Marguerite Hoffman v. David Martinez
838 F.3d 568
| 5th Cir. | 2016Background
- Marguerite Hoffman privately sold a Rothko painting in 2007 for $17.6M via a one‑page agreement providing that "all aspects of this transaction" be kept confidential "indefinitely," with added buyer promises (e.g., $500,000 donation, six months possession, six months no display).
- Negotiations were conducted by L&M Arts (Mnuchin, Levy) with David Martinez/Studio Capital as the undisclosed buyer; Hoffman was told the buyer was a single private individual and the painting would "disappear" into a European collection.
- Christie’s learned of the earlier negotiations (via Martinez consulting Christie’s chair) and contacted Hoffman in March 2007; Hoffman canceled an earlier agreement and later executed the April 2007 Agreement.
- Martinez/Studio Capital later consigned the painting to L&M and it was publicly auctioned at Sotheby’s in May 2010; Hoffman sued for breach of the Agreement’s confidentiality clause and for fraudulent inducement by L&M.
- At trial the jury found breach by L&M and Martinez defendants and returned multiple damages figures; the district court later granted JMOL for Martinez, denied JMOL for L&M, then amended judgment to award Hoffman $500,000 on an auction‑premium theory; Fifth Circuit reviews multiple issues de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether L&M fraudulently induced Hoffman by misrepresenting it had authority to bind the undisclosed buyer | Hoffman: L&M represented it acted for the buyer and that induced her to accept confidentiality terms | L&M: Theory not pleaded with Rule 9(b) specificity; no factual allegation that authority representation was false | Court: Forfeited/insufficiently pleaded under Rule 9(b); summary judgment for L&M affirmed |
| Whether L&M’s statement that buyer was an “individual” was actionable and caused Hoffman's loss | Hoffman: Belief buyer was an individual caused her reliance and harms from later publicity | L&M: Even if false, no causal nexus between that fact and Hoffman’s post‑contract losses (consequential damages require proximate link) | Court: No evidence misrepresentation produced the later losses; summary judgment for L&M affirmed on this theory |
| Whether L&M’s statement that the painting would “disappear” was actionable fraud | Hoffman: Statement induced secrecy reliance | L&M: Statement was a prediction/opinion, not an empirically verifiable fact | Court: Statement was a non‑actionable prediction (not sufficiently factual or intertwined with present facts); summary judgment for L&M affirmed |
| Whether the Agreement’s confidentiality clause covered the fact of the 2007 sale and whether jury damages measures were legally valid | Hoffman: "All aspects of this transaction" includes the fact of sale; lost "auction premium" is benefit‑of‑bargain damages; alternatively seeks disgorgement | L&M: "Aspects" means features of the transaction, not the fact of sale; auction‑premium and disgorgement measures are legally improper | Court: Confidentiality clause does not cover the fact of sale (contract construed against confidentiality as indefinite restraint on alienation); damages questions submitted were legally flawed—disgorgement invalid under Texas contract law and the auction‑premium question failed to isolate confidentiality’s value; judgment as a matter of law for L&M on breach reversed (i.e., L&M entitled to JMOL) |
Key Cases Cited
- Miller v. Metrocare Servs., 809 F.3d 827 (5th Cir.) (standard for de novo review of summary judgment cited)
- Bohnsack v. Varco, L.P., 668 F.3d 262 (5th Cir.) (elements of fraudulent inducement under Texas law)
- Herrmann Holdings, Ltd. v. Lucent Techs. Inc., 302 F.3d 552 (5th Cir.) (Rule 9(b) fraud pleading requirements)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex.) (opinion vs. fact analysis for fraud)
- Trenholm v. Ratcliff, 646 S.W.2d 927 (Tex.) (when future predictions may be actionable if intertwined with present‑fact misrepresentations)
- Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41 (Tex.) (consequential damages and causation in fraudulent inducement)
- Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex.) (fraud damages principles and producing cause requirement)
- Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (5th Cir.) (unjust enrichment/unavailable quasi‑contract remedy when express contract governs)
- Kansas v. Nebraska, 135 S. Ct. 1042 (U.S.) (discussion of disgorgement in an interstate‑dispute context cited by plaintiff but distinguished)