Bilinski et al v. The Keith Haring Foundation, Inc. et al
Filing
63
OPINION & ORDER...Defendants' August 29 motion to dismiss is granted. The Clerk of Court shall close the case. A separate order addresses the defendants' motion for sanctions. (Signed by Judge Denise L. Cote on 3/6/2015) Filed In Associated Cases: 1:14-cv-01085-DLC, 1:14-cv-01582-DLC(gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------- X
:
ELIZABETH BILINSKI, et al.,
:
:
Plaintiffs,
:
-v:
:
THE KEITH HARING FOUNDATION, INC., et :
al.,
:
Defendants.
:
:
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APPEARANCES
14cv1085 (DLC)
(Consolidated)
OPINION & ORDER
For Plaintiffs:
Brian C. Kerr
Brower Piven, A Professional Corporation
488 Madison Avenue, Eighth Floor
New York, NY 10016
(212) 501-9000
For Defendants:
Margaret Antinori Dale
Qian Jennifer Yang
Sarah Schrank Gold
Proskauer Rose LLP (NY)
11 Times Square
New York, NY 10036
(212) 969-3000
DENISE COTE, District Judge:
Plaintiffs assert that they are owners of Keith Haring
artwork and that the actions the Keith Haring Foundation
(“Foundation”) and related defendants interfered with the
exhibition and sale of their artwork, reducing the value of
their property.
Keith Haring (“Haring”), who died in 1990, was
a prolific artist and social activist whose work responded to
the New York City street culture of the 1980s.
Plaintiffs bring
federal and state antitrust claims, as well as a false
advertising claim under the Lanham Act.
Plaintiffs also seek
relief under New York law for defamation, conspiracy to defame,
tortious interference with prospective business relations, trade
libel, intentional infliction of economic harm/prima facie tort,
and unjust enrichment.
Defendants have moved to dismiss the
complaint in its entirety.
For the following reasons,
defendants’ motion to dismiss is granted.
BACKGROUND
This motion to dismiss is addressed to a consolidated
amended complaint (“Complaint”) filed on August 13, 2014.
This
is the third motion to dismiss the claims in this action, the
plaintiffs having been given an opportunity to amend in response
to the two prior motions. 1
The following facts are asserted in the Complaint and taken
from documents integral to it.
This case principally concerns
Two separate actions were filed by two groups of plaintiffs on
February 21, 2014, and March 7, and joined in a consolidated
complaint filed on June 24. On August 13, the plaintiffs
amended that pleading in response to a motion to dismiss filed
on July 25. The plaintiffs who filed suit on February 21 are
Elizabeth Bilinski (“Bilinski”), George Lathqouras, Lisa
Cubisino, Jacqueline Petruzzelli, Anthony Petruzzelli, Arthur
Canario, Geraldine Biehl, Jesus Ramos, and Lucas Schoormans.
The plaintiffs who filed suit on March 7 are Tami Sturm, Maxine
Kobley, Stephen Kobley, Dianne Duncan, Randy Nichols, Inez
Strysick, Beverly Costello, Brendan Costello, Khristos
Karastathis, Eva Karastathis, and Geri Berman. The first motion
to dismiss was filed on May 9, 2014.
2
1
the authentication and sale of Haring artwork.
Defendants
include the Foundation, a New York not-for-profit corporation
established by Haring to continue his philanthropic legacy, and
individual officers and directors of the Foundation Julia Gruen
(“Gruen”), Kristen Haring, Gilbert Vazquez (“Vazquez”), Allen
Haring, Tom Eccles, and Judith Cox.
The Complaint also names as
defendants Studio LLC, the entity that formally operated an
authentication committee for the Foundation, as well as the
Estate of Keith Haring (“Estate”) and David Stark (“Stark”), the
president of Artestar, a company that represents the Foundation
in licensing and consulting.
Gruen and Stark are compensated by
the Foundation; Gruen receives a salary and Stark receives fees
for licensing and consulting work.
Haring bequeathed the majority of his works to the
Foundation, as well as “any copyrights relating hereto” and
trademarks. 2
The Foundation has maintained a collection of
Haring works since his death, valued at approximately $25
million as of 2011.
The Foundation earns income by selling
pieces from its collection.
Haring’s work is valuable.
From 2008 to 2011, the
Foundation sold an unspecified number of Haring works for a
total of $4,598,697.
In May 2014, three Harings were sold
Haring also bequeathed works to defendants Gruen, Kristen
Haring, and Vazquez.
3
2
through the auction house Sotheby’s.
Two of these pieces were
sold for $9,458,000 by Jeffrey Deitch (“Deitch”), who the
Complaint describes as an “ally” of the defendants.
Until 2012, the Foundation operated an Authentication
Committee (“Committee”) to review artwork attributed to Haring
and issue opinions regarding the authenticity of submitted
works.
Although the Committee was formally operated by Studio
LLC, it was controlled by the Foundation.
The dissolution of
the Committee in 2012 has increased the value of previouslyauthenticated works.
Many auction houses require a certificate of authentication
as a condition of sale, but will sell Haring artwork without a
certificate with the tacit approval of the Foundation.
Haring
artwork may also be sold privately at reduced prices without
authentication or the Foundation’s approval.
The plaintiffs own 111 pieces of Haring work they believe
to be authentic. 3
All of this artwork came to the plaintiffs
through Angelo Moreno (“Moreno”), who was a personal friend of
Haring.
Delta Cortez (“Cortez”), who also knew Haring, acted on
behalf of Moreno to sell a number of Moreno’s Harings to
plaintiff Elizabeth Bilinski (“Bilinski Collection”).
A list of the works owned by plaintiffs is attached as Exhibit
A to the Complaint. Plaintiffs do not identify which plaintiffs
own which works.
4
3
In January 2007, Bilinski showed the Bilinski Collection to
an art dealer, plaintiff Lucas Schoormans (“Schoormans”).
Working on Bilinski’s behalf, Schoormans submitted photographic
transparencies for thirteen works on March 28, 2007, and
transparencies for an additional twenty-eight works on May 4, to
the Foundation.
Schoormans also submitted letters of provenance
from Cortez and Moreno.
On May 7, 2007, the Foundation rejected
the works as “not authentic.”
The letter of rejection did not
provide a reason for the rejection, and stated that the
determination by the Committee could “change by reason of
circumstances arising or discovered . . . after the date of this
opinion.”
Following the Foundation’s rejection, Bilinski
gathered additional evidence of authenticity.
This evidence
included a signed statement of origin from Moreno, in which he
explained that he had received the works as gifts from Haring.
An attorney for Bilinski and Schoormans deposed Moreno and
Cortez. 4
On May 8, 2008, the Foundation accused Bilinski in writing
of selling or making “available for sale items you are
representing to be original works by Keith Haring when you have
been duly warned they are not,” and warned Bilinski that legal
The Complaint states that Bilinski contacted the Foundation in
2010 seeking to resubmit the entire Bilinski Collection to the
Committee for authentication. It does not indicate whether this
additional material was also submitted to the Foundation.
5
4
action could follow if she did not cease this activity.
Despite
Bilinski’s efforts to address the matter with the Foundation in
2008, the Foundation refused to respond.
In 2010, Bilinski resumed her efforts to sell her
collection.
In the spring or summer of 2010, Bilinski brought
the Bilinski Collection to Sotheby’s.
A Sotheby’s
representative indicated his belief that the works were
authentic, but reported that he could not do anything to help
her because of Gruen.
Bilinski then brought the works to
Gagosian Gallery on May 26, 2010.
After conferring with Gruen
and others, the gallery refused to offer the works for sale.
Bilinski then sought to resubmit the pieces to the
Foundation for authentication.
In July 2010, Bilinski’s
representative, Petruzzelli, 5 wrote to the Foundation that
Bilinski now had the necessary information to authenticate her
collection.
Gruen asked that Bilinski provide a written Power
of Attorney or notarized letter authorizing Petruzzelli to speak
on her behalf, and that she resubmit the Bilinski Collection
through her attorneys on account of Bilinski’s previous threats
to sue.
In response to Petruzzelli’s inquiry, on February 7,
2011, the Foundation informed Bilinski that it would not
reconsider its judgment about the authenticity of the Bilinski
The Complaint identifies Bilinski’s representative by a last
name only.
6
5
Collection.
In 2012, Bilinski received further confirmation that her
Haring works were authentic.
The auction house Guernsey’s told
Bilinski that the works appeared to be authentic and it would be
willing to produce an auction of the Bilinski Collection.
Bilinski commissioned a forensic analysis of two of the works.
The analysis concluded that the two paintings “could be
considered as having been produced in the mid-1980s.”
In early 2013, the plaintiffs participated in an exhibition
organized by Michael Rosen (“Rosen”) and Colored Thumb Corp.
(“Colored Thumb”) featuring the plaintiffs’ Haring works (“Miami
Exhibition”).
The Miami Exhibition had a VIP opening on March
6, and was scheduled to run from March 7-10.
Stark went to the
exhibition to ascertain the authenticity of the works shown.
On March 8, the Foundation filed suit against Rosen and
Colored Thumb (“Miami Complaint”) and sought a temporary
restraining order.
The Miami Complaint described the works
shown in the Miami Exhibition as “fakes, forgeries, counterfeits
and/or infringements.”
The motion for a temporary restraining
order referred to the show as “fraudulent.”
That same day, the
Foundation and the organizers of the Miami Exhibition agreed to
the removal of all but ten works from the Miami Exhibition, and
to remove and destroy all copies of the brochure and/or catalog
7
for the Miami Exhibition (“Agreement”).
In a press release of
March 8 (“Press Release”), the Foundation described the lawsuit
as an “effort to stop the display of fake Haring works at the
exhibition.”
The Press Release reports that the organizers of
the Miami Exhibition “agreed to remove all fake Haring works
from the exhibition immediately and to destroy the offending
catalogue that illustrated most of the fake works.”
The Press
Release also stated that the Foundation “plans to continue to
pursue this lawsuit, carrying the message that it will enforce
the Foundation’s rights and protect the artist’s legacy in every
case of suspected fraud.”
Plaintiff Arthur Canario (“Canario”)
lost the sale of artwork to an unidentified museum in London as
a result of the Press Release and Miami litigation.
DISCUSSION
When deciding a motion to dismiss under Rule 12(b)(6), Fed.
R. Civ. P., a court must “accept all allegations in the
complaint as true and draw all inferences in the non-moving
party’s favor.”
LaFaro v. New York Cardiothoracic Group, PLLC,
570 F.3d 471, 475 (2d Cir. 2009).
To survive a motion to
dismiss, “a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citation omitted).
A complaint must do more than offer “naked
8
assertions devoid of further factual enhancement.”
(citation omitted).
Id.
A court is “not bound to accept as true a
legal conclusion couched as a factual allegation.”
Id.
“For purposes of a motion to dismiss, we have deemed a
complaint to include any written instrument attached to it as an
exhibit or any statements or documents incorporated in it by
reference, as well as . . . documents that the plaintiffs either
possessed or knew about and upon which they relied in bringing
the suit.”
Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000)
(citation omitted).
Plaintiffs have attached images and
descriptions of their artwork to the Complaint.
The Complaint
also relies upon the Miami Complaint and Press Release.
These
materials may be considered in deciding the motion to dismiss.
I. The Antitrust Claims
Two of the nine claims raised in the Complaint assert
violations of Sections 1 and 2 of the Sherman Act, and the
corresponding New York State antitrust statute, the Donnelly
Act. 6
The defendants have raised several grounds to support
Except when state policy or legislative history dictates
otherwise, the Donnelly Act is generally coextensive with the
Sherman Act. See Gatt Commc’ns, Inc. v. PMC Assoc., LLC, 711
F.3d 68, 81 (2d Cir. 2013) (citing X.L.O. Concrete Corp. v.
Rivergate Corp., 83 N.Y.2d 513, 518 (1994)). No party has
identified, and the Court has not found, any state policy or
legislative history that would require a different
interpretation of the Donnelly Act in this case. This Opinion
thus analyzes the Sherman Act and Donnelly Act claims
9
6
dismissal.
It is unnecessary to discuss each of them.
Assuming
without deciding that the plaintiffs have antitrust standing,
their claims are timely, and the Noerr-Pennington doctrine does
not immunize the filing of the Miami Complaint, 7 the defendants’
motion to dismiss is granted as to the Sherman Act and Donnelly
Act claims.
A. Conspiracy in Restraint of Trade
The Complaint alleges a violation of Section 1 of the
Sherman Act.
Section 1 of the Sherman Act declares illegal
“[e]very contract, combination in the form of trust or
otherwise, or conspiracy in restraint of trade or commerce among
the several States, or with foreign nations.”
15 U.S.C. § 1.
Although the language is capacious, it has been interpreted to
“outlaw only unreasonable restraints” on trade.
Texaco Inc. v.
collectively.
Antitrust standing, because it is intertwined with the merits
of the antitrust claim, is not jurisdictional in nature but
rather relates to the merits of a claim addressed through a
12(b)(6), Fed. R. Civ. P., motion to dismiss. See Lerner v.
Fleet Bank, N.A., 318 F.3d 113, 128-29 (2d Cir. 2003)
(analogizing RICO’s proximate cause standing requirement to
antitrust standing and holding that it was not jurisdictional);
In re Lorazepam & Clorazepate Antitrust Litig., 289 F.3d 98,
107-08 (D.C. Cir. 2002). Similarly, issues of timeliness and
Noerr-Pennington immunity are also decided as part of 12(b)(6)
motion to dismiss. See Ortiz v. Cornetta, 867 F.2d 146, 149 (2d
Cir. 1989); Primetime 24 Joint Venture v. Nat’l Broad., Co., 219
F.3d 92, 98 (2d Cir. 2000). Accordingly, the Court may reach
the merits of the antitrust claims without first addressing
these threshold issues.
10
7
Dagher, 547 U.S. 1, 5 (2006) (citation omitted).
In order to
state a claim under Section 1, a plaintiff must allege (1) a
contract, combination or conspiracy between two legally distinct
entities, (2) in restraint of trade, (3) affecting interstate
commerce.
See E & L Consulting, Ltd. V. Doman Indus. Ltd., 472
F.3d 23, 29 (2d Cir. 2006); Maric v. Saint Agnes Hosp. Corp., 65
F.3d 310, 313 (2d Cir. 1995).
“The ultimate existence of an agreement under antitrust
law . . . is a legal conclusion, not a factual allegation.”
Mayor & City Council of Baltimore, Md. v. Citigroup, Inc., 709
F.3d 129, 135-36 (2d Cir. 2013).
At the motion to dismiss
stage, a plaintiff must allege enough facts to support the
inference that a conspiracy actually existed.
Id. at 136.
This
can be accomplished by alleging direct evidence of an agreement,
or by presenting circumstantial facts supporting the inference
that a conspiracy existed.
Id.
Plaintiffs essentially allege a group boycott between the
defendants and “their allies” in the art world who sell Haring
works.
This boycott excluded the plaintiffs from that market,
resulting in supracompetitive prices for Haring artwork.
The Complaint fails to state a claim under Section 1 of the
Sherman Act.
Even assuming that the market for the sale of
Haring artwork constitutes a valid product market, the
11
plaintiffs have failed to allege sufficient information about
the conspiracy to give the defendants fair notice of the claim,
or sufficient facts that would support the inference of
interdependent, rather than independent, conduct by the alleged
conspirators.
Plaintiffs describe the conspiracy, formed sometime in the
early 90s, as being between “Defendants and their allies,”
specifically art galleries, dealers, and major auction houses
who “severely restrict the supply of Haring artwork in the
marketplace.”
All named defendants are employees of, or
associated with, the Foundation.
The only “ally” identified by
name is Deitch, an art dealer who sold two Harings at a
Sotheby’s auction in 2014.
Under the theory advanced in the
Complaint, any refusal by an auction house, dealer, or gallery
to sell a Haring without authentication by the Foundation could
be a conspiratorial act.
Such broad allegations do not give the
defendants fair notice of the claim against them.
See In re
Elevator Antitrust Litig., 502 F.3d 47, 50-52 (2d Cir. 2007).
Furthermore, the Complaint’s allegations regarding the
refusals of auction houses and others to accept plaintiffs’
works can be explained by unilateral decisions motivated by
entirely lawful goals.
The decision by any individual entity
not to sell artwork that may not be authentic is an act
12
consistent with lawful, independent action.
“[A]lleging
parallel conduct alone is insufficient, even at the pleading
stage.”
136.
Mayor & City Council of Baltimore, Md., 709 F.3d at
After all, an art dealer may be liable under the law if it
sells counterfeit work.
See, e.g., N.Y. Arts & Cult. Aff. Law §
13.01; U.C.C. § 2-313.
Moreover, the Complaint admits that a market for
unauthenticated work exists, albeit at reduced prices.
Furthermore, the Complaint does not assert that the defendants
provide the only means to obtain authentication of Haring works.
That the Foundation is the sole source of the Foundation’s
authentication certificate is stating the obvious and does not
bridge this gap.
In support of their claim, the plaintiffs emphasize the
refusals to deal by Sotheby’s and Gagosian Gallery after initial
expressions of interest.
The plaintiffs contend that this
supports an inference of illegal collusion since it is against
an art dealer’s self-interest to refuse to sell artwork it
believes is authentic.
A refusal to sell, however, is
consistent with both independent and interdependent conduct as
the decision to sell artwork turns on an assessment of a number
of factors.
Moreover, the plaintiffs have not stated in a non-
conclusory fashion any facts indicating what benefit the auction
13
houses derive from participating in a group boycott of works
they believe to be authentic but that have not been
authenticated by the Foundation. 8
At its core, the Complaint
asserts that auction houses and other sellers of art do not sell
Haring works without the Foundation’s approval because they fear
legal retribution from the Foundation.
This is an argument for
monopolization, not conspiracy, and is addressed below.
Plaintiffs attempt to save the Section 1 claim by arguing
that the Complaint sufficiently alleges an intra-enterprise
conspiracy within the Foundation because some directors, as
owners of Haring artwork, have a personal interest in
restraining the market for Haring works.
Plaintiffs have also
suggested that defendants Stark and Gruen, who are compensated
by the Foundation, have independent economic interests in the
conspiracy.
This argument lacks merit.
Generally, a Section 1 claim requires concerted action
between separate legal entities.
Copperweld Corp. v.
Independence Tube Corp., 467 U.S. 752, 768 (1984).
In some
Plaintiffs make a single, general allegation that unnamed coconspirators benefit from their participation in the boycott by
being permitted to exhibit and display the Foundation’s own
collection. But, as plaintiffs acknowledge in the Complaint,
they own $40 million worth of Haring artwork, and the Foundation
only owns $25 million. It is not a credible inference that coconspirators would forego the benefits of selling the
plaintiffs’ art solely for the privilege of selling the
Foundation’s.
14
8
instances, a conspiracy may exist among persons within a single
organization when it joins together “separate economic actors
pursuing separate economic interests such that the agreement
deprives the marketplace of independent centers of
decisionmaking and therefore of a diversity of entrepreneurial
interests and thus of actual or potential competition.”
Am.
Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 195 (2010)
(citation omitted).
American Needle directs courts to look at
the “competitive reality” rather than the legal organization to
determine if a conspiracy may exist within one legal entity.
Id. at 196.
The participation in the Foundation of three or more
directors alleged to own Haring artwork does not “deprive the
marketplace of independent centers of decisionmaking” in any
sense.
There is no allegation that these directors are art
dealers or play a role akin to the other institutions alleged to
be co-conspirators with the Foundation.
The directors named as
owners of Haring works acquired their artwork as bequests in
Haring’s will.
Nor is there any basis for asserting that, because some
defendants are compensated by the Foundation, these defendants
are separate competitors in the market for the sale of Haring
art.
The mere fact that a director is paid does not make a
15
director a separate competitor in the market, even if the
compensation gives the director an interest in perpetuating
anticompetitive conduct.
In opposition to the defendants’ motion to dismiss, the
plaintiffs primarily rely on Allied Tube & Conduit Corp. v.
Indian Head, Inc., 486 U.S. 492 (1988), and Simon-Whelan v. Andy
Warhol Found. for the Visual Arts, Inc., 07cv6423(LTS), 2009 WL
1457177 (S.D.N.Y. May 26, 2009).
Plaintiffs cite Allied Tube
for the general proposition that “standard-setting”
organizations are ripe for antitrust abuse, and argue that the
Foundation is a “standard-setting” organization that has abused
its authority.
Reliance on Allied Tube is misplaced.
Foundation is not a standard-setting authority.
The
It does not
purport to create industry standards for competitors in the
market.
Allied Tube, 486 U.S. at 500.
In any event, the
existence of standard-setting authority does not create a freestanding antitrust claim absent a Section 1 conspiracy or
Section 2 monopoly.
See id. at 509.
Simon-Whelan, though not binding on this Court, also arises
from a dispute in the art world.
Despite this surface
similarity, however, reliance on Simon-Whelan in inapt.
There,
the Andy Warhol Foundation for the Visual Arts (“Warhol
Foundation”) was alleged to have conspired with the Andy Warhol
16
Authentication Board (“Board”) to restrain the market for Andy
Warhol (“Warhol”) artwork.
*2.
Simon-Whelan, 2009 WL 1457177, at
The plaintiff in Simon-Whelan alleged a conspiracy between
the Warhol Foundation, which published a catalogue raisonné 9 of
Warhol’s work, and the Board, which authenticated or declined to
authenticate submitted works.
Id.
By controlling both the
catalogue raisonné and the Board, the defendants were alleged to
exercise complete control over the authentication of Warhol’s
work, which they used to create scarcity in the market for
Warhol’s work.
Since the factual context in the two cases are so
dissimilar, the Simon-Whelan legal analysis provides little
guidance here.
No catalogue raisonné exists for Haring’s works,
and the plaintiffs here do not premise their claim on an
agreement between the Foundation and the Committee, but on an
agreement between the Foundation and art dealers, auction
houses, and galleries.
As significantly, the defendants here
ceased their authentication activities in 2012 and could not be
plausibly alleged to control authentication of Haring’s work.
The Section 1 claim and corresponding claim under the Donnelly
Act are dismissed.
A catalogue raisonné is a comprehensive, scholarly compilation
of an artist’s known body of work.
17
9
B. Monopolization
Plaintiffs also bring a claim under Section 2 of the
Sherman Act.
To state a claim for monopolization under Section
2 of the Sherman Act, 15 U.S.C. § 2, a plaintiff must allege
“(1) the possession of monopoly power in the relevant market and
(2) the willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a
superior product, business acumen, or historic accident.”
Pepsico, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir. 2002)
(quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71
(1996)) (summary judgment decision); see also Clorox Co. v.
Sterling Winthrop, Inc., 117 F.3d 50, 61 (2d Cir. 1997).
“The core element of a monopolization claim is market
power, which is defined as the ability to raise price by
restricting output.”
omitted).
Pepsico, 315 F.3d at 107 (citation
To prove a monopolization claim, plaintiffs may
demonstrate market power in one of two ways: either through
direct evidence that the defendant can control prices or exclude
competition, or through defendants’ share of the relevant
market.
Tops Market, Inc. v. Quality Markets, Inc., 142 F.3d
90, 98 (2d Cir. 1998).
The possession of a copyright interest
in property is a “limited grant of monopoly privileges.”
Prof’l
Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,
18
508 U.S. 49, 64 (1993) (citation omitted).
The holder of
intellectual property rights may enforce these rights, even in
circumstances where it is not clear that conduct is actually
infringing.
Id. at 65.
Plaintiffs have defined the relevant market for their
Section 2 claim as the worldwide market for the sale of Haring
works.
Plaintiffs do not allege any facts regarding the
defendants’ market share or even that the defendants have
participated in the market more recently than 2011.
Rather, the
Complaint essentially claims that the Foundation continues to
act as an informal market regulator by threatening or initiating
pretexual lawsuits to preclude authentic Haring works from being
exhibited or sold.
Plaintiffs contend that the defendants, as
the final standard-setting authority in the authentication
market and the owner of “virtually all intellectual property
rights relating to Keith Haring,” are able to exclude any given
Haring work from the relevant market through the use of lawsuits
to enforce its intellectual property rights.
Assuming that the market for the sale of Haring works
constitutes a valid submarket in the art market, the plaintiffs
have failed to plausibly allege a claim under Section 2.
The
Complaint does not provide any factual basis for the contention
that the defendants possess monopoly power in the relevant
19
market.
Plaintiffs do not allege that defendants have
participated in the market more recently than 2011, and allege
no facts regarding the defendants’ market share.
The Committee
was dissolved in 2012 and no longer offers authentication
services.
As the Complaint acknowledges, there are others in
the art world that provided authentication services in the past
and that do so today.
The only fact alleged in support of the claim that the
defendants have monopoly power is that defendants possess
intellectual property rights in Haring works, and the defendants
initiate lawsuits asserting those rights.
Even assuming that
some of these lawsuits were brought in bad faith, this does not
establish unlawful monopoly power.
“Regardless of whether [a
copyright holder] intended any monopolistic or predatory use,
[it] acquired this [copy]right . . . [and] to condition a
copyright upon a demonstrated lack of anticompetitive intent
would upset the notion of copyright as a limited grant of
monopoly privileges.”
Id. at 64 (citation omitted).
In opposition to the motion to dismiss, the plaintiffs
essentially abandon their Section 2 claim. 10
The failure to
allege facts to suggest that the defendants possess unlawful
monopoly power requires dismissal of the Section 2 claim and
Plaintiffs make only one reference -- in a footnote -– to the
Section 2 claim.
20
10
corresponding claim under the Donnelly Act.
II. The Lanham Act Claim
Plaintiffs also bring a claim under the Lanham Act, 15
U.S.C. § 1125, on the theory that the Miami Complaint and Press
Release constitute false advertising.
The Lanham Act provides:
Any person who, on or in connection with any goods or
services, . . . uses in commerce any . . . false or
misleading description of fact, or false or misleading
representation of fact, which . . . in commercial
advertising or promotion, misrepresents the nature,
characteristics, qualities, or geographic origin of
his or her or another person’s goods, services, or
commercial activities shall be liable in a civil
action by any person who believes that he or she is or
is likely to be damaged by such act.
15 U.S.C. § 1125(a)(1)(B) (emphasis added).
To constitute
commercial advertising or promotion under the Lanham Act, a
statement must be: “(1) commercial speech, (2) made for the
purpose of influencing consumers to buy defendant’s goods or
services, and (3) although representations less formal than
those made as part of a classic advertising campaign may
suffice, they must be disseminated sufficiently to the relevant
purchasing public.”
Gmurzynska v. Hutton, 355 F.3d 206, 210 (2d
Cir. 2004) (citation omitted).
Core commercial speech is
“speech which does no more than propose a commercial
transaction.”
City of Cincinnati v. Discovery Network, Inc.,
507 U.S. 410, 422 (1993) (citation omitted).
21
In some instances,
“commercial speech” may also include “expression related solely
to the economic interests of the speaker and its audience.”
Id.
(citation omitted).
Plaintiffs have failed to plead a claim under the Lanham
Act.
Plaintiffs allege that the Press Release and Miami
Complaint were commercial in nature because they were published
“with the intent of preventing sales of the [the plaintiffs’]
works . . . and of increasing the value of Defendants’ artworks
at their expense.” (Emphasis added.)
This fails to allege a
sufficient connection between either the Press Release or Miami
Complaint and a proposed commercial transaction and thus fails
to allege the essential elements of a Lanham Act violation. 11
The plaintiffs’ claims under the Lanham Act are dismissed.
III. State Law Claims
Plaintiffs have also brought six separate tort claims under
New York law stemming from the defendants’ filing of the Miami
Complaint and the issuance of the Press Release.
Where no
federal claims remain in an action, and diversity jurisdiction
is lacking, a district court is not required to retain
jurisdiction of remaining state law claims.
28 U.S.C. §
1367(c)(3); Rocco v. New York State Teamsters Conference Pension
The parties dispute whether a pleading could ever be
considered commercial speech. It is unnecessary to reach this
issue in order to resolve this motion.
22
11
& Retirement Fund, 281 F.3d 62, 72 (2d Cir. 2002).
A district
court may, however, “at its discretion, exercise supplemental
jurisdiction over state law claims even where it has dismissed
all claims over which it had original jurisdiction.”
Parker v.
Della Rocco, 252 F.3d 663, 666 (2d Cir. 2001) (citation
omitted).
The court must “consider and weigh in each case, at
every stage of the litigation, the values of judicial economy,
convenience, fairness, and comity” in order to decide whether to
exercise jurisdiction over pendent claims.
Itar-Tass Russian
News Agency v. Russian Kurier, Inc., 140 F.3d 442, 445 (2d Cir.
1998); see also Mauro v. Southern New England Telecomm., Inc.,
208 F.3d 384, 388 (2d Cir. 2000).
On balance, these factors weigh in favor of exercising
supplemental jurisdiction over the plaintiffs’ state law claims.
While the federal claims have been dismissed and this motion is
brought at an early stage in the litigation, the state law
claims may be resolved without considering any novel or complex
questions of state law.
Convenience and judicial economy weigh
heavily in favor of resolving these straightforward tort claims
as part of this motion.
Thus, the Court will exercise
supplemental jurisdiction over the plaintiffs’ remaining state
law claims.
The defendants’ motion to dismiss as to the
plaintiffs’ tort claims is granted.
23
A. Privilege
Defendants contend that the plaintiffs’ state law claims
are entirely barred by the absolute privilege afforded to
statements made during judicial proceedings and the statutory
privilege accorded to anyone who makes a “fair report” of a
lawsuit.
Under New York law, statements made in the course of
legal proceedings are absolutely privileged if pertinent to the
litigation.
Kelly v. Albarino, 485 F.3d 664, 666 (2d Cir. 2007)
(citation omitted) (applying New York law).
This privilege is
not lost even in the presence of actual malice.
Id.
Furthermore, while statements must be pertinent to the
litigation to be privileged, “this is the broadest of possible
privileges and any matter which, by any possibility, under any
circumstances, at any stage of the proceeding, may be or may
become material or pertinent is protected by an absolute
privilege even though such matter may be ineffectual as a
defense.”
Id.
The statements in the Miami Complaint are privileged.
The
core issue in the Miami litigation was whether the organizers of
the Miami Exhibition falsely claimed that the displayed works
were created by Haring, thereby infringing on the Foundation’s
intellectual property rights.
The statements in the Miami
Complaint alleged to be tortious -- namely, statements
24
describing the plaintiffs’ works as fakes or counterfeits -- are
directly relevant to that central dispute.
The statements in
the Miami Complaint are therefore privileged and may not be the
basis for a tort claim.
The statements in the Press Release, however, are not
privileged.
New York law provides that “[a] civil action cannot
be maintained against any person, firm or corporation, for the
publication of a fair and true report of any judicial proceeding
. . . .”
N.Y. Civ. Rights Law § 74.
Whether or not the fair
reporting privilege applies requires a determination of whether
or not the report is “substantially accurate.”
Karedes v.
Ackerley Grp., 423 F.3d 107, 119 (2d Cir. 2005) (citation
omitted).
Application of the fair reporting privilege is
inappropriate at the motion to dismiss stage if a reasonable
jury could conclude that the report “suggest[ed] more serious
conduct than that actually suggested in the” judicial
proceeding.
Id. (citation omitted).
The Press Release characterized the Agreement between the
parties as an agreement to remove “fake” Haring works. 12
The
Agreement, however, does not contain any admission by the
organizers of the Miami Exhibition that the removed works were
The Miami litigation was later settled on February 28, 2014,
through a stipulation of dismissal. This stipulation did not
contain any agreement about the authenticity of the works
displayed at the Miami Exhibition.
25
12
inauthentic, and proffers no reason for the removal of the
disputed works.
Accordingly, a reasonable jury could find that
the Press Release stated that the parties had agreed that the
works were inauthentic, a conclusion not warranted by the terms
of the Agreement.
For the purposes of this motion, it is
therefore assumed that the fair reporting privilege does not
apply to statements made in the Press Release. 13
B. Defamation and Conspiracy to Defame
Defamation or libel require a plaintiff to show: “(1) a
written defamatory factual statement concerning the plaintiff;
(2) publication to a third party; (3) fault; (4) falsity of the
defamatory statement; and (5) special damages or per se
actionability.”
Chau v. Lewis, 771 F.3d 118, 126-27 (2d Cir.
2014) (citation omitted) (applying New York law).
“A plaintiff
in a libel action must identify a plausible defamatory meaning
of the challenged statement . . . .
If the statement is
Plaintiffs also contend that the Williams exception to the
fair reporting privilege applies. Williams v. Williams, 23
N.Y.2d 592, 599 (1969). In Williams, the New York Court of
Appeals established an exception to the statutory fair reporting
privilege that applies when a person maliciously institutes a
judicial proceeding alleging false and defamatory charges, and
then circulates a press release or other communication based on
the judicial proceeding. Id. Plaintiffs suggest that if the
Williams exception applies, it would permit tort claims against
defendants for statements made in the judicial proceedings
themselves. Even assuming that the Williams exception applies,
it is an exception to the statutory fair reporting privilege,
not the absolute privilege afforded to statements made in
judicial proceedings.
26
13
susceptible of only one meaning the court must determine, as a
matter of law, whether that one meaning is defamatory.”
Celle
v. Filipino Reporter Enterprises Inc., 209 F.3d 163, 178 (2d
Cir. 2000) (citation omitted) (applying New York law).
New York law distinguishes between defamation of a person
and defamation of a product.
Ruder & Finn Inc. v. Seaboard Sur.
Co., 52 N.Y.2d 663, 670-71 (1981).
The bare accusation that a
product does not conform to its advertised quality does not,
without more, defame the owner of the product.
Where a statement impugns the basic integrity or
creditworthiness of a business, an action for
defamation lies . . . . Where, however, the statement
is confined to denigrating the quality of the
business’ goods or services, it could support an
action for disparagement, but will do so only if [the
additional elements for trade libel] are proven.
Id. at 670-71; see also El Meson Espanol v. NYM Corp., 521 F.2d
737, 739-40 (2d Cir. 1975) (applying New York law and finding
that an article stating that a restaurant was a good place to
meet for drug deals did not defame the owner, when it did not
state that the owner knew or participated in the illegal
activity); Harwood Pharmacal Co. v. Nat’l Broad. Co., 9 N.Y.2d
460, 462-63 (1961) (noting that mere disparagement of the
quality of a product does not defame the owner but statement
that the plaintiff’s product was “full of habit-forming drugs”
and would require “a hospital cure to stop” defamed the owner
27
because it accused him of putting an “unwholesome and dangerous”
product on the market (citation omitted)); Drug Research Corp.
v. Curtis Pub. Co., 7 N.Y.2d 435, 440 (1960) (holding that
article concerning the deceptive business activities of a
corporation did not defame the integrity and business methods of
the owner).
Even viewing the Press Release in the context of the Miami
litigation, the plaintiffs have failed to allege sufficient
facts that would allow a reasonable jury to conclude that the
Press Release concerns them.
The Press Release specifically
states that the lawsuit is against the organizers of the Miami
Exhibition.
The Press Release also describes the lawsuit as an
“effort to stop the display of fake Haring works at the
exhibition,” and the stipulation as an agreement “to remove all
fake Haring works from the exhibition immediately and to destroy
the offending catalogue that illustrated most of the fake
works.”
No plaintiff is named as a defendant in the Miami
litigation, and only Bilinski is mentioned by name in the Miami
Complaint.
The Miami Complaint was not disseminated with the
Press Release.
Assuming arguendo that the statements in the
Press Release are defamatory, they are defamatory only in that
they accuse the organizers -- not the owners of Haring works -of misconduct.
To the extent that the plaintiffs are referenced
28
by implication, the disparagement only relates to their property
and thus cannot constitute the basis for defamation.
El Meson
Espanol, 521 F.2d at 739-40.
Relying on Kelly v. Schmidberger, 806 F.2d 44 (2d Cir.
1986), the plaintiffs argue that the Press Release defames them
personally, rather than their property.
In Kelly, a statement
that the plaintiffs had placed church property “in their own
names” sufficiently concerned the plaintiffs rather than their
property.
Id. at 48.
That statement, however, addresses the
plaintiffs’ actions rather than the nature and quality of the
property.
In contrast, the statements at issue in the Press
Release concern the quality of property.
Because the plaintiffs
have failed to demonstrate that the Press Release concerned
them, it is unnecessary to resolve the parties’ disputes over
the other elements of a defamation claim and whether the
Complaint adequately pleads those elements.
The claims for
defamation and conspiracy to commit defamation are dismissed. 14
C. Tortious Interference with Business Relationships
The plaintiffs assert that the Miami litigation and Press
Release tortiously interfered with a sale of Haring art by one
of the plaintiffs to a London buyer.
To prevail on a tortious
New York law does not recognize an independent tort of
conspiracy. Kirch v. Liberty Media Corp., 449 F.3d 388, 401 (2d
Cir. 2006).
29
14
interference with business relations claim, a plaintiff must
demonstrate that: (1) it had a business relationship with a
third party; (2) the defendant knew of that relationship and
intentionally interfered with it; (3) the defendant acted solely
out of malice, or used dishonest, unfair, or improper means; and
(4) the defendant’s interference caused injury to the
relationship.
Carvel Corp. v. Noonan, 350 F.3d 6, 17 (2d Cir.
2003) (New York law); see also 534 E. 11th St. Hous. Dev. Fund
Corp. v. Hendrick, 935 N.Y.S.2d 23, 24 (App. Div. 2011)
(requiring the defendant to have knowledge of the business
relationship); Amaranth LLC v. J.P. Morgan Chase & Co., 888
N.Y.S.2d 489, 494 (App. Div. 2009) (same); Caprer v. Nussbaum,
825 N.Y.S.2d 55, 78 (App. Div. 2006) (same).
This claim must be dismissed since the Complaint does not
identify the London buyer or allege that the defendants knew of
the business relationship at the time they filed their lawsuit
or issued the Press Release.
Brill Physical Therapy, P.C. v.
Leaf, 2011 N.Y. Slip Op. 33903(U) (Sup. Ct. Aug. 4, 2011), cited
by the plaintiffs in support of their tortious interference
claim, stands at most for the proposition that a plaintiffs need
not identify the name of the buyer in this pleading.
It does
not excuse the plaintiff from pleading that the defendants
actually knew of the business relationship.
30
The tortious
interference with business relations claim is dismissed.
D. Trade Libel
Defamation of a product or good, 15 rather than a person,
constitutes a distinct cause of action under New York law.
Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314
F.3d 48, 59 (2d Cir. 2002) (citing Ruder & Finn, 52 N.Y.2d at
670–71).
“To recover for disparagement of goods, the plaintiff
must show that the defendant published a[] . . . defamatory
statement directed at the quality of a business’s goods and must
prove that the statements caused special damages.”
Id.
Generally, special damages means “the loss of something having
economic or pecuniary value.”
Albert v. Loksen, 239 F.3d 256,
271 (2d Cir. 2001) (citation omitted).
“Where loss of customers
constitutes the alleged special damages, the individuals who
ceased to be customers, or who refused to purchase, must be
named and the exact damages itemized.”
Fashion Boutique, 314
F.3d at 59 (citation omitted) (New York law).
Pleading damages
as a round number with no attempt at itemization alleges general
rather than special damages.
Drug Research Corp., 7 N.Y.2d at
441–42.
Assuming that the plaintiffs have sufficiently alleged that
the statements in the Press Release defamed their goods, the
This tort is described interchangeably as trade libel,
injurious falsehood, and product disparagement.
31
15
plaintiffs have failed to allege special damages.
The Complaint
only attempts to itemize damages for one plaintiff, alleging
that Canario “lost the sale of artwork” to a London museum as a
result of the Miami litigation, but does not name the museum or
the sales price.
As special damages are an element of a trade
libel claim, the failure to allege special damages is fatal to
the claim.
Defendants’ motion to dismiss is granted as to the
claim of trade libel.
Plaintiffs argue that they have alleged special damages
because the requirement that the lost customers be identified
may be relaxed when disparaging comments are disseminated widely
and the nature of the plaintiffs’ business prevents the
identification of lost customers.
This argument lacks merit.
None of the authorities cited by plaintiffs excuse their failure
to identify the amount of lost sales in connection with the sale
to the London museum.
Moreover, of the two cases cited by the
plaintiffs in support of this argument, one was reversed on
appeal as the plaintiffs had failed to plead special damages by
not identifying lost customers or sales amounts.
Prince v. Fox
Tel. Stas., Inc., 941 N.Y.S.2d 488, 488 (App. Div. 2012)
(“Plaintiffs’ product disparagement claim should have been
dismissed to the extent it seeks damages in connection with lost
customers, as Plaintiffs failed to plead such special damages
32
with the requisite specificity.”).
Charles Atlas, Ltd. v. Time-
Life Books, Inc., 570 F. Supp. 150 (S.D.N.Y. 1983), the other
case cited by the plaintiffs, predates Prince and is also
factually distinguishable as the plaintiff was able to identify
an exact number of lost sales even if the identities of the
would-be purchasers were unknown.
Id. at 155-56.
E. Intentional Infliction of Economic Harm/Prima Facie Tort
“Under New York law there are four elements to a prima
facie business tort claim: (1) an intentional infliction of
harm; (2) without excuse or justification and motivated solely
by malice; (3) resulting in special damages; (4) by an act that
would otherwise be lawful.”
U.S. for Use & Benefit of Evergreen
Pipeline Const. Co. v. Merritt Meridian Const. Corp., 95 F.3d
153, 161 (2d Cir. 1996).
As the plaintiffs have failed to plead
special damages, the prima facie tort claim is dismissed.
F. Unjust Enrichment
“The basic elements of an unjust enrichment claim in New
York require proof that (1) defendant was enriched, (2) at
plaintiff’s expense, and (3) equity and good conscience militate
against permitting defendant to retain what plaintiff is seeking
to recover.”
Briarpatch Ltd., L.P v. Phoenix Pictures, Inc.,
373 F.3d 296, 306 (2d Cir. 2004).
The benefit acquired by the
defendant must be “specific” and directly related to the loss
33
suffered by the plaintiff.
Kaye v. Grossman, 202 F.3d 611, 616
(2d Cir. 2000) (reversing a jury verdict where benefit acquired
by the defendant was indirectly related to plaintiff’s loss).
Plaintiffs allege that the defendants were enriched because
the value of their own Haring works was increased by preventing
others from selling works.
Plaintiffs also allege that Stark
and Gruen were enriched through the salaries and fees paid by
the Foundation.
enrichment.
These facts fail to plead a claim for unjust
The benefit acquired by the Foundation -- the
alleged increase in value of Haring works owned by the
Foundation -- is not a benefit flowing directly to the
defendants at plaintiffs’ expense.
and hypothetical benefit.
Rather, it is an indirect
Also, the connection between the
alleged harm to the plaintiffs and the compensation paid to
individual defendants is too attenuated to support an unjust
enrichment claim.
Plaintiffs’ claim for unjust enrichment is
dismissed. 16
Because all tort claims have been dismissed, the defendants’
argument that claims against uncompensated directors are barred
as a matter of law need not be considered.
34
16
CONCLUSION
Defendants’ August 29 motion to dismiss is granted.
Clerk of Court shall close the case.
The
A separate order addresses
the defendants’ motion for sanctions.
Dated:
New York, New York
March 6, 2015
__________________________________
DENISE COTE
United States District Judge
35
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