One of the highest-profile and highest-value cases in which Victor Wiener has served as an expert witness is the trial on the Estate of Andy Warhol [Determination of Legal Fees Payable by the Estate of Andy Warhol, deceased, N.Y.L.J., Apr. 18, 1994, at 29, col. 5; In re Warhol estate, No. 824/87, unpublished opinion, N.Y. County Surrogate’s Court, Apr. 14, 1994.]. Mr. Wiener’s testimony treated the use of blockage discount in appraisal methodology.
When Warhol died in 1987, he left approximately 96,000 works to the Andy Warhol Foundation for the Visual Arts. Shortly after Warhol’s death, his Estate contracted attorney Ed Hayes to handle their legal matters. Hayes was to be compensated at the rate of 2% of the Estate’s value. Thus, to calculate Hayes’s compensation, the value of the entire Estate needed to be determined – and this was the matter of contention that was central to the case and to Mr. Wiener’s testimony.
Christie’s, which had previously done the Warhol Estate appraisal, was retained again to value the Foundation’s holdings of the Warhol property as of 1993 instead of Warhol’s date of death in 1987. Christie’s considered it to be appropriate for the valuation of such a large mass of property to apply a variety of blockage discounts to several types of Warhol’s art – e.g., paintings, prints, mixed-media works, etc. If blockage discount were to be used for the determination of Hayes’s legal fees, he would have received significantly less than he would, had it not been applied – i.e., 2% of a total value of approximately $70 million (as determined by Christie’s) as opposed to 2% of approximately $900 million (as set forth by Hayes’s appraisers).
In 1993, when the Warhol/Hayes valuation was to be determined, the market for Warhol was experiencing a depression. Of the thirteen Warhols offered for sale during the high-end spring 1993 auctions, only one sold.
Hayes contested, in Surrogate’s Court, Christie’s valuation, and the case went to trial in November 1994. For the trial, the Foundation retained Mr. Wiener to testify to the appropriate use of blockage discount in appraisal methodology as it relates to the Warhol valuation.
Despite Hayes’s arguments, Surrogate Eve Preminger ruled that it was appropriate to use blockage discount in the valuation of the Warhol property, although she differed in the percentages of the actual discounts applied by Christie’s. While the Foundation agreed that this decision was correct in supporting the use of blockage discount, it appealed the decision on the basis that the new financial award given by Preminger to Hayes was far too generous.
In ruling on the appeal submitted by the Foundation, the Appellate Court agreed with the Warhol Foundation that Hayes had been compensated too highly. The Appellate Court mentioned in its decision that it believed blockage discount to be an appropriate valuation consideration in determining the value of the mass of Warhol’s works. At the time, this was the highest-value art case to be tried in a US court.