Kohler v. Leslie Hindman, Inc.

In 1989, the Kohlers (plaintiffs) inherited a painting they believed was by Theodore Rousseau. They hired Leslie Hindman, Inc. (Hindman) (defendant) to sell it and signed a consignment agreement making Hindman their auction agent. This agreement bound Hindman to the auction-catalog sale conditions, which provided that works were sold as-is, absent any warranties. However, paragraph 14 of the agreement gave Hindman sole discretion to rescind any sale that might result in liability under a warranty of authenticity. Additionally, paragraph 10 of the agreement provided that if the Kohlers withdrew a painting from auction due to dubious authenticity, they had to pay Hindman 20 percent of the most recent estimated price. An agent for Richard Thune, a potential buyer, saw the painting at a preview and doubted its authenticity. The agent informed Thune and Hindman of his doubts, and Hindman contacted Thune, who said he was interested in the painting but wanted to independently authenticate it. Hindman and Thune verbally agreed that if Thune was the successful bidder, he could return the painting if an expert determined it was unauthentic. Hindman did not inform the Kohlers of this agreement. Thune bought the painting at auction and sent it to an expert, who determined that it was unauthentic. He then returned it. The Kohlers sued Hindman, arguing that the side agreement with Thune and the failure to inform them of the painting’s doubtful authenticity breached the consignment agreement. Both parties moved for summary judgment, and the district court ruled for Hindman. The Kohlers appealed.