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FOXLEY v. SOTHEBY'S INC.

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


June 12, 1995

WILLIAM FOXLEY, Plaintiff, against SOTHEBY'S INC., Defendant.

The opinion of the court was delivered by: SHIRA A. SCHEINDLIN

OPINION

 SHIRA A. SCHEINDLIN, U.S.D.J.

 Pursuant to Local Rule 3(j), Defendant Sotheby's, Inc. seeks reargument of the Court's denial of its Motion to Dismiss the twelfth and fifteenth causes of action in the proposed Second Amended Complaint ("SAC"). Those causes of action allege (gross) negligence and/or bad faith with respect to two agreements the parties entered into whereby Foxley paid Sotheby's to appraise his art collection ("appraisal agreements").

 

The standard for moving to reargue is not in dispute.

 

The only proper ground on which a party may move to reargue an unambiguous order is that the court has overlooked [important facts or controlling law] which, had they been considered, might reasonably have altered the result reached by the court.

 Adams v. U.S., 686 F. Supp. 417, 418 (S.D.N.Y. 1988) (citations omitted); see also, Fulani v. Brady, 149 F.R.D. 501 (S.D.N.Y. 1993) ("local Rule 3(j) is to be narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been considered fully by the court"), aff'd, 35 F.3d 49 (2d Cir. 1994).

 This Court fully considered the law and facts of this case in its Memorandum Opinion issued on April 21, 1995 ("Mem. Op."). Familiarity with that opinion is assumed.

 Sotheby's argues that this Court erred in finding that "Sotheby's had a duty to authenticate the painting notwithstanding the explicit provisions in the appraisal agreements stating that Sotheby's was not [performing an] authentication." Defendant's Reply Brief at 2, (emphasis in original). Sotheby's contends, therefore, that it is immune from suit as a result of a disclaimer contained within each appraisal agreement. *fn1" This argument misconstrues the Memorandum Opinion. The Court does not, in its earlier opinion or in this one, require appraisals to include authentication of the article appraised. However, in the absence of an explicit disclaimer that the customer agreed that the appraisal fully assumes authenticity and other indicia of genuineness, liability may attach from an appraisal performed with gross negligence or bad faith. The assumption of authenticity for appraisal purposes can be rebutted by supportable allegations of gross negligence or bad faith, including fraudulent appraisal. This is particularly true where the appraiser, itself, was aware of significant doubt as to the authenticity of the work in question. *fn2"

 Perhaps of paramount importance, Sotheby's argues that Foxley failed to allege that Sotheby's knew or should have known the painting was inauthentic. Sotheby's Reply Brief at p. 3. The Second Amended Complaint, in fact, makes precisely that allegation. SAC at P 29. These claims are, therefore, supported by sufficient facts to withstand dismissal. Defendant's alleged knowledge of the painting's inauthenticity at the time of the appraisals, if proven at trial, necessarily gives rise to liability. Rendering an appraisal of the painting at $ 650,000 in the face of knowledge of inauthenticity would clearly constitute -- not merely gross negligence but also -- mala fides.

 Finally, Sotheby's arguments, taken at face value, would insulate all appraisals from any claims of gross negligence or fraud based on inauthenticity. Sotheby's argues that appraisals accompanied by disclaimers can never be negligently performed if the claim is based on the fact that the artwork in question is inauthentic. Defendant's concern that this holding will burden appraisers with a duty to authenticate is unfounded. Appraisals of inauthentic artwork do not give rise to liability where they explicitly disclaim authentication and where a plaintiff cannot demonstrate that the appraiser had, or should have had, knowledge of inauthenticity.

 Construing the complaint liberally, as required, *fn3" these two claims should not be dismissed. If, at the completion of discovery on this issue, plaintiff's allegations of gross negligence or bad faith are inadequate as a matter of law, the claims will then be dismissed.

 Because Sotheby's has not demonstrated that the Court overlooked any controlling law or material facts, the Motion to Reargue is denied.

 SO ORDERED:

 Shira A. Scheindlin

 U.S.D.J.

 Dated: New York, New York

 June 12, 1995


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