Peter Friedman
Lawyer
Ruling Imagination: Law and Creativity
Buying art and then refusing to pay
The New York
Times on Friday ran a story explaining that “Sotheby’s has filed a $16.8 million lawsuit against the art collector and Internet entrepreneur Halsey Minor for refusing to pay the auction house for three paintings he bought in May” (including “The Peaceable Kingdom and the Leopard of Serenity” by Edward Hicks (left)). According to the story, “Diana Phillips, a spokeswoman for Sotheby’s, said that Mr. Minor had told the auction house that he had not paid for the works because hewas owed money by other parties and could not afford to.” Halsey strenuously objected to the suggestion he couldn’t afford the paintings, explaining instead that he refused to go through with the sale because he didn’t know at the time of the sale that Sotheby’s had an interest in maximizing the amount he would bid because the paintings’ seller owed $11.5 million to Sotheby’s. According to the Art Law Blog, Mr. Halsey explained:
Did they have an economic interest in the painting they were showing me privately and touting, or did they not? Who knows, I still may have paid $9.6 mm for the painting, but at least I would have been able to take their scholarship/marketing in context and with a grain of salt.
When a broker shows you a home and sells you on its merits and you find out later the broker owned the home, the law has been broken and the process has been tainted. I am going to bet that when they have to finally cough up the documents and stop spouting nonsense they will have served in the dual role of auctioneer and secret undisclosed owner. And all else will have been long forgotten.
There are several problems with Mr. Halsey’s position. The first is that generally, unless a broker (of art or real estate) is acting as an agent of the buyer, the broker owes no duties to the buyer. In other words, the broker does not have any duty to explain its financial interest in the transaction. In fact, generally when you buy from a broker you know the broker is acting on behalf of the seller and that the broker’s fee will be depend on how high the selling price is. In short, a broker acting on behalf of a seller very often, if not almost always, has an interest in maximizing the sale price. He’s a salesman, and we know how to take the words of a salesman. Sotheby’s may be high end, but the truth of the matter is that it’s full of salesman whose products happen to be very expensive art.
In addition, according to the Times story, the sale of the paintings by Sotheby’s attracted a lot of attention at the time because of the financial problems of the paintings’ owner. It doesn’t stretch the imagination to suppose, therefore, that Mr. Halsey knew at the time of the sale that Sotheby’s had an even greater interest in the painting than a broker’s fee based on a percentage of the sale price.
Of course, whether he has the money or not Mr. Halsey may be trying to back out of a deal for an asset that, like most other assets these days, isn’t what it was worth at the height of the market (not that long ago, but a time that is rapidly fading from memory).
September 30th, 2008 at 4:50 pm
Wait a minute.
I just noticed this and I need to point out a few problems with your analysis. First Sotheby’s works for ME and not the seller which is why I paid them $1 mm for just that painting. For that kind of money I am suppose to get their expertise and knowledge about the work of art. One would assume $1 mm would by their own name in the Provenance. We pay ungodly sums of money to these people so that they — not me — can keep track of these things. For Christ’s sake I live on the west coast, so how am i suppose to know about 1 NYT article on 1 day.
Lastly if I am going to pay Sotheby’s $1 mm to educate me why would I be expected to follow the trials and tribulations of every collector in the world who may one day sell me a painting. The one story in the new york times didn’t even say whether sotheby’s had 50 paintings or one painting to get there money back. They broke the law but the article in inconclusive.
Sotheby’s committed Fraud and will pay for it and its disappointing to see you allow them to get away with charging outrageous fees and then blaming lack on knowledge on the victim.
June 7th, 2010 at 9:31 am
[...] example of being told I was flat-out wrong occurred over a year and a half ago, when I wrote about Sotheby’s $16.8 million lawsuit against the art collector and Internet entrepre… for refusing to pay the auction house for three paintings he bought in May” (including The [...]