For years now, we’ve been following the legal fallout resulting from a rancorous dispute between Russian billionaire Dmitry Rybolovlev and his onetime art dealer, Swiss businessman Yves Bouvier.  The feud has resulted in legal proceedings in multiple countries, and other art world players have become entangled in the fray as well.  In one of those spinoff disputes, Rybolovlev has sued auction house Sotheby’s, alleging that it aided Bouvier’s machinations.  Earlier this month, a New York federal court rejected a number of those claims, but other claims will proceed to trial unless the parties can reach a settlement in an upcoming mediation. 
 
Background
 
Our previous posts (see here, here, here, here, here and here) have more detail, but in summary, Bouvier helped Rybolovlev build a massive art collection over the course of several years.  But the relationship imploded around 2014 when Rybolovlev allegedly learned that Bouvier had charged him huge markups on some of Rybolovlev’s acquisitions.  Rybolovlev maintains he was defrauded—he believed Bouvier was acting as his agent, negotiating the best price on artworks on Rybolovlev’s behalf and taking a flat fee in exchange for his services.  Bouvier asserts he was an independent seller who was free to buy and resell art for as much as the market would bear, and that Rybolovlev, a sophisticated businessman, was capable of protecting himself. 
 
The plaintiffs in this particular litigation are two companies controlled by Rybolovlev and used by him to buy and sell art.  Bouvier is not a party to this lawsuit but is obviously a major character, as is Jean-Marc Peretti, a Bouvier associate who worked with him on some deals.  The defendants are two Sotheby’s entities.  The plaintiffs claim they were defrauded because Bouvier lied to them about the prices of works they purchased through him, and about his supposed negotiations with sellers—and for purposes of this case, they allege that Sotheby’s aided Bouvier’s scheme by helping Bouvier with 16 transactions between 2011 and 2015, including by helping him acquire artworks and then resell them at inflated prices to the plaintiffs, and by providing assistance with auctioning and valuation of some of the artworks involved.  The artworks include works by Picasso, Rodin, Klimt, and Matisse, among others, as well as the legendary Salvator Mundi.  (This work was discovered at a small auction in New Orleans in 2005, and subsequently reattributed to Leonardo da Vinci around 2011; Rybolovlev paid $127.5 million for it in 2013 and later resold it at a 2017 Christie’s auction for an eye-popping $450 million, setting a record for the most expensive artwork ever sold.) 

For context, Bouvier was an important customer of Sotheby’s; he apparently engaged in more than 800 transactions with Sotheby’s between 2005 and 2015.  In 2007, a Sotheby’s employee, Samuel Valette, was assigned to be Bouvier’s “Key Client Manager” (KCM) or point of contact with Sotheby’s worldwide; Valette also became the KCM for Peretti and for Rybolovlev.  
 
The Motions
 
Sotheby’s filed a motion for summary judgment with respect to all of the claims against it.  As a threshold matter, Sotheby’s argued that most of Plaintiffs’ claims for aiding and abetting breach of fiduciary duty were time-barred.  The court agreed, and further ruled that it would not apply “equitable estoppel” (a doctrine that can sometimes save belated claims from dismissal), because in most instances, Sotheby’s had not concealed its conduct in a way that prevented the plaintiffs from suing in a timely manner. 
 
The Court did, however, allow a fiduciary duty claim regarding Salvator Mundi to proceed, holding that there were “genuine disputes of material fact” as to whether equitable estoppel should be applied as to the claims regarding that work, citing evidence that Sotheby’s knew Bouvier purchased the painting on plaintiffs’ behalf, and that Valette worked closely with Bouvier to adjust its valuation, over the objection of one of Sotheby’s own experts, and to alter the cover letter, by deleting references to Bouvier’s earlier purchase of the work.  From this, the court held, “a reasonable jury could infer that Sotheby’s assisted Bouvier in obtaining an inflated valuation to conceal his breach” of fiduciary duty, and that Sotheby’s knew Bouvier was going to give the inflated valuation to plaintiffs.  Thus, claims for aiding and abetting fiduciary duty could go forward as to Salvator Mundi.
 
The court also refused to toss most of plaintiffs’ claims for outright fraud, reasoning that while the plaintiffs learned of Bouvier’s fraud around 2014, there was a question of fact as to when they had adequate knowledge of Sotheby’s role in the situation so as to trigger the running of the statute of limitations for those claims.
 
Separately, Sotheby’s argued that, for twelve of the sixteen transactions, the plaintiffs had sued the wrong Sotheby’s entities, and that the named defendants were not the entities involved.  Plaintiffs countered that the named defendants could still be liable because other Sotheby’s subsidiaries were acting as agents for these defendants.  Here, the court held that, for ten of the transactions, the named Sotheby’s entities had exercised control over subsidiaries, and had provided required approvals for the transactions, in a way that could at least arguably support a finding of an agency relationship.  The court also noted that Valette acted as Bouvier’s KCM for all of the deals at issue. 
 
Finally, Sotheby’s argued that all the claims for aiding and abetting fraud should be dismissed before trial because no reasonable jury could find that Sotheby’s had “actual knowledge” of the alleged fraud or breach of fiduciary duty, or that Sotheby’s provided “substantial assistance” to Bouvier.  The court disagreed, noting that “circumstantial evidence” can be enough to show actual knowledge, as can evidence that a defendant reviewed or had access to information that would have indicated the fraud.  Here, the court ruled, there were sufficient issues of fact for trial with respect to five art transactions, including the Salvator Mundi sale, while the other 11 deals did not warrant a trial on aiding and abetting fraud.  For example, the court held that in at least one deal, internal Sotheby’s emails supported an “inference” that Valette knew Bouvier was not disclosing certain information to plaintiffs.  As to other transactions, though, the court held there was insufficient evidence of actual knowledge.
 
On the flip side of the story, the Rybolovlev plaintiffs cross-moved for partial summary judgment on two underlying issues necessary to their claims: that Bouvier defrauded them and that he breached his fiduciary duties to them.  The court denied those cross-motions, holding that there were genuine disputes of material fact with respect to whether plaintiffs’ reliance on Bouvier’s representations was reasonable, as well as whether Rybolovlev and Bouvier were in a fiduciary relationship.
 
Finally, both sides had sought to exclude certain testimony from the other side’s expert witnesses.  The court sought to draw a balance, ruling as to one expert that he should be available to help a lay jury understand “indicia of fraudulent conduct in the high-end art market,” conduct that is “uncommon or suspicious” in that market, and “conduct that is typical of those who engage in art fraud.”  But the expert had to stop short of offering legal conclusions about Sotheby’s conduct here, or opining about witness credibility or what conclusions should be drawn from the evidence, since that would arguably infringe on the roles of the jury and the court.  Likewise, the court held that another expert could testify about the indicia of an agency relationship in this market, but could not opine that Bouvier had a principal-agent relationship with plaintiffs.    

Takeaways
 
This summary judgment decision illustrates some important points about fraud and fraud-related claims in connection with art deals. 
 
First, courts are often reluctant to decide certain fraud-related questions (such as what a party knew and when, and whether a party’s reliance on someone was reasonable) without a trial, because such questions tend to be fact-intensive and require an assessment of the relative credibility of the people involved.  Unless the facts are truly cut-and-dried, a court may want to ensure that a jury—not a judge—gets to evaluate the full picture.
 
Second, this case highlights the importance of “aiding and abetting” claims; even if a party is not accused of being the primary wrongdoer in a scheme, there may be legal risk involved in assisting someone else who is acting in a questionable manner. 
 
And third, the court’s ruling on the subsidiary agency issue is also an important reminder to any art-market company whose operations include multiple subsidiaries or related entities; the mere fact that corporate entities are separately organized does not always insulate them from liability for one another’s actions.  While one entity name may appear on documents, a court may be willing to consider indications that the entity was controlled by or acting as an agent for another entity.  
 
Separately, the court’s discussion of the parties’ expert witnesses illustrates a common challenge when it comes to litigating art disputes, especially when a jury trial is planned.  Many layperson jurors will need some education about business norms and practices that are common in the art market, and expert witnesses can be invaluable for that purpose.  But courts, attorneys, and parties need to walk a fine line to ensure that expert witnesses are helpful but do not tell a jury what to think or how to decide a case.
 
What’s Next
 
The end result of this summary judgment ruling is that a handful of the Rybolovlev plaintiffs’ claims against Sotheby’s could proceed to a trial.  Those claims include claims for aiding and abetting fraud related to four artworks, as well as a claim for aiding and abetting breach of fiduciary duty related to Salvator Mundi.
 
Interestingly, the summary judgment decision here contained a blunt assessment from U.S. District Judge Jesse Furman: “the Court is of the view that the parties should try to settle this case without the need for a trial that would be expensive, risky, and potentially embarrassing to both sides.”  He directed the parties to confer about a possible settlement conference.  The parties seem to have heard the message; the docket now indicates that they have agreed to mediation before a magistrate judge, and pretrial deadlines have been extended to make room for the mediation process.  We’ll continue to follow the case with interest.