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Wroth About Rothko: “Order & Joint Stipulation of Dismissal” in De Sole Case vs. Freedman & Knoedler

When a litigant perceives, during the course of a trial, that there’s a good chance he’ll lose his case, there is an impetus to settle. With many expert witnesses having denied authenticating the disputed Rothko sold by a New York gallery to Domenico and Eleanore De Sole, and with the underlying implausibility of the sudden emergence on the market of a huge trove of previously unknown works by major artists, Ann Freedman and the shuttered gallery she formerly directed, Knoedler & Co., may have seen the writing on the courtroom wall.

Instead of ruling about the fraud allegations surrounding one of many sales from the Rosales trove, U.S. District Court Judge Paul Gardephe will now review the De Soles’ confidential settlement agreements with Freedman and with Knoedler regarding this work:

The purported Rothko, “Untitled,” 1956, sold by Knoedler to the De Soles for $8.3 million

The truce freed Freedman and former Knoedler owner Michael Hammer from being hammered in court today, where they had been expected to testify.

Here’s the judge’s Order and Joint Stipulation of Dismissal of the claims against Freedman. And here’s the similar order in the settlement with Knoedler and Hammer.

The judge’s orders state that the case was “voluntarily dismissed…without costs or fees to any party.” That means (as explained by Freedman’s lawyer, Luke Nikas) that “the court itself will not award any costs or fees to either party. The parties’ own agreement regarding the Settlement Amount is separate from that and confidential.”

The De Soles, whose lawyer, Gregory Clarick, pronounced them “extremely satisfied” with the settlements, had been seeking $25 million under the federal RICO [Racketeer Influenced and Corrupt Organizations] law, which allows recovery of three times the damages sustained (i.e., purchase price plus the cost of the suit), if that law is violated. Passed in 1970, RICO was originally intended to aid prosecution of the Mafia. But its use has since expanded to include business enterprises.

The De Soles had also floated the dubious theory (described in this Memorandum of Law) that the measure of damages against Knoedler for the breach-of-warranty claim should be the current value of the fake Rothko, had it been a real Rothko when they bought it in 2004. They engaged an appraiser, Elin Lake-Ewald, who gamely assigned an appreciated value of $25 million to the if-real Rothko.

Elin Lake-Ewald

Elin Lake-Ewald

I wonder how Sotheby’s (where Domenico De Sole is chairman) would have felt about establishing case law that elevates the fake to authentic for the purpose of determining damages in such a dispute. Where there is no finding of fraud, the more typical practice of art dealers, if a work is judged to be not as described, is to refund the purchase price.

“Ann is pleased to be able to reach this settlement,” Nikas, her lawyer, said in a statement released to reporters. “She stands behind the work that she sells. From the very beginning of these cases, Ann never wanted to keep a penny of the commissions she made on these works.”

Meanwhile, life apparently goes on for Freedman’s current gallery. Julia Loughlin, an associate at FreedmanArt, told me this today, in response to my query:

FreedmanArt is fully open and will remain so. We look forward to our next exhibition, Glenn Goldberg, “Of Leaves and Clouds,” which opens Mar. 5.

When I went to FreedmanArt’s website earlier today, it listed only the current exhibition of works from the collection of oncologist Luther Brady, which closes tomorrow. After I emailed my questions about the gallery’s future plans, an Upcoming Exhibition link appeared.

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