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HESSEL v. CHRISTIE'S INC.

November 10, 2005.

CARL M. HESSEL, a Swiss Citizen, Plaintiff,
v.
CHRISTIE'S INC., a New York corporation; and JOHN DOES 1-5, Defendants.



The opinion of the court was delivered by: VICTOR MARRERO, District Judge

DECISION AND ORDER

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.

I. BACKGROUND

  A. FACTS

  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 ...


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