Accent Delight International Ltd. v. Sotheby'sAccent Delight International Ltd. v. Sotheby's
Case Information
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
ACCENT DELIGHT INTERNATIONAL LTD., et al., :
:
Plaintiffs, :
: 18-CV-9011 (JMF) -v- :
: OPINION AND ORDER SOTHEBY’S, et al., :
:
Defendants. :
:
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JESSE M. FURMAN, United States District Judge:
The question presented here — which has spawned surprisingly little and, in this Circuit at least, conflicting law — is whether a party seeking to discover materials relating to a private confidential mediation must satisfy a heightened standard of need. The question arises in a lawsuit between Plaintiffs Accent Delight International Ltd. and Xitrans Finance Ltd. and Defendants Sotheby’s and Sotheby’s, Inc. (collectively “Sotheby’s”) over Sotheby’s role in an alleged scheme by Yves Bouvier, an art dealer who is not a party to this case, to defraud Plaintiffs of approximately one billion dollars in connection with the purchase of a world-class art collection, including Leonardo da Vinci’s Christ as Salvator Mundi . In a private mediation subject to an agreement of confidentiality, Sotheby’s settled separate litigation with the original sellers of Salvator Mundi , and Plaintiffs here now move to compel disclosure of materials relating to that mediation. For the reasons that follow, the Court holds that a heightened standard does apply to that request and that Plaintiffs fail to satisfy it. Accordingly, the motion is denied.
BACKGROUND
The Court has issued many opinions in connection with Plaintiffs’ claims against
Sotheby’s and Bouvier, in this and a related case, familiarity with which is presumed.
See, e.g.
,
Accent Delight Int’l Ltd. v. Sotheby’s
,
In brief, Plaintiffs (and their principal, a Russian billionaire named Dmitry Rybolovlev) hired Bouvier in or about 2003 to assist them in purchasing a world-class art collection. See ECF No. 66 (“Am. Compl.”), ¶¶ 13-15. Plaintiffs allege that, over the next twelve years, although Bouvier purported to act as their agent, he was also, improperly and secretly, acting as a dealer, buying the art himself and selling it to Plaintiffs at a higher price. See id. ¶¶ 16-19. Christ as Salvator Mundi , one of only about fifteen authenticated paintings by da Vinci that exist today, is one of the artworks at issue. See id. ¶¶ 166-88. Plaintiffs allege that, in May 2013, Sotheby’s facilitated the sale of the painting from a group of sellers (the “da Vinci Sellers”) to Bouvier for $83 million. See id. ¶¶ 166-73. Based on Bouvier’s false representations about the true purchase price, however, Plaintiffs paid Bouvier $127.5 million — “a markup of 53.62%.” ¶¶ 172, 175. Plaintiffs allege that Sotheby’s “assist[ed]” Bouvier in this fraud and that, when they began to develop suspicions, Sotheby’s “help[ed]” Bouvier in his efforts “to justify the fraudulent price” he had charged Plaintiffs. Id. ¶¶ 175, 182-85.
As it happens, Plaintiffs are not the only ones who, upon learning about Bouvier’s markup, felt aggrieved about Sotheby’s role in the Christ as Salvator Mundi transaction. On November 21, 2016, Sotheby’s filed a separate lawsuit against the da Vinci Sellers seeking a declaratory judgment that it did not breach its obligations to them in connection with the sale of the painting. See Sotheby’s Inc. v. R.W. Chandler, LLC , No. 16-CV-9043 (ALC) (S.D.N.Y.). As Plaintiffs allege in their Amended Complaint here, “Sotheby’s claimed” in that lawsuit — which was assigned to the Honorable Andrew L. Carter — that it had been “unaware of Bouvier’s relationship with Rybolovlev when it arranged for Rybolovlev to view” the painting. Am. Compl. ¶ 186. With the assistance of a private mediator, former District Judge Barbara Jones (the “Mediator”), Sotheby’s and the da Vinci Sellers “quickly” resolved their disagreement and entered into a confidential settlement. ; see ECF No. 201 (“Defs.’ Letter”), at 1. Notably, the mediation (the “Mediation”) began even before Sotheby’s filed its lawsuit. In September 2016, Sotheby’s, the da Vinci Sellers, and the Mediator signed an engagement letter providing that the Mediation “was a settlement negotiation deemed private and confidential.” Defs.’ Letter 1. At no point did Judge Carter order mediation or address the confidentiality of the parties’ private mediation. (Indeed, from a review of the docket, there is no indication that Judge Carter was even aware that the parties were engaged in the Mediation.)
In May 2020, Plaintiffs in this case served the da Vinci Sellers with subpoenas seeking their confidential settlement agreement with Sotheby’s and other documents relating to the Mediation, which Sotheby’s then sought to quash. See ECF No. 182, at 1-2. The Court, after reviewing the settlement agreement in camera , granted Sotheby’s motion to quash as to the settlement agreement, ECF No. 190, but declined to do so as to the remaining requests, subject to any objections Sotheby’s might raise, ECF No. 189. Thereafter, the da Vinci Sellers “produced their mediation statement, as well as other documents, but Sotheby’s blocked the Sellers’ production of communications that, according to the DaVinci Sellers, are ‘otherwise responsive’ and ‘directly relate to the mediation.’” ECF No. 200 (“Pls.’ Letter”), at 2. Plaintiffs now seek the blocked materials as well as Sotheby’s “own mediation statement and communications about the mediation” (together, the “Mediation Materials”). See id. In total, Plaintiffs seek approximately 250 withheld documents, including communications (along with attachments) between Sotheby’s counsel and counsel for the da Vinci Sellers and communications (along with attachments) between Sotheby’s counsel and the Mediator. See id. ; Defs.’ Letter 1.
DISCUSSION
The threshold question for purposes of determining whether Plaintiffs are entitled to the
Mediation Materials is whether such materials are subject to the heightened standard adopted by
the Second Circuit in
In re Teligent, Inc
.,
The Court tethered this heightened standard to the importance of confidentiality to “the mediation and other alternative dispute resolution processes”:
Confidentiality is an important feature of the mediation and other alternative dispute resolution processes. Promising participants confidentiality in these proceedings “promotes the free flow of information that may result in the settlement of a dispute,” In re Grand Jury Subpoena Dated Dec. 17, 1996, 148 F.3d 487, 492 (5th Cir. 1998), and protecting the integrity of alternative dispute resolution generally, see e.g., In re Cnty. of Los Angeles,223 F.3d 990 , 993 (9th Cir. 2000); Clark v. Stapleton Corp.,957 F.2d 745 , 746 (10th Cir. 1992) (per curiam); Sheldone v. Pa. Tpk. Comm’n,104 F. Supp. 2d 511 , 517 (W.D. Pa. 2000); Fields-D’Arpino v. Rest. Assocs., Inc.,39 F. Supp. 2d 412 , 417 (S.D.N.Y. 1999); Folb v. Motion Picture Indus. Pension & Health Plans, 16 F. Supp. 2d 1164, 1170-80 (C.D. Cal. 1998), aff’d216 F.3d 1082 (9th Cir. 2000); Bernard v. Galen Grp., Inc.,901 F. Supp. 778 , 784 (S.D.N.Y. 1995). We vigorously enforce the confidentiality provisions of our own alternative dispute resolution, the Civil Appeals Management Plan (“CAMP”), because we believe that confidentiality is “essential” to CAMP’s vitality and effectiveness.
Id.
at 57-58. More specifically, the Court explained that it drew the heightened standard for
disclosure of confidential mediation materials “from the sources” on which the lower court had
relied, including “the Uniform Mediation Act . . . , the Administrative Dispute Resolution Act of
1996 . . . , and the Administrative Dispute Resolution Act of 1998 . . . .”
Id.
at 58 (footnotes
omitted). “Each of these” sources, the Court reasoned, “recognizes the importance of
maintaining the confidentiality of mediation communications and provides for disclosure in only
limited circumstances.”
Id.
The standards adopted by these sources, the Court noted, were “also
consistent with the standard governing modification of protective orders entered under Federal
Rule of Civil Procedure 26(c).” at 59 (citing
SEC v. TheStreet.Com,
Since
Teligent
, there have been only two decisions in this District addressing whether the
Circuit’s holding applies to private mediations subject to a confidentiality agreement not
otherwise blessed by any court order.
See Rocky Aspen Mgmt. 204 LLC v. Hanford Holdings
LLC
,
By contrast, in
Rocky Aspen
, upon which Plaintiffs rely here, Magistrate Judge
Gorenstein concluded that
Dandong
was “wrongly decided” and that “the heightened test
articulated in
In re Teligent
applies to situations in which there has been a prior court promise of
confidentiality — not to discussions between parties without court involvement and not to a
settlement agreement with a private promise to maintain its confidentiality.” 394 F. Supp. 3d at
463-65.
[2]
Beyond observing that
Teligent
itself “did not involve a private mediation,” he too
offered several reasons for his conclusion. at 464. “First,” he reasoned, “there is a significant
difference between parties who proceed under a court order of confidentiality and parties who
engage in private discussions or who insert a confidentiality provision into a settlement
agreement.
In re Teligent
specifically adverted to the fact that there had been a ‘promis[e]’ made
by a court to participants in the settlement process to keep matters confidential.
In re Teligent
’s
rationale thus rested on the notion that the court had an obligation to honor to some degree its
promise of confidentiality.”
Id.
at 463 (alteration in original) (quoting ,
So which decision is right? The question is a close one, but the Court ultimately
concludes that the heightened standard applies to confidential private mediations too. First and
foremost, although this fact was ignored by the
Rocky Aspen
Court (and is not cited by the
parties here), the Second Circuit itself has applied the heightened
Teligent
standard in relation to
a confidential private mediation.
See In re Tremont Sec. Law, State Law & Ins. Litig.
, 699 F.
App’x 8, 15 (2d Cir. 2017) (summary order).
[3]
Second, although Magistrate Judge Gorenstein is
undoubtedly correct that there is a significant difference between parties who rely on a judicial
promise of confidentiality and parties who forge a private agreement of confidentiality, the
Teligent
Court’s rationale did not rest solely “on the notion that the court had an obligation to
honor to some degree its promise of confidentiality.”
Rocky Aspen
,
Additionally, the relevant question is ultimately not — as
both
the
Dandong
and
Rocky
Aspen
Courts framed it — whether the
Teligent
Court actually held that a heightened standard
applies to confidential private mediations. On that narrow question,
Rocky Aspen
may well have
the better of the argument because
Teligent
, of course, “did not involve a private mediation.”
Rocky Aspen
,
Granted, parties interested in engaging in private mediation could ask the presiding court
to enter an order providing for confidentiality. In that instance, the mediation, although
“private,” would be conducted pursuant to a court order or promise of confidentiality, and even
Rocky Aspen
would provide for heightened protection. But that presumes that there
is
a
presiding court, which underscores a major downside of differentiating between private
mediations and court-ordered mediations: It would discourage what the parties did here, namely
turning to mediation prior to, and as a potential substitute for, commencing litigation. That is, to
secure a stronger assurance of confidentiality, parties who might otherwise have been able and
willing to settle a dispute without burdening the courts might feel they have no choice but to file
a lawsuit. In short, applying the same standards to confidential private mediations and to court-
ordered mediations is likely to “facilitate settlement, which courts are bound to encourage.”
Gambale v. Deutsche Bank AG
,
Finally, extending a heightened standard to disclosure of information or materials from a
confidential private mediation finds support in case law outside of Second Circuit.
See, e.g.
,
Ford Motor Co. v. Edgewood Props., Inc
.,
In short, whether itself compels the conclusion or not, the Court concludes that
its heightened standard should and does apply to private mediations in which there was an
explicit promise of confidentiality.
[5]
Applying that standard here, the Court concludes,
substantially for the reasons provided by Sotheby’s,
see
Defs.’ Letter 3, that Plaintiffs’ request
for the Mediation Materials falls short. There is no dispute that the subject matter of the
Mediation — the sale of
Christ as Salvator Mundi
— is relevant to Plaintiffs’ claims; that sale is
one of transactions on which Plaintiffs’ claims are based.
See
Am. Compl. ¶¶ 166-88. But the
fact that the Mediation Materials concern one of the transactions at issue in this case does not, by
itself, establish a “special need,” “resulting unfairness,” or that “the need for the evidence
outweighs the interest in maintaining confidentiality.” ,
CONCLUSION
In short, the Court holds that Plaintiffs’ request for the Mediation Materials is subject to the heightened standard adopted in , even though the Mediation was a private affair. And applying the heightened standard, the Court concludes that Plaintiffs are not entitled to the Mediation Materials. [6] Accordingly, Plaintiffs’ motion to compel production of the Mediation Materials is DENIED. The Clerk of Court is directed to terminate Docket No. 200.
SO ORDERED. Dated: December 8, 2020 __________________________________
New York, New York JESSE M. FURMAN United States District Judge
Notes
[1] Not long after Judge Sand’s decision,
Dandong
was coincidentally reassigned to the
undersigned, and the defendants moved for reconsideration of his decision. The Court denied the
motion without addressing the issue of whether
Teligent
applies to a private mediation.
See
Dandong v. Pinnacle Performance Ltd.
, No. 10-CV-8086 (JMF),
[2] Ironically, the initial decision in Dandong that the standard applied to a private mediation was made by Magistrate Judge Gorenstein, to whom Judge Sand had referred the case. See id. at 463 n.1 (“The Dandong case decided objections to an oral ruling by this Court that also assumed the In re Teligent standard applied. . . . [T]his Court now believes that the In re Teligent standard did not in fact apply.”).
[3] To be sure,
Tremont
was a non-precedential summary order. “But a district judge is not
at liberty to disregard, let alone contradict, a Second Circuit ruling squarely on point merely
because it was rendered in a summary order.”
Boone v. United States
, Nos. 02-CR-1185 (JMF)
& 13-CV-8603 (JMF),
[4] Additionally, the “slew” of cases cited by Magistrate Judge Gorenstein in which courts
applied “the ‘good cause’ standard of Rule 26(c)” has only limited relevance.
Rocky Aspen
, 394
F. Supp. 3d at 464. Only three of these cases were decided after , and in none was the
court asked to apply the
Teligent
standard.
See Kent v. The N.Y. State Pub. Emps. Fed’n, AFL-
CIO
, No. 17-CV-268 (GTS) (CFH),
[5] To decide the present case, there is no need define the precise metes and bounds of what qualifies as “mediation” for purposes of this rule. Whatever they may be, there is no dispute that what occurred between Sotheby’s and the da Vinci Sellers — negotiations under the auspices of a former District Judge pursuant to a written agreement providing that the negotiations were “private and confidential,” Defs.’ Letter 1 — qualifies.
[6] In light of that conclusion, the Court need not and does not reach Sotheby’s alternative
argument that a subset of the Mediation Materials — namely, the sixteen documents that were
shared with the Mediator, but not with the da Vinci Sellers — are protected by the work-product
doctrine.
See
Defs.’ Letter 2-3;
see also
Fed. R. Civ. P. 26(b)(3)(A). That said, there is reason to
believe that they are.
See, e.g.
,
GenOn Mid-Atl., LLC v. Stone & Webster, Inc
., No. 11-CV-1299
(HB),