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Art Dealers Are Not Professionals?

October 29, 2009

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On October 22, 2009, Judge Eileen Bransten dismissed a complaint by a disgruntled art dealer, charging another art dealer with fraud, negligent misrepresentation, and unjust enrichment.
Plaintiff Seung, a Korean art dealer, claimed that New York art dealer Mary Dinaburg represented that a work by Julian Schnabel was worth at least $500,000. On that basis, Seung purchased the work for $380,000. But, soon after concluding the purchase, Seung began to do her own due diligence as to the Schnabel’s worth. Seung discovered that some months earlier the work sold at Philips de Pury for $156,000 (against estimates of between $60,000 and $80,000) and that the likely market value was no more than $110,000.
Understandably unhappy, Seung charged Dinaburg with fraud and related theories of misrepresentation. But Judge Bransten saw things differently: “In the context of an arm’s length transaction, Seung’s blind reliance on Dinaburg’s alleged statements of the painting’s value is not reasonable as a matter of law.”
In dismissing the charge of negligent misrepresentation, Judge Bransten held that art dealers, unlike professionals such as lawyers and engineers -- absent special circumstances -- do not owe a special duty of care to their clients.
While Judge Bransten carefully reviewed existing case law on the distinction between “puffery” and actionable misrepresentations, it seems clear that the court placed great weight on the fact that Seung, a sophisticated buyer, failed to conduct any of her own due diligence before agreeing to the purchase.
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