## Facts

- Marguerite Hoffman owned a Mark Rothko painting (“Untitled 1961”) and sought to sell it privately to avoid publicity.
- Hoffman, through an intermediary, communicated confidentiality concerns to L & M Arts, a gallery that agreed to broker a discreet sale and stated it would approach only a single buyer.
- Hoffman and L & M executed a written sale agreement for $17.6 million that included a confidentiality provision limiting public disclosure of the transaction.
- L & M arranged the purchase by David Martinez through his entity, Studio Capital, Inc.
- Years later, Martinez declined Hoffman’s offer to repurchase and instead consigned the painting to Christie’s, where it sold at a public auction for about $31 million; the auction materials revealed the painting’s provenance and Hoffman’s prior ownership.
- Hoffman claimed she was fraudulently induced into the sale by assurances about secrecy and the buyer, and that defendants violated the contract’s confidentiality obligations.

## Issues

1. Whether summary judgment for L & M Arts on Hoffman’s Texas fraudulent-inducement claim was proper.
2. Whether Martinez and Studio Capital could be liable for breach of the confidentiality provision despite being non-signatories.
3. Whether the confidentiality clause, properly construed under Texas law, supported a jury finding that L & M breached the contract.
4. Whether the expectation-damages award (based on a hypothetical nonconfidential public-sale price versus the private-sale price) was legally permissible and supported by evidence.
5. Whether Hoffman could recover attorney’s fees under Texas Civil Practice & Remedies Code § 38.001(8) without ultimately prevailing on a contract claim.

## Decision

- Affirmed summary judgment for L & M on fraudulent inducement.
- Affirmed JMOL for Martinez and Studio Capital on breach of contract.
- Reversed the denial of JMOL for L & M on breach of contract and rendered L & M not liable on the confidentiality claim.
- Affirmed denial of attorney’s fees to Hoffman and remanded for further proceedings consistent with the opinion.

## Legal Principles

- Under Texas law, fraudulent inducement requires proof of a materially false representation, intent to induce reliance, actual and justifiable reliance, and resulting injury; a sophisticated written agreement can preclude reasonable reliance on broader oral assurances that are not reflected in the contract.
- Non-signatories are not bound to a contract’s obligations absent a valid basis to treat them as contracting parties or otherwise impose contractual liability under recognized Texas doctrines.
- Unambiguous contract language is enforced as written; a confidentiality clause will not be extended to impose obligations (such as ongoing restrictions on downstream resale publicity) that the text does not clearly impose.
- A party must prevail on a contract claim to recover attorney’s fees under Texas Civil Practice & Remedies Code § 38.001(8).

## Conclusion

The Fifth Circuit held that Hoffman’s fraud theory failed as a matter of law, the subsequent buyer and his entity were not contractually liable, and the confidentiality clause did not support liability against the gallery for later public resale disclosures; because Hoffman did not prevail on a contract claim, she was not entitled to attorney’s fees.


Hoffman v. L & M Arts, 838 F.3d 568 (5th Cir. 2016)