MAFG Art Fund, LLC v. Gagosian

In May 2010, the MAFG Art Fund, LLC and MacAndrews & Forbes Group, LLC (collectively, MacAndrews) (plaintiffs) agreed to buy a sculpture by Jeff Koons entitled Popeye from Larry Gagosian and Gagosian Gallery, Inc. (collectively, Gagosian) (defendants). In the purchase agreement (MacAndrews agreement), MacAndrews agreed to pay $4 million for Popeye and intended to resell it for profit with Gagosian’s help. Gagosian did not acquire title to Popeye until June 2010, when Gagosian purchased Popeye from the Sonnabend Gallery, subject to a new purchase agreement (Sonnabend agreement). The terms of the Sonnabend agreement made it unprofitable for Gagosian to assist MacAndrews with the resale of Popeye. In April 2011, MacAndrews transferred to Gagosian several artworks, including its rights to Popeye, and about $4 million in cash. Gagosian gave MacAndrews a $3.6 million credit for a painting by Willem de Kooning and a $4.5 million credit for a Roy Lichtenstein sculpture. In exchange, Gagosian transferred to MacAndrews a steel sculpture by Richard Serra and other artworks. In June 2011, Gagosian notified MacAndrews that Popeye would not be completed until July 2012. Gagosian later sold the Lichtenstein for $4.8 million and the de Kooning for $3.5 million. MacAndrews sued Gagosian, bringing claims based on breach of contract, breach of fiduciary duty, fraudulent misrepresentation, breach of the covenant of good faith, and unjust enrichment. MacAndrews argued that the Sonnabend agreement amounted to a breach of the MacAndrews agreement because the Sonnabend agreement made it unprofitable for Gagosian to be involved with Popeye’s resale to others. MacAndrews also argued that Gagosian misrepresented the value of the artworks by Lichtenstein and de Kooning and that MacAndrews relied on Gagosian’s superior and unique knowledge of the art market. Gagosian moved to dismiss all claims.