The Thomas Kinkade Company of Morgan Hill still owes a Virginia couple more than $2 million for luring them into investing their life savings to become dealers of the self-described "painter of light's" works, which the couple's attorney called "bathroom art."
A three-judge panel of the 9th Circuit U.S. Court of Appeals ruled Wednesday that the artist's company and its senior vice president Richard Barnett must pay up on the original arbitration award granted in October 2006.
The Thomas Kinkade Company appealed that award, which was rejected by the Northern District Court of California in August 2007. Wednesday's ruling overturned that decision.
Craig Fleming, President and CEO of the Thomas Kinkade Company, said the company will likely continue to fight the ruling.
"We feel we were in the right all along," Fleming said.
Virginia residents Karen Hazlewood and Jeffrey Spinello agreed to become "Signature Dealers" of the artist's mass-produced works after attending a sales pitch seminar with company executives in November 1998. Married at the time, they opened two Thomas Kinkade galleries in Virginia in 1999 and 2000. Due to lack of sales an arbitration panel determined was the result of failure to disclose key aspects of the dealer agreements on the part of Kinkade and his company's associates, the couple's galleries closed in 2003.
After the galleries' failure, the couple announced its claims that Kinkade and his company falsely represented the agreement they entered into by telling them they would be treated as "partners," and used their Christian faith to establish an unwritten trust.
Furthermore, the Thomas Kinkade Company did not disclose to the couple that they could not charge below a minimum retail price for the artist's works, while Kinkade undercut them by selling the same products inexpensively through his own stores and Web sites, according to the 2006 arbitration award.
As the couple's attorney put it, the company "openly and wildly deceived" his clients by telling them they would be part of a "religious mission." He said they were told they would succeed financially by opening a Kinkade gallery.
"The plaintiffs have been so destroyed financially and emotionally by Thomas Kinkade and his minions," said Norman Yatooma, attorney for Hazlewood and Spinello. "I'm relieved to see some vindication and some reimbursement for the life savings they squandered."
He added that at the same time Kinkade was telling the couple that his art would be a significant investment, he was mass-producing works and selling them at lower prices. "In fact, nobody but Thomas Kinkade undermined his art by turning it into bathroom art that he could sell on QVC," he said, referring to the television shopping channel that peddles a variety of wares including cosmetic products, electronics, jewelry, and fitness equipment.
Fleming did not know what the remaining legal options are when contacted Monday. Yatooma said the only remaining options for the Kinkade company are to convince the appeals court to reverse its decision, or convince the U.S. Supreme Court to hear the case.
Damages for the couple's losses in opening their two dealerships, announced in the 2006 arbitration and re-affirmed by the appeals court Wednesday, amount to about $860,000. The Thomas Kinkade Company and Barnett also have to pay the couple about $1.2 million in attorney's fees and arbitration expenses.
Kinkade himself was not named in the complaint, and is not personally found to be responsible for wrongdoing.
In 2007, a district court judge found that Kinkade did not receive a fair proceeding at the original arbitration because the plaintiff's appointed arbitrator improperly influenced the neutral arbitrator.
However, Wednesday's ruling said the hearings were fair.
Yatooma added he has previously represented Kinkade dealers who were similarly defrauded, including one who recently won an arbitration award of $1.4 million. He said numerous other parties have expressed similar complaints to him, but are unable to afford the cost of arbitration or other legal proceedings.
Michael Moore Michael Moore covers county and law enforcement issues for the Morgan Hill Times. Reach him at (408) 779-4106, ext. 202, or mmoore@morganhilltimes.com.
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