"The market for fine art is idiosyncratic and it is like no other market"

The IP Finance Blog:  The Oddest Market of Them All?

"Nonprofits Step Up Pressure to Keep Charitable Deduction Intact"

From the Chronicle of Philanthropy.

How the Gundlach Case Was Cracked

It involves a Google search.  Background here.

"Charitable giving reacts to tax incentives ..."

"... and in response to any limits on deductions it could even fall by about the same amount as the increase in the tax bill, according to John List of the University of Chicago, who recently reviewed the literature on this subject. Other studies have suggested an effect about half as large. Even that smaller estimate, though, suggests that limiting deductions to $50,000 a year could easily reduce giving by tens of billions of dollars."

That's former Obama administration official Peter Orszag on proposals to limit the charitable deduction.

"The eagle has now landed" (UPDATED)

Patricia Cohen reports that there's been a (very sensible) settlement in the Rauschenberg bald eagle case:  "the I.R.S. dropped the [$41 million] tax assessment; in exchange, the family was required to donate [the work] to a museum where it would be publicly exhibited and claim no tax deduction."

UPDATE:  The Art Market Monitor:  "a reminder that real value in art history doesn’t come in market denominations."

"Alas, plenty of other experts are now too scared of lawsuits to authenticate pictures."

The Economist:  Fear of litigation is hobbling the art market. 

"In the 25 years I have investigated these robberies, I have never heard of anyone actually monetising these very valuable paintings."

BBC News:  Thieves fail to profit from stolen works of art.

"The book, unlike the film, posits no vast conspiracy involving Philadelphia sharks bent on consuming cultural fish from the defenseless ponds of Merion."

"In fact, Rudenstine argues that by moving to Philadelphia, the Barnes Foundation simply rescued itself from inevitable financial ruin."

The Philadelphia Inquirer's Stephan Salisbury previews a new book by Neil Rudenstine, president emeritus of Harvard:  The House of Barnes: The Man, the Collection, the Controversy.  I've already ordered my copy.

"There would be no deduction for charitable giving, or close to none, angering wealthy donors and nonprofit directors."

How to raise $1.6 trillion in new tax revenue.

"If Wiley gets its way in the Kirtsaeng case, every museum that hangs a foreign-made work of art on its walls would be a potential infringer."

Rozalia Jovanovic on the big first sale case in front of the Supreme Court.

"Part salvage operation, part art dealership and part private detective agency"

Chris Marinello and The Art Loss Register.

Felix Salmon on the State of the Art Market (UPDATED)

Occupy Art.

UPDATE:  A response at The Art Market Monitor from dealer Kenny Schachter.

Met Admission Suit

The NYT's Randy Kennedy reports that a new lawsuit contends that the Met "misleads the public into thinking that its admission fees ... are mandatory and not simply suggested."

Sergio Muñoz Sarmiento:  "We have to say it’s not just the sign, or lack thereof, that makes one pay a 'suggested fee.' Sometimes it’s just guilt."

Are millages the future of arts funding?

Judith Dobrzynski says no.

"Mr. Ramnarine ... was indicted on charges he used Mr. Johns’s mold to surreptitiously make a bronze sculpture that he attributed to Mr. Johns and tried to sell for $11 million"

Patricia Cohen has the story.

"[T]he consignment agreement gave Sotheby's the right to withdraw the print from auction 'if in its sole judgment' there were doubt as to attribution" (UPDATED)

"Given Noland's assertion of her right under VARA to prevent use of her name in connection with plaintiff's [work], ... Sotheby's was within its rights to withdraw the [work] from [auction]."

Sotheby's has prevailed on summary judgment in the lawsuit brought against it by Marc Jancou.  No link available at the moment.  Jancou's claims against artist Cady Noland were not at issue on the motion, and so remain intact.

UPDATE:  More from ARTINFO's Rachel Corbett here.

Proceeds from the auction will go towards "the nurturing of young photographers, artists and explorers"

The National Geographic Society is auctioning off 240 pieces from its collection of photos and original illustrations at Christie's in December.  The sale is expected to bring about $3 million and the proceeds will not be used for acquisitions.  Does that make them repulsive?

As I've wondered before, how is it that some nonprofits hold their assets in the public trust and others don't?  How are we supposed to tell the difference?

Peters-Waitt Settlement

Story here.  Background here.

"How Larry Gagosian is like Goldman Sachs"

Felix Salmon makes the case.

"Four of five paintings stolen from the Pretoria Art Museum have been found on a bench in a cemetery" (UPDATED)

"Mills said there was no obvious evidence of damage to the artworks."

UPDATE:  More from the ARCAblog.

Some Clarifications Re Murakami v. Boesky

There was some press coverage last week about the lawsuit brought by Takashi Murakami against his former dealer Marianne Boesky.  I'm co-counsel to Murakami on the case.

A couple of points are worth clarifying/emphasizing:

The Daily News story says "Murakami is seeking compensation to be proven at trial."  That's not what the case is primarily about.  It's really about the right of an artist to control the production of his own work.  Murakami left Boesky more than six years ago.  There's no earthly reason why she should continue to print and distribute his work on her own.

And the Post says Murakami's claim is that Boesky "lent a wallpaper design he created to the Metropolitan Museum of Art without permission."  That's not right either.  She has every right to lend work she owns to whomever she'd like.  The issue in the case, again, is whether she has the right to print additional sheets of the wallpaper on her own.

New Art Fund

Details from The Art Market Monitor.

Armed Museum Robbery in South Africa

ARCA's Catherine Schofield Sezgin has the details.

Just Doing Their Job

I’ve mentioned a couple of times a new collection of essays on museums that’s just been published by MuseumsEtc.  The book is called A Handbook for Academic Museums:  Beyond Exhibitions and Education and is part of a two-volume series (the other being A Handbook for Academic Museums:  Exhibitions and Education).  My essay (on Fisk-O’Keeffe) is in a chapter entitled Monetization of the Collection to Support the Parent Organization.  I recently did a Q+A with Peter Dean, who also has an essay in that chapter.  That was so much fun I thought I’d do it again, this time with Mark Gold, who, along with Stefanie Jandl, edited the book and also contributed an essay of his own on the legal obligations of trustees of what he calls “parent organizations” – primarily colleges and universities that contain art museums:

Q.  It won't come as any surprise to regular readers of the blog that I thought your piece was terrific. If you were a museum director, I would put you in my Hall of Fame. One thing I particularly liked is how you emphasize that, to the art world, the needs of the parent organization are completely irrelevant. They don't matter at all. I've long thought that, rather than being impartial "arbiters" of the ethics of the situation, groups like the AAMD are just lobbyists for a particular point of view (namely that art is more important than any competing need the parent organization can point to). Do you think that's a fair assessment? Is the AAMD really just lobbying for their desired outcome?

A.  I do think that’s a fair assessment, but it goes far beyond lobbying.  As you know, the response of AAMD, AAM and others includes condemnation and punishment.  I can appreciate, actually, the passion with which they take that position, although I don’t agree with it.  But their apparent lack of appreciation for the fiduciary duties of trustees to do what is best for the parent organization and its broader mission, and the often vitriolic response, can cause them to look more like petulant children than collegial partners in addressing the difficult situation in which the parent organization finds itself.  And, frankly, I think that harms their cause.

At the end of the day, trustees will do what is best for the organization and its mission.  Indeed, the “settlement” reached in the Rose litigation does not limit in any way the ability of future trustees to monetize all or part of the unrestricted collection.  The inflexibility of the position that the collection trumps all (including the survival of the museum), or that the museum trumps the competing needs of the parent organization, renders the professional associations and their rules essentially irrelevant when crunch time comes for a parent organization – or even a free-standing museum.  A prudent trustee is not going to let the rules of a professional association (in some cases, such as Randolph, of which the museum is not even a member!) get in the way of doing what is best for the parent organization. 

Q.  I think that’s right.  As I’ve noted from time to time, their position is a classic of circularity.  Step 1:  If you sell that work, we will sanction you.  Step 2:  It would not be a good thing for you to be sanctioned.  Step 3:  Therefore, you should not sell that work.  You almost have to admire the chutzpah!  But what do you think a more useful role for these organizations would look like?  How could they stay more relevant?

A.  I had a conversation with a museum director when I first started looking at this issue, and we were talking about the ethical rule on the use of proceeds of deaccessioning.  When I asked whether there should be an exception where the survival of the museum was at stake, she replied, “Those museums deserve to die.”   It was a stunning moment for me.  And even more stunning when I later found that she was no outlier.

Yet this view persists, along with the naïve belief that objects in closed museums will find happy and welcoming homes in other museums.  The experience of the Fresno Metropolitan Museum, in which the entire collection was sold for the benefit of creditors, should be a wake-up call to those who take comfort in that myth. 

I think the professional associations become more relevant when they acknowledge that there are legitimate exceptions to the rule – some whose rationale cannot be denied without a complete loss of credibility.  Illustratively, how can it be unethical for a museum to finance the purchase of an important painting for the collection (thereby keeping it in the public domain), by pledging the work as collateral while donors have time to raise the cash?  How can it be unethical to sell the multiple duplicates of a particular object in the basement to other museums to raise cash to keep the doors open?  The point is that, like most rules, there are factual situations that cry out to be exceptions.  To deny them, undermines the rule itself, as well as the professional associations that seek to enforce it regardless of the circumstances. 

But we’ve strayed a bit from the role of trustees in making decisions for the parent organization. 

Q.  So let’s come back to that.  What is the role of a trustee in these situations, where, as you point out in your piece, her legal obligation is “to focus on the specific mission of the [parent] organization” … but, at the same time, there are these professional organizations (again quoting from your essay) “weigh[ing] in on these decisions with outrage and condemnation,” “relentlessly assert[ing]” that the interests of the museum trump those of its parent?

A.  A prudent trustee will – or at least should – consider and give weight to the positions taken by the professional associations.  These are serious people with considerable knowledge of their field, deserving of respect. 

But the law is very clear.  The trustees are bound by a duty of obedience, which you describe above, as well as a duty of due care - to act in the best interest of the corporation.  In the case of academic museums, for example, the duty of trustees is to hold paramount the college or university and its educational mission.   When times are tough and programs need to be cut or assets monetized, they will naturally look to all programs and all assets.  It is not reasonable to think that they will or should hold the museum and its collections exempt from this process. 

In my opinion, an astute museum professional will spend time and energy building relationships and posturing his or her museum solidly within the broader mission of the parent, rather than insisting that it be afforded special treatment or privileged status.  No one does that better than Lyndel King at the Weisman Art Museum at the University of Minnesota.  She also has an essay in our book that outlines her strategies in a very helpful way.  Educating parent organization trustees about what the museum and its collections contribute to the broader mission in a way that makes it unthinkable that the museum and its collections ever be compromised – and building relationships across campus - is far more effective than relying upon the dictates of professional associations that are not binding on the parent organization or its trustees.

"I have a duty to ensure residents do not suffer from the brunt of the horrendous cuts being imposed on us"

The Borough of Tower Hamlets in the East End of London has decided to sell a Henry Moore sculpture.  "The Tower Hamlets council ... is looking at a potential sale price estimated around $32 million, which would cushion it against cuts in government funding that are forcing the council to make drastic trims in its own budget."  Repulsive!

Around here, every day is Art Law Day

Had a good time talking about the state of fractional giving at the Appraisers' Association's "Art Law Day" down at NYU this afternoon.  Many thanks to Aleya Lehmann Bench and her team for putting together such a nice event.

"Perhaps the most quietly revealing comment on the nature of disputes in the art market"

The Art Market Monitor has it here.

"Where Now for the Charitable Contribution Deduction?"

The Nonprofit Law Prof Blog has some thoughts.

More on Jenack (UPDATED 2X)

ARTINFO's Julia Halperin has a piece on the meaning of the Jenack decision which quotes from this post last week.

UPDATE:  Some thoughts from the Art Market Monitor.

UPDATE 2:  More from Nicholas O'Donnell:  "The decision does not say that an auction house has to disclose the seller as a matter of course. To the extent that reports have simplified it in that way, the criticism is correct, and a welcome clarification."

"Something like a game of Whac-A-Mole"

The NYT's Patricia Cohen on fakes that just keep resurfacing.

On the Jenack Decision

There was an interesting Appellate Division decision last month involving the application of the statute of frauds to auction sales.  Nicholas O’Donnell summarizes the facts here.  It's been described as a “bombshell,” “monumental,” “potentially game-changing,” “mind-boggling.”  But Jonathan Olsoff of Sotheby’s has convinced me that the decision is being misread.

The Maine Antique Digest, for example, says “the justices’ decision meant that for the sale to be binding on the buyer, the name of the seller must be included in some part of the invoice, memorandum, bill of sale, clerking sheet, or other document given to the buyer at point of sale” (my emphasis).  Not so, says Jonathan:

“The court did not require disclosure of the name of the consignor during the auction process.  The decision deals only with the evidence that is required if an auction purchaser defaults in paying and is sued by the auction house.  The court held that because the auction house in the Jenack case refused to disclose the name of the consignor during the litigation – when an order protecting the consignor’s confidentiality could presumably have been obtained – the auction house failed to offer sufficient evidence to establish its claim.  Under the Jenack ruling, if an auction house offers evidence that its internal records comply with the requirements of Section 5-701 of the New York General Obligations Law, it will establish its claim against a defaulting purchaser and will be entitled to a court judgment requiring the purchaser to pay.”

But didn’t the court say the “auctioneer’s memorandum” must include the name of the seller?  Again, Jonathan says no:

“It seems clear enough that the Court based its holding on the fact that the auction house ‘failed to produce any writing identifying consignor “#428” by name, either in response to defendant’s discovery demands or in opposition to the defendant’s motion for summary judgment.’  If it was necessary for ‘the name of the person on whose account the sale was made’ to be on the ‘auctioneer’s memorandum,’ the production of another writing in discovery or on summary judgment would be immaterial. But the Court did note that and, just as it said that the absentee bid form could satisfy the writing requirement for the bidder, it clearly meant that the consignment agreement or other ‘writing identifying the consignor’ when ‘taken together’ with the auctioneer’s memorandum with the corresponding number would satisfy the statutory requirements requiring ‘the name of the person on whose account the sale was made.’ Further support is found in the form of the summary, in which the Court notes that the deadbeat bidder showed ‘prima facie’ that the memorandum failed to include the consignor’s name and that the auction housed ‘failed to raise a triable issue of fact in that regard.’ If a name on the auctioneer’s memorandum was necessary, there would be no way for the auction house to raise a ‘triable issue’ in any way. The auctioneer’s memorandum either had the consignor’s name or it didn’t. If a ‘triable issue’ could be raised, it would have to be raised by ‘another writing identifying’ the consignor.  But that would apparently have been enough, as that writing, plus the memorandum, taken together, would satisfy the statute.”

That seems right to me, but for a second opinion I went to my friend Jo Laird, formerly General Counsel at Christie’s.  She agreed with Jonathan:

“In further support of the argument, note that the court held that with respect to the buyer the existence of a direct paper trail that could identify the buyer by his number in the clerk's book was sufficient to satisfy the statutory requirement. There is no reason why the court would not have made the same decision with respect to the seller had the auction house provided the same kind of paper trail with respect to the seller. In fact, the court seemed to indicate that it would have by noting the gap in the evidence presented.”

Jo adds that “the real danger here is not the opinion itself. It is appealing the case to the Court of Appeals. [There are reports that Christie’s is ‘joining in Jenack's appeal to New York's highest court’ -- DZ]  On the record as it appears to stand in the case (i.e., with the house's failure to produce the consignment agreement, etc.) the appeal risks getting a worse opinion from a court with broader jurisdiction. Maybe not a good idea.”

Resale Royalty Comment Period Extended

Because of Sandy.

"Scarcely a gallery was unscathed" (UPDATED)

The New York Times on Sandy's toll on Chelsea.

UPDATE:  Jerry Saltz has  a "devastating" on-the-scene report:  "This could spell the end of many galleries small and large."

"Any proposed cap would have long-lasting negative consequences on the charitable organizations upon which millions of Americans rely for vital programs and services."

"Leaders of big nationwide nonprofits sent letters to President Obama and Mitt Romney on Thursday urging the presidential candidates to reconsider their proposals to cut the charitable tax deduction."

Worst Lawsuit of the Week (UPDATED)

Rebecca Tushnet hands out the honors.

UPDATE:  The estate doubles down.

Randolph College: A Study in Governance and Decision-making

I mentioned recently that I have a chapter in a new book on academic museums.  One of the most interesting chapters in the book is co-authored by the President of Randolph College and Peter Dean, the Trustee who was most deeply involved in the decision to sell four paintings from the college’s collection.  I believe that, aside from a letter to the editor of Museum magazine a couple of years ago, it’s the first time they have publicly discussed their decision-making process.  In an Art Law Blog first, I conducted the following Q+A with Peter over the course of the last several days:

Q.         Let’s start at the beginning.  Can you tell us what led the school to decide to sell the paintings?

A.         To answer that, I need to provide some context. 

Since its foundation in 1891, Randolph-Macon Woman’s College had existed for the purpose of providing a single-sex undergraduate education for women.  By the first decade of this century it was becoming increasingly difficult to attract sufficient numbers of qualified young women with the ability to pay the tuition necessary to maintain financial sustainability.  Since the college’s operating costs went up over time, as all such costs do, the operating deficit was increasing.  This deficit was covered to some extent by donations, but most significantly by draws from the college’s endowment.  By 2006 the amount of this annual draw had increased to the point that it had become unsustainable.

In order to address this problem, the first and most important decision was taken in 2006: the college should become co-educational and admit male students.  This occurred in 2007, when the college’s name was changed to Randolph College.  However, the board of trustees recognized that, even with the admission of men and the implementation of cost reductions, the college would continue to incur a substantial operating deficit until enrollment grew and tuition discounting could be reduced.  This meant that the excessive draw from the college’s endowment would continue for several years because the absolute amount of funds required would not be reduced.  Since the amount of the draw was not going to be reduced soon, the only way to make the draw sustainable (preferably at a rate that is close to the recognized benchmark of 5%) was to increase the size of the endowment.

The pressure to find a solution was increased at the end of 2006 by the decision of the college’s accreditation agency to place the college on warning because of its financial condition.

One well-established way to increase the endowment would have been to conduct a capital campaign specifically for that purpose.  However, that option was ruled out at that time because the change to co-education as well as the inevitable change to the college’s name had, predictably, resulted in many alumnae being disaffected and the level of financial support from donations to decline, though they are now climbing again.  Recognizing the great difficulty of launching a successful capital campaign the board concluded that the required capital infusion would have to come from the sale of selected assets with the proceeds being placed in the general endowment.  No other group of assets represented anything like the value of the college’s art collection so that became the focus of attention, though it was hoped that a sufficient sum could be raised by a sale of a partial interest in selected works that would allow the college to continue to display the paintings for some of the time.   The college had extensive discussions with two institutions but was unable to work out an acceptable transaction.

That left the college with no alternative but to make the difficult decision to select a smaller number of paintings to be sold outright with the proceeds from sale being transferred to the college’s general endowment.  After extensive debate, that decision was unanimous.

Q.         That sounds to me like a board wrestling with a set of less than ideal alternatives, and then ultimately pursuing the path that, in their judgment, was least damaging to the overall well-being of the institution.  But to some in the art world, none of that matters.   In their view, it’s never okay for a museum to sell work and use the proceeds for general endowment purposes.  Those works, according to this view, are “held in the public trust” and therefore may not be sold.  Was the college aware of this point of view when it made its decision and, if so, what impact did it have, if any, on its thinking?

A.          Randolph College is an educational institution, whose principal purpose is to provide an undergraduate education to current and future students.  The college’s assets are held by it for that purpose.  This principle applies to all the assets of the college, whether in the form of real estate, buildings, equipment, financial assets, books and educational materials, individual works of art or artifacts, or collections of such items.   Unless an express condition has been imposed by a donor on a specific asset at the time of the gift, the college is free to manage its assets in accordance with its stated purposes.

The college owns its art collection outright and has never taken any steps to limit its authority to deal with individual items or the collection as a whole.

While it is surely true that in 2007 some members of the board of trustees were aware of the position taken by many in the art world that museum collections, at least those of accredited museums, are held “in the public trust”, there was never a suggestion by anyone on the board that such a concept applies to the Randolph College art collection. The short answer to your question is “no, the public trust point of view did not affect our thinking”.  What the “public trust” concept may mean in general, or to any other institution in particular, may be the subject of debate, but that would be in a different forum.

Q.         The other argument (besides the “public trust” argument) that the anti-deaccessionists like to make is that selling art will discourage future donations.  They say that, in the future, people will be reluctant to donate work because they’ll be afraid the school will turn around and sell it to pay the bills.  What do you make of that argument?  Did that factor into the decision-making process at all?

A.          I cannot speak for any other institution, but in Randolph College’s experience that has not been an issue.  Since the announcement of the college’s intention to sell four paintings, and the sale of one of them, the college has continued to receive donations of both additional art as well as financial contributions expressly for the purpose of acquiring art.  I am not aware of any decision by a potential donor to withhold a gift of art because of the proposed sale of selected paintings.

I would also add that we did not and do not intend to use sale proceeds “to pay the bills”.  Our intent is to use the proceeds to increase the size of the endowment so that it continues as a permanent asset providing financial support for all the College’s activities for the indefinite future.

The college’s art collection has been built up by a sustained and deliberate process of acquiring contemporary art by the college over a period of more than 100 years.  It has received gifts and bequests of art, but in general the acquisitions have been made by the college, and we expect this to continue.  One of its most recent acquisitions was of an important piece by Betye Saar, Nevermore, which was purchased earlier this year from the college’s 100^th Annual Exhibition of Contemporary Art: The Vision Endures.  Thirteen alumnae made donations towards that purchase.

Randolph College’s financial support comes from people who believe in its academic mission, which includes the use of its art collection as an educational asset, and in the case of donations of art from those who wish to add to that collection.  There is no doubt that the decision to sell four paintings upset many people, including alumnae and other supporters, and it was made very reluctantly.  We recognized that would be the case, but we believed that our fiduciary obligation was to do all we could to enable Randolph College to survive and thrive, and that if we did so we would continue to receive financial support.  We have every reason to think that judgment was and remains correct.

Q.         That was actually going to be my next (and final) question:  with the benefit of hindsight, do you still feel it was the right decision?  (It sounds like your answer is clearly yes.)  Would you have done anything differently?  What advice would you offer to a college or university facing a similar predicament in the future? 

A.         Yes, when the time came to make the decision, this was the right decision.  When we considered the challenges facing the college in 2006 and 2007, the need to put the college on a financially sustainable foundation, the educational purpose of the college, the duties of the board of trustees in overseeing the college’s affairs and, finally, the options available to us, we did not have a better option.  I would make the same decision.

In hindsight it is always possible to see ways in which a matter could have been handled differently.  I wish that the fact that the college owns its art collection directly and is not subject to any legal or other obligations restricting it from selling the paintings and transferring the proceeds to its endowment had been better understood by others who were not standing in our shoes.  Perhaps we could have done a better job of explaining that important point, and also that our obligations to the college as an educational institution take priority over other concerns.

Hindsight also requires us to consider the effect of the financial crisis that started in 2008 on the value of the college’s endowment.  Though the endowment value performed relatively well compared to some benchmarks, as was the case with other colleges it suffered a severe decline.  That decline reduces the amount of the sustainable draw, and exacerbates the need to increase the overall value of the endowment with the proceeds of sale.

What is my advice to other colleges or universities?

·        First, and at all times, focus on the primary mission of the institution, and make decisions with that in mind.

·        When it comes to the management of college assets of any kind, be very clear about ownership and control.  It is better to clarify that at the outset than have to try and explain it later on.

·        Before accepting proposals that, even if attractive in other respects, could result in actual or perceived restrictions on the college’s freedom to act and to manage its assets, ask all the necessary questions.

·        Do not let others try to set your agenda, but if a decision is made to establish a program or subsidiary institution that will restrict the use of assets, then make sure the issues are understood by the governing body, the administration and, to the extent they are involved, the faculty.

·        Educational institutions of all sizes, both public and private, are under increasing financial pressure.  Over the next several years they may have to examine more closely than before which assets are really essential to their mission and which are secondary.  Tough choices may have to be made and not all constituencies can be accommodated, so good preparation will be important.

Student Note on Deaccessioning

Sara Tam, In Museums We Trust: Analyzing the Mission of Museums, Deaccessioning Policies, and the Public Trust, Fordham Urban Law Journal, Vol. 39, No. 3, p. 849, 2012.

Lap Dances are Not Art

Says the New York Court of Appeals, in a 4-3 decision.

"[I]f we treated these crimes (and yes, their perpetrators) with some (albeit grudging) respect we may get closer to cracking them...and to properly defending our museums"

Tom Flynn continues to push back against the "thieves are stupid" meme.

"For more than a dozen years ... Knoedler & Company was 'substantially dependent' on profits it made from selling a mysterious collection of artwork that is at the center of a federal forgery investigation ..."

". . . former clients of this former gallery have charged in court papers."

"If a decision by the U.S. Court of Appeals for the Second Circuit is upheld, every museum in the United States that exhibits modern art created overseas could potentially be infringing copyright."

The NYLJ [$] has more on the big first-sale doctrine case I mentioned recently here.

Changes to the New York Consignment Statute

Recent posts by Sergio Muñoz Sarmiento and ARTINFO's Rachel Corbett remind me that I've been negligent in not mentioning the important changes to the New York consignment statute.  You can see the changes here.  The New York City Bar Association Art Law Committee has some good background here, and Nicholas O'Donnell has an excellent summary here.  To my mind, the most significant change is the provision allowing the artist to recover his legal fees if his lawsuit is successful.  That will have huge practical effects.

Rotterdam Update

In the New York Times this morning, the museum "denied accusations of sloppy security."

The ARCA blog is really the go to place for news on the theft.  Just keep scrolling.

ARCA founder Noah Charney had a piece at ARTINFO maintaining that "there is a good chance that the art was stolen only in order to be ransomed back to the victim ... or their insurers."

The Daily Beast's Megan McArdle says "the big mystery is ... why thieves continue to steal the stuff" (since it's so hard to sell).  She quotes retired FBI art theft agent Robert Wittman that "the general pattern is that the criminals who do these jobs, these heists, are good thieves, but they're terrible businessmen. That's what it comes down to."  (Full interview with Wittman here.)

Tom Flynn dissents from the view that the thieves are stupid.

Gagosian Drops Suit Against Perelman

Patricia Cohen has the story here.

"What do you do if you’re a dealer who has been sued by art handlers, banks, clients, another gallery, and your own artists?"

"Move to Kazakhstan."

Rotterdam Roundup

Lots more today on the big Dutch art heist.

The New York Times reports "the theft was the latest alarm about museum security in Europe, now a prime hunting ground for art thieves," includes a slide show of some of the stolen works, and also has an op-ed by Anthony Amore, director of security at the Gardner Museum, who says that art thieves "are often opportunistic and almost always shortsighted."  The Guardian's Edward Dolnick has a similar take:  "what are the thieves thinking? Less than you would imagine."

CBS News wonders if it was an inside job.

ARCA's Catherine Sezgin rounds up some additional reports.

And Crispin Sartwell speculates that the thieves "are art-rights extremists who are trying to free all the works of art that are imprisoned in museums. how can i help? let my paintings go. we need to bring the art back into the world and stop locking it up behind layers of bulletproof glass and impregnable marble."

"The big question every reader will want to know is, how and why does a person become an art forger?"

Vanity Fair:  "The Greatest Fake-Art Scam in History?"

The Art Market Monitor says they may the most boring art forgers in history.

"Those thieves got one hell of a haul." (UPDATED 2X)

Says the Art Loss Register's Chris Marinello, about a theft today from a Rotterdam museum. AP story here.

UPDATE: Derek Fincham: "Most likely of all, these beautiful clear windows made for such an easy target that the thieves stole first and will decide to worry about selling the works later."

UPDATE 2: More from the ARCAblog.

New Book on Academic Museums

I’m thrilled to have contributed to a new book on issues involving academic museums, A Handbook for Academic Museums: Beyond Exhibitions and Education.  You can find more information about it here.  My chapter is on issues regarding donor intent in the Fisk-O’Keeffe litigation.  I hope to have more about the book in the coming days.

"The thing with gentlemen’s agreements is that gentlemen tend to disagree, in retrospect, over what they meant."

The Observer's Rozalia Jovanovic reports on a copyright infringement lawsuit by photographer Rodrigo Pereda against artist Ivan Navarro.  Josh Baer expressed what's probably a pretty widespread view last week, writing that the suit "doesn’t seem to make much sense to me on the surface" because Pereda is suing "over the use of copyrighted photos of NAVARRO’s own sculpture."  But there's no doubt that a photograph of a work of art is an independently copyrightable thing; the artist isn't automatically entitled to use it.

Navarro's team seems to be setting up a work-for-hire defense, but, as the Observer piece notes:

"'If the photographer was in fact the artist’s employee, ... that’s probably a work made for hire and the copyright belongs to the sculptor,'" said Christopher Sprigman, a professor of intellectual property law at the University of Virginia. But if the photographer was an independent contractor and not an employee, Dr. Sprigman said it’s not a work made for hire situation unless there’s an agreement that says as much."

Oh, by the way: museums may not be able to display foreign-made, copyrighted works

It's a first-sale doctrine thing.  Sergio Muñoz Sarmiento explains.

"Charitable Deduction Under Fire"

Some gloom and doom from the Nonprofit Law Prof Blog.

"Can algorithms help explain art?"

Art.sy goes live.

"The most serious problem with copyright law is the length of copyright protection"

Judge Posner on some problems with copyright law.

"The work is part of a large cache of art attributed to Modernist masters that the F.B.I. is investigating as possible forgeries."

Another lawsuit involving the "Rosales collection."  Patricia Cohen has the details.

What is it with cruise ships and art?

Dan Duray points to the latest curiosity.

Knoedler Settlement

Knoedler gallery has settled one of the suits against it.

Are those sets and costumes held in the public trust?

To be accessible to present and future generations.

If not, why not?

It's a serious question.  How is it that only some assets of only some nonprofits come to be held in the public trust (and then only some of the time)?

What, exactly, is the mechanism?

Brant Borrows

Bloomberg reports that collector Peter Brant has been doing a lot of borrowing against his collection.  Felix Salmon has some thoughts here.

Is this a violation of Dr. Barnes's intent?

The new Barnes gets high marks from the United States Green Building Council.

"Potomack is relieved this came to light in a timely manner as we do not want to sell any item without clear title."

It turns out that a work bought for $7 at a flea market and now believed to be an authentic Renoir may have been stolen from the Baltimore Museum of Art.  Patricia Cohen has the details in the NYT.  Derek Fincham says "the case reveals the importance of reporting a theft, even decades into the future."  Nicholas O'Donnell says sorting it all out "looks to be a complicated question of history, records, legitimacy of sale, and a host of art law issues."

Tell me again about the public trust ("the usual array" edition)

Carol Vogel's Inside Art column today reports that "when the big November auction catalogs begin arriving in the mail next month, they will include the usual array of art being sold by museums."

The Brooklyn Museum is selling one of Yves Klein's "classic painted sponges on board."  Aparently that work, although under the aegis of a museum, is not held in the public trust, to be accessible to present and future generations.  Future generations are on their own when it comes to that work.  Maybe there is a painted sponges on board exception to the "held in trust" rule.

The work was a 1992 bequest to the museum from William K. Jacobs Jr.  But, obviously, no one is going to look at this sale and say, "Why should I give this to you? What guarantee do I have that you're not going to sell this tomorrow?"

The Hirshhorn is selling a Picasso musketeer painting.  That too must be a work that is somehow not held in the public trust, to be accessible to present and future generations.  Perhaps a musketeer exception.  And, again, no one is going to say, Why should I give this to you if there is no guarantee that you're not going to sell it?

Kelly Crow had a similar story in the Wall Street Journal, pointing out that "some of the biggest sellers in the upcoming fall auctions in New York are museums."

The Cleveland Museum of Art is selling a Monet that it received as a gift in 1947.  Gee, you'd think that, seeing this, someone considering making a gift to the museum in the future might say, "Why should I give this to you? What guarantee do I have that you're not going to sell this tomorrow?"  But I guess that's not a legitimate concern.  And future generations in and around Cleveland will have to find other Monets to look at.  What do you think this is, a public trust or something?

Finally, the Virginia Museum of Art is selling a Renoir still life that it received as a gift in 1994.  Come on, that's almost 20 years.  That's almost a full generation.  What do you people want?  Where did you ever get the idea that museums had some kind of obligation to hold onto works so they can be accessible to present and future generations?  Who ever suggested that potential donors will be discouraged from giving without a guarantee that the museum won't sell?

Stop being so touchy.  It's no big deal when museums sell work.

"[T]he news is that it has stayed true to its founder’s intentions and is fulfilling its fiduciary responsibility to optimise assets in support of its charitable purpose"

Christine Vincent tells us what the Warhol Foundation's art sale tells us about artists' foundations.

Lost, Then Found

Lots of art law happened while I was busy atoning for my sins this week.  For starters, "star bond fund manager" Jeffrey Grundlach had a bunch of art (including works by Johns, Mondrian, and Diebenkorn) stolen from his "posh Santa Monica home" ... and then recovered on Wednesday when police cracked the case and made two arrests.  His 2010 Porsche Carrera 4S is still missing.

"The case has attracted attention in part because of e-mails and other documents that have been made public, revealing frank details of how the painting was offered to a collector" (UPDATED)

The NYT's Randy Kennedy reports that Jan Cowles's suit against Gagosian Gallery has survived a motion to dismiss.  More later after I've had a chance to read the decision.

UPDATE:  Okay, I've had a chance to read the decision.  It's a motion to dismiss, so technically all the court decided was that, if you assume everything in the complaint is true, it states a claim for relief.  But you are left with the feeling that Judge Ramos is a little alarmed by the picture the complaint presents.  He let the fraud claim stand because, even though this is a "sophisticated plaintiff" -- the gallery argued that Cowles's son Charles "is himself an art dealer and had access to the same information and resources concerning the condition of the Work" -- whether his reliance on the gallery was reasonable is nevertheless "fact-intensive."  The breach of fiduciary duty claim survived because the gallery "purportedly disclosed to the buyer ... that [Charles] was in 'terrible straights' and invited him to make a 'cruel and offensive offer' in order to ... capitalize on his misfortune, while concealing information that was material to his interests" -- and, if true, that is "conduct that would constitute a breach of fiduciary duty."  He even left in the demand for punitive damages, which are only available "where there is a showing of conduct exhibiting a conscious disregard of rights or a high degree of moral turpitude."

Felix Salmon had some thoughts on the case back when it was first filed here.

The Art Market Monitor responded here:  "Remember that this is January of 2009. The world is in the depths of the credit crisis. The bubble has burst and the entire financial class is bracing for what might be a near collapse. Credit markets remain frozen and equity markets are approaching a bottom. All asset classes have correlated and are falling sharply. This may be the most important point about the entire saga. The art market’s spectacular recovery is still unforeseeable."

Copyright Office Seeking Comments on Possible Resale Royalty Law

"This initial notice of inquiry seeks comments from the public on the means by which visual artists exploit their works under existing law as well as the issues and obstacles that may be encountered when considering a federal resale royalty right in the United States."

Some useful context from Rachel Corbett here.

Restitution and Repatriation

A conference at DePaul Law, October 29.  Details here.

Another one bites the dust (UPDATED)

Josh Baer reports that the Keith Haring Foundation is disbanding its authentication committee.  This is becoming a trend.

UPDATE:  More here from GalleristNY.

"... with each man claiming the other cheated him out of millions of dollars over art purchases"

Gagosian v. Perelman.

"What responsibility ... do institutions have to hold on to donated works and display them?"

The Evansville Museum's newly-discovered Picasso makes it to the pages of the New York Times.  Patricia Cohen had a story on the front page of today's Arts section.

Notably absent from the story is the usual outrageous outrage -- Lee Rosenbaum hasn't called for the trustees to be taken away in handcuffs, Ford Bell is not on the scene reminding us that the work is held in the public trust, to be accessible to present and future generations, nobody's warning that, if we allow this sale to happen, future donations will dry up because potential donors will worry that, if the value of the works they donate goes up, museums will get rid of them rather than pay the costs of insurance.

I've been assuming the reason for the silence is that the museum (cleverly) has not said what they plan to do with the proceeds (if they spend it on more art, then the Deaccession Police will be perfectly pleased with the sale; if they spend it on anything else, then you can cue up the outrageous outrage -- how dare they sell off this important part of the public trust?!).  But maybe there's an alternative explanation I'm not seeing.

If it's not the tax exemptions, what is it?

Speaking of the Warhol Foundation, I thought it was interesting that Juila Halperin's ARTINFO story on last week's big news said that "thousands of works by the Pop icon will hit the market when the artist’s foundation deaccessions its entire collection through a combination of sales and donations" (my emphasis).

I don't mean in any way to criticize Julia, who was using it in its ordinary, dictionary sense ("to sell or otherwise dispose of an item in a collection"), but seeing the word "deaccession" there was, I think, instructive.  No one would suggest that what the Warhol Foundation is doing is "unethical" or "repulsive" or "Stalinist."  Nobody questions the right of artist-endowed foundations to sell work.  Nobody claims those works are held in the public trust, to be accessible to present and future generations.

But why?  Why are works owned by, say, the Warhol Museum held in the public trust, while works owned by, say, the Warhol Foundation are not?  I've mentioned before that Lee Rosenbaum is the one critic of deaccessioning who even attempts to justify the existing rules (the others just cluck their tongues and congratulate each other on how much more ethical and non-repulsive they are than everyone else).  She argues that the public "in essence" has paid for the works:  "The tax exemptions that are granted to nonprofit institutions and the tax deductions allowed to donors are the way by which the American public subsidizes museums and their acquisitions. The objects are [therefore] held in trust for us by these nonprofit institutions."  But that theory can't explain why sales by one kind of nonprofit institution (museums) should be viewed differently than sales by another kind of nonprofit institution (foundations).

This isn't just an academic debate.  There are real-world consequences.  The Detroit Institute of Art just convinced local residents to pay as much as $400 million in property taxes, "in a city so financially troubled that its leaders announced this year that it was at risk of running out of cash entirely."  It did so, in part, by telling voters it could not sell art to raise the money it needed because those works are "held in trust for the benefit of the public." 

If those works are in fact held in the public trust, I still haven't heard a good explanation of how they got there.

Bananas (UPDATED)

There was a decision in the Warhol Foundation-Velvet Underground lawsuit, but the press reports aren't getting it quite right.  Here's Rolling Stone, for example, with the headline "Velvet Underground Lose Andy Warhol Copyright Claim," and the following lead:  "The Velvet Underground do not have a valid copyright claim on the Andy Warhol artwork on the cover of the band's 1967 debut, a federal judge ruled ...."  And in their morning round-up of links, GalleristNY said:  "Judge says the Andy Warhol Foundation does not own rights to banana image, in Velvet Underground suit."

That's actually not what happened.  What happened was the band brought several trademark claims, but also brought a claim seeking a declaration that the Foundation had no copyright in the banana image.  After the action was brought, the Foundation gave the band a covenant not to sue for copyright infringement, "unconditionally and irrevocably" agreeing never to sue them over the banana image.  The court ruled that this "eliminated any justiciable controversy between the parties over copyright" in the image, and so dismissed the claim for declaratory judgment.  The Velvet Underground wasn't claiming any copyright on the image, nor did the court rule that the Foundation "does not own rights" to the image.

UPDATE:  More from Nicholas O'Donnell:  "Reporting of the decision has been spotty at best, however, ranging from declaring a 'win' for the Velvet Underground, to suggestions that the copyright question was decided. In fact, the Court did not reach the copyright issue, and the Velvet Underground still has other trademark-based claims that remain very much alive and unaffected by the decision."

No Jail Time for Fairey

Two years' probation and a $25,000 fine.

"Shepard Fairey should face jail time for destroying documents ..."

"... according to the Department of Justice."

Sentencing is tomorrow.

Held in the Public Crust

World’s First Pizza Museum Opening in Philadelphia.

"The sales will take several years to complete and are expected to garner about $100 million."

In today's New York Times, Robin Pogrebin reports that the Warhol Foundation will "disperse its entire collection," through a combination of donations and sales, and "shift[] almost exclusively into a grant-making organization."

"It is only a matter of time before disputes over artists’ rights pit Asian artists and art institutions against their American counterparts"

Sergio Muñoz Sarmiento in ArtAsiaPacific.

And relatedly, a happy birthday to Clancco!

"Just what will the Evansville museum do with its windfall?"

"There are no plans."

We still don't know whether the museum's sale of a Picasso is repulsive or to be encouraged.

Online Art Sales

Monitoring the New York Times, the Art Market Monitor picks out some interesting data points from Patricia Cohen's front-page story yesterday on the growth in the online art market:

• One recent study estimated that 91 percent of the Henry Moore drawings and small sculptures sold online were fake.
• The Giacometti Foundation spent more than 40 percent of its 2011 operating budget on tracking fakes.

"It’s unclear to me what, exactly, is being licensed."

Mike Madison on a deal between the Warhol Foundation and Campbell's Soup.

Artelligence 3

Another terrific-sounding conference from The Art Market Monitor.  September 13.  Register here.

Handicapping Prince-Cariou

Rachel Corbett talks to Columbia's Pippa Loengard about the possibilities.

"Does this represent a new line in the sand … a raising of the bar for all of us in the arts?"

Diane Ragsdale has some questions about the Detroit Institute's recent millage campaign.

Related post from Nina Simon.

"I looked upon my activities as a contest of wits with world experts, and I enjoyed every moment of it."

NPR has a story on forger Ken Perenyi.  Derek Fincham says Perenyi "does not exactly seem to have reformed."

"40 Kinkade paintings are gone, and local art dealers are on alert for limited edition prints."

A bunch of Thomas Kinkade paintings were stolen from a California "shop owner."  He says "evidently they [the thieves] had some discrimination."  Dan Duray isn't so sure about that.

What do they call it again when you do the same thing over and over and expect a different result?

I see the Friends of the Barnes have posted the latest petition to re-open the lawsuit based on the "shocking" new evidence that the Barnes was not bankrupt at the time of their initial petition.  They've also posted the Barnes's response, seeking a fresh round of sanctions (which I'd bet they'll get).

Beyond the obvious issue of standing, the Barnes's response points out that the shocking new evidence "is not new":  "No witness at the hearing ever claimed that the Foundation filed its petition because it was bankrupt; indeed, the testimony made clear that the Foundation was desperately seeking to reverse its financial distress so that it could avoid bankruptcy."   They quote extensively from the Jan. 2004 interim opinion which I summarized recently here, and note that, after surveying the evidence, Judge Ott concluded:  "What has been established beyond peradventure is that The Foundation's finances have reached a critical point."

"I have a lot more faith in donors than in the AAMD and its selectively, inconsistently enforced policies that generally apply the myopic rule of one-size-fits-all."

I'm making former Crystal Bridges curator Chris Crosman an honorary member of my Museum Directors Hall of Fame.  At Lee Rosenbaum's blog, he argues that "Fisk needs to be unshackled from patronizing, museum establishment-imposed bonds that do not address Fisk's unique circumstances and rich history."  "Fisk's future," he says, "must be its own to determine."

He joins Hugh Davies, who called "B.S." on the "held in trust" argument; Richard Armstrong, who called for an "infusion of pragmatism" (another way of saying enough with the myopic rule of one-size-fits-all); Christine Miles; David Gordon; and of course Gresham Riley, after whom the Riley Wing of the Hall of Fame is named, who persuasively argued that the AAMD policy is "an exercise in smoke and mirrors."

One striking thing about the Hall of Fame members is that no one on the other side ever actually engages with their arguments.  Instead, from time to time the Deaccession Police gather their pitchforks and do their little "held in trust" dance and pretend that no one has noticed that their prissy fatwa makes absolutely no sense.

Two Simple Words in the English Language

The Wall Street Journal:  The Lawyer Who Forgot He Was a Thief.

Call it the Steve Martin Defense.

Abandoned Ship

I also see that the defendant prevailed in the Burning Man/La Contessa trial.  The jury found that the plaintiff abandoned the work, so the defendant could not be liable for "conversion."  The plaintiff says he will appeal to the Ninth Circuit on his previously-dismissed VARA claim, which is the more interesting issue anway.

Tell me again about the public trust (secret Picasso edition)

Also while I was away, I see American museums continue to do a bang-up job of making sure important works from their collections will be accessible to present and future generations.  The latest example is the Evansville Museum, which recently discovered, after 50 years, that a work that had been given to it was a Picasso ... and promptly decided that the best reaction to this happy discovery was to sell the work.

That must be sub-clause (iii) of rule (a) of section 17 of the Held In The Public Trust Rules (copies available upon request from the AAMD).  That sub-clause states that if a museum discovers that a work is more valuable than it had previously believed, then that work is no longer Held In The Public Trust to be accessible to present and future generations.  Makes perfect sense, if you think about it.

It's also interesting that this may be a real-life example of a Schrodinger's Deaccessioning.  The museum says it "will make no immediate decisions about utilizing funds from a successful sale."  That may be why the Deaccession Police haven't pounced (it may also be that it's August).  They don't know yet whether to be repulsed or not.  If the museum decided to use the proceeds for anything other than buying more art, there will be hell to pay.  But if they decide to buy more art, well, that's a perfectly normal act, to be encouraged.  It's all right there, in the rulebook.

"This type of inquisitive approach falls short of the 'hatchet job' that Biro's counsel described at oral argument."

While I was away, the district court dismissed "most of" Peter Paul Biro's defamation claims against The New Yorker at the pleading stage.  The opinion is here.  The court noted that in the Second Circuit you can't bring a defamation suit based on the "overall impact" of an article, and threw in some helpful literary criticism as well:  "At the end of the [New Yorker] article, the reader is left genuinely uncertain what to believe. ... If anything, the Article seeks to draw a parallel between the idea that one can never be wholly certain whether a piece of art is truly 'authentic' ... with the idea that it is difficult to fully know the truth about who a person is."  Precisely.

Break in the Action

I'm away again this week, so, unless something really important happens, things'll be quiet around here until next week.

"What is art? Hard to say, but whatever it is it seems to go up satisfyingly in price."

SWAG.

"The levy is expected to raise $23 million a year."

The new property tax to benefit the Detroit Insitute passed in all three counties yesterday.  Story here.

"How can anyone outside of a comic opera expect the authenticity of an old painting to be settled by a lawsuit?"

Patricia Cohen has an interesting article in yesterday's Times on "the divide between the court and the market" when it comes to assessing authenticity claims.

One of the themes that runs through the piece is that what a court says is "meaningless," because whether or not a work will be accepted as authentic is "a function of the marketplace."   That's no doubt true, but that doesn't mean the legal outcome is meaningless.  If a plaintiff prevails against an expert for claiming a work is inauthentic, or a foundation for refusing to authenticate a work, then, although the market is still free to (and likely will) ignore the court's decision, the consequences to the parties to the lawsuit are enormous.  A court can't compel the market to accept that your Picasso is real; but it can award you the millions of dollars you would be entitled to if it could.  That means something.

"The harm would come from the fact that no accredited museum would lend art to the DIA."

I mentioned Judith Dobrzynski's Wall Street Journal article last week about the DIA millage proposal.  She has a follow-up post at her blog.  Check out the comments as well, from which the above quote is taken.

Fisk Fight Finally Finished

The collection-sharing arrangement between Fisk University and the Crystal Bridges Museum has been finally approved.

I assume everyone is happy about this because, besides sharing the financial burden, having a second venue is fair to the art and to the artists, who get more visibility.  Right?

"The Barnes definitely has the goods."

"And for the first time, you can really see them."

Burning Down the Bus

Sergio Muñoz Sarmiento notes that a trial is under way over the destruction of a Burning Man art project.  As he points out, the Court already dismissed the artists' VARA claims on the ground that the work at issue was "applied art" (and thus excluded from VARA-protection) "because it was used and intended to be used as a mobile stage for performances."  They still have a common law conversion claim for the destruction of their property, though the Court noted on summary judgment that it's not so clear they owned it:  "the only documentation supporting [the artists'] claim of ownership is the receipt showing Cheffins' purchase of the bus in 2002"; there is "no proof of registration of insurance"; and their limited contact with the work "in the year before its destruction suggests possible abandonment."

"If the tax fails, Mr. Beal says he'd have to cut the museum's budget immediately: laying off 70 people; closing on weekdays except perhaps Fridays; shuttering half the galleries; stopping many educational programs; and curtailing some temporary exhibitions."

Judith Dobrzynski has a piece in the Wall Street Journal on the Detroit Institute of Arts' property tax proposal.