide stark lessons about the costs of collecting, which extends far beyond purchase and insurance premiums to include storage, shipping and when necessary-conservation. While there is a strong drive to preserve artifacts as assets, all artworks have inherent vices and are vulnerable to the elements, incentivizing collectors to perform due diligence when acquiring items and finding spaces to house them.

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About the Author: Scotti Hill is a J.D. Candidate, 2018 from the S.J. Quinney College of Law at the University of Utah. She serves as a summer 2016 intern for the Center for Art Law, and works as an art critic and curator. Prior to law school, she received a Master’s Degree in art history and visual studies. She can be reached at

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

Parting Is Such Sweet Sorrow: Covenants Not to Compete Between Auction Houses

*By Elizabeth Weber, Esq.

Covenants not to compete (CNCs), also called non-compete clauses or simply non-competes, are commonplace in employment contracts. Generally, CNCs seek to prevent an employee from leaving his or her current employer to work for a direct competitor. CNCs typically last for a set period of time and only pertain to a specific geographic area. In specialized fields like the art market, these restrictive covenants prevent employees from moving between similar companies with the ease they would prefer. Specifically, CNCs entered into by auction house employees present unique issues to those who work in the field and seek career developments due to the limited number of major auction houses, especially within a particular geographic area.

Covenants Not to Compete

A covenant not to compete is a contractual provision in which one party, the employee, affirms that he or she will not work for a market competitor within a specified geographic area for a particular period of time after the employment period ends. CNCs are a part of  contract law and, as such, are dictated by state law. In New York,

[t]he modern, prevailing common-law standard of reasonableness for employee agreements not to compete applies a three-pronged test. A restraint is reasonable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.

BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388-89 (1999) (emphasis omitted). A violation of any of the three prongs may invalidate the CNC completely unless the suit arises in a state that follows the blue pencil rule. When a particular CNC provision is overbroad, courts in blue pencil states may reform or strike the offending provisions from the contract while the rest of the CNC remains intact and partially enforceable. For example, New York allows courts to reform overbroad CNCs; Florida courts follow a mandatory CNC reformation regime; and California law does not permit the use of CNCs, although the use of CNCs to protect trade secrets in California is unsettled. Beck Reed Riven LLP’s extensive state-by-state chart provides a more in-depth view of CNC law by state.

Additionally, in Reed, Roberts Assocs. v. Strauman, a 1976 case involving the enforceability of CNCs, the New York State Court of Appeals specifically focused on the fact that “our economy is premised on the competition engendered by the uninhibited flow of services, talent and ideas. Therefore, no restrictions should fetter an employee’s right to apply to his own best advantage the skills and knowledge acquired by the overall experience of his previous employment.” Reed, Roberts Assocs. v. Strauman, 40 N.Y.2d 303, 307 (1976). Despite the Court of Appeals’ focus on an employee’s right to participate in the market economy, this right is not limitless. CNCs may be used to prevent a former employee from disclosing a company’s trade secrets or confidential client information or, alternatively, CNCs may be enforced if the former employee performed unique or extraordinary services for the former employer. Id. at 308.

Auction House CNC Case Study: Heritage Auctioneers v. Christie’s

Despite the prevalence of CNCs, few cases that involve breached covenants within the auction house world arise. One case in particular illustrates the importance of CNCs: the ongoing matter between Heritage Auctioneers & Galleries and Christie’s. Heritage Auctioneers & Galleries v. Christie’s, Sup Ct, New York County, 2014, Oing, J., index No. 651806/2014.

Heritage involves three former Heritage employees who specialized in the pre-owned luxury accessories sector (think vintage Hermès Birkin bags): Matthew Rubinger, Rachel Koffsky, and Caitlin Donovan, who worked in Heritage’s Luxury Accessories department with Rubinger serving as both Director and department head while Koffsky and Donovan held positions as Director of Operations and Director of Consignments, respectively.

According to Heritage’s complaint, Heritage hired Rubinger in 2010 to head the company’s Luxury Accessories business right out of college. The company alleges that it “invested in Rubinger’s identity” to elevate Rubinger within the auction world and brand him as the face of Heritage’s Luxury Accessories department worldwide. Complaint, Heritage Auctioneers & Galleries v. Christie’s, Sup Ct, New York County, 2014, Oing, J., index No. 651806/2014. As their Luxury Accessories business grew, Heritage hired Koffsky and Donovan in that department as well.

Four years later, in 2014, Rubinger renewed his written contract with Heritage through December 31, 2014. Rubinger’s employment contract included both CNC and non-solicitation clauses and an additional non-disclosure clause in which he affirmed that he would not disclose any of Heritage’s trade secrets. Specifically, the CNC provision in Rubinger’s contract stated that Rubinger would not work for a Heritage competitor anywhere in North America for twenty-four months after ending his employment with Heritage. Koffsky and Donovan’s employment contracts included a nondisclosure agreement only. The text of Rubinger’s CNC as shown in Heritage’s complaint is included below.

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Images found in Complaint, Heritage Auctioneers & Galleries v. Christie’s, Sup Ct, New York County, 2014, Oing, J., index No. 651806/2014.

During the week of May 12, 2014, Christie’s extended offers of employment to Rubinger, Koffsky, and Donovan. On May 16th, Rubinger accepted the offer from Christie’s Hong Kong, Ltd., which is based and conducts business in Hong Kong, China. Koffsky and Donovan accepted offers from Christie’s, Inc., which is based in the United States. The three resigned from Heritage the following Monday, May 19th.

Heritage subsequently filed suit against Christie’s, Rubinger, Koffsky, and Donovan on June 13, 2014. The complaint alleges that Christie’s engaged in unfair business practices; tortiously interfered with Heritage contracts; induced, aided, and abetted Heritage employees to violate their fiduciary duties; and misappropriated trade secrets and other proprietary information. The complaint further alleges that Rubinger, Koffsky, and Donovan all breached their fiduciary duty of loyalty to Heritage in addition to breaching their Heritage employment contracts.

In response, the defendants asserted that Christie’s Hong Kong and Rubinger specifically structured their employment arrangement to avoid breaching Rubinger’s CNC with Heritage. Defendants’ Memorandum of Law in Opposition to Plaintiff’s Motion for a Preliminary Injunction, Heritage Auctioneers & Galleries v. Christie’s, Sup Ct, New York County, 2014, Oing, J., index No. 651806/2014. By working in Hong Kong, not the United States, Christie’s and Rubinger argued that Rubinger complied with the territorial terms of his CNC. Christie’s further stated that Rubinger, Koffsky, and Donovan were instructed not to use or disclose to Christie’s or use for Christie’s benefit any information derived from their time with Heritage. The defendants also noted that Heritage failed to provide any evidence that Rubinger, Koffsky, or Donovan utilized any confidential information thus far during their employ with Christie’s.

Heritage is currently pending in the New York Supreme Court before Justice Jeffrey K. Oing, and updates regarding this case will follow.

What Does the Future Hold for Auction House CNCs?

In addition to Heritage, recent shakeups at Christie’s and Sotheby’s have reinforced how important CNCs are for auction houses. For example, after the former chairman of Christie’s Americas, Marc Porter, resigned his position with Christie’s in December 2015, The New York Times reported that “after a noncompete period of about a year, [Porter] will join Sotheby’s in a high-ranking position that has yet to be announced but is expected to involve international client development.” The fact that Porter must wait about a year before joining Sotheby’s puts both Sotheby’s and Porter at a distinct disadvantage: the company must hold Porter’s future position open during this time period while Porter awaits the expiration of the CNC period before joining Sotheby’s.

Interestingly, it appears that Sotheby’s attempted to renegotiate Porter’s CNC with Christie’s by offering to waive the CNC of a former Sotheby’s employee who planned to join Christie’s. The New York Times reported in February 2016 that Sotheby’s offered to release Guillaume Cerutti, former Sotheby’s deputy chairman in Europe and chief executive in France, from a CNC if Christie’s would respond in kind and release Marc Porter from his CNC obligation before the contracted duration of the CNC. Reportedly, Christie’s declined this offer.

CNCs in the auction house world may be an attempt by top houses to avoid any semblance of collusion. In 2000, both Christie’s and Sotheby’s settled a $512,000,000 price-fixing lawsuit “amid allegations that the two auction houses had colluded on fixing the commissions paid by buyers and sellers of art.” Accordingly, strong CNCs in auction house employment contracts may serve as preventative measures to demonstrate a complete lack of collusion on the part of either house. What is more likely, however, is that the competing businesses wish to avoid client poaching and using valuable insights learned at their former place of employment in unfair business practices that may result from well-informed individuals using the information for the benefit of a new employer.


While there are thousands of auction houses worldwide, the number of leading international houses is much smaller and, as such, employment opportunities at top-tier houses are limited. Either due to the corporate culture or the CNCs, changing allegiances between these top houses incite great interest in both clients and the media. The widespread use of CNCs in auction house employment contracts serves to encourage institutional loyalty and decrease lateral movement between the top houses, but the question remains–who really wins when CNCs are strictly enforced in the auction house world?



*About the Author: Elizabeth Weber is a lawyer living in Brooklyn, NY. Elizabeth graduated from the University of Florida Levin College of Law where she received her certificate in Intellectual Property Law and served as an active member of the Art Law Society and the Journal of Technology Law and Policy. Elizabeth is the Spring/Summer 2016 Postgraduate Fellow with the Center for Art Law.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. Instead, readers should seek an attorney with any legal questions.


Case Preview: Andy Warhol Foundation v. Bugarin

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Andy Warhol, “Liz” (ca. 1963).

By Jessica Preis*


In 2014, Agusto Bugarin, a one-time associate of Andy Warhol (b. 1928- d. 1987) found himself accused of stealing various Warhol works, including the extremely valuable piece entitled, Liz (the “Work”), portraying the actress, beauty icon, and business woman Elizabeth Taylor.

What was Bugarin’s relationship with the artist and how did he come to possess this and other Warhols?

In its complaint, the Andy Warhol Foundation for the Visual Arts (the “Foundation”) refers to Bugarin as a bodyguard for the artist, a description derived from one Warhol reference. The Foundation claims that Bugarin stole the Work sometime in the 1980s. Also, the Foundation alleges that Bugarin waited over 30 years to eventually sell the Work and reap profits from his illicit actions. According to Warhol’s family members, however, Bugarin stands at 5’4 and weighs 135 pounds, and it is possible that he was merely a personal assistant, not a bodyguard. In his defense Bugarin argues that Warhol gave him the Work as a present out of gratitude for his services.

The Players:

        The Foundation is the beneficiary of the Warhol estate. It is responsible of holding and safekeeping all of the artist’s works in the Warhol Estate. In the case against Bugarin, the Foundation is represented by Luke Nikas, attorney with Boies, Schiller & Flexner LLP, who also  represented Defendant Ann Freedman in the De Sole v. Knoedler trial. Henry Welt is representing Bugarin and Taglialatella Galleries, the gallery through which Bugarin was attempting to sell the Work. The case was filed in New York Supreme Court, New York County.

The Conflicting Stories:

        By virtue of Bugarin’s occupation as one of Warhol’s bodyguards he had access to Warhol’s property. Bugarin alleges that he was involved in the cover-up of Warhol’s love affair with Jon Gould, Vice President for Corporate Communications at Paramount Pictures. Bugarin claims that Warhol asked him to renovate an apartment for Jon Gould who was moving to New York from California in 1984. Warhol also allegedly asked Bugarin to keep the renovation a secret because he wanted to keep the relationship under wraps since he recently broke up with his long time partner, Jed Johnson, an interior designer and film director.

According to Bugarin, after he worked on the apartment for about a week, he went to Warhol’s studio where he helped Warhol with a few works that Bugarin believed Sotheby’s intended to exhibit. Out of gratuity for his services, Warhol presented Bugarin with the Work, “synthetic polymer and silkscreen ink on canvas, measuring 42.5 inches by 44.25 inches, painted circa 1964.” Bugarin then kept the work for three decades until he attempted to sell it in 2014 with the assistance of Taglialatella Galleries.

The Foundation has put forward a series of events that starkly contrasts with Bugarin’s accounts of the events. The Foundation believes that Bugarin is a liar and a thief. Once the Foundation learned that Bugarin was attempting to sell the missing piece, a request was made for him to return it along with  four other works. There is no sign that Warhol would have given his bodyguard such a valuable painting that was already worth a great deal more than Bugarin’s annual salary in the 1980s.

The Foundation also asserts that “Bugarin’s version of the facts are nothing but fabrications.” For example, the Foundation has reasons to believe that Warhol ended his relationship with Johnson years earlier than 1984. Also, Gould moved into a New York home Warhol acquired years earlier. Not an apartment like Bugarin alleges. Additionally, the works Bugarin claims he assisted Warhol with sold years prior and were no longer in Warhol’s possession at the time. Finally, none of the works were actually exhibited at Sotheby’s in 1984. The Foundation ultimately believes that Bugarin stole the painting and tried to sell it only after everyone he thought could challenge the ownership of the work had died.

Remedies Sought:

        The Foundation claims they own the Work and have a right to possess it. Prior to 2014, Bugarin never disclosed that he owned the work, the Foundation was unaware it was under his control and had it listed in its records as stolen. Once the Foundation learned of its whereabouts, within Taglialatella’s possession, it demanded the return however the gallery refused to do so.

        After the Foundation’s requests were denied, it filed a complaint in October 2014 raising conversion and replevin claims. Conversion applies when someone intentionally interferes with personal property belonging to another person. Replevin is a legal procedure for claiming the right to have personal property returned from someone who does not have the right to hold it. The Foundation argues that Bugarin and Taglialatella have converted the work to their own use and therefore it should be returned. Furthermore, the Foundation alleges that due to this improper conduct, the Foundation has been damaged in regard to both claims. The Foundation’s property should be returned and converted back into proper hands.

        Moreover, the Foundation is requesting general and compensatory damages at trial. More specifically, the Foundation is asking for possession of the work, nominal damages, punitive damages, prejudgment and postjudgment interest at the maximum rate allowed by law, attorney’s fees, and other appropriate relief.

This case is as colorful and dynamic as the piece of art in question. Is Bugarin truly a dishonest thief as the Foundation alleges? Or did he receive the Work out of gratuity from Warhol, the renowned artist who once stated, “Employees make the best dates. You don’t have to pick them up and they’re always tax deductible.”

Select Sources:

*About the Author: Jessica Preis is a 3L at Benjamin N. Cardozo School of Law. She was a staffer on the Arts and Entertainment Law Journal and is fascinated by Art Law and Criminal Law.


Is it a Crime? The Empty Defendant’s Chair at the Knoedler Civil Trial

By Jessica Preis*

On February 10, 2016, the highly watched case, De Sole v. Knoedler Gallery, LLC, settled out of court. The events leading to the settlement date back either to 2004 when Eleanore and Domenico De Sole purchased a forged painting attributed to Mark Rothko from Knoedler Gallery (the “Gallery”), or to 1990s when Glafira Rosales, a Long Island-based art dealer walked into the Knoedler Gallery with a story that she knew a son of a collector who had some paintings he wanted to sell. At the time, Ann Freedman was the long-standing President of Knoedler Gallery; she has been quoted as “believing in” Rosales’ paintings. Freedman and Knoedler proceeded to sell dozens of paintings either consigned by or sold by Rosales. After the story broke that these works were fake and the gallery closed, the De Soles and other buyers sought restitution for the the fakes they purchased for millions of dollars. Additionally, the U.S. Attorney began a criminal investigation to punish the wrongdoers. One particular claim that could be raised in both the civil and criminal contexts is fraud.

Background of Law:

Fraud is defined and handled differently in civil and criminal cases. In the civil context, fraud is defined more broadly and is oftentimes based in tort and contract law. The Restatement of Restitution delineates that fraud entails misrepresentation, concealment, or nondisclosure by individuals intending to cause others to make a mistake. Thereby, the defrauders induce their victims to refrain from or enter into particular transactions. In the civil realm, the plaintiff has the burden to prove by clear and convincing evidence that the defendant committed fraud. Penalties include restitution by paying back the victims and payment of fines.

In criminal law, there is no universally established statute addressing or defining  fraud. However there is consensus by scholars and lawyers  that criminal fraud involves an element of deceit. According to United States District Judge Edward J. Devitt, fraud is “the intentional or deliberate misrepresentation of the truth for the purpose of inducing another, in reliance on it, to part with a thing of value or to surrender a legal right.” Therefore, fraud is deceit which can be committed by words, conduct, or an omission such as silence, with the intention of someone else acting upon it and incurring an injury. In order to obtain a guilty verdict, the government has the burden to prove someone committed fraud “beyond a reasonable doubt” in the criminal context. Individuals who are convicted of committing criminal fraud face penalties such as imprisonment, probation, fines, and restitution.


What did the artist see? Elizabeth Williams (above) drew court sketches at both criminal and civil trials involving Rosales, Knoedler Gallery, Ann Freedman and others. Show with William’s works, entitled “Knoedler Trial Courtroom Illustrations” is currently on display.

History of Litigation:

Defendants in the civil cases have included, with some variation, the Gallery, Ann Freedman, and Rosales. During the De Sole trial, however, only attorneys for the Gallery and its former Director were present. Auspiciously, Glafira Rosales, the other major player in the legal fiasco, was absent from the recent De Sole civil proceeding. The Gallery was originally subpoenaed by the Grand Jury on September 14, 2009. Thereafter, it paid the firm Herrick Feinstein $700,000 to assist with the subpoena. The De Soles argued that Freedman must have known Rosales was selling the Gallery fakes because she was selling the paintings far below market value.

Some may wonder why Ann Freedman was the only named individual defendant in the De Sole case (in other instances civil plaintiffs have also named art advisors among the culpable parties). Especially since on September 16, 2013, Rosales pled guilty in a Manhattan federal court to conspiracy to sell fake works of art, conspiracy to commit money laundering, and various other fraud and tax-related crimes arising out of the forgery scheme. After all, Rosales’s ultimate targets paid over $80 million for the artwork she delivered to Knoedler for sale. The case against her was named USA v. Rosales. According to the New York Times, Rosales cooperated with federal prosecutors, probably in hopes that she would receive a reduced prison sentence by assisting in additional arrests. Preet Bharara, United States Attorney for the Southern District of New York, reported that Rosales agreed to forfeit $33.2 million and her home in Sands Point, New York to pay restitution to the victims of her crimes. Interestingly, it seems Rosales changed residence. In 2005 she  lived at 10 Station Road, Great Neck, New York. In 2008, she was listed as residing at 21 Elm Court, Sandy Point, New York.  

There are some practical reasons not to name Rosales as a defendant: it is unlikely that she would have maintained sufficient funds to pay the De Soles back. The De Soles likely brought the lawsuit against Knoedler Gallery because they wanted monetary compensation for the forged Rothko that cost them nearly $8.5 million. According to an assistant U.S. Attorney, Rosales was sued civilly along with Freedman and Knoedler, however her case did not progress because she was arrested on May 21, 2013. She asserted her Fifth Amendment right not to incriminate herself. After pleading guilty and paying nearly $4 million to the government, there would be no sense to admit to the crime. Additionally, the money paid out would ultimately be given to the injured plaintiffs.

Sentencing in criminal proceedings:

There is a question as to why Rosales has not actually been sentenced despite pleading guilty in the criminal proceedings. Generally, in a plea bargain, the prosecutors in the case negotiate charges and possible sentencing with the defendant. The government may make certain concessions to induce the defendant to agree to a specific lesser guilty charge in place of a lengthy and expensive trial where the defendant could ultimately be charged with a more severe crime. In this case, Art Newspaper reported that Rosales cooperated with the U.S Attorney’s office to help build cases against others, as mentioned before, which may include Ann Freedman. In 2013, the government requested a stay in the civil litigation due to the ongoing criminal investigations against Rosales. Specifically, the government was concerned that the civil suit would undermine the criminal investigation.


The federal prosecutors may have made a deal with Rosales so that she could help strengthen the case against the worst perpetrators in the crime scheme, who in their mind would most likely be Ann Freedman and Knoedler Gallery as an entity. In such a scenario, Rosales would have made a deal to testify against individuals like Freedman.

Inquiring minds may want to know as to whether the government may have a criminal case against Freedman and Knoedler Gallery. If so, why has the government not filed those suits and is there a statute of limitations to do so? Typically, the statute of limitations begins to toll once the particular crime is completed.  According to federal law, depending on the specific type of fraud committed (i.e. tax offenses or major frauds against the United States), the statute of limitations vary anywhere between three and seven years. The U.S. Attorney may not have charged Freedman in a criminal case during the civil litigation for cautious and strategic reasons. It is possible that the U.S. Attorney wanted to wait out the civil proceedings in order to strengthen the criminal case against Freedman. Before the civil litigation, the prosecutors’ investigators may not have had knowledge of or access to all the same witnesses. Without such witnesses, the federal prosecutor’s case may be seriously weakened due to a lack of probable cause. Now, there is a full record that will ultimately help the U.S. Attorney with its potential case. Moreover, if the civil case failed, it would be very unlikely for a criminal case to succeed with the higher burden of proof, guilt beyond a reasonable doubt.

Recently there has been some progress in the criminal arena that will making this continuing forgery saga even more interesting. On February 16, 2016, Spain’s National Court came to a ruling that Jesus Angel Bergantinos Diaz, a businessman involved in the commissioning of the forged art can be extradited to the United States to face criminal charges in New York federal court. This process will be time consuming because Diaz will most likely appeal the extradition.

Other individuals charged include Diaz’s brother, Jose Bergantinos Diaz, and Pei Shen Qian, the Chinese artist responsible for creating all the forgeries. Pei Shen Qian, like both Diaz brothers fled the United States. In his case, he travelled back home to China.

The civil proceedings relating to the Gallery forgery scandal have proven very momentous and dynamic. It begs the question whether there will be similar litigation in the criminal realm against individuals like Rosales. We must wait and see!

Select Sources:

*About the Author: Jessica Preis is a 3L at Benjamin N. Cardozo School of Law and is working with Center for Art Law through Cardozo School of Law Art Law Field Clinic. She was a staffer on the Arts and Entertainment Law Journal and is fascinated by Art Law and Criminal Law.

Case Review: Rauschenberg Estate Saga of Trust and Fees Explained, Again


By Samantha Elie*

As the Center for Art Law already reported in Rauschenberg Estate Saga of Trust and Fees Explained, the three trustees of a revocable trust that named the Rauschenberg Foundation as the sole remainder beneficiary became entangled in litigation with the Foundation. Following a Petition by the Foundation to determine trustee’s fees on June 21, 2011, litigation arose when the trustees claimed that they were entitled to a mere $60 million in fees, in clear opposition with the Foundation’s belief that they were only entitled to a total of $375,000. On January 6, 2016, Florida’s Second District Court of Appeals unanimously upheld Circuit Judge Jay Rosman’s decision to award $24,600,000 to be split evenly among the three trustees.

Prior to his death, iconic artist and philanthropist Robert Rauschenberg (1925-2008) established a revocable trust whose sole remainder beneficiary was the Robert Rauschenberg Foundation. The Foundation is an organization he had established to further his philanthropic and educational initiatives, and to support artists and art related issues. The trustees were three of Rauschenberg’s long time friends and business associates: Darryl Pottorf, the artist’s business partner and companion of over twenty-five years; Bennet Gruntman, his accountant for over eighteen years; and Bill Goldston, a trusted associate. During their four years as trustees, the value of the assets in the trust, comprised mainly of high-value works of art created by Rauschenberg, increased from $605 million to over $2 billion. This increase was due at least partially, to the trustees’ “strategic plan to withdraw Rauschenberg’s art from the market, in order to prevent a decline in value from speculators or collectors flooding the market with his art,” a fate that other famous artists’ estates, such as Andy Warhol’s estate, were not as lucky to avoid. In Re Estate of Rauschenberg, Circuit Court of Florida, 20th Judicial Circuit (Lee County), File No. 08-CP-2479 (Aug. 15, 2014). The trustees maintained a hands-on approach to the job throughout their tenure, and the trial court noted that “Rauschenberg’s artistry was recognized in the marketplace, and some of that recognition is attributable to the Trustee’s management of his ‘brand,’” though the artist’s talent and favorable market conditions at the time after his death should also be mentioned. Id.

The written instrument outlining the parameters of the Trust did not contain a provision addressing the methodology to be used in determining trustee’s fees, and the difference between what the parties thought the fees should be, or $59.625 Million, would prove impossible to settle. So the parties looked to the Florida statute addressing trustee fees. Unfortunately, the statute provides only that the award be “reasonable under the circumstances” without providing any criteria, methodology, or further explanation. § 736.0708(1), Fla. Stat. (2007).

At trial, both sides brought in experts and utilized case law to explain their differing world views. The Foundation focused on the amount of time that the trustees worked and sought to set a reasonable hourly rate. The Foundation thus calculated trustee fees using the “lodestar” method, set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), by multiplying the number of hours reasonably expended by a reasonable hourly rate. This method is typically used to determine attorney’s fees but was expanded to determine reasonable fees for guardians or personal representatives in In re Estate of Platt, 596 So. 2d 328 (Fla. 1991). The Foundation sought to expand the doctrine and apply this method to trustee fees.

The trustees, on the other hand, focused on the work rendered and value created for the trust. They argued that the court should use the criteria set forth in West Coast Hospital Ass’n v. Florida Nat’l Bank of Jacksonville, 100 So. 2d 807 (Fla. 1958), a case in which trustee fees were actually being contested. The eleven factors to be considered are:

  1. The amount of capital and income received and disbursed by the trustee;
  2. The wages or salary customarily granted to agents or servants for performing like work in the community;
  3. The success or failure of the administration of the trustee;
  4. Any unusual skill or experience which the trustee in question may have brought to his work;
  5. The fidelity or disloyalty displayed by the trustee;
  6. The amount of risk and responsibility assumed;
  7. The time consumed in carrying out the trust;
  8. The custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks;
  9. The character of the work done in the course of administration, whether routine or involving skill and judgment;
  10. Any estimate which the trustee has given of the value of his own services; and
  11. Payments made by the cestuis to the trustee and intended to be applied toward his compensation.

After hearing from 21 witnesses and seeing over 300 exhibits, the Circuit Court found “that there is no precedent for use of the lodestar analysis to determine a reasonable fee for trustees, and further [found] that the use of the lodestar analysis would be unreasonable under the particular facts and circumstances of this case.” In Re The Estate of Rauschenberg. While the trial court applied the West factors recommended by the trustees, it found that they were still asking for more than was appropriate. Using the same factors as the trustees, the court awarded trustee’s fees in the amount of $24,600,000, approximately half of $55,000,000 requested at trial. (For an analysis on how the court weighed the factors and came to this conclusion, please see Rauschenberg Estate Saga of Trust and Fees Explained). Despite the trial court reducing the award and splitting the difference, the Foundation appealed, believing that the judgment frustrated the testator’s intent and hoping to persuade the Court of Appeals that the lodestar method was really the correct way to calculate trustee fees.

On appeal, Circuit Court Judge Silberman, writing for a unanimous court, upheld the trial court’s decision and wrote “only to explain why the trial court correctly refused to calculate fees using the lodestar method.” The opinion focused on the history of applying the lodestar method, emphasizing that it was to proper in determining attorney fees, but there were no cases on point in which the lodestar method was used to determine trustee fees. Since the Florida Statute discussing trustee fees, Fla. Stat. § 736.0708(1) (2007), merely explains that trustees should receive reasonable compensation, the Court of Appeals looked to the statute’s legislative history. The decision relied heavily on the Senate Staff Analyses in support of the bill, which explained “[o]n the factors to be taken into account in determining a reasonable compensation, see West Coast Hospital Association v. Florida Nat’l Bank of Jacksonville.” Therefore, while attorneys will continue to be paid following an hourly rate, trustees fees must be calculated based on the particular trust over which they have control and how well they’ve maintained the trust assets.

The three trustees were represented by Michael Gay, Partner at Foley & Lardner LLP in Orlando Florida, and the Robert Rauschenberg Foundation was represented by Robert W. Goldman, attorney at Goldman Felcoski & Stone P.A. law firm.


About the Author: Samantha Elie (JD Candidate 2017) is a legal intern with Center for Art Law and a student at the Benjamin N. Cardozo School of Law. She may be reached at

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