For Wine, Old = Good . . . For Legal Claims, Not So Much.
A federal court just taught a valuable and expensive lesson to a wine connoisseur: Unlike wine, legal claims age poorly. In the late 1980’s, billionaire William I. Koch bought bottles of wine represented to have belonged to President Thomas Jefferson. When he discovered that Thomas Jefferson actually had not owned the wine in question, he sued Christie’s Auction House for fraud in New York federal court. However, the Second Circuit recently upheld the district court’s dismissal based on an expiration of the statute of limitations. See Koch v. Christie’s Intern. PLC, — F.3d —-, NO. 11-1522-CV (2d Cir. October 04, 2012).
Koch’s argued that Christie’s promoted as authentic a cache of wine that was supposedly bottled in the late 1700’s and linked to Thomas Jefferson. Koch alleged that these “Jefferson wines” were, in fact, counterfeit, and that Christie’s knew or recklessly did not know of the wines’ dubious nature. Koch purchased four bottles of the now discredited Jefferson wines from third-party dealers in November and December 1988, allegedly relying on promotional representations made by Christie’s. In 2010, he brought suit on the issue alleging fraud and racketeering by Christie’s.
In 2011, a district court judge dismissed the case, finding Koch had missed the statute of limitations on the racketeering claim. The heart of the issue was the operation and scope of “inquiry notice.” Attorneys for Christie’s argued that news coverage of the Jefferson wine issue should have put Koch on notice at least ten years prior to his filing suit. Koch argued that inquiry notice doesn’t trigger the running of the statute of limitations. Instead, he said the statute doesn’t begin to run until a plaintiff has knowledge of a defendant’s scienter, as well as the alleged injury.
The Second Circuit agreed with the district court, holding that the statute of limitations began to run when there were “storm warnings” that should have prompted Koch to inquire into as to whether he has been injured. It noted that the “storm warnings” need not spell out every aspect of the alleged fraudulent scheme. The “warnings” will be sufficient to start the running of the statute of limitations when they would suggest to an investor of ordinary intelligence that he has probably been defrauded. Perhaps the District Court Judge, John Koeltl, put it best: “For wine, timing is critical, the same is true of causes of action.”
