Hoffman v. L&M Arts

838 F.3d 568 (5th Cir. 2016)

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Nature of the Case

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Facts

P purchased the Red Rothko in 1998. P later bequeathed the Red Rothko to the Dallas Museum of Art. In the wake of her husband's death in 2006, P decided to sell. the Red Rothko. P was eager to avoid the publicity that would likely result from a public sale and decided to sell privately. P reached out to Mnuchin, and Levy was the co-principal of D, an art gallery. Through an intermediary, Van Doren, P conveyed to D her concern for confidentiality. To maintain secrecy, Mnuchin agreed to approach only a single buyer and assured Van Doren that the buyer would be an individual. D approached Martinez (D) who consulted with the chairman of Christie's International for advice on an appropriate price. P immediately canceled the sale and complained to Ds that there had been a breach of confidentiality. Van Doren and Mnuchin executed a letter agreement that contained a commitments by the buyer to anonymously donate $500,000 to the Dallas Museum of Art and to allow P to retain possession of the painting for six months after closing; and to refrain from hanging or displaying the painting for an additional six months thereafter. The agreement stated: 'All parties agree to make maximum efforts to keep all aspects of this transaction confidential indefinitely.' The agreement closed at $17.6 million, and P kept the painting for 6 months. D tried to resell the painting from March 2009 to March 2010. Martinez then moved it to D's gallery in New York and decided to sell it at public auction at Sotheby's. In May 2010, the Red Rothko appeared on the cover of the Sotheby's catalog. As part of the write up, P was given prominent display. Mention was clearly made of the 'Fast Forward' exhibit catalog. An art blogger also referenced the exhibit as well as P. Mnuchin reached out to P in mid-March 2010 and informed her of the impending auction. P asked if she could buy back the painting and was rebuffed. Sotheby's auctioned the Red Rothko for approximately $31 million, including commissions. P sued Ds for breach of contract. Ds moved to dismiss because the Agreement governed disclosure of the terms but not the sale itself. The court disagreed. At the conclusion of discovery, Ds moved for summary judgment. The court refused and upheld P's benefit of the bargain theory of damages. The value of the allegedly breached confidentiality provision could be measured by 'the difference between $17.6 million [the sale price in the Agreement excluding commissions and what the painting would have sold for at public auction on or around April 24, 2007. P got the verdict. Everybody appealed.