NEW YORK, NY.- One of the art world’s most acquisitive and controversial collectors has been dealt a noteworthy setback this week by a New York federal judge.

In a closely watched case, European art broker Anne Faggionato, former Director of Art International and current CEO of BlueLabel, won a favorable decision in a long-running dispute over the purchase and subsequent sale of “The Composition,” a 1923 painting by renowned Dutch artist Piet Mondrian that has been valued as high as $7 million.

The decision comes nearly a year after a February 2011 bench trial in which New York art dealer Edelman Arts sought damages against Art International for failing to complete its purchase of the painting in 2005. Art International was principally owned at the time the litigation was filed by Ms. Faggionato; Edelman Arts is principally owned by legendary corporate buyout artist Asher Edelman.

Seyfarth Shaw LLP represented Art International in the case, styled Edelman Arts, Inc. v. Art International (UK) Ltd., 06 Civ. 410 (RJH).

The core issue at trial was whether a signed bill of sale for the Mondrian painting between Edelman Arts and Art International, which was acting as agent for an undisclosed buyer, was ever operative. Critical to the dispute was the fact that the bill of sale was to be held by Mr. Edelman “in escrow” until funds were received by Art International from its principal. Such funds were never received, and thus the proposed transaction was never consummated.

In a 33-page decision, U.S. District Judge Richard J. Holwell of the Southern District on Jan. 25 entered a judgment for defendant Art International. Judge Holwell (who presided over the recent trial of former Galleon hedge fund manager Raj Rajaratnam) found that the evidence demonstrated that the parties intended to create a condition precedent to the formation of a contract to purchase the Mondrian.

In his ruling, Judge Holwell relied on written communications between and among Edelman, Faggionato, and another of Art International’s Directors, Tobias Thomas, and various other parties on either side of the transaction, as well as live testimony from the principals, and the receipt of funds by Art International from its principal. Because the condition did not occur, the bill of sale, which was held by Edelman “in escrow”, never became operative. The Court rejected Asher Edelman’s testimony to the contrary.

Representing Art International was Seyfarth partner Katherine Perrelli, Chair of the firm’s national Litigation Department, along with Alexander Jeffrey, counsel in the firm’s New York office.

Ms. Perrelli pointed out that the case involved international discovery under the European Union Data Protection Act, numerous motions relating to exclusion of documentary evidence from witnesses in foreign jurisdictions, and unique issues under the Uniform Commercial Code in the context of high-end international art dealings.

“The issues in this case are of critical importance to the art industry and how galleries, dealers and other players conduct sales of major works,” said Ms. Perrelli. “The extensive litigation surrounding the proposed transaction involved multiple parties on either side from several different countries, with the ultimate seller of the painting several times removed from the entity with whom our client was dealing. We are extremely pleased that the court rejected Mr. Edelman’s attempt to bind Art International to a deal that was clearly never consummated.”