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Collector wins $1.7 million in damages from New York Gallery over violation of lending contract

Jean-Pierre Lehmann was denied “the right of first refusal over everybody”

New York

A judge has ordered a New York gallery to pay $1.7 million to a collector who was denied his contractual right of first choice of all art sold, after he loaned money to the gallery at its request.

On 2 March, the collector, Jean-Pierre Lehmann, was awarded the damages at a hearing which followed a two-day trial in January in which the judge indicated that the gallery, Project Worldwide Inc, would have to pay “substantial” damages for breach of contract. The proceeding, before Judicial Hearing Officer Ira Gammerman, took place in State trial court in Manhattan.

The Project expects to appeal the judge’s determinations as to both liability and damages, which it believes are erroneous, Alan Effron, the gallery’s New York attorney, of Pelosi Wolf Effron & Spates LLP, told The Art Newspaper.

Mr Lehmann lent the gallery $75,000 in February 2001, with no interest and no due date, receiving in exchange the right of first choice of art sold by the Project and discounts on future purchases.

The judge found that the agreement gave Mr Lehmann “the right of first refusal over everybody”, and that the Project had breached the agreement, by selling its highly sought-after contemporary works to other clients.

Among those works, Mr Lehmann said he particularly wanted those by Julie Mehretu, the Ethiopian-born US artist whose rise in the art world, the court was told, has been “meteoric”. Her art, produced in limited quantities, has been included most recently at the 2004-05 Carnegie International, and has also been shown at the Whitney and Istanbul biennials, among other exhibitions.

The hearing last month focused on calculating the damages to be paid by the gallery, based on the amount by which the Mehretu paintings that Mr Lehmann wanted have increased in value from the date he would have bought them to the present. Mr Lehmann testified that he spends more than $1 million a year buying art, and that he would have bought nine works by Mehretu which the gallery sold to others.

In January, expert witnesses on each side gave conflicting testimony on the present value of the Mehretu paintings. Ms Mehretu herself testified, saying that her paintings were priced by a square footage formula which she said she had agreed on with Christian Haye, owner of the Project. Mr Haye testified that the gallery priced the paintings at $1,000 per square foot if larger than 100 square feet, $1,500 per square foot for work between 50 and 100 square feet, and $2,500 per square foot for works smaller than 50 square feet, with a minimum price of $25,000.

At last month’s hearing, the judge accepted the testimony of Mr Lehmann’s witness, Ann Cook, a private art dealer, consultant and appraiser in New York, in determining the current value of the paintings. Determining the original price Mr Lehmann would have paid, the judge said he was “not interested” in the square foot price and used the actual prices made when the gallery sold the paintings to other clients. Mr Lehmann is represented by Peter R. Stern, of the New York firm McLaughlin & Stern LLP.