Buyer of Fake Rothko Given Leave to Amend Allegations of Fraud

In 2001, Ron Meyer, a film industry executive with no ability to distinguish an authentic Mark Rothko painting from a forgery, bought for $900,000 (plus commissions) what sellers, Susan Seidel and Jamie Frankfort, represented as an authentic Mark Rothko painting (not the one, “Untitled,” pictured at right). Happy with his purchase, Mr. Meyer hung the painting in his home until 2019, when he discovered that the painting was a forgery. He came to believe that the defendants knew that it was a forgery. He sued, alleging fraud, breach of warranty, negligent misrepresentation, and seeking rescission based on mistake.

In Meyer v. Seidel, the main issue facing the Second Circuit was whether the statute of limitations had run on Mr. Meyer’s claims. The relevant statute of limitations for the warranty claim was four years; for misrepresentation and rescission, it was six years.  However, fraud claims can be brought within six years or within two years of when the plaintiff could have discovered the fraud in the exercise of reasonable diligence, whichever is later. Defendants argued that a 2011 phone call in which Ms. Seidel disclosed to Meyer that law enforcement was investigating allegations of counterfeit Rothko paintings put Meyer on notice in 2011 of the potential misrepresentation. Meyer countered that the call did not mention his painting and gave him no cause of concern once time passed and the authorities did not contact him.  

The District Court dismissed all of Mr. Meyer’s claims as untimely. It also found that his allegations of fraud did not meet the standard for alleging such a claim, and given that the claims were time-barred in any case, the District Court concluded that amendment of the complaint would be futile.

The Second Circuit affirmed the District Court’s finding that the relevant statutes of limitations had run with respect to all but the fraud claim. The District Court found that Mr. Meyer was on notice of possible fraud through the combination of Ms. Seidel’s 2011 telephone conversation with Mr. Meyer and news reports of fraud claims against New York art dealers in connection with the sale of artworks purportedly created by, among others, Mr. Rothko. 

The Second Circuit found however that the District Court erred in considering evidence beyond that presented in the complaint on a motion to dismiss.  While courts may take judicial notice of things like newspaper reports, the reports at issue were not closely-enough connected to the sale at issue to put Mr. Meyer on notice that his painting might be a forgery.  The Second Circuit agreed with the District Court that Mr. Meyer had not adequately alleged fraud. However, because his fraud claim was not time barred, it would not be futile for him to amend his complaint, and the Second Circuit thus granted him leave to do so.  Judge Sullivan concurred in part and dissented in part, as he would have affirmed the dismissal of Mr. Meyer’s claims without leave to amend.