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Collector sues gallery over right to first choice of artists’ work

He was promised preferential treatment (and paid for it) but was then left out of almost all sales

New York

Contemporary art collector Jean-Pierre Lehmann is seeking more than $1 million in damages from New York gallery Project Worldwide Inc with which he signed a $75,000 deal to be given first pick to buy art. In closing remarks after a two-day trial in state court in January in Manhattan, Judicial Hearing Officer Ira Gammerman said that there will be “substantial” damages awarded to Mr Lehmann for breach of contract when he rules on the case. A hearing on the calculation of damages was scheduled for 16 February (the day after The Art Newspaper went to press). The judge’s rulings will be subject to appeal.

Mr Lehmann lent $75,000 to the gallery in February 2001 with no interest and no due date, receiving in exchange the right of first choice and price discounts on future purchases. Mr Lehmann sued the gallery in March 2004, claiming it had violated his contract by selling about 40 paintings by the Ethiopian-born US artist Julie Mehretu to just about everybody but him. The Project represents Mehretu exclusively in the US, and her works, produced in limited number, have skyrocketed in value in recent years. Mr Lehmann, who has collected over 1,000 works of art over 35 years, testified that he spends about $1 million annually on acquisitions.

Ms Mehretu’s works have appeared in the Whitney and Istanbul biennials, a one-person show at the Walker Art Center, and other prestigious shows. “Even her squiggles are worth $500,” Peter R. Stern, Mr Lehmann’s lawyer, told the judge.

The contract, dated 7 February 2001, said that Mr Lehmann and his wife, “as well as four other parties who have invested in the Project”, would have the right of first choice “of any work by any artist represented by” the gallery. A key question at trial was whether any “other parties” existed who had actually made investments when Mr Lehmann signed the contract.

Mr Lehmann said that when he signed the agreement, he understood that four other investors had already invested, or would do so within weeks, not that future investors could gain first choice rights at any time. He said he made the investment, his first in a gallery, “to have preferred access to a young gallery which usually discovers young, interesting artists.”

The Project argued that “four other parties” could invest and gain first choice rights at any time. The judge said he would interpret the contract as giving first choice to Mr Lehmann alone, because despite the reference to four other investors, “there were no other four investors” when Mr Lehmann agreed. “I don’t like people who don’t tell the truth when they write documents,” the judge said.

Those who purchased Mehretu’s works from the Project during the disputed period included the Museum of Modern Art in New York; the Walker Art Center; White Cube in London; New York collector Jeanne Greenberg Rohatyn, and others. The judge did not find that any of them had a right of first choice.

The contract also gave Mr Lehmann $100,000 in discounts to be applied to future purchases. Mr Lehmann said this was less important than the first-choice right, because he generally receives a 10-20% discount from other galleries with no loan or investment, but simply by asking for it.

Christian Haye, the owner of the Project, testified that he sold a Mehretu painting to London dealer Thomas Dane in March 2002, without first offering Mr Lehmann the chance to buy it, because Mr Dane was “a valued friend and client” and an advisor to the gallery. But Mr Dane did not have a right of first choice, and Mr Haye had already sold him one Mehretu painting just three months before, during the artist’s show at the Project in November 2001, Mr Haye said. Mr Haye also said that he sold a Mehretu painting to the Walker because it was hosting the artist’s first major solo museum exhibition and it wanted to be able to choose whatever it wanted from that show.

The gallery argued that Mr Lehmann did buy one Mehretu painting and other art, including works by Paul Pfeiffer. But Mr Lehmann testified that he bought the Pfeiffers, which belonged to a series and were not unique works, because he realised he would “never be offered any [works by] Mehretu”.

The gallery also argued that it did not know that Mr Lehmann wanted works by Mehretu, and that when it did learn this, Mr Lehmann expressed an interest only in Mehretu’s very large works. But Mr Lehmann testified that he “certainly” did not mean only a large painting.

Testimony from Mr Lehmann, Ms Liu and Mr Haye reinforced that the gallery did not routinely offer Mr Lehmann first choice on all the works it was selling, for example by sending him slides or reproductions of all its Mehretus or other works. The judge concluded that there was “no question” that the gallery was obligated under the contract to offer paintings to Mr Lehmann, and that it had “breached that obligation.”

He added that while he could understand why a gallery and artist would want a painting to be sold to a museum rather than a private collector, and that such a sale might be an exception he might recognise, “the agreement makes no reference to that.” The agreement, he said, gave Mr Lehmann “the right of first refusal over everybody, over every institution.”

Mr Lehmann is seeking more than $1 million in damages. Each side offered testimony of expert witnesses as to the price increase of Mehretu’s work from the time that Mr Lehmann would have bought it to today. The judge said he would probably accept the testimony of one expert witness or the other. He added that with the gallery’s 50% commission on sales of Mehretu’s paintings, “there will be at some point eventually enough funds to satisfy a judgment.”