One year ago, Bill Koch posed triumphantly on the steps of a Manhattan federal courthouse holding a magnum of counterfeit Château Petrus 1921. A jury had just awarded the Florida billionaire $12 million in punitive damages in his wine-fraud case against Eric Greenberg, a California Internet entrepreneur and wine collector who had sold him the magnum and other wines at a Zachys auction. But yesterday the trial judge drastically reduced that award to $711,622. He also reduced the jury’s compensatory damages award to Koch to $212,699 from $355,811.
Despite the cash reductions, Koch still could claim a core victory in his seven-year legal battle against Greenberg. Judge J. Paul Oetken upheld the jury’s finding that, in selling supposedly ultrarare wine that Greenberg knew to be counterfeit, Greenberg was guilty of conduct whose “reprehensibility and flagrancy” deserved a punitive damages award that was double the $355,811 that Koch had paid for 24 bottles of counterfeit wine purchased from Greenberg. The original award, the judge ruled, was so much greater than Koch's actual loss that it might violate due process and might even be unconstitutional. The compensatory damages were reduced to reflect Koch's earlier settlement with Zachys.
At issue in the three-week trial were those 24 purportedly ultrarare bottles which Koch purchased at a Zachys wine auction in 2005. They included a bottle of Château Latour 1864. After being told by Koch that the wines were counterfeit, Greenberg twice offered to refund the purchase price. But Koch was having none of it.
In yesterday's ruling, Oetken wrote that “[t]here is a real sense, reinforced by the amount of attorney’s fees [Koch claimed $7.8 million] and Koch’s rejection of the refund offers, in which this was a litigation of choice and of principal, rather than of necessity or monetary recompense.”
Koch has long mounted an array of legal attacks on the “as is,” clause typically found in the small print at the back of auction catalogs. But under New York’s General Business Law, the “as is” clause can be defeated if the seller had “peculiar knowledge” of the wine’s inauthenticity which the purchaser could not have independently learned. The authenticity of Greenberg's wines had previously been questioned by two other auctioneers and an independent wine expert.
In yesterday's ruling, Judge Oetken denied Koch's request that Greenberg reimburse his legal fees and that Greenberg be barred from selling wine in the future. Koch was granted post-judgment interest on the damages he is to be paid. "With the interest, Bill will receive well over $1 million," said Koch's spokesman Brad Goldstein. "More important, the court determined that Eric Greenberg is a fraudster, and that will follow him for the rest of his life."
Greenberg's attorney Arthur Shartsis told media sources he welcomed the ruling. "This is obviously a very dramatic turnaround," Shartsis said. "Though we maintain that Eric did not defraud anybody, the thrust of the judge's decision is correct on compensatory damages, although high on punitive damages."