The Estate of Lorette Jolles Shefner et al v. Tuchman et al

Filing 66

MEMORANDUM ORDER denying 56 Motion to Vacate. For the foregoing reasons, Movants motion to vacate the default judgment is denied. This Memorandum Order resolves docket entry no. 56. (Signed by Judge Laura Taylor Swain on 6/14/2013) (ft)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ESTATE OF LORETTE JOLLES SHEFNER et al.,
Plaintiffs,
-v-

No. 08 Civ. 4443 (LTS)

MAURICE TUCHMAN et al.,
Defendants.
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MEMORANDUM ORDER
Non-party movants Jacques de la Béraudière (“Béraudière”) and the Galerie
Jacques de la Béraudière, S.A. (“Galerie Béraudière”) (collectively, “Movants”) move pursuant
to Federal Rule of Civil Procedure 60(b) to vacate a default judgment entered in 2009 in favor of
the Estate of Lorette Jolles Shefner (the “Shefner Estate”), Barry Shefner individually, and the
Ariela Braun 2002 Family Trust, against defendants Galerie Cazeau-Béraudière and Lontrel
Trading. For the following reasons, Movants’ motion to vacate the judgment is denied.

BACKGROUND
On May 12, 2008, Barry Shefner, Ariela Braun and Leon Miller, in their capacity
as executors of the Shefner Estate1, commenced an action in this Court against Maurice
Tuchman (“Tuchman”), Esti Dunow (“Dunow”), the Galerie Cazeau-Béraudière (the “Galerie
Cazeau”), the National Gallery of Art (the “NGA”) and Lontrel Trading (“Lontrel”)
(collectively, “Defendants”), seeking the return of a Chaim Soutine painting entitled Le Boeuf
1

Prior to a settlement agreement with the non-defaulting Defendants (discussed infra),
the Shefner Estate was the sole Plaintiff in the action.

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(the “Soutine Painting”) through replevin, a declaratory judgment as to ownership rights, and
money damages. (See Defs. Mot. to Vacate Default J., Decl. of David Hoffman, Ex. 1, March
15, 2013, ECF No. 65 (hereinafter “Hoffman Decl.”).) According to the Complaint, Tuchman
and Dunow, who are experts on Soutine, fraudulently induced Lorette Shefner to sell the Soutine
Painting to Lontrel for a price well below market value. (Id. at ¶ 1.) With the assistance of the
Galerie Cazeau, Lontrel then re-sold the Soutine Painting for a substantially higher price to the
NGA. (Id. ¶¶ 27–28.) The NGA was allegedly aware that the Soutine Painting had previously
been acquired by fraudulent means. (Id. at ¶ 6.)
At the time of the allegedly fraudulent transaction, the Galerie Cazeau was a
French corporation owned by Philippe Cazeau (“Cazeau”). (Mem. in Supp. of Mot. to Vacate
Default J. at 1, Dec. 13, 2012, ECF No. 57.) Jacques de la Béraudière was an employee and
minority shareholder of Galerie Cazeau. (Id.) Cazeau died on August 29, 2007. (Hoffman
Decl., Ex. 3.) His wife, Ms. Daniele Cazeau, liquidated the Galerie Cazeau in June 2008. (See
Defs. Mot. to Vacate Default J., Decl. of Jacques de la Béraudière, ¶ 8 , Dec. 12, 2012, ECF No.
58 (hereinafter “Béraudière Decl.”).) In a letter dated October 24, 2008, Ms. Cazeau informed
the Court that the Galerie Cazeau did not intend to appear in the action. (Hoffman Decl., Ex. 3.)
The Court informed Galerie Cazeau of its obligation to appear by counsel and the risks of failing to
do so, and afforded Galerie Cazeau opportunities to participate in settlement discussions involving
the other parties. (Hoffman Decl., Ex. 4.)

On May 14, 2009, the Sheftner Estate, along with Barry Shefner and the Ariela
Braun 2002 Family Trust (the Estate’s beneficiaries), reached a settlement with Defendants
Tuchman, Dunow and the NGA. The agreement stipulated that Barry Shefner and the Ariela
Braun 2002 Family Trust (“Acquiring Parties”) would purchase the Soutine Painting from the

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NGA for the sum of $1,975,000. (Hoffman Decl., Ex. 5.) Tuchman and Dunow agreed to
contribute $210,000 to the repurchase. (Id. at ¶ 2.) The settlement also provided that the
Acquiring Parties would be named as additional plaintiffs in the action. (Hoffman Decl., Ex. 6
at 1.) The Galerie Cazeau was invited to participate in the settlement proceedings, but declined
to do so. (Hoffman Decl., Ex. 4 ¶ 7.)
On September 25, 2009, the Court permitted Plaintiffs to move for a default
judgment against the Galerie Cazeau and Lontrel.2 (Order, Sept. 25, 2009, ECF No. 47.) In its
Order, the Court mandated that Plaintiffs’ motion for default judgment include sufficient
evidence to satisfy Plaintiffs’ burden of proof had the action proceeded to trial. (Id.)
The Order was served on Lontrel, Daniele Cazeau, Jean-Francois Cazeau and
Jacques de la Béraudière on October 1, 2009. (Affidavit of Service, Oct. 2, 2009, ECF No. 48.)
On October 15, 2009, Plaintiffs moved for a default judgment, and on the following day, served
a Notice of Motion for Default Judgment on the defaulting Defendants, as well as on Movants
here and on Ms. Cazeau, the liquidator of Galerie Cazeau. (Affidavit of Service, Oct. 16, 2009,
ECF No. 52.) No opposition to the motion was filed. On December 10, 2009, this Court entered
a default judgment in the amount of $975,000, plus pre- and post-judgment interest against the
Galerie Cazeau and Lontrel. (Hoffman Decl., Ex. 9.)
In November 2011, Plaintiffs commenced a second action in New York Supreme
Court against Movant Jacques de la Béraudière individually and as owner of the Galerie
Béraudière, a Swiss corporation, alleging fraudulent conveyance and successor-in-interest
liability. (Hoffman Decl., Ex. 12 ¶¶ 59–87.) Plaintiffs also obtained an order of attachment

2

Pursuant to the settlement agreement, “Plaintiffs” included both the Shefner Estate
and the Acquiring Parties.

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against Béraudière and the Galerie Béraudière, levying and placing in secure storage a second
painting, Willem de Kooning’s Woman in the Garden II (the “de Kooning Painting”), pending
resolution of the state court litigation. (Hoffman Decl., Ex. 13.) The order of attachment was
executed on November 15, 2011. (Mem. in Opp. of Mot. to Vacate Default J. at 7, Feb. 5, 2013,
ECF No. 62.)
Béraudière and the Galerie Béraudière now move, pursuant to Fed R. Civ. P.
60(b)(4), to have the default judgment against the Galerie Cazeau set aside as void.

DISCUSSION
“[T]he court may relieve a party or its legal representative from a final judgment,
order, or proceeding” when the judgment is void. Fed R. Civ. P. 60(b)(4). A judgment is void
under Rule 60(b)(4) of the Federal Rules of Civil Procedure, “only if the court that rendered it
lacked jurisdiction of the subject matter, or of the parties, or if it acted in a manner inconsistent
with due process of law.” In re Texlon Corp., 596 F.2d 1092, 1099 (2d Cir. 1979) (internal
quotations omitted).
As an initial matter, only “a party or its legal representative” can challenge the
validity of a judgment. Fed R. Civ. P. 60 (b). Here, Movants Béraudière and Galerie Béraudière
are neither legal parties to the action nor legal representatives of parties. However, the Second
Circuit has, under exceptional circumstances, granted standing to a non-party to challenge a
default judgment. See Grace v. Bank Leumi Trust Co. of NY, 443 F.3d 180, 188 (2d Cir. 2006);
Dunlop v. Pan Am. World Airways, Inc., 672 F.2d 1044, 1051–52 (2d Cir. 1982). In both Grace
and Dunlop, the Second Circuit cautioned that the exception was limited to the facts of those
cases. Grace, 443 F.3d at 188; Dunlop, 672 F.2d at 1051–52. In Grace, plaintiffs were minority
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shareholders who filed a derivative action against a corporate defendant and its majority
shareholder, alleging violations of federal securities law and state law in connection with a
freeze-out merger. Grace, 443 F.3d at 184. The plaintiffs ultimately settled with the
corporation’s majority shareholder, who acted on behalf of himself and the corporation. Neither
the corporation nor the shareholder was represented by counsel in connection with the settlement
and both were judgment-proof. Id. at 185. The District Court entered judgment against the
defendants, but the writs of execution were returned unsatisfied. Id. at 185–86. Plaintiffs, as
judgment creditors, thereafter attempted to use the unsatisfied judgment as a predicate for a
fraudulent conveyance action against non-party entities whom the plaintiffs had been unable to
sue in the original action. Id. at 186. Those non-parties moved to vacate the default judgment as
void under Fed. R. Civ. 60(b). Id. at 186–87. The Second Circuit held that the non-party
movants had standing to challenge the validity of the judgment, holding that:
where plaintiffs enter into a settlement agreement with a judgmentproof, pro se defendant with the intent at the time of the settlement
to collect from a third party that allegedly received fraudulent
conveyances, and further, they attempt to use the judgment as a
predicate for a fraudulent conveyance action against the third party,
the third party is “strongly affected” by the judgment and entitled to
standing to bring a Rule 60(b) motion.
Id. at 188. The Grace Court emphasized, however, that its holding was “an exceedingly narrow
exception to the well-established rule that litigants, who were neither a party, nor a party’s legal
representative to a judgment, lack standing to question a judgment under Rule 60(b).” Id. at 189.
The Court further noted that
This decision does not mean that similarly situated plaintiffs must automatically
defend their judgments from third-party transferees. Rather, if a plaintiff holds a
judgment on liability against a judgment-proof pro se defendant and hopes to use
the judgment as a predicate for a fraudulent conveyance claim, she need only
carry out a judicially supervised inquest to protect her judgment.
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Id. at 188.
The limited exception recognized in Grace is inapplicable here. The judgment
challenged by Movants was not entered pursuant to a collusive stipulation with Movants’ alleged
predecessor in interest. Rather, following a settlement among the original Plaintiff, its
beneficiaries and other defendants, reached through a process in which Galerie Cazeau was
invited to participate, Plaintiffs moved for and were granted a default judgment against Galerie
Cazeau. Notice of that motion was served on the Movants here as well as on Galerie Cazeau and
its liquidator. The motion was accompanied by documentary evidence establishing the basis for
liability and the damages claimed. The proceedings were thus the practical equivalent of an
inquest. Cf. Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 (2d Cir. 1989) (hearing
unnecessary to determine damages specified in a default judgment when district court relied
upon documentary evidence and personal knowledge of the record). By requiring Plaintiffs to
provide evidentiary support in their motion for default judgment, the Court ensured that the
Galerie Cazeau was afforded due process. Accordingly, Movants lack standing to challenge the
default judgment against Galerie Cazeau.

CONCLUSION

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For the foregoing reasons, Movants’ motion to vacate the default judgment is
denied. This Memorandum Order resolves docket entry no. 56.
SO ORDERED.

Dated: New York, New York
June 14, 2013
___________ /S__________
LAURA TAYLOR SWAIN
United States District Judge

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