Confidentiality Agreements Between Art Buyers and Art Galleries are Not Bulletproof
Many art buyers operate under the belief that a confidentiality agreement with an art gallery is a bulletproof mechanism to preserve the secrecy of their identities. A recent case by a New York Surrogate Court shows that this is a misperception because the law is above these private agreements.
In Lumerman v. Tunick et. al., No. 0489/05, 2008 WL 920666 (Surr. Co., Westchester Co. Mar. 14, 2008), a New York Surrogate Court ruled that Sotheby’s, Inc. (“Sotheby’s”) and Christie’s, Inc. (“Christie’s”) had to turn over information concerning the identities of buyers, despite confidentiality agreements with the buyers.
At issue in the case were over 200 of the decedent’s artworks by the famous artist Willem de Kooning. In May 2007, the decedent’s first wife and three daughters (over the objection of the second wife) sued to recover certain of these artworks that had been consigned to Christie’s and Sotheby’s prior to and shortly after the decedent’s death. Among others, the lawsuit named Christie’s, Sotheby’s, and “John Does” as defendants. The John Does referred to persons and/or entities who purchased the subject items from Christie’s and Sotheby’s (the “buyers”). After Christie’s and Sotheby’s refused to identify during discovery the names of these buyers, the plaintiffs filed a motion to compel. Both Christie’s and Sotheby’s opposed plaintiffs’ motion on the basis that confidentiality agreements were in place with the buyers which prevented them from disclosing the buyers’ identities. Christie’s and Sotheby’s also claimed that having to disclose this information would damage their trust-based relationships, threaten the privacy and safety of the buyers, and harm their reputation and business advantage. Christie’s and Sotheby’s also argued that the plaintiffs should first be required to prove that they are entitled to the return of the artworks.
The court rejected all of these arguments, and compelled Christie’s and Sotheby’s to turn over the information requested about the buyer’s identities. The court found that: (i) New York’s C.P.L.R. § 3101, which requires “full disclosure of all evidence material and necessary to the prosecution or defenses of action,” was met because without this information, the plaintiffs would not be able to maintain an action against the buyers - i.e., satisfy New York’s demand and refusal rule; (ii) denying the requested disclosure would increase the chance that the art would be re-sold or moved beyond the jurisdiction of the court; and (iii) proving ownership first would be a waste of judicial resources, because the plaintiffs would still need to know who was in possession of the artworks to satisfy New York’s demand and refusal rule.
This case presents an important reason why clients should understand that a confidentiality agreement is not impregnable and its enforceability may one day be subject to the discretion of a court.
