Davis v. Carroll
937 F. Supp. 2d 390
S.D.N.Y.2013Background
- Davis consigned Stuart Davis works, including the Eight Disputed Works, to Salander-O’Reilly Galleries (SOG) and Davis later learned of SOG’s fraudulent dealings that led to criminal charges against Salander; Carroll engaged in a 2006 series of art-for-art and cash exchanges with SOG involving 44 works, including eight Davis works; Davis sued Carroll for return or damages and for related relief; the court granted summary judgment for Davis, denied sanctions, and granted in part and denied in part the motion to strike; the action centers on whether Carroll bought the Davis works in the ordinary course and with proper diligence; ownership and provenance disputes under U.C.C. Article 2-403 govern the title transfer at issue; the court addressed the admissibility of expert Rosenberg and the sufficiency of Carroll’s due diligence; the decision ultimately grants summary judgment for Davis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Buyer in ordinary course under U.C.C. 2-403 | Davis argues Carroll did not qualify as a buyer in ordinary course due to red flags and misrepresented ownership. | Carroll contends he acted in good faith, relied on SOG’s representation, and performed due diligence. | Carroll was not a buyer in ordinary course; summary judgment for Davis. |
| Ratification | Davis did not ratify the transactions. | Carroll argues ratification via acceptance of benefits. | No ratification by Davis. |
| Due diligence standards in presence of red flags | Carroll should have pursued heightened inquiry given red flags. | Carroll relied on standard due diligence. | Carroll’s due diligence insufficient; Davis wins on summary judgment. |
| Admissibility of Rosenberg ROP expert | Rosenberg’s methodology should be admitted to support reasonableness of prices. | Rosenberg’s ROP is novel and not reliably grounded in standard appraisal methods. | Rosenberg’s ROP testimony stricken; limited admissible aspects acknowledged. |
| Red flags and patterns of ownership signals | Multiple red flags show foul play and misrepresentation of ownership/right to sell. | Defendant disputes the severity and materiality of some red flags. | Numerous red flags found; heightened duty of inquiry applicable. |
Key Cases Cited
- Guggenheim Foundation v. Lubell, 77 N.Y.2d 311 (N.Y. (1991)) (art market title and fiduciary considerations in transfers of art)
- Porter v. Wertz, 53 N.Y.2d 696 (N.Y. (1981)) (duty of inquiry for art merchants; ownership and right to sell)
- Morgold, Inc. v. Keeler, 891 F. Supp. 1361 (N.D. Cal. (1995)) (art title and due diligence under U.C.C. in transfers)
- Amorgianos v. Nat’l R.R. Passenger Corp., 303 F.3d 256 (2d Cir. (2002)) (Daubert/Kumho Tire reliability standard for expert testimony)
- U.S. v. Glynn, 578 F. Supp. 2d 567 (S.D.N.Y. (2008)) (flexible application of Rule 702; gatekeeping for experts)