Edelman Arts, Inc. v. Spoelstra et al

Filing 102

ORDER: It is hereby ORDERED that, by no later than June 12, 2020, Plaintiff shall supplement the record by filing: (1) any admissible evidence reflecting an agreement with the Defendants as to the commission rate; (2) any admissible evidence on th e usual and customary commission rate for this type of agreement; (3) any admissible evidence that Plaintiff was "ready, willing and able" to perform under the contract; (4) any admissible evidence of Plaintiff's effort to mitigate d amages. The legal consequences, if any, related to mitigation; (5) any legal basis for finding that Defendants are obligated to pay a commission even if the art remains in the custody of the broker, possession of the seller, or both; (6) any legal basis for finding that the defendants owe Plaintiff the difference between the sale price agreed upon between the parties for a piece of art and the subsequent (lesser) actual sale price of that piece of art between non-parties; and (7) any other admissible evidence and/or legal basis supporting a finding of Plaintiffs entitlement to the amount of damages sought under the specific theories of recovery put forth by Plaintiff. The Court hereby notifies the parties that it may conduct this inq uest based solely upon their written submissions. See Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991); Fustok v. ContiCommodity Servs. Inc., 873 F.2d 38, 40 (2d Cir. 1989). (As further set forth in this order.) (Signed by Magistrate Judge Sarah Netburn on 5/29/2020) (cf)

Case 1:17-cv-04789-JGK-SN Document 102 Filed 05/29/20 Page 1 of 6

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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5/29/2020

EDELMAN ARTS, INC.,
17-CV-4789 (JGK)(SN)

Plaintiff,

ORDER

-againstREMKO SPOELSTRA, et al.,
Defendants.
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SARAH NETBURN, United States Magistrate Judge:

Plaintiff Edelman Arts, Inc., filed a Second Amended Complaint on December 4, 2017,
against four individual and corporate defendants. The complaint alleges that the Plaintiff is in the
business of “finding and brokering art works for sale.” The complaint alleges that, “[p]ursuant to
the invoices,” defendants agreed to purchase four works of art by Keith Haring totaling
$19,800,000, and one work of art by Edvard Munch for $7,000,000. At the relevant time,
Plaintiff was “ready, willing and able to perform its obligations under all the invoices.” In the
complaint, Plaintiff seeks the total purchase price for two Haring pieces that remained in its
possession (totaling $9,000,000), the price difference for two Haring pieces that were
subsequently sold (totaling $4,175,000), and the purchase price for the Munch piece
($7,000,000). Thus, Plaintiff seeks $20,175,000 in the complaint. Nothing in the complaint
references a commission rate and none of the invoices, attached to the complaint, identifies a
commission rate.
Remko Spoelstra, an agent for the buyer, answered the Second Amended Complaint and
asserted counterclaims against the Plaintiff Edelman Arts and Asher Edelman. In the

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counterclaim complaint, Spoelstra accuses Edelman of intentional misrepresentation, tortious
interference with contract and defamation. Specifically, Spoelstra alleges that Edelman did not
own the paintings he invoiced and has never had access to them.
On August 17, 2018, District Judge Katherine B. Forrest entered default against
Defendants Jason Holloway, SSR Invest Switzerland, and Swiss Business Counsel (the “Original
Defaulting Defendants”). ECF No. 56. In so doing, the Court noted that “the strength of
plaintiff’s claim” was “open to question.” Id. at 1. Nevertheless, the Court found that “the
complaint appropriately addresses all legal elements of a breach of contract claim, if all
allegations in the complaint are taken as true.” Default was entered against the Original
Defaulting Defendants.
By order dated September 11, 2018, Judge Forrest denied Plaintiff’s motion for default
judgment against the Original Defaulting Defendants, finding that Plaintiff failed to meet the
“low standard” to establish contract damages to a reasonable degree of certainty. ECF No. 66.
Judge Forrest concluded first that Plaintiff had failed to provide sufficient proof of its damages,
noting that the purchase prices in the complaint and the proposed judgment did not align, and
that Plaintiff had claimed, without any proof, that some artworks were sold. Id. at 2-3. Second,
Judge Forrest noted that Plaintiff failed to provide any “legal explanation” for how defendants
could be liable for the entire purchase price of the paintings that appeared to still be in the
Plaintiff’s possession. Id. That is, Plaintiff’s damages calculation did not account for the value of
the paintings that allegedly remained in its possession. Accordingly, Plaintiff was ordered to
supplement its briefing within two weeks. Id.
Before that deadline, on September 20, 2018, the case was reassigned to District Judge
John G. Koeltl. Plaintiff timely filed a two-page supplemental letter brief with supporting

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exhibits, and the Court held a conference on November 18, 2018, at which Defendant Spoelstra,
who was now proceeding pro se, failed to appear. 1 After opportunity was provided for Defendant
Spoelstra to appear, on April 24, 2019, the Court entered a default against him – meaning that all
defendants were subject to a default – and referred the matter to me for a report and
recommendation on a damages inquest. ECF Nos. 84, 85.
In its third proffer on damages – having previously filed for damages against the Original
Defaulting Defendants, such proffer having been found inadequate, and thereafter supplemented
– Plaintiff sought (i) $1,985,000 for one Haring piece, representing the difference between the
purchase price offered to the Defendants and the amount for which it subsequently sold; (ii)
$1,200,000, representing the alleged commission on a second Haring piece; (iii) $600,000,
representing the alleged commission on a third Haring piece; and (iv) $1,400,000, representing
the alleged commission on the Munch piece. Plaintiff also sought 9% statutory interest,
amounting to $2,199,441.87. ECF No. 90.
This Court found Plaintiff’s third proffer wanting. By order dated December 10, 2019,
the Court directed Plaintiff to explain the factual and legal basis for calculating damages based
on potential commissions, and damages based on the difference in asking price and sale price for
one of the Haring pieces. 2 ECF No. 92. Plaintiff responded by describing the transactions that led
to the “discounted” sale and indicated that of the $1,985,000 that Plaintiff sought, $500,000
would be Plaintiff’s commission and the balance would (apparently) go to non-party seller
Artemis USA, LLC. ECF No. 93.

On March 2, 2018, Spoelstra’s original counsel withdrew. On April 8, 2018, new counsel appeared on
his behalf, but that counsel moved to withdraw 19 days later for failure to pay. ECF Nos. 40, 44.
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The Court recognizes that its request was arguably poorly worded. It appears that Plaintiff interpreted
the Court’s request to be limited to the basis for seeking the price differential for the one Haring piece.
Accordingly, the Plaintiff provided no additional support for its legal and factual claim for damages based
on any commissions.
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On January 14, 2020, this Court recommended that Plaintiff be awarded no damages,
having failed to establish the legal and factual basis for the damages sought. First, the Court
found that Plaintiff was not entitled in the difference between the offer price and the purchase
price for the one Haring piece that was subsequently sold given that Plaintiff would be entitled
to, at most, the commission from such sale. Second, the Court found that Plaintiff failed to
establish to a reasonable degree of certainty the “agreed upon” commission rate. Indeed, none of
the evidence offered indicated any discussion, much less agreement, on Plaintiff’s commission.
Third, Plaintiff sought $7,585,000 in principal damages, but the proposed findings only
requested a total amount of $5,185,000. Because it is Plaintiff’s burden to establish damages to a
reasonable degree of certainty, and because Plaintiff was given four opportunities to present its
claim to the Court, this Court recommended that no damages be awarded.
Plaintiff objected to this recommendation and its objections included some evidence
regarding commission rates. See ECF No. 97. On May 5, 2020, Judge Koeltl declined to adopt
my recommendation and recommitted the matter to me to permit the Plaintiff to offer further
evidence in support of its damages request. See ECF No. 101.
In the May 5, 2020 Memorandum Opinion & Order, Judge Koeltl concluded that “[t]here
was clearly a breach of contract.” Id. at 12. This Court is bound by that legal conclusion.
Accordingly, the Court further assumes that this contract included payment of a commission fee
regardless of whether the art was ultimately purchased. See Restatement (Second) of Contracts §
204 (Am. Law Inst. 1981) (“When the parties to a bargain sufficiently defined to be a contract
have not agreed with respect to a term which is essential to a determination of their rights and
duties, a term which is reasonable in the circumstances is supplied by the court.”); accord De
Graff v. McKesson & Robbins, Inc., 31 NY.2d 862, 869 (1972).

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Accordingly, Plaintiff is given another opportunity – by this Court’s count, its sixth – to
establish to a reasonable degree of certainty the missing term in its contract with the Defendants
and establish Plaintiff’s entitlement to any damages.
It is hereby ORDERED that, by no later than June 12, 2020, Plaintiff shall supplement
the record by filing:
(1) any admissible evidence reflecting an agreement with the Defendants as to the
commission rate;
(2) any admissible evidence on the usual and customary commission rate for this type of
agreement;
(3) any admissible evidence that Plaintiff was “ready, willing and able” to perform under
the contract;
(4) any admissible evidence of Plaintiff’s effort to mitigate damages. The legal
consequences, if any, related to mitigation;
(5) any legal basis for finding that Defendants are obligated to pay a commission even if
the art remains in the custody of the broker, possession of the seller, or both;
(6) any legal basis for finding that the defendants owe Plaintiff the difference between
the sale price agreed upon between the parties for a piece of art and the subsequent
(lesser) actual sale price of that piece of art between non-parties; and
(7) any other admissible evidence and/or legal basis supporting a finding of Plaintiff’s
entitlement to the amount of damages sought under the specific theories of recovery
put forth by Plaintiff.
The Court hereby notifies the parties that it may conduct this inquest based solely

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upon their written submissions. See Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir.
1991); Fustok v. ContiCommodity Servs. Inc., 873 F.2d 38, 40 (2d Cir. 1989).
SO ORDERED.

DATED:

May 29, 2020
New York, New York

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