The fallout from the 2007 Barrett-Jackson Auction continues. In an unprecedented move in March, Barrett-Jackson filed suit in federal court against Judge David Clabuesch, an unhappy consignor at the January auction. Generally, the allegations in the complaint are that Clabuesch’s post-auction conduct and statements damaged Barrett-Jackson’s reputation, and its Palm Beach, Florida auction, by causing potential consignors to decide not to consign their cars.
Clabuesch, who serves as a probate judge in Michigan, was the owner of the 1970 Plymouth Hemi-‘Cuda that was documented as the last-surviving Ramchargers race car. The ‘Cuda sold for $300,000 on Saturday afternoon. Clabuesch claims a variety of improprieties in the conduct of the auction. Most notably, he claims the car was short-gavelled—the auctioneer hammered the ‘Cuda sold without fair warning and without allowing bidders sufficient opportunity to enter the bidding.
’CUDA IN CHAINS
Clabuesch filed a grievance report contesting the validity of the auction. Then, while the ‘Cuda was being stored in the public Showcase Pavillion, Clabuesch posted on the car a copy of the grievance and a notice that the auction was void and under protest. He also locked the front wheels with chains and padlocks.
It didn’t take long for the story to appear on several internet blogs. Of particular import was an article entitled “Barrett-Jackson in trouble: Barrett-Jackson Westworld Tents Turn-out to be a House of Cards,” which incorporated a number of allegedly false statements that Barrett-Jackson has attributed to Clabuesch.
B-J SIX SHOOTER
The Complaint filed by Barrett-Jackson asserts six separate counts of liability, and is available for your perusal at www.sportscarmarket.com. Obviously, this is just one side of the story. The final answer will take months to become known. But let’s take a look at each of the claims, and assess the prospects.
1. BREACH OF CONTRACT
Count One asserts breach of the consignment contract by protesting the sale, posting the notices on the car, and chaining the Cuda. The Complaint does not specify which provision of the contract has been breached, and nothing stood out in my review of the contract. I would expect Clabuesch to file a motion asking that the Court order Barrett-Jackson to make this allegation more specific.
In my opinion, it’s going to be tough to make out a breach of contract. Not only could I not find a specific provision that could have been breached, but it seems pretty obvious that Clabuesch thought that Barrett-Jackson breached the consignment contract. Ordinarily, one does not breach a contract by claiming that the other party has breached the contract, and taking action to assert one’s legal rights.
It is also unclear from the Complaint if Barrett-Jackson is seeking to recover its Palm Beach losses as part of the breach of contract claim. Again, I would expect Clabuesch to file a motion asking that this be made clear. If that is the intent, that will be tough sledding. It’s hard to imagine that such an alleged breach of contract by Clabuesch, by itself, would cause sellers to pull out of the Palm Beach auction.
But this is an important allegation, because a breach of contract will entitle the prevailing party to recover its attorney fees. No doubt, that’s going to be a big number here.
2. GOOD FAITH AND FAIR DEALING
Under Arizona law, every contract carries an implied duty of good faith and fair dealing, and Count Two alleges that Clabuesch violated these duties with his post-auction conduct. Though much is often made of these implied duties, the reality is that the legal meaning of these words is quite a bit different than their dictionary definitions. I would expect Clabuesch to claim that he did no such thing, and only asserted his rights to prevent a further breach by Barrett-Jackson. That could very well be a complete defense.
3. INTERFERENCE WITH PALM BEACH
Count Three claims that Clabuesch’s actions constituted a tortious interference with Barrett-Jackson’s anticipated consignments at its Palm Beach auction. That claim is going to be very tough to establish. It won’t be enough to establish that the alleged conduct drove sellers away from the Palm Beach auction. Rather, Barrett-Jackson will have to establish that Clabuesch intended to accomplish that result, which would seem to require a more direct interference. For example, no allegation is made that any prospective seller was contacted and advised to stay out of the auction, which is more along the lines of the type of conduct that would ordinarily give rise to such a claim. I would expect very difficult proof problems, as Barrett-Jackson would probably have to identify specific sellers who were induced to keep their cars out of Palm Beach.
4. CONVERSION WITH CHAINS
Count Four alleges that the chaining of the ‘Cuda improperly interfered with Barrett-Jackson’s right to possess and control the car after the auction, which is called “conversion.” This claim would seem to depend on the outcome of the expected battle over whether or not Barrett-Jackson breached the consignment agreement. If Clabuesch wins that argument, then there would be no conversion, as it was still his ‘Cuda. But if Barrett-Jackson wins that battle, the chaining of the car might well be a conversion. However, the most likely damage recovery would be the cost of cutting the chains. I doubt that would be much of a victory.
5 & 6. DEFAMATION
These claims seem to be the guts of the Complaint, that Clabuesch defamed Barrett-Jackson and damaged its business reputation. Count Five alleges defamation on account of the comments made to the internet blogger; Count Six deals with the posting of the notices on the ‘Cuda at the auction site.
Let’s address the claim regarding the notices first, as that one seems easier to analyze. The defense I would expect to see here is that Clabuesch was merely asserting his legal rights, and attempting to protect himself from a breach of contract on the part of Barrett-Jackson. That could make out a privilege—under certain circumstances, the law gives people the privilege to make defamatory statements about others without liability.
I would also expect to see the defense that there was nothing defamatory about the postings. The notice cites “irregularities” in the auction. But, read literally, it does not blame Barrett-Jackson for them, nor does it state that Barrett-Jackson even knew about them. And, even if the alleged irregularities are considered to be attributed to Barrett-Jackson, a legitimate belief that Barrett-Jackson made errors in the conduct of the sale would not impugn its character or reputation.
Further, proving damages is going to be tough. Since the alleged defamation was communicated only to persons present in the Showcase Pavilion, it will be hard to demonstrate a specific financial impact.
The claim regarding the alleged statements to the internet blogger is difficult for me to understand. Much of this claim seems directed to the effect the alleged statements had on the blogger himself, asserting that Clabuesch was trying to dissuade the blogger from dealing with Barrett-Jackson. I’ve read the blog, and it’s very clear to me that the blogger had a very poor impression of Barrett-Jackson even without the Hemi-Cuda incident. Consequently, I doubt Judge Clabuesch has much exposure there.
But this count is worded vaguely enough that the point might be that the statements were made to the blogger with the expectation that he would repeat them online, and republish the defamatory comments to the general public. If that is what is intended, it would suggest a potentially good claim.
Again, I’ve read the blog. It is not very complimentary to Barrett-Jackson, but the majority of the comments appear to come from sources other than Judge Clabuesch, and address other areas of complaint. For example, a major portion of the blog expresses support for SCM Publisher Martin, after having been stripped of his media credentials and ejected from the auction site. To hold Clabuesch liable for defamation on this theory, Barrett-Jackson is going to have to establish exactly what he may have said to the blogger, and its defamatory content.
The defense I would expect to see here is truth. No matter how damaging statements might be to one’s reputation, they are not defamatory if they are true. If Clabuesch made comments to the blogger, but they were all truthful statements, then he would not have any liability to Barrett-Jackson, no matter how much damage they may have caused. This claim will likely be heavily intertwined with counterclaims that we expect Clabuesch will file alleging deficiencies in the conduct of the auction.
IS THIS A SMART STRATEGY?
The thought certainly crosses one’s mind—does filing this lawsuit make good business sense? You have an unhappy seller—a judge no less—who has threatened suit. But he hasn’t filed one yet, and he may never file one. Why file first, and essentially force him to retaliate? Obviously, he’s no stranger to the courtroom.
Perhaps more important from a business perspective, the Complaint is a public document which will likely be widely disseminated. The Complaint alleges damage because potential sellers have decided not to consign their cars to the Palm Beach auction, which may be true. But doesn’t stating that publicly encourage other sellers to stay away? And doesn’t that inject uncertainty into the question whether the damages were caused by the alleged untrue statements of Judge Clabuesch, or by the self-generated publicity that comes from the filing of the lawsuit by Barrett-Jackson?
We can only surmise that the Palm Beach Auction has been having substantial problems, and that Barrett-Jackson decided that this lawsuit was its best bet to keep the situation from getting worse. The reasons for this decision may become more apparent as we get closer to the Palm Beach auction.
WATCH FOR CHAPTER TWO
As mentioned before, the Complaint is simply one side of the story. I fully expect that Judge Clabuesch will tell a much different story, and file a substantial counterclaim. It may take a while to happen, but watch for Chapter Two of this saga.
JOHN DRANEAS is an attorney and car collector in Oregon. His comments are general in nature and no substitute for consultation with an attorney. He can be reached at firstname.lastname@example.org