Christie's Dilemma: Sue When Buyer Refuses To Pay?

By Dave Rein

If you are an average Joe the plumber who happens to have an extra $40 million laying around to bid on an item or two at an auction and you don't pay, the auction company will sue you and will likely win.  The terms at most auction houses are such that it will probably win attorney fees as well.  But, things get a bit more complicated when the refusal to pay is done at the instigation of or has the support of the Chinese government.

I wrote about the recent legal circus surrounding two Chinese bronzes sold as part of the Yves Saint Laurent art collection that the auction house, Christie's held last week.  The latest twist is either a brilliant bit of patriotism or unvarnished commercial sabotage -- depending upon your perspective.

The winning bidder for the bronzes, Cai Mingchao, announced on Monday that it was his patriotic duty to scuttle the auction of the items and that he could not and would not pay for the bronzes.  A video clip of his announcement is found here.   As a prominent bidder of Chinese art, he was allowed to register the day of the auction.  Closer scrutiny would have shown that he was an adviser to the National Treasures Fund which is a group backed by the Chinese government to recover Chinese art.

The contract terms are clear that Christie's could bring an action to enforce the sale, it could sell to the next highest bidder and seek the difference from Mr. Mingchao, or return the bronzes to the seller and sue to recover the expected commission.  Or it could walk away.

But, if Christie's walks away, does it open itself and other auction houses to future games whenever someone decides an item should be returned even if there is no legal basis for requiring the item's return?

Jackie Chan, I get it.  You are upset that items were looted from China and there is no legal recourse.  I'm not weighing in on the moral rights China may or may not have to demand the bronzes' return.  Make your movie about a quest for stolen Chinese relics.  I, for one, will likely go and see it.

I am, however, weighing in on the legal questions.  Unless a reader can point me to some fact that I am missing, Christie's has strong legal arguments to pursue Mr. Mingchao although business concerns may weigh more heavily than the legal ones.  Will pursuing Mr. Mingchao cause Christie's a greater financial loss

Given that Christie's wants to maintain a strong presence in China and has a publicity mess on its hands, it may decide not to antagonize the Chinese government by pursuing damages against Mr. Mingchao.  China has already stated that the sale is going to have "serious affects on Christie's development in China."  Christie's does not have many other alternatives.  It could prohibit Mr. Mingchao or his own auction house from bidding in future auctions, but he could simply use an agent or a shell company to do his bidding.

One potential way that this may hurt the legal efforts to reclaim looted Chinese art is that an attorney representing an auction house or seller can cite this incident to argue that the National Treasures Fund, the Association for the Protection of Chinese Art in Europe or the Chinese government itself are simply trying to scare potential buyers and is again engaging in frivolous litigation.  The tactics that these organizations engaged in this time may encourage a future court to impose the strongest penalty available to discourage others from using the courts for what amounts to a publicity stunt.

What would you do now if you were Christie's?  Would you pursue Mr. Mingchao?  Do you think the recent events will help or hurt China's efforts to reclaim looted art?

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