The Salander-O'Reilly Lawsuits: One Settled, One in Limbo, and Another Goes Deeper

by David Hewett

In August we reported (pp. 28-29-A) that one of New York City’s premier art merchants, Salander-O’Reilly Galleries, was involved in no fewer than three lawsuits. One suit has now been settled, but another appears to have worsened. Founder and owner Lawrence (Larry) Salander, connoisseur of the classic and baroque, who is included on the power list of the 100 most influential people in the art world, is involved in a spate of court actions.

The Dougall Arts Ltd. suit, stemming from Salander-O’Reilly’s purchase of a 16th-century terra-cotta sculpture of St. Jerome from Dougall Arts Ltd. in 2004, has been settled. The purchase price had been €850,000. Dougall Arts Ltd. sued when Salander-O’Reilly missed several deadlines for payment. That bit of unpleasantness culminated in a May 5 order by Judge William H. Pauley III that Dougall Arts Ltd. could recover €497,144 (approximately $700,000) from Salander-O’Reilly Galleries. On June 1 the attorneys for Dougall Arts Ltd. received a wire transfer payment of $200,000 from Salander-O’Reilly, and on July 5 the attorneys received a cashier’s check for $500,203.22. Those payments led to the issuance of a Satisfaction of Judgment document issued by attorney Sean T. O’Leary on July 10, 2007. Dougall Arts Limited vs. Salander-O’Reilly Galleries was closed.

In another lawsuit (the one now in limbo), Salander-O’Reilly Galleries and Lawrence Salander have filed their answers to the complaints launched by Earl Davis, who charged them with mishandling and/or misappropriating the works of art left with them that were produced by his father, Stuart Davis.

Stuart Davis, one of America’s more prolific artists, died in 1964 and left behind a large number of works. Earl Davis handed “hundreds” of them to Larry Salander under agreements specifying that the gallery was entitled to commissions on paintings of 20% up to $1 million; 10% for proceeds in excess of $1 million. For works on paper, the commission was to be 30% up to $20,000; 20% in excess of $20,000. In 2005, Earl Davis stated, he became aware that the “gallery was having bookkeeping problems.” He asked for an inventory, which was not forthcoming, and the relationship began to sour. Davis then demanded the gallery return “my entire inventory of works by my father.” None were returned as of May 31, 2006, he said.

Later, during a meeting with an accountant on June 21, 2006, Davis stated that Larry Salander “handed me a stack of 24 post-dated checks (each in the amount of $222,083). The checks were to pay over a period of 24 months the Gallery’s debt to me—at least to the extent that he and the Gallery had disclosed their debt to me as of that date.” From June 1, 2006, to January 11, 2007, 102 of Stuart Davis’s works of art were returned to Earl Davis. Another 124 that Earl Davis could identify were not returned. He alleged he was told that “103 of the 124 Works were out on consignment to other galleries or dealers, and eight others were on consignment or approval with various collectors and museums."

Earl Davis said he later learned that several listed as on consignment had actually been sold. “Specifically, a Gallery client, Joseph Carroll, told me that he owned 10 of my Works, contrary to the Gallery’s representation to me that all the Works merely were out on consignment. In addition, a show at the Whitney Museum included two of the Works and identified them as being owned by someone other than me. Finally, another art gallery, the Babcock Gallery, was selling five of the Works…,” he stated in court papers, “under penalty of perjury,” on June 27, 2007.

On July 9, 2007, Salander-O’Reilly Galleries and Lawrence Salander agreed to cease selling any of the disputed Davis artworks, deliver documents to Earl Davis relating to the sale or consignment of the artworks, and inventory those that remained. They and Earl Davis were to try to negotiate “to resolve the claims in this action,” ordered Judge Sidney H. Stein. If they failed to reach agreement before August 11, then the case before the court would go forward until decided by the judge.

On July 17, the attorneys for the gallery and Lawrence Salander filed their answer to the charges set forth in Davis’s original complaint of May 29. They denied all allegations charged and offered a shopping list of Affirmative Defenses. The case of Saundra B. Lane vs. Salander-O’Reilly Galleries and Lawrence Salander took on a decidedly darker note in a Worcester, Massachusetts, court during July.

Two years ago, in 2005, Larry Salander wanted a particular painting owned by wealthy Massachusetts collector Saundra Lane, a Charles Sheeler (1883-1965) oil on canvas titled Newhaven (alternately described as New Haven). Salander entered into several detailed agreements with Lane in order to get the iconic 1932 artwork by the man considered to be the American master of precisionism. On April 1, 2005, Lane, best known as a collector of vintage photography, sold Salander the painting for $9,173,261. Salander signed a promissory note agreeing to pay the principal plus 5% interest per year. Payments were to begin on June 30, 2005, and to end on January 31, 2007. A late fee of 5% was due on installments not paid within 15 days of the due date. Salander signed both an Unconditional Guarantee and a Security Agreement, the latter naming specific works of art as collateral.

 There’s no disagreement over the fact that Salander-O’Reilly Galleries failed to make a full payment on March 31, 2006, and failed to make the June 30 and July 21 payments in 2006. The matter was referred to the U.S. District Court of Massachusetts, Central Division, as a complaint by Lane’s attorneys. The parties got together, and new agreements were drawn up restating the payment dates. New collateral for the agreement was also designated. Early this year, however, there were allegations of more missed payments, and Saundra Lane’s attorneys were back in the Worcester court seeking relief. By midyear, matters had worsened to the point where attorneys for Lane were asking for a Summary Judgment from Judge F. Dennis Saylor IV.

In the latest batch of documents filed with the court (July 25), Salander-O’Reilly Galleries is alleged to have missed a total of six payments due in 2007, of roughly $2.9 million. To add insult to injury (financial, that is), of the six items of collateral, as designated in the Security Agreement signed by Lawrence Salander, four are missing totally, and the two remaining items, paintings described as by Albert Pinkham Ryder, were discovered, upon examination by an independent appraiser, to be unsigned and were denied certificates of authenticity by a Ryder authority. Their value was appraised at a total of $45,000, far from the $3.5 million originally claimed.

Worse yet, from the point of value, the Charles Sheeler painting at the heart of the matter, the $9 million Newhaven, is gone. It had been “sold or otherwise disposed of,” Saundra Lane stated in the July 25 document. Two other works of art listed as collateral were also missing. “The Defendants represented and warranted to me that they would not sell, convey, or dispose of the Collateral,” she stated in the document she “signed under the penalties of perjury.” Attorneys for Lawrence Salander “failed to respond to Request for Admission, failed to respond to a request for the production of documents, and failed to attend to their noticed depositions.

“Defendants have stated that they will not remedy their failures to produce discovery,” the attorneys for Saundra Lane told the court. Attorney-speak aside, what Lane’s attorneys were telling Judge Saylor was that Salander-O’Reilly Galleries and Lawrence Salander had not met with them to give testimony, even after they had received proper warnings of the scheduled dates for such meetings (“noticed depositions”). Furthermore, they had not complied with the request for documents concerning the purchase of the painting and told them they would not do so in the future.

What’s a judge to do in the event of such a happening? Judge F. Dennis Saylor IV canceled a deadline previously set and the July 31 Status Conference. Instead, he gave notice of a September 7 hearing on Lane’s July 25 Motion for Summary Judgment and a Judgment Pursuant to Rule 37. (Rule 37 of the Federal Rules of Civil Procedure concerns the failure to cooperate in the discovery or disclosure process of law. A judge can sanction a party ruled in violation of Rule 37 by ordering him to pay certain fees, or, for willful violation, judge it as contempt of court.)

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