Accent Delight Int'l Ltd. v. Sotheby's, No. 18-cv-09011 (S.D.N.Y. Dec. 8, 2020) [click for opinion]

Plaintiffs, Accent Delight International Ltd. and Xitrans Finance Ltd., brought suit against Defendants, Sotheby's and Sotheby's, Inc. (together, "Sotheby's") regarding Sotheby's involvement in an alleged scheme by Yves Bouvier ("Bouvier"), to defraud Plaintiffs of approximately one billion dollars in connection with the purchase of a world-class art collection, including Leonardo da Vinci's Christ as Salvator Mundi. Plaintiffs alleged that, while Bouvier purported to act as their agent, he was also, improperly and secretly, acting as a dealer, buying the art himself and selling it to Plaintiffs at a higher price. Plaintiffs alleged that Sotheby's assisted Bouvier in this fraud and that, when Plaintiffs began to develop suspicions, Sotheby's helped Bouvier in his efforts to justify the fraudulent price he had charged Plaintiffs.  

  Plaintiffs were not the only ones who, upon learning about Bouvier's markup, felt aggrieved about Sotheby's role in the Christ as Salvator Mundi transaction. Prior to the present lawsuit, Sotheby's filed a separate lawsuit against the original sellers of Christ as Salvator Mundi (the "da Vinci Sellers") seeking a declaratory judgment that Sotheby's did not breach its obligations to them in connection with the sale of the painting. The parties to that lawsuit entered into private mediation subject to an agreement of confidentiality and ultimately settled their dispute.  

  Plaintiffs in this case subsequently served the da Vinci Sellers with subpoenas seeking their confidential settlement agreement with Sotheby's and other documents relating to the mediation. Sotheby's sought to quash these subpoenas. The court granted Sotheby's motion to quash with respect to the settlement agreement, but declined to do so on the remaining requests, allowing the production subject to any objections Sotheby's might raise. During production, Sotheby's blocked the da Vinci Sellers' production of communications, which, according to the da Vinci Sellers, were otherwise responsive and directly relevant to the mediation. In response, Plaintiffs filed a motion to compel before the court seeking the blocked materials, as well as Sotheby's mediation statement and communications about the mediation.  

  In ruling on Plaintiffs' motion, the court considered the holding in In re Teligent, Inc. In that case, the Second Circuit did not require the disclosure of materials relating to a confidential mediation conducted pursuant to a court order. Specifically, the Second Circuit stated that "a party seeking disclosure of confidential materials must demonstrate (1) a special need for the confidential material, (2) resulting unfairness from a lack of discovery, and (3) that the need for the evidence outweighs the interest in maintaining confidentiality."  

  In determining whether the heightened standard adopted for court-ordered mediation should also apply to private mediations, the court cited several reasons for answering the question in the affirmative. The court considered that providing weaker protections to communications during a private mediation would discourage parties from agreeing to engage in private mediation. The court found this was critical, particularly in more complex cases, where private mediation may be preferable to, and more likely to succeed than, court-ordered or -sponsored mediation. Further, the court noted that "not disincentivizing" private mediations benefits not only the parties, but also the court system generally, both because it alleviates the burdens on court-sponsored mediation programs and because, when successful, it lightens the court's docket.  

  The court thus held that parties seeking to discover materials relating to private mediation are also required to meet the heightened standard set out in Teligent. Applying that standard to the instant case, the court ultimately held that Plaintiffs' request for the mediation materials did not meet the heightened standard: the fact that the materials concerned one of the transactions at issue did not, by itself, establish a "special need," "resulting unfairness," or that "the need for the evidence outweighs the interest in maintaining confidentiality." Accordingly, the court denied Plaintiffs' motion to compel production of the mediation materials.   

  Katelyn Sprague of the Chicago office contributed to this summary.