Monday, June 10, 2013

"There is ... a way Detroit could raise money and share its art with other cities without relinquishing its treasures altogether: ..."

"... a time share."

Virginia Postrel responds to some of the criticism her column on the DIA received last week.  This time, she looks to the Fisk-Crystal Bridges partnership as a model:

"Finding a partner or partners to buy shares in individual works or selected portions of the DIA’s collection would give the city a way to liquidate some of its assets without actually losing them."

As I've noted before, jointly-held work is generally seen as a good thing, but was outweighed in the Fisk case by the deaccessioning taboo.  By the "logic" of the Deaccession Police, if Museum A and Museum B chip in and buy some work, that's great, a win-win.  But if Museum A buys it and later sells half to Museum B (resulting in the same state of affairs as in the first example), that's repulsive, Stalinesque, etc.  Go figure.

The Art Market Monitor says that "as an idea, it actually doesn’t go quite far enough":

"[T]he BBC has pointed to a growing trend in the UK’s formerly wealthy industrial North where works of art accumulated during the heyday of English manufacturing—like Detroit’s cultural acquisitions when it ruled the automotive industry—are being organized into travelling exhibitions that produce enough in fees to help maintain the museums."

Tyler Cowen says that, if it sells work, Detroit "would be sending a signal that it will never even try to go back to what it was."  But he adds:  "perhaps that is where we are at with Detroit."  And, in the comments, Postrel shows up and recommends this dissertation:  Treasures in the Basement? An Analysis of Collection Utilization in Art Museums.

Friday, June 07, 2013

"Art lovers should stop equating the public good with the status quo."

Bloomberg columnist Virginia Postrel writes about the DIA issue today.  She gets a lot pushback in the comments on her assertion that it's a "relatively unpopular" museum, but, putting that issue to the side, she says some interesting things.

First, she points out that "suggestions that the museum can’t sell major works without risking violations of donor intent are disingenuous. ... [T]he records for the most valuable pieces are right on the museum’s website. The city bought those works, it owns them, and it should be able to sell them."

And she's interesting on the issue of how to define the "public good" in a case like this, and ends up endorsing an application of the Ellis Rule in this instance:

"A sale to satisfy Detroit’s creditors would certainly be a tragedy for the institution and its local constituents. But if buyers were limited to other museums, possibly even to museums in the U.S., the works wouldn’t disappear from public view. ... The public trust is no less served by art in Atlanta, Phoenix or Seattle than it is by art in Detroit. ... Letting the Getty add the Canaletto view of the Piazza San Marco now in Detroit wouldn’t constitute a rape or a bonfire of the vanities. Hanging Van Gogh’s self-portrait alongside his 'Irises' at the Getty or Bellini’s Madonna near his 'Christ Blessing' at the Kimbell would not betray the public trust. It would enhance it."

Thursday, June 06, 2013

Sloganeering

Had to share another great email from Peter Dean, in response to my post on the AAMD letter about Detroit the other day:

Donn,

There is such a lack of clear thinking on this issue.  It appears that many people just reach into their briefcases or file drawers and pull out a comforting slogan in the hope or belief that it will cure the problem, rather than looking at the real issues.  It is rather like medicine back in the 18th century when doctors might prescribe their favorite remedy for any number of ailments - regardless of likely effect.

One of the woolliest concepts is that of a “trust”, and its derivative a “public trust”.  What has been lacking is sustained legal analysis.  You might say that it is easy for a lawyer to claim that lawyers must have a say in this controversy, but in fact that kind of analysis is what is required.

Legal usage.  You and I know what the word “trust” means in the legal context (at least in the common law system, as I don’t think the Napoleonic Code really deals well with trusts).  It is a very powerful concept that imposes strict obligations on a trustee, but for there to be a trust there must be some intentional act that creates the trust, some defined property that is affected, and a trustee – and usually a defined beneficiary.  Sometimes the trust may arise as a matter of law when someone behaves very badly in a way that that leads to the imposition of a constructive trust, but I don’t think that applies in this case.

Other usage.  The term “trust” is also used frequently in other relationships, and, especially, one hears increasingly often of a “public trust”, but what is meant by that?

·       Sometimes it is an aspirational goal related to a transaction, but not necessarily creating legally enforceable rights and obligations.

·       Sometimes it is a relationship that arises as a result of legislative action (such as the creation of a national park).

·       Sometimes it reflects the residual power of the government (often exercised by an attorney-general) to ensure that assets donated for a charitable purpose continue to be used for a similar purpose of the first one fails or is completed.

·       Sometimes it is just a slogan.
 
Express trust.  There’s no doubt that one can create an express trust to encompass an art collection, and that the law will protect that.  Where the Wedgwood Museum failed was in not taking the necessary steps to make sure that the Wedgwood pottery collection was in fact conveyed to it under a legally enforceable trust.  Certainly that could have been done; but it was not.  I do not know the facts of the DIA situation, but if what I read is correct - that several decades ago the DIA transferred its collection to the City of Detroit in exchange for a promise of financial support – that arrangement could also have been set up as an express trust, that would now protect the collection from sale.  Was that done?  It sounds like it was not.

If a legally recognized trust is not created then the game is very different.  Of course, as you have noted many times, if a legally recognized trust were in fact created by the creation of a museum, then many de-accessioning sales could not occur, even if the proceeds are to be used for new acquisitions, unless the trust deed expressly permits that.  You really cannot have your trust cake and eat it too, at least not without careful planning and drafting.

When it comes to the hard issues of meeting obligations and paying bills, it is the law that will govern, not an aspirational slogan or policy.  Those who brandish the phrase a “public trust” as a cure-all against an evil, are not doing anyone a favor, but are confusing the issue  It would be better to explain what is actually required to create a trust.

Peter

"This is a crazy case." (UPDATED)

The judge presiding over the Perelman-Gagosian lawsuit urges settlement.  Background here.

UPDATE:  A fuller report from Bloomberg.com.

Wednesday, June 05, 2013

Tell me again about the public trust (Clark Sickle-Leaf Carpet edition)

The Corcoran sold a Persion rug at Sotheby's for more than $30 million today.  James Panero says it's "first-rate work that has been in the collection since 1925."

Look.  I obviously enjoy calling them out for their hypocrisy, but this is a serious point.  Works in museum collections ARE NOT HELD IN THE PUBLIC TRUST.  They're just not.  And it's not me telling you that; it's the museums themselves, by their actions.

You can't sell this first-rate work for $30 million and then turn around and tell me, when I want to sell another work (to keep from going out of business, or to pay creditors, or to avoid laying off staff, and so on) that I can't do so because it's held in the public trust.  If my work is held in the public trust, why wasn't yours?  Why wasn't this Persian rug held in the public trust?

Why are we still having this conversation?

Why does anybody take the slightest bit seriously the dopey letter the AAMD issued the other day about Detroit?

I've been saying for four years that they need better talking points.  I'm still waiting.

Here's a better idea

Why don't they pass a law making all assets beyond the reach of creditors?  Fiscal problems solved.  You're welcome.

Warhol Foundation Sued in Canada

Sergio Muñoz Sarmiento says the "story is a bit unclear, but it seems that the issue boils down to who owns the actual Polaroids: the Warhol Foundation or Frans Wynans Fine Art."

"It’s too soon to know the significance of the Rosales arrest because we haven’t seen the full scope of the government’s investigation."

Laura Gilbert has the latest on the Knoedler story in The Art Newspaper.

"Sophisticated businesspeople would never do a business deal without asking questions, but somehow when they are buying art or collectibles, their common sense flies out of their head."

Forbes:  Thieves And Forgers Rush In Where Big Spenders Dare To Tread.

Tuesday, June 04, 2013

You'll never guess the AAMD's position on the possible Detroit sale (UPDATED)

Their letter to Governor Rick Snyder is here.  Let's take a look.  Here's what they have to say, with my comments interspersed in italics:

The Honorable Rick Snyder
Office of the Governor
P.O. Box 30013
Lansing, Michigan 48909

Dear Governor Snyder,

The Association of Art Museum Directors (AAMD) is deeply concerned that the Emergency Financial Manager responsible for addressing the City of Detroit’s financial problems has questioned whether works of art could be sold from the collection of the Detroit Institute of Arts (DIA) to pay for the city’s operating expenses and debt obligations.

Duly noted.  There is much to be concerned about in Detroit.

Taking such a step would violate fundamental principles long recognized by the museum community (and embedded in many organizational policies including those of the AAMD) ...

Watch how many times, here and elsewhere, opponents of a sale fall back on this sort of argument.  "You can't sell because it would violate the standards of the museum community."  But the question is whether those standards make sense in the first place.  You can't appeal to the standards as the reason they should be respected.  It's as if the American Philosophical Association announced a standard that philosophy professors have to be the highest paid members of any university faculty, and then, when a school tried to pay their economics professors more, argued that they couldn't do so because "taking such a step would violate fundamental principles long recognized by the philosophical community (and embedded in many organizational policies)."

... as well as constitute a breach of trust with the generations of donors, both of art and funds for acquisitions, to the DIA.

This, at least, is an argument:  to sell art constitutes a breach of trust with donors.  The problem is, as we've seen, museums sell work all the time.  Why is it only sometimes a breach of trust?

Furthermore, selling art for operations of the City would constitute a material change from the financial statements presented for many years to the public and others by the DIA.

I've never understood what the force of this argument is supposed to be (so it's a change from the financial statements -- so what?).  And neither apparently does the AAMD because, after this one mention, it doesn't come up again in their letter.  (Peter Dean had some thoughts on this issue here.)

The acquisition, conservation, and exhibition of a museum’s collection are at the very heart of the museum’s service to its community. These activities represent the fundamental responsibility museums have for the stewardship of the cultural assets they hold in trust for present and future generations. For these reasons, and many more, it is a fundamental professional principle that if works of art are removed (deaccessioned) from the collections of art museums, the funds realized from their sale can only be utilized to enhance their collections and for no other purpose.

A couple of weird things here.  First, they talk about what museums "hold," which ignores the fact that, in this particular case, the museum doesn't "hold" anything: the collection is owned by the city.  So the real question is what is the fundamental responsibility cities have for the stewardship of the cultural assets they hold, and how do they balance that with other responsibilities they have (like to keep the lights on, or to pay the pensions it promised to its workers).  And second, notice the sleight of hand:  in the first sentence, we hear about "acquisition, conservation and exhibition" of the collection, but by the last sentence we're down to just acquisitions ("to enhance their collections").  Why can't the proceeds also be used for "exhibitions" (e.g., to build more and better exhibition space)?

The DIA’s collection is one of the most significant in the United States, and the museum has long been an outstanding example of the role an arts institution can play as an anchor for its community. The DIA was a founding member of AAMD, which was established in 1916, and has continued to be an active participant in the Association and a leader in the museum community.

Okay, but doesn't really address the pickle the city finds itself in.  (The AAMD is not really in the pickle-acknowledging business.  They're an advocate for a particular outcome, not a fair-minded observer balancing competing considerations.)

The sale of any part of the DIA’s collection to provide funds for any purpose other than the acquisition of art would place it firmly outside the standards of the American museum community. 

Appealing again to their own standards as an argument for why the standards should be followed.

The impact of such a decision would be felt in many, many quarters.

Not just many.  Many, many.

For example, fund raising for any state, county or city owned museum in Michigan could be impacted. Donors of objects to state, county or city owned museums would be very concerned about making any donation of their property for fear it would be sold anytime the government had a financial issue.

This is another of their standard arguments.  Donors will be very concerned about making donations if they know the work can be sold "anytime the government had a financial issue."  First of all, is that what Detroit has?  A "financial issue"?  They're bankrupt, for God's sake.  More importantly, I'm trying to remember who it was who said, just the other day, that museums want gifts to be unrestricted, so they can sell the work whenever they want.  Under the AAMD's own "standards," donors of objects know that their property can be sold, not anytime the government "had a financial issue," but anytime the museum sees a shinier object they'd like to acquire.  Why aren't donors "very concerned" about that?  Aren't they more likely to have their work sold for that than as a result of a government "financial issue"?

Such a sale—even against the will of its staff and leadership—would mean that the museum would not be operating in compliance with nationally accepted professional principles. If such a step were taken, it would violate the guidelines defined for the stewardship of collections in the AAMD’s Professional Practices in Art Museums.

Not in compliance.  Violate the guidelines.  Blah blah blah.  See above.

It would, moreover, represent a breach of the City of Detroit’s responsibility to maintain and protect an invaluable cultural resource that has been entrusted to its care for the benefit of the public.

This is really the core of it.  It is undoubtedly true that the City of Detroit has breached its responsibility to its citizens, in "many many" ways.  Yes, it has a responsibility to protect these invaluable resources, but it has other responsibilities too.  The AAMD doesn't provide any suggestion for how the City ought to balance those responsibilities, doesn't even acknowledge that those other responsibilities exist.  We know how valuable the museum is; we didn't need the AAMD to write a short, uninteresting letter to tell us.  But that's only the beginning of the conversation, not the end.

The AAMD strongly encourages everyone involved in the process of seeking solutions to Detroit’s fiscal challenges to preserve this irreplaceable part of the heritage of the city. It is a link to Detroit’s past and a fundamental key to Detroit’s future.

Sincerely,
Timothy Rub
President, Association of Art Museum Directors

Well, I guess that settles it then.  You can expect to see news that the City's emergency manager (he was appointed to deal with the City's "financial issue") has dropped the idea any day now.

UPDATE:  A different take on the letter from Lee Rosenbaum.

Are giraffes held in the public trust?

The latest from Detroit.

Monday, June 03, 2013

"There have been many successful art funds in the world ..."

". . . if you consider secondary dealers—many of whom have spread the risk through financial backers—to be art funds."

"It is at least a legitimate view that the tragedy that befalls working people when their pensions are affected by insolvency is at least as great as the tragedy that has befallen, or may now befall, the collection in this case."

An interesting email on the situation in Detroit from my friend Peter Dean, who, as I've mentioned before, was closely involved in the Randolph College deaccessioning controversy:
 
Donn:

I have been following the unfolding saga at the Detroit Institute of Arts and the possibility that it may have to sell, or that the City of Detroit may sell, some of its very valuable collection to pay the City’s debts.  I understand that the DIA collection is in fact owned directly by the City of Detroit.
I read your Art Law Blog on this topic and, as always, thought your comments are right on point.  I have also seen the remarks of other commentators who have pointed out the difficulty of resolving the competing claims of those who wish to keep the collection intact and of city employees whose jobs and pensions are at risk.

There is a very interesting English court decision from December 2011 that deals with an analogous situation:  Young v Her Majesty’s Attorney-General, WedgwoodPlan Trustee Limited and The Pension Protection Fund [2011] EWHC 3782The case arose from the collapse and bankruptcy in 2009 of Waterford Wedgwood (I’ll refer to it as the Wedgwood Trading Company), leaving substantial unfunded liabilities in its pension plan.  This company is the successor to the famous Josiah Wedgwood and Sons Ltd. which has a history dating back to the 18th Century.  The question then arose as which assets are available to satisfy those pension liabilities.  This affected The Wedgwood Museum Trust Ltd. (the Museum Company), which is a separate but affiliated company that was organized in 1962 to take ownership from The Wedgwood Trading Company of the valuable and historically important Wedgwood collection of pottery and arrange for its public display.  
The Museum Company had only a few employees and was run separately from the Wedgwood Trading Company, but its employees had previously been employees of the Trading Company and were part of the same pension plan.  The Museum Company thus became subject to English multi-employer pension plan rules.  It did not file for bankruptcy at the same time as the Wedgwood Trading Company, but did so later when it became clear that the Museum Company might be responsible for the unfunded pension liabilities of the Wedgwood Trading Company and any other companies participating in the same plan, under “the last man standing rule”.  This rule is derived from a law enacted in the 1990s following some financial scandals, and was intended to make sure that even if some companies in a multi-employer plan went bust, the surviving companies would be responsible for the unfunded obligations under the plan. 

The administrator of the Museum Company brought an action to determine whether the Wedgwood pottery collection was to be regarded as part of the general assets of the company, and thus could be reached and sold to meet the claims of the Wedgwood pension plan trustee as well as the English equivalent of the Pension Benefit Guaranty Corporation.
The answer to that question was “Yes”.  The court held that the Museum Company’s collection is part of the general assets of the company and is not held under any legally recognized form of trust.  As such, the collection could be reached by the Museum Company’s creditors and is subject to being sold to meet the company’s obligations.  This was a surprise to many who thought that the assets were held in some kind of trust. 

The case contains a fascinating discussion of the ins and outs of corporate governance and family affairs through the middle decades of the 20th century, including donations to the collection by the composer Ralph Vaughan Williams, a Wedgwood relative, and others.  The court held that none of the various donors ever actually imposed conditions on their gifts that rose to the level of creating an express trust in the donated items.  It also held that, despite some rather vague use of the term “trust” in various documents, the transfer from the Wedgwood Trading Company to the Museum Company in 1964 was not carried out in a way that created a legally recognized trust.  As a result the Museum Company is the beneficial owner of the pottery collection which is a general asset reachable by its creditors. 

Despite the fact that the collection was transferred to the Museum Company to protect it from liabilities arising from the Trading Company’s business and to make it available for public display, the court held that no separate charitable trust was created and there was no suggestion that the collection is held in the “public trust” or any similar concept.  The British Government which had intervened in the case to argue that the collection ought to be protected from creditors has declined to appeal the decision.  Efforts are now under way to raise funds to keep the collection intact.
The last words from the court’s opinion are relevant to the DIA situation, and perhaps others.
This is a sad conclusion for those who are concerned to preserve a collection which is, as everyone recognises, part of our cultural heritage and of immense importance, but it is the combined result of the pension protection and insolvency legislation. It is at least a legitimate view that the tragedy that befalls working people when their pensions are affected by insolvency is at least as great as the tragedy that has befallen, or may now befall, the collection in this case.
 
A separate but related issue is likely to be the accounting treatment of the DIA collection.  Is the collection capitalized, i.e., is the value of the collection shown on a balance sheet of the DIA, or the City of Detroit?  I do not know which accounting rules apply to the City of Detroit, but I would think that the DIA, as a non-profit institution, is probably subject to FASB Rule 116.  That accounting standard gives a non-profit institution a choice as to how it treats its collection from an accounting perspective. 
  • If it adopts an express policy that the proceeds of sales from its collections may only be used to add to the collection (and some closely related purposes) then it does not need to disclose the collection on its balance sheet.
  • If it does not have such a policy it must disclose the value of the collection (presumably at cost) on its balance sheet.
I believe that most, but not all, institutions with collections held for public display adopt a policy restricting the use of sale proceeds, in part because that is what the museum organizations such as AAMD and AAM insist on as a requirement for accreditation as a museum.  Does the DIA have such a policy? 
Even if the DIA has such a policy restricting the use of sale proceeds, I expect that it is unlikely to have much legal effect in the current situation, because the policy can be changed by its board of directors or trustees, rather than being an express and legally recognized trust affecting the collection that cannot be altered without court approval. 

I doubt that any such policy would affect the legal issue of ownership and who has the legal power to sell, or the claims of creditors to reach the collection, but it would be interesting to know.  This is a difficult situation that will shed more light on a number of questions concerning collections held by institutions that come under financial stress.
Peter

"Serra Work Gains Protected Status in Ontario" (UPDATED)

In today’s New York Times, Randy Kennedy has some great news regarding (our client) Richard Serra’s site-specific landscape sculpture Shift.  Tyler Green wonders if anything new happened, but the answer is yes:  while the Township had already voted in Feb. to “prepare a bylaw” for the designation, last week they made it official:  the by-law was approved, by a 5-2 vote.

UPDATE:  More on Shift from Green here.

Friday, May 31, 2013

"At what price point do you give up on platitudes about the inviolability of art?"

Ben Davis has an interesting piece on the Detroit situation at ARTINFO.  Though he "of course, find[s] revolting the idea" of selling art, it's miles better than the typical anti-deaccessionist piece because he at least acknowledges that there's another side to the argument:

"But I also understand how, in a city that has been forced to experiment with turning off street lights, righteous rhetoric about DIA's art holdings being a 'public good' might ring a wee bit hollow. Hammering away at fine art’s sanctity while the privatization of the city’s water authority is also 'on the table' seems bound to make pundits seem out of touch."

The usual anti-deaccessionist work, by contrast, begins with a ritual incantation that art is held in the "public trust" and so can't be sold (even though it's sold all the time) and then moves on to the deeply thoughtful view that, because some museum groups have decided it's "unethical" to sell work for some purposes but not others, only a Stalinist would disagree.  Davis at least recognizes there's some complexity to the problem.

Lee Rosenbaum has lots more coverage, including this astonishing quote from the museum's director, Graham Beal:

"[O]ur concern has been not to have [gifts] restricted, so the DIA would be able to deaccession that art to buy different art. We’ve always wanted gifts to be unrestricted. We [will now] have to start inviting donors to put restrictions on gifts."

Hold on a second.  Haven't we been told, over and over again, that the reason museums can't deaccession is that donors won't give if they know their works can be sold?  Why wouldn't somebody say, Why should I give this to you? What guarantee do I have that you're not going to sell this tomorrow?

But now we find out that donors have always known there is no guarantee the work won't be sold and the museums want it that way.

They hypocrisy is so thick you could cut it with a chainsaw, assuming Detroit can afford a chainsaw.

"In April 2010, Sotheby’s Inc. won a $6.6 million judgment against him in connection with three artworks he bought at auction and later refused to pay for." (UPDATED 2X)

Halsey Minor files for personal bankruptcy.  Some background here.

UPDATE:  "Halsey Minor's Art Addiction Helped Drive Him To Bankruptcy."

UPDATE 2:  "Halsey Minor's Canny Use of Art as an Asset."

"At this point, the city may need the money more than it needs the art."

Walter Russell Mead on Detroit:  "Unfortunately the city is already struggling to keep the lights on. Local businesses recently had to step in to buy the city police cars and ambulances. Meanwhile, Detroit has closed nearly a quarter of the city’s firehouses, and the department’s equipment is beginning to fall apart."

Relatedly, two views of the situation, via Lee Rosenbaum.

Thursday, May 30, 2013

"Although some legal commentators see the case as portending the end of the auction world as we know it, we view the holding as quite narrow, applying only to evidence that is needed if a purchaser is sued by the auctioneer after failing to pay."

Charles and Tom Danziger on the Jenack case and various and sundry other auction-related legal issues.  On Jenack, they side with the Olsoffian minimalist interpretation.

"The Visual Artist’s Rights Act, Copyright and Conceptual Art"

For our Chicago-area readers.

Why do people make anonymous donations?

Tyler Cowen has some thoughts.

"Neither party is commenting on the resolution."

A settlement in the Velvet Underground-Warhol Foundation suit.

"Time and again it has been illustrated that art thieves are more sophisticated in their ability to plan and execute a robbery than they are in figuring out how to dispose of the works"

The Art Market Monitor on the latest example.

"Court finds for artist who disowned work before auction"

In The Art Newspaper, Laura Gilbert reports that Marc Jancou's claim against Cady Noland has been dismissed.  His breach of contract claim against Sotheby's had been previously dismissed (see here) and, since the only claim against Noland was for tortious interference with the same contract, that claim was dismissed too.  Jancou's appeal of the Sotheby's decision is being argued in the Appellate Division June 6.

"For modern art museums, what they’re doing would be largely impossible."

The Rijksmuseum is offering downloads of high-resolution images at no cost.

Saturday, May 25, 2013

Cant (UPDATED)

The other big news this week was that "Detroit emergency manager Kevyn Orr is considering whether the multibillion-dollar collection at the Detroit Institute of Arts should be considered city assets that potentially could be sold to cover about $15 billion in debt."

You can guess the reaction in the art world, I don't have to bother linking to anything.  But I was amused by this story in today's Times under the headline, "Collection of Detroit Institute of Arts Cannot Be Sold, Its Director Says."

Got that?  Cannot be sold.

Not shouldn't be sold.  Cannot be sold.

Why "can't" it be sold?  Because it's held in the "public trust," of course.  (Tell me again ....)

Now, in fairness to the museum's director, Graham Beal, the quotes attributed to him in the story don't support that headline.  He says:

"We believe that that kind of action — diminishing our collection, the cultural value — would not be in the long-term interest."

That sounds like a "shouldn't" statement, not a "can't" statement, and that's where the conversation has to take place.  If you think selling any of the art is a bad idea, given all of the relevant circumstances, then make the case.  But nobody gets to chant the magic words "public trust" and end the discussion.

The works absolutely can be sold; as we've seen repeatedly, museums sell work all the time (even some museums in Detroit).  The question is whether they should, and what happens -- to the public in whose trust they are held -- if they are not.

UPDATE:  Tell me again about the public trust.

"The artwork Rosales sold appears to be as fake as her story about the clients she claimed to represent."

I was out of town this week, but while I was away, the big news was that federal prosecutors charged Glafira Rosales, who is at the center of the Knoedler mess, with tax fraud.  The New York Times has all the details here.  The criminal complaint is here.  Excellent analysis at Jack Townsend's Federal Tax Crimes blog here.

Wednesday, May 15, 2013

Six of one

Sergio Muñoz Sarmiento responds to my post yesterday on his latest post on Prince-Cariou.

I wasn't really disagreeing with him.  It's hard to say whether things were better or worse pre-Prince.  Sergio says we're left now with a fair use clusterfark, which is true.  But we had a fair use clusterfark before Prince.  You'd need a very finely tuned clusterfark detector to be able to measure the difference.

Tuesday, May 14, 2013

"Since the full price of artworks donated to charity are not tax deductible for the artist, new records are a major incentive for their participation."

Dan Duray on last night's Leonardo DiCaprio-organized charity auction.

Much Better Than The Impractical Advice Panel

"Practical Advice on Handling Legal Issues Confronting the Art World Today":  New York City Bar Association, May 21, 6:00-9:00 pm.

"So although many in the art world and the art law world are championing the latest Second Circuit flop, what they should be asking is how the hell are we supposed to analyze fair use post-Cariou."

Sergio Muñoz Sarmiento is still not happy with the Prince decision:  "This isn’t about chilling speech; it’s about knowing a good thing when you have it. The pre-Cariou test elaborated by Judge Batts simply asked that we question the appropriating artist on what her purpose was in appropriating copyrighted work. Now that that fish has been gutted to the bone, all we art lawyers are left with is uncertainty and guess-work."

I'm not sure we had much more than that pre-Cariou . . .

Monday, May 13, 2013

Detroit is broke

Details here.  Maybe they should try a millage?

"Why Can’t We Take Pictures in Art Museums?" (UPDATED)

Carolina Miranda explores in ARTnews.

UPDATE:  Some thoughts from Sergio Muñoz Sarmiento.

"It is hard to imagine a business more custom-made for money laundering" (UPDATED 3X)

Patricia Cohen has a front-page story in today's New York Times on the increase in art-related money laundering.

The Art Market Monitor says it's "an open secret in the art world."

UPDATE:  Charlotte Burns and Melanie Gerlis have a related story in The Art Newspaper.

UPDATE 2:  Fox Rothschild's Daniel Schnapp:  "One important question is whether an innocent purchaser or seller of laundered art has any right to receive back the work or the funds used in the sale of the work. Certainly a major concern would be if the art is forfeited by the government.   The artwork is then potentially subject to the criminal proceedings against the accused money launderer and a long delay in recovering either the work or the funds may be inevitable."

UPDATE 3:  Asher Edelman comments:  "The article’s focus is that there are no safeguards on money laundering in the art market. However, the Times is mistaken. The art market and its participants are subject to the same money laundering, tax evasion, fraud, and other laws applying to transactions as any other business."

Friday, May 10, 2013

"While of course we're glad that the individual artist, Richard Prince in this case, has had the aesthetic merit of his work validated ..."

". . . it does very little to stop the chilling effect that we're already seeing on any other artist, collector, or museum."

Virginia Rutledge, quoted here.

Are there too many nonprofits?

Slate's Matthew Yglesias:  "Due to the progressive rate structure of the income tax, these tax deductions are very much a way of increasing the social and political clout of the rich and don't seem to inspire a ton of charity in the sense of helping poor people."

Fielder's Choice

I've been meaning to get to the news about the Field Museum of Natural History in Chicago.  It's the usual story -- the museum is deeply in debt, faces millions of dollars in budget cuts, including a new round of layoffs, this time including tenured scientists who will find it "very, very hard" to find new jobs -- but, while it's fine for them to sell off their entire collection of paintings by George Catlin and use the proceeds to "buy [more] artifacts," it would be a mortal sin to use those same proceeds for anything else.

And, on NPR, we hear from Carroll Joynes of the University of Chicago's Cultural Policy Center, who tells us "what make deaccessioning so tricky":  one, "[i]t makes donors in the future fear for the security of the things they leave to the organization"; and two, it "seems to many to skirt with a breaking of a trust or a vow to take these things into permanent protection for future generations."

But it never seems to occur to anyone to ask why those same concerns didn't apply to, for example, the sale of the museum's entire collection of Catlin paintings.  Did that not make donors in the future fear for the security of the things they leave to the organization?  Did that not skirt with a breaking of a trust or a vow to take those things into permanent protection for future generations?

Why don't the reporters ever call them on the inconsistency?

"In the press info for the commercial, Inversion, Havel, and Ruck are mentioned as inspirations."

Houston Chronicle:  Artists behind iconic Houston sculpture sue Honda over ad.

Idea or expression?

And, if the latter, is it a fair use because it has a "different purpose" than the original (i.e., to sell cars)?

Tuesday, May 07, 2013

"Battle Heats Up Over Resale Royalties for Artists"

I'm quoted in this Art in America story on resale royalties.

I hope to write more about this issue soon.  It seems to me that a consensus has formed around the view that the royalty is clearly a bad idea.  I'm not so sure.

"Good luck in finding the real artist for this. Any attempt to attribute this painting to Peter Doig in any way will be dealt with by our attorneys."

Guy claiming to have been Peter Doig's parole officer in the mid-1970s says he has a painting Doig made in 1976.  Doig (vehemently) denies it's his.  Parole officer sues for $12 million.

"He was assigned to paint two more rooms of the Schulhof house, but this time, hidden cameras had been strategically placed."

NYT:  House Painter Is Charged in Long Island Art Thefts.

"While the decision may provide some comfort for many artists who truly transform underlying artistic works, it may leave other artists struggling to understand exactly how much 'transformation' is needed to be 'transformative'"

Still more on Prince-Cariou.

Thursday, May 02, 2013

"A salute to the Court's own transformative, creative spirit"

Greg Allen has published another Cariou v. Prince book, a "carefully cross-referenced catalogue of each use of Cariou's YES RASTA images in Prince's Canal Zone paintings. This indexing was the basis of the judges' Solomonic decision to divide the Canal Zone series into 25 non-infringing works, and 5 infringing?-who-knows-let's-look-again works. Where applicable, the Court added highlights to Cariou's images, arguably creating yet another transformative work. And submitting it into the public record."

Tuesday, April 30, 2013

Friday, April 26, 2013

"We think the 2nd Circuit has been reading too many Chelsea gallery press releases." (UPDATED)

Sergio Muñoz Sarmiento has been Tweeting his responses to the Prince decision.  You can find them here.  Some highlights:
  • "The Cariou/Prince decision basically says that if you're an artist without a market, your art work is up for grabs and free to take."
  • "The 2nd Circuit's talk of art would get any undegrad art major thrown out of art school. Serene? Jarring? Hectic? Provocative?"
  • "2nd Circuit: what is critical is "how the work in question appears to the reasonable observer." Reasonable = hip, trendy, superficial."
  • "Someone please forward the Bleistein case to the Cariou/Prince judges. Here's the link!"
  • "25 out of 30. Why not just say the other 5 are NOT fair use? Why are those 5 so 'special'? Guidance, rationale. We need guidance."
UPDATE:  And here's Sergio's blog post.

"The remand notwithstanding, today’s decision protects a long-standing tradition of using existing imagery as raw material for new artistic expression and this opinion will play a key role in the fight to maintain artists’ rights to continue to do so."

Julie Ahrens of the Stanford Fair Use Project is pleased with the Prince decision:

"The decision confirms the principle that a use can be fair even if it doesn’t criticize or comment on the original work. While it it’s far from groundbreaking to say that commentary or criticism isn’t necessary for fair use, it is a principle that hasn’t been applied before in the visual art context. Here the Court held that copyrighted images can be used as raw material to create new works of art, even where the artist had nothing to say about the images he relied upon. Transformation can be found where the artist’s expression and 'composition, presentation, scale, color palette, and media are fundamentally different and new compared to the photographs.'"

What You See Is What You See

I also asked my friend Bob Clarida (author of the COPYRIGHT LAW DESKBOOK) what he thought of the decision.  His characteristically interesting response:

"Two stray thoughts I had:

(1) By remanding on the five works with fewer visible changes, has the Second Circuit now closed the door (at least a little) on the argument, seemingly well-settled since Bill Graham, that transformativeness is about context and purpose, not visible changes?  By the ruling's logic, it could be argued that Prince's Marlboro Man pieces, or Sherrie Levine or Barbara Kruger, are not transformative.  So by dwelling on the surface of the works the court may be turning back the clock a little.

"(2) The new standard seems much more like it invites a jury question.  If the standard is at least somewhat tied to artist intent, you can have a case where the parties clearly state on the record what their intentions and meanings were, and the court SHOULD be able to see the disparity and say it's fair use.  There's no disputed fact issue.  But if the standard is to compare the 'aesthetic' of two works, looking only at 'results,' the court has nothing to go on but the physical changes.

"So overall, I think the decision sort of de-conceptualizes the art and treats it as merely a bunch of marks on a surface -- very old-timey and reductionist.  If not a jury, you could program a scanner to do it: 88% optically similar is infringement, 38% optically similar is fair use.  The five sent back for remand were in the middle.  Maybe the court's implicit assumption is that visual differences are key here because both works were 'fine art,' so any asserted difference in purpose is not enough to warrant a fair use finding -- certainly the purpose, context and intent of the five remanded pieces are not much different -- if at all -- from the pieces that qualified for fair use; the only difference is the way they look."

A More Positive Take

You may remember the fantastic piece on art and copyright by artist/lawyer Alfred Steiner that I linked tocouple months ago.  I asked him what he thought about the Second Circuit’s decision in Cariou v. Prince, and this is what he had to say:

Before the decision arrived yesterday, my best guess was that the Second Circuit would cite the District Court’s errors (e.g., considering all 30 works as a whole instead of piece-by-piece) and send the case back there for further review.  This is what dissenting Judge Wallace wanted to do, and clearly would have been the judicially conservative move.

Instead, the Second Circuit took a more active approach, providing additional guidance as to how courts should decide when a use is fair.  How much more guidance is the question, and as Donn suggested in his initial post on the topic, it may be quite little.  But given the inherently case-by-case nature of fair use determinations, at the very least the court has provided one more data point against which artists may compare their own work to decide whether they’re in the clear.  I, for one, believe that I’m taking considerably less risk in making my collage-based watercolor works post Cariou.

In my mind, the most important points from the decision are the following:

1.  The secondary work doesn’t need to comment on the first work.

2.  The artist doesn’t have to articulate a critical defense of the secondary work for a finding of fair use, as previously suggested by the Rogers v. Koons and Blanch v. Koons decisions.

3.  What is critical is how the work appears to a reasonable observer, which requires the court only to consider the first work and the secondary work side by side.

4.  Differences in target audiences matter.

5.  The court will continue to focus on actual derivative uses by the owner of the first work, not all potential derivative uses.

These are all positive developments (or at least restatements) from the perspective of an artist whose practice includes using pre-existing work.

But I believe the court made some mistakes and missed some opportunities.  

For one thing, the court has arguably made the second fair use factor irrelevant.  The second factor--the nature of the copyrighted work--asks how close the first work is to the core of copyright protection.  Expressive works are given more protection than factual works--think Harry Potter versus a biography of Abraham Lincoln.  Here, the court held that because Cariou’s works are “creative and published,” this factor weighs against a finding of fair use.  (We can ignore the “published” part here because unpublished works get even stronger protection, so the court would have to find that a creative and unpublished work would weigh even more strongly against fair use, even though, as Pierre Leval has argued, providing this added protection for unpublished works in the fair use analysis has no logical support in the framework of copyright law.)  But all copyrighted works are creative by definition, which means that the second factor always weighs against a finding of fair use. Instead of reading this factor out of the analysis, the court should have weighed it in Prince’s favor because Cariou’s photographs are primarily documentary (and thus factual) not primarily expressive (like Cindy Sherman’s grotesques).

But a larger problem with the court’s decision is posed by its split of the works into 25 works that are fair use as a matter of law and five others that may or may not be fair use.  Although I do not think that Judge Wallace’s admonition against courts “constitut[ing] themselves final judges of the worth of [a work]” is apt--courts have no need to determine the worth of an artist’s work in this analysis--I agree with Wallace that the court erred in splitting the works into two groups.  How is Judge Batts supposed to decide whether the five remaining works are fair use, especially if all she needs to do is compare the works side-by-side, which the Second Circuit could do just as easily?

As I’ve argued before, if the court had simply recognized the essential difference between one-of-a-kind objects and mass-produced objects, it could have held that this fact supported a finding of fair use with respect to all 30 works.  But according to the court’s decision, it now seems that Prince may be entitled to make T-shirts and coffee mugs featuring any of the 25 vindicated works.  That seems about as fair to me as allowing copyright holders to dictate which one-of-a-kind objects people are entitled to create, even when those objects have no plausible relationship to copyright holders’ economic interests.

--Alfred Steiner is an artist and a lawyer whose work often poses questions about copyright. One such work, Erased Schulnik (2010) is appearing in an exhibit curated by Turner Prize-winning artist Mark Leckey called TheUniversal Addressability of Dumb Things, which opens today at Nottingham Contemporary in Nottingham, England.

"Because you’ve been sort of a pill during this process, I’m also going to rule that a few of your paintings actually might not be transformative enough for fair use and send you back to that district court judge who really hates you to get a final decision."

"Have fun!"

Shane Ferro translates the Prince decision.

Thursday, April 25, 2013

NY Times on Prince-Cariou

I'm quoted in Randy Kennedy's story on the decision here.  (It's a much shorter version -- "it’s a missed opportunity to really bring some clarity to this issue" -- of what I said below.)

First Thoughts

Okay, I’ve read the decision.  I think we can hold off on the parade; I don’t think it’s really done much to clean up the fair use mess.

The Court holds, first, that the district court applied the wrong standard:  there is no requirement that the later work comment on the underlying work.  That’s somewhat helpful, but not that big a deal; everyone knew that was wrong from the start.  As the Court notes, “even Cariou concedes … the district court’s legal premise was not correct.”
The other moderately important holding is that it doesn’t matter what Prince said about the work; the question is “how the work in question appears to the reasonable observer.”  Fine, but there weren’t going to be many other fair use defendants who testify their work had no message, or any interest in the underlying work.

The Court then says all you really have to do to tell if something is transformative is look at the works side-by-side, and, having done so in this case, it was “convince[d]” that 25 works passed the test.  They reflect Prince’s “drastically different approach and aesthetic.”  They have “a different character, give Cariou’s photographs a new expression, and employ new aesthetics with creative and communicative results distinct from Cariou’s.”  He “added something new and presented images with a fundamentally different aesthetic.”
But … and here’s where I think things start to go awry … there were five other works that did “not sufficiently differ” from Cariou’s photos to qualify as transformative as a matter of law.  They differed, but they did not sufficiently differ.  They differed, but they are “still similar in key aesthetic ways.”

So they sent those five works back down to the district court.  But why?  Why bother?  What is the district court supposed to do now?  Stare at them side-by-side a little longer?  If the appellate court couldn’t “say for sure whether [this work] constitutes fair use or whether Prince has transformed Cariou’s work enough to render it transformative” (my emphasis), what more can the district court do to resolve that question?
Is the idea that it now has to go to a jury, to decide what a “reasonable observer” would think?  And if that’s the takeaway from the case – that in any case where we can’t “say for sure” whether a work is transformative “enough,” it goes to a jury -- is that really a victory for fair use?

So, on first blush, I’m not sure how much this decision does to reduce the level of uncertainty around the issue of fair use going forward.  How do you know, in any particular case, whether your work is more like the 25 “clearly” transformative works or more like the five that “present[ed] closer questions”?  Aren’t we still, basically, in the dark?

BREAKING: Decision in Prince-Cariou (UPDATED)

"In a closely-followed case in the art world, artist Richard Prince has scored a big win at the Second Circuit Court of Appeal against photographer Patrick Cariou."

Much more later, needless to say.

UPDATE:  Early reactions trickling in.  Julia Halperin in The Art Newspaper.  Randy Kennedy in The New York Times.  Brian Boucher in Art in America.  Dan Duray in the Observer.  And here are the opinions in the case (plural -- there's a dissent).

Thursday, April 18, 2013

More on Facebook and Censorship

I linked last week to an ARTINFO piece on Facebook's "obscenity police."  One of my NYU Law students, Kevin Park, has written a really interesting Note on the general issue of social media and censorship:  "Facebook Used Takedown and it Was Super Effective - Finding a Framework for Protecting User Rights of Expression on Social Networking Sites."  You can read it here.

Tuesday, April 16, 2013

Wednesday, April 10, 2013

"But the plan will infuriate many charities with its renewed call to limit the value of deductions for charitable contributions"

The Chronicle of Philanthropy on President Obama's proposed 2014 budget.

"In this case the coincidences all break one way."

The Sixth Circuit affirms a district court decision vacating an arbitration award against Thomas Kinkade's company.  An interesting read.

Christie's Goes To China

NYT story here.

Wednesday, April 03, 2013

"The statute seems to contemplate and permit the very 'violation' Plaintiff alleges ..."

". . . noting, 'If the multiple was made from a master which produced a prior limited edition, ... this shall be stated.'"

That's the money quote from the District Court decision last week dismissing collector Jonathan Sobel's lawsuit against William Eggleston for making new works from the same images used to make earlier limited editions.  ARTINFO's Julia Halperin has a good summary here.  When the case was filed, Felix Salmon said it looked like "one of the silliest lawsuits the art world has seen in a very long time."  More background here.

What Are Foundations For?

Rob Reich attempts an answer in the Boston Review.  Tyler Cowen has a response here, including the following observation, which struck me as relevant to the deaccessioning debate (regarding the argument that the tax-exempt status of museums means "we" own the works they hold):

"In many localities some items are subject to sales tax and others exempt, or perhaps subject to different rates. Let’s say that I spend my money on untaxed items or lower-taxed items. Does this untaxed expenditure—an indirect subsidy of sorts—imply that 'the public' should have a greater say in how I spend my money?"

Dream Deal

While I was away last week, Steve Cohen bought Picasso's "Le RĂŞve" from casino mogul Steve Wynn ... for $155 million, or $16 million more than he had agreed to pay in 2006, just before Wynn accidentally put his elbow through the work.  The Art Market Monitor notes that "the question is whether the Picasso work is now a $200m painting including the [$45 million] undisclosed Lloyds settlement [Wynn received for the 2006 damage] or whether Wynn just made out like a bandit on the accident."

"More Tony Soprano than George Clooney"

The Guardian's Jonathan Jones on art theft.

Monday, April 01, 2013

Paneling (UPDATED 2X)

It seems lots of art law happened while I was on the road last week.  We'll get to all of that, but, first, some good stuff happening soon.  First, tonight at NYFA, a panel entitled Understanding Artists' Rights.”  It's sold out, but there is a waiting list.

And then, tomorrow, the NYU Law Art Law Society presents:

RESALE ROYALTY RIGHTS
A Conversation Inspired by the Copyright Office's Call for Comments on a Federal Resale Royalty

Tuesday, April 2nd from 6:30 PM to 8:00 PM
Reception to follow in Golding West Wing

Panelists:
Jane Levine '85, Worldwide Director of Compliance, Senior Vice President, Sotheby's
Christopher Reed, Senior Advisor for Policy & Special Projects, U.S. Copyright Office
Christopher Sprigman, Visiting Professor of Law, NYU School of Law
Frank Stella, Artist


Moderator:
Amy Adler, Emily Kempin Professor of Law, NYU School of Law

NYU School of Law, Vanderbilt Hall 210
40 Washington Square South
New York, NY 10012

RSVP HERE

UPDATE:  And here's one on legal issues relatingto digital art, next week.

UPDATE 2:  And another!  The Fordham Art Law Society, April 10: "Defining Cultural Ownership: Shifting Focus, Shifting Norms."

Friday, March 22, 2013

Ulrich Boser on the Gardner News (UPDATED)

Here.  What else do you need to know?  He wrote the book.

UPDATE:  Anderson Cooper will be covering the story on his show tonight.

Tuesday, March 19, 2013

"What are the museums to do, they ask, if the artist retained the copy­right, if the artist cannot be found, or if a group of heirs is arguing about who owns which copyright?"

That's a quote from today's Supreme Court decision in the Kirtsaeng case, holding that the first-sale doctrine applies to works made abroad.  Which (among other things) means museums can continue to display foreign-made works in their collections.  Adam Liptak's New York Times story is here.  Sergio Muñoz Sarmiento comments here.  Yale's Margot Kaminski has a good post here.

"Charitable Deduction Under Fire"

Via the Nonprofit Law Prof Blog (who's keeping count).

Monday, March 18, 2013

"In a stunning twist in a case that had frustrated investigators for decades ..." (UPDATED 2X)

"... federal law enforcement officials said today that they had identified the people who stole $500 million worth of masterworks in a daring heist from the Isabella Stewart Gardner Museum in 1990."

UPDATE:  Ann Althouse:  "I'm glad to hear this art may be returned, but I can't help noting that name: Carmen Ortiz. Here's someone who may be desperate for good publicity after getting trashed earlier this year."

UPDATE 2:  Nicholas O'Donnell is skeptical:  "This time may be different, but the FBI has been 'appealing to the public' for 23 years.  Whatever it now believes happened 15 years ago may be true, but the crime frankly appears no closer to being solved than it was yesterday.  In that respect today’s development may be less 'stunning' than it is somewhat predictable."

"Legal rules are premised on the assumption that art is a stable category, but what happens to law as that assumption becomes unsound?"

A terrific interview at BOMBlog with my friend and law school classmate (and co-teacher) Amy Adler.

Thursday, March 14, 2013

Tell me again about the public trust (fine rugs from the William Clark collection edition)

The Corcoran is selling 25 fine rugs and carpets at Sotheby’s, including "one of the most iconic and important carpets ever to appear at auction."  Iconic, important, and held in the public trust, to be accessible to present and future generations ... just as long as those future generations make it to the museum by June 5th.

"Mr. Gagosian said that he, like most dealers, frequently represented both the seller and buyer in a deal without disclosing that fact to either party."

The New York Times has a report on the settlement of the Cowles-Gagosian lawsuit.

Sunday, March 10, 2013

"It became apparent that there was something wrong here."

Bucking the trend of artist foundations not sticking their noses into authentication-related disputes, the Keith Haring Foundation went after the organizers of a Haring show in Miami, forcing the removal of 165 of the 175 works originally included in the show.

"More importantly, he has articulated a much-needed vision for the Corcoran that would bring it into the 21st century while still staying true to the 19th-century charge of its founder."

The Washington Post editorial board is impressed with Wayne Reynolds's proposal for the Corcoran.

Friday, March 08, 2013

Cowles-Gagosian Settlement

Kelly Crow breaks the news on Twitter.  Background here.

Wednesday, March 06, 2013

Wayne Reynolds's plan to save the Corcoran

Via the Washington Post:  "Most controversially, he proposes selling hundreds of millions of dollars worth of art that rarely, if ever, gets displayed and is not central to founder William Corcoran’s original charge in 1869 for the institution to encourage 'American genius.'"

Stalinist!

A word on Tacoma

The Tacoma Art Museum deaccessioning spat seems to have been resolved.  But before moving on, it's worth a minute to note the usual hypocrisy that surrounds these things.  Judith Dobrzynski was a lone voice critical of the move, calling it a "big mistake," but her fellow bloggers in the ArtsJournal stable have (unless I missed it) been silent.  No one from the AAMD or AAM has shown up to lecture us about how works are held by museums in a sacred public trust, to be accessible to future generations.  There have been no calls for crippling sanctions.

But imagine if the same museum were selling the same works not to raise money for future acquisitions (as is the case here) but to keep from going out of business (or even from having to lay off more than 20 employees).  Now that would be inexcusable.  Now the fainting couches would come out.  How dare they think they can just get rid of work held in the public trust to be accessible to future generations.  We'd never hear the end of it.

I keep hoping that, at some point, they'll be too embarrassed to keep carrying on this way.  But I'm not holding my breath.