U.S. District Judge Lewis Kaplan approved a settlement possibly worth over a half billion dollars in a consolidated class-action lawsuit brought on behalf of buyers and sellers at Christie's and Sotheby's U.S. auctions from 1992. The class action alleged these customers were overcharged because the auctioneers colluded on commission fees.
Meanwhile a different federal judge approved a $70 million settlement of a shareholder class-action lawsuit against Sotheby's related to the same scheme.
The settlement of the suit on behalf of auction buyers and sellers, which the auction houses agreed to pay last fall, includes $412 million in cash and the balance in certificates that can be used to receive discounts on future commission fees at either auction house. These discount certificates have a face value of $125 million, although a market value of only $100 million.
The settlement does not apply to buyers and sellers who participated in auctions overseas and opted out of the class action suit. Last month the judge dismissed lawsuits brought by participants in overseas auctions, principally in London, on grounds that U.S. antitrust law would not apply. Buyers and sellers in foreign auctions can still sue in foreign courts under foreign law, according to the settlement terms, but foreign jurisdictions may not permit the class action lawsuits allowed for under U.S. law.
Former Sotheby's Holdings President and Chief Executive Diana Brooks has pleaded guilty to criminal charges related to the scheme and is cooperating with the government. Sotheby's itself also pleaded guilty to criminal charges and will pay a $45 million fine. Christie's cooperated early with a government investigation into the scheme and was not named in criminal charges.
Former Sotheby's Chairman Alfred Taubman had agreed this past September to pay more than $156 million of Sotheby's half of the settlement of the customer class action case. Taubman has also agreed to contribute $30 million toward the shareholder's class action settlement.
Taubman has not yet been charged criminally, but Kaplan's ruling noted published reports that Taubman is the target of a grand jury investigation.
Sotheby's, apparently in a move to help pay for all of this (although denied by the auction house), has announced that it will cut its worldwide staff back by about 8%.