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On 27th February 2017, the Honorable Charles E. Ramos of the Supreme Court of the State of New York issued a memorandum decision in Schulhof v. Jacobs, (1) a litigation commenced three and a half years earlier, establishing new precedent on the issue of what constitutes a fiduciary relationship in the context of art transactions where buyers and sellers are represented by intermediaries. The plaintiff in the action is Michael Schulhof, as executor for the estate of his mother, noteworthy patron of the arts and collector Hannelore Schulhof; the defendant is Lisa Jacobs, a New York City art adviser who had for over a decade worked as curator to Ms Schulhof. Mr Schulhof and Ms Jacobs had agreed that Ms Jacobs would find a private purchaser for a Basquiat painting from Ms Schulhof's collection pursuant to the terms of an October 2011 contract, which promised Jacobs a US$50,000 seller's commission on a sales price of no less than $5.5m, but forbade her from accepting any buyer's premium on a completed transaction thereunder. (2) Ms Jacobs ultimately secured a purchaser for the Basquiat at the price of $6.5m, which such higher purchase price Ms Jacobs failed to disclose to Mr Schulhof, enabling her to secretly retain a US$1 m buyer's premium in addition to the agreed seller's commission. (3)

This case highlights the relative opacity of the high-end market for private art transactions, in which it is not uncommon for dealers or other intermediaries to represent both ultimate parties to a transaction without disclosing such dual affiliation to either party.4 It also represents the latest decision in a body of jurisprudence which has evolved in New York courts over approximately the last five years on the topic of the 'special sauce' necessary to create a fiduciary obligation on the part of the seller or buyer's agent, all the ingredients for which must be present in order for such a court to recognise such a special relationship. Indeed, the line of relevant case decisions illustrates an apparent 'Goldilocks and the Three Bears' conundrum, in which the porridge of factors comprising various plaintiffs' and defendants' relationships has frequently been 'too hot' or 'too cold' for New York courts' liking.

In fact, a review of recent prior decisions indicates just one other art transaction case in which the allegation of fiduciary duty passed muster. The 2012 case of Cowles v. Gagosian (5) presents somewhat similar facts to Schulhof v. Jacobs. In that case, an elderly individual collector plaintiff sued a prominent gallery who represented her son in the sale of a major contemporary painting (in this case, a Lichtenstein), alleging that the gallery failed to honour its duty of loyalty to her by soliciting a lower-than-market purchase offer from a buyer for the work. Finding that defendant Gagosian acted as an agent for plaintiff as a consignor of the Lichtenstein work, the Supreme Court of New York denied the gallery's motion to dismiss, noting that plaintiff's allegations:

describe conduct that would constitute a breach...