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JN Contemp. Art LLC v. Phillips Auctioneers LLC

JN Contemp. Art LLC v. Phillips Auctioneers LLC

United States Court of Appeals for the Second Circuit

August 19, 2021, Argued; March 23, 2022, Decided

Docket No. 21-32-cv

Opinion

 [*120]  POOLER, Circuit Judge:

Phillips Auctioneers LLC invoked the force majeure clause to terminate LLC, citing the COVID-19 pandemic and state  [*121]  government orders requiring its agreement to sell a Rudolf Stingel painting on behalf of JN Contemporary Art nonessential businesses to cease in-person operations. JN sued for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and equitable estoppel. Phillips moved to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The United States District Court for the Southern District of New York (Cote, J.) granted the motion, concluding that the pandemic constituted "a circumstance beyond the parties' reasonable control," as contemplated by their agreement. On de novo review, we affirm.

BACKGROUND

JN buys, sells, and exhibits works of art. Phillips is an auction house that takes works of art on consignment for auction. In June 2019, JN and Phillips entered into two agreements. The first (the "Basquiat Agreement") required JN to bid £3,000,000 for Untitled, by Jean-Michel Basquiat (the "Basquiat Painting") when Phillips auctioned it during its 20th Century & Contemporary Art Evening [**3]  Sale scheduled to take place in London in June 2019. Phillips agreed to pay JN a financing fee of 20 percent of the sale amount above £3,000,000. The Basquiat Agreement was "[c]onditional upon signature by [JN] of the Consignment Agreement with Guarantee of Minimum Price in respect of the work by Rudolf Stingel, Untitled, 2009 . . . and conditional upon the [Basquiat Painting] being offered for sale with a commitment by Phillips to pay the Seller a Guaranteed Minimum[.]" App'x at 50.

On the same day, the parties entered into the second agreement (the "Stingel Agreement"), which required JN to consign to Phillips Untitled, 2009, a painting by Rudolph Stingel (the "Stingel Painting"), with a guaranteed minimum amount of $5,000,000 to be paid to JN. The Stingel Agreement stipulated that the painting was to be "offered for sale in New York in [Phillips's] major spring 2020 evening auction of 20th Century & Contemporary Art currently scheduled for May 2020" (the "New York Auction"). App'x at 56.

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29 F.4th 118 *; 2022 U.S. App. LEXIS 7652 **

JN Contemporary Art LLC, Plaintiff-Appellant, v. Phillips Auctioneers LLC, Defendant-Appellee.

Prior History: Appeal from the December 17, 2020 judgment of the United States District Court for the Southern District of New York. (Cote, J.). Phillips Auctioneers LLC invoked the force majeure clause to terminate its agreement to sell a Rudolf Stingel painting on behalf of JN Contemporary Art LLC, citing the COVID-19 1 pandemic and state government orders requiring nonessential businesses to cease in-person operations. JN sued for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and equitable estoppel. Phillips moved to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) [**1] . The district court granted the motion, finding the pandemic constituted "a circumstance beyond the parties' reasonable control" as contemplated by their agreement. We agree.

Disposition: Affirmed.

CORE TERMS

auction, force majeure, pandemic, Painting, terminate, district court, argues, postpone, quotation, orders, marks, covenant, parties, nonessential, reasonable control, natural disaster, executive order, consignment, motion to dismiss, circumstances, catchall, excused

Civil Procedure, Appeals, Standards of Review, De Novo Review, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Business & Corporate Compliance, Contracts Law, Standards of Performance, Impracticability, Governments, Legislation, Interpretation, State & Territorial Governments, Employees & Officials, Breach, Breach of Contract Actions, Elements of Contract Claims, Types of Contracts, Divisible Contracts, Contracts Law, Contract Interpretation, Severability, Contract Conditions & Provisions, Conditions Precedent, Evidence, Admissibility, Statements as Evidence, Parol Evidence, Integration Clauses, Types of Evidence, Documentary Evidence, Option Contracts, Good Faith & Fair Dealing, Covenants