Art Firm Alleges Misconduct by Lawyers

Thomas Kinkade Co., owned by the self-described “Painter of Light,” on Thursday filed a lawsuit accusing opposing lawyers in a case brought by former gallery owners of illegally eavesdropping during arbitration hearings last year.

It alleges that the ex-dealers’ Michigan attorneys, Norman Yatooma and Joseph Ejbeh, improperly transmitted over the Internet a live feed of testimony to a witness in the case -- and that Ejbeh later tried to cover it up. The witness, Terry Sheppard, was named as a defendant in the lawsuit, which seeks damages of more than $25,000.

The lawsuit, filed in Oakland County Circuit Court in Michigan, comes a week after the company lost an $860,000 decision to other ex-gallery owners represented by the same lawyers.

In that case and five pending claims in arbitration, ex-dealers allege that Kinkade used his Christian faith to induce them to invest in Thomas Kinkade Signature Galleries, independently owned stores licensed to deal exclusively in his work.

They also allege that they were saddled with unsalable limited edition prints, were forced to open additional stores in saturated markets and were undercut by discounters that sold identical prints at prices they were forbidden to match. They also accuse the painter, one of the U.S.’ most collected artists, of scheming to devalue his formerly public company, Media Arts Group Inc., before taking it private two years ago for $32.7 million as Thomas Kinkade Co.

Kinkade and his Morgan Hill, Calif.-based company have denied the allegations.

Plaintiffs in Thursday’s lawsuit include two current Kinkade officers, Richard F. Barnett and Rose Capistran, and a former executive, Kenneth Raasch. As they were testifying at the arbitration hearings, a transcription of their remarks was sent to Sheppard, a former Kinkade vice president, according to the suit. Sheppard used the transcription to formulate questions for the dealers’ lawyers questioning the witnesses, the suit says.

“Such actions violated fundamental notions of fairness in arbitration and constituted illegal eavesdropping under Michigan law,” according to the complaint, which also said Ejbeh repeatedly denied the existence of the live feed before acknowledging it.

Ejbeh said he did not initially disclose the feed because he was trying to protect Sheppard, whom he said the company had retaliated against for providing key documents. Company executives deny the assertion.

“I made a mistake,” he said. “I wasn’t candid with the panel and I fell on my sword and admitted it.... But everything we did was legitimate and under the color of law.”

Yatooma called the suit an “asinine” response to last week’s decision, in which an arbitration panel ruled that the company and Barnett had fraudulently induced the former owners of two Signature galleries in Virginia to invest $122,000 to open their first store.

“This is the desperate attempt of a losing lawyer and a deceitful client,” said Yatooma, whose firm is handling all five pending claims.

Both Yatooma and Ejbeh said sending the live feed to Sheppard violated neither state law nor arbitration rules. Witnesses in the case had no expectation of privacy, they said.

“They’re testifying in an arbitration, with a court reporter sitting two feet away typing every word they’re saying, and with a tape recorder on the desk,” Yatooma said. “This is not wiretapping, or listening in on a private phone call.... This is a judicial proceeding.”

Yatooma and Ejbeh said there was no prohibition against witnesses in the case hearing others’ testimony. They noted that Kinkade’s lawyer, Dana Levitt, had himself previously provided a record of Sheppard’s testimony to an attorney who was not involved in the arbitration case.

Sheppard -- who previously had lost a wrongful-termination claim against Kinkade’s charitable foundations -- filed a lawsuit alleging that the company had tried to use that testimony, which had been given under subpoena, to accuse him of disseminating proprietary information.

“There is little doubt in my mind that the Thomas Kinkade Co. wanted to keep Terry off the stand and did not want Terry telling the truth as to what occurred,” said his lawyer, Joseph Wall. “This was their way to scare him off.”

Thomas Kinkade Co. general counsel Robert Murray said Thursday’s suit had no relationship to last week’s decision and denied that it was an attempt to retaliate against Sheppard.