Hall v. Gascard et al

Filing 126

ORDER denying 113 Motion for Attorney Fees. So Ordered by Judge Steven J. McAuliffe. (lml)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE

Andrew Hall
v.

Case No. 16-cv-418-SM
Opinion No. 2019 DNH 069

Lorettann Gascard and
Nikolas Gascard

O R D E R

Plaintiff prevailed in this civil art fraud case, and he
now seeks an award of reasonable attorney’s fees necessarily
incurred in vindicating his rights.

Defendants object.

The plaintiff, Andrew Hall, bought a number of paintings
directly from defendant Nikolas Gascard, and a few paintings
from others that Nikolas put into the art market.

Hall thought

the paintings he bought were works by the late artist Leon
Golub.

He thought so primarily because Nikolas unequivocally

represented that the works he sold to Hall were by Golub and,
based on Nikolas’s representations, the other sellers also
represented that the works they sold were by Golub.

The trial

evidence, however, was quite persuasive: the paintings purchased
by Hall were crude fakes.

Leon Golub did not create them.

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There was also some credible evidence pointing to defendant
Lorettann Gascard as the suspect most likely to have created the
fakes.

Lorettann was an art history professor and artist, who

studied under Golub decades ago, and who claimed a long-standing
friendship with Golub before he died.

But Hall’s counsel did

not (understandably) press the question of who created the
works, focusing instead on their inauthenticity and the
Gascards’ knowing and intentional involvement in selling them.

The defense was anemic, resting almost entirely on
defendants’ testimony and cross-examination of Hall’s art
expert.

The Gascards recounted Lorettann’s intermittent

personal relationship with the artist and her interest in his
work; suggested that her former husband (Nikolas’s father) had
an interest in Golub’s work as well, and that perhaps he had
obtained the suspect paintings from the artist or from others;
suggested that perhaps his sister, Nikolas’s aunt, also
collected art to some extent and perhaps acquired some of the
Golub paintings from her brother, or from others.

The aunt died

in Europe and, the Gascards claimed, she left the suspect
paintings at issue, and other ostensible Golubs (a total of 40
or 50 works), in her apartment closet, where the Gascards found
them when they went to settle her affairs.
estate to Nikolas.

The aunt left her

Nikolas’s father (then deceased) had also

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left his estate to Nikolas.

The “Golub works,” then, whether

belonging to the aunt or Nikolas’s father, were said to be part
of Nikolas’s inheritance.

The defendants testified that they brought the paintings to
New Hampshire from Europe when they returned home.

They claimed

to have rolled them up and wheeled them on a cart through an
airport to a Lufthansa Airlines check-in counter, where the
airline graciously took charge of the rolled paintings, wrapped
them, and presumably put them in the plane’s cargo hold.

The

paintings would have weighed approximately 250 pounds or so,
and, given the unfortunate circumstances surrounding the aunt’s
death and the delayed discovery of her body, the paintings were
impregnated with a noticeable stench.

Yet, defendants insisted,

they experienced no difficulty transporting the paintings out of
Europe, then through U.S. Customs, and to their home in New
Hampshire.

Defendants said they thought (and still think) the works
were by Golub.

They began liquidating the collection in a way

that would bring the best prices, i.e. a few at a time.

Plaintiff’s counsel methodically challenged every aspect of
defendants’ narrative, exposed many misrepresentations made

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about the works’ provenance, and offered uncontradicted expert
opinion evidence that the works were crude fakes.

The jury had

little difficulty in expeditiously rejecting the defense and
returning a verdict in Hall’s favor against Nikolas for fraud
and against both Nikolas and Lorettann for conspiracy to commit
fraud.

Hall was awarded $465,000.00 in damages, the full amount

paid for the works.

Attorney’s Fees
This is a diversity of citizenship case in which New
Hampshire law applies.

New Hampshire generally follows the

“American Rule” with respect to awards of attorney’s fees.
Under the American Rule parties to litigation pay their own
fees.

Harkeem v. Adams, 117 N.H. 687, 690 (1977).

“Underlying

the rule that the prevailing litigant is ordinarily not entitled
to collect his counsel fees from the loser is the principle that
no person should be penalized for merely defending or
prosecuting a lawsuit.

An additional important consideration is

that the threat of having to pay an opponent’s costs might
unjustly deter those of limited resources from prosecuting or
defending suits.”

Id. (citing Tau Chapter v. Durham, 112 N.H.

233, 237 (1972) and Fleischmann Distilling Corp. v. Maier
Brewing Co., 386 U.S. 714, 718 (1967)); see also In the Matter
of Mallett and Mallett, 163 N.H. 202, 211 (2012).

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The New Hampshire Supreme Court has, however, recognized
limited exceptions to the general rule.

A court may award

attorney’s fees when specifically authorized by statute, or when
based upon an agreement between the parties, or when a
judicially-created common law exception to the general rule is
found applicable.

Mallett, 163 N.H. at 211.

Here, plaintiff

seeks fees under the judicially recognized “bad faith
litigation” exception:

Under the bad faith litigation theory, an award of
attorney’s fees is appropriate [when] one party has
acted in bad faith, vexatiously, wantonly, or for
oppressive reasons, [when] the litigant’s conduct can
be characterized as unreasonably obdurate or
obstinate, and [when] it should have been unnecessary
for the successful party to have brought the action.

Frost v. Comm’r, N.H. Banking Dep’t, 163 N.H. 365, 378 (2012)
(quotation omitted).

That exception to the American Rule as

established by the New Hampshire Supreme Court, focuses on the
losing party’s litigation conduct; it is related to the conduct
giving rise to the litigation in this case in the sense that
interposing a frivolous defense would qualify as bad faith and
expose the losing party to an award of fees, in the discretion
of the trial court.

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Essentially, Hall sees “bad faith” in the Gascards’
proffered defense, because, he argues, the defense was patently
unreasonable, that is, “without any reasonable basis in the
facts provable by evidence.”

Harkeem, 117 N.H. at 691; Keenan

v. Fearon, 130 N.H. 494, 502 (1988).

Certainly, any reasonable trial observer would likely have
noticed that the Gascards’ defense was weak and largely
unsupported by “hard evidence,” i.e. pertinent documents,
exhibits, or verified facts.

There were, for example, no

receipts, checks, or paper trails of any sort associated with
the paintings at issue that might establish their origin, or
dates of creation, or dates of acquisition.

There were no

export documents related to transportation of the paintings out
of Europe; no airline receipts, or bills; no personal travel
tickets; no customs documents or import duty receipts; nothing
tangible to show the works were, as the Gascards claimed, found
in Europe and brought to the United States.

No defense art

expert offered an opinion to the effect that Leon Golub created
the works, or even may have created them.

Nor did any

independent expert opine that a lay person — someone not an art
expert or Golub expert — could have reasonably believed, upon
examination, that Golub created the works.

(Although the

evidence did disclose that Hall, a major Golub collector and

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presumably one familiar with the fundamental characteristics of
Golub’s work, and at least two highly reputable art auction
houses, were apparently satisfied (initially at least) that the
paintings were created by Golub.)

Defendants did offer what

appeared to be the aunt’s Last Will and Testament, which did
leave unspecified art (paintings) to Nikolas.

The Will was

excluded at trial, under the Rules of Evidence, but with respect
to an attorney’s fees motion, it is mildly relevant in
suggesting at least some arguable support for the defense
narrative — i.e., that paintings were left to Nikolas by his
aunt, and were found in her closet.

Defendants, as they note, did prevail with respect to some
legal claims asserted by Hall, and avoided a minor damages
claim.

But, in context, that is of little significance.

With

respect to the essential substantive claim — art fraud — the
proffered defense was basically, “We acquired the works from
Nikolas’s deceased aunt; we thought (think) she acquired them
from the artist, or from her brother (Nikolas’s father), who we
think was a Golub collector, because he knew Lorettann studied
under Golub and appreciated his work, and because Lorettann had
given him a number of Golub works that she had salvaged when she
was a student; and, critically, we had no reason to think the
works were not authentic Golubs and, although titles for the

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works were fabricated by Nikolas, and the works’ provenance was
otherwise misrepresented to facilitate sales, we still believe
the works to be authentic Golubs.”

The validity of that general

defense necessarily turned on credibility of the witnesses, and
the totality of the factual circumstances as presented to the
jury.

While it might seem that an exception to the general
American Rule ought to be recognized in cases in which active
fraud is found by clear and convincing evidence, New Hampshire
has not created such a blanket rule for fraud (or any other)
cases.

See e.g., Maguire v. Merrimack Mutual Ins. Co., 133 N.H.

51 (1990) (insurance fraud involving deliberate arson by owner
of a home followed by a fraudulent claim on the home insurance
policy does not necessarily command an award of fees).

That is

to say, prevailing in a case asserting fraud does not itself
entitle a litigant to an award of attorney’s fees under New
Hampshire’s common law.
precluded.

Id.

But, neither is an award

An award of fees under the recognized exceptions to

the general rule may be available, and always remains a matter
of discretion for the trial court.

The pertinent exception to the American Rule that might
warrant a fee award in this case relates to whether the

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defendants’ litigation position was “patently unreasonable.”
See Keenan v. Fearon, 130 N.H. at 502.

Without doubt there will

be cases of fraud in which a proffered defense is exposed as
“patently unreasonable,” but this is not quite that case.

Here, the defendants’ litigation position was bereft of
objective supporting evidence, but it cannot be said, on this
record, that it was frivolous.

The defendants’ testimony was

sufficiently coherent, and roughly consistent, in relating a
narrative that, if credited, would have been consistent with, at
least, a finding by the jury that they obtained the paintings
from the aunt’s closet, assumed they were Golubs, and were not
aware (nor should they have been aware) that the artwork was not
genuine, or, that they believed the art was authentic, and so
had no intent to defraud.

That is, the jury could have found

that defendants were unsophisticated and uninformed sellers of
fake Golubs inherited from a relative with whom they had had
little contact over the years.

The outcome in this case, as noted, necessarily turned in
significant part on witness credibility, expert opinion
evidence, close examination of the representative works, and an
assessment of the totality of the circumstances presented to the
jury.

That the defense story seemed stretched and doubtful,

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that it was largely unsupported by objective evidence, and
seemed downright implausible in many respects, does not equate
to a “patently unreasonable” litigation posture within the
meaning of New Hampshire’s exceptions to the American Rule.

That the jury concluded, by clear and convincing evidence,
that defendants engaged in fraudulent conduct naturally gives
rise to a sense that the victim of that fraud ought to recover
attorney’s fees as well as compensatory damages.
required under New Hampshire’s common law.

But more is

The evidence in this

case was limited — pertinent records, or evidence of the absence
of records (like customs declarations), would no doubt be
difficult to come by.

Such records, though, may have

definitively, or persuasively, exposed the defense as being
based not just on an implausible but potentially accurate story,
but on a plainly false one.

A defense shown to be based on

false testimony would certainly qualify as a “patently
unreasonable” defense, and would likely compel the exercise of
discretion to award fees.

That is essentially what is being argued here of course —
that the defense narrative was plainly false, and so the
litigation conduct was in bad faith, the defense having been
offered without any reasonable basis in the facts provable by

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evidence.

But the trial record falls short of establishing more

than that defendants’ story was found by the jury to be not
credible in material respects, and, at minimum, that the jury
found they knew or should have known the works were inauthentic.
An adverse credibility determination is not equivalent to a
finding that the testimony was plainly false, and the record
evidence does not rise to the level necessary for the court to
declare it patently false with the requisite degree of
confidence.

Put another way, could a rational jury have credited
defendants’ narrative, and could it have found that defendants
believed the works to be authentic?

Or, might a rational jury

have found that Hall, a collector of Golub’s work and a
sophisticated buyer, could not reasonably rely on Nikolas’s
provenance representations?
perhaps.

Unlikely as to both, but, still,

Accordingly, I cannot find, on this record, that

defendants interposed a “patently unreasonable” defense, and so
decline to award fees under New Hampshire’s bad faith litigation
exception to the American Rule.

This case comes close perhaps,

but falls “on the non-fee-paying side of the line that
separates” weak defenses from patently unreasonable defenses
interposed “in bad faith, vexatiously, wantonly, or for
oppressive reasons.”

Universal Am-Can, Ltd. v. CSI-Concrete

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Systems, Inc., 2012 WL 579167 * 16 2012 DNH 047 (D.N.H. Feb. 22,
2012) (citations and quotations omitted).

Conclusion
Plaintiff’s motion for award of attorney’s fees (doc. no.
113) is denied.)

SO ORDERED.

____________________________
Steven J. McAuliffe
United States District Judge
April 22, 2019
cc:

Lawrence B. Gormley, Esq.
Ted Poretz, Esq.
Jeffrey Christensen, Esq.
William B. Pribis, Esq.

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