Deconstructing Larry: Defections and Lawsuits Chip Gagosian’s Enamel

‘When somebody’s the king of the world, nobody wants to alienate them, but the minute people start to defect, they all start piling on.’

Whatever its chances of success, the Perelman suit raises a thorny issue for the art world: what information, if any, must a dealer disclose to those with whom he does business, be they artist, buyer or seller? As Mr. Perelman’s complaint claimed, “Unbeknownst to his customers, Gagosian and the Gallery are often on all sides of the transaction—representing the buyer, the seller and the artist—and they use these multiple roles to their advantage by undervaluing works when purchasing them, overvaluing them when selling them, and pocketing the substantial differential.”

Which sounds like a pretty good definition of the gallery trade, except maybe the part about it being unbeknownst to anyone.

Another recent lawsuit also raised the matter of Mr. Gagosian’s supposed fiduciary duty to a client, and some onlookers believe the case may redefine the way business is done in the art world.

An edition of Roy Lichtenstein's 'Girl in Mirror' at Sotheby's in London.

An edition of Roy Lichtenstein’s ‘Girl in Mirror’ at Sotheby’s in London.

In 1964, Pop artist Roy Lichtenstein’s Girl in Mirror—an “enamel” on steel, made in an edition of eight—was a newly minted, fresh-faced ingenue with a bright future and the world at her feet. Today, a little worse for wear, she has emerged as the unwitting subject of a $15 million lawsuit filed by lawyers for art collector Jan Cowles. Ms. Cowles, 93, suffers from dementia, and the suit filed on her behalf alleges that her son, Charles Cowles, who put the Lichtenstein on consignment with Mr. Gagosian and then sold it to him, did not have the authority to do so—and therefore the dealer had no right to sell it to a third party. The suit further alleges that Mr. Gagosian took advantage of Mr. Cowles, who was in tough financial straits, to obtain an unusually rich commission on the sale.

Mr. Cowles, it should be noted, is no novice in the art trade: a longtime dealer himself, he ran a New York gallery for 30 years until closing it in 2009. What’s more, he has a history of unloading works from his mother’s collection—as it turns out, sometimes without her say-so. Indeed, in a settlement agreement between Jan and Charles filed earlier this year after Jan’s attorneys threatened legal action against him, Charles admitted to selling his mother’s art without permission and agreed to pay her back. How he will do so is hard to fathom, though, since the amount owed is said to be approximately $12 million, and Mr. Cowles has no apparent source of income.

In a November court proceeding, the defense stated its intention to add Charles Cowles to the case, a move that the court seemed to approve of. “Well, I’ve been surprised that the son wasn’t brought into the action initially,” Judge Charles Ramos admitted. The defense also indicated that it was considering adding Lester Marks, Ms. Cowles’s accountant and attorney-in-fact, to the case, on the theory that he may have some liability in failing to prevent Charles from selling the artworks.

In late November, both sides agreed to move forward with voluntary mediation, putting litigation on pause.

The Girl in Mirror controversy began in March 2011 with a suit filed over another unauthorized sale. Art collector Robert Wylde sued Gagosian Gallery for fraud after Mr. Gagosian sold Mr. Wylde a Mark Tansey painting, The Innocent Eye Test, that had been consigned by Charles Cowles. It turned out the painting did not belong to Mr. Cowles, but instead was jointly owned by his mother and the Metropolitan Museum of Art.

Mr. Cowles was quick to take responsibility for the debacle. “I didn’t even think about whether the Met owned part of it or not,” he told The New York Times after Mr. Wylde filed suit. “And one day I saw it on the wall and thought, ‘Hey, I could use money’ and so I decided to sell it … And now it’s a big mess.”

Mr. Cowles, whom Mr. Gagosian referred to in a deposition as “a train wreck,” has claimed in an affidavit that he has been treated for memory problems in recent years. He did not respond to requests for comment.