More Trouble for Salander-O’Reilly Galleries

On September 7 Salander-O’Reilly Galleries lost a big one. On that day in United States District Court in Massachusetts, a motion for summary judgment was granted in favor of Saundra Lane in her lawsuit against the New York City art firm and its owner Lawrence (Larry) Salander. The amount of the judgment is yet to be determined, but it’s almost sure to be a multimillion-dollar award.

Saundra Lane had filed suit on August 23, 2006. The case revolved around missed payments for a Charles Sheeler painting, Newhaven. On April 1, 2005, Lane sold Newhaven to the Salander-O’Reilly Galleries for $9,173,261. Salander signed various promissory notes, guarantees, and security agreements and established a schedule for payments. A number of payment installments were missed, the schedule was rewritten, and payments lapsed again. In documents filed on July 25, 2007, it was alleged that Salander and the gallery owed roughly $3 million to Lane. Saundra Lane also claimed that the value of the collateral furnished by Salander was substantially below the value claimed.

Lane’s attorneys complained that Salander refused to meet with them or supply the documents requested and approved by the court and asked the judge to consider a contempt of court ruling against Salander. On September 7, Judge F. Dennis Saylor IV ruled on Lane’s motion for summary judgment in the manner described above.

The arguments against the motion included August 29 filings from Anthony Doniger, Salander’s attorney. Doniger produced an affidavit from Antonette Favuzza, the chief financial officer of Salander-O’Reilly Galleries, stating that Lane’s contention that Salander owed her a total of $3,420,322.35 in principal and interest on the $9 million purchase was erroneous. Using her calculations, Favuzza contended the actual debt was only $2,528,616.88. Anthony Doniger also alleged that Lane “now has in her possession four valuable paintings,” so any judgment must reflect the value of the paintings, “lest the plaintiff receive a double recovery.”

It took Saundra Lane less than 24 hours to rebut Doniger’s arguments. As for the figure of $2,528,616.88 said owed by Salander, “This figure is incorrect,” Lane stated. Some of the error came from payments credited to the wrong times, others were for checks written to Lane, but, as she wrote, “These checks did not clear and, therefore, provided no value or consideration to me.” The true present total due, she stated, was $4,609,232.38, in principal and interest.

As for the four paintings given her as collateral, for the two works by Albert Pinkham Ryder, “the Appraisers have placed a value of only $45,000,” she noted. And for two works possibly by James Abbott McNeill Whistler, “the Appraisers have determined the value of the pair of paintings to be an aggregate of only $3200. “Therefore, based on these appraisals, the total value of the Collateral is only $48,200.”

Lane’s attorneys are due to propose a judgment amount by September 15. An answer is due by Salander on September 21. The judge will rule shortly after the papers are filed.

—More Trouble

The discovery that additional complaints have been filed in New York Supreme Court against Salander-O’Reilly Galleries and its owner Lawrence Salander gave new impetus to the charges of an ongoing “liquidity crisis” at the world-ranked gallery as summer’s end neared.

These “disputes between friends” focus attention on the claim of former friend and art consignor Earl Davis that Lawrence Salander was using his assets to pay the claims of others. Davis’s attorney claims some $4 to $6 million has already been spent to settle such claims.

—John McEnroe



Among the New York Supreme Court filings was a claim from tennis great John McEnroe, alleging that Lawrence Salander failed to make good on an October 5, 2006, pledge to pay $325,000 to McEnroe on or before March 5, 2007.

McEnroe is no outsider to the art world. In 1994 the then 35-year-old semiretired tennis whiz opened a gallery in SoHo on the second floor of a loft building at 41 Greene Street. McEnroe wouldn’t comment on the size of that investment in the art business when asked about it for a 1994 New York Times story but admitted it was substantial and would take him a few years to break even.

McEnroe’s motion for summary judgment was filed on May 11. We attempted to discover how the $325,000 debt was contracted, but our calls were not returned.

—Monty and Sarah Diamond



The other filings include a complaint filed by Monty and Sarah Diamond, collectors who live in New York and Colorado. It alleges that in April 2006, Monty Diamond gave 16 works of art to Salander to assess and perhaps sell for the standard 10% commission. All prospective sales had to be vetted by Monty Diamond before actual selling, he maintained.



Monty Diamond claims he was told by Salander on August 23, 2006, that ten paintings had been sold, “without consent or authorization of the plaintiffs.”

The total price realized by the ten paintings was $477,500, Monty Diamond said he was told by Salander, and in an effort to mitigate any complaints from the Diamonds, Salander agreed to waive his seller’s commission. The payments for the Diamonds’ art were to begin in January 2007, but none have been made through July of this year, they insist.

The Diamonds asked the court for judgment in their favor for the entire $477,500 with interest. Under other “Causes of Action,” the total asked for various damages is just under $4 million.

—Elaine A. Rosenberg

Another legal action against Salander came from Elaine A. Rosenberg, who has several art-related businesses in New York City. She alleged that on May 25, 2005, she joined with Salander to “…purchase  Stuart David’s [sic] Brown Table Still Life, 1922, oil on canvas (the ‘Painting’) for the purchase price of $400,000.” The agreement was that she would give $200,000 to Salander, who would put up the same amount. Salander told her he already had a buyer who was willing to pay $800,000 for it. She claims he told her she would receive $400,000 from the sale “on or before December 15, 2005.”

“To date [filed January 31, 2007], neither the Galleries nor Salander has paid any portion of Rosenberg’s share from the sale of the Painting—the amount of $400,000—to Plaintiff,” she claimed. She asked for judgment in her favor of $400,000, plus interest and legal fees.

—Paul Rosenberg

Another Rosenberg also has a legal problem with Salander. Paul Rosenberg & Co. L.P., a Delaware limited partnership holding company, is the legal owner of the building on 20 East 79th Street where Salander-O’Reilly Galleries LLC leased the entire ground, second, and third floors, plus some of the basement, from April 1, 1989, through December 31, 2009 (the full term was available, if they so wished).

Besides agreeing to pay real estate taxes, maintenance, and utility costs, Salander agreed to pay $700,000 rent annually to Rosenberg & Co., or $58,333.34 per month. There was a later agreement that allowed for a base rent price plus costs for deferral months, and that set up schedules for figuring those charges. It was a fairly complicated piece of business, but Lawrence Salander signed the leases.

By the period ending May 15, 2006, Rosenberg & Co. claimed Salander was in arrears a total of $491,509.50. Salander did not actually vacate the building until November 3, 2006, when the business moved into its present location in New York City’s historic Upper East Side at 22 East 71st Street between Fifth and Madison Avenues.

For the period between mid-May and November 3, 2006, Rosenberg claimed Salander owed either an additional $1,208,391.55 or, under a different formula, an additional $383,983.37.

In the complaint filed with the court on January 31, 2007, Rosenberg & Co. sought the amount of the earlier rent in arrears, $491,509.50, plus either $1,208,391.55 or $383,983.37, plus interest and legal fees.

—Roy Lennox

There’s little we can tell you about the latest claim made against Salander. According to the New York Sun, New York City art collector and hedge fund manager Roy Lennox filed suit in New York Supreme Court on August 29, 2007, seeking some $14.6 million from Salander. Lennox did not yet have an attorney at the time this went to press, and no documents had been scanned into court records.

Sun reporter Sarah Portlock wrote that Lennox and Salander had a joint business in buying and selling art, and that “Lennox claims to have invested $3.6 million to the gallery but received only $1 million in returns, according to the suit.” Portlock stated Salander referred to the suit as a “dispute between friends.” That’s the same response we got when we asked Larry Salander about a suit involving another person.

—Earl Davis

The Earl Davis suit has begun to resemble the Saundra Lane suit in that it too has reached an impasse. Davis had placed “hundreds” of works of art made by his late father, the prolific artist Stuart Davis, with Salander-O’Reilly Galleries and sought an accounting. He wanted to know where they were currently, how many had been sold, and what is due him.

On August 20, 2007, attorneys for Davis filed notice with the court that they would seek a motion for contempt and a preliminary injunction on Salander-O’Reilly Galleries for the failure to comply with stipulations and orders executed in July.

One of those orders was that unsold paintings were to be returned to Earl Davis. The galleries “represented (falsely) that there were no unsold works,” alleged Davis’s attorney Dean Nicyper, but he located some within the city limits. New York City’s Babcock Galleries declared that it had seven of the Stuart Davis paintings (originally placed with Salander by Earl Davis) and returned them to Earl Davis on July 24.

Earl Davis also filed a document with the court on August 20, a declaration supporting Nicyper’s motion. In it, he stated, “Defendants have declared they have a liquidity crisis…The Defendants’ declaration is confirmed by the Defendants’ repeated failed promises to pay me all money they owe. The proceeds from sales of my Works, however, are mine alone. Defendants have no rights to those funds. Given Defendants’ liquidity crisis, the longer Defendants withhold payment of my sales proceeds trust funds, the greater the likelihood that Defendants will never deliver those trust funds to me.”

Nicyper made several charges. He claimed that Salander had sold 73 Davis paintings for a total of $9,378,875. He stated that, “to avoid the collapse of their house of cards, Defendants have been using the cash they receive to pay other creditors.” (In a supplementary document, Nicyper identified one of those creditors, stating, “Defendant Salander paid a contractor $374,388.05 for renovations to his New York  apartment between June 2004 and June 19, 2006.”) Nicyper claimed Salander used sales of Davis’s art to buy other art. In a statement that went to the heart of Davis’s complaint against Salander, he charged, “Court filings in cases brought by sellers against the Gallery for its failure to pay in full for that artwork show that Defendants paid between $4,436,433.10 and $6,138,550.60, or more, to others over the last couple of years, while Defendants withheld from Plaintiff more than $9 million of Plaintiff’s trust funds.”

Nicyper asked for a motion for contempt and a preliminary injunction against Salander.

Salander’s attorneys did not hesitate in posting their opposition to any such steps.

Chief Financial Officer Antonette Favuzza declared in a six-page document, signed on September 4, 2007, that Salander-O’Reilly Galleries had complied with the court’s orders. She claimed that since she met with counsel on July 10, 2007, “I have taken all the steps necessary to ensure that Salander-O’Reilly fully comply with the Order.” She assigned the task of retrieving all of the Davis works to employee Diane Buckley, who resigned from the firm on August 24. She then had Caitlin Fitzgerald take up where Buckley left off. They employed a phone log to identify persons called. They sent out 63 e-mails. Favuzza said she had no personal knowledge of any monies received by Salander since receipt of the order. Favuzza said they had complied with all the court’s orders and supplied all the documents requested.

On that same date, September 4, the attorneys from the firm Winston & Strawn, LLP, representing Salander, filed a declaration in support of Salander’s opposition to Davis’s motion for contempt and for a preliminary injunction, a little over 200 pages of “Main Document and Exhibits.”

It was followed by a 28-page memorandum of law (later superseded by a “Corrected Memorandum”) supporting their opposition to the contempt motion. Edwin Larkin, the lead attorney, argued that his clients have not “sold or encumbered any of the Works” after receiving the Court’s Order, have returned the Works in their possession,” and “have sought the return of Works that have not sold and are not in their possession.” In addition they have “produced documents relating to the categories set forth in the Order.” Furthermore, Larkin maintained, Davis argued that he “has already been irreparably harmed by Defendant’s alleged dissipation of sales proceeds received for the Works.” If that is the case, Larkin argued, “Plaintiff’s allegations therefore have no teeth. If dissipation of the proceeds has already occurred, and the order put in place now prevents further sales of the Works, then there can be no likelihood of irreparable harm.”

On September 7, Larkin issued the following statement: “The Salander O’Reilly Gallery has had a long relationship with Mr. Davis and regrets that the matters in dispute have come to the point of litigation. The gallery denies the allegations set forth in the complaint and believes, as stated in its opposition papers, that Mr. Davis’s motion for contempt and for a preliminary injunction is unwarranted and unnecessary. The Salander O’Reilly Gallery has been diligently complying with its obligations under the Stipulation and Order agreed to by the parties and will continue to do so until this matter is resolved.”

As to when the Davis case will be tried, all we have to go on is an order coming out of a meeting held on August 21 with the various attorneys and Debra Freeman, United States Magistrate Judge. Judge Freeman issued an order to both parties to make all the initial disclosures required by law no later than September 4, to make any other motions amending the matter before October 26, and to complete all discovery issues before November 30. All expert discovery must be completed by December 31.

We sought comment from attorneys for parties in the major disputes. Only attorney Larkin returned our messages.

Login or Register to post a Comment