Martin Hilti Family Trust v. Knoedler Gallery, LLC (386 F. Supp. 3d 319, 2019)

Over the next fifteen years, Rosales provided the Gallery with dozens of previously undiscovered works by well-known Abstract Expressionist artists (the "Rosales Paintings"), and the Gallery sold these paintings to its customers. (Rosales Painting List (Hilti Dkt. No. 219-104)) All of these paintings were forgeries. (Sept. 16, 2013 Rosales Plea Tr. at 27:11-18), United States v. Rosales, No. 13 Crim. 518 (KPF) (S.D.N.Y. Sept. 16, 2013), Dkt. No. 23 (guilty plea allocution).

1. Provenance

As the Gallery sold Rosales Paintings, Freedman and her staff conducted research into the provenance of these works. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 15; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1006) In her deposition, Freedman referred to this undertaking as "the project." (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 998, 1000)

In 2000, Freedman retained E.A. Carmean - a noted art historian - to lead an effort to determine the provenance of the Rosales Paintings. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 11, 15; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1006-07) "Carmean helped a group within [the Gallery] to come up with [a] purported link" between Mr. X and Alfonso Ossorio, a well-known Filipino-American artist and early collector of the paintings of Abstract Expressionist artists, including Jackson Pollock. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1011-13; Freedman Dep. (Hilti Dkt. No. 219-4) at 261:12-17; IFAR Rpt. (Dkt. No. 219-95) at 6; Carmean Dep. (Dkt. No. 219-11) at 117:9-18) When asked whether there was a connection between Mr. X and Ossorio, Rosales represented to Freedman that Mr. X had known Ossorio. (Freedman Dep. (Hilti Dkt. No. 219-4) at 257:16-17; 259:10-12)

Thereafter, Freedman and the Gallery represented to clients that at least some of the Rosales Paintings were originally purchased with Ossorio's assistance. (See, e.g., IFAR Rpt. (Hilti Dkt. No. 219-95)) Freedman viewed as "significant" to provenance information suggesting that a well-known art figure such as Ossorio facilitated the sale of art to a collector. (Freedman Dep. (Hilti Dkt. No. 219-4) at 305:20-22)

In 2003, however, the International Foundation for Art Research ("IFAR") prepared a report (the "IFAR Report") concerning a Rosales Painting - a work purportedly created by Jackson Pollock - and concluded that the Ossorio connection posited by the Gallery was "inconceivable." (IFAR Rpt. (Hilti Dkt. No. 219-95) at 7) After this report was released, Freedman and the Gallery began representing that David Herbert - another well-known figure in the art world - was the advisor who aided Mr. X in amassing his collection, instead of Ossorio. (Freedman Dep. (Hilti Dkt. No. 219-4) at 303:6-304:9) Rosales "confirmed" this purported connection between Mr. X and Herbert. (Id. at 304:7-17)

Freedman told Hammer that she was conducting research concerning the provenance of the Rosales Paintings, and that she had retained Carmean to assist in that research. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1002-03, 1008) Freedman kept Hammer apprised of the results of her research "as it was developing," and she "did not conceal anything from" Hammer regarding this research. (Id. ¶¶ 1009-10) Freedman testified, however, that she did not mention Glafira Rosales to Hammer in writing, and does not recall speaking with Hammer about Rosales. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 261-63)

During the years that the Gallery was selling the Rosales Paintings, Freedman's share of the Gallery's profits grew significantly: from 10% to 15% in 1998; to 25% in 2002; to 30% in 2008. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1040-41, 1044-46) Hammer approved each increase in Freedman's share of the Gallery's profits. (Id. ¶ 1041)

2. White Purchase

In March 2000, Plaintiff Frances White and her then-husband, Harvey White, purchased four paintings from the Gallery, including a purported Jackson Pollock that had been brought to the Gallery by Rosales. The Whites paid $ 5 million for the four paintings. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 41-42, 44) Freedman told the Whites that the Pollock was owned by an unknown art collector in Switzerland. (Id. ¶¶ 51-52) The April 2000 invoice for the Whites' purchase includes the following provenance for the Pollock: "Private Collection, Switzerland." (Id. ¶ 74)

The Whites had purchased at least nine paintings from the Gallery before their purchase of the purported Pollock. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1395) The Whites knew Freedman, who had invited them to visit the Gallery sometime before their March 2000 visit. (Id. ¶¶ 1399-1400)

The Whites divorced in 2001, and ownership of the purported Pollock passed to Plaintiff White. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 76)

3. The Trust's Purchase

Plaintiff Martin Hilti Family Trust is a foreign trust organized under the laws of Liechtenstein and located in Liechtenstein. (Id. ¶ 77) The Trust purchases and owns fine art, which is exhibited at the Hilti Art Foundation in Liechtenstein. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1201-02)

In October 2002, Michael Hilti - a representative of the Trust - visited the Gallery. (Id. ¶ 1203) Freedman told Hilti that she had an "exceptional Rothko for sale," but that it was not available for viewing at that time. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 99-100, 102) Freedman provided Hilti with a photograph of the painting and a written description of the work and its provenance. (Id. ¶ 102) Freedman told Hilti that the painting came from a private collection. (Id. ¶ 111)

Freedman offered to deliver the painting to the Trust in Liechtenstein, so that it could be viewed before a purchase decision was made. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1207) In November 2002, the purported Rothko was delivered to the Trust in Liechtenstein. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 118) The Trust decided to purchase the painting, and it did so by transferring $ 5.5 million from its bank account in Liechtenstein to Knoedler's bank account in New York. (Id. ¶ 130)

4. IFAR Report

In late 2001, Freedman and Knoedler sold a purported Jackson Pollock (the "Green Pollock") to Jack Levy for $ 2 million. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 151-52) Knoedler had purchased this work from Rosales for $ 750,000. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1027) Knoedler included in the provenance of the painting a reference to Ossorio. (IFAR Rpt. (Hilti Dkt. No. 219-95) at 3)

Levy's purchase of the Green Pollock was conditioned on a favorable review of the work's provenance and authenticity by IFAR. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 152) On October 9, 2003, IFAR issued its report concerning the Green Pollock. (IFAR Rpt. (Hilti Dkt. No. 219-95) at 2) The IFAR Report rejects the Gallery and Rosales' claim that Ossorio had been involved in the acquisition of the Green Pollock, and notes that there are "disturbing" differences between the materials used to create the Green Pollock and the materials used to create a known Pollock from the same year. (Id. at 4-7, 8, 10) The report also states that "IFAR's own extensive archival and other research has turned up no documentary material of any kind linking the painting to Pollock, or Ossorio." (Id. at 3) The conclusion of the IFAR Report reads: "[G]iven the several strongly negative opinions [from Pollock experts about the authenticity of the work] and the lack of information as to prior ownership, and with no documentation or other evidence to override the concerns of those who do not accept it as a work by Pollock, we cannot currently support its addition to the artist's oeuvre." (Id. at 13)

In December 2003, Freedman told Hammer that - based on the IFAR Report - Levy wanted to return the Green Pollock and obtain a refund of the $ 2 million purchase price. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 153) Hammer read the IFAR report and discussed it with Freedman and other Gallery executives. (Id. ¶¶ 156-70)

5. Knoedler's Profits

In September 2006 and November 2006 memoranda, Peter Sansone - 8-31's chief financial officer - informed Hammer that Knoedler's gross profits had increased, even while its sales had decreased. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1084, 1089) One of Sansone's memos discloses that the Gallery had made a 363% profit on one painting. (Id. ¶ 1087) This painting was a Rosales Painting, although the memo does not say as much. (Id.; Def. R. 56.1 Cntrstmt. (Hilti Dkt. No. 232-1) ¶ 1087)

6. Internal Investigation and Criminal Investigation

On August 31, 2009, 8-31's board of directors passed a resolution forming a special committee to investigate the purchase and sale of Rosales Paintings by the Gallery. (Board Resolution (Hilti Dkt. No. 219-216)) On September 17, 2009, Hammer requested and obtained a "complete list of the Rosales paintings with date acquired, cost, date sold, selling price, etc." (Rosales Painting List (Hilti Dkt. No. 219-104)) According to Hammer, he was not aware of any issues regarding the authenticity of the Rosales Paintings until this time. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 193)

On September 22, 2009, Knoedler was served with a grand jury subpoena that sought information related to the Rosales Paintings. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1065) In October 2009, Hammer put Freedman on administrative leave. (Id. ¶¶ 1067, 1072-73) Freedman subsequently resigned from her position at the Gallery. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 294; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1071)

On October 27, 2009, Hammer sent a letter to Knoedler clients stating, with no explanation, that Freedman had "resigned." (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1070; Oct. 27, 2009 Ltr. (Hilti Dkt. No. 219-91)) Hammer states: "I wish ... to let you know that I have every confidence in a vibrant and vital future for the gallery." (Oct. 27, 2009 Ltr. (Hilti Dkt. No. 219-91))

In 2010, Knoedler's interdivisional receivables due from 8-31 - amounting to more than $ 13 million - were reclassified as distributions to 8-31. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1142, 1144; Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 578)

7. The Knoedler Gallery Closes

On November 30, 2011, Hammer announced that the Gallery would close that same day. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1196; Knoedler Resolution & Liquidation Plan (Hilti Dkt. No. 219-101)) In connection with the closing of the Gallery, 8-31 and Hammer approved a "liquidation plan" for the Gallery, which Hammer signed on behalf of both 8-31 and Knoedler LLC. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1188; Knoedler Resolution & Liquidation Plan (Hilti Dkt. No. 219-101) at 3) Pursuant to the liquidation plan, Knoedler LLC was required to, inter alia, "make reasonable provision for the satisfaction of[ ] all legally enforceable claims and obligations of [Knoedler LLC], including ... all conditional, contingent, or unmatured claims known to [Knoedler LLC] and all claims which are known to [Knoedler LLC] but for which the identity of the claimant is unknown." (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1189; Knoedler Resolution & Liquidation Plan (Hilti Dkt. No. 219-101) at 4)

Ruth Blankschen - 8-31 and Knoedler LLC's chief financial officer at this time - testified that "she was not informed the 'liquidation plan' existed and did not otherwise know that such a reserve was called for." (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1192) Michael Hammer testified that he did not have personal knowledge of who was implementing the plan of liquidation. (Id. ¶ 1195)

On December 1, 2011 - the day after Hammer announced that he was closing the Gallery effective immediately - Pierre Lagrange filed a lawsuit in this District alleging that the purported Pollock he had purchased from Knoedler for $ 15.3 million was a forgery. Lagrange v. Freedman, No. 11 Civ. 8757 (PGG) (S.D.N.Y. Dec. 1, 2011), Dkt. No. 1 (Cmplt.) On December 2, 2011, a New York Times article reported on the F.B.I.'s investigation of Knoedler and the abrupt closing of the Gallery. Patricia Cohen, Possible Forging of Modern Art is Investigated, Dec. 2, 2011, https://www.nytimes.com/2011/12/03/arts/design/federal-inquiry-into-possible-forging-of-modernist-art.html (last visited March 13, 2019).

Rosales has since admitted that all of the works she sold to Knoedler were "fakes created by an individual residing in Queens."

United States v. Rosales, No. 13 Cr. 518 (KPF) (S.D.N.Y.), Dkt. No. 23 (Sept. 16, 2013 Plea Tr.) at 27:17. Rosales has further admitted that she "agreed with others" to sell the forged works and "to make false representations as to the authenticity and provenance of those works." Id. at 26:16-20.

B. Corporate Structure

In connection with Defendants' motions for summary judgment, the parties make a number of arguments concerning the corporate structure of, and dealings between, Knoedler LLC and 8-31, and about Hammer's relationship with these entities. For example, Knoedler LLC argues that it cannot be held liable for White's injuries, because White purchased her painting in 2000 - a year before Knoedler LLC was formed. (Def. Knoedler LLC (Hilti Dkt. No. 217) at 13) White argues, however, that Knoedler LLC is responsible for her injuries under a successor liability theory. (Pltf. White Br. (White Dkt. No. 172) at 18, 23) Moreover, Plaintiffs argue that - under an alter ego theory of liability - Hammer can be held responsible for 8-31's actions, and 8-31 can be held liable for Knoedler LLC's actions. (Pltf. Jt. Br. (Hilti Dkt. No. 222) at 86-87) Claims premised on theories of successor liability and alter ego liability call for fact-intensive inquiries. Here, analysis of the parties' arguments must begin with a discussion of the corporate structure of and dealings between Knoedler LLC and 8-31, and Hammer's relationship with these entities. Accordingly, the Court considers below the formation of Knoedler LLC and 8-31; the relationship between Knoedler LLC and 8-31; and Hammer's relationship with these entities.

1. Pre-2001 Corporate Structure: Knoedler-Modarco and 8-31

Prior to 2001, the Gallery was operated by the M. Knoedler & Co. division of Knoedler-Modarco, Inc. (Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 30) Knoedler-Modarco had three divisions: M. Knoedler & Co., Hammer Galleries, and Knoedler Publishing. (Id. ¶ 30) Knoedler-Modarco was originally owned by Michael Hammer's grandfather - who owned 74.1 percent of its shares - and Morris Liebowitz - who owned 24.9 percent of its shares. (Id. ¶¶ 30-32) After Hammer's grandfather died in 1990, his shares in Knoedler-Modarco were transferred to a charitable trust, and then to the Maccabee Group, a Caymans Island not-for-profit entity. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1380, 1384; Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 32)

Michael Hammer purchased Liebowitz's shares in 1992. (Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 31) Hammer testified that - from 1992 on - he has been the sole decision-maker for Knoedler-Modarco. The other shareholder in Knoedler-Modarco - the Maccabee Group - has not participated in making decisions for the company. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1393; Hammer Dep. (Hilti Dkt. No. 219-28) at 478-79)

In 2001, Hammer incorporated 8-31, and formed Knoedler LLC, Hammer Galleries LLC, and Knoedler Publishing LLC - all under Delaware law. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 856, 858, 861-64) Hammer is the sole shareholder of 8-31, and 8-31 is the sole member of each LLC. (Id. ¶¶ 857, 865-66, 868; Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 33) In a series of asset purchase agreements in 2001, the three LLCs purchased certain assets and liabilities from Knoedler-Modarco's three divisions. (Knoedler Gallery LLC asset purchase agreement (Hilti Dkt. No. 219-124); Hammer Galleries LLC asset purchase agreement (Hilti Dkt. No. 219-132))

Knoedler LLC purchased the assets and some liabilities of the M. Knoedler & Co. division for $ 14,008,000, which was comprised of $ 7 million in real property and a note for $ 7,008,000. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 884; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1403; Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 35) The purchase price for the M. Knoedler & Co. division was based on a valuation by Ernst & Young. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 887; Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 36) Ernst & Young prepared this valuation in connection with a "review of reorganization options" for Knoedler-Modarco's shareholders, and cautioned that its work "should not be used as a basis to get a transaction price." (Pltf. R. 56.1 Cntrstmt. (Hilti Dkt. No. 219) ¶ 885)

Sansone executed the asset purchase agreement on behalf of Knoedler-Modarco, and Freedman executed the asset purchase agreement on behalf of Knoedler LLC. (Knoedler Gallery LLC asset purchase agreement (Hilti Dkt. No. 219-124) at 103) Knoedler-Modarco and Knoedler LLC were represented by the same law firm. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1439-41)

With respect to this transaction, Sansone testified that: (1) he is not aware of anyone having negotiated its terms; (2) he does not recall discussing the asset purchase agreement with Freedman; (3) he did not read the asset purchase agreement before he signed it; and (4) he did not ask anyone to summarize the asset purchase agreement before he signed it. (Id. ¶¶ 1432-34) Sansone viewed this transaction as a "reorganization." (Sansone Dep. (Hilti Dkt. No. 219-33) at 418:23)

With respect to this transaction, Freedman testified that (1) she did not read the asset purchase agreement before she signed it; (2) she did not participate in any negotiations regarding this transaction; and (3) she signed the agreement because she "was asked to," although she could not remember by whom. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1435-37)

Neither Hammer nor Sansone could recall this transaction being discussed at a Knoedler-Modarco board meeting. (Id. ¶¶ 1442-46)

There was significant overlap between the board of directors and executive officers of Knoedler-Modarco, 8-31, and Knoedler LLC at the time of the asset sale. Knoedler-Modarco's board of directors consisted of Michael Hammer, his wife Dru Hammer, Peter Sansone, Ann Freedman, and Richard Lynch. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1407) 8-31's board of directors consisted of Michael Hammer, Sansone, Freedman, and Lynch. (Id. ¶ 1408) Michael Hammer was the president of both Knoedler-Modarco and 8-31. (Id. ¶¶ 1414-15) Sansone was the chief financial officer of Knoedler-Modarco, 8-31, and Knoedler LLC. (Id. ¶¶ 1412-13) Freedman was the president of the M. Knoedler & Co. division of Knoedler-Modarco, and the president and sole manager of Knoedler LLC. (Id. ¶ 1411)

After the asset purchase agreements with Knoedler LLC, Hammer Galleries LLC, and Knoedler Publishing LLC were consummated, Knoedler-Modarco held the following assets: (1) the Gallery's archives; (2) about 150 paintings; and (3) two promissory notes - the $ 7,008,000 promissory note from Knoedler LLC, and a $ 5,886,000 note from Hammer Galleries LLC. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 896-97, 905, 907, 920-21, 924) In March 2007, after the Knoedler LLC and Hammer Galleries LLC promissory notes held by Knoedler-Modarco were paid in full, Knoedler-Modarco was dissolved. (Id. ¶¶ 926-27; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1428) At that time, Knoedler-Modarco had two board members: Michael Hammer and Dru Hammer. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1429)

After the asset purchase agreement between Knoedler-Modarco and Knoedler LLC was consummated, the Gallery's operations, location, personnel, and telephone number did not change. (Id. ¶¶ 1452-57; Freedman Dep. (Hilti Dkt. No. 219-4) at 690:9-691:14) Invoices issued by the Gallery before and after the transaction reflect the same trade name - Knoedler & Company - and state that the Gallery was established in 1846. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1397-98, 1458)

2. Post-2001 Corporate Structure: 8-31, Knoedler LLC, and Michael Hammer

a. Relationship Between 8-31 and Knoedler LLC

8-31 is a holding company for Knoedler LLC, Hammer Galleries LLC, and Knoedler Publishing LLC, and has no operations or revenue of its own. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 458-59) 8-31 holds board and shareholder meetings, has enacted by-laws, has elected officers and directors, and appoints sole managers for the three LLCs. (Id. ¶¶ 487-90) 8-31 and Knoedler LLC maintain separate bank accounts, general ledgers, and financial statements. (Id. ¶¶ 490, 492-93)

8-31 and Knoedler LLC shared employees, however. For example, Sansone - and later, Ruth Blankschen - served as vice president, secretary, treasurer, and chief financial officer of both 8-31 and Knoedler LLC. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1101-02) Similarly, Freedman was vice president and director of 8-31, and the sole manager and president of Knoedler LLC. (Pltf. R. 56.1 Cntrstmt. (Hilti Dkt. No. 219) ¶ 463; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1107) 8-31 also shared accounting and administrative staff with Knoedler LLC and the two other LLCs (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1111-13), and 8-31 and Knoedler LLC shared office space and a telephone number. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1115, 1121) Moreover, no 8-31 employee had an 8-31 email address; 8-31 employees used Knoedler LLC and Knoedler Publishing e-mail addresses. (Id. ¶¶ 1116-21)

On April 1, 2001, 8-31 and Knoedler LLC entered into a Management Agreement. (Def. R. 56.1 Stmt. (Hilti Dkt. No.

218) ¶ 498; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1135) The Management Agreement provides that 8-31 will charge Knoedler LLC "101% of the actual costs incurred by [8-31] on behalf of [Knoedler LLC] for salaries, wages, benefits, guaranteed draws and other employment[-]related expenses incurred in connection with the delivery of ... [s]ervices." (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 499; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1138, 1140) The Management Agreement indicates that the services 8-31 will provide to Knoedler LLC will include accounting, IT, legal, administrative and operational support, payroll, and human resources. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 500)

According to Defendants, 8-31 never provided the services listed in the Management Agreement, and the Management Agreement was never implemented. (Id. ¶¶ 501, 510) Plaintiffs contend, however, that 8-31 did provide the services listed in the Management Agreement - or arranged for outside professionals to provide such services - but that the 101% fee term set forth in the Management Agreement was not observed. (Pltf. R. 56.1 Cntrstmt. (Hilti Dkt. No. 219) ¶¶ 501, 510; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1138)

According to Plaintiffs, Knoedler LLC - and Hammer Galleries LLC and Knoedler Publishing LLC - regularly transferred funds to 8-31 "unrelated to any need by [Knoedler LLC] or service performed for Knoedler [LLC] by 8-31." (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1128; see id. ¶ 1126; Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 514) These transfers occurred when 8-31 needed money. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1128) The funds 8-31 needed were transferred from the account of whichever LLC had cash available at the time. (Id. ¶ 1129) According to Defendants, 8-31 used those funds to pay business expenses for 8-31 and the three LLCs, such as taxes, profit sharing, salaries, directors' fees, accounting fees, charitable gifts, insurance, automobile expenses, and executive credit card bills. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 515, 522) According to Plaintiffs, however, much of the cash transferred from the three LLCs to 8-31 was used to pay Hammer's personal expenses, including bills related to Hammer's automobiles and credit cards. (Pltf. R. 56.1 Cntrstmt. (Hilti Dkt. No. 219) ¶ 515)

"Prior to 2009, each transfer of cash from Knoedler [LLC] to 8-31 other than for payroll was recorded on Knoedler's general ledger and financial statements as an interdivisional receivable and on 8-31's general ledger and financial statements as an interdivisional payable." (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 525) Sansone and Blankschen both testified, however, that they did not expect that 8-31 would ever repay Knoedler LLC for the funds it transferred to 8-31. (Id. ¶¶ 532-33)

In 2010, Knoedler LLC's interdivisional receivables from 8-31 amounted to $ 13.5 million (according to Plaintiffs) or $ 14.6 million (according to Defendants). (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1142, 1144; Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 578) After Knoedler LLC received the grand jury subpoena in 2010, 8-31 reclassified the Knoedler LLC receivables as "distributions" to 8-31. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1142) Defendants argue that Hammer was not involved in this accounting change, while Plaintiffs contend that Hammer directed the reclassification. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 572; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1142)

b. Relationship Between 8-31 and Hammer

At all relevant times, Michael Hammer lived in California, did not regularly visit the Gallery, and did not maintain an office at Knoedler's building in Manhattan. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 464-65, 469)

Hammer describes his role at 8-31 as follows: "[I engaged in] regular efforts to support and expand the brand recognition of the three [LLC] subsidiaries and thereby improve and increase their revenue. As part of that, I sought out and met regularly with high net worth collectors of art in multiple locations around the country and outside the United States. I also met with directors of galleries and museums." (Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 8) Hammer contends, however, that he was not involved in Knoedler's acquisition or sale of art, the marketing of any specific work of art, the pricing of any work of art, the decision to exhibit any work of art, or "any communications with purchasers about a sale of a work of art." (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 205, 245, 247, 250; Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 17) Although Hammer testified that he met with people in order to promote the LLCs (Hammer Dep. (Hilti Dkt. No. 219-28) at 827:16-837:3), he could not recall whether any of these individuals - or anyone referred by these people - had ever purchased anything from Knoedler LLC or the other LLCs. (Id. at 837:14-840:19)

Hammer regularly used a corporate credit card to pay for his business expenses and his personal expenses. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1208) He also provided corporate credit cards to his ex-wife, Dru Hammer, and to his sons, Viktor and Armie Hammer, all of whom used these credit cards to pay for both business and personal expenses. (Id. ¶¶ 1209-10) In total, the Hammers charged $ 2.7 million to their corporate cards between 2005 and 2014. (Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 51)

Hammer and his staff reviewed the corporate credit card statements monthly, categorizing each charge as a business or personal expense. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 585-92; Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1213) Hammer reimbursed 8-31 for the charges he categorized as personal expenses, which amounted to $ 1.1 million. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 961) Hammer did not provide 8-31 with any information about the purpose of his business expenses, however. For example, if he categorized a dinner as a business expense, he did not disclose who attended the dinner, or what the business purpose of the dinner was. Moreover, no one at 8-31 asked Hammer about his business expenses or otherwise reviewed his claimed business expenses. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1215)

The Hammers' alleged business expenses include, inter alia, meals, drinks, airfare on private and commercial flights, hotels, and car shows. (Id. ¶¶ 1218-20, 1226-27, 1243, 1286) Hammer does not recall the business purpose of certain charges he categorized as business expenses, and he did not maintain records concerning these charges. (See, e.g., id. ¶ 1229 ($ 2,565 charge from Barney's); id. ¶ 1247 ($ 1,649 charge from Le Beach Club's health and beauty spa); id. ¶¶ 1266-67 (Dru Hammer charges from two hotels, a liquor store, a home furnishing store, and a grocery store))

According to Plaintiffs, Hammer sometimes identified a charge as a business expense, and later identified a refund of that charge as a personal refund. (Id. ¶¶ 1234, 1278-79) For example, in February 2010, Hammer categorized a $ 3,176 charge from a hotel in Bora Bora as a business expense, but in March 2010, he categorized a refund of that same charge as a personal refund. (Id. ¶¶ 1278-79; Feb. 2010 Stmt. (Hilti Dkt. No. 219-174) at 6; March 2010 Stmt. (Hilti Dkt. No. 219-175) at 2) Hammer concedes that there were occasions where he (1) charged an expense as a business expense with the intent to later categorize it as personal expense, but did not do so (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1275 (more than $ 10,000 in airfare associated with his son's trip to New Zealand charged as a business expense)), and (2) mistakenly categorized charges as business expenses that he now recognizes were personal in nature (id. ¶¶ 1259-62 (Dru Hammer's personal expenses associated with two trips to Paris); Hammer Decl. (Hilti Dkt. No. 218-3) ¶ 63 (acknowledging that the Paris charges were personal expenses)).

Dru Hammer testified that a number of charges on her corporate credit card that were categorized as business expenses were actually personal in nature. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1221-22, 1236, 1259-62) For example, 8-31 paid for several meals that had no business purpose. (Dru Hammer Dep. (Hilti Dkt. No. 219-10) at 175:10-178:25) Dru Hammer also disagreed with the categorization of several expenses that Michael Hammer had defended as legitimate business expenses. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1236, 1238-39, 1245-46) For example, in October 2006, the Hammers traveled to Barcelona. According to Dru Hammer, the purpose of the trip was to visit their son, and there was no business purpose. (Id. ¶ 1236) Michael Hammer maintains, however, that he conducted business on this trip, and that the $ 17,500 in airfare, hotel, and food expenses was properly classified as a business expense. (Def. R. 56.1 Cntrstmt. (Hilti Dkt. No. 232-1) ¶ 1236)

Between 2001 and 2010, 8-31 paid for at least seven luxury vehicles purchased by Hammer. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1300) Hammer testified that

he used the cars for business purposes to meet with high net worth individuals interested in purchasing expensive art or to otherwise promote the Gallery business, and that "[i]t was important for the image to arrive and meet [potential clients] on the level that they like, that they're used to."

(Id. ¶ 1301)

As the president of 8-31, Hammer decides how many vehicles he needs for business purposes. (Id. ¶ 1302) Hammer does not recall discussing any vehicle purchase with 8-31's chief financial officer - or anyone else - before making the purchase. (Id. ¶ 1353) Hammer typically used his own funds to purchase the vehicles and customizations, and later obtained reimbursement from 8-31. (Id. ¶ 1303) Hammer generally obtained titles for the cars in his own name, or his name and the name of 8-31. (Id. ¶ 1304) Other than Hammer, no one associated with 8-31 or the LLCs drove the cars. (Id. ¶ 1311) On one occasion in which Hammer requested reimbursement for a car, he told 8-31's chief financial officer that the reimbursement was for "work and improvements on the 'company' [car]." (Id. ¶ 1307)

II. PROCEDURAL HISTORY

Hilti was filed on January 29, 2013, and White was filed on February 21, 2013. (Cmplt. (Hilti Dkt. No. 1); Cmplt. (White Dkt. No. 1)) Defendants moved to dismiss Plaintiffs' Amended Complaints (Hilti Dkt. No. 91, 93; White Dkt. No. 72, 74), and on September 30, 2015, this Court granted in part and denied in part Defendants' motions. Martin Hilti Family Trust v. Knoedler Gallery, LLC, 137 F. Supp. 3d 430 (S.D.N.Y. 2015), Hilti Dkt. No. 132, White Dkt. No. 108.

In a December 22, 2015 order, this Court granted the Trust permission to re-plead its alter ego theory of liability as to Hammer in a second amended complaint (Dec. 22, 2015 Order (Hilti Dkt. No. 161)), and on December 28, 2015, the Trust filed a Second Amended Complaint ("SAC"). (SAC (Hilti Dkt. No. 163)) The SAC pleads the following causes of action:

(1) substantive RICO and RICO conspiracy as against all Defendants;

(2) fraud and fraudulent concealment as against all Defendants;

(3) conspiracy to commit fraud and conspiracy to commit fraudulent concealment as against Hammer and 8-31; and

(4) aiding and abetting fraud and aiding and abetting fraudulent concealment as against Hammer and 8-31.

(Id. )

White's Amended Complaint (Am. Cmplt. (White Dkt. No. 37)) pleads the following clauses of action:

(1) substantive RICO and RICO conspiracy as against all Defendants;

(2) fraud and fraudulent concealment as against all Defendants;

(3) conspiracy to commit fraud as against Hammer and 8-31;

(4) aiding and abetting fraud as against Hammer and 8-31.

(Id. )

Defendants have now moved for summary judgment. As discussed above, Hammer seeks summary judgment on all claims against him (Def. Hammer Br. (Hilti Dkt. No. 213) at 8); 8-31 seeks summary judgment on the RICO claims against it in Hilti, and on all claims against it that are based on an alter ego theory of liability (Def. 8-31 Br. (Hilti Dkt. No. 215) at 10); and Knoedler LLC seeks summary judgment on all claims against it in White, and on the RICO claims alleged against it in Hilti. (Def. Knoedler Br. (Hilti Dkt. No. 217) at 7).

DISCUSSION

I. SUMMARY JUDGMENT STANDARD

Summary judgment is warranted when a moving party shows that "there is no genuine dispute as to any material fact" and that that party "is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A dispute about a 'genuine issue' exists for summary judgment purposes where the evidence is such that a reasonable jury could decide in the non-movant's favor." Beyer v. Cnty. of Nassau, 524 F.3d 160, 163 (2d Cir. 2008) (citing Guilbert v. Gardner, 480 F.3d 140, 145 (2d Cir. 2007) ). " '[W]here the non[-]moving party will bear the burden of proof at trial, Rule 56 permits the moving party to point to an absence of evidence to support an essential element of the non[-]moving party's claim.' " Lesavoy v. Lane, No. 02 Civ. 10162, 2008 WL 2704393, at *7 (S.D.N.Y. July 10, 2008) (quoting Bay v. Times Mirror Magazines, Inc., 936 F.2d 112, 116 (2d Cir. 1991) ).

In deciding a summary judgment motion, the Court " 'resolve[s] all ambiguities, and credit[s] all factual inferences that could rationally be drawn, in favor of the party opposing summary judgment.' " Spinelli v. City of New York, 579 F.3d 160, 166 (2d Cir. 2009) (quoting Brown v. Henderson, 257 F.3d 246, 251 (2d Cir. 2001) ). However, a " 'party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment.... [M]ere conclusory allegations or denials ... cannot by themselves create a genuine issue of material fact where none would otherwise exist.' " Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (alteration in original) (quoting Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995) ). "Assessments of credibility and choices between conflicting versions of the events are matters for the jury, not for the court on summary judgment." Eviner v. Eng, No. 13 Civ. 6940 (ERK), 2015 WL 4600541, at *6 (E.D.N.Y. July 29, 2015) (quoting Rule v. Brine, Inc., 85 F.3d 1002, 1011 (2d Cir. 1996) ).

II. RICO CLAIMS

A. Hammer's Liability

In De Sole v. Knoedler Gallery, LLC, 139 F. Supp. 3d 618 (S.D.N.Y. 2015) - which also involves (1) forged Rosales Paintings sold by the Gallery, and (2) many of the same causes of action alleged here against Hammer, 8-31, and Knoedler LLC - this Court found that Hammer was entitled to summary judgment on the RICO claims against him. Id. at 655. No different result is appropriate here, given that Plaintiffs have offered much less evidence of Hammer's knowledge of the ongoing alleged fraud at the Gallery related to the sale of the Rosales Paintings.

1. Legal Standard

To sustain a private cause of action under RICO, a plaintiff must establish: "(1) the defendant's violation of 18 U.S.C. § 1962, (2) an injury to the plaintiff's business or property, and (3) causation of the injury by the defendant's violation." Lerner v. Fleet Bank, N.A., 459 F.3d 273, 283 (2d Cir. 2006) (internal quotation marks and alteration omitted); see also 18 U.S.C. § 1964(c) (providing a cause of action for "[a]ny person injured in his business or property by reason of a violation" of Section 1962 ).

18 U.S.C. § 1962(c) makes it "unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). Thus, in addition to injury and causation, "[t]o establish a civil RICO claim pursuant to § 1962(c), 'a plaintiff must establish: (1) that the defendant (2) through the commission of two or more acts (3) constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly ... participates in (6) an "enterprise" (7) the activities of which affect interstate or foreign commerce.' " Valenti v. Penn Mut. Life Ins. Co., 850 F. Supp. 2d 445, 450 (S.D.N.Y. 2012) (quoting cra Institute of Science v. Neschis, 229 F.Supp. 2d 234, 254-55 (S.D.N.Y. 2002) (citation omitted)), aff'd, 511 F. App'x 57 (2d Cir. 2013) ; see also Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 487 (2d Cir. 2014) ("To establish a violation of § 1962(c), a plaintiff must show that the defendant conducted, or participated in the conduct[ ] of[,] a RICO enterprise's affairs through a pattern of racketeering activity.")

"To establish a conspiracy to violate the civil RICO statute pursuant to 18 U.S.C. § 1962(d) ... plaintiff must prove (1) that there existed a conspiracy to commit acts that, if successful, would constitute a substantive civil RICO violation; (2) that defendant agreed to join in, and knowingly participated in, that conspiracy; and (3) that defendant acted in furtherance of the conspiracy in some manner (although not necessarily by the commission of any RICO predicate acts himself)." City of New York v. Chavez, 944 F. Supp. 2d 260, 268-69 (S.D.N.Y. 2013) (emphasis in original) (citing Valenti, 850 F.Supp.2d at 450-51 ); see also Crawford, 758 F.3d at 487 ("To establish a violation of § 1962(d), a plaintiff must show that the defendant agreed with at least one other entity to commit a substantive RICO offense.")

2. Analysis

In De Sole, this Court granted Hammer summary judgment on the RICO claims against him, finding that the De Sole plaintiffs had not offered sufficient evidence that he knowingly participated in the alleged RICO enterprise. The Court's reasoning in De Sole is directly applicable here, because the evidentiary record concerning Hammer is less developed than in De Sole, but the arguments premised on that record are largely the same. Accordingly, set forth below is the Court's reasoning in granting Hammer summary judgment on the De Sole plaintiffs' RICO claims:

Hammer contends that he is entitled to summary judgment on Plaintiffs' RICO claims because there is no evidence that he had "some part in directing [the enterprise's] affairs." See Reves [v. Ernst & Young], 507 U.S. [170] at 179 [113 S.Ct. 1163, 122 L.Ed.2d 525 (1993) ] ; Hammer Br. (De Sole Dkt. No. 239; Howard Dkt. No. 282)[ ]. Hammer argues that the undisputed evidence shows that [he] "did not make any ... request or recommendation or coordinate anyone's efforts to commit fraud related to the sale of any painting acquired from Rosales." (Hammer Br. (De Sole Dkt. No. 239; Howard Dkt. No. 282) at 19) Hammer further maintains that he "did not play any part in the marketing or selling of any of the paintings sold by Knoedler," and "did not direct or encourage anyone to purchase, sell, or paint a forged painting." ( [Id. ] at 18) In sum, Hammer argues that the undisputed evidence shows that he did nothing to direct the alleged enterprise's affairs. ( [Id. ] at 19)

Hammer has stated that his family has been "directly responsible for the operations of [the Gallery]" since the 1970s. (Pltf. R. 56.1 Add. Stmt. (De Sole Dkt. No. 236) ¶ 1031; Hammer Decl. in Opp. to TRO (De Sole Dkt. No. 236), Ex. 46 ¶ 2) Moreover, as president, CEO, chairman, and sole owner of 8-31 Holdings, Inc. - the sole member of Knoedler - Hammer had the right to exercise complete control over Knoedler's operations. (Pltf. R. 56.1 Add. Stmt. (De Sole Dkt. No. 236) ¶¶ 1033, 1995, 2003; Hammer Dep. (De Sole Dkt. No. 236), Ex. 21 at 57)

The evidence demonstrates, however, that Hammer's contact with Knoedler was sporadic. Hammer lived in California (Def. R. 56.1 Stmt. ( [De Sole ] Dkt. Nos. 219[,] 220) ¶ 761), and rarely visited Knoedler (Freedman Dep. (De Sole Dkt. No. 236), Ex. 18 at 37; see also Del Deo Dep. (De Sole Dkt. No. 236), Ex. 13 at 40-41 (Hammer visited the gallery "very infrequently")). Hammer typically spoke by telephone with Freedman "every three or four weeks." (Freedman Dep. (De Sole Dkt. No. 236), Ex. 18 at 35-36) There is no evidence that Hammer was the day-to-day manager of Knoedler, and his testimony that he played no role in the selling of paintings at Knoedler is unrebutted. (Hammer Dep. (De Sole Dkt. No. 236), Ex. 21 at 195-96, 214, 215, 216-17, 371-72) Indeed, there is no evidence that Hammer ever had any contact with a Knoedler customer who bought a Rosales Painting.

There is also no evidence that Hammer was aware of the outlandish profits Knoedler made on each Rosales Painting. Hammer testified that, on an annual basis, he saw "a summary of the 'numbers' [for Knoedler,] which would include sales, expenses, et cetera." (Hammer Dep. (De Sole Dkt. No. 236), Ex. 21 at 58) There is no evidence that Hammer was ever shown the profit margin for any sale of a Rosales Painting or any collection of Rosales Paintings, however, nor is there any evidence that he was made aware that all of Knoedler's profits were derived from sales of Rosales Paintings.

While Freedman testified that she had a "general recollection" that she informed Hammer of each sale of a Rosales Painting (Pltf. R. 56.1 Count. Stmt. (De Sole Dkt. No. 232) ¶¶ 777-81; Freedman Dep. (De Sole Dkt. No. 236), Ex. 18 at 432, 613; Pltf. R. 56.1 Add. Stmt. (De Sole Dkt. No. 236) ¶¶ 1036-37) - because she deemed "every sale" of a Rosales Painting to be a sale of an "important [A]bstract [E]xpression[ist] work[ ]" (Freedman Dep. (De Sole Dkt. No. 236), Ex. 18 at 613) - she did not testify that she told Hammer what the profit margin was on any Rosales Painting, or on any collection of Rosales Paintings. Freedman's testimony that "Hammer was interested to know what[ ]transacted" (id. at 137), was "aware of sales in general," and "oftentimes [saw] paperwork regarding sales" ( [id.] at 137, 334) does not demonstrate that Hammer was aware of the outlandish profits Knoedler made on the sale of Rosales Paintings. Similarly, Freedman's testimony that Hammer spoke with Knoedler's chief financial officer about financial matters at the gallery (id. at 136-37) does not demonstrate that Hammer was informed of the profit margins associated with sales of Rosales Paintings.

Hammer denies any knowledge of Knoedler's profit margin on Rosales Paintings. (Hammer Dep. (De Sole Dkt. No. 236), Ex. 21 at 131-34, 214, 218) Hammer testified that the financial information he received about Knoedler was never broken down into individual sales, but instead "would be one number for sales, one number for cost of sales, gross profit and then all of these expenses. It was just a summary.... [W]e never had serious detailed information." ( [id.] at 133-34) In sum, there is no evidence that Hammer was aware of Knoedler's profit margins on the sale of any particular Rosales Painting, or on any collection of Rosales Paintings. Accordingly, Hammer's knowledge of the underlying fraud scheme cannot be premised on an awareness that Knoedler was making outlandish profits on the sale of Rosales Paintings.

As to Hammer's knowledge concerning the source and provenance of the Rosales Paintings, Freedman testified that Hammer knew that Rosales was the source of the works, that the works were "newly discovered," that Knoedler was researching the provenance of the works, and that Knoedler did not know the identity of the owner. (Freedman Dep. (De Sole Dkt. No. 236), Ex. 18 at 334-39) There is no evidence, however, that Hammer was aware of (1) Rosales' shifting provenance stories; (2) Rosales' inconsistent accounts of the size and scope of Mr. X's collection; (3) Rosales' unwillingness to sign forms confirming the authenticity of the Rosales Paintings; or (4) the issues raised concerning the Diebenkorns Rosales brought to Knoedler early on. There is likewise no evidence that Hammer ever met Rosales or ever discussed the Rosales Paintings with her. Finally, to the extent that Freedman was making misrepresentations to Knoedler customers about the provenance of the Rosales Paintings, there is no evidence that Hammer knew that she was making those misrepresentations. There is likewise no evidence that Freedman ever told Hammer that there was reason to question the authenticity or provenance of the Rosales Paintings. Freedman's conclusory testimony that she "would have told Michael Hammer what [she] knew [about how the Mexican collector came to own the Rosales Paintings]" ( [id.] at 338-39) is not sufficient to create a material issue of fact as to whether Hammer understood that the paintings were forgeries.

Hammer testified that he never discussed with Freedman or any other Knoedler employee a connection between David Herbert and Mr. X, and that he doesn't know who David Herbert is. (Hammer Dep. (De Sole Dkt. No. 236), Ex. 21 at 201) Hammer "never got involved in the purchases and sales, so [he] didn't even know who most of the artists were." (Id. at 215) Although Freedman testified that "it was explained [to Hammer] that there was an owner and that we did not know the identity and that the owner owned works of art" (Freedman Dep. (De Sole Dkt. No. 236), Ex. 18 at 339), this testimony does not demonstrate that Hammer understood that the Rosales Paintings were not authentic.

Hammer did review "very carefully" the IFAR Report concerning the "Green Pollock" purchased by Jack Levy. (Hammer Dep. (De Sole Dkt. No. 236), Ex. 21 at 170-71) As discussed above, the IFAR report rejects Knoedler and Rosales' claim that Ossorio had been involved in the acquisition of the Green Pollock, and notes that there are "disturbing differences" between the materials used to create the Green Pollock and the materials used to create a known Pollock from the same year. (IFAR Report (De Sole Dkt. No. 236), Ex. 140 at 8, 14) The report also states that "IFAR's own extensive archival and other research has turned up no documentary material of any kind linking the painting to Pollock, or Ossorio." (Id. at 1) The conclusion of the IFAR report reads: "given the several strongly negative opinions [from Pollock experts about the authenticity of the work] and the lack of information as to prior ownership, and with no documentation or other evidence to override the concerns of those who do not accept it as a work by Pollock, we cannot currently support its addition to the artist's oeuvre." (Id. at 10) Based on the IFAR Report, Levy returned the Green Pollock to Knoedler in late 2003, and the Gallery refunded his full purchase price of $ 2 million. (Pltf. R. 56.1 Add. Stmt. (De Sole Dkt. No. 236) ¶ 1256)

Hammer discussed the IFAR Report with Freedman, directed her to refund Levy's purchase price, and to "do whatever research she needed to do to answer the[ ] questions [raised in the report]." (Hammer Dep. (De Sole Dkt. No. 236), Ex. 21 at 187-90) Hammer testified that Freedman told him that the IFAR report was "inconclusive" and "not right" and that she "didn't believe in [it]." (Id. at 186) Hammer and Freedman did not discuss Mr. X, Alfonso Ossorio, or anything else related to the provenance of the Green Pollock. (Id. at 168, 186) Moreover, Freedman did not tell Hammer that Knoedler had sold other paintings from the same source that had b[r]ought the Green Pollock to Knoedler. (Id. at 188) When Hammer asked Freedman if there was any problem with the Green Pollock, she told him "absolutely not." (Id. at 188) Hammer nonetheless directed Freedman to share the IFAR Report with an individual who was preparing to invest in the Green Pollock. (Id. at 193-94) Hammer did not direct Freedman to share the IFAR Report with any customer preparing to purchase a Rosales Painting, however.

The IFAR Report - standing alone - is not sufficient to demonstrate that Hammer knew that all of the Rosales Paintings - including those purchased by Plaintiffs - were forgeries. Plaintiffs have not shown that Hammer should have realized that the IFAR Report cast doubt on the authenticity and provenance of all of the Rosales Paintings. Moreover, Plaintiffs have not cited evidence demonstrating that - over the more than ten years that Rosales Paintings were sold at Knoedler - any other issue concerning the authenticity of a Rosales Painting was brought to Hammer's attention.

Because a reasonable jury could not conclude that Hammer was aware of an ongoing fraud scheme at Knoedler, the actions of Hammer cited by Plaintiffs - such as regularly increasing Freedman's compensation - cannot be viewed as acts in furtherance of the racketeering enterprise. Moreover, the fact that Hammer received a share of Knoedler's profits does not demonstrate that he was a knowing participant in a fraud scheme at Knoedler

De Sole, 139 F. Supp. 3d at 651-55 (footnotes omitted).

Plaintiffs argue that "evidence obtained in discovery in [the instant] cases, including evidence not available or not relied upon in [ De Sole ], warrant[s] a different decision here" than in De Sole. (Pltf. Jt. Br. (Hilti Dkt. No. 222) at 114) Plaintiffs' arguments are not persuasive.

First, Plaintiffs argue that "Hammer knew of and authorized the 'Project' of research into newly-discovered works from Rosales." ( Id. ) As discussed above, however, the Court considered in De Sole Freedman's testimony that Hammer (1) knew about Knoedler's acquisition of "newly discovered" works; (2) knew that Rosales was the source of these works; and (3) knew that Knoedler was conducting research concerning the provenance of these works. The evidentiary record here establishes no more than what this Court found insufficient in De Sole.

Plaintiffs also contend that Hammer "knew of the profits generated by sales of" the Rosales Paintings. ( Id. ) There is evidence that Sansone wrote two memoranda in 2006 explaining that Knoedler's gross profits had increased while its gross sales had decreased, and one of these memos states that Knoedler made a 363% profit on a single painting. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶¶ 1084, 1089, 1091) But there is no evidence that Hammer was ever shown data setting forth Knoedler's profits on a particular Rosales Painting, or on all sales of Rosales Paintings. For example, with respect to the memorandum discussing a 363% profit on a single painting, there is no evidence that Hammer was told that this painting was a Rosales Painting. (Def. R. 56.1 Cntrstmt. (Hilti Dkt. No. 232-1) ¶ 1087)

Again, there is no significant difference between the proof as to profits offered in De Sole and the evidence here. While the evidence here shows that, at least by 2006, Hammer had access to information indicating that the Gallery was generating large profits, it does not show that he "was aware of the outlandish profits Knoedler made on each Rosales Painting." De Sole, 139 F. Supp. 3d at 655. In sum, Plaintiffs have not proffered new evidence as to the Gallery's profits that would justify altering the decision made in De Sole.

Finally, Plaintiffs contend that Hammer "ignored and concealed the IFAR report when, based on his knowledge of the 'Project,' he also knew that the painting addressed in the IFAR report was part of a larger collection of work." (Pltf. Jt. Br. (Hilti Dkt. No. 222) at 114) Again, this is not new information, and Plaintiffs do not make a new argument. In De Sole, this Court discussed in detail Hammer's knowledge of the IFAR Report, and whether he knew that the painting that was the subject of the IFAR Report was part of a larger collection of paintings that had been sold by the Gallery. De Sole, 139 F. Supp. 3d at 654-55. Plaintiffs have not offered new evidence that would give the Court a basis for altering the conclusion in De Sole.

Accordingly, as in De Sole, Hammer is entitled to summary judgment on Plaintiffs' substantive RICO and RICO conspiracy claims.

B. Whether The Trust Has Demonstrated a "Domestic Injury"

Defendants argue that the Trust's RICO claims fail as a matter of law because a RICO plaintiff must demonstrate that it suffered a "domestic injury," and the Trust's injury occurred in Liechtenstein. (Def. Knoedler Br. (Hilti Dkt. No. 217) at 7; Def. Hammer Br. (Hilti Dkt. No. 213) at 41; Def. 8-31 Br. (Hilti Dkt. No. 215) at 45)

1. Legal Standard

In RJR Nabisco, Inc. v. European Cmty., --- U.S. ----, 136 S. Ct. 2090, 195 L.Ed.2d 476 (2016), the Supreme Court considered whether RICO's substantive provisions and private right of action apply extraterritorially. Id. at 2101. The Court concluded that (1) RICO's substantive provisions apply extraterritorially only to the extent the predicate acts underlying the RICO claim at issue apply extraterritorially, id. at 2105 ; and (2) "[i]rrespective of any extraterritorial application of [RICO's substantive provisions], ... [RICO's private right of action] does not overcome the presumption against extraterritoriality. A private RICO plaintiff therefore must allege and prove a domestic injury to its business or property," id. at 2106 (emphasis in original); see also id. at 2111 (" Section 1964(c) requires a civil RICO plaintiff to allege and prove a domestic injury to business or property and does not allow recovery for foreign injuries") (emphasis added). In so holding, the Supreme Court emphasized that "the presumption against extraterritoriality must be applied separately to both RICO's substantive prohibitions and its private right of action." ( Id. at 2108 ) Because the plaintiffs in RJR Nabisco stipulated that they had not suffered a "domestic injury," the Court did not address the meaning of this term. Id. at 2111.

In Bascuñán v. Elsaca, 874 F.3d 806 (2d Cir. 2017), however, the Second Circuit addressed what constitutes a "domestic injury" for purposes of extraterritorial application of RICO. Id. at 814. The court

conclude[d] that an injury to tangible property is generally a domestic injury only if the property was physically located in the United States, and that a defendant's use of the U.S. financial system to conceal or effectuate his tort does not, on its own, turn an otherwise foreign injury into a domestic one.

Id. at 819. Accordingly, where a plaintiff suffers an injury to tangible property -including money - "absent some extraordinary circumstance, the injury is domestic if the plaintiff's property was located in the United States when it was stolen or harmed, even if the plaintiff himself resides abroad." Id. at 820-21. The court stressed that the focus of the domestic injury analysis is on the location of the plaintiff's property when it is harmed, and not on the location of the defendant when wrongful conduct was committed. Id. at 819 ("[I]mportantly, the only domestic connections alleged here were acts of the defendant." (emphasis in original)).

In this District, courts have interpreted RJR Nabisco as requiring a domestic injury without considering whether there is an extraterritorial application of RICO's substantive provisions. Accordingly, these courts analyze - as an initial matter - whether a RICO plaintiff has sustained a domestic injury. Where a domestic injury has not been shown, the RICO claim is dismissed. There is no analysis as to whether RICO's substantive provisions are being applied extraterritorially. See, e.g., Dandong Old N.E. Agric. & Animal Husbandry Co. v. Hu, No. 15 Civ. 10015 (KPF), 2017 WL 3328239, at *15 (S.D.N.Y. Aug. 3, 2017) ("Plaintiff did not sufficiently prove that it suffered a domestic injury from the alleged price-inflation scheme; in consequence, the claims under 18 U.S.C. § 1962(d) against each Defendant must be dismissed."); Yanchukov v. Finskiy, No. 15 Civ. 8128 (JPO), 2017 WL 3491965, at *8 (S.D.N.Y. Aug. 14, 2017) (dismissing RICO claim because plaintiffs did not suffer a domestic injury, without considering whether RICO's substantive provisions were being applied extraterritorially); City of Almaty, Kazakhstan v. Ablyazov, 226 F. Supp. 3d 272, 288 (S.D.N.Y. 2016) (same).

2. Analysis

Here, Hilti learned about the purported Rothko when he visited the Gallery in Manhattan and was provided with false information about the painting. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶¶ 98-102, 111) The purported Rothko was not available to be shown, however, and Hilti was merely given a photograph of the painting. (Id. ¶ 102-03) Accordingly, as a courtesy, the Gallery delivered the painting to the Trust in Liechtenstein, so that the Trust could view the painting before deciding whether to purchase it. (Pltf. R. 56.1 Add. Stmt. (Hilti Dkt. No. 220) ¶ 1207; Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 118) The Trust decided to purchase the painting after it was delivered to the Trust in Liechtenstein. (Def. R. 56.1 Stmt. (Hilti Dkt. No. 218) ¶ 118) There is no evidence that any trustee, beneficiary, or representative of the Trust was in the United States when the Trust's purchase of the purported Rothko was consummated. Instead, the Trust's purchase of the painting occurred when it transferred $ 5.5 million from its bank account in Liechtenstein to Knoedler's bank account in New York. (Id. ¶¶ 126, 130)

Defendants contend that, under Bascuñán, the Trust did not suffer a "domestic injury." (Def. Knoedler Br. (Hilti Dkt. No. 217) at 29) In Bascuñán, the court identified four injuries: two involved the theft of money from foreign bank accounts, which was subsequently transferred to accounts in the United States. Bascuñán, 874 F.3d at 818. The Second Circuit held that these were not "domestic injuries," explaining that "a defendant's use of the U.S. financial system to conceal or effectuate his tort does not, on its own, turn an otherwise foreign injury into a domestic one." Id. at 819. The two other injuries involved the theft of money and "bearer shares" located in the United States. Id. at 818-19. The Second Circuit concluded that these were "domestic injuries" under RJR Nabisco, because the property was inside the United States when it was stolen. Id. at 824.

Here, Defendants argue that the Trust was injured in Liechtenstein when the funds constituting the purchase price for the purported Rothko were transferred from the Trust's Liechtenstein bank account to Knoedler LLC's bank acc