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Law360 (September 16, 2020, 11:09 PM EDT) -- New York City's revered Marlborough Gallery hit its ex-president and his father with an $8 million fraud and defamation suit Tuesday, alleging they ran the art gallery into the ground by helping themselves to its collection and funds, but the former president countersued alleging a plot to wrest control of the gallery from his family.
Marlborough Gallery, which is known for exhibiting the works of major artists such as Mark Rothko and Jackson Pollock, brought suit in New York State Supreme Court on Tuesday against former gallery president Max Levai and his father Pierre Levai, who previously ran the gallery, alleging economic and reputational harm.
The gallery, which has had various locations in New York City since 1963, said in its 94-page complaint that Max and Pierre Levai "were engaged in a pattern of self-interested and self-enriching transactions" and had undermined the responsible management of the Marlborough Gallery.
Over the years, Pierre Levai — who is the nephew of the gallery's co-founder Frank Lloyd — appropriated Marlborough Gallery artwork and funds for his own use and for the use of various friends and acquaintances, the gallery alleges.
Pierre Levai, the gallery alleges, "developed a sense of entitlement that eroded his understanding as to his role with the Marlborough Gallery and his right to take certain actions with regard to the Marlborough Gallery's property and resources."
Pierre Levai also diverted "unauthorized corporate monies to support Max Levai's ill-advised venture into the restaurant and nightclub business," the gallery alleges.
Max Levai inherited his father's sense of entitlement, the gallery alleges.
The gallery blames father and son, at least in part, for the gallery's financial losses, alleging in its complaint that "many major artists that left the gallery left due to issues that they had with one or the other of Pierre Levai and Max Levai."
The gallery alleges negligence, defamation, fraud, unjust enrichment and breach of fiduciary duty, among other claims, against the pair and their alleged co-conspirators.
"Our complaint makes clear that while the ownership of the Marlborough Gallery has consistently tried to find a constructive path forward, unfortunately an unfounded sense of entitlement seems to be motivating the defendants," the gallery's attorney, Brendan Johnson of Robins Kaplan LLP, said in an emailed statement Wednesday.
Marlborough Gallery is seeking the return of artwork that it claims is being wrongfully held by Max and Pierre Levai or by people to whom they unlawfully transferred or consigned pieces of the gallery's collection. The gallery seeks damages in excess of $8 million for losses that it says it incurred as a result of the defendants' allegedly wrongful actions.
The gallery is also seeking damages for reputational damage suffered as a result of allegedly false statements made by Max Levai.
But Max Levai — who served as president of the gallery beginning in 2019 until his termination on June 24, 2020 — filed his own suit the same day, naming the gallery and two members of its board, including Stanley Bergman, a founder of the law firm Withers LLP, as defendants.
"As the complaint alleges, the Marlborough Gallery, Stanley Bergman and Franz Plutschow have egregiously sought to destroy Max Levai's exceptional reputation and career," said Max Levai's attorney, Marc E. Kasowitz of Kasowitz Benson Torres LLP, in a statement Tuesday. "We look forward to vindicating our client's reputation in court and holding them accountable for the damage they have caused."
Max Levai claims that after the Marlborough Gallery decided to shutter amid the COVID-19 pandemic, the gallery terminated him and began a campaign to destroy his reputation in order to ensure that he wouldn't be able to compete with the gallery when it reopened.
He says the gallery tried to wrest control over the gallery from the Levai family and give the control to the Lloyd family, which he says was ousted years earlier as a result of the "infamous Rothko estate scandal" of the 1970s, in which a court determined that the executors of Mark Rothko's estate conspired with the Marlborough Gallery to undervalue the artist's work and defraud his heirs of their proper share.
Max Levai claims that "the Lloyd family embarked on a scheme to seize control of Marlborough's operations" from him and his father and that "as part of this coup d'état" they voted to terminate him while his father was ill with COVID-19 and unable to vote. The gallery denies the allegation in its suit.
He claims that they then spread defamatory statements about him to his business contacts and artists with whom he had professional relationships.
Marlborough Gallery Inc. is represented by Brendan V. Johnson and Eamon O'Kelly of Robins Kaplan LLP.
Max Levai is represented by Marc E. Kasowitz, Albert Shemmy Mishaan and Kim Conroy of Kasowitz Benson Torres LLP.
The cases are Max Levai v. Marlborough Gallery Inc. et al., case number 654436/2020, and Marlborough Gallery Inc. v. Max Levai et al., case number 654459/2020, both in the Supreme Court of the State of New York, County of New York.
--Editing by Michael Watanabe.
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