Source: https://fkks.com/news/statements-made-in-dispute-over-authenticity-of-art-are-not-covered-by-the
Timestamp: 2019-04-19 12:37:24+00:00

Document:
In the recent case of Boule v. Hutton, 328 F.3d 84 (2d Cir. 2003), the Second Circuit declined to extend the availability of the Lanham Act to claims for false representation outside the context of mainstream commercial advertising. The Court ruled that statements concerning the authenticity of works of art were not commercial speech within the purview of the Lanham Act. At the same time, however, the Court left open the possibility that statements made to reporters about a matter of public interest could constitute deceptive practices under New York’s General Business Law or unfair competition by disparagement.
The facts of the case, as well as its procedural history, are complicated. There have been three lengthy District Court opinions, one following a bench trial, as well as the above-cited decision by the Court of Appeals. After more than five years of litigation, the plaintiffs have been awarded about $7,000, but the case still may not be over, given the remand to the District Court for further proceedings on several of the plaintiffs’ legal theories.
Plaintiffs Claude and René Boule are French art collectors with a specialty in Russian Constructivism. Neither are professional art dealers. Claude is an art historian and René is a retired dentist.
In the early 1980s, the Boules purchased 176 paintings attributed to a Russian painter named Lazar Khidekel (“Lazar”) from a Russian art dealer. Given the severe restrictions at that time on the acquisition and exportation of Russian avant-garde art, the Boules were unable to obtain the provenance of the paintings, and did not take steps to confirm their authenticity.
Between 1988 and 1991, the Boules became acquainted with Lazar’s son and daughter-in-law, Mark and Regina Khidekel. At one point, the Boules and Mark and Regina agreed to present a joint exhibition of their respective collections of Lazar’s works. Later, when the Boules announced plans for an exhibition of Lazar’s works in Montreal, Mark and Regina expressed strong interest in attending and participating in the show.
In 1991, Mark agreed to sign certificates of authenticity of Lazar’s works for the Boules. For this service, Mark charged 2,500 FF for each certificate. Because Mark insisted on being paid in cash (he said he did not have a checking account) and the Boules only had 40,000 FF on hand, Mark signed certificates for only 16 of the works. Each certificate was signed after careful examination by Mark, and most included the statement: “I, Mark Khidekel, having examined the artwork shown to me measuring..., hereby confirm that it is the work of my father, Lazar Khidekel, and that it can be identified as a study.” Mark later denied having signed the certificates, testimony which the District Court rejected, concluding that Mark had lied under oath on this subject.
While Mark and Regina did not end up participating in the exhibitions of Lazar’s works held in different galleries in Canada during 1992 and 1993, they did not at that time question the authenticity of the works shown.
Verbal Statements. On several occasions Ingrid Hutton made statements to individual curators and dealers verbally questioning the authenticity of certain of Lazar’s works in the Boule’s collection.
Catalog Statement. The 1995 Hutton Galleries Catalog accompanying the showing of Lazar’s works owned by Mark and Regina included the statement: “We present for the first time anywhere the works of Lazar Markovich Khidekel.” The catalog also stated that neither Mark nor his family had ever sold or parted with any of his works.
Repudiation Letter. Mark, Regina and Ingrid Hutton sent a letter under the letterhead of Hutton Galleries to at least 25 museums specifically repudiating the catalog of the 1992 exhibit of Lazar’s works in Montreal.
In 1997, the Boules commenced litigation against Mark and Regina as well as against the art dealer, Ingrid Hutton, and Leonard Hutton Galleries. The main thrust of the complaint was that the defendants had violated Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(b), by promoting the sale of their works at the Leonard Hutton Galleries by falsely disparaging the authenticity of the Boules’ collection. The Boules also brought a panoply of state law claims including, among others, claims for defamation, common law unfair competition by disparagement, deceptive practices under New York’s General Business Law, and breach of contract (arising from Mark’s repudiation of the certificates of authenticity).
Defendants moved for summary judgment dismissing the Boules’ claims under the Lanham Act, arguing among other things that the Boules lacked standing to bring these claims and that the statements were not made in commercial advertising and/or were not representations of fact within the meaning of the Lanham Act. In October 1999, the District Court granted summary judgment dismissing all the Boules’ Lanham Act claim with the exception of the claim based on the catalog statement. Boule v. Hutton, 70 F. Supp. 3d 378 (S.D.N.Y. 1999) (Cedarbaum, J.).
The District Court first held that while the Boules were not traditional commercial entities, they had sufficient economic interest to have standing to sue under the Lanham Act. Then, after holding that there was sufficient commercial activity in the United States or impact on interstate commerce to justify application of the Lanham Act, the Court proceeded to analyze each of the statements.
With respect to the Verbal Statements, the court, citing the District Court’s opinion in Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 942 F. Supp. 209 (S.D.N.Y. 1996), affirmed, 314 F.3d 48 (2d Cir. 2002), held that the alleged statements by Hutton to various individuals were “reactive” rather than “proactive” and therefore, could not be considered commercial advertising or promotion under the Lanham Act. Similarly, the District Court dismissed as merely reactive the claims based upon the statements to ARTnews. The Lanham Act claims with respect to the Repudiation Letter were dismissed on the ground that plaintiffs had not provided any evidence that this document would be understood by recipients as making any representations of fact concerning the nature, quality or characteristics of any goods or services. The District Court did, however, sustain the Lanham Act claim based upon the statements in the Catalog that this was the first time any of Lazar’s works were available.
In 2000, a bench trial was held on the Boules’ remaining Lanham Act claim and their state law claims. The District Court held that while the Boules had established that Mark and Regina had endorsed the authenticity of the Boules’ collection, the Boules had failed to prove that the works were in fact authentic. Boule v. Hutton, 138 F. Supp. 2d 491 (S.D.N.Y. 2001). On this critical issue, the District Court found that the evidence as to authenticity was in “equipoise.” As a result, because it found that falsity is an essential element of the Boules (remaining) Lanham Act as well as the claims under New York’s General Business Law, product disparagement and unfair competition, the Boules could not carry their burden of proof.
With respect to the defamation claims, the District Court ruled that the failure to prove authenticity of the works precluded the Boules from prevailing. But plaintiffs did prove the falsity of the statement by Mark and Regina in ARTnews that they had initially informed the Boules that the works were not authentic as well as the statements in Le Devoir denying that Mark signed certificates of authenticity. Since the Boules could not prove special damages with respect to these statements, in order to recover they had to show that the statements were defamatory per se. On this issue, the District Court held that because the Boules were not professional art dealers, but only collectors, they could not claim damage to their professional reputation as dealers. But because Claude was an art historian and writer in the field of Russian avant-garde art, statements which implied that she continued to allow her works to be displayed despite having been informed that they were not authentic could be presumed to injure her reputation. The District Court found for Claude on the defamation claim and awarded her nominal damages of ten dollars.
The District Court further determined that Mark had breached his contract to furnish certificates of authenticity when he repudiated the authenticity of the Boules’ collection. Applying a theory of restitution damages, the District Court awarded the Boules the amount (40,000 FF, or just over $7,000) that they had paid to Mark for the certificates. A motion to reopen the case based on new evidence on the issue of authenticity was denied, Boule v. Hutton, 170 F. Supp. 2d 441 (S.D.N.Y. 2001).
Not surprisingly, the Boules appealed. With respect to the Lanham Act claims, plaintiffs only appealed the dismissal of the statements in ARTnews and in the Repudiation Letter. As for the ARTnews statements, the Court of Appeals affirmed the District Court’s grant of summary judgment dismissing the Boules’ Lanham Act claim. The Court applied the three-part test for determining whether given statements constitute commercial advertising or promotion set forth in its 2002 decision in Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 56-58 (2d Cir. 2002). The statement must: 1) constitute commercial speech; 2) made for the purpose of influencing consumers to buy defendant’s goods or services; and 3) while the statements need not be part of a classic advertising campaign, they must be disseminated sufficiently to the relevant purchasing public. Because it found that the Boules and Mark and Regina were competitors in the sale of Lazar’s art, the Court of Appeals did not need to reach the issue, also avoided in Fendi, as to whether the Lanham Act requires that the opposing parties be competitors.
The Court of Appeals held that the plaintiffs had offered sufficient evidence to meet the second and third prongs of this test. They had introduced evidence that defendants intended to influence customers to buy their own collection of Lazar’s paintings and that they expected their statements to ARTnews to be disseminated to virtually every important dealer of Russian Supremacist art.
With respect to the statements in the Repudiation Letter, the Court of Appeals disagreed with the analysis by the District Court and determined that the Boules had raised triable issues of fact as to whether the statements would be appreciated as representations of fact. But it proceeded to hold that because the District Court had properly found that the evidence on the issue as to whether the paintings were authentic as in equipoise, the Boules could not, as a matter of law, establish that the statements were false thus dooming this particular Lanham Act claim.
The Court of Appeals did disagree with the District Court’s denial of the Boule’s claims under Section 349 of the General Business Law and under New York’s common law of unfair competition by disparagement. With respect to certain of these claims, the Court of Appeals held that the Boules did not need to establish the authenticity of Lazar’s works in order to prevail. For example, the District Court had ruled that the statements made to ARTnews and Le Devoir about Mark’s purportedly not having signed the certificates were false. The Court of Appeals remanded to the District Court the question whether these false statements would constitute a violation of Section 349 or unfair competition by disparagement. The Court of Appeals further held that a claim under Section 349 was available not only to a consumer, but also to a competitor who could prove that a given statement was likely to mislead a reasonable consumer.
Where does this leave us? Both the District Court and the Court of Appeals refused to permit use of the Lanham Act as a vehicle for pursuing claims involving false statements far outside of the normal bounds of commercial advertising and promotion. Nonetheless, plaintiffs were permitted to pursue alternative claims for many of these same statements under various common law theories, including defamation, deceptive business practices, and unfair competition by disparagement. And while plaintiffs were unable to obtain significant damages after a bench trial, it is not at all clear that a jury would have been as reluctant to award substantial damages, particularly if it felt the way Judge Cedarbaum did, that Mark had lied under oath when he testified that he did not sign the certificates of authenticity.
Finally, Judge Calabresi’s concurrence presents a warning as to what might have happened had the Supreme Court reached the merits of and affirmed the lower court decision in Nike, Inc. v. Kasky. A holding now or at some future time that expands the definition of commercial speech to include statements which are reactive or otherwise not specifically intended to promote the sale of goods or services could greatly expand the reach of the Lanham Act.

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