The Eaton Collection: Off the Block at Rago

By Rebecca Krishnan-Ayer*Screen Shot 2015-06-10 at 12.26.01 AM

The Contested Sale

The New Jersey-based auction house Rago Arts and Auction Center (est. 1988) stirred controversy with the April 2015 projected sale of 450 works of art and artifacts from the Japanese-American internment camps established during World War II. In the wake of the New York Times article announcing the auction, activists and community leaders alike banded together to ignite a social media campaign against the auction house, whose annual sales total approximately $30 million. Rago initially stood behind their decision to proceed with the sale, citing a lack of alternate options available to the client for relinquishing the items. As the New York Times reported, “A spokeswoman for Rago wrote in an email that the unnamed auction consignor, who knew the Eaton family, is ‘not in a financial position’ to donate the material to institutions and ‘did not feel qualified to choose one institution over another.’ The consignor has described the protests as a ‘social media attack’ meant to ‘bully us into compliance with their demands.’”

Meanwhile, protest groups established a Facebook page, “Japanese American History: NOT for Sale,” assembling over 6,700 followers. Critics also launched a Change.org petition, lambasting “the betrayal of those imprisoned people who thought their gifts would be used to educate, not to be sold to the highest bidder in a national auction, pitting families against museums against private collectors.” Among those issuing a rallying call for action was Japanese American actor George Takei, who helped catapult the controversy to the forefront of Japanese American cultural groups’ and foundations’ agendas–he himself was interned in one of these camps at the age of five. Eric L. Muller, Dan K. Moore Distinguished Professor in Jurisprudence and Ethics at University of North Carolina School of Law, assisted with preparing the sale catalog for Rago, and declined to proceed with a lecture planned at the auction house after learning that the consignor had refused to transfer or donate the property to Japanese-American cultural institutions. “I did not feel that I could deliver a public lecture connected to the sale in good conscience,” Muller told the ArtsBeat blog of the New York Times of the ethical quandary he faced. As the social media campaign opposing the sale gained traction and an injunction was issued from one former internment camp site, the Heart Mountain Wyoming Foundation, Rago announced their agreement to cancel the auction on April 15, 2015. The auction house’s decision and underlying motivations still draw criticism from activists such as Shirley Higuchi, chairwoman of the Heart Mountain Wyoming Foundation, who stresses that only after the immediate threat of legal action did Rago agree to withdraw the items from the auction block.

The Objects

The ownership of the collection, comprising 23 lots, can be traced back to the 1950s. Following World War II, a number of former internees and Japanese American families donated works of art and furniture to Allen Hendershott Eaton, a historian conducting research for his 1952 book, Beauty Behind Barbed Wire: The Arts of the Japanese in Our War Relocation Camps. The objects were then handed down to an unnamed family friend of Eaton’s heirs based in Connecticut. Among the items bestowed to Eaton were unique “handmade cigarette boxes, delicate bird brooches carved of wood, intricate family nameplates, a cat figurine shaped from tree roots, and watercolors of life inside the camps, including children playing in dirt lanes and outdoor assemblies,” the LA Times reports. In an interview with NPR, Delphine Hirasuna, a scholar specializing in art created in the internment camps observes: “Here is something that gives them pride about what the[ir] grandparents created under really bad circumstances.” The emotional value of the collection far exceeds its monetary value (Rago appraised the lots for a collective estimate of around $26,000) and includes oil paintings and rare black and white photographs depicting families, internees creating works of art, and the rarely seen environs of camps in the West. Individuals born in internment camps or whose relatives experienced the tragic imprisonment of 120,000 Japanese Americans following the U.S. bombing of Pearl Harbor stand by the injustice in selling and monetizing such seminal memories and facets of history.

The Outcome

Screen Shot 2015-06-10 at 12.23.26 AMOn May 2, 2015, the Japanese American National Museum in Los Angeles announced plans to acquire the hotly contested collection as a result of Takei’s efforts to halt the public sale and with the cooperation of the would-be consignor. The museum recently honored Takei, a board trustee, for his contributions with the Japanese American National Museum’s Medal of Honor for Lifetime Achievement. According to Takei, “To put [the Eaton collection] up on the auction block to the highest bidder, where it would just disappear into someone’s collection, was insensitive. The most appropriate and obvious place for the collection was the Japanese American National Museum.” Rago Arts and Auction Center presumably played a role in the amicable settlement and urged the arts community to engage in a broader discussion on related legal and ethical dilemmas facing other institutions. Its managing partner, Miriam Tucker, affirms, “The issue extends beyond what is legal. It is something auction houses, galleries and dealers are faced with regularly.”

The Rago case recalls the efforts and ethics involved in recovering other culturally significant property such as Nazi-era looted works or Native American artifacts. Marc Masurovsky, co-founder of the Holocaust Art Restitution Project, describes a certain “sensibility and sensitivity” that must be acknowledged when dealing with such works. The attempted sale of the Eaton collection also raises interesting issues regarding precedent and discretion when it comes to auction houses accepting consignments, institutions acquiring objects, or galleries purchasing works. Legality aside, ethics and public good seem to challenge the notion of a “pure transaction” involving works of art and objects of cultural heritage.

Note from the editors: On the footsteps of the positive outcome for the Eaton collection, Center for Art Law is acutely interested in the auctions of Hopi artifacts that have taken place and continue to occur in France despite the communal and legal efforts to halt those contested sales. While Rago decided, with some backing from the court, to withdraw the Eaton items from auction, Hôtel Drouot, the largest auction house in Paris, has been proceeding with the sales of Hopi relics despite public outcry.

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About the Author: Rebecca Krishnan-Ayer received a B.A. in Art History and French Literature from Johns Hopkins University.

 

More than Just “Street Cred”: Why Intellectual Property Rights Matter to Street Artists

By Christine E. Weller*

Perhaps to the dismay of artists executing works in public spaces or on private property, street art and graffiti art has financial value and can be sold at auction without the artist’s consent. This commercialization does not sit well with some artists who engage in street art (illegally at times) as part of a political act, social commentary, or even just  for exposure.  Increasingly, graffiti and street artists who fight the involuntary commercialization of their work are achieving some success.

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Street art near Center for Art Law’s Headquarters in DUMBO. The DUMBO Improvement District commissioned this work with studio Sagmeister & Walsh, in partnership with Two Trees Management Co and the NYCDOT Urban Art Program, who collaborated with renowned Japanese illustrator Yuko Shimizu, and hand painted by Coby Kennedy.

While the terminology is unclear and used interchangeably, graffiti and street art are distinct.  The two disciplines can inform each other and are interrelated, but they differ in terms of style, method, and theme. Graffiti generally refers to stylized writing such as graffiti tags and visual work placed on buildings without permission.  Street art can take the form of murals or installations incorporated into property, more often with permission (tacit or explicit) of the property owner. Labels aside, street art lawsuits are garnering attention, and have enough merit to have caused several major commercial brands, including American Eagle Outfitters and Sony Music to settle infringement claims.

Since July 2014, there has been a rise in intellectual property (IP) lawsuits filed by street artists. However, a tension in the legal framework exists.  Many still view street art as an illegal act without artistic merit, to which no rights should attach. Notwithstanding the Visual Artists Rights Act (VARA), U.S. Copyright legislation that protects “moral” rights of artists in their work, there is legal precedent that street art may be destroyed by the property owner or painted over. Cohen v. G&M Realty LP, 988 F. Supp. 2d 212, 214, 109 U.S.P.Q.2d 1869 (E.D.N.Y. 2013)(Five Pointz). Nevertheless, the right to reproduce the street art may be protected by copyright or trademark law as evidenced by the successes in recent copyright cases brought by street artists.  The tension between the street artists’ intellectual property rights and the arrests and vandalism charges they may face is illustrated by the arrest of graffiti artist Cost (Adam Cole) and the recent false arrest lawsuit filed by Richard Pfeiffer, who police allegedly thought was Banksy. Richard Pfeiffer vs. The City of New York et al, No. 152797/2015 (N.Y. Sup Ct. Mar. 21, 2015).

However, with this new wave of successful suits and several forthcoming street art exhibitions, such as Coney Art Walls presented by Jeffrey Deitch in New York and Open Source: Engaging Audiences in Public Spaces presented by the Philadelphia Mural Arts Program, there is an increased need for both artists and brand owners to appreciate that intellectual property rights can attach to artworks installed or executed in public spaces.

A Legal Primer

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“Trust Your Vision” By gilf! Street art near our headquarters in DUMBO. Plaque next to art states: “As the world becomes more and more competitive it’s easy to lose sight of one’s goals and aspirations. This maze-inspired piece references the difficulty of navigating life, especially in a city like New York.”

Under U.S. Copyright law, legal protection attaches when an original work is “fixed in a tangible medium of expression.” 17 U.S. Code § 102. Originality is a fairly low bar. The holder of the copyright has several exclusive rights in the work for the duration of the copyright (the general rule today is the life of the author plus 70 years for most works), including: reproducing the work, preparing derivative works, distributing copies of the work and displaying the work publicly. Id. § 106.  Authors need not own the physical copy of the original, nor register their works in order for rights to attach.  However, registering the works with the U.S. Copyright Office is a prerequisite to bringing a lawsuit and allows for statutory damages. Id. § 411. In cases where actual damages are hard to prove, registration is a cheap and added benefit to the copyright owner.

Under U.S. Trademark law, protection attaches to words or symbols used to distinguish a good or service in commerce. 15 U.S. Code § 1051 et. seq. Trademark law is used to protect consumers against confusion. A trademark has the potential to last indefinitely provided that it is being used in commerce.  While the use in commerce requirement for trademarks may make it more challenging for an artist to obtain a trademark registration than a copyright registration, a trademark registration with the Patent and Trademark Office may be another source of artists’ rights in their work. Trademark protection may be especially relevant where an artist uses a graffiti or street art tag in commerce.

The Cases

Anasagasti v. American Eagle Outfitters, Inc., No. 1:14-cv-05618 (S.D.N.Y. Jul 23, 2014)

The recent wave of street art infringement cases began in 2014 with the copyright case filed by Cuban-American street artist Ahol Sniffs Glue (David Anasagasti).  In July, Anasagasti filed a copyright infringement action against American Eagle Outfitters for their use of his mural Ocean Grown (Fl) in an advertising campaign. The original mural, located in Miami’s Wynwood neighborhood, known for its abundance of street art, was commissioned by Ocean Grown Glass Gallery. Wynwood has a vibrant collection of murals, and according to the Miami Times, photographers often seek licenses from the artists before shooting the work. In his complaint, the artist alleges that no permission was sought, and the photography included models posing as if they were painting the murals. American Eagle and Anasagasti privately settled in December.

Hayuk v. Sony Music Entertainment et al, No. 1:14-cv-06659 (S.D.N.Y. Aug 19, 2014)

Well known and successful artist Maya Hayuk also brought and settled a copyright infringement case against musician Sara Bareilles and Sony Music for the unauthorized use of her mural, Chem Trails NYC, in promotional materials for Bareilles’ new album and tour. Previously, Hayuk has sued Urban Outfitters, Target, Coach, and Elle Warner, for the unauthorized use of her artwork.

Miller v. Toll Brothers, Inc., No. 1:15-cv-00322 (E.D.N.Y. Jan 21, 2015)

Luxury  real estate developers Toll Brothers settled with CAM (Craig Anthony Miller) for copyright infringement of his famous Elephant Mural (NYC). The mural was featured prominently in advertisements for luxury condos in Brooklyn that Toll Brothers were developing in the neighborhood where the artwork was originally located. CAM had painted the mural with permission of the property owner in 2009, but it was later painted over in 2013.

Franco Fasoli et al v. Voltage Pictures LLC et al., No. 2:15-cv-00889 (C.D. Cal. Feb 06, 2015)

In February, director Terry Gilliam also found himself at the center of a lawsuit over his film, The Zero Theorem (2013), when he  allegedly infringed a mural by Argentinian street artists Jaz (Franco Fasoli) and Ever (Nicolas Santiago Romero Escalada), along with Canadian artist, Other (Derek Shamus Mehaffey).  In Fasoli, the defendant filed a motion to dismiss.  The Court vacated the hearing date of May 4, 2015 and the parties await a finding on the papers.

Jason Williams et al v. Roberto Cavalli, S.p.A. et al, No. 2:14-cv-06659 (C.D. Cal. Aug 25, 2014)

Finally, in a case involving both copyright and trademark infringement claims, Revok, Reyes, and Steel (Jason Williams, Victor Chapa, and Jeffrey Rubin respectively) filed suit against fashion designer Cavalli for the use of the Plaintiffs’ mural in Cavalli clothing designs. In Williams, the Plaintiffs alleged that pieces of their work were reproduced on Cavalli clothing with their signatures obliterated, and the Cavalli trademark superimposed instead. Plaintiffs argued that this creates a false impression to the consumer as to the origin of the product. In February the court denied a motion to dismiss filed by another named defendant in the suit, Staff USA. Williams v. Cavalli, 113 U.S.P.Q.2d 1944 (C.D. Cal. 2015). This suit is currently pending in the District Court of the Central District of California (Western Division).  It will be interesting to see how the court will treat the trademark argument if the case does not settle.  Many of the artists that have brought suit engage in their own commercial transactions and have carefully policed their brands to control how their work is used and sold to ensure that they are being compensated. The disposition of Williams could establish a new legal tool for street artists.

Going Forward

Defendants in many of these cases, recognized brand owners such as Sony, Cavalli and American Eagle usually find themselves on the other side of IP infringement lawsuits. However, these graffiti and street art cases illustrate that savvy business people and corporations exploring new marketing strategies do not always appreciate that art appearing in “public” spaces is not necessarily in the “public domain.” Copying and distributing street art without permission may constitute infringement and may expose the copier or distributor to significant legal risks.

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“The Owls, Revealing Flight” by Craig Anthony Miller (CAM). Street art near our headquarters in DUMBO.

With the preceding examples in mind, street artists should consider their IP rights when installing work in public spaces, and the public and brand owners should be aware that artwork appearing in public spaces may be protected. Before using street art or graffiti art in marketing or product campaigns, brand owners should consider investigating who holds the rights to those works and seek appropriate permissions.  Going forward, street artists who install work in a public space may consider registering that work with the Copyright Office.  Where an artist uses a specific tag or name for commercial purposes, the artist could consider filing for a trademark.  While the notion of “use in commerce” in the context of street art is still untested, bringing a trademark claim in addition to a copyright infringement claim as in Williams might be an additional remedy for a recognized artist.

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*About the Author: Christine E. Weller is an Associate at Griesing Law, LLC where she focuses her practice on new media, intellectual property, nonprofit, and employment law  matters. She can be reached at (215) 732-3923 or cweller@griesinglaw.com.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers are not meant to act or rely on the information in this article without attorney consultation.

Oy May! Artless Boycotts Blossom

Chris Ofili, The Holy Virgin Mary, 1996.  Mixed media, elephant dung.

Chris Ofili, The Holy Virgin Mary, 1996. Mixed media, elephant dung.

By Irina Tarsis, Esq.*

The front page of the New York Times The Arts Section today, May 5, 2015, features indigenous actors and prominent writers staging walk outs. The story of American writers withdrawing from a literary gala that plans to honor the French satirical magazine Charlie Hebdo for “freedom of expression courage” is particularly surprising, as it rings counter to one of the basic principles of this nation’s freedom of speech and the press. While from the standpoint of free speech, “the state has no legitimate interest in protecting any or all religions from views distasteful to them which is sufficient to justify prior restraints upon the expression of those views,” reportedly 200 of 4,000 members of the PEN American Center signed a letter against awarding Charlie Hebdo’s “unacceptable” expressions.

This NY Times story appears just a few pages back from the front page photograph of “a crew … removing the bodies of two gunman who made an assault on a gathering [of controversial cartoonists] in Garland, Tex.,…” The foiled assault on the Mohammad cartoon contest in the United States, carried out by the self-declared ISIS supporters, instantly recalled the attack on the Charlie Hebdo headquarters in Paris earlier this year and the attacks on cultural sites and artifacts carried out by the bonafide ISIS militants.

The New York Times/The Arts (May 5, 2015).

The New York Times/The Arts (May 5, 2015).

Be it a boycott, an assault or a parade, these public spectacles are powerful tools for capturing attention and galvanizing support for a cause. When we talk about boycotts and cultural divides, we must not forget that this week marks the the 70th anniversary of the end of World War II, where millions of people, including talented writers and cartoonists, followers of all religions, died due to intolerance, racism, economic disparity and grand military aspirations. In commemoration of this date, nations and national leaders, veterans and survivors are conducting memorial services worldwide. One nation that arguably suffered the most from the so-called Great Patriotic War, the Russian Federation is poised to conduct one of the biggest parades on the Red Square both to celebrate the triumph over the Nazism but also to illustrate its current military might. Auspiciously, the nations that played as important a role in ending World War II, the Russian allies and former sister nations are not sending their representatives to Moscow this week. The list of absentees includes: the United States, the United Kingdom, France, Poland, Ukraine, Belarus, and Latvia.

The righteousness felt by those engaged in boycotts may be just as harmful as the debase and radical thinking that propels people to engage in unfair labor practices, take property from others without compensation, destroy artifacts and commit murder.

Michelangelo

Michelangelo Buonarroti, Male Nude Seen From the Back With a Flag Staff, ca. 1504. Black and white chalk

What does this editorial have to do with art law? In 1999, Brooklyn Museum organized a show “Sensation: Young British Artists from the Saatchi Collection,” which included works by Chris Ofili made with mixed media including elephant dung. The Mayor of the City of New York, Rudolph Giuliani decided that a number of the works were “sick” and “disgusting.” He decided that one work in particular, “The Holy Virgin Mary” was an attack on religion as it was offensive to Catholics. The Mayor tried to withhold funding from the Brooklyn Museum and threatened eviction. The Court held that the City and the Mayor were prohibited from taking any steps to inflict any punishment, retaliation, discrimination, or sanction against the museum because the freedom of speech trumped in this instance and that no “objective observer could conclude that the Museum’s showing of the work of an individual artist which is viewed by some as sacrilegious constitutes endorsement of anti-religious views.” Art and anti-religious sentiment may be subjective. The line between art and dung is sometimes indistinguishable. Legal minds thrive in the gray zone. Nevertheless, somethings remain black and white. Muscles flexing looks wonderful when it is rendered by Michelangelo or Baryshnikov, but it is much less palatable when done by means of weapons and at the cost of human lives. Certainly, there are fascinating art law debates and cases that stem from trademarking “Je suis Charlie,” looting that occurred during World War II, terrorist attacks and the recent annexation of Crimea, and even using elephant dung to create artworks. This week in May, however, there are few matters more important than cultural tolerance.

Suggested Readings:

About the Author: This editorial is by Irina Tarsis, art lawyer and Founder and Director of Center for Art Law.

WYWH: Review of “Cultural Property: Current Problems Meet Established Law”

By Jill A. Ellman, Esq.*

Screen shot 2015-04-29 at 12.42.28 PM

On March 27, 2015, the Lawyers Committee for Cultural Heritage Preservation (LCCHP) and the Penn Cultural Heritage Center hosted the conference entitled Cultural Property: Current Problems Meet Established Law  in Philadelphia. This was the sixth annual conference for LCCHP, a not-for-profit organization dedicated to safeguarding cultural heritage, and the attendees included attorneys, archaeologists and other individuals interested in preserving cultural property. Four panels tackled ongoing issues including the problem of archaeological site looting, museum responses to the legal environment and collecting ethics, due diligence in provenance research, and emergency responses to the current crisis in Syria.

Patty Gerstenblith (Distinguished Research Professor of Law, DePaul University), commenced the conference by presenting on the adequacy of U.S. law, policy and practice in averting the international trade of looted objects. Gerstenblith explained that as looting of cultural property, a worldwide phenomenon, motivates by economic gain from source countries, cutting the demand for such objects in destination markets might be the only way to stem it. She described the vulnerability of archaeological sites, which consist of multiple layers of objects that reconstruct entire time periods and civilizations. Once looters destroy these sites, the context of the objects contained within are misunderstood or lost. See, e.g., Euphronios krater. While scholars are able to piece together the painter, potter, writing and characters represented on the Euphronios krater, information regarding the person buried in the tomb, including the food ritual burial practices as well as the health and age of the person, remain a mystery. Additionally, Ms. Gerstenblith explained that the abrupt stripping of objects from the ground results in the loss of knowledge of authenticity and purpose of those objects, such as the case of looted Cycladic figurines, which appeared on the art market in the 1950s.

Ms. Gerstenblith addressed existing laws aimed to combat illicit trafficking and trade of cultural property, including the UNESCO 1970 Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (implemented by the United States through the enactment of the Cultural Property Implementation Act in 1983). Ms. Gerstenblith emphasized that even if an object is seized at the U.S. border and returned to the source country, it is still a loss for humanity because the context of that object is displaced. The ultimate win would be for the object to stay in the origin country. Efforts to train and provide expertise that would stem the flow of exporting objects in the originating country are therefore more effective for the preservation of cultural remains.

Ms. Gerstenblith also discussed the history of legal cases involving stolen property, identifying a first generation of cases in which a foreign country brings a replevin action in a U.S. court with the assistance of U.S. attorneys. But, she explained that a second generation of cases involving countries requesting actions to be brought by the U.S. government is now more prevalent. With respect to these second generation cases, the burden of proof is in favor of the U.S. government. Ms. Gerstenblith highlighted the problems with the current state of government involvement for this second generation of restitution cases. For instance, the U.S. government is likely to prevail even in circumstances where it is unclear how a foreign state possesses ownership of an object. See, e.g., U.S. v. Khmer Statue (specific factual allegations in the U.S. government’s complaint were lacking as to when the statue was stolen from Cambodia). See also Buying and Selling Antiquities in Today’s Market. In addition, Ms. Gerstenblith emphasized that because of the burdens of proof and costs, most of these cases are not litigated. Instead, courts sign off on complaints brought by the U.S. government, resulting in the creation of bad law.

Finally, Ms. Gerstenblith mentioned that there has not been a successful criminal prosecution since U.S. v. Schultz, in which the U.S. government brought charges against an American dealer for his conspiracy to smuggle Egyptian antiquities. Instead, the importation of stolen antiquities has become more of a game of catch and release: if a person imports stolen antiquities, then he or she may simply give up the object and walk away. She contended that the U.S. government has become lax with prosecuting and governmental agencies do not actively pursue criminal investigations. In addition, she suggested that there is ambiguity within the current legal framework for those who want to comply with the law.

Part I. Destruction of Archaeological Context

Dr. Katharyn Hanson (Postdoctoral Fellow, Penn Cultural Heritage Center, the University of Pennsylvania) opened the first panel concerning The Problem of Archaeological Site Looting and the Legal Context/Legal Response by showing satellite images of devastating looting of Mesopotamian archaeological sites in Iraq and Syria. At the site of Umma in southern Iraq, for example, satellite images detected over 8,000 looters’ pits between 2003 and 2005. The rapid acceleration of damage to Syrian sites is also very alarming. With respect to the ancient site of Apamea in Syria, satellite images taken between July 2011 and April 2012 revealed looting of at least 15,000 more pits than in southern Iraq. Dr. Hanson stated that looting is most effective when stopped on the ground by archaeologists and local police.

Tess Davis (Executive Director, the Antiquities Coalition) presented her research on the criminal trafficking networks in the historical case study of Cambodia’s civil war in the 1960s and 1970s. Her presentation revealed the corrupt nature of criminal looting networks that often involve gangs, foreign military and incumbent governments. Ms. Davis painted a grim picture that once the established criminal networks are in place, especially when armed forces fund the theft, those networks become more difficult to dismantle, and peace may in fact make it easier for them to operate.

Ole Varmer (Attorney, National Oceanic and Atmospheric Administration) and Jim Goold (Counsel, Covington & Burling) delved into the emerging area of law regarding the looting of underwater cultural heritage (UCH). Mr. Varmer explained that there is a gap in protecting UCH. He suggested future protection of UCH may be enforced through the Archaeological Resources Protection Act §6(c), which has been applied to archaeological objects from foreign lands. For further discussion See Underwater Cultural Heritage Law Study. Mr. Goold spoke on his involvement in the “Black Swan” case, concerning the salvage from a Spanish warship off the coast of Portugal by U.S. treasure hunters. In that case, the American company Odyssey Marine Exploration, Inc. brought a lawsuit claiming that its imported treasure from an unknown site (code-named the “Black Swan”) was from beyond the territorial waters of any nation, and therefore international laws did not apply. Mr. Goold’s presentation highlighted the thorny set of issues that may arise in cases where UCH does not fall within specific jurisdictional boundaries.

Keynote speaker Mariano Aznar Gomez (Professor, Universitat Jaume I) addressed the issue of the adequacy of international law, policy and practice in preventing underwater looting. He noted the difficulty of establishing hierarchy of ownership among states or countries of origin. Mr. Gomez concluded that while there are still many perceived threats to the protection of UCH, the 2001 UNESCO Convention on the Protection of the Underwater Cultural Heritage may be a good solution. He emphasized the importance of the cooperation and collaboration of states to protect cultural objects.

Museum Responsibility, Collection Ethics and Due Diligence in Provenance Research

The lunchtime discussion moderated by Thomas Kline (Of Counsel, Andrews Kurth) among Dr. Richard Leventhal (Executive Director, Penn Cultural Heritage Center), Timothy Rub (CEO, Philadelphia Museum of Art), and Victoria Reed (Senior Curator for Provenance, Museum of Fine Arts, Boston (MFA)) focused on Museum Responses to Legal Environment and Collecting Ethics. All panelists emphasized the importance of transparency and continued best-effort practices for museums to disclose objects with incomplete provenance to foreign countries as a means to encourage dialogue. Dr. Leventhal highlighted that he was proud of the University of Pennsylvania’s “Pennsylvania Declaration” that it would not purchase art without verifiable provenance. Nonetheless, he emphasized that museums should engage in more provenance research and provide object registries accessible to the public. He opined that the transition from litigation to cooperation between museums and other countries, especially smaller and poorer countries, is essential in negotiating the placement of an object. Ms. Reed mentioned the MFA’s adherence to the 2008 Association of Art Museum Directors (AAMD) Guidelines and its staffs’ due diligence in conducting research to verify an object’s provenance. She seconded Dr. Leventhal’s sentiment that museums may reach creative solutions with countries, such as receiving exhibition loans in exchange for the museum’s return of certain objects. In addition, she stressed the importance of museums’ ongoing responsibility to consistently review collections and digitize records. Mr. Rub responded that digitizing records for big museums with large collections is a monumental task. He queried whether the more important issue is museums’ ability to check so-called orphaned objects with unverifiable provenance.

Legal Responsibilities, Methods and Due Diligence in Provenance Research, as those responsibilities extend to museum collections, was the topic of the third panel. Dr. Margaret Bruhac (Assistant Professor of Anthropology, the University of Pennsylvania) discussed approaches to provenance research for Native American heritage collections. Dr. Bruhac revealed the immoral museum collection methods of Native American artifacts in the early 19th century, including the purchase of artifacts from elderly or vulnerable tribes. She explained the identity of an object may be lost through the sorting and circulation of museums and collectors; such as the case of wampum belts, which became a hot sales commodity in the 1970s. Dr. Bruhac concluded that Native American property may be identifiable to a particular tribe only if museums and tribal nations share an open dialogue. Ms. Reed defended the ability of museums to acquire antiquities in the case of unverifiable provenance, citing MFA’s policy of assessing the risk of acquisition based on certain criteria. Ms. Reed mentioned that museums and collectors should demand the proper paperwork and ask more questions in order to facilitate transparency of orphaned objects. Dr. Lauren Ristvet (Associate Professor of Anthropology, the University of Pennsylvania) presented on provenance research approaches regarding cuneiform tablet collections. Her presentation highlighted the problematic impact that continual looting in Mesopotamian archaeology has in understanding the past. She differentiated the University of Pennsylvania’s collection, acquired through excavations in the ancient city of Nippur in Iraq versus those purchased for Yale University’s collection. The tablets at Penn, while not as aesthetically pleasing as those in Yale’s collection, are arguably more invaluable because their context is intact, providing insights into Sumerian literature and the Sumerian educational system. The tablets acquired at Yale, in contrast, consist of glued, incongruent fragments, some of which were thrown away, thereby destroying the historical meaning of the tablet.

Current Responses and Solutions

The final panel, Emergency Responses to Heritage Destruction in Times of Conflict, focused on the safeguarding of antiquities under siege and attempts to curtail present-day looting. Cori Wegener (Cultural Heritage Preservation Officer, Smithsonian Institution) disclosed international responses to site looting and heritage destruction in Syria. In particular, she stressed the importance of partnerships between non-governmental organizations and museums in order to raise awareness of the looting and help those on the ground who have been cut off from resources. She discussed the current collaboration of the Smithsonian with Safeguarding the Heritage of Syria Initiative (SHOSHI), spearheaded by Salam Al-Kuntar (Consulting Scholar, the University of Pennsylvania Museum). In June 2014, SHOSHI along with the Smithsonian led a conference in Southern Turkey to address emergency packing and planning for Syrian museum collections and the protection of archaeological sites. Led by Syrian technical experts, SHOHSI provided training workshops and supplies to volunteers looking to respond to the disaster. Apart from the conference, SHOSHI engaged in other projects, including training officials from the Ma’arra Museum to cover 90% of the museum’s mosaics with sandbags. Dr. Al-Kuntar seemed hopeful that these emergency efforts will preserve existing artifacts amidst the continual looting.

Susan Wolfinbarger (Project Director, the Geospatial Technologies and Human Rights Project, American Association for the Advancement of Science (AAAS)) concluded with the potential use of satellite imagery for cultural property war crimes prosecutions in Syria. She mentioned efforts by AAAS to train international human rights courts and commissions regarding the use of remote sensing in research documentation. Inaccurate evidence is common in these cases as prosecutions are based off of eyewitness testimony and lack of access to sites. Ms. Wolfinbarger expressed that the technology would be a useful tool in presenting objective evidence of human rights abuses and destruction to cultural property.

Conclusion

The destruction and plunder of cultural heritage, especially in areas of conflict, continues to be a devastating, universal problem. This year’s LCCHP conference highlighted the loss of the cultural meaning of objects and our understanding of memory and past cultures if artifacts are disturbed from their original context. A current illustration of this is ISIS’s attempts to eradicate past history and cultures.

While cooperation, as in the case between foreign governments and museums, is a useful tactic for the restitution of looted objects, there is room for improvement to block looted objects before they reach destination countries. Technology may facilitate the tracking of lost antiquities, but the most effective way to prevent looting is on the ground. Unfortunately, countries of conflict do not possess the resources or ability to police such pillaging. However, educational efforts led by non-governmental organizations and/or resource-rich populations may provide an answer to restrict the flow of antiquities from the origin country. In addition, if museums and collectors take the proper measures to conduct due diligence, demand for looted objects may be subdued. More extensive criminal investigations and policing efforts in destination countries may also prevent the facilitation of this illicit trade. Presently, there is legislation pending in Congress imposing import restrictions from Syria. Ms. Gerstenblith recommends that those wishing to make an impact in restricting trade from Syria call their representatives to pass the appropriate legislation. See H.R. 1493- Protect and Preserve International Cultural Property Act.

Nonetheless, the above efforts are only a beginning to arrest the flow of the illicit antiquity trade. Satellite imagery shows the vast destruction of looted archaeological sites, in which centuries of information regarding past cultures is lost. The universe of looted antiquities from such immense plunder will be resurfacing for years to come. Consequently, the message from this year’s conference was clear: education, transparency of collection practices, and meaningful dialogue between origin countries and market participants are the strongest means to keep cultural heritage intact.

Select Sources:

About the Author: Jill A. Ellman is an attorney in New York interested in the preservation of cultural heritage. She may be reached at jillaellman@gmail.com.

WYWH: NYCLA Discussion of Forensic Art Analysis

Screen Shot 2015-04-28 at 5.14.46 PMby Megan Noh, Esq.*

On Wednesday, April 1st, the New York County Lawyers Association (NYCLA)s Art Law Committee hosted James Martin, founder of Orion Analytical LLC, an independent laboratory dedicated to examining cultural property in authenticity studies and legal proceedings. Martin is a frequent guest in New York City; he recently gave a lecture at Center for Art Law’s “Youve Been Served” event, and is also an adjunct professor at the New York University School for Continued Education. Martin uses a range of scientific techniques – including technical photography, microscopy, elemental analysis, and chemical analysis of materials – to compare questioned and documented works, and identify anachronisms and anomalies in fraudulent and misattributed works. Mr. Martins presentation focused on his work in the context of several prominent art authenticity claims.

The first such instance was the widely-reported controversy surrounding 32 canvasses claimed by owner Alex Matter to be previously-unknown Jackson Pollock “drip/pour” works dating from 1946-1949. Mr. Matter purportedly discovered these works in an East Hampton warehouse in approximately 2002, and although the Pollock-Krasner Foundation officially ceased issuing authenticity opinions in the mid-1990s, its then-remaining members did express opinions about the Matter canvasses. Unfortunately, those opinions conflicted; as a result, three of the works were sent to Harvards Straus Center for Conservation, and more than twenty to Orion, so that both laboratories could conduct independent analyses. Mr. Martin found at least six anachronistic materials in the Matter canvasses he studied, including an automotive pigment first used on Ferrari automobiles in the 1980s, well after the works supposed date of execution. Orions official conclusion was that this scientific evidence indicated that the date and attribution of the works were not as alleged by Mr. Matter. Mr. Martin presented these findings, which were consistent with Harvards report of its own analysis (issued in January 2007) at an IFAR symposium in November 2007 and in a 2008 volume of IFARs journal, thus putting the matter to rest in New Yorks art community.

The second authenticity claim Mr. Martin discussed with NYCLAs ALC members was Lagrange v. Knoedler; Mr. Martin was cautious to limit his discussion to non-privileged information. (See our Knoedler Obituary). In this 2011 suit filed in the Southern District of New York, billionaire hedge fund manager Pierre Lagrange brought claims for breach of contract, fraud, and unjust enrichment against the then-venerable American gallery where he had purchased a work attributed to Jackson Pollock. According to the complaint, at the time of purchase, Knoedler told Mr. Lagrange that the Pollock catalogue raisonné was in the process of being updated, and would ultimately include the painting in question. However, several years after his purchase, Mr. Lagrange tried to consign the painting for auction, and two major auction houses rejected it on the basis that it was not included in the catalogue raisonné. Mr. Lagrange sought to rescind the Knoedler sale, alleging that there were in fact never any definitive plans to update the catalogue raisonné to include the painting in question, and that Knoedler had knowingly misrepresented these facts in order to sell him the work. Orion was retained to analyze the painting, and found at least three paints that were produced later than its purported 1950 date of execution. Apparently Knoedler shut its doors a day after receivingOrions report and the two sides subsequently reached a confidential settlement, while other cases brought against Knoedler are still pending.

This NYCLA meeting was a wonderful opportunity for members to learn more about the importance of scientific analysis in what Mr. Martin refers to as the “three-legged stool” model of authentication, where connoisseurship and provenance are supported by a third essential element: technical and scientific examination of physical substance. As the art market grows in complexity and commercial value, and questions of attribution become increasingly contentious and convoluted, authentication methodology will continue to evolve. It is likely that collectors and the attorneys who represent them will place more weight on this leg of the so-called stool, and Mr. Martins presentation was a welcome primer in that area.

Suggested Reading:

  • De Sole v. Knoedler Gallery, LLC, 974 F. Supp. 2d 274 (S.D.N.Y. 2013).
  • The Martin Hilti Family Trust v. Knoedler Gallery, LLC et al., 1:2013-cv-00657(S.D.N.Y. Jan 29, 2013).
  • White v. Freedman et al., 1:2013-cv-01193 (S.D.N.Y. Feb. 21, 2013).
  • David Mirvish Gallery Limited et al v. Knoedler Gallery, LLC, 1:2013-cv-01216 (S.D.N.Y. Feb. 22, 2013).
  • The Arthur Taubman Trust et al v. Knoedler Gallery, LLC et al., 1:2013-cv- 03011 (S.D.N.Y. May 3, 2013).
  • Rosenfeld v. Knoedler Gallery, 653030/2013 (Aug. 30, 2013).

About the author: Megan E. Noh, Esq. is the Assistant General Counsel of Bonhams and an active member of both the New York City Bar Association’s Art Law Committee and the New York County Lawyers’ Association.

Disclaimer: This and all articles are intended as general information, not legal advice, and offer no substitution for seeking representation.

Case Review: Rybolovlev v. Bouvier

By Chris Michaels*

Amadeo Modigliani, Nu Couche au Coussin Bleu (1916)

Amedeo Modigliani, Nu Couche au Coussin Bleu (1916)

A criminal complaint filed in the principality of Monaco on January 12, 2015 sent shockwaves through the international art market. In it, Russian oligarch Dmitry Rybolovlev, businessman and owner of the AS Monaco football club, reportedly alleged fraud and money laundering against Yves Bouvier, a Swiss art dealer and president of Natural Le Coultre S.A., a storage business operating freeports in Geneva, Luxembourg, and Singapore. Bouvier was detained in Monaco in February and his assets were frozen by a Singapore court in March.

The dispute erupted following a pre-New-Years-eve conversation between Rybolovlev and Sandy Heller, Steven Cohen’s art advisor. During their conversation, Heller informed Rybolovlev that Cohen, a billionaire hedge fund manager, sold a Modigliani from his collection to an anonymous buyer for $93.5 million. Unbeknownst to Heller, Rybolovlev had recently purchased the Modigliani from Bouvier for $118 million, which represented a markup of more than $24 million that went to Bouvier.

This case not only highlights the tax implications surrounding freeports, which allow for luxury goods to be stored and sold tax-free, but also emphasizes the need for greater transparency in private sales. Commonly, private sales of art, especially those of high value, are shrouded in secrecy. Confidential components of private sales typically include identity of the parties, purchase price, as well as commissions collected by dealers. A problem for collectors arises when collectors and dealers enter into an agreement whereby a net return price is set, which guarantees the amount that the selling collector will receive for the art. The issue here is that the seller may never know the actual final selling price for the art and/or the amount of the commission received by the dealer. In Rybolovlev’s case, this situation was reversed, as he, the buyer, found out the “real” final selling price post-sale. As an aside, it would be interesting to know if Steven Cohen was aware of either the price Rybolovlev paid for the Modigliani or the commission paid to Bouvier. I would speculate that he did not.

To solve the problem of unreasonably inflated commissions, transparency is paramount in private art sales. When collectors and dealers enter into consignment agreements, it is imperative that the agreement include terms that specifically outline the total commission to be collected by the dealer OR that the selling collector agrees to the net return price and also agrees that the dealer may collect any commission that is above the net return price. Handling the issue of commissions in private sales will alleviate any concerns of dealer impropriety that may arise after a sale.

According to the April issue of The Art Newspaper, a temporary order against Bouvier disallows sales of personal assets worth up to $550m and asks Bouvier to surrender Mark Rothko’s No 6 (1951) as a collateral to his would-be-debt to Rybolovlev if the court finds that the transaction was unconscionable.

Sources:

About: Chris Michaels is a litigation attorney in the Philadelphia office of the Atlanta, GA-based law firm, Cruser & Mitchell, LLP, where he actively pursues his interest in the field of art law. He may be reached at (267) 888-2842, cmichaels@cmlawfirm.com, or on Twitter @CMichaelsartlaw.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.

Artists, Not Judges, Should Decide Fair Use: Select Implications of the Cariou-Sconnie Nation Deviation

by Sekou Campbell, Esq.*

This piece will focus on two implications of the Cariou and Sconnie Nation analyses: (1) the inherently factual nature of “fair use” analysis and (2) fair use as an affirmative defense. “Fair use” started as a judge-made remedy to technically correct legal conclusions that led to absurd results, a practice commonly known as “equity.” Generally, and in the case of “fair use,” equity requires a court to make a significant factual investigation so as to demonstrate why the technical law should not apply. “Fair use,” however, is odd because despite its equity origins, it has been codified as a technical law for the last forty years in the U.S. Copyright Act. Moreover, “fair use” can only be found if (a) a defendant has been found to infringe a plaintiff’s copyright, and (b) a defendant proves that “fair use” should be applied. Although the burden of proof is traditionally on a plaintiff, “fair use” is an affirmative defense, meaning the defendant must prove each element. Courts frequently delve into their analyses without acknowledging the significance of the fact that they are making equitable, not technical, decisions that the defendant, not the plaintiff-creator, must fully prove. Sconnie Nation serves as a good reminder of the pitfalls to treating equity like a technical law and ignoring that the defendant bears the burden to prove “fair use.”

Over the last two decades, a single doctrine has garnered much of the attention of “fair use” case law: “transformativeness.” “Transformativeness,” first introduced by Southern District of New York District Judge Pierre N. Leval, suggests that when a subsequent user “adds value” to an original piece of artwork by using that original as “raw material,” rather than “repackaging” or “republishing” the original, that subsequent use deserves protection under the “fair use” statute.[1] As more and more artists “quote” other artists and artwork, “transformativeness” has become more and more central to the “fair use” decisional law. Indeed, it can be argued that Cariou, the 2013 Second Circuit decision, held that transformativeness is a dispositive “fair use” factor.

The case law generally ignores the equity origins of “fair use” and by necessary implication “transformativeness,” and jumps right into a “legal analysis” by comparing the plaintiff-creator’s work to the defendant-second user’s work. Focusing the analysis on which facts best show “fair use” by relying on art experts and fact testimony and documents from artists rather than other judges will result in two favorable outcomes: (1) fewer judges acting like art critics and (2) more private negotiations between artists about the use of each other’s work.

It seems that thee Seventh Circuit’s criticism of Cariou, in Sconnie Nation, highlights the shortcomings of relying too heavily on works that are technically “transformative” in order to conclude that a defendant has proven “fair use.” Specifically, Judge Easterbrook reasoned that “transformativeness” is actually codified as a protected right in 17 U.S.C. § 106(2), the statute that establishes what uses constitute “copyright infringement.” That statute protects “derivative works,” which is defined to include a “transformed work.” Therefore, as Sconnie Nation points out, an expanding “transformative use” doctrine threatens to extinguish the derivative work right. But, as will be discussed below, a more nuanced and fact-intensive inquiry can save both the transformativeness doctrine and the derivative work statute.

Tale of Two Circuits: 2nd and 7th

Cariou and Sconnie Nation both purportedly involved “appropriation art,” whereby the defendant-second users copied or otherwise used the plaintiff-creator’s copyrightable artwork as “raw material.”[2] In Cariou, the “raw material” came from Patrick Cariou, a professional photographer who lived in Jamaica for six years. During that time, Mr. Cariou developed a relationship with Rastafarians that allowed him to take “extreme classical” and not “pop culture” photographs. In Sconnie Nation, Michael Kienitz photographed Madison, Wisconsin mayor Paul Soglin during his inauguration. In both cases, the defendant-second users (Richard Prince in Cariou and Sconnie Nation in Sconnie Nation) modified the original, taking elements away and adding others to them. Thus, both defendants admitted to “appropriating” or infringing upon their adversary’s work. Both parties also asserted “fair use” defenses by incorporating a “transformativeness” argument.

Cariou

cariou-princeCariou represents a tension between the “reasonable observer” test, on the one hand, and the oft-quoted dictum that “it would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of [a work],” on the other.[3] The “reasonable observer” test requires the Court to “examine how the artworks may ‘reasonably be perceived’ in order to assess their transformative nature.”[4] Without a fully developed factual record, however, judges serve as rather inept observers because they generally do not “assess transformativeness from multiple perspectives, with attention to what different audiences might see in a work and in an allegedly transformative remix of that work.”[5] The dissent in Cariou takes a similar position.[6] Thus, to resolve the tension between the “reasonable observer” test and the judge-as-art-critic problem, appellate courts, like the Cariou dissent, should defer more to lower courts, pushing litigants to trial and not merely dispositive motion practice.

This adjustment will lead to two developments. First, the higher courts will have more facts on appeal. Specifically, they will have experts’ testimony, actual professional art critics, upon which to base their opinion. Second, more settlements will occur, encouraging artists to resolve these disputes on their own. In either case, an artist or art professional gets a much more prominent voice in decisions affecting artwork, a welcomed development.

Sconnie Nation

Screen shot 2015-04-02 at 10.41.13 AMJudge Easterbrook points out that “[f]air use is a statutory defense to infringement.”[7] This is almost correct.[8] It highlights, without saying it, the fact that a defendant has the burden to prove fair use. Judge Easterbrook stated that transformativeness cannot be a significant factor when considering a “derivative work” protected by 17 U.S.C. §106(2). This statement, taken together with the fact that fair use is an affirmative defense, suggests that “transformativeness” cannot do much work in a fair use analysis because a “transformed work” is defined as a “derivative work” in the Copyright Act.[9] Therefore, if a plaintiff argues that its derivative work copyright has been violated, it may also be conceding fair use, rendering 17 U.S.C. § 106(2) useless. Sconnie Nation solves this problem by largely ignoring the “transformativeness” analysis. However, another solution exists; require the defendant to distinguish between an infringing transformation (e.g. translation or summary) and fair transformation (e.g. parody and satire).

Of course, such a distinction requires a court, preferably the U.S. Supreme Court, to provide a principled rule of law. However, this could also be a factual inquiry, governed by some basic principles that mirror current copyright law, like a modicum of creativity and originality, an effect on the commercial market of the plaintiff-creator and the amount and substantiality of the transformation (e.g. is the change subtle or bold). Ultimately, when courts require defendants to prove more, they may also help artists to fashion more developed arguments that lead to better rules that guide the fact finders below.

Conclusion

Judge Easterbrook seems to have done a good job stoking the flames of controversy over fair use and hopefully triggering Supreme Court analysis in Sconnie Nation. This piece hopefully highlights some additional considerations that will make the doctrine more clear.

 

Select Sources:

About the Author: Sekou Campbell is an attorney in private practice in Philadelphia, Pennsylvania, where he litigates commercial matters in state and federal courts throughout the country.

  1. The Cariou Court adopted the Tate Gallery’s definition of appropriation art as “the more or less direct taking over into a work of art a real object or even an existing work of art.” Cariou, 714 F.3d at 699.
  2. Cariou, 714 F.3d at 714 (quoting Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251 (1903)).
  3. Cariou, 714 F.3d at 714 (“because the district court takes the primary role in determining the facts and applying the law to the facts in fair use cases, after which we exercise our appellate review if called upon to do so, I conclude that as to each painting, the district court is best situated to determine, in the first instance, ‘whether Prince is entitled to a fair use defense in light of the correct legal standard.’”).
  4. Sconnie Nation, 766 F.3d at 758.
  5. Fair use is derived from equity and merely codified in the 1976 Copyright Act. See Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 448 (1984).
  6. A ‘derivative work’ is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a ‘derivative work.’
  7. 17 U.S.C. § 101.

Help Wanted: Miami’s Alarming Number of Directorship Successions

FL MUSEUMS COLLAGE

by Emily Behzadi*

With the musical chairs of museum and auction house directors moving from one institution to another, series of announcements about Miami art museums losing their directors in quick succession seems distressing. How important is it to have a director and how long can an institution survive with an interim leader at the helm?

A growing trend in museum management shows the likelihood of directors moving from one institution to another. However, this is particularly alarming as a large number of museums in Miami, one of the art world’s most prominent cities, have or will have concurrent current vacancies in 2015.

Over the past decade, Miami has become one of the premier destinations for contemporary art. Miami boasts several museums in its orbit, which cover a broad range of interests. However, four of Miami’s museums experienced directorship successions in the past year. On February 11, 2015, Suzanne Weaver, former-interim director of The Institute of Contemporary Art (ICA), stepped down just over four months after her arrival. The reason for her departure is a mystery. The Pérez Art Museum Miami (PAMM) has been without a director since March of 2014. Its past director, Thom Collins, stepped down last March to become executive director and president of the Barnes Foundation in Philadelphia. Furthermore, Cathy Leff, the former director of Florida International University’s Wolfsonian Museum, has been absent for nearly a year. Lastly, the Cisneros Fontanals Art Foundation (CIFO), is absent a director after Jesús Fuenmayor, who led the organization for less than three years, left.

With this news, a formidable question to answer is how important is it to have a director and how long an institution can survive with an interim leader at the helm. A director must wear many hats. He or she must be a shrewd business person, an art scholar, a teacher, a publicist and fundraiser. In today’s wavering financial climate, museum leaders are moving more to fields of business or administration than to the arts. A reason for this may be that museums are conspicuously trying to employ strategies to raise funds and widen their audiences.

The management’s knowledge and skill can be beneficial or detrimental to the health and survival of the museum. For example, the Corcoran museum faced a plethora of legal difficulties due to “peculiar and egregious mismanagement,” according to the Save the Corcoran (STC) coalition.  Some of Corcoran’s officers, such as the former chief operating officer, Lauren Garcia, were not trained and educated in the arts or museum management. Perhaps this is one of the many reasons the museum faced years of financial and management troubles before ultimately closing in 2014.

Furthermore, although many of the responsibilities of a director, such as overseeing the museum’s policies and assets, are shared with an institution’s trustees, the director has its own responsibilities. A director’s role varies according to the mission of the museum. The museum director’s role is not limited to the programming of the institution. The director has its hands in many aspects of a museum’s day-to-day operations. Although the board of trustees is important in evaluating a museum’s acquisitions and dispositions, a director acts as the figurehead and the chief administrative officer of the institution.

The director must not only see that the institution’s operations are running smoothly, but also must manage the trustees’ expectations and demands. Without a director at the helm to run the museum, the future of an institution is uncertain. This is evident in the case of CIFO, which is an institution that does not have a board of trustees or an endowment and relies solely on the management of a board of directors and the president.

Most notably, the director is in charge of fundraising. The director’s fundraising practices must be in compliance with the professional standards articulated by the Association of Art Museum Directors (AAMD). This includes avoiding any fundraising practices that could damage the public’s trust. The director serves as a figurehead at donor fundraising events and represents the museum to potential donors. Successful directors must be able to secure private funding in order to keep an endowment, which ultimately ensures the survival of the museum.

For example, PAMM’s absence of a director comes at an especially precarious time as its endowment is currently at $14 million, which is well below its announced target of $70 million. This is difficult because PAMM now must struggle to compete with ICA and Miami’s other institutions. Likewise, a vacancy at ICA is problematic because the institution needs a mouthpiece to obtain funding for its new facilities, which the museum purports will be ready by Art Basel 2016.

As briefly mentioned above, directors and the museums they govern must abide by a set of codes of ethics, policy statements and guidelines of the American Association of Museums (AAM) and the AAMD. The director is responsible for staff appointments, in which the AAMD emphasizes a director “should build and sustain a high level of morale and productivity.” If a director does not “[uphold] the highest standards of professional practice and ethical conduct,” he or she is subject to censure and or a sanction by the AAMD. For example, the former director of the Wolfsonian, Cathy Leff, was rumored to have left in April 2014 due to complaints of her creating a “hostile work environment” and inappropriate behavior towards her employees. If true, she and the museum may be subject to censure and/or sanctions by the AAMD.

Additionally, the AAMD holds the director responsible for the “daily monitoring of the institution’s compliance with laws and regulations. Legal matters that arise in the operation of the museum include those concerning the collections, exhibitions, personnel and labor relations, contracts, governance, finances, facilities, taxes, rights and reproductions, and events. The museum also has legal counsel, who is available to advise on general and specific matters. According to the AAMD, the board, the director, and general counsel all work together “to share current information about legal issues and legislation relevant to the institution and museum standards.”

A museum can face legal troubles if its management is not run correctly. The management of a museum relies on a director, a board of trustees and a curatorial staff. Museum trustees and some directors owe fiduciary duties to the museum in order to further its enumerated nonprofit and charitable purposes. These duties are divided into two categories: the duty of care and the duty of loyalty. A fiduciary’s duty of loyalty entails the obligation “to remain loyal to the purpose of the charitable or nonprofit organization.” Thus, the fiduciary must give to the public the benefit to which the entity earned its tax-advantaged status, i.e. the educational value of a museum. These purposes should be articulated in the organization’s incorporation documents and bylaws which the fiduciary must work to carry out.

The fiduciaries also have an obligation to exercise reasonable care and diligence in the management of the museum and its assets. If the fiduciaries fail to do this, they may be liable for negligence to the beneficiaries of the trust or for financial losses due to the mismanagement. This duty may be comprised of many aspects including the duty to take possession of and to protect the trust property, the duty to make the trust property productive through prudent investment, and in some cases, to sell trust assets to render the trust more profitable. For example, the Delaware Art Museum in March 2014 decided to sell up to four works from its collection, “to right its finances and save the museum from closing.” This is a particularly contentious issue because it is acceptable for museums to sell works of art in order to buy other works, however, selling works to pay for operations is regarded as an ethical violation. Issues may also arise in regards to the proper investment of institutional funds and accounting.

In the absence of a director, the board of trustees is responsible for operating the museum in a fashion that complies with its mission and incorporating documents. This may be especially hard to do if the director is in charge of the day-to-day tasks of an institution. The trustees may not be equipped to adequately complete these tasks. This is because although the trustees and the director share some of the same tasks and responsibilities, the trustees are only present intermittently. For example, the board carries full responsibility of investment policies, however, the director prepares the budget of the museum with the hands on knowledge of the museums daily expenditures. Thus, the fiduciary duties to the public could be breached in the absence of a director, putting the management of a museum into peril.

Sebastian Smee, Pulitzer Prize-winning art critic for The Boston Globe, claimed in an interview with Radio Boston, that directors cannot just be art lovers and scholars; they have to be visionaries and fundraisers. In the end, it is easy to conclude that directors are massively important to the management of a museum. Although they share responsibilities with the trustees and curators, they contribute to the funding and programming of an institution, which are two of the most important aspects of running a successful museum. The museum industry is self-regulated through its own membership in professional membership programs such as the AAM and the AAMD. Museums are self-regulatory in function; as such they have the discretion to determine whether in the absence of a director, they are complying with their individual organizations’ mission and purpose. The absence of a director may impact the prosperity of the museum and raise doubts among those benefiting from the public trust.  Again, this also depends on the contractual duties the board entrusted upon the director’s position.

Legal issues in Museum Administration are varied and few, if any, are specifically art related. The director’s duties are just one of many issues that lawyers in the field of art law will need to know to diligently represent potential clients in the museum administration profession. The annual conference on the subject of “Legal Issues in Museum Administration” (scheduled for DC in Spring 2015) will cover employee diversity, visitor access, fair use developments and trends, copyright (global and virtual), managing collections and financial challenges, social media and technology, authentication, museum mergers, tax and legislation updates, federal grants updates and strategies for gift agreements.

As for the museums currently without directors or with interim directors, best of luck with the interviews.

Select Sources:

About the Author: Emily Behzadi is a 3L at Georgetown University Law Center.

How do you solve a problem like Gurlitt?

By Irina Tarsis*

As Hollywood is celebrating the 50th Anniversary of “The Sound of Music,” set in Salzburg, Austria and the public release of “Woman in Gold,” a film based on successful legal actions to recover Nazi-looted art scheduled for release April 1, 2015, the Gurlitt saga continues to permeate the media and the legal scene. The News Wires are alive with the name of ‘Gurlitt,‘ and every related court decision and legal filing is music to our ears.

Screen shot 2015-03-27 at 2.19.12 PM

Cornelius Gurlitt (1932-2014), was born into a family of artists, art historians and musicians. He was a son of one of the four infamous art dealers who had been involved in sales of “degenerate art” and purchases of works for the Führermuseum in Linz, among other transactions during the Third Reich. In 2013, the story broke that Cornelius, who was under a tax investigation, inherited a large art trove of paintings, drawings and prints, split between his apartment in Munich, Germany and a house in Salzburg, Austria. The insiders of the German-speaking art world, and probably beyond, must have known of the collection, particularly since the 2011 Lempertz auction of the Max Beckmann’s “Lion Tamer,” that was stolen from Alfred Flechtheim during World War II and was consigned by Cornelius Gurlitt.

Having vacillated between refusing to part with his collection and agreeing to allow researchers access to determine provenance of the works, Gurlitt passed away in 2014. Reportedly, he reached an agreement with the German government regarding access to the art; however, in his Will, Gurlitt bequeathed the contested art collection to the oldest fine art museum in Switzerland, Kunstmuseum Bern. Validity of the Will was challenged by Gurlitt’s relative, Uta Werner, who reportedly had promised to make Gurlitt’s documents public.

On March 25, 2015, it has been reported that the German court reviewed the challenge to Gurlitt’s will and ruled it valid.

Only days earlier, in two separate instances, Monika Grütters, Germany’s culture minister as of December 2013, announced that she approved and signed restitution agreements to release two of the paintings, a Matisse and a Liebermann, that have been affirmatively determined months ago as to have been looted from victims of the Nazi prosecution. Matisse’s “Seated Woman” is expected to be returned to the heirs of Paul Rosenberg and Liebermann’s “Two Riders on the Beach” should be sent to the heirs of David Friedman. The agreements are expected to be approved with the Munich court that is in charge of the Will and thus the Gurlitt estate.

After much dissonance and delay, let the next movement in the Gurlitt concerto be more of restitution agreements and release of documents – “these are a few of my favorite things.”

Select Sources:

About the Author: Irina Tarsis, Esq., specializes in art law, provenance research and cultural heritage law. She may be reached at itsartlaw@gmail.com.

Disclaimer: This article presents general information and is not intended as legal advice.

The European VAT: Good for Tax Revenue, Bad for the Commercial Art Market?

by Elizabeth R. Lash, Esq.

As an American, one might be forgiven for assuming that Europe, with its traditional support for the arts (at least, as a cultural phenomenon), would be equally supportive in its tax regime for the same. While in some limited instances, the European Union continues to provide a more favorable regime for the independent artist, the trend towards an ultimately higher value-added tax (“VAT”) on the sale, import and export of artwork, particularly with respect to art sold by galleries and in the resale market, may discourage the growth of an EU-wide commercial art market in comparison with more favorable tax regimes outside the EU.

VAT was initially intended to be used as a single tax rate applicable to all goods and services across all European Union member states. While the standard rate was originally set at 15% in 2006, member states could theoretically request reduced rates in one or two categories, set at no less than 5%. In reality, as each member state negotiated the terms of its entry into the EU, the list of categories has expanded to at least 21, with rates above and below the standard rates (which already varies from 17% to 27%), along with multiple categories of rates below 5% (zero rates, “parking rates” (i.e., rates negotiated with entry into the EU), and super reduced rates). As well, categories of rates are inconsistently drawn, from too narrow to overly broad: it includes, among others, such categories as printed books, e-books, cultural institutions, household cleaning, sporting facility use, bicycles, and writers and composers.

When it comes to artwork, VAT rates vary widely, ranging from 5% (Malta) to 25% (Sweden) (although there is a reduced rate for independent artists’ sales). In addition, VAT may be calculated on the margin (i.e., the difference between the original sale price and the purchase price), instead of under the standard or reduced rate (whichever is applicable to artwork in that particular member state). In a number of member states, the VAT may be set at multiple rates: one for independent artists; another for galleries and dealers; and still another for the import or export of art.

Further complicating this picture, the EU Commission may not only pressure (or even sue) a member state as to the categories for which reduced rates are permitted, but may also regulate individual tax cases affecting artists and collectors. One example in particular is the Flavin case, whose outcome confounded the international art community (and sets an unfavorable precedent in future, similar circumstances). In 2006, a British gallery (named the “Haunch of Venison”) imported two well-known American conceptual artists’ sculptures: Dan Flavin’s light sculpture, and Bill Viola’s video installations. The former consisted of several tubes of fluorescent lights, while the latter consisted of several audio-visual productions playing on various projection screens. The British customs office imposed a 20% rate instead of the reduced 5% rate for artwork. However, upon appeal to the British VAT and Duties Tribunal (the “Tribunal”), the reduced rate was re-instituted in 2008.

But despite this local regulator’s final decision (with no further appeal by the parties to the EU courts), the EU Commission weighed in anyway with its own regulation, issued in September 2010, which specifically overturned the Tribunal’s decision, ostensibly to effectuate the uniform taxation rules on imported goods. The EU Commission found that it was not the installations themselves which constituted artwork, but the results of such installations, whether of the “light effect” of Dan Flavin’s light sculpture, or the videos screened on Bill Viola’s video installations. Thus, in effect, the EU Commission found that the installations should have been taxed just as if a hardware or electronics store had imported lightbulbs and video components. For conceptual artists, this represented a major blow to the sale in and import of their artwork into Europe.

Then take Germany. Germany formerly assessed a reduced VAT of 7% on sales of art (other than photography). However, due to pressure from the EU Commission, which had opened proceedings against Germany regarding this reduced rate category, Germany passed legislation to raise the rate to 19%, effective January 1, 2014 (Germany’s standard VAT rate since 2007). In response, German federal legislators passed a national directive that permitted the tax to be assessed on only 30% of the purchase price, relying in part on an exception to the VAT directive that had been used in France for several years. But the application of this directive was restricted less than a year later by the German states to artwork priced under 500 Euros, and a few other categories, essentially undercutting the law’s essential purpose—to provide a more favorable rate for the commercial art market. Meanwhile, artists selling out of their studios remain subject to the 7% rate. While this may be acceptable for those select artists who sell out of their own studios, it does not bode well for those who are represented by galleries.

In 2014, in another instance of muddying the tax waters, the French government increased VAT on the sale of art in France from 7% to 10%, while still permitting imports of non-EU artwork to be taxed at 5.5%. Only a year later, the French legislators acknowledged this inconsistency, and reduced the VAT on direct sales by French artists to 5.5%, effective January 1, 2015. Meanwhile, in Spain, the current VAT on artwork was raised from 8% to 21% in September 2012, initially as part of the general rate assessed on goods and services related to “culture.” Within a year, after much hue and outcry, Spain decreased the rate again to 10%. Meanwhile, in Italy, the VAT on the sale and import of artwork is still 22%.

The dust may eventually settle on the various VAT rates and their application, but the newest wrinkle is a regulation (Council Implementing Regulation (EU) No 1042/2013) which changes how VAT is assessed—from the place of supply to the place of purchase. While this does not affect traditional visual artists and sculptors, it does impact those who are considered to supply services or goods digitally to consumers—for instance, freelance website designers. The regulation, effective January 1, 2015, requires such businesses to assess VAT based on the country of the purchaser, rather than the VAT of their own country, placing yet another burden on artists in figuring out the application of VAT—even though the regulation was meant, in part, to apply to the likes of e-retailers such as Amazon.com.

In light of the fluctuations in tax rates and their applications, with the ultimate trend inching towards a uniformly high VAT rate, the art market looks nowhere near as enticing in the EU as it does in those countries and locales not subject to the vagaries of the VAT rate debate. In the U.S., for instance, no VAT exists (although, of course, the U.S. does have a sales tax), and there is no import duty assessed on original works of art. Hong Kong does even better—it has no sales tax, import tax, or export tax on artwork. To some degree, the numbers back this up: according to an annual study conducted by Arts Economics for the European Fine Art Foundation, in 2013, the U.S. accounted for 38% of the global market by value, while the EU as a whole dropped 3% points to 32%. (The UK ranked separately at 20%–perhaps not a surprise in light of its 5% reduced VAT rate on artwork, the Flavin case notwithstanding.) Moreover, in the EU itself, the numbers for those member states with the highest VATs declined or remained the same. And while Hong Kong and Singapore did not rank individually as the top winners in 2013 (having perhaps to do with factors other than VAT or customs duties), still, such figures may show in part the effect of applicable tax regimes.

Then there are the so-called “free ports,” located around the globe, which have become popular as a way to store works of art intended primarily as an investment. A free port is essentially a tax haven: artwork may be shipped directly to the free port, and as long it is stored there, VAT will not be assessed on the import. (Of course, once the work is shipped outside the free port to its new destination, any applicable tax will be assessed.) An additional benefit for potential purchasers (depending on the local laws applicable to the free port) is that VAT may not be assessed on any sales of artwork made within the free port—at least not until the artwork has left the free port. (So, hypothetically speaking, if a sale has been made, but the work never leaves the free port, VAT will never be assessed.) Arguably, the art fair Art Basel became popular just for that reason, having made its initial home base in a Swiss free port. As of right now, there are free ports located in Switzerland, Luxembourg, Singapore, and Beijing. (One of the best indications of how popular the Singapore free port has become is that Christie’s auction house now has an office located there.)

The EU Commission has previously expressed that VAT rates are not to be used to control social and economic policy in the EU, and clearly is increasingly attempting to pressure member states, whether through regulation, litigation, or other alternative avenues, to raise VAT rates to a uniformly high rate. However, in the face of global competition, one can only wonder what this trend may mean for the EU in the future as a major player in the commercial art markets.

 

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About the Author: Elizabeth R. Lash, Esq., serves as in-house counsel at Kroll, where she focuses on reviewing agreements relating to cyber security and data breach notification.

DISCLAIMER: This article was prepared by Ms. Lash in her personal capacity; the opinions are the author’s own, and do not reflect the view of Kroll Associates, Inc. or of its affiliates.