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Gowen v. Helly Nahmad Gallery, Inc.

Supreme Court, New York County

May 8, 2018

Geore Gowen as LIMITED ANCILLARY ADMINISTRATOR OF THE ESTATE OF OSCAR STETTINER, Plaintiff,
v.
Helly Nahmad Gallery, Inc., DAVID NAHMAD, HELLY NAHMAD, INTERNATIONAL ART CENTER, S.A., Defendants.

          Attorneys for Plaintiffs: Landrigan and Aurnou, LLP.

          Joel M. Aurnou, Esq. Phillip C. Landrigan, Esq. Attorneys for Defendant: Aaron Richard Golub, Esquire, P.C.

          Nehemiah S. Glanc, Esq. Aaron Richard Golub, Esq. Russell I. Zwerin, Esq.

          Eileen Bransten, J.

         Defendants move to dismiss the complaint based upon CPLR 3211(a)(1), CPLR 3211(a)(2), CPLR 3211(a)(3), CPLR 3211(a)(4), CPLR 3211(a)(5), CPLR 3211(a)(7), CPLR 3211(a)(8), CPLR 3211(a)(10), CPLR 327 (forum non conveniens), CPLR 1001 and 1003, CPLR 3025, and CPLR 306-b.

         Defendants further move to have this court take judicial notice of foreign laws pursuant to CPLR 4511.

         I. Background [1]

         This is a case involving Amadeo Modigliani's Seated Man with a Cane, 1918 ("the Painting"), a painting that was allegedly taken by the Nazis and was lost for over a half-century. See Amen. Comp. ¶¶1, 3, 34-58. This action is brought by George Gowen as the Ancillary Administrator for the Estate of Oscar Stettiner, the original owner of the painting. Id. at ¶4.

         A. Historical Background

         Oscar Stettiner was a Jewish art dealer who both lived and worked in Paris, France in the 1930's. Amen. Comp. ¶38. The Painting was part of Oscar Stettiner's private collection. Id. at ¶¶ 38-40.

         Commencing in 1933 and lasting until their defeat in 1945, the Nazi Reich enacted laws which confiscated the possessions of Jewish persons in occupied territory. Amen. Comp. ¶¶ 34-37. In 1939, as the Nazi's advanced toward France, Oscar Stettiner fled his Paris home, leaving behind many possessions, including the Painting. Id. at ¶42. He took up residence at a home he owned in La Force, Dordogne, France, this area remained unoccupied by the Nazis through the end of World War II. Id. at ¶43.

         During the period of the Nazi occupation of Paris, possessions which had belonged to Jewish individuals were assigned to a Temporary Administrator for auction. Amen. Comp at ¶¶ 47, 48. Oscar Stettiner's property, including the Painting, was taken into custody by Marcel Philippon who was appointed to be the Temporary Minister of Oscar Stettiner's Parisian Estate. Id. at ¶49. Marcel Philippon held four public auctions in 1943 and 1944; the Painting was sold at one of these auctions on July 3, 1944. Amen. Comp. at ¶¶ 50-51.

         In 1946, forced sales of property by the Nazi regime were declared null and void; Oscar Stettiner is alleged to have obtained an order granting the return of the Painting from the courts of France on July 31, 1946. Id. at ¶52. Subsequent to obtaining that Order Oscar Stettiner, and his heirs, attempted to locate the Painting to no avail. Id. at ¶¶ 57-58. In 1948, Oscar Stettiner died at his home in La Force, leaving behind a wife and two children without having discovered the location of the Painting. [2] Id. at ¶¶ 43, 44.

          B. The Elusiveness of the Painting and Ownership by IAC

         In 1930, Oscar Stettiner exhibited the Painting at the Venice Biennale. [3] The evidence of ownership as catalogued by the Venice Bienale provides the basis for Stettiner's claim of title to the Painting. See id at ¶58. Despite the reasonable efforts of Oscar Stettiner and his heirs to locate the Painting, it eluded them for years. Amen. Comp. ¶57-58 During a 1996 auction at Christies in London, the Painting was misidentified as being a different painting, with an owner other than Stettiner, where it was bought by Defendant International Art Center. See id. at ¶59. At the 1996 auction, the Painting was identified as having been sold by an Anoynmous seller between 1940 and 1945 to a J. Livengood in Paris and "thence by descent to the present owners". Amen. Comp. ¶62.

         C. Discovery of the Painting by Oscar Stettiner's Heir

         Between 2005-2006, the Defendants exhibited the painting at Defendant Helly Nahmad Gallery. In 2008, the Painting was offered at auction at Sotheby's in New York City. Id. at ¶¶64-67. After failing to sell the Painting at the 2008 auction, Defendants purportedly moved the painting to a warehouse in Switzerland. [4] See id at ¶70. On February 28, 2011, and again on March 29, 2011, Phillippe Maestracci, a French resident and sole heir to the Estate of Oscar Stettiner, wrote the Defendants through counsel demanding the return of the Painting. See id ¶72-73. The Defendants did not respond to this demand. Id. at ¶74. Thereafter, Philippe Maestracci commenced an action in the Southern District of New York for the return of the Painting. Id. at ¶75. It was during the discovery phase of the federal action that International Art Center was revealed to be the owner of the Painting, jeopardizing diversity jurisdiction. Id. at ¶76. Maestracci then withdrew the federal action without prejudice. Id. at ¶78. In 2014, the Plaintiff commenced the present action seeking the return of the Painting. Id. at ¶¶79-80.

         II. Discussion

         Given the complexity of the issues involved in this decision the court has subdivided this opinion into a number of sections. Section A addresses the general legal standards of a motion to dismiss pursuant to CPLR 3211 and, given the extensive documentary evidence submitted by both parties, the heightened standards of CPLR 3211(a)(1). Section B of this decision addresses Defendants' argument that there is no personal jurisdiction over Defendants Davide Nahmad and International Art Center pursuant to CPLR 3211(a)(8). Section C examines the amendment of the complaint without first seeking leave of the court. Section D discusses the Defendants' argument that there is no subject matter jurisdiction over the Painting pursuant to CPLR 3211(a)(2). Section E addresses a later filed turnover proceeding, pending before the Surrogate Court of New York County, wherein Plaintiff George Gowen, in his capacity as limited ancillary administrator of the estate of Oscar Stettiner, and Defendant International Art Center are also parties. Section F discusses the Defendants argument that there are missing, necessary parties, pursuant to CPLR 3211(a)(10). Section G addresses a related argument made by the Defendants that the Plaintiff lacks capacity to assert claims under CPLR 3211(a)(3). Section H then examines the general argument that the Plaintiff has failed to state claims for Declaratory Judgment, Conversion, and Replevin under CPLR 3211(a)(7). Section I discusses the applicable statute of limitations. Section J addresses the Defendants' foreign affairs arguments including the Act of State Doctrine, the principle of international comity, the conflict of laws, and the effect of judicially noticing foreign law pursuant to CPLR 4511. Section K examines the Defendants' argument that New York is an inconvenient forum. Last of all, Section L addresses the Defendants' arguments raised under the doctrine of champerty.

         A. Legal Standards of CPLR 3211 [5]

         The Court, recognizing the multiple provisions under CPLR 3211 by which the Defendants seek dismissal, notes that the general legal standard of a motion to dismiss brought under CPLR 3211 is to afford the pleading a liberal construction, accepting the facts as alleged to be true, and according the Plaintiff the benefit of every possible favorable inference. See Leon v. Martinez, 84 N.Y.2d 83, 87-88 (1994). Under CPLR 3211(a)(1), even where documentary evidence seems to controvert the pleadings, dismissal is warranted only where that documentary evidence conclusively establishes a defense to the asserted claims as a matter of law. Id. (emphasis added). The caveat to this treatment, however, is that the allegations can neither consist of bare legal conclusions, nor can the factual claims be flatly contradicted by documentary evidence. See Myers v. Schneiderman, 30 N.Y.3d 1, 11 (2017) reargument denied, 30 N.Y.3d 1009 (2017) citing Simkin v Blank, 19 N.Y.3d 46, 52 (2012).

         These standards, which govern the favorable treatment given to the complaint, underlie this Court's consideration as to each of the Defendants' arguments. Given the vast number of exhibits proffered by both parties, and the need to address this documentary evidence throughout, this Court also considers the standard set forth under CPLR 3211(a)(1), wherein documentary evidence conclusively establishes a defense as a matter of law, to underlie each of its considerations.

         B. CPLR 3211(a)(8) - Personal Jurisdiction over the Defendants [6]

         Defendants International Art Center and Davide Nahmad argue that this court lacks personal jurisdiction over them as they are neither residents nor domiciliaries of New York nor have they conducted business in New York sufficient to establish personal jurisdiction over them. Defendant Davide Nahmad, in particular, states he does not have a residence in New York, does not conduct business in New York, and was not served properly through an affidavit. The court initially notes that this is not conclusive documentary evidence warranting dismissal under CPLR 3211(a)(1). See generally David Nahmad Aff; see also Tsimerman v. Janoff, 40 A.D.3d 242, 242-243 (1st Dep't 2007) (holding affidavits do not constitute conclusive documentary evidence).

         Personal jurisdiction is conveyed over a Defendant under CPLR 302. Here Plaintiff argues that CPLR 302(a)(1) conveys personal jurisdiction over the Defendants by virtue of their conducting business in the state of New York. Plaintiff further argues that, under CPLR 302(a)(2), personal jurisdiction is also acquired over the Defendants through their committing a tortious act in the state of New York.

         As to Defendant Davide Nahmad, specifically, the Plaintiff argues that personal jurisdiction is acquired by and through alleged alter egos, Defendants International Art Center and Helly Nahmad Galleries. See Amen. Comp. ¶18-21. Aurnou 2018 Affirm. Ex. 12 (NYSCEF Doc. No. 1620) (Sotheby's Email); Aurnou 2016 Affirm ¶¶33-35 (NYSCEF Doc. Nos. 1621 and 1655) (also annexed to the 2018 affirmation as Ex. 13); Aurnou 2018 Affirm. Ex. 24 (NYSCEF Doc. No. 1633) (a New York Times article quoting David Nahmad as having said "the International Art Center is me personally"... "it's David Nahmad").

         In answering the question of personal jurisdiction, this Court will first address the issue of whether it has acquired personal jurisdiction over Defendant International Art Center. The Court will next address the issue of whether the Plaintiff has sufficiently pleaded whether International Art Center can be construed to be merely the alter ego of Davide Nahmad such that personal jurisdiction would be extended to them. The Court will then turn to the Plaintiff's second allegation of alter ego, namely whether Davide Nahmad or International Art Center could be construed to be alter egos of Defendant Helly Nahmad Gallery, Inc., a New York corporation.

          i. Personal Jurisdiction over Defendant International Art Center

         As it concerned a related action before the Surrogate Court of New York County, the Appellate Division, First Department, stated "a court may exercise personal jurisdiction over any nondomiciliary who, in person or through an agent, transacts any business within the state or contracts anywhere to supply goods or services in the state or commits a tortious act within the state or regularly does or solicits business or engages in any other persistent course of conduct. The commission of some single or occasional acts of an agent in a state may be enough to subject a corporation to specific jurisdiction in that state with respect to suits relating to that in-state activity." Estate of Stettiner, 148 A.D.3d 184, 192 (1st Dep't 2017), leave to appeal denied sub nom. Matter of Estate of Stettiner, 30 N.Y.3d 907 (2017) (emphasis added). The appellate division found that personal jurisdiction existed over International Art Center by virtue of its having offered the Painting for sale at Sotheby's. See id at 192. The Appellate Division also found a basis for personal jurisdiction which may have been based on the allegations that "IAC transacted business in New York through the Nahmads at the gallery's office in Manhattan". Id.

         This Court acknowledges the Appellate Division's determination that there is personal jurisdiction over the International Art Center in the related probate matter and, independent of the Surrogate's Court, holds that personal jurisdiction is acquired against Defendant IAC under two grounds.

         Plaintiff first alleges that Defendant IAC transacts business in New York by and through Defendant Helly Nahmad and Helly Nahmad Gallery . See Amen. Comp. ¶¶17-19, 21 (alleging that the Helly Nahmad Gallery sells pieces of art of which Defendant IAC is the title holder). Under this theory of engaging the Helly Nahmad Gallery to sell artwork owned by IAC, jurisdiction is proper under CPLR 302(a)(1) where Defendant IAC has transacted business by and through its agents.

         Plaintiff next alleges that after the painting was exhibited at the Nahmads' gallery, and placed into New York's stream of commerce for auction, Oscar Stettiner's heir, Phillippe Maestracci, made a demand in New York for the Painting's return. See Amen Comp. ¶¶71-78. "[A] demand consists of an assertion that one is the owner of the property and that the one upon whom the demand is made has no rights in it other than allowed by the demander." See Feld v. Feld, 279 A.D.2d 393, 394-95 (1st Dep't 2001). This demand went unanswered which, under New York's law, gives rise to a cause of action such that personal jurisdiction would be acquired pursuant to CPLR 302(a)(2). See id. (noting that a refusal need not specifically use the word "refuse"); see also Solomon R. Guggenheim Foundation v. Lubell, 77 N.Y.2d 311, 316-317 (1991) (stating that, under New York Law if stolen property was sold to a good faith purchaser, a cause of action accrues when the owner of the stolen property makes a demand upon that purchaser for the return of that property); see also Estate of Stettiner, 148 A.D.3d at 191 (noting that an estate's assets can include a cause of action which arose in New York); Maestracci v. Helly Nahmad Gallery, Inc., 155 A.D.3d 401, 405 (1st Dep't 2017) (noting the earliest time Maestracci became aware of Defendant IAC as the title holder to the Painting was after the ownership interest was revealed during the discovery phase of the prior federal action). As a result, personal jurisdiction is acquired over Defendant International Art Center under the theory that it has committed tortious conduct in the State of New York.

         For the foregoing reasons, personal jurisdiction has been acquired over Defendant IAC under CPLR 302 by and through it's having conducted business in the state of New York and by the allegation that it has committed tortious conduct in the state of New York.

          ii. Alter Ego as a Basis for Personal Jurisdiction over Davide Nahmad

         Plaintiff alleges Defendant International Art Center is actually the alter ego of Defendant Davide Nahmad. In order to state a basis for alleging an alter ego such that the court can pierce the corporate veil, the complaining party must "establish that the owners of the entity, through their domination of it, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the party asserting the claim such that a court in equity will intervene." See Tap Holdings, LLC v. Orix Finance Corp., 109 A.D.3d 167, 174 (1st Dep't, 2013) citing Morris v. NY State Dep't of Taxation & Fin., 82 N.Y.2d 135 (1993); see also Baby Phat Holding Co., LLC v. Kellwood Co., 123 A.D.3d 405, 407 (2014) (noting that stating a claim under a theory of alter ego requires a demonstration of complete domination with respect to the transaction attacked).

         In determining whether the corporation was completely dominated by another, the Court may consider factors such as "the disregard of corporate formalities; inadequate capitalization; intermingling of funds; overlap in ownership, officers, directors and personnel; common office space or telephone numbers; the degree of discretion demonstrated by the alleged dominated corporation; whether the corporations are treated as independent profit centers; and the payment or guarantee of the corporation's debts by the dominating entity... [n]o one factor is dispositive." Tap Holdings, LLC, 109 A.D.3d at 174.

         In support of its contention that Defendant Davide Nahmad is the alter ego of IAC, Plaintiff has pleaded a number of facts supported by documentary evidence. These include the following:

1) Defendant, Davide Nahmad, is the principal of Defendant IAC. See Amen. Comp. ¶21(a); see also Amen. Comp. Exs. 7-8 (exhibit 7 is an article by WealthX, Exhibit 8 is a New York Times Article).
2) Davide Nahmad holds all of the shares of stock in Defendant International Art Center. See Aurnou 2016 Affirm Ex. 12 (NYSCEF Doc. 1667) (a Panamanian Stock Certificate stating Defendant IAC has 100 shares of stock and issuing all 100 shares of stock to Defendant Davide Nahmad).
3) Plaintiff believes Defendant IAC was formed by a law firm which has garnered a reputation for creating "shell corporations". See Amen. Comp. ¶21(c); see also Amen. Comp. Ex. 9 (a news article captioned "A Law Firm that Works with Oligarchs, Money Launderers, and Dictators) (emphasis added).
4) Plaintiff alleges that Defendant Davide Nahmad has used Defendant International Art Center to conceal his name, and thus the name of the owner of the Paintings, to perpetuate a wrong. See e.g. Aurnou 2018 Affirm. Ex. 24 (NYSCEF Doc. No. 1633) (a New York Times article quoting David Nahmad as having said "the International Art Center is me personally"... "it's David Nahmad").
5) Plaintiff also has a good faith belief that Defendant IAC fails to adhere to corporate formalities such as keeping regular books and records, fails to generate income, and fails to have an independent board of directors. See Amen. Comp. ¶21; see also Amen Comp. Exs. 7-8; Aurnou 2016 Affirm Ex. 12 (NYSCEF Doc. 1667) (a Panamanian Stock Certificate stating Defendant IAC has 100 shares of stock and issuing all 100 shares of stock to Defendant Davide Nahmad); Aurnou 2016 Affirm Ex. 13 (NSCEF Doc. No. 1668) (a letter exclusively signed by Defendant Davide Nahmad to the board of directors of International Art Center purporting to revoke powers of attorney to conduct corporate business).
6) Defendant Davide Nahmad is alleged to have placed paintings owned by IAC into New York's Stream of Commerce prior to the Painting at issue. See Amen. Comp. ¶¶ 23-26 (noting sales and profits of Paintings purportedly owned by IAC are given to Defendant Davide Nahmad, that Davide Nahmad has held himself out to be the owner of Paintings, and that purchases and sales of IAC's art have been orchestrated by Defendant Davide Nahmad); see also Aurnou 2018 Affirm. Ex. 24 (NYSCEF Doc. No. 1633).
7) Defendant International Art Center is alleged to be underfunded such that the Plaintiff would be unable to recover reasonable costs if he were to be successful on a claim. See Amen. Comp. ¶¶20-21, 23.
8) The Painting at issue is alleged to be held in Switzerland, but it is unclear under whose name the Painting is held. See e.g. Amen. Comp. ¶¶15, 19-20 (noting that Defendant Davide Nahmad conducts business on behalf of Defendatn IAC); Amen. Comp. ¶70 (noting the Painting is believed to have been moved to a Swiss bank account under David Nahmad's, or the other Defendants', names); Aurnou 2018 Affirm Ex. 24 (NYSCEF Doc. No. 1633) (a New York Times article quoting David Nahmad as having said "the International Art Center is me personally"... "it's David Nahmad").

         Under these grounds, the Court finds that it has acquired personal jurisdiction, pursuant to CPLR 302(a)(1), over Defendant Davide Nahmad by and through his conducting business vis-à-vis Defendant IAC and, in so doing, so perverting its corporate form such that this court cannot determine a substantial difference between the two Defendants. The Court also finds that it has acquired personal jurisdiction, pursuant to CPLR 302(a)(2), over Defendant Davide Nahmad by and through his alter ego, Defendant IAC, in committing tortious conduct in the State of New York for failure to respond to the demand for the Painting. See Solomon R. Guggenheim Foundation v. Lubell, 77 N.Y.2d 311, 316-317 (1991).

          iii. Alter Ego of ...


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