Accent Delight International Ltd. v. Sotheby's

Background

Accent Delight International Ltd. and Xitrans Finance Ltd. alleged that art dealer Yves Bouvier defrauded them in connection with their purchases of an art collection and that Sotheby’s aided that alleged fraud. This opinion concerns a separate breach-of-contract claim involving a tolling agreement. Under that agreement, the parties were required to provide at least 14 days’ written notice before filing litigation or another legal proceeding based on claims or defenses arising from Sotheby’s involvement with Bouvier.

The court had previously granted the plaintiffs summary judgment on liability, ruling that Sotheby’s breached the agreement by filing a lawsuit against the plaintiffs in Switzerland on November 17, 2017, without providing the required notice. Only damages remained on the contract claim; the court had already dismissed the plaintiffs’ requests for an injunction and declaratory relief.

The plaintiffs retained Skadden in September 2017 regarding litigation they contemplated filing in the United Kingdom against Sotheby’s, Bouvier, and others. From October through December 2017, they paid Skadden $1,577,377.58 in legal and bank-wire fees. The plaintiffs never filed the United Kingdom lawsuit. According to the opinion, the Swiss lawsuit prevented them from filing the contemplated United Kingdom lawsuit under the treaty governing jurisdiction between Switzerland and certain European countries.

Parties’ Arguments

The plaintiffs sought more than $1.5 million in damages for the Skadden fees. They argued that, without Sotheby’s breach, they would have filed the United Kingdom lawsuit and that the fees were wasted because the Swiss filing prevented that suit. They also argued that the fees were recoverable as reliance damages—expenses incurred because they relied on the tolling agreement.

Sotheby’s argued that the plaintiffs were entitled only to nominal damages. The opinion notes that Sotheby’s disputed whether all of the fees related to the proposed United Kingdom lawsuit, but the court resolved the motions on the ground that the claimed damages were legally too speculative.

Court’s Analysis

Applying New York law, the court explained that a party may recover direct and foreseeable damages caused by a contract breach, but damages must be reasonably certain rather than speculative. The court rejected the plaintiffs’ main theory because determining their loss would require speculation about whether they would have succeeded in filing their United Kingdom lawsuit before Sotheby’s filed its Swiss action. The tolling agreement required advance notice but did not guarantee that either side could file first in its preferred jurisdiction.

The court also rejected the reliance-damages theory. It reasoned that the plaintiffs’ decision to retain Skadden to prepare a contemplated United Kingdom lawsuit was a gamble on winning the race to file. Because the agreement did not guarantee that result, the court concluded that the plaintiffs could not show that the fees were incurred in reasonable reliance on the agreement or that they were a foreseeable consequence of its breach. The court stated that no reasonable jury could award the plaintiffs those fees.

Disposition

The court denied the plaintiffs’ motion for summary judgment and granted Sotheby’s cross-motion for summary judgment. Because the plaintiffs proved a breach but could not prove recoverable related loss, the court awarded nominal damages of $1 to each plaintiff.

The court also required any party seeking to keep motion materials sealed or redacted to explain, within two weeks, on a document-by-document basis why continued sealing or redaction would be consistent with the presumption that judicial filings are publicly accessible. The Clerk was directed to terminate the plaintiffs’ summary-judgment motion.