This morning's New York Times reports that "a visitor at an exhibition at the Royal Academy in London on Saturday slipped and fell into a nine-foot ceramic sculpture, smashing it into hundreds of pieces .... The damaged sculpture, ... valued at approximately $11,900, was part of an exhibition organized by the artist Tracey Emin." The Guardian's Laura Barnett has much more, including the following:
"Financial compensation is ... the main concern for artists, curators and owners when an artwork ends up smashed to smithereens. According to Robert Read, a fine art underwriter at the specialist insurers Hiscox, accidental damage accounts for between 50% and 60% of the claims the company handles each year. The vast majority of these arise ... following damage incurred while works are being moved or transported."
Wednesday, July 30, 2008
Tuesday, July 29, 2008
Monday, July 28, 2008
"She says it's not just about the money. She says her motivation all these years is finding out the truth about her painting."
Arizona's East Valley Tribune had a long story this weekend on a 62-year old Scottsdale real estate agent who "is the latest person to publicly come forward with the claim that she may own a Jackson Pollock painting." She says she bought it for $900 in 1969 at an art auction in King of Prussia, Pa. The work is listed as a fake in the Pollock Catalogue Raisonne, and "in 1993, Rodgers unsuccessfully challenged members of the Pollock Raisonne committee, the Marlborough Gallery and the estate of [Lee] Krasner, suing them on the grounds that their 'blacklisting' of her painting in the Pollock Catalogue Raisonne willfully kept her from selling her painting on the open market. The case was rejected in a U.S. District Court in the Southern District of New York on the grounds that the statute of limitations expired."
Saturday, July 26, 2008
Thursday, July 24, 2008
Two Suits
Josh Baer reports:
"In an interesting lawsuit Giancorrado Ulrich has sued Sotheby’s seeking $16 million. They allege, which Sotheby’s denies, that the 'Parmigiano' old master painting 'Rest of the Flight Into Egypt' was never returned to Ulrich’s agent in NY Marco Grassi after appraisal. Valid signed paperwork aside, Sotheby’s claimed that the work was not in their opinion by the artist (and hence valuable) but school of (and hence not valuable) the artist."
More here from the New York Post, which says he's seeking $32 million, not sixteen.
Also from Baer:
"Christie’s has been sued as well - by the National Academy of Recording Arts & Sciences over the sale of a James Brown Grammy Award."
"In an interesting lawsuit Giancorrado Ulrich has sued Sotheby’s seeking $16 million. They allege, which Sotheby’s denies, that the 'Parmigiano' old master painting 'Rest of the Flight Into Egypt' was never returned to Ulrich’s agent in NY Marco Grassi after appraisal. Valid signed paperwork aside, Sotheby’s claimed that the work was not in their opinion by the artist (and hence valuable) but school of (and hence not valuable) the artist."
More here from the New York Post, which says he's seeking $32 million, not sixteen.
Also from Baer:
"Christie’s has been sued as well - by the National Academy of Recording Arts & Sciences over the sale of a James Brown Grammy Award."
Wednesday, July 23, 2008
Stolen Art Settlement (UPDATED)
The lawsuit to determine ownership of three paintings stolen more than 30 years ago (mentioned earlier here) has been resolved. The Worcester Telegram & Gazette's report begins: "A federal judge in Rhode Island has ruled the Yoffie estate is the rightful owner of three paintings stolen from a Shrewsbury home ...." But that's a highly misleading way of putting it. The judge didn't really rule on the case -- the parties reached a settlement, and the judge merely rubber-stamped it. So the question is: what did the insurance company get in return?
UPDATE: The Boston Globe gets it right: "Last week, US District Court Chief Judge Mary Lisi signed a consent decree formalizing an agreement by all three parties that the rightful owners are Alan Yoffie and his siblings." They also add that "Patrick Conley received an undisclosed sum from the Yoffie family as a reward for 'finding' the paintings," but "bound by a confidentiality clause in the consent decree," he wouldn't say how much.
UPDATE: The Boston Globe gets it right: "Last week, US District Court Chief Judge Mary Lisi signed a consent decree formalizing an agreement by all three parties that the rightful owners are Alan Yoffie and his siblings." They also add that "Patrick Conley received an undisclosed sum from the Yoffie family as a reward for 'finding' the paintings," but "bound by a confidentiality clause in the consent decree," he wouldn't say how much.
Tuesday, July 22, 2008
More on Fractional Gifts
Today's Wall Street Journal has an article on the "Schumer-Grassley plan" to amend the fractional gift rules. It says "the senators could attach the changes to other tax legislation by the end of the year."
Since the story goes over a lot of the same ground as Stephanie Strom's piece in the New York Times last week (discussed here), I don't have much to add. But a couple of observations.
First, there is this passage:
"The Schumer-Grassley plan would ease some of these restrictions, but would add others, according to the people briefed on the negotiations. Collectors would once again be allowed to take bigger deductions over time as their art appreciated. But higher art values, for tax purposes, would be restrained by any deductions taken previously, under one option being discussed. For example, say a donor gave 10% of a painting valued at $100,000. For that initial gift, the donor could deduct $10,000. But when calculating the next deduction for a partial gift in a later year, the painting would be valued at only 90% of its fair-market value. If in the later year the market valued it at $200,000, the IRS would peg its taxable worth at $180,000."
But that's exactly what the IRS should peg its taxable worth at! If the donor then gives another 10% interest in the painting, that would be 1/9th of what's left, or $20,000 (the same as 10% of $200,000). So I don't see how this is supposed to be a "restriction" that "restrains" the value of the subsequent donation in any way.
The other thing that I think it's worth mentioning is that, though the story starts off by saying that "in the meantime [i.e., until the Schumer-Grassley fix is enacted], wealth advisers are steering donors away from fractional giving and toward an array of other complex art-giving vehicles, such as charitable-remainder trusts and donor-advised funds," in general those vehicles are decidedly inferior to fractional-giving, primarily because, in the former, the deduction will be limited to the donor's tax basis in the work (usually what she paid for it), as opposed to its current fair market value. The story does get around, near the end, to mentioning this distinction, but I don't think it accurately conveys what a huge difference it can make.
Since the story goes over a lot of the same ground as Stephanie Strom's piece in the New York Times last week (discussed here), I don't have much to add. But a couple of observations.
First, there is this passage:
"The Schumer-Grassley plan would ease some of these restrictions, but would add others, according to the people briefed on the negotiations. Collectors would once again be allowed to take bigger deductions over time as their art appreciated. But higher art values, for tax purposes, would be restrained by any deductions taken previously, under one option being discussed. For example, say a donor gave 10% of a painting valued at $100,000. For that initial gift, the donor could deduct $10,000. But when calculating the next deduction for a partial gift in a later year, the painting would be valued at only 90% of its fair-market value. If in the later year the market valued it at $200,000, the IRS would peg its taxable worth at $180,000."
But that's exactly what the IRS should peg its taxable worth at! If the donor then gives another 10% interest in the painting, that would be 1/9th of what's left, or $20,000 (the same as 10% of $200,000). So I don't see how this is supposed to be a "restriction" that "restrains" the value of the subsequent donation in any way.
The other thing that I think it's worth mentioning is that, though the story starts off by saying that "in the meantime [i.e., until the Schumer-Grassley fix is enacted], wealth advisers are steering donors away from fractional giving and toward an array of other complex art-giving vehicles, such as charitable-remainder trusts and donor-advised funds," in general those vehicles are decidedly inferior to fractional-giving, primarily because, in the former, the deduction will be limited to the donor's tax basis in the work (usually what she paid for it), as opposed to its current fair market value. The story does get around, near the end, to mentioning this distinction, but I don't think it accurately conveys what a huge difference it can make.
"Specialists at banks and auction houses say that more of their clients recently are interested in borrowing against their art collections"
Monday, July 21, 2008
Art Theft News
Derek Fincham has a roundup. The tally includes one theft, two recoveries, and one prison sentence.
Thursday, July 17, 2008
The Louis Vuitton Multiples Suit
Lee Rosenbaum has a post today on the lawsuits recently filed against Louis Vuitton and the Los Angeles Museum of Contemporary Art alleging violations of the California print disclosure statute in connection with the sale of works by Takashi Murakami. I missed the story when it first broke, but I did want to mention one thing about it that seemed odd to me. As I read the statute, the available recovery for a violation is "the consideration paid by the purchaser for the multiple, with interest at the legal rate thereon, upon the return of the multiple in the condition in which received by the purchaser" -- in other words, you can return the print and get your money back (with interest). If you can show the violation was willful, you can get three times that amount (but presumably you still have to return the print). I would think that Vuitton (and, perhaps, the museum) has a pretty strong defense to a willfulness charge since they are not really in the art-selling business and therefore wouldn't have reason to know about something the LA Times calls "an obscure chapter of the California Civil Code called the Fine Prints Act."
According to that same LA Times story, Vuitton has already offered the plaintiff a refund plus interest (i.e., what he would be entitled to for a non-willful violation), but he turned it down, apparently on the ground that "the suits were not about just one art buyer's losses, but rather a consumer class action on behalf of all purchasers in a similar position. 'What does [a refund for the plaintiff] do for all the other people who bought them? It leaves them hanging.'" Leaving aside the question of what "losses" the plaintiff has sustained, wouldn't the class have to be composed of only those buyers who are willing to return their prints in the condition they were received (in order to be eligible for damages under the statute)? And isn't it likely that, at the end of the day, that turns out to be a class of one?
According to that same LA Times story, Vuitton has already offered the plaintiff a refund plus interest (i.e., what he would be entitled to for a non-willful violation), but he turned it down, apparently on the ground that "the suits were not about just one art buyer's losses, but rather a consumer class action on behalf of all purchasers in a similar position. 'What does [a refund for the plaintiff] do for all the other people who bought them? It leaves them hanging.'" Leaving aside the question of what "losses" the plaintiff has sustained, wouldn't the class have to be composed of only those buyers who are willing to return their prints in the condition they were received (in order to be eligible for damages under the statute)? And isn't it likely that, at the end of the day, that turns out to be a class of one?
A Different Kind of "Orphaned" Work
Daniel Grant in the Wall Street Journal on "the question what to do with [public] art that its owner no longer wants."
Wednesday, July 16, 2008
More on eBay and Fakes (UPDATED)
I mentioned a couple of weeks ago that a French court had held eBay responsible for fakes sold on the site. They're doing much better here in the U.S. From yesterday's New York Times:
"In a long-awaited decision in a four-year-old trademark lawsuit against eBay brought by the jeweler Tiffany & Company, Judge Richard J. Sullivan of the Federal District Court in Manhattan ruled that the online retailer does not have a legal responsibility to prevent its users from selling counterfeit items on its online marketplace. The verdict reaffirms that Internet companies do not have to actively filter their sites for trademarked material. Rather, they can rely on intellectual property holders to monitor their sites, as long as they promptly remove material when rights holders complain."
The decision is here. Eric Goldman has a good summary. Rebecca Tushnet says "it’s certainly a major victory for eBay, and by extension perhaps numerous other internet services."
UPDATE: More from our friends at Paul Weiss: "The ... decision stands in stark contrast to that reached just two weeks earlier by the Commercial Court of Paris in a similar dispute between eBay and LVMH Moet Hennessy Louis Vuitton ('LVMH'). In that case, the court granted a sweeping injunction that not only requires eBay to block all sales of certain counterfeit LVMH products on its site, but also to block all sales of genuine LVMH perfumes being sold there by unauthorized distributors. In addition, that decision requires eBay to pay various LVMH units $60.8 million in damages for past counterfeit or unauthorized sales."
"In a long-awaited decision in a four-year-old trademark lawsuit against eBay brought by the jeweler Tiffany & Company, Judge Richard J. Sullivan of the Federal District Court in Manhattan ruled that the online retailer does not have a legal responsibility to prevent its users from selling counterfeit items on its online marketplace. The verdict reaffirms that Internet companies do not have to actively filter their sites for trademarked material. Rather, they can rely on intellectual property holders to monitor their sites, as long as they promptly remove material when rights holders complain."
The decision is here. Eric Goldman has a good summary. Rebecca Tushnet says "it’s certainly a major victory for eBay, and by extension perhaps numerous other internet services."
UPDATE: More from our friends at Paul Weiss: "The ... decision stands in stark contrast to that reached just two weeks earlier by the Commercial Court of Paris in a similar dispute between eBay and LVMH Moet Hennessy Louis Vuitton ('LVMH'). In that case, the court granted a sweeping injunction that not only requires eBay to block all sales of certain counterfeit LVMH products on its site, but also to block all sales of genuine LVMH perfumes being sold there by unauthorized distributors. In addition, that decision requires eBay to pay various LVMH units $60.8 million in damages for past counterfeit or unauthorized sales."
At Sea (UPDATED)
There's a lengthy article in today's New York Times on complaints against Park West Gallery, which conducts art auctions on cruise ships. It reportedly does more than $300 million in annual revenue (on sales of nearly 300,000 artworks a year) and calls itself “the world’s largest art dealer.” "Yet," reports the Times, "some Park West customers say they did not get what they bargained for. ... In April a Florida resident and a California resident filed class action lawsuits against Park West that could potentially cover tens of thousands of residents of those states. They have accused the company of misrepresenting the value of its artwork and are seeking unspecified damages for unfair trade practices, breach of contract and unjust enrichment."
Separate and apart from those suits, Park West has brought a defamation suit against the founder of the Fine Art Registry, its lead writer, and Bruce Hochman, a Dalí specialist that they've quoted. "Park West’s suit against Fine Art Registry revolves in part around the Web site’s allegations that the company’s Dalí prints are inauthentic. The suit quotes, for example, a Fine Art Registry interview in which Mr. Hochman said of the signatures on these pieces: 'They’re all the same. And we feel they’re done with an auto pencil device.'" (I recently mentioned another lawsuit, or threatened lawsuit, against Fine Art Registry here.)
The Art Market Monitor sees "a fascinating glimpse of what happens when you convince people that art is an investment and they should buy without having done their research." Walter Olson notes that "as so often proves to be the case when a business reacts to criticism by suing its critics, the suit has if anything stimulated further press curiosity about the business’s practices."
Related story from 2006 here.
UPDATE: Tyler Cowen sums it up in seven words: "Do not buy art on cruise ships." A few more: "The bottom line is that you should never spend more than $1500 on art unless you know at least roughly what it is worth at auction. One of life's good rules of thumb."
Separate and apart from those suits, Park West has brought a defamation suit against the founder of the Fine Art Registry, its lead writer, and Bruce Hochman, a Dalí specialist that they've quoted. "Park West’s suit against Fine Art Registry revolves in part around the Web site’s allegations that the company’s Dalí prints are inauthentic. The suit quotes, for example, a Fine Art Registry interview in which Mr. Hochman said of the signatures on these pieces: 'They’re all the same. And we feel they’re done with an auto pencil device.'" (I recently mentioned another lawsuit, or threatened lawsuit, against Fine Art Registry here.)
The Art Market Monitor sees "a fascinating glimpse of what happens when you convince people that art is an investment and they should buy without having done their research." Walter Olson notes that "as so often proves to be the case when a business reacts to criticism by suing its critics, the suit has if anything stimulated further press curiosity about the business’s practices."
Related story from 2006 here.
UPDATE: Tyler Cowen sums it up in seven words: "Do not buy art on cruise ships." A few more: "The bottom line is that you should never spend more than $1500 on art unless you know at least roughly what it is worth at auction. One of life's good rules of thumb."
Tuesday, July 15, 2008
"Seeing this I can understand why you were so upset with me. ... I am sorry to have 'jumped the gun'"
Yesterday's New York Sun had a short piece on a lawsuit filed by London dealer Michael Hue-Williams's Albion Gallery against artist James Turrell. Turrell is a client of mine, and I'm co-counsel on the case (with Greg Clarick), so I was disappointed that the reporter didn't give us a chance to comment before going to press. (It's not like this is breaking news: the case was filed last July.)
If the reporter had talked to me, I could have pointed out that what the case is really about is a dealer who sold work he didn't have the right to sell and is now looking to the artist to save him from the consequences of his own misconduct. As we detail in our counterclaims, in May 2005 Hue-Williams sent Turrell a draft agreement regarding the series at issue. In September 2005, Hue-Williams wrote to Turrell to "nullify" that offer and make a new one. In December 2005, Hue-Williams wrote that he again "would like to redraft the terms of [the] offer," and he presented yet another offer.
Stop right there for a minute, and keep those dates in mind: May 2005 - draft agreement; September 2005 - offer "nullified," new offer made; December 2005 - offer "redrafted." Yet in Hue-Williams's own complaint (copy available on request) he talks about purported sales he made in February 2005 (paragraphs 17 and 18), May 2005 (paragraph 20), July 2005 (paragraph 21), and September 2005 (paragraph 22). So by their own admission Hue-Williams and Albion were selling Turrell's work before reaching any agreement with him. That's one of the bases for the breach-of-fiduciary-duty countersuit the Sun story mentions: that Hue-Williams promised Turrell's work to buyers, and collected payments from them, without Turrell's authority.
Another basis for the countersuit is that Hue-Williams displayed an unfinished prototype of the Tall Glass series in direct contravention of Turrell's instructions. Again, if the reporter had talked to us, we could have showed him a letter Hue-Williams wrote to Turrell in late 2006 admitting that he had "jumped the gun" and "acted too swiftly" and that, after seeing a properly completed work, he "now understand[s] why [Turrell] was so upset" with him. He acknowledged that as a result of his conduct Turrell's "trust" in him had been "so damaged" and said he was "sorry" for the "problems" he had created. I think that bit of context would have been pretty useful to readers.
Our counterclaims seek, among other things, the disgorgement of all commissions collected by Hue-Williams purportedly on Turrell's behalf.
The lawsuit has just entered the discovery stage, and is scheduled to stay there through January.
If the reporter had talked to me, I could have pointed out that what the case is really about is a dealer who sold work he didn't have the right to sell and is now looking to the artist to save him from the consequences of his own misconduct. As we detail in our counterclaims, in May 2005 Hue-Williams sent Turrell a draft agreement regarding the series at issue. In September 2005, Hue-Williams wrote to Turrell to "nullify" that offer and make a new one. In December 2005, Hue-Williams wrote that he again "would like to redraft the terms of [the] offer," and he presented yet another offer.
Stop right there for a minute, and keep those dates in mind: May 2005 - draft agreement; September 2005 - offer "nullified," new offer made; December 2005 - offer "redrafted." Yet in Hue-Williams's own complaint (copy available on request) he talks about purported sales he made in February 2005 (paragraphs 17 and 18), May 2005 (paragraph 20), July 2005 (paragraph 21), and September 2005 (paragraph 22). So by their own admission Hue-Williams and Albion were selling Turrell's work before reaching any agreement with him. That's one of the bases for the breach-of-fiduciary-duty countersuit the Sun story mentions: that Hue-Williams promised Turrell's work to buyers, and collected payments from them, without Turrell's authority.
Another basis for the countersuit is that Hue-Williams displayed an unfinished prototype of the Tall Glass series in direct contravention of Turrell's instructions. Again, if the reporter had talked to us, we could have showed him a letter Hue-Williams wrote to Turrell in late 2006 admitting that he had "jumped the gun" and "acted too swiftly" and that, after seeing a properly completed work, he "now understand[s] why [Turrell] was so upset" with him. He acknowledged that as a result of his conduct Turrell's "trust" in him had been "so damaged" and said he was "sorry" for the "problems" he had created. I think that bit of context would have been pretty useful to readers.
Our counterclaims seek, among other things, the disgorgement of all commissions collected by Hue-Williams purportedly on Turrell's behalf.
The lawsuit has just entered the discovery stage, and is scheduled to stay there through January.
Monday, July 14, 2008
"In recent years a number of advertising campaigns have seemed to draw their inspiration directly from high-profile works of contemporary art"
Very interesting article by Mia Fineman in yesterday's New York Times on advertisers "being inspired by" or, more precisely in some cases, "stealing" work by contemporary artists. I'm quoted as follows:
"Donn Zaretsky, a lawyer in New York who specializes in art law, is often approached by artists who perceive echoes of their own work in advertisements. 'It does seem like advertising people are pushing the envelope on this,' he said. 'They’re being more and more brazen in their borrowing. On the one hand they should be mining the art world for inspiration, and you would expect them to be referencing works that people are familiar with. But more and more they seem to be getting into the territory of blatant rip-offs.'
"The law governing the unauthorized use of copyrighted images and ideas, he said, is notoriously murky. 'Copyright law doesn’t protect ideas, it only protects expression. The question is, where do you draw the line? Is the agency being inspired by the idea? Or did they copy the artist’s expression?'"
"Donn Zaretsky, a lawyer in New York who specializes in art law, is often approached by artists who perceive echoes of their own work in advertisements. 'It does seem like advertising people are pushing the envelope on this,' he said. 'They’re being more and more brazen in their borrowing. On the one hand they should be mining the art world for inspiration, and you would expect them to be referencing works that people are familiar with. But more and more they seem to be getting into the territory of blatant rip-offs.'
"The law governing the unauthorized use of copyrighted images and ideas, he said, is notoriously murky. 'Copyright law doesn’t protect ideas, it only protects expression. The question is, where do you draw the line? Is the agency being inspired by the idea? Or did they copy the artist’s expression?'"
Friday, July 11, 2008
The Upside of Deaccessioning
From Carol Vogel's Inside Art column in today's New York Times:
"In November 2006 the Albright-Knox Art Gallery in Buffalo caused an uproar when it announced its intention to sell dozens of older works in a series of auctions to raise money. Ultimately 207 works were sold at Sotheby’s for a total of $67.2 million. Some patrons complained that the museum was selling off its history, but Albright-Knox officials countered that it wanted to boost its endowment so that it could further its central mission, collecting and exhibiting contemporary art. The institution is now doing just that. This week it said it had acquired 71 works by 15 artists in a part-gift, part-purchase arrangement from the contemporary art collection formed by Count Giuseppe Panza di Biumo, the Italian industrialist. ... 'This helps fill several historic gaps,' said Louis Grachos, the Albright-Knox’s director. Until now the institution had no pieces by the Conceptual artist Joseph Kosuth, for example. The acquisition includes several of his pieces. While the museum had commissioned a wall drawing by Sol LeWitt, it had none of his early works; now it has a wall drawing from 1969."
"In November 2006 the Albright-Knox Art Gallery in Buffalo caused an uproar when it announced its intention to sell dozens of older works in a series of auctions to raise money. Ultimately 207 works were sold at Sotheby’s for a total of $67.2 million. Some patrons complained that the museum was selling off its history, but Albright-Knox officials countered that it wanted to boost its endowment so that it could further its central mission, collecting and exhibiting contemporary art. The institution is now doing just that. This week it said it had acquired 71 works by 15 artists in a part-gift, part-purchase arrangement from the contemporary art collection formed by Count Giuseppe Panza di Biumo, the Italian industrialist. ... 'This helps fill several historic gaps,' said Louis Grachos, the Albright-Knox’s director. Until now the institution had no pieces by the Conceptual artist Joseph Kosuth, for example. The acquisition includes several of his pieces. While the museum had commissioned a wall drawing by Sol LeWitt, it had none of his early works; now it has a wall drawing from 1969."
"A good deal all around"
Speaking of tax deductions for art donations, Tyler Cowen's review of Don Thompson's "The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art" in yesterday's New York Sun includes the following:
"Most accomplished works of art end up in museums and are eventually accessible to the public; Mr. Hirst's shark last fall went on view at New York's Metropolitan Museum of Art for a three-year visit. Someday, if past behavior of major collectors is any guide, a permanent donation will likely follow. The associated tax deduction drains the Treasury, but this process is cheaper than having our government spend more on direct support of the arts, as is the case in Western Europe. It's a good deal all around."
"Most accomplished works of art end up in museums and are eventually accessible to the public; Mr. Hirst's shark last fall went on view at New York's Metropolitan Museum of Art for a three-year visit. Someday, if past behavior of major collectors is any guide, a permanent donation will likely follow. The associated tax deduction drains the Treasury, but this process is cheaper than having our government spend more on direct support of the arts, as is the case in Western Europe. It's a good deal all around."
Thursday, July 10, 2008
Fractional Gift Update
This morning's New York Times reports that "members of the Senate Finance Committee have agreed in principle" to "loosen stringent limits . . . that made partial gifts less advantageous for donors."
It's worth quickly running through some history here, because the story leaves out one important chapter. The Pension Protection Act of 2006 drastically changed the rules governing gifts of fractional interests in artworks to museums. As today's article notes, "the new rules led to a sharp decline in donations of art"; Anita Difanis of the Association of Art Museum Directors is quoted as saying they "stopped fractional gifts almost entirely." I summarized the problems with the new rules here. The main (though not the only) problem was what I referred to as the "mismatch" problem: if the work were to appreciate in value between the time of the initial gift and a subsequent gift, the excess value of the subsequent gift would be subject to gift or estate tax.
What the Times story leaves out is that in January of this year technical corrections were enacted which completely eliminated the mismatch problem. (It also fails to mention the Promotion of Artistic Giving Act, which was introduced last fall but seems to have stalled.) In fact, a major fractional gift to LACMA went forward not too long ago, but two disincentives to fractional giving remain in place, and it is on these that the current negotiations seem to be focused.
First, under current law the gift of the entire work must be completed within 10 years (or, if sooner, the collector's death). The Times says "amendments hammered out by aides to Mr. Schumer and Mr. Grassley would lengthen that to 20 years." (This, incidentally, is a step back from the Promotion of Artistic Giving Act, under which the deadline would be 9 months after the collector's death.)
Second, under current law the value of any additional contribution is determined using the value of the work at the time of initial contribution or at the time of the additional contribution, whichever is lower (which keeps the donor from benefitting from any increase in the value of the work). (I don't think I'd ever seen an explanation for this provision, but today's story says: "Art tends to appreciate after it is exhibited in museums, and Mr. Grassley’s concern was that donors were using partial gifts to bolster the value of the donation and thus the size of their deductions.") But "it now appears that Mr. Grassley is willing to allow donors to claim deductions for subsequent donations that reflect increases in the value of the portion of the artwork they still own."
Other proposed changes mentioned in the article include a requirement "that all partial gifts be subject to binding written contracts, to prevent heirs from reneging on the gifts after a donor’s death" (though, presumably, if that happens and the gift is not completed, the recapture provisions of the current law would kick in) and an increase in partial-gift-related reporting by museums.
Senator Schumer says "the changes could be attached to tax-related legislation sometime next week, or as an independent bill," and he "think[s] this will pass." Senator Grassley cautions that "any changes being looked at right now — and that process is far from over — also must work to stop the rich and powerful from hanging on to their art at taxpayer expense."
It's worth quickly running through some history here, because the story leaves out one important chapter. The Pension Protection Act of 2006 drastically changed the rules governing gifts of fractional interests in artworks to museums. As today's article notes, "the new rules led to a sharp decline in donations of art"; Anita Difanis of the Association of Art Museum Directors is quoted as saying they "stopped fractional gifts almost entirely." I summarized the problems with the new rules here. The main (though not the only) problem was what I referred to as the "mismatch" problem: if the work were to appreciate in value between the time of the initial gift and a subsequent gift, the excess value of the subsequent gift would be subject to gift or estate tax.
What the Times story leaves out is that in January of this year technical corrections were enacted which completely eliminated the mismatch problem. (It also fails to mention the Promotion of Artistic Giving Act, which was introduced last fall but seems to have stalled.) In fact, a major fractional gift to LACMA went forward not too long ago, but two disincentives to fractional giving remain in place, and it is on these that the current negotiations seem to be focused.
First, under current law the gift of the entire work must be completed within 10 years (or, if sooner, the collector's death). The Times says "amendments hammered out by aides to Mr. Schumer and Mr. Grassley would lengthen that to 20 years." (This, incidentally, is a step back from the Promotion of Artistic Giving Act, under which the deadline would be 9 months after the collector's death.)
Second, under current law the value of any additional contribution is determined using the value of the work at the time of initial contribution or at the time of the additional contribution, whichever is lower (which keeps the donor from benefitting from any increase in the value of the work). (I don't think I'd ever seen an explanation for this provision, but today's story says: "Art tends to appreciate after it is exhibited in museums, and Mr. Grassley’s concern was that donors were using partial gifts to bolster the value of the donation and thus the size of their deductions.") But "it now appears that Mr. Grassley is willing to allow donors to claim deductions for subsequent donations that reflect increases in the value of the portion of the artwork they still own."
Other proposed changes mentioned in the article include a requirement "that all partial gifts be subject to binding written contracts, to prevent heirs from reneging on the gifts after a donor’s death" (though, presumably, if that happens and the gift is not completed, the recapture provisions of the current law would kick in) and an increase in partial-gift-related reporting by museums.
Senator Schumer says "the changes could be attached to tax-related legislation sometime next week, or as an independent bill," and he "think[s] this will pass." Senator Grassley cautions that "any changes being looked at right now — and that process is far from over — also must work to stop the rich and powerful from hanging on to their art at taxpayer expense."
Wednesday, July 09, 2008
ARIS in The Sun
Kate Taylor has a story in tomorrow's New York Sun on art title insurance, which at the moment is still being offered by just one company, ARIS. She slots me in as a "skeptic":
"Of course, there are skeptics. The author of the Art Law Blog, Donn Zaretsky, said in an e-mail that he would be concerned about what he called the adverse selection problem — namely, that 'the people who buy the coverage are more likely to be people who have a reason to be concerned about possible defects in title (and may in fact be acting on information they have but the insurer does not).'"
The fundamental weirdness of art title insurance is that, normally, we think of insurance as covering the risk of something happening in the future (death, injury, illness, earthquake, hurricane, fire, etc.), but in this case it's covering something that's already happened, i.e., a break in the chain of title. Offhand, I can't think of any other backward-looking insurance product, but maybe I'm overlooking something.
"Of course, there are skeptics. The author of the Art Law Blog, Donn Zaretsky, said in an e-mail that he would be concerned about what he called the adverse selection problem — namely, that 'the people who buy the coverage are more likely to be people who have a reason to be concerned about possible defects in title (and may in fact be acting on information they have but the insurer does not).'"
The fundamental weirdness of art title insurance is that, normally, we think of insurance as covering the risk of something happening in the future (death, injury, illness, earthquake, hurricane, fire, etc.), but in this case it's covering something that's already happened, i.e., a break in the chain of title. Offhand, I can't think of any other backward-looking insurance product, but maybe I'm overlooking something.
"A mural is created in 1940 under a work for hire, but the work is not published . . ."
"Experts say it could be a year before the case goes to trial and that Cutler and Solomon have already spent more than the painting’s estimated value"
The Las Vegas Sun's Kristen Peterson has an entertaining update on the battle over a stolen Rockwell painting that ended up in Steven Spielberg's hands. I posted some thoughts about the case a little over a year ago. I think the issue still is going to be whether Solomon, the theft victim, reasonably should have discovered that the painting had been found back in 1989 (in which case he would lose on statute of limitations grounds). According to Peterson:
"After purchasing the work, Cutler toured and advertised the painting, which was written about in a couple of antiques periodicals. It was this publicity that prompted a former employee of Solomon’s to contact Jack and Carolyn Solomon. The ex-employee says they never returned her calls. A newspaper reporter, who also left messages for the Solomons, says his calls were not returned."
Those aren't great facts for Solomon, although the question probably goes to a jury, so you never know.
"After purchasing the work, Cutler toured and advertised the painting, which was written about in a couple of antiques periodicals. It was this publicity that prompted a former employee of Solomon’s to contact Jack and Carolyn Solomon. The ex-employee says they never returned her calls. A newspaper reporter, who also left messages for the Solomons, says his calls were not returned."
Those aren't great facts for Solomon, although the question probably goes to a jury, so you never know.
"Who loses out? The reader, the public, the people you want to spread the history to" (UPDATED)
EFF's Richard Esguerra spots "a clear, real-life example of the orphan works problem" in this recent New York Times article on a local high school history teacher and labor-of-love publisher of books of historical Brooklyn photographs who has been blocked from using certain orphan photographs in his forthcoming book on Canarsie:
"Deborah Schwartz, president of the [Brooklyn] historical society ... said Wednesday that the society was only trying to follow the letter of copyright law. The holders of the copyrights for the pictures — one taken around 1895 and the other in the early 20th century — are unknown, she said, and without permission from them or their estates, the photos cannot be reused for a commercial endeavor. ... 'We would like to accommodate him, but we can’t do that until we’re sure that we have the copyright,' Ms. Schwartz said. 'It’s kind of a drag on some level,' she added. 'On the other hand, it’s a law that’s designed to protect artists, photographers, because it’s their work.'"
Says Esguerra: "So, there's orphan works problem in a nutshell: both creativity and commerce are in suspended animation, with no one -- not the photographer/copyright owner, not the archive, not the publisher -- able to express, document, or profit from the works in question."
UPDATE: Heather Hope comments: "[F]or situations like this - where the photographer is unknown and likely deceased, and there is no way to discover the artist and contact the estate - these photographs have now become absolutely useless due to the current state of copyright law. They can't be used by anyone. How does that serve anyones interests?"
"Deborah Schwartz, president of the [Brooklyn] historical society ... said Wednesday that the society was only trying to follow the letter of copyright law. The holders of the copyrights for the pictures — one taken around 1895 and the other in the early 20th century — are unknown, she said, and without permission from them or their estates, the photos cannot be reused for a commercial endeavor. ... 'We would like to accommodate him, but we can’t do that until we’re sure that we have the copyright,' Ms. Schwartz said. 'It’s kind of a drag on some level,' she added. 'On the other hand, it’s a law that’s designed to protect artists, photographers, because it’s their work.'"
Says Esguerra: "So, there's orphan works problem in a nutshell: both creativity and commerce are in suspended animation, with no one -- not the photographer/copyright owner, not the archive, not the publisher -- able to express, document, or profit from the works in question."
UPDATE: Heather Hope comments: "[F]or situations like this - where the photographer is unknown and likely deceased, and there is no way to discover the artist and contact the estate - these photographs have now become absolutely useless due to the current state of copyright law. They can't be used by anyone. How does that serve anyones interests?"
"What is the point of having lawyers at your disposal unless you can wage a trans-Atlantic battle over a piece of furniture that let you down?"
The New York Times today has a story on the lawsuit between Ronald Perelman and Jacques De Vos, the Paris dealer who sold him the offending furniture. According to the story, a "tentative" settlement was reached in April, but everything's subject to a strict confidentiality agreement.
Ethics
The "Ethicist" column in last Sunday's New York Times Magazine posed the following question:
"My friend, a young artist at the start of his career, offered to sell me a 1 percent share in him for $9,000. I would receive a portion of his lifetime earnings but would have no say in the sort of work he did. This seems like a good deal for us both, but it does feel a bit like slavery. Is this agreement ethical?"
The Ethicist answers that it's not unethical. Lawprof Christine Hurt, who's not a fan generally ("Exactly what code of ethics is being followed is unclear; Cohen is obviously drawing on some sort of moral compass, but we are never told where this moral compass comes from, what moral philosophy it draws from, etc. Just a big jumble of what is right and wrong according to Cohen"), says he overlooks the securities law aspects of the deal (but he said it was ethical, not legal!). She also notes that a minor league baseball player recently considered a similar scheme but "abandoned [it] after both the SEC and the MLB became interested."
"My friend, a young artist at the start of his career, offered to sell me a 1 percent share in him for $9,000. I would receive a portion of his lifetime earnings but would have no say in the sort of work he did. This seems like a good deal for us both, but it does feel a bit like slavery. Is this agreement ethical?"
The Ethicist answers that it's not unethical. Lawprof Christine Hurt, who's not a fan generally ("Exactly what code of ethics is being followed is unclear; Cohen is obviously drawing on some sort of moral compass, but we are never told where this moral compass comes from, what moral philosophy it draws from, etc. Just a big jumble of what is right and wrong according to Cohen"), says he overlooks the securities law aspects of the deal (but he said it was ethical, not legal!). She also notes that a minor league baseball player recently considered a similar scheme but "abandoned [it] after both the SEC and the MLB became interested."