Thanks Ryan,
That is what I was questioning…Still not sure if it is like this or much more black and white in the UK…
That’s probably because as per my previous questions re this practice, they then realized they had been caught doing something illegal??
HIGHLIGHTS OF CALIFORNIA AUCTION STATUTES—
Ryan’s post inspired me to finish looking at the California auction statutes (other than the provisions of the California version of the Uniform Commercial Code Ryan mentioned above). There are some powerful enforement provisions under California law from the perspective of consignors, purchasers and even just ordinary citizens. Here’s a summary of a lot of the key ones:
California Civil Code Section 1812.605 imposes an affirmative duty upon every auction house (and every employee of every auction house) to …. “(c) Truthfully represent the goods to be auctioned; and (d) Otherwise perform his or her duties in accordance with the laws of this state.” The latter provision incorporates into the auction statutes by reference all of the other laws of the State of California, including the other provisions of the Civil Code which impose liability for fraud for making false statements of material fact or omitting to state material facts. California Civil Code Section 1812.605(c) imposes an affirmative obligation on the auction house to truthfully describe the goods. Subsection (d) incorporates the obligation under Civil Code Section 1572(3) not to suppress or omit to state material facts known to the auction house or its employees.
California Civil Code Section 1812.608(i) makes it a violation of California law and a criminal misdemeanor to “Knowingly misrepresent the nature of any item or items to be sold at auction, including, but not limited to, age, authenticity, value, condition, or origin.”
California Civil Code Section 1812.608(c) makes it a violation of California law and a criminal misdemeanor to “**Place or use any misleading or untruthful advertising or statements or make any substantial misrepresentation in conducting auctioneering business.**” Civil Code Section 1812.601(a) defines “advertisement” to include: “[**a]ny written or printed communication** for the purpose of soliciting, describing, or offering to act as an auctioneer or provide auction company services, **including any brochure**, pamphlet, newspaper, periodical, **or publication**.”
California Civil Code Section 1812.608(a) makes it a violation of California law and a criminal misdemeanor to “[**f]ail to comply with any provision of this [Civil] code, or with any provision of** the Vehicle Code, **the Commercial Code, any regulation of the Secretary of State, the Code of Civil Procedure**, the Penal Code, or any law administered by the State Board of Equalization, relating to the auctioneering business, including, but not limited to, sales and the transfer of title of goods.” This effectively makes anything constituting fraud or deceit under the Civil Code a violation of the auction statutes, thus triggering the civil penalty and attorney’s fees provisions in the other sections described below.
California Civil Code Section 1812.609 states that “**Any waiver of the provisions of this title is contrary to public policy, and is void and unenforceable**.” This suggests that, at least in the face of allegations of fraudulent misrepresentations and omissions, an auction house’s contractual provisions that purport to disclaim any representations or warranties to prospective purchasers and which state that the bottles are sold “as is” and that the purchaser has no rights or remedies against the auction house except as provided in the auction house’s stated conditions are contrary to California public policy and such provisions are “void and unenforceable” in California.
In addition, the Civil Code auction statutes impose certain affirmative obligations on auction houses with respect to consignments and contracts with consignors. For example, pursuant to Civil Code Section 1812.608 subdivisions (d) through (f) an auction company may not proceed with an auction unless and until the auction house and consignor have entered into a signed written contract with consignor which sets forth all of the terms and conditions to which the parties have agreed and which contains the various types of provisions required by the statute. Section 181.607 requires the auction house to provide the consignor an accounting within **30 working days** for all items sold. The same section imposes the obligation on auction houses to “Within 30 working days after a sale transaction of goods, pay or cause to be paid all moneys and proceeds due to the owner or the consignor of all goods that were the subject of an auction engaged in or conducted by the auctioneer or auction company, unless delay is compelled by legal proceedings or the inability of the auctioneer or auction company, through no fault of his or her own, to transfer title to the goods or to comply with any provision of this chapter, the Commercial Code, or the Code of Civil Procedure, or with any other applicable provision of law.“
California Civil Code Section 1812.607(i) imposes an affirmative obligation upon auction houses and makes it a criminal misdemeanor to fail to “[m]aintain the funds of all owners, consignors, buyers, and other clients and customers separate from his or her personal funds and accounts.” This statute imposes an an obligation to maintain one or more separate trust accounts for the deposit of funds belonging to purchasers and consignors.
The California Civil Code Auction statutes also impose some specific affirmative disclosure obligations on auction houses. For example, pursuant to Civil Code Section 1812.607(k), “Immediately prior to offering any item for sale, [the auction house must] disclose to the audience the existence and amount of any liens or other encumbrances on the item, unless the item is sold as free and clear.” New York law has a very similar obligation. This was one of the issues with the Christie's sales of Rudy Kurniawan's wines in 2009 and 2010 and apparently no such disclosure was made.
California Civil Code Section 1812.608(h) prohibits and makes it a criminal misdemeanor to: “Cause or allow any person to bid at a sale for the sole purpose of increasing the bid on any item or items being sold by the auctioneer, except as authorized by Section 2328 of the Commercial Code or by this title. A violation of this subdivision includes, but is not limited to, either of the following:
(1) Stating any increased bid greater than that offered by the last highest bidder when, in fact, no person has made such a bid.
(2) Allowing the owner, consignor, or agent thereof, of any item or items to bid on the item or items, without disclosing to the audience that the owner, consignor, or agent thereof has reserved the right to so bid.
While there are no California cases discussing subsection (h)(2), this statutory language would seem to impose an affirmative obligation on the auction house which is slightly broader than the duty of disclosure under Commercial Code Section 2328 quoted above. It appears to command an oral statement before beginning the auction (or that particular consignment) that the owner, consignor, or an agent acting on behalf of the owner or consignor (including the auction house) reserves the right to bid on the lots offered. The Civil Code provision is explicit that in the absence of such prior disclosure, no bid may be lawfully placed for the sole purpose of increasing the bid to next increment.
.
Of course, Rudy and his auctioneers could always argue, “Oh, it wasn’t this bottle #0634 of La Tache that was encumbered, it was the other bottle #0634.”
Section 9 (1) and (2) of Don’s post of California law regarding auctions is exactly why I won’t be buying anything at auction.
What was that tag line in those old Jay Leno Doritos commercials? “Don’t worry, we’ll make more!” ![[wow.gif]](/uploads/db3686/original/2X/7/7d450e9830889c8943b674446a21b7254cad657e.gif "wow"){kind=small}
I have a burning question that will doubtlessly shed new light on this whole tawdry affair (sarcasm). Do Federal prosecutors and FBI agents use old fashioned typewriters for Complaints and affidavits or are they using a software program designed to emmulate an old fashioned typewriter and regardless of which it is, why?
Non-proportionately spaced Courier is still the standard in the legal world, 30 years after the laser printer became widespread.
Welcome to the world of the law!
Just as point of reference, there are A LOT of mags (and other large formats) floating around out there without the correct capsule, or the correct label (750ml vs. 1.5L) that are completely real. They were bottled at the winery for importers, friends, top clients etc.
They were not “sold”, there was no transaction, and therefore no need to follow all the rules.
hehe.
Don’t forget word perfect 
Strip label mis-prints are apparently not a cause for alarm.
In vetting an old bottle, we noticed a misspelling on the importer strip label. SO, we reached out to the importer about it and this was his reply:
“Seeing strip labels with miss-printed information is very common. It happens frequently
with consignments which we do not actually affix the strip labels ourselves (agents).
There is no way we can determine if the bottle is authentic by the strip label.”
It would have been great if this was a counterfeit tell - but apparently it is not. That said - we would/will still reach out to the individual importers to verify the information when needed. It would not be responsible to think this one importer is necessarily speaking for all.
Not my experience – virtually all the federal district and bankruptcy courts that I practiced in (which because of bankruptcy was all around the country), as well as the federal appellate courts use Times New Roman. Ditto for California courts with rare exceptions (Third District Court of Appeal, occasionally a particular division of another court of appeal).
Indeed, it looks like I and the F.B.I. are out of date:
http://www.justice.gov/usao/pae/News/Pr/2011/Apr/gordon_indictment.pdf
But cf. http://fl1.findlaw.com/news.findlaw.com/cnn/docs/peterson/captrson42103cmp.pdf (2003)
But we digress…
Well, who knows. Maybe the FBI complaint is counterfeit. Has Don checked it carefully? 
This thread is very heavily focused on DRC and Burgundy, thanks to Don’s abundant knowledge of those wines. I find it interesting, though, that the FBI pictures show almost exclusively Bordeaux labels. I don’t see that the surface has even been scratched in uncovering the full extent of the market penetration achieved by Rudy’s counterfeits. A thorough investigation could take a(nother) decade or more. I add the parenthetical out of consideration for the diligence already shown by Don and others over the years.
In any case, it seems there’s plenty left to do.
Agreed Adam.
One of the things that Geoff and Doug and I talked about concerning the February auction was that we obviously saw all of those brand-new-appearing 1945 and 1961 bordeaux labels that we had concerns about but we just didn’t have time to try to do the detailed side-by-side comparisons on those wines. As it was, we couldn’t get through all of the photos on all of the DRC wines before the auction happened. We were particularly concerned that by focusing only on the DRC wines someone would inevitably get the idea that the bordeaux were okay. That’s clearly not the case. If you look at the patterns of what Rudy sold in the Cellar I and Cellar II auctions as well as what he sold in the Christie’s auctions, in addition to burgundies he sold a large amount of first growth bordeaux and, in some sales, champagne.
Wow, that took a long time to get caught up.
Though of course there’s another side to take into account. Refusing to buy real wine at that auction would have penalized the consignor (who presumably had no idea he or she would be selling wines alongside fakes) far more than the auction house.
Hi Greg - I see how it could be read that way but I saw it as Jancis pointing out that she could easily be sued (and lose) under UK libel law.
NEWS ITEM–DISMISSAL OF KOCH’s CLAIMS AGAINST ACKER MERRALL REVERSED ON APPEAL
The New York Court of Appeals, New York’s highest-level appellate court, yesterday reversed the dismissal of Bill Koch’s lawsuit against Acker Merrall. The Court ruled that Koch’s claims for deceptive consumer-related practices under New York General Business Law Sections 349-350 were improperly dismissed by the trial court (referred to as the “Supreme Court” in NY.) The full decision states as follows:
The judgment of Supreme Court appealed from and the order of the Appellate Division brought up for review should be reversed, with costs, and defendant’s motion to dismiss plaintiff’s General Business Law §§ 349 and 350 causes of action denied. To successfully assert a claim under General Business Law §§ 349 (h) or 350, “a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice” (City of New York v Smokes-Spirits.com, Inc., 12 NY3d 616, 621 [2009]; see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 324, n 1 [2002]). Here, plaintiff sufficiently pleaded such causes of action, and the disclaimers set forth in defendant’s catalogs “do not . . . bar [plaintiff’s] claims for deceptive trade practices at this stage of the proceedings, as they do not establish a defense as a matter of law” (Goshen, 98 NY2d at 326; see Gaidon v Guardian Life Ins. Co. of Am. 94 NY2d 330, 345 [1999]).
To the extent that the Appellate Division order imposed a reliance requirement on General Business Law §§ 349 and 350 claims, it was error. Justifiable reliance by the plaintiff is not an element of the statutory claim (see Small v Lorillard Tobacco Co., 94 NY2d 43, 55 [1999], citing Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 26 [1995]).
Great!
But I actually have no idea what any of that means.
Lucky (for us) that the legal profession is so highly paid, say I!
Great news, Don. Is there a link to Koch’s original pleadings, where he lays out the facts as he sees them? I’d be interested to read what he charges Acker did.