The opinion of the court was delivered by: VICTOR MARRERO, District Judge
Plaintiff Carl M. Hessel ("Hessel") seeks a preliminary
injunction restraining and enjoining Christie's Inc. and John
Does 1-5*fn1 (collectively, "Christie's") from (1) selling
at auction on November 8, 2005 or otherwise, a painting by Jeff
Koons, titled "Saint Benedict" (the "Koons"); (2) selling at
auction on November 8, 2005*fn2 or otherwise, a painting by
Jean Michel Basquiat, titled "The Whole Livery Line" (the
"Basquiat"); and (3) selling at auction or otherwise an untitled painting by Damian Hirst (the "Hirst")
delivered by Hessel as collateral. (Order to Show Cause for
Preliminary Injunction and Temporary Restraining Order, dated
Nov. 1, 2005 ("Order to Show Cause"), at 2.) In the underlying
complaint, filed concurrently with the Order to Show Cause,
Hessel alleges that the parties entered into an oral contract for
Hessel to purchase the Koons and Basquiat based on his successful
bid for these paintings at an auction on May 11 and 12, 2004, but
that a dispute has arisen over the contract's terms, including
ownership, time remaining for payment, interest rate, storage
fees and remedies available for breach of the oral contract, such
as what Christie's may do with the Hirst painting that Hessel
pledged as collateral. The underlying complaint requests that the
Court issue declaratory and injunctive relief defining the rights
of the parties under the contract. By Order to Show Cause, Hessel
seeks a preliminary injunction to prevent Christie's from
proceeding with the auction of the paintings on November 8-9,
2005 before the Court can resolve the dispute. (Pl. Mem. at 2.).
On November 7, 2005, the Court heard oral argument on Hessel's
motion and ruled from the bench to deny the injunctive relief
requested. A review of the parties' pleadings and submissions reveals that
Hessel is unlikely to demonstrate success on the merits, nor is
the irreparable harm as great as Hessel claims. Moreover, the
balance of hardships does not tip decisively in Hessel's favor.
For the reasons stated at the oral argument and elaborated below,
Hessel's request for a preliminary injunction is denied.
On May 11 and 12, 2004, Christie's conducted an auction of
Post-War and Contemporary Art. (Declaration of Jennifer Zatorski,
dated Nov. 4, 2005 ("Zatorski Aff."), at 2 ¶ 4.) On May 11,
Hessel placed a bid of $1.5 million by telephone on the Koons
painting, and on May 12, he placed a bid of $600,000 on the
Basquiat painting. (Affirmation of Carl Hessel in Support of
Application for Restraining Order and Other Relief, dated Oct.
31, 2005 ("Hessel Aff."), at 2 ¶ 3.) Hessel was the highest
bidder for both paintings. (Zatorski Aff. at 3 ¶ 7.)
Hessel alleges that prior to the auction, he reviewed
Christie's website and saw only descriptions of the paintings and
estimates of their value. (Hessel Aff. at 1-2 ¶ 2.) According to
Hessel, the website contained no terms or conditions of sale. (Hessel Aff. at 1 ¶ 2.) Prior to the auction,
Hessel also contacted Christie's by telephone to inquire about
bidding by telephone and was told how to bid by telephone, but
was not informed of any terms or conditions of sale. (Verified
Complaint of Carl M. Hessel for Accounting; Declaratory and
Injunctive Relief, dated Oct. 31, 2005 ("Compl."), at 3 ¶ 10.)
Hessel also alleges that when he placed his bids by telephone, no
terms or conditions were mentioned to him. (Hessel Aff. at 2 ¶
2.)
Christie's, however, alleges that its website did contain terms
and conditions governing the auction. According to Jennifer
Zatorski, Business Director and Senior Vice President,
Impressionist, 20th Century and Contemporary Art at Christie's
("Zatorski"), the lower left-hand corner of the web pages that
contained the descriptions of the Koons and the Basquiat had the
words "Important Notice." (Zatorski Aff. at 2 ¶ 6.) When a viewer
clicks on the words "Important Notice," a notice appears,
stating, among other things, that "All terms and conditions
relating to the auction at which any property is offered for
sale, as well as information about how to bid, are set forth in
the catalogue for the auction at which the property is offered.
The catalogue for the auction at which the property is offered supercedes anything presented here. It is your
responsibility to check the catalogue in advance of the sale to
inform yourself of the terms applicable to the sale." (Zatorski
Aff. at 2 ¶ 6.) The full text of the "Important Notice" is
attached to the Zatorski Affidavit. (See Important Notice, Ex.
3 to Zatorski Aff.)
The printed catalogues for the Koons and Basquiat auction
contained a section called "Conditions of Sale." (See Excerpt
from Post-War and Contemporary Art catalogue, dated May 11, 2004,
pp. 208-209 ("Conditions of Sale"), attached as Ex. 1 to Zatorksi
Aff.)
*fn3 The Conditions of Sale contain various terms
governing contracts between Christie's and auction buyers. Among
other terms, the Conditions of Sale provide that:
1. the Conditions of Sale contain all terms on which
Christie's and the seller contract with the buyer
(See Conditions of Sale, first para.);
2. by bidding at auction the buyer agrees to be bound
by these terms (See Conditions of Sale, first
para.);
3. subject to the auctioneer's discretion, the
highest bidder accepted by the auctioneer will be the
buyer and the striking of his hammer marks the
acceptance of the highest bid and the conclusion of a contract for sale between the seller and the
buyer (See Conditions of Sale, 3(j));
4. the buyer agrees to pay the buyer's premium (a
commission) in addition to the bid price (See
Conditions of Sale, 4(a));
5. the buyer does not acquire title to the lot until
all amounts due are received in good cleared funds
(See Conditions of Sale, 4(b));
6. the buyer must pay the full amount due no later
than 4:30 p.m. on the seventh calendar day following
the sale (See Conditions of Sale, 4(b));
7. Christie's remedies if the buyer fails to make
payment in full within seven calendar days following
the sale include but are not limited to:
(a) charging interest at such rate as Christie's
reasonably decides,
(b) canceling the sale,
(c) reselling the property on such terms as
Christie's thinks fit,
(d) where several amounts are owed by the buyer on
different transactions, applying any amount paid to
discharge any amount owed from any particular
transaction, and
(e) exercising all rights and remedies of a person
holding security over property owned by the buyer to
the fullest extent permitted by the law of the place
where such property is located and retaining such
property as collateral for the buyer's obligations
(See Conditions of Sale at 4(f)); and
8. if Christie's resells the property as a remedy for
the buyer's breach, then the defaulting buyer is
liable for any deficiency as wells as all costs,
expenses, damages, legal fees and commissions and
premiums associated with both sales or otherwise
arising from the default (See Conditions of Sale at
4(f)).
Hessel alleges that at the time he bid for the Koons and
Basquiat paintings, he had over $1 million in cash and "believed" he had securities worth more than $2 million that he
would liquidate to pay for the paintings if he were the
successful bidder. (Compl. at 4 ¶ 16.) However, Hessel alleges
that he "later" discovered that the securities he intended to
liquidate to pay for the paintings could not be liquidated, "due
to the issuer's unexpected failure to comply with the United
States Securities Laws." (Compl. at 4 ¶ 16.)
*fn4 He
described himself as "in the difficult position of having
successfully purchased paintings that he desperately still wanted
to own, but without the immediate cash resources necessary to pay
for them." (Id.)
Hessel alleges that he first received invoices for the Koons
and the Basquiat on June 8, 2004. (Compl. at 4 ¶ 13.) Christie's
contends that the invoices were issued earlier approximately
three business days after the auction and were again sent to
Hessel on June 8, 2004. (Zatorski Aff. at 3 ¶ 8-9.) The invoices
indicated a total purchase price of $1,687,500 for the Koons and
$679,500 for the Basquiat. (See Invoices dated May 11, 2004 and
May 12, 2004 ("Invoices"), attached as Ex. 1 to Hessel Aff.) The
invoices indicated that the purchase price was the sum of the
final bid price plus a premium, as set forth in the Conditions of Sale. (See Invoices, attached as Ex. 1 to Hessel
Aff.) The Koons invoice was dated May 11, 2004 and stated that
payment was due May 18, 2004; the Basquiat invoice was dated May
12, 2004 and stated that payment was due May 19, 2004. (See
Invoices, attached as Ex. 1 to Hessel Aff.) The cover letter
accompanying the June 8, 2004 issuance of the invoices noted that
the invoices were past due. (See Cover Letter dated June 8,
2004, attached as Ex. 1 to Hessel Aff.) The invoices stated that
they were subject to the Conditions of Sale set forth in the
auction catalogue, that lots remaining on Christie's premises for
more than seven days following a sale will incur storage charges,
that Christie's may impose a 1.34% late charge*fn5 per month
if the buyer does not make payment in full in accordance with the
Conditions of Sale, and that title to the property does not pass
to the buyer until Christie's has collected payment in full from
the buyer. (See Invoices, attached as Ex. 1 to Hessel Aff.)
From June through July 2004, Hessel sent Christie's funds
totaling $1,003,750. (Compl. at 5 ¶ 18.) In June 2004, Hessel
asked his "personal friend" Oliver Gelmini ("Gelmini") to assist him in "working out the terms of an
acceptable postponement of Hessel's payment obligations to
Christie's." (Compl. at 5 ¶ 19.) According to Hessel, Christie's
advised Gelmini that Hessel could have more time to pay off the
balance. (Compl. at 5 ¶ 19). No further payments were made that
year. (See Account Statement dated November 3, 2005 ("Account
Statement"), attached to Zatorski Aff. as Ex. 19.)
In October 2004, Christie's requested that Hessel send the
Hirst painting as collateral, as well as $500,000 in funds wired
to Christie's account. (Zatorski Aff. at 4 ¶ 12.) On October 29,
2004, Christie's acknowledged that it received the Hirst painting
but had not yet received the $500,000. (See Email from Brett
Gorvy to Oliver Gelmini, dated Oct. 29, 2004 ("Oct. 29, 2004
Email"), attached as Ex. 8 to Zatorski Aff.) Christie's stated
that if it did not receive the $500,000 by October 31, 2004, it
would be forced to sell the Koons privately. (See id.)
In the Oct. 29, 2004 email, Christie's also reminded Hessel of
the accruing interest and attached an account statement. (See
id.) Hessel contends that this was the first time Christie's
ever attempted to impose interest. (See Hessel Aff. at 4 ¶ 11.)
In contrast, Christie's alleges that, consistent with its Conditions of Sale and its standard
practice, it began assessing default interest on the balance owed
by Hessel starting seven days after the auctions, at a rate of
16% per annum. (Zatorski Aff. at 3 ¶ 10.) According to
Christie's, the 16% rate takes into account that the purchaser is
in default, and that Christie's "does not willingly or knowingly
take on the credit risk of purchasers who fail to pay." (Zatorski
Aff. at 3-4 ¶ 10.)*fn6
On November 12, 2004, Christie's emailed Gelmini and stated
that it had received no response to its October 29 email, that it
had not received the $500,000, and that unless it received the
$500,000 by November 19, it would sell the Koons and Basquiat.
(See Email from Jacqueline Tran On Behalf of Brett Gorvy to
Oliver Gelmini, dated Nov. 12, 2004, attached as Ex. 3 to Hessel
Aff.). On November 15, 2004, Gelmini informed Christie's that
Hessel would pay in full at the "very beginning of December."
(See Email from Oliver Gelmini to Brett Gorvy, dated Nov. 15,
2004, attached as Ex. 9 to Zatorksi Aff.) However, when
Christie's asked for a precise payment date, Gelmini replied on November 24 that the money would not be available in December
after all, that he "can't promise that money will come at a
precise date," and authorized Christie's to sell the Koons by
stating: "I believe that I have no other choice than to tell you
that . . . we have to arrange for a private sell [sic] of the
Koons." (See Email Correspondence between Brett Gorvy and
Oliver Gelmini, dated Nov. 22-24, 2004, attached as Ex. 9 to
Hessel Aff.)
In a November 25, 2004 email to Christie's, Gelmini then said
that he was "sorry to give you such an answer," that he could not
promise when the money would be available, but that his "best
shot" would be January 27 and February 10, 2005. The email also
stated, "If you agree to wait and if we can keep interest rates
low, we can maybe send small amounts throughout this time."
(See Email from Oliver Gelmini to Brett Gorvy, dated Nov. 25,
2004, attached as Ex. 8 to Affirmation of Oliver Gelmini in
Support of Application for Temporary Restraining Order and Other
Relief, dated Oct. 27, 2005 ("Gelmini Aff.").)
Hessel alleges that he "assumed" that Christie's "agreed to
[his] offer by lowering its interest rate and postpone [sic]
their collection actions, as a result of Mr. Gelmini's
correspondence." (See Hessel Aff. at 6 ¶¶ 17-18). He states between March 4 and March 31, 2005, "in reliance on"
this agreement, he sent an additional total of $195,000 to
Christie's. (See Hessel Aff. at 6 ¶ 18.) Prior to sending this
money, however, several events happened. First, Zatorski alleges
that in December 2004 she met with Hessel, who stated that he
could not pay until the end of February 2005. (Se Zatorksi Aff.
at 5 ¶ 15.). Second, on January 3, 2005, Christie's sent Hessel a
letter stating that it was "formal notice" that Hessel was in
default of his obligations to pay the full purchase price under
the Conditions of Sale and that it was a "formal demand" for
payment of all amounts due as set forth on the attached
spreadsheet, by January 26, 2005 or else Christie's would
exercise its rights. (See Zatorski Aff. at 5 ¶ 18; Letter to
Carl Hessel from Christie's, dated Jan. 3, 2005, attached as Ex.
10 to Zatorski Aff.). Third, on February 25, 2005, Christie's
sent another letter to Hessel stating that it had not received
full payment as required by the Conditions of Sale, that the
letter constituted "final notice" to Hessel that he was in
default of his obligations and that if full payment was not
received by March 7, 2005 Christie's would exercise its rights.
(See Zatorski Aff. at 5 ¶ 18; Letter to Carl Hessel from Christie's, dated Feb. 25, 2005, attached as Ex.
11 to Zatorski Aff.)*fn7
From March 4 to March 31, 2005, Hessel made additional payments
totaling $195,000. (See Hessel Aff. at 6 ¶ 18; "Account
Statement" attached to Zatorski Aff. as Ex. 19.) No further
payments were made.
Hessel alleges that he had no further contact with Christie's
until September 2, 2005, when he received an email informing him
that because he had not made full payment, Christie's intended to
sell both the Koons and Basquiat at auction on November 8 and 9,
2005. (See Hessel Aff. at 7 ¶ 21; Email from Jennifer ...