Tortious Interference Claim Highlights Statute of Limitations Challenge
In 'S.A.R.L. Galerie Enrico Navarra v. Marlborough Gallery', the First Department agreed with the Supreme Court that plaintiff’s claims for tortious interference with contract and aiding and abetting tortious interference with contract had not expired as a matter of law, because all of the elements of the claims had materialized before the statute of limitations had run its course.
When does the statute of limitations start to run on a tortious interference with contract claim when the breach occurred somewhere on a spectrum of increasingly breach-like behavior? The Appellate Division, First Department, tackled that question in a May 6 decision concerning a long-running dispute involving the work of world-renowned Chinese-French artist Chu Teh-Chun. In S.A.R.L. Galerie Enrico Navarra v. Marlborough Gallery, the First Department agreed with the Supreme Court that plaintiff’s claims for tortious interference with contract and aiding and abetting tortious interference with contract had not expired as a matter of law, because all of the elements of the claims had materialized before the statute of limitations had run its course. The case highlights the challenges of determining when a breach of contract occurred, and the tension between statutes of limitations and the rights of an injured party to bring a claim.
Background
The facts underlying this case go back to 2003, when the plaintiff, Galerie Enrico Navarra (“Navarra”), contracted with a non-party, the now dead abstract artist Chu Teh-Chun (“Chu”). Under their agreement, Chu would design 24 ceramic plates, and Navarra would support Chu by, among other things, paying for the production of the plates, helping to promote the sale of the plates, and, ultimately, selling the plates.
Allegedly because of tortious interference by the defendant, Marlborough Gallery (“Marlborough”), the relationship between Navarra and Chu soured over the next few years, and in February 2007 Chu first sent a cease-and-desist letter to Navarra claiming that the gallery had breached their agreement. Then, two months later, Chu sued Navarra on the same grounds in France. In May of 2008, Chu took additional action against Navarra, first by sending a letter to Christie’s in Hong Kong, casting doubt on the authenticity of plates that Navarra had arranged to be auctioned there, and demanding that Christie’s withdraw the plates from auction. Then, in October of 2008, an advertisement appeared in a French art magazine announcing that the plates that Navarra was offering for sale were not authentic.
In October 2010, within the three-year statute of limitations for tortious interference claims arising in 2008, but beyond the reach of the law for claims dating to early 2007, Navarra sued Marlborough, an international dealership with galleries in New York, London and Spain, in Federal Court in New York. Navarra claimed that Marlborough had persuaded Chu to sever its ties with Navarra, and to publicly disavow the authenticity of the plates that Navarra was trying to sell, in order to monopolize the market for Chu’s ceramics. After defendants’ motion to dismiss that case was granted, the Second Circuit reversed, but the District Court declined to exercise supplemental jurisdiction over the state law claims, and Navarra sued Marlborough all over again in New York state court in 2019. There being no dispute that the state law claims related back to the 2010 complaint, defendants moved for summary judgment on the statute of limitations issue, and a hearing was held in August 2020.
Summary Judgment Denied Following Oral Argument at Supreme Court
While the First Department’s decision is somewhat lean on both background and reasoning, the Supreme Court decision appealed from offers plenty of both. Counsel engaged in a spirited and thoroughly well-researched and well-argued debate between Jeremy Wallison of Wallison & Wallison, counsel for Navarra, and Richard Rosberger of Rottenberg Lipman Rich on behalf of Marlborough, punctuated by thoughtful and pertinent questions from the bench. Judge Joel Cohen concluded the hearing by issuing a reasoned opinion denying defendants’ motion for summary judgment.
A claim for tortious interference with contract accrues when all four elements of the claim can be truthfully alleged in a complaint, namely: the existence of a contract, defendant’s knowledge of the contract, defendant’s intentional inducement of a third party to breach the contract, and damages to the plaintiff. The main point that Marlborough made in support of its argument that the claims had accrued in early 2007, and were therefore time barred, was that because tortious interference with contract is not a continuing tort, the claims accrued as soon as Chu breached the contract. Marlborough argued that happened as early as February 2007, when Chu (allegedly at the behest of Marlborough) sent Navarra a cease-and-desist letter, and no later than April 2007, when Chu initiated the lawsuit in France. Since Marlborough also had to show that Navarra suffered an injury as a result of Chu’s actions in 2007, Rosberger argued that Navarra’s complaint itself stated that the gallery suffered an injury because it had to put its plans to exhibit and sell the plates at issue on hold for more than a year as a result of the cease-and-desist letter and the French lawsuit.
In rebuttal, counsel for Navarra argued that, while the events of 2007 (the cease-and-desist letter and the French lawsuit) and those of 2008 (the letter to Christie’s and the advertisement in the French art magazine), were all part of the same broad scheme by Marlborough to monopolize the market for Chu’s ceramics, they were fundamentally different. Because the events of 2008 were public-facing, they were of a different kind altogether than those of 2007. Navarra also pointed out that during the first year and a half of the French lawsuit, Chu was aware that some of the plates at issue were being offered for sale, but took no action to try to prevent their sale.
Judge Cohen ultimately did not address the question of whether the events of 2007 and 2008 comprised a continuing tort, as he determined that neither the cease-and-desist letter nor the French lawsuit constituted breach as a matter of law. Stressing that he was not making a factual finding about whether a breach occurred in 2007, Judge Cohen determined that a breach could only occur when Chu took steps to hinder Navarra’s ability to sell plates, and, on the summary judgment record before him, that did not happen in 2007. Chu, however, did breach his contract with Navarra when he sent a letter to Christie’s disavowing the authenticity of the plates in 2008, within the limitations period.
The Appellate Division Affirms
The First Department agreed with Judge Cohen that summary judgment was inappropriate because a question of fact existed as to when the claims accrued. The appellate court also agreed that, on the record, it could not find as a matter of law that a breach occurred in 2007 because both parties continued to perform their obligations under the contract until 2008, when Chu’s actions deprived Navarra of its right to sell the plates. According to the First Department, Navarra’s contractual right to sell the plates was “merely suspended” in 2007 pending the result of the French lawsuit.
It may seem somewhat odd to find that a party that both sends a cease-and-desist to, and sues, its contractual counterparty based on allegations of breach of contract nevertheless “continued to perform [its] obligations under the contract,” as both Supreme Court and the First Department found in this case. While Judge Cohen did in fact grapple with that question at oral argument, he may have been persuaded that no breach occurred in 2007 because neither the cease-and-desist letter nor the French lawsuit (surprisingly, perhaps, to American jurists) were public acts. Despite the fact that in 2007 Chu was privately alleging that the plates were not authentic, the possibility still existed at the time that the lawsuit could be resolved and Chu’s allegations never made public, in which case Navarra could sell the plates, thereby accomplishing the fundamental purpose of the contract. It was only once Chu made his allegations public in 2008 that Navarra lost any hope of being able to sell the plates.
Aaron Chase is the Managing Attorney at Aaron Chase LLC, a New York law firm focused on strategic legal research and risk analysis.
Reprinted with permission from the May 11, 2021 edition of the New York Law Journal© 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.
