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IN Contemporary Art LLC v. Phillips Auctioneers LLC: A Slightly Forced Major Force Majeure Decision Aaron Chase In a decision with potentially significant repercussions for commercial contracts governed by New York law, a judge in the Southern District of New York appears to have opened the door to using force majeure clauses more broadly to excuse performance as a result of the pandemic. On December 16, Judge Denise Cote issued an opinion granting Phillips Auctioneers LLC's motion to dismiss a breach of contract case filed by the art dealer JN Contemporary Art LLC concerning the auctioning of paintings by Rudolf Stingel and Jean-Michel Basquiat. Judge Cote ruled that Phillips' obligation to auction a painting pursuant to its contract with JN was excused according to the terms of the contract's "force majeure" clause in light of the Covid-19 pandemic. The relevant facts are fairly simple: Phillips was to present a Stingel painting owned by JN for auction "in New York" at its annual "20th Century & Contemporary Art" auction "currently scheduled for May 2020." Phillips guaranteed that JN would receive a minimum of $5 million from the sale. In March, New York became the global epicenter of the pandemic and everyday life and commerce was drastically and quickly disrupted. Governor Cuomo issued a series of executive orders restricting and then outright banning all non-essential business activity until at least June. On March 14, Phillips announced that it was postponing the New York 20th Century & Contemporary Art auction until June. (Although the court did not seem to think it was relevant to its decision, Phillips's announcement came more than a week before Governor Cuomo instituted a complete ban on non-essential business activity). On June 1, Phillips sent JN a letter informing JN that, as a result of the pandemic, Phillips "had no choice but to postpone" the New York auction. Referring to the "force majeure" clause in their contract, Phillips informed JN that it was terminating their agreement. The force majeure clause read as follows: "In the event that the auction is postponed for circumstances beyond our or your reasonable control, including, without limitation, as a result of natural disaster, fire, flood, general strike, war, armed conflict, terrorist attack or nuclear or chemical contamination, we may terminate this Agreement withimmediate effect. In such event, our obligation to make payment of the Guaranteed Minimum shall be null and void and we shall have no other liability to you.\" On July 2, Phillips held a virtual auction, streamed from London but open to bidders remotely, that it called \"20th Century Aid Contemporary Art Evening Sale New York Auction.\" The key issue on Phillips's motion to dismiss JN's breach of contract claim was whether Phillips could rely on the force majeure clause to terminate the agreement as a result of the Covid-19 pandemic. Judge Cote had no trouble nding that the pandemic constituted a triggering event under the force majeure clause. Interestingly, she found support for her conclusion in both the general and specic wording of the clause. Judge Cote primarily relied on the clause's catch-all language permitting Phillips to terminate if the auction were to be "postponed for circumstances beyond our or your reasonable control,\" nding that the pandemic and accompanying regulations \"fall squarely\" within that language. She also found that the pandemic constituted a \"natural disaster,\" which was one of the enumerated triggering events listed in the clause. Accordingly, Judge Cote found that Phillips's obligation to offer the Wpainng for auction in New York in May 2020 was excused according to the terms of the parties' contract
