Al Hirschfeld Foundation v. Margo Feiden Galleries

Background

The Al Hirschfeld Foundation (AHF) and Margo Feiden Galleries Ltd. (MFG) had previously litigated claims concerning a 2000 settlement agreement. After summary-judgment rulings and bench hearings on damages, the only claim left for trial was MFG’s counterclaim that AHF breached the implied covenant of good faith and fair dealing. The court’s October 11, 2019 decision had defined the scope of that counterclaim. This order decided motions in limine—requests to rule before trial on whether specified evidence may be admitted.

Margo Feiden was a co-defendant in the broader case and represented herself, but she was not a party to this counterclaim. The court stated that MFG’s counterclaim must be handled exclusively by MFG’s counsel.

Witnesses

AHF asked the court to bar MFG from calling Louise Hirschfeld Cullman. The court denied that motion. It held that a witness need not have been deposed to testify at trial and found that MFG had offered a plausible basis for believing that Cullman might have relevant knowledge, including possible knowledge of AHF retail sales of Hirschfeld works or derivative works in New York or New Jersey. The court cautioned, however, that MFG could not use her testimony to revisit already resolved claims or to question her vexatiously. It said questioning would be strictly limited to matters relevant to the surviving counterclaim.

AHF also asked to bar AHF president Lynn Surry, creative director David Leopold, and corporate counsel Lee Snow from testifying for MFG. The court denied that motion. Because MFG was the plaintiff on the counterclaim being tried, the court held that MFG could call witnesses of its choice, including adverse witnesses affiliated with AHF. The court would allow broader cross-examination if those witnesses testified for MFG, to help avoid having them called again during AHF’s defense.

The court treated Snow differently for a later procedural step. Because AHF’s tax returns were being excluded, and because MFG’s general description of Snow’s proposed testimony was unclear, the court ordered MFG to submit a sworn declaration identifying the specific admissible testimony Snow could provide, along with deposition excerpts. AHF could respond three business days later. The court stated that it expected to issue an order excluding Snow’s testimony if it could not identify relevant admissible evidence he could give, but it did not exclude him in this order.

Tax returns

The court granted AHF’s motion to exclude several years of its tax returns under Federal Rules of Evidence 401 and 403. Rule 401 concerns whether evidence is relevant; Rule 403 permits exclusion when relevant evidence’s usefulness is substantially outweighed by risks such as confusion, unfair prejudice, or wasted time.

The court found that the tax returns aggregated AHF’s art-sale revenue without identifying the works sold or whether sales occurred in New York or New Jersey, the territory in which MFG claimed contractual exclusivity. The returns therefore would show only that AHF sold art, not that AHF made sales prohibited by the agreement. The court also found that the returns could confuse the jury and cause unnecessary delay.

Permitted and excluded liability theories

AHF asked the court to bar MFG from relying on certain alleged sales as support for its counterclaim. The court denied the motion as to three categories of alleged sales in New York or New Jersey: a 2011 sale through the Doyle Auction House, a 2014 sale of an individual print in Woodstock, New York, and alleged 2015 authorizations of sales through the New York Historical Society. The court held that its prior summary-judgment decision had preserved these theories for trial and that AHF had notice of the sales. It also held that AHF’s arguments that the sales were permissible presented factual issues that should not be resolved before the evidence was heard.

The court granted AHF’s motion to preclude evidence and arguments concerning AHF’s sales of Consigned Works and online sales. It interpreted the agreement as giving AHF the right to reclaim particular Consigned Works, subject to MFG’s right to a specified number of works. After reclaiming a Consigned Work, AHF could sell it outside New York and New Jersey, although the geographic restriction barred AHF from retail sales of such works in that territory. MFG had not identified evidence that AHF sold Consigned Works in New York or New Jersey during the agreement’s term.

The court gave additional reasons for excluding online-sales evidence. AHF represented that its online store opened after it had terminated the agreement, and that online sales began months after termination. The court also found that the agreement did not clearly impose the claimed geographic restriction on AHF’s online sales. It declined to use the implied duty of good faith and fair dealing to create a new contractual restriction.

Disposition

The court granted in part and denied in part AHF’s motions in limine. It denied the requests to exclude Cullman, Surry, Leopold, and Snow at that stage; granted the request to exclude AHF’s tax returns; denied the request to exclude evidence about the Doyle Auction House, Woodstock, and New York Historical Society sales; and granted the request to exclude evidence and arguments about Consigned Works and online sales. The clerk was directed to terminate the motion pending at docket 322, and the court stated that staff would contact counsel to schedule the trial.