This week, the litigation team at Grossman LLP achieved a win for the Hirschl & Adler Galleries and its director in a suit arising out of the sale of a Gilbert Stuart portrait of George Washington. 
The case was initiated in New York state court (New York County Docket No. 159990/2020) in November 2020 by art collector and former hedge fund manager Michael Steinhardt.  In his complaint, Steinhardt outlined the history of the portrait (known as the “Munro-Lenox” due to its provenance), a massive full-length rendering, nearly nine feet tall, of the country’s first president.  Steinhardt acquired the Munro-Lenox for $5 million in 2006 from the New York Public Library, which was at the time experiencing financial struggles.  Steinhardt owned the painting for several years, loaning it to various exhibitions and institutions, but in 2017 he decided to consign it to Hirschl & Adler for sale.  The parties agreed that the Gallery would take the Munro-Lenox “on consignment for sale to sell for ten million dollars ($10,000,000.00) net to you.”  The Gallery eventually located a buyer who agreed to pay $12 million for the painting, and the Gallery remitted the agreed-upon $10 million to Steinhardt. 
 
Steinhardt, however, was dissatisfied with this outcome, and sued the Gallery, alleging that the Gallery had misled him by telling him the Painting would be difficult to sell.  He also took issue with the validity of the contract’s “net to you” consignment structure, urging that the contract had not stated that the Gallery would retain any amount received from a buyer in excess of the net price of $10 million, nor did it state what the Gallery’s ultimate maximum commission would be.  He asserted state law claims for fraud, breach of fiduciary duty, aiding and abetting breach of fiduciary duty (against the Gallery’s director), unjust enrichment, and deceptive business practices. 
 
Less than two months into the litigation, the Grossman LLP team filed a motion to dismiss the complaint in its entirety.  And on July 26, state court Justice Joel M. Cohen agreed that Steinhardt’s claims should be dismissed at the pleading stage.  In his written decision, Justice Cohen explained that Steinhardt’s fraud claim was not alleged with the kind of specificity that is required under New York law, and further, that any statements that Gallery made regarding the painting’s value or saleability were simply opinion and could not form the basis for a fraud claim.   Further, the Gallery had not breached its fiduciary duty to Steinhardt where Steinhardt never claimed he was confused by the meaning of a “net to you” consignment, and where he, as a sophisticated collector, voluntarily entered an agreement “in which the risk of the Portrait selling for more or less than $10 million was clearly allocated between two sophisticated parties.”  The Court likewise dismissed his unjust enrichment claim as duplicative of his other claims, and ruled that his state law claim of deceptive business practices could not go forward where the state law at issue, N.Y. G.B.L. § 349, is not intended to cover this type of one-off, bespoke transaction between sophisticated parties involving large sums of money. 
 
The case stands as a reminder that, while the law protects against fraud, breach of contract, and other wrongs, it may not protect a party—especially a sophisticated and experienced one—from buyer’s or seller’s remorse.