Perelman v. Gagosian Heats Up

The gallerist Larry Gagosian sat quietly in the John Drew Theater at Guild Hall last week, greeting some of the high-powered guests at a screening he was hosting but mostly keeping to himself in a back row. He left it to the film’s director to introduce it and was out of his seat by the time the post-screening discussion began.

His low-key demeanor stood in sharp contrast to recent filings in a long-running lawsuit against him brought by Ronald Perelman, a former friend and client. Both men are part-time East Hampton residents.

Mr. Perelman first sued Mr. Gagosian in 2012, asserting fraud in provisions regarding the resale of a sculpture he had commissioned from Jeff Koons two years before. Such provisions “effectively crippled plaintiff’s ability to resell ‘Popeye’ at its fair market value,” the suit claimed.

The dealer also stipulated that Mr. Perelman could not resell the work to anyone until it had been completed, according to the lawsuit, despite an agreement stating that it could be resold once paid for. At that point, the sculpture had been delayed for seven months because of issues with the fabricator, prompting Mr. Perelman to believe “that the work would not be completed and delivered at any time in the near future.”

The two parties eventually agreed to value the work at $4.25 million as part of a purchase agreement for a painting by Cy Twombly, “Leaving Paphos Ringed With Waves.” Mr. Perelman contended in the 2012 lawsuit, however, that the value of the Koons had increased significantly from the time of the 2011 agreement, and that the exchange resulted in a loss to him of several million dollars. He amended the complaint a few months later to charge that not only had Mr. Gagosian, by dealings with a third party, artificially inflated the price of the Twombly, but had also undervalued other works Mr. Perelman had offered in exchange for the painting.

More broadly, the suit suggests, as many articles about Mr. Gagosian in recent years have asserted, that the gallerist’s dominant position in the art market gives him unfettered power to set and maintain market prices for the artists he represents, by sales through both the gallery and at auction.

Some of the past month’s filings in the case have addressed ongoing issues related to the subpoenas of Alberto, Jose, and David Mugrabi, a family of art collectors and private dealers that has partnered with the Gagosian Gallery on many deals over the years. Subpoenas have also been issued for many years of documents related to those dealings.

Mr. Perelman maintains that the Mugrabis’ ownership of the Twombly painting, during the five months in which it was initially presented to him and then offered to him again at $3.5 million above the original asking price, served to purposefully inflate the price over its fair-market value. The painting was eventually bargained down to $10.5 million.

In a letter to the court, the Mugrabis’ attorneys said that given their clients’ limited involvement, it was unreasonable to require them to deliver years of unrelated documents.

In phone conversations transcribed by an associate of Alberto Mugrabi from his end in 2009 and published in New York magazine last year, Mr. Mugrabi and Mr. Gagosian agreed to buy Warhol pieces that appeared to be unlikely to sell at an upcoming auction. According to the transcript, Mr. Mugrabi discussed the works with a Sotheby’s director in an attempt to convince the seller that his asking price was too high. The magazine noted that about half the art sold at contemporary art auctions that year were by artists represented by Mr. Gagosian.

Mr. Perelman is not the only person who has sued Mr. Gagosian. Jan Cowles, a collector and the mother of Charles Cowles, a gallery owner in  Manhattan  until 2009, sued the gallery over work from her collection that her son sold without her knowledge or permission. Mr. Perelman’s amended complaint includes some details from that lawsuit.

Mr. Gagosian’s attorneys requested this month to depose Mr. Perelman in September, not in October as the Perelman side had offered, which would be only days before the discovery cutoff date. The Gagosian lawyers have been asking for a deposition date since February. This month, they requested full tax documents from the plaintiffs related to the value of the art at issue.

The Perelman side has offered only redacted documents to date, stating that the information withheld had been approved by the court.

Mr. Gagosian has also requested that the plaintiffs’ communication with Dentons, the law firm that represented Ms. Cowles, be made available to them. Mr. Perelman cited information from the Cowles case in his amended complaint asserting that the valuations of the Twombly painting, as well as the works used in exchange for its acquisition, were fraudulent.

Whether these actions are about money or ego remains to be seen. The amount involved is relatively small, given the billions each party manages and deals with on a yearly basis. Aside from the filings, neither is talking, and Mr. Gagosian is famous for not giving interviews. His last one was with Peter Brant, a friend and fellow Warhol investor, in Interview magazine in December 2012. A Guild Hall panel discussion this summer, “Andy Warhol: Global Phenomenon,” featured Mr. Gagosian, Mr. Brant, and Alberto Mugrabi.

In the past few years, most press about Mr. Gagosian has been less than flattering, detailing artist defections and his “shark-like” business practices. In his lawsuit, Mr. Perelman appears to yearn for a simpler time, mentioning that “in addition to their relationship concerning art, Gagosian and Mr. Perelman are also friends and have been business partners outside of the art world. For example, Mr. Perelman and Gagosian, with others, invested as partners in the re-opened Blue Parrot restaurant in East Hampton, New York. They have been guests in each other’s homes, have met often for dinner or drinks, and have attended the same social events.”

Mr. Perelman did not appear to be in attendance at last week’s film screening. Mr. Gagosian was not one of the bold-faced names mentioned at Mr. Perelman’s recent Apollo in the Hamptons party, which attracted such notable guests as Barbra Streisand and New Jersey Gov. Chris Christie.