De Sole v. Knoedler Gallery, LLC
974 F. Supp. 2d 274
S.D.N.Y.2013Background
- Plaintiffs allege Knoedler Gallery and related parties sold forged Rosales-supplied paintings represented as works by Rothko, de Kooning, Pollock, and Motherwell.
- Knoedler, 8-31 Holdings, Hammer, Freedman, Andrade, Rosales, and Diaz are named; Rosales is the source of the forged works.
- Plaintiffs assert RICO and state-law fraud, breach of warranty, and unilateral/mutual mistake claims.
- Key alleged facts include a Green Pollock sale that was canceled after IFAR questioned authenticity and a Rothko sold to the De Soles later found to be forged.
- The 2007–2011 period involved major forgeries, grand jury subpoenas, Knoedler’s closure, and subsequent criminal disclosures involving Rosales.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RICO statute of limitations and discovery rule applicability | De Sole asserts timely RICO claims based on discovery of injury in 2011. | Defendants contend discovery should occur earlier, triggering limitations. | Statute of limitations tolling issues reserved for later stages; open questions remain. |
| Whether the alleged enterprise and defendants satisfy RICO elements | Plaintiffs allege a group associated in fact and that defendants conducted the enterprise’s affairs. | Defendants challenge sufficiency of participation and continuity. | Court finds open questions on enterprise validity and some defendants’ participation, denying summary dismissal on these points. |
| Adequacy of fraud pleadings under Rule 9(b) | Plaintiffs identify speakers, times, places, and why statements were fraudulent; filings meet 9(b). | Defendants argue lack of specificity or reliance issues. | Fraud claims survive Rule 9(b) pleading requirements. |
| Fraudulent concealment and tolling | Fraudulent concealment tolls limitations where defendants concealed information. | Defendants argue tolling is inappropriate due to lack of self-concealing actions. | Fraudulent concealment claims survive against Freedman and Knoedler. |
| Breach of warranty and timing | Howard asserts express warranties under U.C.C. 2-313 arising from representations. | Claim untimely under 2-725; equity tolling insufficient. | Breach of warranty claim dismissed as untimely, with limited tolling considerations. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for pleading; reject naked assertions)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (facial plausibility required in pleading)
- Rosen v. Spanierman, 894 F.2d 28 (2d Cir. 1990) (fraud discovery and timeliness in art cases)
- Koch v. Christie’s Int’l PLC, 699 F.3d 141 (2d Cir. 2012) (inquiry notice and discovery rule in NY fraud claims)
- In re Pfizer Inc. Sec. Litig., 584 F.Supp.2d 621 (S.D.N.Y. 2008) (fraud pleading standards and scienter requirements)
- Staehr v. Hartford Fin. Servs. Grp., 547 F.3d 406 (2d Cir. 2008) (standard for evaluating discovery and inquiry notice)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (U.S. 2008) (standing and proximate cause in RICO context)
- Reves v. Ernst & Young, 507 U.S. 170 (U.S. 1993) (operation or management requirement for RICO)
- Cofacredit, SA v. Windsor Plumbing Supply Co., 187 F.3d 229 (2d Cir. 1999) (continuity analysis for RICO predicate acts)
- Hemi Grp., LLC v. City of New York, 559 U.S. 1 (U.S. 2010) (proximate causation in RICO injury)