Spotlight on Art Law Instruction

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By Lesley Sotolongo

Art law is taught to different types of students in different forums – law school, undergraduate, graduate, continuing education, and now, even by prominent auction houses. Two popular auction houses that offer art law programs are Christie’s and Sotheby’s. In collaboration with the University of Glasgow in London, Christie’s offers an intensive fifteen-month Master’s program designed to provide their students insights and access to the art market. It is a program that explores the important ethical and legal aspects of working in the commercial art world while also teaching students about the history of art, including the arts of China, the arts of Europe, art style and design or modern and contemporary art.

An interesting component of the program is the opportunity for a work placement at Christie’s. For the 2013 – 2014 academic term, Christie’s admitted eleven students of nine different nationalities out of sixty-four applicants. The program is administered by two distinguished faculty members, The cost of attendance is approximately $53,000 and is offered in the course of three terms: Fall, September 29, 2014 – December 5, 2014, Winter, January 12, 2015 – March 20, 2015, and Spring April 20, 2015 – June 26, 2015. This program is designed for the student who is dedicated to developing a professional career working in the art market.

For those interested in studying in New York, Sotheby’s Institute of Art offers a Master’s in Art Business designed for students with a visual arts or art history background seeking an alternative to the traditional academic model and desire advanced study in arts administration. The program is a combination of rigorous academic instruction and experiential learning. Some of the core courses offered are business, law, marketing and finance. The core curriculum is supplemented with specialized modules such as appraisal techniques, gallery and auction operations, and art collection management. Travel to vital art world destinations and events is also a crucial component of the program providing a platform for students to directly learn from and interact with a broad spectrum of leaders in the art field.

Judith Prowda, Esq. is a full-time faculty member and this will be her seventh year teaching at Sotheby¹s Institute of Art. Prowda recently spoke with Center for Art Law about the Sotheby’s program. She noted that art law is one of the core, year-long courses in the Masters of Art Business program. Students from the two other programs (Masters in Contemporary Art and Masters in American Fine and Decorative Arts) may also take the course as an elective. The first semester focuses on commercial aspects of art and the second semester on ethics and policy. Prowda’s course generally follows the outline of her book, “Visual Arts and the Law: A Handbook for Professionals (Lund Humphries 2013).” She remarks, “our students learn not only legal principles essential to art professionals, but also their applications to current issues in the context of the evolving global art market.” Furthermore, each year the course follows the very latest emerging legal issues. For example, in the past few years the course has been following the most important developments in appropriation fair use cases, museum cases, Nazi-era art restitution, authenticity, artist foundations, and cultural property, to name a few. Prowda also includes a debate component on current policy issues, such as Artist’s Resale Rights, which is ripe for discussion with two bills pending in Congress and the recent New York State Art Authentication bill pending before the New York State Assembly. Prominent speakers from all corners of the legal sphere are also invited to speak, including artists, gallerists, auction counsel, museum counsel, government officials, lawyers focused on art restitution, estate planning, tax and fiduciary law, to name a few. Another wonderful aspect of Sotheby’s legal training is mock negotiations during the first semester. Within the first few weeks of class, in which the students are negotiating artist-dealer agreements, collector-dealer agreements, auction house consignment agreements, artist commission agreements.

In addition to the course itself, the students attend art law conferences, where they learn about the newest developments in the field and have the opportunity to meet lawyers, judges, State Department Officials, academics and other members of the legal community. Finally, a number of the students have published their Art Law paper in the New York State Bar Association¹s Entertainment, Arts and Sports Law Journal and other journals. The growing list of publications as well as examples of Master’s thesis on the library website at: http://nylibrary.sothebysinstitute.com/BibliographyOfSIANYAlumniPublishedWorks.pdf. If you are interested in the Sotheby’s Institute of Art program, it is offered in a combination of three semesters: September – December, January – May, June – October, or alternatively, September – December. Each semester’s tuition is approximately $21,981.

Other options include select art law courses and certificate programs for appraiser, law students, foreign students interested in earning their LLMs and even artists. Schools nationwide that offer art law programs such as Cardozo School of Law, Duke University, University of Pittsburgh, University of California, DePaul University, Miami University, and Tufts University. For example, the New York University School of Continued Education (NYU) offers a certificate in art business. Just to highlight the program, three required courses are: “Today’s American and International Art, Law and Ethics in the Art Markets and The Art Auction.” All three are offered at $450 per course. Alternatively, Fordham University offers The Art & Law Program, which is a semester-long seminar series with a theoretical and philosophical focus on the effects of law and jurisprudence on cultural production and reception. Other training opportunities are offered by practicing attorneys. such as the Art & Law Program founded by a former Volunteer Lawyer’s for the Arts Director of Education and Associate Director, Sergio Sarmiento. This program is now offered in collaboration with Fordham Law School. The Art & Law Program takes place in New York from mid-January to early May.

For those who claim that there is no such thing as art law, there is a wide range of training and learning opportunities happening on the subject. The programs highlighted above are just a few great educational resources for those interested in expanding their knowledge base related to law and the arts.

Sources:

Christie’s Education website

The Art Law office website.

Sotheby’s Art Institute’s website

*About the Author

Lesley Sotolongo, is a third year law student at Benjamin N. Cardozo School of Law. She may be reached at Lesley.Sotolongo@law.cardozo.yu.edu.

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

 

 

 

 

Restrictions on Ivory in the United States, U.S. Fish and Wildlife Service Director’s Order No. 210

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By: Chris Michaels, Esq.

Piano Keys, by Texasgurl
Piano Keys, by Texasgurl

The U.S. Fish and Wildlife Service recently enacted an order seeking to restrict the market for ivory in the United States; an action that may have unintended consequences. For example, in 2012, The New York Times ran an article noting that the market for upright pianos has plummeted in recent years. Formerly considered a “middle-class must-have” the cost of upkeep, coupled with the low cost of new electronic keyboards and foreign-manufactured uprights, caused many owners to discard their older upright pianos. Some of these relics of the past were outfitted with ivory – a material traditionally used to construct the keys. The resale of such ivory may now be subject to the newly enacted order.

While restrictions against the use and trade of ivory have been in place for years, there is an increased demand for ivory in emerging markets like China. In response to this trend, on 25 February 2014 the U.S. Fish and Wildlife Service (the “Service”), through Director Daniel M. Ashe, enacted Director’s Order No 210: Administrative Actions to Strengthen U.S. Trade Controls for Elephant Ivory, Rhinoceros Horn, and Parts and Products of Other Species Listed Under the Endangered Species Act. The Order was enacted to protect endangered species, namely African elephants, by regulating the ivory market in the United States. Specifically, it calls for strict enforcement of existing restrictions on the import, export, and interstate sale of ivory.

At first blush, the Service’s goal of protecting endangered animals through strict regulation of the market seems relatively straightforward. What is less straightforward, however, is the effect the enforcement of the restrictions will have on the sale of ubiquitous objects such as old musical instruments, chess sets, handguns, and other items that contain ivory. Until the new Order was enacted, these types of items could be sold within the United States with little concern for intervention by authorities. With the new Order in place it will become much more difficult to sell these items.

Pursuant to the Order, the interstate sale of ivory is strictly prohibited unless accompanied by an Endangered Species Act (“ESA”) permit. Transport is nonetheless allowed if the item can be qualified as “antique.” To comply with the “antique” exception, the importer, exporter, or seller must show that the object meets the following qualifications. The item:

  • Must be 100 years or older;
  • Must be composed in whole or in part of an ESA-listed species (of which there are approximately 2,140 endangered or threatened species under the ESA);
  • Must not have been repaired or modified with any such species after December 27, 1973 (the ESA was signed in to law by President Nixon on December 28, 1973); and
  • Is being or was imported through an endangered species “antique port.”

The specific “antique ports” include the following thirteen locations: Boston (MA); New York (NY) Baltimore (MD); Philadelphia (PA); Miami, (FL); San Juan, (PR); New Orleans, (LA); Houston, (TX); Los Angeles, (CA); San Francisco, (CA); Anchorage, (AK); Honolulu, (HI); and Chicago, (IL).

The ability to prove the above-mentioned criteria prior to a sale are extremely slim since the majority of antique ivory items lack provenance records.

In addition to restricting sales, the Order restricts the sale of musical instruments using ivory and also makes them difficult to import into the United States. The Order sets forth the following criteria that must be established in order to legally import the item:

  • It must have been legally acquired before February 26, 1976;
  • It must not have been subsequently transferred from one person to another person in the pursuit of financial gain or profit since February 26, 1976;
  • The importer must qualify for a Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”) musical instrument certificate; and
  • The musical instrument containing elephant ivory must be accompanied by a valid CITES musical instrument certificate or an equivalent CITES document that meets the requirements of CITES Resolution Conf. 16.8.

Similar restrictions are now in place for objects containing ivory imported for traveling exhibition purposes. In other words, museums and foundations seeking to exhibit collections with ivory will likely find themselves struggling to meet the requirements set out in the Order. In fact, they are more likely to opt out of exhibiting objects containing or made of ivory to avoid incurring additional costs and risks associated with the exhibition.

The sentiment behind the Order is certainly praiseworthy, but it remains to be seen whether the overall chilling effect on the market for ivory in the United States will actually curb the poaching of African elephants. It surely will not have a chilling effect on continued demolition of antique pianos; however, art loans are another matter altogether.

Sources:

About the Author: 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 518-421-7238, chriswmichaels@gmail.com, or on Twitter @CMichaels88.

Getty Seeks to Quiet Title of the Ansouis Diptych: Back to Legal Technicalities or End of an Era?

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By Emma Kleiner*

"The Stigmatization of St. Francis, and Angel Crowning Saints Cecilia and Valerian" (The Getty Museum)
“The Stigmatization of St. Francis, and Angel Crowning Saints Cecilia and Valerian” (The Getty Museum)

Employing a popular yet controversial legal tactic, in September 2013 the J. Paul Getty Museum (Getty), represented by Munger, Tolles & Olson LLP, sued in federal court in California seeking an order to quiet title to The Stigmatization of Saint Francis and The Crowning of Saints Cecilia and Valerian. Typically, this type of action is instituted to assert a party’s title to a piece of property, thus preventing claims by others to the property. If successful, any future legal action against the Getty by Geraud Marie de Sabran-Ponteves, the heir to the original owner of the work, would be barred.

In summer 2012, the counsel for Geraud Marie de Sabran-Ponteves, a French citizen, informed the Getty that its client was claiming to be the sole owner. Defendant Geraud Marie de Sabran-Ponteves alleged the artwork belongs to him as a component of a “long-running inheritance dispute”— a claim that the Getty asserts is erroneous. This lawsuit may be a test case for resuscitating technical defenses museums use seeking to keep works with disputed histories within their collections. Legal arguments like these are based on technicalities rather than the merits of a case, and the use of such arguments has a divisive history in the context of art title disputes.

For three decades, the Getty has prized The Stigmatization of Saint Francis and The Crowning of Saints Cecilia and Valerian, also known as the Ansouis Diptych, for being “a beautiful and well-preserved and devotional object” and “[u]nique in subject.”The Ansouis Diptych, currently valued at approximately $2.7 million, has been alternately attributed to a late fourteenth  century Avignon painter and to an early fourteenth  century Naples painter. The Getty purchased this work in 1986 from the Wildenstein & Company gallery, which in turn had purchased it five years earlier from the Sabran-Ponteves family. The Sabran-Ponteves family owned the Ansouis Diptych for generations. In fact, the work is traditionally interpreted as featuring Sabran-Ponteves’ ancestors in one of the panels. Geraud Marie de Sabran-Ponteves asserts that the sale of the artwork to the Wildenstein & Company gallery was unauthorized because the seller, his brother Charles Elzéar, offered it to the gallery without acquiring the consent of the other four siblings.

The Getty, however, is seeking an order to quiet title based on its purchase of the work in good faith and its display of the artwork prior to any legal claims arising. Furthermore, the Getty asserts that Geraud Marie de Sabran-Ponteves’ claims are barred by California’s statute of limitations. According to the Getty, Sabran-Ponteves was aware of the artwork’s location as early as 1987; he even contacted the Getty staff in 1999 about the artwork for the purpose of valuing his family’s estate. To sue in California within the statute of limitations, Sabran-Ponteves needed to bring suit within three to six years of locating the artwork, which he failed to do. In the alternative, the Getty asserts that it owns the artwork by adverse possession.

The tendency for a museum to seek an order to quiet title to an artwork, and the success of doing so in terms of outcome and public opinion, has waxed and waned over the last decade. It is informative to look at how museums have approached similar disputes regarding Holocaust-era assets because the legal techniques discussed above are frequently utilized in such lawsuits. For instance, in 2006 the Toledo Museum of Art filed suit to quiet title of Street Scene in Tahiti by Gaugin. Similarly, in 2006 the Detroit Institute of Art filed suit to quiet title of The Diggers by Van Gogh. In 2008 the Museum of Modern Art and the Solomon R. Guggenheim Foundation filed suit to affirm their respective ownership of Boy Leading a Horse by Picasso and Le Moulin de la Galette by Picasso on the basis that the original owners voluntarily sold the artworks. In 2009 the Museum of Fine Arts, Boston invoked the statute of limitations to affirm ownership of Two Nudes (Lovers) by Kokoschka, and the matter was resolved without reaching the merits of the case. Finally, in 2011, the Museum of Modern Art used a similar argument to affirm ownership of three works by Grosz. The tactical decision to use actions to quiet title and invoke statutes of limitations is readily seen through these examples, as in the dispute with Sabran-Ponteves.

Many museums, including those mentioned above, have received harsh criticism for opting for preemptive legal measures to settle title disputes, instead of conducting provenance research prior to the acquisition of the artwork or working with the individuals claiming rightful ownership of artwork. For example, Charles Goldstein and Yael Weitz, of Herrick, Feinstein LLP (NYC), write: “[M]useums, as institutions that function in a climate of ethical responsibilities, owe a duty to the public to maintain the integrity of their institutions,” which includes allowing for cases involving artworks with disputed histories to be litigated on the merits. Still, other scholars and practitioners argue that actions seeking to quiet title of artwork or actions based upon statutes of limitations are appropriate. For example, not all claims made by heirs of the former owners of artwork are meritorious, and such ought to be dismissed at an early stage of the dispute both to conserve museum resources and reduce the court docket. Furthermore, museums have the obligation to “take all reasonable steps to protect the assets they hold in trust,” including bringing suit to quiet title or invoking statutes of limitations. While scholars often times focus the discussion around Holocaust-era asset lawsuits, this debate readily reaches all situations in which a museum attempts to argue the technicalities rather than the merits of a case.

The controversy surrounding filing suit to quiet title and invoking statutes of limitations continues to influence the manner in which a museum chooses to claim ownership of contested works. In this case, the Getty already holds a controversial reputation due to its past legal problems and public repatriation battles. Now, the Getty took a public relations gamble in attempting to utilize the legal system to bar Sabran-Ponteves from bringing suit against it. Thus the anticipated resolution of this lawsuit by Judge Gary Feess may shed light on whether these legal tactics will continue to be favored or disfavored by museums.

Sources:

About the Author: Emma Kleiner is a student at Stanford Law School.

SPOTLIGHT: U.S. Immigration and Customs Enforcement

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By Lesley Sotolongo

ice

In January 2003, the U.S. Immigration and Customs Enforcement (“ICE”) bureau was established as an agency within the U.S. Department of Homeland Security (HSI) to refocus homeland security inspection and investigation functions. ICE prides itself on being the largest investigative arm within HSI, providing “unparalleled investigation, interdiction, and security services to the public and to our law enforcement partners in the federal and local sectors.”

Among its many investigative functions, ICE plays a leading role in criminal investigations that involve the illegal importation and distribution of cultural property, specifically, objects that have been reported lost or stolen. Cultural property is defined by HSI as “movable or immovable property of importance to a cultural heritage, society, or nation.”

ICE has a special program dedicated to the retrieval of stolen works known as, The Cultural Property, Art and Antiquities Program (Program), with the largest office consisting of approximately twenty-six special agents located in New York. These agents are tasked with ‘promoting goodwill’ with foreign governments and citizens, while significantly protecting the world’s cultural heritage and knowledge of past civilizations. Under the Program, investigators are assigned to domestic and international offices to partner with federal, state and local agencies, private institutions, and foreign governments. Federal importation laws give HSI the authority to investigate crimes involving illicit importation and distribution of cultural property and art. ICE agents use customs laws under 18 U.S. Code § 545, such as smuggling, entry, and trafficking of goods into the U.S. through false statements,to seize cultural property and art and return it to the countries of origin.

According to Interpol, the third most profitable crime currently in existence is the trafficking of cultural property. It is estimated to be a $6 – $8 billion a year industry. Statistics available about the ICE activities indicate that since 2007, more than 7,150 artifacts have been returned to twenty-seven countries, including paintings from France, Germany, Poland and Austria, historical manuscripts from Italy and Peru, and also cultural artifacts from China, Cambodia and Iraq. ICE keeps a comprehensive list of works returned by HSI available on its website entitled Fact Sheet.

ICE Works: Poland Case Study

Most recently, a painting by Johann Conrad Seekatz Saint Philip Baptizing a Servant of Queen Kandaki looted from Poland during World War II (“WWII”) was returned to the Polish Minister of Culture and National Heritage, Bogdan Zdrojewski in a ceremony held at the Polish Consulate on February 6, 2014. This painting was one of those removed from the national Polish Museum in Warsaw by Nazi soldiers sometime between 1939 and 1945.

polish

It is well known that during World War II, millions of artworks were displaced and looted. Efforts to recover looted art began as soon as the war ended and have continued into the present, with new discoveries (see Gurlitt) and new claims being filed regularly (see Picasso in Germany and Pissarro in Oklahoma). Poland was one of the nations whose cultural heritage suffered terrible losses during the war. Today, the Polish MInistry of Culture is engaged in a systematic campaign to find and return as many of the lost cultural valuables as possible. Like Poland, other countries catalogue wartime losses and recent thefts. Once a country becomes aware of a particular missing artwork’s whereabouts, the country may place the information on the Interpol database which notifies special agents to further investigate it.

In the case of Seekatz’s Saint Philip, U.S. special agents met with Polish officials who provided supporting documentation to assist in the identification and recovery of this painting. Specific efforts to recover this painting date back to 2006, when a painting matching the description of the missing “Saint Philip Baptizing a Servant of Queen Kandaki” surfaced at auction at Doyle New York Auctioneers and Appraisers in October 2006. The painting was consigned and auctioned under an erroneous name to Rafael Valls Gallery in London for approximately $24,000. Investigation persisted, however, and after completing its investigation, ICE agents informed the Rafael Valls Gallery that it was in fact the looted painting belonging to Poland. ICE agents seized the painting in London and brought it to New York were it was repatriated to Poland. In summary, the investigation and return occurred over a period of seven years.

Seekatz’s painting is not the first Polish-owned artwork to be recovered by ICE. The agency spent years investigating other Polish wartime losses; it has repatriated three more works to Poland throughout the years of the Program’s existence including a Polish army pre-1939 Regimental Standard (Banner) and two Julian Falat paintings, The Hunt and Off to the Hunt also known as Before Going Hunting in Rytwiany. Moreover, ICE continues its mission of preserving cultural property and encourages anyone with further information to reach out to its agents. For more information please visit the ICE website at: www.ice.gov.

Those interested in working for ICE are encouraged to apply to its Presidential Management Fellows Program. Graduate students from any academic discipline who are expected to complete an advanced degree (i.e., master’s, law, or doctoral degree) from a qualifying college or university by August 31 of the current academic year are eligible to apply to the program. The ICE also has internships and a recent graduates program.

Sources:

ICE News

The Cultural Property, Art and Antiquities Investigation

ICE Fact Sheet

ICE Homeland Security Investigations: Efforts to Combat Illicit Trafficking in Stolen Art, Antiquities, and Cultural Property

DHS, “Border Reorganization Fact Sheet” (Jan. 30, 2003), available at http:// http://www.dhs.gov/dhspublic/interapp/press_release/press_release_0073.xml (announcing creation of ICE).

Images:

ICE

NY Daily News

*About the Author

Lesley Sotolongo, is a third year law student at Benjamin N. Cardozo School of Law. She may be reached at Lesley.Sotolongo@law.cardozo.yu.edu.

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

Gurlitt Saga Continues: U-Turn or Rotary?

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By Steffanie E. Keim*

Children should not be punished for the mistakes of their parents. Sometimes it gets difficult to determine where mistakes of the parents end and new mistakes, those by their children, begin. The international art community is continuing to look at the Gurlitt saga with great interest, not the least because of the mistakes that have been made in handling the art collection that Cornelius Gurlitt inherited from his father Hildebrand Gurlitt, the German art historian and art dealer who traded in “degenerate” and other art during the Nazi era, but also because of the glacial pace the entire process by the authorities has taken. More than 1,000 works of art were seized in the Munich apartment of art collector Cornelius Gurlitt in 2012 and the ongoing controversy surrounding the case has been widely publicized and reported on since November 2013. (See our original report; as well as an update WhoisGurlitt.info).

Now, there seems to be some new movement in the controversy regarding Gurlitt’s art collection. The German television news service Tageschau reported that Christoph Edel, the court appointed custodian of Gurlitt announced that his client plans to return all works of art which have been stolen or looted from Jewish owners. Concerned observers, including Nicholas O’Donnelle, a litigator and editor of the Art Law Report have already asked who will draw the line between what constitutes “stolen” and “looted” works and those that were just taken or sold under duress.

An agreement in the ongoing negotiations with the descendants of the Jewish art dealer Paul Rosenberg regarding the return of the portrait “Sitzende Frau” (Sitting Women) by Henri Matisse, which is valued in excess of $10 million, and is in custody of the Office of the Public Prosecutor in Augsburg, is expected shortly.  This work of art was looted by the Nazis and was part of the art collection of Herman Goering before it eventually came into possession of the Gurlitt family.  Rosenberg himself and his heirs have pursued the restitution of Rosenberg’s art collection since 1945 and been able to reclaim and re-purchase scattered pieces from his pre-war collection.

According to Edel, further restitution can be expected in the coming weeks as Gurlitt has apparently expressed that he has no interest in retaining art works which have been looted and has given the custodian full discretion regarding the return of works which are verifiably looted. Dr. Hannes Hartung, who had been in charge of negotiating possible restitutions was relieved from his mandate on 26 March 2014, with immediate effect (as reported by the Wall Street Journal on 28 March 2014 by Edel) and future claims are to be are directed to Gurlitt’s court appointed custodian Edel.

In connection herewith it has also been announced, that the collection found at Gurlitt’s Salzburg house, which was initially estimated to contain sixty works is now estimated to contain 238 nineteenth century and classical modernity works, including oil paintings, drawings and sculptures by Monet, Renoir, Manet, Gauguin, Toulouse- Lautrec, Liebermann and Cézanne as well as long missing painting by Jean Desire Gustave Courbet “Portrait of Monsieur Jean Journet” (1850). The art trove has been removed from Gurlitt’s Salzburg house at Carl-Storch-Strasse 9, which was listed as his main residence with the registry office and were he resided for many years, and where he and his art work went as unnoticed by his Salzburg neighbors and galleries as he has been in Munich, where he lives in an apartment, which he shared with his mother until her death.  The Salzburg home has been uninhabited and neglected for years, as were the paintings, drawings and sculptures hidden inside.  The art works, some of which are in poor condition have been removed from the premises for safekeeping and cleaning and are currently stored at an undisclosed location in Austria.

Gurlitt art works stored in secret location (still from the news reel).
Gurlitt art works stored in secret location (still from the news reel).

Gurlitt’s statements and actions continue to be ambiguous and even contradictory.  While he has given a group of journalist access to the art trove and allowed for filming and photographing of some works he continues to refuse to release a list of the collection found in his Salzburg residence.  Although he has vowed to return stolen or looted art works, Gurlitt currently insists on retaining experts himself to research the provenance of the works discovered in Salzburg and promises to publish the findings.  However, the identity of the experts, the timing of their retention, and when the results of such provenance research would be released to the public remains unclear and would be entirely in Gurlitt’s discretion.

Rüdiger Mahlo, the representative of The Jewish Claims Conference in Germany and other Jewish organizations have requested that independent researchers determine the provenance of the works and have insisted that the art trove be made public so Holocaust survivors or their heirs can file claims.

The reactions to and assessments of Gurlitt’s motives in agreeing to return stolen and looted artworks to the heirs of the rightful owners are polarized, as some believe that it might be an expression of goodwill while others believe he is yielding to public pressure or that he may not be as forthcoming as he claims to be since by controlling the process he may very well be controlling the outcome.
It remains to be seen if actual progress is being made in this case or whether it is merely the debate that has shifted from Gurlitt questioning whether he should return any works of art to his pledge to return works of art he considers stolen or looted.  As the story continues to unfold, the chain of events demonstrate that predicting Gurlitt’s next steps remains as elusive and unknown as the man himself and his collection have been for the past decades. For now the collection found and seized in Gurlitt’s Munich apartment in March 2012 demonstrate the contrariness of Gurlitt – while part of the collection has been digitized and posted on the German website lostart.de, it is being juxtaposed by charges filed by Gurlitt claiming the illegal seizure of this collection.

Senior Public Prosecutor in Augsburg, Reinhard Nemetz has made clear however, that while cooperation and reparation by the suspect are being taken into consideration, the investigation will continue and that no plea bargain will be accepted in exchange for restitution of art works.

Postscript: The public rediscovery of the Gurlitt collection raised many questions about how German civil and criminal laws deal with restitution matters. Further, the ongoing search for thousands of missing works has even prompted a new wave of provenance research investigations. Sadly, governments continue to make mistakes when faced with and concerning restitution issues. The Bavarian Department of Justice has admitted to making mistakes in response to the tedious piecemeal handling of the Gurlitt case. Michael Grauel, the Head of the Cultural Committee of the Bavarian Parliament declared that in hindsight things could have been handled differently and better.  While the remarks were introspective, the complexity of the case and the fact that legal authorities are not provenance experts was also noted.  According to Grauel a simultaneous search of the two Gurlitt’s residences, one in Munich, Germany, and the other in Salzburg, Austria, was planned at the time the initial search in Munich took place.  However, the prosecutor’s office in Salzburg denied the German petition for international administrative assistance in the search claiming at the time they received the request that the minimum amount of 100,000 Euros required to authorize such international administrative assistance had not been established.

In a related decision, the Bavarian Higher Administrative Court denied the request for temporary relief from a journalist who had sought information about the Gurlitt collection. According to the order of March 27th, 2014 [Bayerischer Verwaltungsgerichtshof, Beschluss vom 27.03.2014 - 7 CE 14.253], the prosecution in the Gurlitt case will not be “required to hand over a full list of the artworks as well as their dimensions.” since, the public interest does not sufficiently outweigh the confidentiality interest of Gurlitt in his collection and thus does not merit a grant of the temporary injunction. While to-date, less than half of the Gurlitt collection has been digitized and made available to the public via lostart.de website according to the court the journalist does not suffer unreasonable harm by awaiting a decision in the main proceedings. While this decision certainly is frustrating, since so long as the entire collection is not listed and reviewed by provenance researchers, it will be hard to guarantee that all artworks with questionable provenance will have an opportunity to return to their rightful owners, it is a very fact specific decision and faces the heightened pleading burdens of summary proceedings. This decision however does not preclude a different outcome in the main proceedings or even in a request for temporary relief by a different plaintiff with a legitimate interest (possibly the owner of an art work already listed on the lostart.de website who may have further claims regarding art works not yet listed.)

Sources:

*About the Author: Steffanie E. Keim is admitted to the bar in New York and Germany and is practicing law and pursuing her interest in art law in New York. She may be reached at 917-669-2514 or steffanie.e.keim@hotmail.com

Muses in Bankruptcy Court: a look at US arts and cultural institutions finding themselves in bankruptcy and out

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By Lesley Sotolongo.

Cultural institutions rely on both public and private funding to keep their doors open, however, public funding has become increasingly more difficult to obtain. For example, in 2013, the National Endowment for the Arts (NEA) with a budget of $138.383 million, awarded 2,153 grants totaling $112.734 million to the arts. On March 4, 2014 President Obama released his fiscal year 2015 budget request of $146.021 million for the NEA, the same amount as the current year’s budget. In response to this announcement, Senior Deputy Chairman Joan Shigekawa stated “[i]n these challenging economic times, it is heartening that President Obama has put forward level funding for the National Endowment for the Arts, allowing the NEA to continue our mission of providing all Americans opportunities for arts participation.” The effects of recent events – such as the government shutdown – has led to budget sequestrations visible throughout the US, as private and public sectors are faced with massive deficits. Consequently, arts and cultural institutions, for profit and nonprofit, that cannot operate within their existing contracts and obligations are finding themselves in Bankruptcy Court.

The requirements under US bankruptcy laws vary depending on the type of entity seeking to file. Common filings for nonprofit applicants are made under Chapter 7 (11 U.S.C.A. § 707) or Chapter 11 (11 U.S.C. § 1109). These sections of the US Bankruptcy Code allow nonprofit organizations to eliminate or repay their debts under the protection of the federal court. Specifically, filing a Chapter 7 bankruptcy allows the entity to liquidate property in order to pay back debt, except for property that is protected by state law. On the other hand, filing a Chapter 11 bankruptcy permits companies, including nonprofits and individuals, to reorganize, cut debt, and continue operating. In other words, Chapter 7 is used to wind down operations while Chapter 11 is used for restructuring purposes. A restructuring plan reorganizes the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. All organizations seeking to restructure their debt must offer a valid reorganization plan under the governing bankruptcy law and also receive approval from the bankruptcy judge assigned to the case.  Government owned entities, privately owned businesses and individuals have different filing requirements.

Applicants seek bankruptcy protection for a variety of reasons, but regardless of the motive, bankruptcy filings raise important questions regarding the utility of a bankruptcy filing as an effective means of dealing with outstanding liabilities or debt. Issues unique to nonprofits that may arise in bankruptcy cases can range from the nonprofit’s eligibility to file for bankruptcy to more complex matters concerning what assets are properly included as part of the debtor’s bankruptcy estate. Another concern for nonprofit arts organizations in Chapter 11 cases concerns a workable exit strategy, especially if debt repayment funding depends on donor contributions. The guiding case law on this issue stems from a recent Fifth Circuit decision In re Save Our Springs (S.O.S.) Alliance Inc., 632 F.3d 168 (5th Cir. 2011). In that case, the court affirmed the denial of a nonprofits Chapter 11 plan because “voluntary pledges [from donors] alone are too speculative to provide evidence of [plan] feasibility.”  This is relevant because pursuant to Section 1129(a)(11) of the Bankruptcy Code, a reorganization plan may be confirmed only if it meets the feasibility requirement – that there is a “reasonable assurance” of its success.  The following four case studies illustrate notable art/cultural profit/nonprofit bankruptcies filed from 2007 to now.

Case study - Salander-O’Reilly Bankruptcy

To start, one of the biggest arts related bankruptcies to make the news in the last decade was the Salander-O’Reilly bankruptcy in 2007. Gallery owner, Lawerenc Salander was involved in fraudulent business practices and admitted to selling artworks that he did not own while keeping the proceeds of those sales. He allegedly exchanged the works to satisfy outstanding debts; solicited investments to purchase artworks or shares in artworks that he then improperly resold to other clients; and then failed to inform or pay consigners when their works were sold. The gallery filed bankruptcy with many creditors filing claims. Ramifications of this case were felt throughout the art market, as these fraudulent sales affected private owners, artists, gallerists and auction houses, as well as the gallery creditors. The mess created by Salander even precipitated legislative changes in New York State and an amendment to the Arts & Cultural Affairs Law, N.Y. Arts & Cult. Aff. Law § 12.01 (2012). This amendment affects the consignment relationship, which creates critical new duties and liabilities for art dealers operating on consignment. Most importantly, it makes using any form of agreement drafted under the old law risky, particularly for the gallery or consignee. The amendment was made as an effort to protect artists and their families consigning art in bankruptcy proceedings.

Case Study - The Philadelphia Orchestra  

April 2011 marked the first time a major US orchestra filed for bankruptcy protection. The Philadelphia Orchestra was formed by Fritz Scheel in 1900 and is based at the Kimmel Center for the Performing Arts. The Philadelphia Orchestra’s board of directors voted in 2011 to file for Chapter 11 reorganization due to the organization’s large operational deficiency. The United States Bankruptcy Court for the Eastern District of Pennsylvania’s Honorable Eric Frank reviewed personal and real property assets of the Philadelphia Orchestra, totaling approximately $15.9 million with liabilities to creditors at approximately $704 million. (See Schedules). Ultimately, US Bankruptcy Judge Eric L. Frank approved the association’s reorganization plan 28 June 2012 and the Philadelphia Orchestra was able to emerge from bankruptcy. Specifically, it reduced its orchestra size by about 10% from 105 musicians to 95 and also cut their salaries by about 15%.

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Case Study – New York City Opera 

Another important cultural institution filing for bankruptcy under Chapter 11 in 2013 was the New York City Opera (Opera). The Opera was founded in 1943 with the purpose of making opera accessible and as a center for American composers and singers.  By 2011,  The dwindling opera company began facing financial difficulties and ultimately filed in October 2013 an application in United States Bankruptcy Court in the Southern District of New York documenting assets worth $7.7 million and liabilities of $5.6 million. According to the Court papers filed by the Opera, represented by Anne M. Aaronson of Dilworth Paxson LLP, the Opera is evaluating the restrictions on its approximately $4 million endowment fund, generally, protected from creditors. Ultimately, the fate of the Opera rests in the hands of the bankruptcy judge. The New York City Opera serves as an example of the struggle faced by the art community given the fact that the Opera is  one of America’s pre-eminent cultural institutions forced to make the difficult decision of filing for bankruptcy protection in order to remain open.

Case Study – Detroit and the Detroit Institute of Arts

Most recently, the City of Detroit (Detroit) filed Chapter 9 bankruptcy protection on 18 July 2013, with a calculated $18 billion debt. This development set off a ripple effect with adverse impact on the Detroit Institute of Arts (DIA).  In 2003, the DIA was ranked as the second largest municipally-owned museum in the United States, with an art collection valued at more than one billion dollars. Its collection is regarded as one of the United States most significant art collections.

Detroit filed for Chapter 9 bankruptcy, because of its status as a municipality. The threshold requirements for a Chapter 9 bankruptcy petition include i) demonstrating insolvency and a desire to effect a plan of debt adjustment, and ii) negotiating, attempting to negotiate, or establishing the impracticality of negotiating, in good faith with creditors holding a majority of interest in claims.

In light of the significant debts owed by the Detroit to its pension plans and its other creditors, the city considered the option of selling artwork from the DIA in order to climb out of debt. Creditors consider the entire collection to be worth billions of dollars.  Christie’s Inc. conducted an appraisal of the museum’s collection based the report commissioned last July by Detroit emergency manager Kevyn Orr. The report contains 2,773 individual pieces totaling in the appraised value ranging from $454,277,995 to 866,997,240. Notably, all of these works were acquired with funds provided by Detroit over the course of the museum’s history. Christie’s appraisal was made available to the public in December 2013. (See News).

As recently as 22 January 2014 Detroit’s creditors were battling in court for the sale of the art. Bankruptcy Judge Steven Rhodes raised questions about whether he would even allow the sale of the museum’s art to settle city debt, emphasizing that he had not made up his mind on the matter yet.  The public outcry that erupted at the suggestion of selling the collection triggered an immediate response by the DIA. The Detroit Institute of Art announced that it would raise $100 million to help save itself. The museum has reached out to corporate leaders in Detroit that have committed to a multiyear effort to help with fundraising as a way to protect its collection. Private foundations have already pledged $370 million toward the effort. A condition of the deal is that Detroit would relinquish ownership of the museum, and instead, it would be owned by a nonprofit organization, as most large public museums across the country are. This would relieve the city of any future financial responsibility for the Institute while also shielding the institute from future municipal threats.

However, the courts must first approve this plan. On 24 February 2014, Judge Rhodes proposed a hearing to decide whether to approve the city’s plan of adjustment starting on 16 June 2014 and possibly extending to June 17-20 and June 23-27. This timeline for approval of the city’s bankruptcy plan may potentially limit the bickering and force all sides to negotiate and propose concessions.

Conclusion 

The term ‘bankruptcy’ is imbued with stigma, in part because of the embarrassment of having financial woes made public, and also because of the looming threat of closure. Bankruptcy is also dreadful because of the complicated legal proceedings. What is important to remember about bankruptcy is that filing for it may be a helpful and smart move for struggling institutions as it halts all creditor collection activity and legal proceedings in regards to the debt. Like swallowing a bittersweet pill, filing for bankruptcy may be the last resort used to save an organization from permanently closing its doors.  Sadly, not every organization can be saved through the bankruptcy proceedings. New York dance studio, the Dance New Amsterdam Ballet, is an example of this, unable to restructure its debt and was as a result forced to enter a settlement with its creditors and closed its doors on in September 2013.  The public is thus, encouraged to donate to the arts so that similar institutions do not become bankrupt, while arts organizations are encouraged to familiarize itself with US bankruptcy laws.

Sources:

  1. See http://www.usatoday.com/story/news/nation/2014/01/22/detroit-bankruptcy-institute-of-arts/4771613/ (accessed March 2014).
  2. See http://www.huffingtonpost.com/2011/04/16/philadelphia-orchestra-bankrupt_n_850133.html  (accessed March 2014).
  3. See http://www.bbc.com/news/entertainment-arts-19078179 (accessed March 2014).
  4. See http://articles.latimes.com/2013/jul/24/entertainment/la-et-cm-nea-funding-20130724 (accessed March 2014).
  5. See http://arts.gov/news/2014/president-obama-releases-fy-2015-budget-number-national-endowment-arts (accessed March 2014).
  6. See 11 U.S.C. § 1109 (West).
  7. See 11 U.S.C.A. § 707(b) (West).
  8. See http://www.philly.com/philly/blogs/entertainment/fine_arts/Philadelphia-Orchestra-Association-exits-bankruptcy.html (accessed March 2014).
  9. See http://dnadance.org (accessed March 2014).
  10. See 57 A.L.R. Fed. 2d 121 (West 2013).
  11. See In Re Philadephia Orchestra Association, No. 11-13098 (E.D. Pa. 2011).
  12. See http://www.uscourts.gov/FederalCourts/Bankruptcy/BanruptyBasics/Chapter11.aspx (accessed March 2014).
  13. See http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.95n8ZwIPv8
  14.  See http://www.lexology.com/library/detail.aspx?g=d2242f36-7bbe-4c28-afc2-283cc5869fee
  15. See http://www.artnews.com/2010/07/01/untangling-the-salander-mess/

*About the Author

Lesley Sotolongo is a third-year law student at Benjamin N. Cardozo School of Law and may be reached at Lesley.Sotolongo@law.cardozo.yu.edu.

Basquiat sightings, or Case Review: Heriveaux v. Christies, Inc.

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By Chris Michaels, Esq.*

Born in Brooklyn, NY in 1960, Jean-Michel Basquiat was a contemporary American artist, who started his career as a graffiti artist in the mid-1970s working in and around the Lower East Side of Manhattan. He gained popularity in the art world in the early 80s when his first solo art show opened in 1981. It was also in 1981 that Artforum magazine published a feature on Basquiat, effectively bringing his work into the mainstream. Basquiat’s art received widespread critical acclaim and in 1985 The New York Times Magazine featured the artist on their cover. Three years later, Basquiat died of a heroin overdose in 1988 at the age of 27. His popularity continued and grew after his death; today Basquiat’s work continues to bring in huge sums at auction. For example, in May of 2013 his painting, Dustheads, sold for $48.8 million at auction.

Basquiat’s “Dustheads,” which recently sold at auction on May 15, 2013 for $48.8 million:
Basquiat’s “Dustheads,” which recently sold at auction on May 15, 2013 for $48.8 million.

After the artist’s death, his estate established a committee to review and determine authenticity of works thought to be Basquiat. The authentication work was directed by the artist’s father, Gerard Basquiat, with assistance from a former curator of American Art at the Whitney Museum. As of September 2012, the authentication committee disbanded. (Read our report on the phenomenon of closing authentication committees here.)

Basquiat’s estate is currently administered by his sisters, Jeanine Basquiat Heriveaux and Lisane Basquiat, who in their roles as administrators are currently suing the Internal Revenue Service, alleging that their brother’s estate was overvalued. (Read: Untitled but Taxable.) The sisters took over the suit, which was originally filed by their father Gerard, after Gerard died. The origins of the IRS suit began when Sotheby’s originally valued Basquiat’s mother’s half of the estate at $36 million. Death taxes were paid by Gerard using the Sotheby’s valuation of the estate. The IRS, however, later valued the estate at $138 million, significantly increasing the amount of death taxes owed by the estate, and imposing nearly $2 million in penalties. The IRS suit is on the docket for a hearing by the United States Tax Court in April of 2014.

With April only weeks away, on 4 March 2014, Basquiat’s sisters filed a claim against the auction house Christie’s, Inc. (“Christie’s”), alleging it was attempting to sell inauthentic Basquiat items. The Complaint concerns publication Christie’s 148-page sales catalogue entitled “Jean-Michel Basquiat: Works From The Collection of Alexis Adler.” The catalogue was published in mid-February 2014 and was created to publicize the auction house’s March 2014 sale of approximately 50 items that Christie’s attributed to/listed as created by Basquiat.

UNTITLED (FLAG), one of the works attributed to Basquiat which was to be sold by Christie's before the case.
UNTITLED (FLAG), one of the works attributed to Basquiat which was to be sold by Christie’s before the case.

The source of the collection featured in the catalogue purportedly comes from Alexis Adler, a woman with whom Basquiat had a relationship and lived with for time between 1979 and 1980 in New York. The collection that Christie’s accepted on consignment for sale was allegedly left behind by Basquiat in the apartment he shared with Adler.

Prior to the catalogue being published, in 2007, Adler attempted to have seven items in her possession authenticated by the Estate’s Authentication Committee. At the time, six out of the seven items were, in fact, determined to be authentic Basquiat works. Nevertheless, according to the Complaint, at no time did Adler or Christie’s attempt to authenticate the rest of the items in her collection.

If, by way of example, Christie’s had in fact submitted the collection to the Estate for authentication and it declined to authenticate some of the items, a proposed New York State bill, if passed, would afford the Estate greater protection if Christie’s then decided to sue for improper/negligent denial of authenticity. Proposed New York State legislation, §13.04 of the New York Arts and Cultural Affairs Law, outlines specific protection for people or entities that qualify and are sued as “authenticators.” Under the bill, an “authenticator” is defined in two ways: 1) “a person or entity recognized in the visual arts community has having expertise on the artist or work of fine art with respect to whom such person or entity renders an opinion in good faith as to the authenticity, attribution or authorship of a work of fine art”; or 2) “a person or entity recognized in the visual arts community or scientific community as having expertise in uncovering facts that serve as a direct basis, in whole or in part, for an opinion as to the authenticity, attribution or authorship of a work of fine art.”

Notably, under the proposed bill, an authenticator shall not include “a person or entity that has a financial interest in the work of fine art for which such opinion is rendered. . . .” The proposed bill does, however, allow for an authenticator to be compensated for their efforts relating to their authenticating a work.

Untitled (We'll Get You Next Time), work attributed to Basquiat, listed in the Christie's catalog.
Untitled (We’ll Get You Next Time), work attributed to Basquiat, listed in the Christie’s catalogue.

Under the proposed bill, if a suit is brought against an authenticator that relates to the authenticator’s opinion concerning a work of art, the claimant must: 1) specify with particularity in the complaint facts sufficient to support each element of the claim or claims asserted; and 2) prove the elements of the claim or claims by clear and convincing evidence. As further protection for authenticators in civil claims, if the authenticator prevails in the action, he, she, or it may recover reasonable attorney’s fees, costs and expenses.

When the catalogue for the online auction was published, however, a notice on the last page was included which read, “All artwork by Jean-Michel Basquiat: © 2014 the Estate of Jean-Michel Basquiat/ADAGP, Paris/ARS, New York.”

In the Complaint, Basquiat’s sisters allege that Christie’s included the above-mentioned notice to deceive potential bidders into thinking that all of the items for sale were authenticated by the committee. In addition, plaintiffs/or their first names allege that Christie’s included the notice to increase the auction prices in order to maximize its revenue from the sale. At the time, the Complaint noted that allowing the sale to continue would serve to damage the Basquiat Estate by putting into the marketplace items of questionable authenticity, which will in turn decrease the value of works actually created by Basquiat.

The plaintiffs in this case are seeking, among other things, a minimum of $1 million in damages and injunctive relief restraining Christie’s from using the Estate’s name in any credits without the Estate’s prior written consent. Plaintiffs’ claims for relief include, but are not limited to, false endorsement, false advertising, deceptive trade practices, and unfair competition.

Plaintiffs are represented by Cinque & Cinque, P.C. law firm in New York. Christie’s has yet to enter its appearance. However, on March 9, 2014, Christie’s postponed the Basquiat auction pending the outcome of this case. No amended complaint was filed as of March 24, 2014. An Initial Pre-Trial Conference is scheduled for May 2, 2014.

Sources: 

About the Author: 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 518-421-7238, chriswmichaels@gmail.com, or on Twitter @CMichaels88.