Minor files suit against Sotheby’s over painting

By Tasha Kates

Published: October 2, 2008

Entrepreneur Halsey Minor has filed a class action lawsuit against Sotheby’s Inc. over the auction house’s alleged economic interests in a painting for which he bid $8.6 million.

The complaint, which was filed Wednesday in the U.S. District Court, Northern District of California, alleges that Sotheby’s concealed information about its financial stake in the items that it sells at auction.

The class action suit, which is estimated to include thousands of people, accuses Sotheby’s of deceptive practices, unjust enrichment and fraud.

Minor, a Charlot-tesville native and University of Virginia graduate who earned his wealth in part through his founding of the technology site CNET, also is suing on a separate count of breach of fiduciary duty. The amount that the suit is seeking has not yet been determined, said Eric M. George, Minor’s attorney.

According to the complaint, Minor placed the $8.6 million bid on the Edward Hicks painting, “The Peaceable Kingdom with the Leopard of Serenity,” during a May 22 auction.

“Mr. Minor made the bid largely on the advice of Sotheby’s Executive Vice President and Director of the American Paintings Department [Dara Mitchell], who agreed to be, and acted as, [the] plaintiff’s art consultant and purchasing agent,” the complaint read. “Yet Sotheby’s never revealed to the plaintiff that it maintained a direct economic interest in that painting.”

The auction house does indicate which art has “the equivalent of an ownership interest,” a phrase that George said is unclear.

“By law, Sotheby’s is supposed to disclose all types of economic interest,” George said. “In reality, by their own admission, they disclose only a fraction of those interests.”

Neither Minor nor a representative of Sotheby’s returned calls for comment Thursday.

Soon after placing a phone-in bid on the painting, Minor said he learned about Sotheby’s interest in selling the work. According to the complaint, previous painting owner Ralph Esmerian was indebted to Sotheby’s. The auction firm held works of art that included the Peaceable Kingdom to secure his debt, the suit said, but ultimately they opted to sell the painting to reduce Esmerian’s balance.

George said Sotheby’s valued Peaceable Kingdom at $6 million, giving rise to a theory that the firm’s reported concealment of the painting’s history resulted in an inflated bid.

E-mail exchanges quoted in the complaint show that Mitchell had previously told Minor that the painting hadn’t sold for $10 million at a private sale earlier that year. A month before the sale, Mitchell send an e-mail to Minor telling him that she thought the painting would sell because of “quite a bit” of interest and a “reasonable” reserve, according to the suit.

Upon learning about what had happened with Esmerian and Sotheby’s, Minor stated in the complaint that he decided not to pay for all of the art he won through the auction firm, in case he was misinformed about the other works.

On Sept. 2, the auction house filed a complaint against Minor in the U.S. District Court, Southern District of New York. Sotheby’s suit alleges that Minor didn’t pay for three works of art that he won totaling $13.8 million, including Peaceable Kingdom. George said Minor has filed a counterclaim in that suit.

The first conference on Minor’s suit against Sotheby’s will be heard on Jan. 7.