This painting, sold as an authentic Basquiat in 1990, has been declared a fake.

February 2009 The Reporter

After the Fall

Making it Neue

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In February 1990, the dealer Tony Shafrazi bought an untitled 1982 Jean-Michel Basquiat painting from Christie’s for $242,000. In 1991, Shafrazi sold the work to Guido Orsi, a Milan-based collector. Orsi claims that in 2006, before an exhibition of the artist’s work, he submitted the canvas to the Basquiat Authentication Committee, in New York, for examination only to have it pronounced a fake. The collector brought charges against Shafrazi but dropped them to join the dealer in suing Christie’s for, among other things, fraud, deceptive business practices and breach of contract. The suit, filed in September 2007, alleges that the auction house knowingly offered a fake picture and failed to disclose that fact to Shafrazi.

Last November, Justice Herman Cahn threw out Shafrazi’s claims on the grounds that the dealer had not suffered any damages, since he was able to resell the work. Because the five-year limit on the auction house’s liability had expired, the court scratched most of Orsi’s claims as well. It left in place, however, the allegation of fraud and, with it, Orsi’s claims for damages that, if affirmed at trial, could total $7 million: $2 million for the alleged current value of a genuine Basquiat of that type plus $5 million in punitive damages.

In his decision, Justice Cahn cites Orsi’s contention that Christie’s had ignored early warnings from the artist’s father, Gerard Basquiat, and the New York art dealer John Cheim — who, at the time, was the director of the Robert Miller Gallery, which represented the Basquiat estate — that the painting "was not right" and should be withdrawn from the sale. "At this stage of the proceedings," Cahn writes, "plaintiffs have sufficiently alleged fraud as to Orsi, in as much as Christie’s is alleged to have published its catalogue containing a fraudulent misrepresentation as to the authenticity of the painting, and that Orsi relied upon that misrepresentation."

In allowing the fraud charge to stand, Justice Cahn seems to be accepting two of Orsi’s claims: first, that he based his purchase on Christie’s pronouncement in its sale catalogue that the work was authentic — in regard to which the judge notes the plaintiffs’ assertion "that when Christie’s provides a warranty concerning the authenticity or provenance of a painting, the custom and practice of the art industry is that the provenance of the work of art has been firmly and permanently established" — and second that the auction house is, in effect, a market maker.

"It never occurred to me that this was a possible outcome — that the warranties and representations made by Christie’s would extend not just to the buyer but to the public," says a New York attorney familiar with the case. According to the boilerplate terms and conditions printed in the back of sales catalogues, guarantees of authenticity apply only to the winning bidder and only for a period of five years (for more on the subject, see Brothers in Law, this issue). If Orsi were to prevail, the attorney adds, "it could be a significant problem for the auction houses, holding them to an entirely different standard that could broaden in an untenable way the liabilities that they would face."

The logic of this decision, says Donn Zaretsky of the New York law firm John Silberman Associates, means that "any subsequent buyer — no matter how remote in time and no matter how many intervening transactions have occurred — could potentially bring a fraud claim against an auction house as market maker."

"Justice Cahn’s decision in the context of the art world is erroneous and misguided," says the New York attorney Peter Stern, "except where the direct purchaser is acting as agent for the real purchaser." The plaintiffs’ lawyer, Aaron Richard Golub, disagrees: "This is the way the law ought to be. You set a tort in motion, you’re responsible for the consequences."