The long-running legal feud between Phillips auction house and Chinese collector Zhang Chang over Gerhard Richter’s 1963 painting of a fighter jet, Düsenjäger, may finally be over. In a decision on 3 March, the appellate division of New York’s state supreme court upheld that court’s July 2021 decision, in which it dismissed Zhang’s claims that Phillips had breached the terms of its contract with the collector and unjustly enriched itself.
The appeals court’s dismissal seemingly marks the end of a twisting series of disputes and settlements—which includes Zhang effectively winning the Richter painting at two different Phillips auctions—that began with the collector’s purchase of an entirely different painting from a different auction house nearly seven years ago. To understand how we arrived here, a recap of this epic of art market litigation is in order.
In June 2015, Zhang bought Francis Bacon’s diptych painting Study for Head of Isabel Rawsthorne and George Dyer (1967) at a Christie’s sale in London for £12.1m. In order to help pay for it, he secured loans from another Chinese individual, Lin San, but when Zhang failed to repay the funds, Lin agreed to loan him more money still, on the condition that he (Lin) would become the owner of the Bacon. The diptych was then consigned to Gagosian in order to cover the sum Zhang owed Lin.
Separately, Zhang had also purchased Richter’s Düsenjäger at a November 2016 sale at Phillips in New York for $24m ($25.5m with fees) by way of a guarantee agreement with the auction house. While Phillips paid out the $24m owed to the Richter’s consignor (believed to be the heirs of late Microsoft co-founder Paul Allen), Zhang failed to pay that sum to the auction house, which filed a lawsuit seeking title to the Bacon diptych to help secure some of the funds it was owed by Zhang. Seeking to secure his claim to the Bacon and prevent Phillips from taking possession of it, Lin filed his own lawsuit in an effort to affirm his ownership of the diptych.
In January 2018, Zhang, Lin and Phillips reached a settlement. Lin relinquished any claim to the Bacon, and Phillips took possession of both it and the Richter painting. Under the terms of the settlement, Zhang was given until July 2018 to pay Phillips his outstanding debt of $26m in order to take ownership of Richter’s Düsenjäger.
But Zhang failed to pay the $26m in time, and in March 2019 Phillips brought Düsenjäger back to market at its spring evening sale of contemporary art in London, this time with a much lower estimate of £10m-£15m (as opposed to the 2016 estimate of $25m-$35m). After a bidding war, it sold to a phone bidder for a hammer price of £13.5m (£15.5m with fees). The buyer, subsequent litigation revealed, was none other than Zhang.
The collector brought the lawsuit whose dismissal was just upheld in appeals court after paying Phillips his outstanding debts and taking possession of the Richter and Bacon paintings. Zhang alleged that Phillips had breached the terms of their agreement and unjustly enriched itself by requiring that he pay the buyer’s premium, around $2.6m, which he was seeking to recover via litigation. In its decision following a contentious virtual hearing on 9 February, the appeals division affirmed the court's July 2021 ruling, finding that Phillips “was doing no more than exercising its right under previous agreements” by reselling the Richter.
Lawyers for Zhang and Phillips had not responded to requests for comment as of press time. A spokesperson for the auction house said, “Phillips is pleased that the plaintiff’s claims have been found to be without merit and firmly dismissed by the court.”