## Facts

- In 1987, William Foxley, an experienced art buyer and seller, bought a painting at a Sotheby’s auction cataloged as Mary Cassatt’s *Lydia Reclining on a Divan* for $632,500 (including buyer’s premium).
- Sotheby’s catalog stated the painting would be accompanied by a letter “discussing” the work from Adelyn Dohme Breeskin and included a five-year authenticity guarantee running from the sale date.
- Around 1992, Foxley noticed the Breeskin letter was missing from his records and asked Sotheby’s for it; Sotheby’s initially indicated it did not have the letter readily available.
- In 1993, Foxley received a copy of the Breeskin letter and learned Breeskin’s opinion had been based on a color transparency rather than examination of the original painting.
- In August 1993, Foxley consigned the painting back to Sotheby’s for resale at a December 1993 auction.
- On November 30, 1993, Sotheby’s advised Foxley that the Cassatt Committee believed the work might be inauthentic and recommended withdrawal; Foxley withdrew the painting.
- Foxley alleged Sotheby’s agreed after withdrawal to refund his purchase price but did not do so.
- In a proposed second amended complaint asserting 17 causes of action, Foxley alleged, among other theories, that Sotheby’s misrepresented or concealed facts about the existence/possession of the Breeskin letter, the basis for Breeskin’s opinion, Breeskin’s reliability, and the identity/reputation of the consignor.

## Issues

1. Whether the complaint pleaded fraud and fraudulent concealment with particularity, including facts supporting scienter and reasonable reliance, as to alleged misstatements or omissions about the Breeskin letter, expert methodology, expert reliability, and consignor identity.
2. Whether New York’s limitations periods barred fraud-based claims arising from a 1987 auction sale filed in 1994, including whether delayed discovery was sufficiently alleged.
3. Whether contract and warranty-based claims tied to the catalog’s five-year authenticity guarantee, and an alleged later refund agreement, were timely and plausibly pleaded.

## Decision

- The court granted Sotheby’s motion to dismiss in part and denied it in part.
- Most fraud-based claims were dismissed for failure to satisfy Rule 9(b) and for failure to plead facts supporting scienter and reasonable reliance.
- Many fraud theories were also dismissed as time-barred under applicable New York limitations rules.
- Certain non-fraud contract-based theories survived in limited form, including claims plausibly tied to the five-year authenticity guarantee and aspects of the alleged refund agreement, to the extent adequately pleaded and timely.

## Legal Principles

- Under New York law, fraud requires a material misrepresentation or omission, scienter, reasonable reliance, and causation; in federal court, these allegations must satisfy Rule 9(b)’s heightened particularity standard.
- Difficulty producing an authentication-related document after the sale, without particularized facts showing knowing falsity or reckless disregard at the time of sale, does not adequately plead scienter.
- Nondisclosure is not actionable fraud absent a duty to disclose; in an arm’s-length auction setting, customary non-disclosure of consignor identity does not alone create such a duty.
- Fraud claims are subject to limitations periods that generally run from accrual at the transaction, with limited delayed-discovery relief requiring sufficiently pleaded facts showing the fraud could not reasonably have been discovered earlier.
- A catalog authenticity guarantee may support contract or warranty theories distinct from fraud, and a later promise to refund may constitute a separate contractual undertaking evaluated under ordinary contract principles.

## Conclusion

The court largely rejected Foxley’s attempt to recast disputes about authenticity-related information into fraud, holding the allegations lacked Rule 9(b) particularity, did not support scienter and reasonable reliance, and were often untimely; however, the pleadings supported limited contract-based paths forward based on the catalog’s authenticity guarantee and an alleged post-withdrawal refund agreement.


Foxley v. Sotheby’s Inc., 893 F. Supp. 1224 (S.D.N.Y. 1995)