New Blow in Art Clash of Titans

Ethan Leib in The New York Times, January 18, 2013

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By PATRICIA COHEN

After failing to persuade the billionaire collector Ronald O. Perelman to drop his lawsuit over an art deal gone sour, the powerhouse gallery mogul Larry Gagosian switched to attack mode on Friday. He described Mr. Perelman — his longtime friend, client and business partner — as a “deadbeat” and “bully” in court papers, saying he should be sanctioned by the judge for bringing the “frivolous” action.

The papers, filed in the State Supreme Court in Manhattan, ask for a dismissal of the case, which accuses Mr. Gagosian of being a cheat, and say that he lost money in a series of art transactions with Mr. Perelman that involved 11 works worth upward of $45 million.

The legal complaints center on the worth of an unfinished Jeff Koons sculpture, “Popeye,” that Mr. Perelman bought from Mr. Gagosian for $4 million, as well as the value of eight other works that Mr. Perelman used as partial payment for a $10.5 million Cy Twombly painting and a $12.6 million Richard Serra sculpture he bought from the dealer.

Mr. Perelman had charged in his papers that Mr. Gagosian took advantage of him, “undervaluing works when purchasing them, overvaluing them when selling them, and pocketing the substantial differential.”

But the legal details have not attracted as much attention as the prospect of a nasty grudge match between two men known for their volcanic tempers, relentless empire building and refusal to take no for an answer. One British pundit, Emma Brockes, has described the case in The Guardian as “a really good ding-dong between two rich public figures.”

The roots of the dispute go back to May 2010 when Mr. Perelman bought the oversize granite “Popeye,” which was supposed to have been delivered 19 months later. In 2011 Mr. Perelman discovered that Mr. Koons was going to miss the date by several months and decided to cancel the deal. But he insisted that Mr. Gagosian owed him more than the $4 million he had paid. The value of Mr. Koons’s work rises at light speed, Mr. Perelman maintained, and therefore this “Popeye” was worth as much as $12 million — even though it was unfinished.

He contended that he was being denied his rightful profit because of a “secret agreement” between the gallery and Mr. Koons that had the effect of redirecting most of the gains from the resale of “Popeye” to the artist and away from Mr. Perelman.

Mr. Gagosian had already filed and dropped his own lawsuit against Mr. Perelman. On Friday Mr. Gagosian filed a motion to dismiss Mr. Perelman’s suit. In it he characterizes Mr. Perelman’s accusations as fanciful, while offering a rare glimpse into his gallery’s dealings. The Koons work, Mr. Gagosian states, was ultimately sold to an unnamed buyer for $4.5 million, of which he gave $4.25 million to Mr. Perelman.

Mr. Gagosian also contends that Mr. Perelman acted unreasonably, refusing to pay the agreed-upon price for the Twombly or the Serra and instead using “strong-arm tactics” to force Mr. Gagosian to accept the bulk of the payment in art that Mr. Perelman no longer wanted. “Perelman taunted the defendants, daring them to sue him if they were not willing to accept his insistence on paying with unwanted works of art instead of cash,” Mr. Gagosian asserts.

Rather than profiting from the deal, as Mr. Perelman declares in his suit, Mr. Gagosian says he has lost $1.18 million so far. Three pieces he accepted as part of the exchange sold for less than the value credited to Mr. Perelman’s account; two reaped a 6.25 percent profit instead of the dealer’s normal 10 percent; and three remain unsold, court papers said.

Responding to the filing, Christine Taylor, a spokeswoman for Mr. Perelman, said: “These allegations were false when he first made them, false when he withdrew the unsupported lawsuit, and are still false today. His call for sanctions is itself sanctionable because it is frivolous.”

The suit is one of several unsettling recent developments for Mr. Gagosian, who has dominated the art world for several years. Last month, the artists Damien Hirst and Yayoi Kusama announced that they were leaving Gagosian, and Mr. Koons said that his next show would be with a rival dealer, David Zwirner. Mr. Gagosian is also being sued by Jan Cowles, a prominent collector, who accuses him of selling a Roy Lichtenstein painting of hers without her consent. (Ms. Cowles’s son, Charles, negotiated with the gallery without her knowledge.)

Mr. Perelman and Mr. Gagosian were once friends, dining, traveling and even opening a restaurant together. Mr. Perelman said he had bought more than 200 works from Mr. Gagosian, whom he described in court papers as someone who served as his “trusted adviser, mentor and friend” for more than 20 years.

“He is the most charming guy in the world,” Mr. Perelman said in an interview. “Everyone thinks when they’re doing business with him, they’re the one guy being treated honestly.”

But Mr. Perelman now portrays Mr. Gagosian as unscrupulous and deceitful. His lawyers (like Ms. Cowles’s), accuse Mr. Gagosian of simultaneously representing the buyer and the seller and at times the artist without disclosing what they characterize as a potential conflict of interest.

Ultimately, Mr. Perelman’s suit may hinge on whether Mr. Gagosian and he had what is called a special fiduciary relationship because of their long friendship and Mr. Gagosian’s role as an art adviser. That argument can be tricky, said Ethan Leib, a Fordham law professor and the author of “Friend v. Friend: The Transformation of Friendship — and What the Law Has to Do With It.”

For a friendship to engender a fiduciary responsibility, Mr. Leib said, a person generally has to prove that he or she lacked power. Mr. Perelman would need to say: “I needed him to look after my interest because I couldn’t, that I’ve been made vulnerable to his exploitation and I couldn’t protect myself,” Mr. Leib explained. “It requires him to act humble, or at least to convince a court he is, and that’s challenging for someone like Perelman.”