## Facts

- In May 2010, MAFG Art Fund, LLC and MacAndrews & Forbes Group, LLC (collectively, MacAndrews) agreed to purchase a Jeff Koons sculpture titled *Popeye* from Larry Gagosian and Gagosian Gallery, Inc. (collectively, Gagosian) for $4 million, payable in installments, with completion estimated for December 2011.
- MacAndrews alleged it intended to resell *Popeye* for profit and expected Gagosian would assist with that resale.
- MacAndrews claimed Gagosian did not obtain title to *Popeye* until June 2010, when Gagosian acquired it from Sonnabend Gallery under a separate purchase agreement (the Sonnabend agreement).
- MacAndrews alleged the Sonnabend agreement created economic terms that made it unprofitable for Gagosian to help MacAndrews resell *Popeye*, contrary to what MacAndrews expected when it signed its own purchase agreement.
- In April 2011, the parties restructured their dealings through an exchange: MacAndrews transferred several artworks (including its rights relating to *Popeye*) and approximately $4 million in cash to Gagosian.
- In that exchange, Gagosian provided MacAndrews credits of $3.6 million for a Willem de Kooning painting and $4.5 million for a Roy Lichtenstein sculpture, and transferred to MacAndrews a Richard Serra steel sculpture and other works.
- In June 2011, Gagosian informed MacAndrews that *Popeye* would not be completed until July 2012.
- MacAndrews alleged Gagosian misstated the values assigned to the de Kooning and Lichtenstein works and asserted that those values were supported by “market data,” and that MacAndrews relied on Gagosian’s claimed superior access to information about art values.
- MacAndrews sued asserting breach of contract, breach of fiduciary duty, fraudulent misrepresentation, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and deceptive business practices under New York General Business Law (GBL) § 349.
- Gagosian moved to dismiss under CPLR 3211(a)(1) and (a)(7), arguing that documentary evidence defeated the claims and that the complaint failed to state viable causes of action.

## Issues

1. Whether MacAndrews plausibly pleaded a fiduciary relationship with Gagosian in connection with the art transactions.
2. Whether the complaint stated a claim for fraudulent misrepresentation based on alleged valuation statements and claims that values were supported by “market data.”
3. Whether an implied covenant of good faith and fair dealing claim was duplicative of contract allegations and subject to dismissal.
4. Whether MacAndrews stated a consumer-oriented claim under GBL § 349 based on the alleged art-market conduct.
5. Whether, at the pleading stage, MacAndrews could proceed on contract and unjust-enrichment theories arising from the *Popeye* transaction and the later exchange.

## Decision

- The court granted Gagosian’s motion to dismiss the breach of fiduciary duty cause of action, holding the pleaded facts described arm’s-length dealings between sophisticated parties rather than a relationship of trust and control giving rise to fiduciary obligations.
- The court dismissed the GBL § 349 claim, concluding the allegations did not fit the consumer-oriented misconduct targeted by that statute.
- The court dismissed the implied covenant of good faith and fair dealing claim as duplicative of the contract theories pleaded from the same alleged conduct.
- The court denied dismissal of the fraud claim at the pleading stage, finding the complaint sufficiently alleged misrepresentations and reliance to proceed to discovery.
- The court denied dismissal of at least part of the breach of contract and unjust enrichment claims, allowing MacAndrews to continue litigating those theories based on the *Popeye* agreement and related transactions.

## Legal Principles

- A fiduciary duty does not arise from ordinary commercial transactions, even in specialized markets, absent well-pleaded facts showing a relationship of trust and confidence and the defendant’s control or dominance over the plaintiff.
- On a CPLR 3211(a)(7) motion, the court accepts the complaint’s factual allegations as true and gives the plaintiff the benefit of favorable inferences, dismissing only where the pleading fails to state a legally cognizable claim.
- Under CPLR 3211(a)(1), dismissal based on documentary evidence is proper only when the documents conclusively refute the plaintiff’s factual allegations as a matter of law.
- An implied covenant of good faith and fair dealing claim is subject to dismissal when it merely restates a breach of contract claim and seeks the same damages for the same alleged conduct.
- GBL § 349 targets consumer-oriented acts and practices; disputes focused on a private, high-value commercial transaction between sophisticated parties generally do not state a § 349 claim.
- Unjust enrichment is an equitable theory that may be pleaded in the alternative at the early stage of a case, but it is not available to duplicate a fully governing contract claim on the same subject matter.

## Conclusion

The New York Supreme Court allowed MacAndrews to proceed past the pleading stage on contract, fraud, and unjust enrichment theories arising from the Koons *Popeye* deal and the later exchange, but it dismissed fiduciary-duty, implied-covenant, and GBL § 349 claims because the complaint described arm’s-length dealings between sophisticated parties and not the type of relationship or consumer conduct needed for those causes of action.


MAFG Art Fund, LLC v. Gagosian, 2014 WL 359341 (2014)