Leading auction house Sotheby’s takes legal hit amidst Rybolovlev-Bouvier battle

Leading auction house Sotheby’s takes legal hit amidst Rybolovlev-Bouvier battle

Just days after the announcement that Sotheby’s is set to be sold for $3.7 billion to a company owned by French media tycoon Patrick Drahi, the company suffered a bruising legal setback in Manhattan courts.

This Tuesday, June 25th, Judge Jesse Furman, of the District Court for the Southern District of New York (SDNY), denied Sotheby’s motion to dismiss a $380 million lawsuit filed against the 275-year-old auction house by two companies owned by Russian billionaire Dmitry Rybolovlev. Rybolovlev, who amassed a noteworthy collection of paintings between 2003 and 2013, has opened legal proceedings around the world accusing his former art dealer, Yves Bouvier, of having defrauded him out of over a billion dollars.

In Rybolovlev’s complaint against Sotheby’s, the billionaire asserted that the famous auction house—which was involved in 14 out of the 38 art deals between Bouvier and Rybolovlev— had “aided and abetted” Bouvier’s alleged scheme by providing the Swiss dealer with fraudulently inflated estimates for the works he intended to sell to Rybolovlev. The art collector’s suit further argues that Sotheby’s contrived to lend a “veneer of legitimacy and expertise” to Bouvier’s deals.

On Tuesday, Judge Furman rejected Sotheby’s argument that Switzerland was a manifestly more appropriate forum for any claims related to Yves Bouvier’s alleged art fraud. In November 2017, the auction house, in concert with Bouvier, filed a conciliation request with the Court of Geneva, in the hope of enjoining Dmitry Rybolovlev’s trust companies from pursuing further claims against Sotheby’s in London. Sotheby’s heavily relied on the existence of these parallel proceedings in Switzerland, which they argued was “more convenient”, in their motion to dismiss the case in the SDNY. This week, however, Judge Furman concluded that Sotheby’s failed to adequately demonstrate that New York is “genuinely inconvenient” and that Switzerland is “significantly preferable.”

The judge further ordered a number of previously confidential documents to be made public, by rejecting in large part Sotheby’s motion to seal the Amended Complaint and its associated exhibits. Notably, these exhibits contain quotes from numerous email exchanges between Yves Bouvier and Samuel Valette, Vice Chairman of Private Sales at Sotheby’s.

These newly unredacted documents suggest that key figures at Sotheby’s were aware of the scale of the profits Bouvier was making on his transactions with Rybolovlev. One exchange in particular, in which Valette emailed the Swiss dealer a draft valuation for Leonardo da Vinci’s Salvator Mundi after Rybolovlev had asked for an appraisal of the work, raises the possibility that Valette was willing to modify such appraisals at Bouvier’s request; Valette asked the Swiss dealer in his cover email to “let him know if this worked for him”.

Counsel for both sides reacted to the latest legal developments. Daniel Kornstein, a partner in Emery Celli Brinckerhoff & Abady LLP, acting for Rybolovlev’s companies, commented: “We are pleased with these new developments. Of course they are only preliminary skirmishes in what has already been a long-running legal battle, but they—importantly—allow our side to move onto the merits and recover the losses. These new rulings took time, but that time allowed the various judges to give the issues careful consideration and thorough legal analysis and arrive at the correct conclusions. We look forward to the next stages of these litigations”.

Sotheby’s acknowledged that Judge Furman’s decision was “disappointing”, but remarked in a statement: “While it allows for the litigation to proceed in New York, it also provides for our ongoing case to proceed in Switzerland, which we have consistently maintained is the appropriate venue for this matter, given that is where the conduct at the center of this dispute occurred. Sotheby’s will vigorously litigate the merits of this case in Switzerland and New York.”

The two sides in the art drama will next meet for a pre-trial conference, ordered by Judge Furman to take place on July 24th.