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Phoenix Ancient Art v. J. Paul Getty Trust

United States District Court, S.D. New York

March 29, 2018

PHOENIX ANCIENT ART, S.A., PETRARCH LLC a/k/a ELECTRUM, and REGULUS INTERNATIONAL CAPITAL CORP., Plaintiffs,
v.
J. PAUL GETTY TRUST, J. PAUL GETTY MUSEUM, TIMOTHY POTTS, LIVIO RUSSO, and ARTURO RUSSO, Defendants.

          OPINION AND ORDER

          EDGARDO RAMOS, U.S.D.J.

         Phoenix Ancient Art, S.A. (“Phoenix”), Petrarch LLC A/K/A Electrum (“Electrum”), and Regulus International Capital Corp. (“Regulus”) bring this action against the J. Paul Getty Trust, the J. Paul Getty Museum (the “Getty”), and Timothy Potts (collectively, the “Getty Defendants”), and Livio Russo and Arturo Russo (collectively, the “Russo Defendants”), alleging misappropriation, fraud, breach of and interference with a contract, interference with prospective business relationships, and conversion. Pending before the Court are: (1) the Getty Defendants' motion to dismiss Counts Two through Ten of the Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), Doc. 50; and (2) the Russo Defendants' motion to dismiss the Complaint for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) and for failure to state a claim, Doc. 45. For the reasons discussed below, the Getty Defendants' motion is GRANTED in part and DENIED in part, and the Russo Defendants' motion is GRANTED.

         I. Factual Background[1]

         Phoenix is a world-leading dealer in rare and exquisite antiquities, and is managed by brothers Ali and Hicham Aboutaam. Id. ¶ 4. Electrum, a New York limited liability company, is the exclusive agent for Phoenix in the United States. Id. ¶ 7. Plaintiffs' claims stem from their efforts to broker the sale of the Torlonia family's collection of approximately 620 Roman and Greek sculptures (the “Torlonia Collection”), which is known as one of the world's most significant collections of classical sculptures and is valued in the billions of dollars. See Complaint (“Compl.”) ¶¶ 43, 49. Prince Alessandro Torlonia (the “Prince”) is responsible for the assets of the Torlonia family, including the sculptures. Id. ¶ 42. Since the 1960s, the Torlonia family kept the collection out of public view in its various palaces in Rome, causing an outcry from experts who called for the collection to be confiscated by the Italian government. Id. ¶ 45. The family long resisted government attempts to return the collection to the public and kept the collection out of public view. Id. ¶ 46.

         At some point in time, the Torlonia family decided to attempt to sell the collection, and the Russo Defendants became involved in their efforts to find a private buyer.[2] See Id. ¶ 48. The Russo Defendants are world-renowned ancient coin collectors and engage in multiple high-dollar coin auctions every year. Id. ¶ 47. The Aboutaam family also collects ancient coins. Id. ¶ 48. Through this mutual interest, the Russo Defendants contacted Ali Aboutaam and told him about the Torlonia sculptures that were available for sale. Id. Plaintiffs allege that the Russo Defendants told Electrum that they believed that only Electrum could find a buyer for the Torlonia Collection. Id. ¶ 50. The Russo Defendants provided Ali Aboutaam with an 1885 catalogue of the Torlonia sculptures. Id. ¶ 51. The catalogue was over 130 years old, included low-resolution black-and-white pictures and abbreviated descriptions only, and did not provide sufficient details regarding current status, condition, market value, restoration, or attributions regarding chain of title for the works of art. Id. After Hicham Aboutaam traveled to Rome to view the sculptures and met with Livio Russo and the Prince, Electrum immediately began working to find a buyer. Id. ¶ 52.

         Beginning in the summer of 2010, Electrum painstakingly catalogued the Torlonia collection, took thousands of new photographs of the sculptures, and translated supporting documents from Italian to English to support the provenance of the collection in order to prepare it for sale. Id. ¶ 53-54. Plaintiffs allege that at all times they kept the contents of their catalogue and research under reasonable security measures. Id. ¶ 54. Over the next several years, Electrum continued its efforts in evaluating the Torlonia Collection, cultivating its relationships with Italian authorities, and attempting to find a buyer. Id. ¶ 55.

         In the spring of 2013, Electrum invited Timothy Potts, the director of the Getty Museum, to visit their New York gallery. Id. ¶¶ 13, 56. The Getty Museum is the richest museum in the world, with an endowment that exceeds $4 billion. Id. ¶¶ 10. Electrum told Potts that it was cataloguing a significant collection that could be of interest to the Getty, and they discussed the substantial work Electrum had undertaken in preparing the collection for sale. Id. ¶ 57. At that time, Electrum did not tell Potts that the collection involved the Torlonia sculptures. Id. According to Plaintiffs, Potts was excited about the collection and expressed that the Getty would be very interested in a deal through which the Getty could acquire an interest in it. Id. ¶ 58. After Potts orally agreed to keep the opportunity in the strictest confidence-and agreed to later document that oral promise in writing after consulting with the Getty's lawyers-Electrum shared that the collection was the Torlonia sculptures and showed Potts thousands of photographs it had taken of the collection. Id. ¶ 60-61.

         On July 12, 2013, Potts, on behalf of the Getty, signed a Non-Disclosure and Non-Circumvention Agreement (the “NDNCA”) with Electrum and Phoenix. Id. ¶ 62. Potts and the Getty agreed to “receive disclosure of confidential and proprietary information from Electrum pursuant to the terms of [that] agreement for the purpose of evaluating a possible transaction” and “agreed to maintain the confidentiality of the disclosed information.” Id. ¶ 64. Potts and the Getty also agreed to “take all reasonable measures to protect the secrecy of and avoid disclosure or use of the Confidential Information” and to “take at least those measures that [the Getty] takes to protect its own most highly confidential information.” Id. ¶ 65. Additionally, “[a]s an express prior condition to its receipt of information” regarding the Torlonia sculptures, Potts and the Getty agreed that they would “not contact either directly or indirectly” the Torlonia family or any party representing or related to the Torlonia family regarding the Torlonia sculptures, except exclusively through Electrum and Phoenix. Id. ¶ 67. The Getty further undertook the obligation to return to Electrum and Phoenix “all originals and copies of Confidential Information upon request.” Id. ¶ 68. The NDNCA did not provide terms for compensation to Phoenix and Electrum. See id.; Doc. 74, Ex. A.

         On November 8, 2013, Potts met with Electrum and Regulus in New York. Id. ¶ 70. Regulus is a Delaware corporation that agreed to participate in a cooperative venture with Electrum to assist in the sale or transfer of the Torlonia Collection. Id. ¶ 8. Electrum and Regulus told Potts that Regulus could advise the Getty regarding trade-secret deal structures for the Torlonia Collection that would allow foreigners to purchase rights to important cultural collections in Italy. Id. ¶ 70. Throughout the first part of 2014, Plaintiffs continued facilitating a possible transaction between the Getty and the Torlonia family, serving as a conduit for communications, organizing visits by Potts to Italy to view the sculptures, and arranging meetings with Potts and members of the Torlonia family. See id. ¶¶ 72-91. Throughout this time, the Prince preferred to receive correspondence through the Russo Defendants. Id. ¶ 78. Accordingly, Electrum emailed the Russo Defendants a copy of the NDNCA no later than April 7, 2014. Id. ¶ 83. Plaintiffs, however, assert that the Russo Defendants and the Torlonia family had been informed of the NDNCA prior to that date. Id.

         On June 27, 2014, Potts and the Getty requested that Plaintiffs send them the original version of the catalogue of sculptures that Electrum had prepared, and, relying on the Getty's confidentiality obligations set forth in the NDNCA, Plaintiffs did as requested. Id. ¶ 92. After receiving the catalogue, however, Potts and the Getty suddenly stopped communicating with Plaintiffs regarding the Torlonia Collection. Id. ¶ 93. By February 19, 2015, the Prince became concerned by the Getty's apparent loss of interest and stated that he was considering gifting the collection to the Italian authorities in exchange for tax-related benefits. Id. ¶ 94. When Plaintiffs conveyed the Prince's concerns to Potts and the Getty, the Getty represented that it had decided to decline the opportunity to pursue purchasing the collection. Id. ¶ 95. The Getty claimed that applicable Italian law made acquiring the collection unappealing. Id. ¶ 96. According to Plaintiffs, the Getty's concerns were borne out of past conflicts with the Italian government involving art purchased without proper authentication of source. Id. ¶ 97. The Getty was also concerned that the Italian government would not allow exportation of the sculptures, given their value to the Italian public. Id. ¶ 98.

         Plaintiffs, however, claim that they had already developed a deal structure that would alleviate the Getty's concerns and the political risk of a transaction. Id. ¶ 99-101. In an attempt to salvage the negotiations between the Getty and the Torlonia family, on March 5, 2015, Plaintiffs told the Getty that they believed the potential sales price for the sculptures had decreased. Id. ¶ 102. Plaintiffs now estimated that the cost of the sculptures was between $350 million and $550 million, and proposed a deal structure involving a commission for Plaintiffs of 22% of the purchase price. Id. ¶ 103. Stephen Clark, general counsel for the Getty, expressed interest in Plaintiffs' proposal and agreed to discuss it further. Id. ¶ 104. Plaintiffs claim that by March 24, 2015, the Getty had once again expressed a lack of interest in the Torlonia Collection and claimed that the proposal did not make sense. Id. ¶ 105.

         Plaintiffs proposed another deal structure that would decrease political risk to the Getty in June 2015, and Electrum met with Potts and forwarded additional information-including regarding the Prince's willingness to further decrease the purchase price-in July 2015. Id. 108- 111. Shortly thereafter, however, Potts separately met with Livio Russo and the Prince's grandson in Los Angeles to discuss the sale of the Torlonia Collection. Id. ¶ 113. Plaintiffs did not learn of this meeting until well after it had occurred. Id. ¶ 116.

         Plaintiffs assert that by the fall of 2015, all of the Defendants and the Prince had ceased discussing the sale of the Torlonia Collection with Plaintiffs. Id. ¶ 117. Through the remainder of 2015 and the first half of 2016, Plaintiffs claim that the Defendants conspired without Plaintiffs' knowledge or involvement regarding the sale or transfer of the sculptures to the Getty. Id. ¶ 119. Specifically, they assert that the Getty Defendants and the Russo Defendants met and communicated in violation of the NDNCA in an attempt to cut Plaintiffs out of the deal so they would not have to pay Plaintiffs a commission. Id. ¶ 120.

         In March 2016, the New York Times reported that the Italian Ministry of Culture had signed an agreement with the Torlonia Foundation to display the Torlonia sculptures in Europe and the United States, with the intent of “finding a new permanent home for the collection.” Id. ¶ 122-123. Salvatore Settis, a long-term former employee of the Getty, was selected to be the historian and curator of the exhibition. Id. ¶ 124. Plaintiffs assert that the structure of the final agreement between the Ministry of Culture and the Torlonia Foundation was essentially the same as the structure Plaintiffs had proposed for a deal between the Getty and the Torlonia Family. Id. ¶ 125, 128-133. After learning of the agreement, Plaintiffs attempted to schedule a call with the Getty, and in response to that request, Clark confirmed that Settis and Potts were actively discussing the possibility of exhibiting some of the sculptures at the Getty. Id. ¶ 127. Plaintiffs contend that such direct communication between Clark and Settis is a violation of the NDNCA. Id. ¶ 128. Plaintiffs also assert that various individuals have confirmed that the Getty violated the NDNCA throughout the time it was negotiating a potential deal through Plaintiffs. Id. ¶ 130- 136.

         On May 27, 2016, Arturo Russo met with Plaintiffs and told them that they should “forget” about any compensation regarding the Torlonia Collection because the Getty and the Torlonia Family were in direct contact. Id. ¶ 137. According to Plaintiffs, the Getty has denied that Plaintiffs are entitled to any compensation and has refused to return Plaintiffs' confidential information, in particular the catalogue and photographs of the Torlonia sculptures prepared by Electrum. Id. ¶ 139.

         II. Procedural History

         On January 12, 2017, Plaintiffs brought this action alleging the following claims: (1) breach of contract (against the Getty only); (2) breach of third-party beneficiary contract (against the Getty only); (3) breach of the implied covenant of good faith and fair dealing (against the Getty only); (4) tortious interference with contract (against Potts and the Russo Defendants only); (5) intentional interference with an advantageous business relationship; (6) fraud; (7) unjust enrichment; (8) unfair competition; (9) conversion; and (10) violation of the Defend Trade Secrets Act (“DTSA”). On May 4, 2017, the Getty Defendants moved to dismiss Counts Two through Ten on the ground that Plaintiffs' tort and quasi-contractual claims are duplicative of their breach of contract claim and that they otherwise fail on the merits. Doc. 50. The Russo Defendants also moved to dismiss, contending that the Court lacks personal jurisdiction over them and that Plaintiffs' claims against them fail on the merits. Doc. 45.

         On May 5, 2015, the Court granted Plaintiffs' request for limited jurisdictional discovery with respect to the Russo Defendants. Doc. 81, 20:14-15. Jurisdictional discovery has demonstrated that the Russo Defendants are shareholders in two ancient coin-related companies-Numismatica Ars Classica Ltd. (“NAC”) and Numismatica Ars Classica AG (“NAC AG”)-that make substantial sales to New York residents. Doc. 94 at 9. Livio and Arturo each own 20% in NAC and 17% and 28.5% respectively in NAC AG. Doc. 94, Ex. 1 at 39:7-23. Additionally, Arturo draws a salary of at least £40, 000 from NAC AG. Id. at 46:1-21.

         III. Legal Standard

         A. Rule 12(b)(2) Motion to Dismiss: Lack of Personal Jurisdiction

         “A plaintiff opposing a motion to dismiss under Rule 12(b)(2) for lack of personal jurisdiction has the burden of establishing that the court has jurisdiction over the defendant.” BHC Interim Funding, LP v. Bracewell & Patterson, LLP, No. 02 Civ. 4695 (LTS) (HBP), 2003 WL 21467544, at *1 (S.D.N.Y. June 25, 2003) (citing Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999)). To meet this burden, the plaintiff must plead facts sufficient for a prima facie showing of jurisdiction. Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001). The court construes all of the plaintiff's allegations as true and resolves all doubts in its favor. Casville Invs., Ltd. v. Kates, No. 12 Civ. 6968 (RA), 2013 WL 3465816, at *3 (S.D.N.Y. July 8, 2013) (citing Porina v. Marward Shipping Co., 521 F.3d 122, 126 (2d Cir. 2008); Martinez v. Bloomberg LP, 883 F.Supp.2d 511, 513 (S.D.N.Y. 2012)). “However, a plaintiff may not rely on conclusory statements without any supporting facts, as such allegations would lack the factual specificity necessary to confer jurisdiction.” Art Assure Ltd., LLC v. Artmentum GmbH, No. 14 Civ. 3756 (LGS), 2014 WL 5757545, at *2 (S.D.N.Y. Nov. 4, 2014) (internal quotation marks and citations omitted). As stated, courts may rely on additional materials outside the pleading when ruling on 12(b)(2) motions. John Hancock Prop. & Cas. Ins. Co. v. Universale Reinsurance Co., No. 91 Civ. 3644 (CES), 1992 WL 26765, at *1 n.1 (S.D.N.Y. Feb. 5, 1992); Darby Trading Inc. v. Shell Intern. Trading and Shipping Co. Ltd., 568 F.Supp.2d 329, 334 (S.D.N.Y. 2008). When the Court is confronted by a motion raising a combination of Rule 12(b) defenses, it will pass on the jurisdictional issues before considering whether a claim was stated by the complaint. See Darby Trading, 568 F.Supp.2d at 335; Yellow Page Sols. Inc. v. Bell Atl. Yellow Pages Co., No. 00 Civ. 5663 (MM), 2001 WL 1468168, at *3 (citing Rationis Enter., Inc. v. AEP/Borden Indus., 261 F.3d 264, 267-68 (2d Cir.2001)).

         B. Rule 12(b)(6) Motion to Dismiss: General Legal Standard

         Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Koch v. Christie's Int'l PLC, 699 F.3d 141, 145 (2d Cir. 2012). However, the Court is not required to credit “mere conclusory statements” or “[t]hreadbare recitals of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). If the plaintiff has not “nudged [his] claims across the line from conceivable to plausible, [the] complaint must be dismissed.” Twombly, 550 U.S. at 570.

         IV. Discussion

         A. Claims against the Getty Defendants

         1. Tort Claims

         The Getty Defendants seek dismissal of Plaintiffs' tort claims on the ground that they are duplicative of their breach of contract claim. Getty Defendants' Memorandum in Support of Motion to Dismiss (“Getty Defs.' Mem.”) at 10. The Getty Defendants also contend that Plaintiffs' tort claims fail on the merits. Id. at 15.

         Under New York law, “a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated.” Negrete v. Citibank, N.A., 187 F.Supp.3d 454, 471 (S.D.N.Y. 2016) (quoting Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, 389 (1987)). This legal duty “must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract.” Clark-Fitzpatrick, 70 N.Y.2d at 389. If an independent duty exists, “a plaintiff may maintain both tort and contract claims arising out of the same allegedly wrongful conduct.” Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 58 (2d Cir. 2012). “If, however, the basis of a party's claim is a breach of solely contractual obligations, such that the plaintiff is merely seeking to obtain the benefit of the contractual bargain through an action in tort, the claim is precluded as duplicative.” Id.

         Plaintiffs contend that their tort claims are not duplicative because the Getty Defendants engaged in wrongful conduct beyond breaching the NDNCA. Plaintiffs' Memorandum of Law in Opposition to the Getty Defendants' Motion to Dismiss (referred to as “Pls.' Mem.” in section IV.A. of this opinion) at 8. Plaintiffs' argument is premised on the theory that the Getty Defendants misappropriated Plaintiffs' services, benefits, and property by falsely representing that they intended to compensate Plaintiffs for facilitating a transaction involving the Torlonia Collection. Id. Because the NDNCA did not address compensation for facilitating a deal, Plaintiffs contend that the parties created legal relationships that, though related to the NDNCA, imposed legal duties that arose outside the NDNCA, and that the Getty Defendants violated those duties. Id. The Court addresses Plaintiffs' tort claims in turn.

         a. ...


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