Guest Post: Courts Find “Your Art Dealer is Not Your Friend”: Due Diligence Requirements for Purchasers of Artwork
Reprinted with permission from: Entertainment, Arts and Sports Law Journal, Summer 2015, Vol. 26, No. 2, published by the New York State Bar Association, One Elk Street, Albany, NY 12207.
Introduction
The largest art scandal of 2015 came unraveled just before the New Year, when Dmitry Rybolovlev was vacationing in St. Barth. Rybolovlev is a Russian billionaire and, as one might expect, an avid collector of art. The oligarch is particularly fond of Picasso, Van Gogh, Gauguin, Rothko, and Modigliani.[1]
Last December, while Rybolovlev was mingling with other guests over lunch at the Eden Resort, the polite conversation naturally turned to art. As the guests discussed the record high prices commanded by the secondary market for art, New York art dealer Sandy Heller blithely remarked that one of his clients had just sold a Modigliani painting to an undisclosed buyer.[2]
It was at this moment that Rybolovlev finally heard something that he had not heard before. Curious, Rybolovlev asked, “Which Modigliani?” and Heller responded that it was “Nu couché au cossin bleu” – one of Modigliani’s most celebrated erotic portraits of a reclining female nude.
Rybolovlev asked Heller the sale price of this particular Modigliani. After checking with the seller, Steve Cohen, Heller informed Rybolovlev that the painting had sold for $93 million.[3]
Unbeknownst to Heller, Rybolovlev was actually the “undisclosed” buyer of this very painting.
But, Rybolovlev had
paid not $93 million for it. Instead, he had paid $118 million – a markup of over $22 million – which included a 2% commission of $2.36 million for his art dealer, Yves Bouvier.
Rybolovlev returned to Monaco, where he resides, and filed a complaint against Bouvier, the Swiss art dealer with whom he had a relationship of over a decade.[4] (Bouvier, also a billionaire, also ran Luxembourg’s Le Freeport until recently.[5]).
The complaint alleges forgery and fraud. It characterizes Rybolovlev’s relationship with Bouvier as a friendship, within which Bouvier “enjoyed the absolute trust of the buyers and had sole responsibility to carry out the usual verifications, including concerning the price of the work.” Bouvier denies the charges, claiming that Rybolovlev owes him money for another transaction. In any event, Bouvier’s attorney clarified that his client and Rybolovlev are certainly not “friends.”[6]
To some degree, Bouvier’s attorney is correct. At least in New York, art galleries and brokers do not owe a fiduciary duty to collectors, no matter how longstanding or intimate their relationship.
In fact, a recent string of decisions in the state and federal courts of New York demonstrates that collectors must conduct due diligence not just to discern a work’s authenticity[7] but also to determine the market value before making a purchase – even if the purchase is from someone whom they trust.
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