Post Co-Authorship and Past Congeniality: Creative Relationship Spoils

By Colby A. Meagle*

Screen Shot 2017-06-28 at 10.51.01 AMSynergy is the sharing of talent and ideas, the combining of two or more minds in order to produce a product superior to anything one is capable of creating alone. Partnerships may look like a constructive arrangement, one where everyone benefits, and maybe that is the case at the beginning, but what happens when the relationship falls apart? What is the consequence of that fleeting love affair, or late night bar fight? In the context of art law and partnerships dissolving, who gets custody of the “kids”, a.k.a. the artwork? Artists are romanticized for their passionate relationships that include both personal and work related matters. But all too often these fiery affairs go up in flames and the issues of authorship and ownership are brought front and center. The following is a review of three recent legal battles that have highlighted these difficulties, as well as a brief discussion on the prominent applicable laws that underlie the arguments.

Cases & Controversies

In a pending case Chan v Schatz, authorship is in dispute.  Generally, to determine if work has been co-authored courts look at the intention of the parties to create a joint work. If the intent is lacking, it is likely not a joint work, but they also consider if there were substantial contributions made to the work, and the extent of control exerted over the work (Aalmuhammed v. Lee). Artist Eric Chan, well known for his abstract paintings and sculptures, is in the midst of a divorce from Heather Schatz. The split has prompted him to take precautionary actions by filing suit for a declaratory judgment naming him the sole creator of his works, therefore excluding Schatz from a co-authorship claim. He, represented by Lindsay Elizabeth Hogan of Grossman LLP, and she, now represented by Andrew Berger of Tannenbaum Helpern Syracuse & Hirschtritt LLP, were married in 1992. The suit encompasses 1139 works created during the span of their quarter century marriage.

While Chan and Schatz lived and worked together Schatz appears to have provided assistance in managing the studio. While Chan admits Schatz occasionally provided advice, and suggested concepts for pieces, he maintains in his complaint that, “her contributions were not themselves fixed independent creative expressions.” Furthermore, Chan “never intended that [his wife] would be his co-author,” rather, throughout the entirety of the relationship his understanding was that he was unequivocally the sole author of his works. This is despite the fact that the work was and is displayed under the joint name “ChanSchatz,” which he claims was merely a homage to his relationship and love for his wife.

However, Schatz feels differently. She asserts that her contributions were significant, as proven by the use of the joint name and their long history of working together publicly. As such, Schatz feels entitled to be credited as a co-creator of the work. So, while Chan maintains there was no intent for co-authorship, Schatz claims that her contributions were material.  

Chan is seeking to resolve this controversy by approaching the court for a declaratory judgment “that he is the sole author of all of the Chan Works” (Chan Complaint). A ruling in his favor would grant him status as the only author, and to full intellectual property rights over the art. Conversely, if the court side with Schatz, then the rights and credits will be shared between the two now-estranged lovers. The case is to be tried to a jury, with amended complaints due in July, 2017.

Another couple that frequently appears in the public eye, Marina Abromović and Frank Uwe Ulay, have also faced their fair share of legal issues. Following their tear-jerking reunion at Marina’s retrospective, Ulay filed suit as a citizen of Holland in Dutch courts in retribution for a breach of contract relating to joint works created before the duo’s split in 1988. Ulay was eventually awarded twenty percent of the net sales of their work by Amsterdam courts, in accordance with the contract they signed in 1999, along with legal fees and backdated royalties (theguardian.com). Abramovich v Ulay highlights how important it is for artist couples to document their arrangements. Without the contract, Ulay would have faced a more difficult legal battle in the pursuance of receiving fair compensation for his contributions.

Payment was not the only issue addressed in the Dutch filings:  attribution for future displays and documentations was also resolved. The question of whose name comes first may seem insignificant, but to many artists it is of the utmost importance, marking one as superior or more influential if named first. The courts decided that works from 1976 to 1980 be listed as by “Ulay/Abramović” and those from 1981 to 1988 as “Abramović/Ulay.” It is possible that the courts considered, based on the evidence presented, whose artistic vision was dominant in creating the work during those times to determine this order, although their reasoning for this specific division was not explicitly stated. Regardless, the suit is evidence that even the seemingly minute details, such as the name order, can cause conflict, and should be considered when drafting a partnership contract.

Artists involved in romantic relationships are not the only ones at risk of authorship and credit-related legal issues: friends and acquaintances can face similar  difficulties. Moi v Chihuly Studio, inc., is instructive. In his complaint, Michael Moi alleges that renowned glass artist Dale Chihuly not only took credit for work they created together but refused to pay him at all over a period of fifteen years. Plaintiff Michael Moi worked as studio assistant to Chihuly from 1999-2014. His contributions included helping in the creation of paintings, which he claims to have co-authored, as well as forging Chihuly’s signature– under the direction of the artist — on numerous pieces. The visual works he helped produced were consequently sold to the benefit of and attributed only to Chihuly. During his time working for Chihuly, Moi was “repeatedly and consistently” promised future compensation, and Moi relied on their friendship as assurance that this was true, and that he would eventually be paid. However, the complaint puts forth that, at no point did Moi receive the promised payment. Chihuly denies the claims, stating that he has long employed studio assistants, and that the suit is merely an attempt to extort him. Moi is seeking the recovery of damages for the missing payments and proceeds of his work under the Copyright Act and the Visual Artists Rights Act (VARA).

The lack of an employee contract is important here, because without it Moi may not have any claims to the intellectual property. Under the typical contract for work or contributions to work, the creator remains the author, and the owner/contractor of the work retains all the economic rights to the work, including its copyrights. Thus, a pivotal point in the case for his claims under the Copyright Act, may be whether he was a partner and co-author of the work, or an employee of the studio.    

Conflict Foresight/Preparation

How might disputes over authorship between collaborators (spouses or business partners) have been avoided? One possibility was to have a private agreement detailing the nature of their working relationship, including exactly who would be credited as the author of the works. The agreements could also have covered various other issues of copyright ownership for the works, along with ownership of the physical pieces if a split were ever to occur. The value of the initial challenges forming these contracts would far outweigh the difficulties the pairs now face in resolving their disputes.

Artists Jack Beal and Sondra Freckelton provide an example of this forward-thinking precautionary action. Sondra was a successful sculptor in the 1970’s before she transferred into watercolor painting. Her husband Jack Beal was an American realist painter until his death in 2013. The two included a written agreement in their marriage certificate to provide that they would have an equal partnership in both marital and artistic endeavors. Sondra felt that this agreement was extremely important to maintaining her valued independence as artist, as well as to ensuring that her husband and his career would not overshadow her own.

However, the reality is that most artists, and people in general for that matter, are not anticipating the demise of a relationship upon its commencement. For this reason, contracts are rarely drafted, and often one partner could even feel insulted by the other for asking for official documents to be created – seeing it as a testimonial to the relationship’s inevitable demise. So while the creation of a contract in every working relationship is ideal, the frequency of their actual existence is much smaller. Even if one does manage to make a contractual agreement, there may still be issues of enforcement depending on the contract’s nature and terms, as evident by the Abromović – Ulay suit.

That is not say that one can’t go overboard with preparation. One couple made Internet news, when their specific contract request went viral. The couple was getting married and in need of a wedding photographer. The odd part is, they wished to include a clause in their contract stipulating that if they ever got divorced they would receive a full refund for their photographs, as they would no longer need them. Needless to say, they had quite a difficult time finding someone willing to accept such an agreement (PetaPixel.com). So, while planning is encouraged, it is possible to go too far. One should find a happy medium, somewhere between a fully stocked fallout bunker and never getting a flu shot, perhaps the contract equivalent of a first aid kit.       

Distribution of Assets: Tangible and Intangible

When relationships end, many artists may be surprised to learn that in most states, artwork is considered marital property unless provided otherwise in a prenuptial agreement. This means that during a divorce, artwork is part of the property that is divided 50/50.

In relation to works created by one or both partners, the first step is to make an accounting of all the works made and sold during the marriage and their location. It is worth remembering that works in progress should be included. This step should be taken seriously since in the case of an accidental omission, one could face charges for fraud, and the other spouse could either keep the omitted work or all the profits from its sale. The work must also be assigned a value, perhaps a touchy subject. But if both sides can agree, it can be much simpler and faster to have a single appraisal completed than arguing over whose is correct.

Copyright should also be kept in mind during the distribution of assists. Although the work may be going to both parties, the copyright remains with the original creator and must be transferred separately to the new owner. This becomes important if the spouse who holds the work but did not create it wishes to sell the work or license it, as they will need the corresponding rights. The transfer of which must be explicitly detailed in the allocation of the artworks during the proceedings. It is also important to note here, that in the case of co-authors, each author has equal copyright rights.   

Lastly, there are issues that may arise under VARA (the Visual Artist Rights Act of 1990). VARA provides some protection to the artist’s work regardless of ownership. It allows, among other rights, “the right to prevent distortion, mutilation, or modification that would prejudice the author’s honor or reputation”. This means that in the case of a rather heated divorce you shouldn’t plan on keeping your spouse’s work only to burn it in a fit of rage or revenge, to do so would be a violation of their rights and you could face charges (not equal in value to the fun of your bonfire).

Conclusion

In summary, matters of heart and business are complicated, throw art into the mix and you have a recipe for calamity. Whether it is determining who receives credit for the work, or who ultimately gets to keep the work, small steps along the way in contractile prep paired with a little legal advice can lead to less headache, if not less heartache in the long run.

Select Sources:

  1. Complaint, Moi v. Chihuly Studio, inc., (Wash. Super. 2017).
  2. Complaint, Chan v. Schatz, 1:17-cv-03042 (S.D.N.Y. Apr. 26 2017)
  3. THE VISUAL ARTISTS RIGHTS ACT OF 1990, 136 Cong Rec E 3716
  4. 17 U.S.C.S. § 101 (LexisNexis, Lexis Advance through PL 115-37, approved 6/2/17)
  5. Ben Quinn and Noah Charney, Marina Abramović ex-partner Ulay claims victory in case about joint works, Sep. 21, 2016, available at https://www.theguardian.com/artanddesign/2016/sep/21/ulay-claims-legal-victory-in-case-against-ex-partner-marina-abramovic
  6. Nichole Martinez, What Happened to Art in a Divorce? [Hint: Get an Art Appraiser], Nov. 8, 2016, available at https://artlawjournal.com/art-appraiser-divorce/
  7. Daniel Grant, Love and Marriage, Artist Style, Dec. 17, 2010, available at http://www.huffingtonpost.com/daniel-grant/love-and-marriage-artist-_b_784179.html
  8. Christies, How deep is your love?, last visited Jun. 12, 2017, available at http://www.christies.com/features/10-most-famous-art-couples-of-20th-century-7062-1.aspx
  9. Noah Charney, Ulay v Marina: how art’s power couple went to war, Nov. 17, 2015, available at, https://www.theguardian.com/artanddesign/2015/nov/11/marina-abramovic-ulay-performance-art-sued-lawsuit
  10. Columbia Law School, Keep Your Copyrights, available at, http://www.law.columbia.edu/keep-your-copyrights/copyrights/know-your-rights/joint-works
  11. PetaPixel, Wedding Photographer Asked for Refund Guarantee in Case of Divorce, (2017), available at https://petapixel.com/2017/06/07/wedding-photographer-asked-refund-guarantee-case-divorce/
  12. Aalmuhammed v. Lee, 202 F.3d 1227 (9th Cir. 2000)

*About the Author: Colby Meagle is a 2019 J.D. candidate at Pepperdine University School of Law. Prior to law school, she received her B.A. in Arts Administration and B.F.A from Elon University in 2016. She can be reached at colby.meagle@pepperdine.edu

Disclaimer: This article is intended for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely upon the information in this article and should consult a licensed attorney.

 

Bring Me the Head of King David: Questions of Attribution and the Responsibility of Museums

By Center for Art Law Team*

Art forgery has long been a siren of the art world. Dark yet beguiling, it ranges from misidentification of orphaned works to forgers deliberately passing off fakes on the market. Some forgeries gain notoriety because they contain all the elements of  catch-me-if-you-can intrigue: outsmarting experts, creating intricate webs of deception, evading discovery, collecting a hefty prize. Other forgeries endure in perpetual obscurity, only caught years or decades after the fact (if at all). This spring the Center for Art Law hosted an evening on the topic, screening Orson Welles’ F for Fake and featuring Aaron Crowell’s remarks about root causes for transactions involving fakes. Though forgery implicates all spheres of the art economy, its effect on reputations and credibility is particularly noteworthy in the context of museums’ roles in the public and educational sectors.

As part of a series of seminars given at the Metropolitan Museum of Art in 1967, director Thomas P. F. Hoving stated that taking fakes and their detection seriously is a key part of the Museum’s educational obligations. But he also quoted art historian Max Friedländer’s qualifying statement that, while it is an error to collect a fake, it is as much “a sin to stamp a genuine piece with the seal of falsehood”. In his 1996 book on art forgery, False Impressions, Hoving also suggested that the entire art market was 40 percent forgeries. More recently, the art critic Michael Glover estimates that at least 20 percent of paintings held by major museums will be attributed to a different painter by the end of the 21st century. It is unsurprising, then, that at times misattribution in museums would be inevitable. The key questions are: how should museums treat the subject of attribution and respond to allegations of forgery? What responsibilities do curators have to the members of the public? And what actions can museums take to prevent or uncover forgeries in their collections?

What are Museums’ Legal and Ethical Responsibilities?

There are no explicit regulations regarding museums’ obligations to investigate and disclose purported fakes. Ultimately, the art market polices itself and curators and museum administrators have their boards of directors to report to and codes of ethics to uphold. However, these codes sparsely mention fakes and forgeries.

The American Alliance of Museum’s (“AAM”) Code of Ethics expresses the common tenet that museums are stewards of the world’s natural and cultural common property, holding their collections for the benefit of the public. It does not mention fakes or forgeries, but exhibiting and acquiring such items unawares conceivably threatens the core mission by taking resources away from genuine artifacts. Interestingly, the American Association of Art Museum Curators’ ethical guide, the Professional Practices for Art Museum Curators, and the American Association of Art Museum Directors’ Code of Ethics, also overlook issues of fakes and forgeries. The exception to this is the American Association of Art Museum Directors’ Professional Practices in Art Museums, but forgery is mentioned just once, merely as a potential reason to deaccession an art object. Given the recent interest in fakes and forgeries as a cultural phenomenon, museums have been collecting and exhibiting fakes for their unique albeit detrimental effect on the art history canon.

Regarding faked antiquities, the American Association of Museums announced in 2008 “New Standards on Collecting of Archaeological Material and Ancient Art”, which advocated reference to the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export, and Transfer of Ownership of Cultural Property. The section on existing collections stipulated that, in the interests of public trust, research and accountability, museums should “make available the known ownership history of archeological material and ancient art in their collections, and make serious efforts to allocate time and funding to conduct research on objects where provenance is incomplete or uncertain.”

The antiquities trade is susceptible to forgeries, as writes Leila A. Amineddoleh, an art lawyer specializing in art and cultural heritage law, and an adjunct professor at Fordham University School of Law. This susceptibility comes down to trade in unprovenanced antiquities being driven by demand, including from within the black market. For example, a large number of purported Coptic sculptures from the late fourth century in Egypt entered the international art market in the 1960s, at a time when Coptic art was not widely understood by scholars, yet was popular with collectors. Recently, historians have concluded that most of them – including a considerable collection within the Brooklyn Museum – are fake, thereby distorting our understanding of Christian iconography in ancient Egyptian art. Accountability for museums, most of which are privately owned in the US, seems to come more from public pressure and bad press. In 2009, The Brooklyn Museum responded to these unflattering allegations by planning an entire exhibition dedicated to the forgeries. Some scholars, such as the art crime professor Noah Charney, have noted that museums may only assume moderate shame in acquiring forgeries.  

Another explanation for the lack of rigid rules in this area is Hoving’s idea that it is anathema for an expert to dub an authentic work as fake. This opinion appears to be shared throughout his field. In a 2011 publication, Professor Andrew Stewart of the University of California posits that the “sin” of accusing a genuine antiquity as fake is “much more heinous” than authenticating a forgery). According to Stewart, such can be associated with a rush to judgment and the imposition of one’s own ego on the object. According to Sharon Flescher, the Director of the International Foundation of Art Research (IFAR), art attributions can and do shift over time. In her essay on IFAR in Ronald D. Spencer’s 2004 book, The Expert versus the Object: Judging Fakes and False Attributions in the Visual Arts, Flescher argues that scholars should not be encumbered by threats of litigation or pressure from the art market to make such determinations.

A Tale of Two Heads

Screen Shot 2017-06-21 at 12.02.37 PMImage: the Metropolitan Museum of Art’s Head of King David, #38.180, whose authentication is questioned by Robert Walsh. The Met’s website gives the following data: c. 1145, made in Paris, fine-grained limestone, 33lb.

In 2012, Robert Walsh, a New York antiques dealer, purchased a limestone head at a Greenwich Village antiques store, believing it to be a sleeper. (A sleeper is an orphaned artifact which may become attributed to a known and famous creator.) Walsh learned that that the Metropolitan Museum of Art was exhibiting a similar head, apparently originating from the Cathedral de Notre-Dame, and began investigating. Where did Met acquire its sculpture, and what did the two pieces have in common? These questions led Walsh down a twisting, years-long road of research.

The Met describes its sculpture as a head of King David, originating from the St. Anne portal of the west facade of the Cathedral de Notre-Dame in Paris. The portals contained monumental sculptures of each of the Kings of Judah, which were decapitated and presumably destroyed in the political fervor of the French Revolution.

Walsh researched both pieces using scientific analysis, provenance and stylistic research, and theorized that the Met was exhibiting a 1920s copy of his own authentic sculpture. He concluded that neither sculpture originated from the Cathedral de Notre-Dame, but that his was a French antique, and that there were some inconsistencies in the Met sculpture’s provenance. The Met sculpture was sold by a French art dealer, Georges Demotte, who was active in the 1920s and 1930s and who is believed to have sold forgeries to museums. Demotte’s original catalogue listing of the piece for his New York gallery in 1930 contained no mention of either Notre-Dame or King David. Instead, the sculpture was said to have been discovered in St. Germain de Pres, which is located further down the River Seine. Walsh believes that the author of the Met’s work is Emile Boutron, an accomplished conservator and forger employed by Georges Demotte.

Allegedly, these findings were shared with Met’s Medieval Department in 2012, but the curators were unconvinced that their King David was inauthentic. Walsh later contacted the Louvre, which had purchased a very similar sculptural head, also from the controversial Demotte New York Gallery, in 1934. According to Walsh, the Louvre removed the sculpture from public display. 

In 2014, Walsh, through his company Latipac, Inc. (now dissolved), served a Summons with Notice on the Met, apparently seeking to preclude the Met from challenging the authenticity of Walsh’s sculpture. Other threatened causes of action, which did not manifest in court action, were breach of the museum’s Collection Management Policy (on a theory that Latipac is its intended third-party beneficiary), as well as a series of tortious actions, including defamation, interference with prospective economic relations, injurious falsehood and product disparagement.

In October 2014, both sculptures were reportedly drilled and tested at the Met by an expert in French limestone from the the Limestone Sculpture Provenance Project at the University of Missouri at St. Louis. The test results revealed that Walsh’s sculpture consists of Burgundian limestone, whereas the Met sculpture was sculpted from Paris Lutetian limestone.

The Subtle Art of Authentication

In an effort to curb fakes and forgeries in the art market and in museum collections, three general methods of authentication have emerged.

1. Provenance Research:

Provenance is the record of the ownership or chain of title of a work of art or antique. Works with clear, substantiated and complete provenances are naturally of a higher financial value, based on risk and return. (For more on this, see Gail Feigenbaum and Inge Jackson Reist’s 2012 book “Provenance: An Alternate History of Art” and Art Watch UK’s upcoming publication detailing the proceedings of its 2015 London conference “Art, Law and Crises of Connoisseurship”). Works with questionable or incomplete provenances, such as the Met’s sculpture, will often lead an authenticator to research further the object’s history and affiliation with suspicious characters appearing within the chain of title.

The circumstances of the Met’s acquisition of its sculpture are noteworthy. According to Walsh, James Rorimer, one of the Monuments Men and 1930s curator for medieval art at the Met, oversaw the 1937 acquisition of the Met sculpture from the renowned dealer Arnold Seligmann for $2,500. Apparently, Seligmann had purchased it from Demotte’s New York Gallery in 1934. The 1930 Demotte Gallery Sculpted Portraits exhibition catalogue listed it as “Head #9, Crowned King’s Head”, and claimed it was excavated from St. Germain de Pres. Also in the Sculpted Portraits catalogue was an entry for “Head #10”, which the Louvre acquired from Demotte in 1934. Whether Rorimer believed Head #9 to be real or not, he clearly believed it to be worth acquiring for the museum. The Met’s sculpture was not included in the 1970 medieval sculpture catalogue, The Year 1200: A Centennial Exhibition at the Metropolitan Museum of Art, where over 50 stone sculptures – including a series of heads – were showcased together with medieval mosaics, coins, stained glass, frescoes and other artefacts.

2. Scientific data

Business of authenticating is a risky proposition. Increasingly, scientific expertise and methods are used for testing of different artifacts depending on the age and materials of the piece. Testing methods may include elemental analysis, microspectroscopy, molecular analysis, carbon-dating, pigment analysis, x-ray fluorescence, and even fingerprint testing. The most common indicator that a work of art is forged is the detection of materials  on the work which were not manufactured or used until after the work’s purported era. Orion Analytical, a private lab which was purchased by Sotheby’s in 2016, was one of the most highly regarded art analysis companies in the United States, as it combined scientific testing with connoisseurship. Sotheby’s cited the use of modern materials in an alleged old master work as grounds for revoking a private sale and seeking reimbursement from the broker in a recently filed lawsuit regarding an £8.4 million Frans Hals painting which turned out to be a forgery.  

Similarly, the famous forger Wolfgang Beltracchi, who was convicted in 2011 and released from prison in 2015 after he and his wife sold hundreds of fake works attributed to Pablo Picasso, Fernard Léger, Max Ernst and others, was ultimately exposed through forensic analysis. Dr. Nicholas Eastaugh tested the pigments of a painting the Beltracchis claimed to be by the Dutch artist Heinrich Campendonk, and uncovered titanium white, which did not exist in 1915 when the work was supposedly painted.

The forensic testing of Walsh and the Met’s sculptures, done by the University of Missouri’s limestone experts as part of the settlement agreement, assisted with identifying the source of the material used, but fell short of providing the date of creation to the objects. Although  scientific analysis may be helpful in determining whether an object is fake, it is unable to confirm an object’s authenticity without the stylistic knowledge of a connoisseur.

3. Connoisseurship 

The least precise and most subjective form of authentication is connoisseurship, or expert aesthetic judgment. It relies upon an expert’s training, expertise, and – more often than not – gut instincts. Expert opinions are heavily relied upon by dealers, auction houses and museums. Connoisseurship is at once heavily subject to corruption, and powerful enough to hold sway in court.

Connoisseurs have been known to be fooled by highly skilled forgers. Last year’s Knoedler trial revealed how a single artist could paint, from his garage in Queens, a raft of fake de Koonings, Rothkos, Pollocks and other masterpieces, which would pass muster with some of the most prominent experts and gallerists. Similarly, Wolfgang Beltracchi duped scholars, museums, auction houses, gallerists, and even Max Ernst’s widow, with his numerous forgeries. In a recent documentary on Beltracchi, he brags that his forged Vermeers, Rembrandts and Leonardos are currently in circulation, and that Leonardo da Vinci’s work is “not difficult” to copy.

Walsh relied on his own connoisseurship and his belief that he uncovered in the Greenwich village antiques store a valuable and probably medieval find. According to him, experts in Paris with deep knowledge of the facades of the Cathedral de Notre-Dame were adamant that such a sculpture did not match the Cathedral’s sculptural program.

The Object v. the World: Curatorial Sins

Museum directors, experienced or non, may be faced with claims and possibilities of having fakes in their collections. For the Expert versus the Object: Judging Fakes and False Attributions in the Visual Arts, attorney Ronald D. Spencer conducted an interview with the former director of the Frick Museum, Samuel Sachs II. According to Sachs, museums should be ready to purchase high-quality and interesting work even if there are ongoing authentication disputes: “Ultimately, aesthetic quality holds sway even over matters of attribution or authenticity. Museums can hang a picture that is absolutely, certifiably by artist X, but if it is a weak picture, why do it?”.

It appears that encyclopedic art museums, including the Met, abide by this rule of thumb. Another rule of thumb: shock or disbelief should come not from having acquired a forgery but from inaction when flags are raised about authenticity. And such flags are raised regularly for most museums. One of the most notorious art hoaxes of the 20th century involves the Met’s acquisition of three “Etruscan” terracotta warriors from 1915 – 1921. Following their exhibition in 1933, scholars began to suspect, on grounds of connoisseurship, that the statues were anachronistic to the Etruscan style. The statues were finally scientifically tested in 1960, and their glazes revealed the presence of manganese, a mineral uncharacteristic to Etruscan sculpture. Months later, the sculptor Alfredo Fioravanti signed an affidavit confessing that the statues were forged. Brothers Pio and Alfonso Ricardi had fabricated them for the dealer Domenico Fuschini. In 1961, the Met accepted that the works were inauthentic.

The Metropolitan Museum of Art announced yesterday that, as a result of recently completed studies, its three “Etruscan” terracotta statues must be considered of doubtful authenticity. For some years there have been conflicting claims about these statues on stylistic grounds. Recently the staff of the Museum began a series of modern scientific and technical analyses. These developed convincing proof that these famous statues were not made in ancient times.

~ Feb. 14, 1961 Press Release

Critics of the Etruscan misattribution point out the Met’s lackluster investigations and ignorance of many “red flags” during the 30 years of their exhibition. Hoving would later go on to suggest that Gisela Richter, the Greek and Roman curator who acquired the pieces for the Met, was likely taken in by “pride” and “curatorial greed”.

Pride, greed, sloth, wrath… these art market sins allow forgeries to penetrate and pollute collections. However, hiding the existence of embarrassing yet known forgeries directly undermines museums’ obligations to expose and educate the general public about its cultural history – a responsibility espoused by the AAM in its various policy documents. It is safe to say that museums should, as organizations of public trust, act impartially and employ third party experts to investigate such claims, working collegially with individuals who present sound theories that a work’s authenticity is questionable. After all, forgers can be incredibly skillful, and even the most renowned connoisseurs can be duped.

A biblical character, King David was known to have been righteous and effective in administering justice. The dispute over his representation and the motives behind the actions of various private and public players, if nothing else, may help provide a measure of justice to the subject of due diligence in authentication. And that’s something worth losing your head over.

List of Sources

Disclaimer: This article is intended for educational purposes only and is not meant to provide legal or business advice.

Job Posting: Art Law Associate (NYC)

Cahill, Cossu, Noh & Robinson LLP (CCNR)  is seeking an Associate. CCNR is a boutique firm which provides a wide range of litigation and transactional services to its clients. The firm is best known for its focus on matters arising in the art world, in addition it represents variety of clients (including those in fashion and publishing) in diverse engagements that involve intellectual property, employment, nonprofit, as well as commercial litigation.

Responsibilities for a candidate with 2-5 years’ experience, including litigation, will include:

  • Legal research
  • Drafting legal briefs and other litigation documents
  • Documenting transactions and related due diligence
  • Pro Bono engagements
  • Professional activities in law and the art world

Contact: CAHILL PARTNERS llp 70 West 40th Street, New York, NY 10018 (T) 212-719-4400

Case Review: Maestracci v. Helly Nahmad Gallery Inc. (2014)

By Madeleine Werker*

Screen Shot 2017-06-12 at 11.42.36 AM

Amedeo Modigliani, Seated Man with a Cane (1918)

At the core of Maestracci v. Helly Nahmad Gallery Inc., case filed in 2014 is the battle for ownership of an Amedeo Modigliani painting, Seated Man with a Cane (1918) (the “Painting”) valued at 25 million USD. The release of the Panama Papers in April 2016 revealed new information about the Painting, which could assist in settling the ownership conflict in court.

According to the complaint, Seated Man with a Cane was first exhibited at the 1930 Venice Biennale, where the so-called self-portrait was listed as number 35 in the catalogue. It belonged to Oscar Stettiner, a Jewish art dealer in Paris. Stettiner fled Paris in 1939 during the Nazi occupation of France, leaving his gallery and his artworks behind. After the war, in 1946, Stettiner attempted to retrieve the work by filing a French civil claim for “a Modigliani portrait of a man”, among other items, without success. Stettiner died in France in 1948 never having found the Painting.

In their filings, Plaintiff(s) allege that in 1941, Stettiner’s gallery was taken over by Nazi-appointed administrator, Marcel Philippon, who held four public auctions of the gallery’s inventory. In July 1944, the painting, listed as Selt Portrait of the Artist, was sold at the French auction house, Drouot, to John Van der Klip for 16,000 francs.[3] Although the painting was thought to have been resold in a series of unknown transactions, a May 2016 letter from Van de Klip’s descendants confirmed that the Modigliani stayed in the family and was passed down “by descent to the present owners” until the 1996 Christie’s London auction, where it was sold to the International Art Centre (“IAC”) for 3.2 million USD.[3]

At the time of the sale, the painting had not been flagged as a potential Nazi-looted artwork. The Christie’s catalogue entry noted that the painting had been sold in an anonymous sale in Paris between 1940 and 1945, and mistakenly attributed provenance to known French collector Roger Dutilleul. Christie’s cited the painting as number 16 from the 1930 Venice Biennale, not number 35.[4] This later complicated the painting’s identification.

In 2008, the Painting resurfaced and was relisted in the Sotheby’s New York catalogue (valued at 18-25 million USD). The 2008 catalogue listing cited the painting’s owner as the IAC and attributed provenance “possibly” to Roger Dutilleul and to Stettiner. The catalogue also re-listed the work as number 35, not 16, from the 1930 Venice Biennale. Two letters subpoenaed from Sotheby’s in April 2016, as part of the ongoing lawsuit, show an executive at Sotheby’s addressing Helly Nahmad Gallery as the painting’s consignor.

The Painting failed to sell at the 2008 auction and disappeared until the release of the Panama Papers led to its retrieval from the Geneva Freeport.

In 2009, Mondex Corporation, a Toronto firm that specializes in recovering Nazi-looted art, began putting together the painting’s history. Founder James Palmer then contacted Philippe Maestracci, an Italian citizen and Stettiner’s only heir, who agreed to have Mondex pursue the research on his behalf. Before this, Maestracci was not aware of his grandfather’s connection to the painting.

This pursuit led Maestracci to the US federal court where he sued the Helly Nahmad Gallery for the Painting in 2011. The Nahmads, a wealthy family of art dealers long believed to be in possession of the painting, denied ownership,[9] instead maintaining that the IAC owned the Painting independently after purchasing it in 1996. Maestracci later withdrew the amended federal court complaint over jurisdictional issues.

In February 2014 the Stettiner estate re-filed its suit against David Nahmad, Helly Nahmad (both the gallery and the individual), and the IAC with the New York Supreme Court.[11] In November 2015, when a New York State Supreme Court judge ruled that France-based Maestracci lacked standing to pursue the case in the United States, Maestracci amended his claim to make George Gowen, the New York administrator of Stettiner’s estate, the sole plaintiff in the case. The November filing alleged that the IAC was a “shell company” set up by the Nahmad family “to conceal and confuse their identities, and hide revenues…stemming from their art dealings.”[11]

Until recently Maestracci’s claim has not seen much success, but this all changed in April 2016 with the release of the Panama Papers, leaked documents from the Mossack Fonseca law firm, which linked various wealthy individuals to offshore companies. Originally published on April 3, 2016, the papers revealed the location and ownership of the painting that Maestracci sought to reclaim. The documents confirm the link between the Nahmads and the IAC.[12] Mossack Fonseca set up the IAC as a Panama-based company for the Nahmads in 1995. David Nahmad, has been the company’s sole owner since January 2014.

David Nahmad relies on two key points in denying Maestracci’s claim to the painting. First, according to Nahmad, the price fetched for the painting in 1944 was too low, even in an anonymous sale during wartime. Second, Nahmad cites Stettiner’s 1946 claim in which he referred to the painting as a self-portrait of the artist in a notation taken by a court bailiff.[14] Nahmad believes this proves that the work in question is, in fact, a different painting. Nahmad supported his position with the assertion that the family loaned the painting out a number of times, including to the Jewish Museum in 2004. Nahmad, who is Jewish, insists he would never accept Nazi-looted art. He has told Radio-Canada, “I could not sleep at night if I knew I owned a looted object”.[16] For now, the Nahmads are prepared to take their defense to the courts. However, Ezra Nahmad has said that if Maestracci “can provide concrete proof that this piece of art truly belongs to him, then [he] will gladly give it to him.”[15]

The New York State Supreme Court case, George Gowen v. Helly Nahmad Gallery Inc., 650646/2014, is ongoing. The last set of motions was filed in March 2017.

Select Sources:

  1. Maestracci Affidavit, Exhibit A: Nature of Action, ¶ 16 (NYSCEF DOC. NO. 9).
  2. Livengood Letter, Ex 72, 3 (NYSCEF DOC. NO. 941).
  3. Maestracci Affidavit, Exhibit G: Christie’s Listing (NYSCEF DOC. NO. 25).
  4. Maestracci Affidavit, Exhibit A: Nature of Action, ¶ 30 (NYSCEF DOC. NO. 9).
  5. Sotheby’s Letters 2-11-10 and 4-28-10 (NYSCEF DOC. NO. 768,769)
  6. Maestracci Affidavit, Exhibit B: Sotheby’s Catalogue, ¶ 32-33 (NYSCEF DOC. NO. 9).
  7. Golub Affidavit, ¶ 3 (NYSCEF DOC. NO. 918).
  8. Motion Sequence No. 7, 22 (NYSCEF DOC. NO. 378).
  9. Maestracci Notice With Summons, 2 (NYSCEF DOC. NO. 1)
  10. Verified Amended and Supplemental Complaint (NYSCEF DOC. NO. 489).
  11. Verified Amended and Supplemental Complaint, ¶ 2 (NYSCEF DOC. NO. 489).
  12. Maestracci Affidavit, Exhibit M: Panama Registry (NYSCEF DOC. NO. 69).
  13. Exhibit 1: Letter from Geneva Ministere public (NYSCEF DOC. NO. 917).
  14. Julian Sher, Modigliani masterpiece seized in wake of Panama Papers (CBC: Apr 11, 2016) available here; Schub Affirmation, ¶ 31 (NYSCEF DOC. NO. 929).
  15. Amah-Rose Abrams, David Nahmad Denies Modigliani Painting Is Nazi Loot (Art Net: June 13, 2016) available here; Fern Sidman, Ezzy Nahmad: “If the Gentleman Can Prove Rightful Ownership, I Will Gladly Give Him the Painting” (The Jewish Voice: May 4, 2016) available here.

About the Author: Madeleine Werker received her J.D. from the University of Ottawa, Canada in 2017. Before law school, she obtained her Bachelor of Art in Art History and Cultural Studies from McGill University in Montreal.

Spotlight: The Rise of Two Midwest VLAs

*By Abby Placik

The first pro bono arts organization in the United States, Volunteer Lawyers for the Arts, was established in New York City in 1969 (“VLANY”). Other robust creative communities that needed legal assistance, such as Chicago, Cleveland and other Midwestern cities soon followed. For example, a young group of lawyers formed the “Creative City Committee” in Chicago in 1972. A few years later, in the mid-1970s, a circle of local lawyers founded the Cleveland VLA as a committee of the Cleveland Area Arts Council.

These Midwestern organizations modeled their legal referral program after VLANY’s process. An applicant would write a statement with a brief description of the artist’s work or the organization’s history, the applicant’s income, and the legal problem. The most common legal issues artists listed on their applicants for legal assistance included copyright, trademark and patents; contract drafting, review, and negotiation; and landlord-tenant disputes. Most of the applicants earn a household income a little over minimum wage. VLA clients may be charged for service were a processing fee for an application and any required legal forms depending upon the specific case. 

Originally the requirements for pro bono applicants were that they were either artists or not-for-profit organizations, they were financially unable to retain an attorney and they had an income under $6,000 or, if an organization a budget under $100,000. The contemporary application process at most VLAs remains almost identical to its original form (the required personal income and organizational budget have been adjusted over time). For over forty years, VLAs have been providing legal assistance to artists, non-profit and for-profit organizations, higher education institutions and even local governments. This article explores the founding of Lawyers for the Creative Arts in Chicago and Volunteer Lawyers for the Arts in Cleveland and the development of their programs and initiatives to the present.

Chicago Lawyers for the Creative Arts (“LCA”)

Working with the Chicago artistic community, the Creative City Committee noticed a need for pro bono legal services and created the organization now called Lawyers for the Creative Arts (“LCA”). The mission of LCA was and still is, “to provide legal assistance to artists and arts organizations financially unable to retain legal counsel.” Under its first president James N. Alexander and first executive-director Thomas R. Leavens, LCA had a $38,000 budget and had fifty-three volunteer attorneys who processed 100 applications. Reflective of their commitment, Alexander and Leavens continue to help artists in Illinois through their current positions on the Honors Council of LCA.

In its early years, LCA was supported by grants from the Illinois Arts Council, the Borg-Warner Foundation, the Grant D. Pick Foundation, and individuals. Originally, LCA provided legal services to artists and arts organizations in the Chicagoland area, and clients received general explanatory material, model forms, and non-technical advice. Those interested in receiving legal assistance would fill out an application, an LCA member would review it and provide counsel at the office or over the phone. In the mid-1970s, a statistic stated that “LCA referred a total of 940 cases and [had] 87 volunteer attorneys.”

Today, LCA is an independent, non-profit §501(c)(3) corporation. Supporters of its programs have grown to include law firms, corporations, numerous foundations, governmental entities, and many individuals. As the only pro bono legal service dedicated to the arts in the state, LCA now serves clients in the art, culture, media and entertainment fields throughout Illinois. LCA has assisted individuals, for-profit and not-for-profit groups. LCA now offers legal advice pertaining to a wide array of subjects, including corporate law, commercial law, and general business advice; as well as copyright, trademark and patents, including rights clearances, licensing and fair use.

Artists, non-profit and for-profit organizations can apply on the LCA website for legal assistance at https://law-arts.org/application. According to Jan Feldman, Executive Director at LCA, the organization’s aim is to be financially inclusive in its application process. There is no minimum financial requirement–only a maximum of $35,000 household income. Feldman noted one of the challenges of meeting the needs of potential clients is the existence of a “donut hole,” meaning some applicants have above the maximum household income but cannot afford the high expenses that occur with retaining counsel in a specialized field (e.g. art and entertainment law). Despite the maximum income bar, LCA has assisted applicants over the bar who have compounded expenses (e.g. business and medical).

Today, LCA enlists more than 1800 attorneys to provide pro bono assistance to creative professionals and organizations throughout Illinois. Over the past year, LCA has held free educational events such as Legal Issues for Authors: Pen to Press Issues for the DIY Writer, Seminar: Funding for the Arts and Entertainment Law 101: Intellectual Property for Filmmakers and the Nonprofit and Tax Exemption Workshop. To support its programming, the LCA hosts an Annual Benefit Luncheon.

Cleveland Volunteer Lawyers for the Arts (“VLA”)

In the 1970s in Cleveland, Nina Gibans, a renowned advocate for local art and artists, was the Executive Director of the Cleveland Area Arts Council (“CAAC”). She partnered with William R. Joseph, a prominent attorney and backer of nonprofits, to form the Cleveland Volunteer Lawyers for the Arts (“VLA”).  The original mission of the CAAC and VLA, “was to disseminate information to local artists to give them the best opportunity to succeed.” A legacy of the program under the CAAC is “City Canvasses,” a series of ten murals that were painted on blank building walls throughout the city, and some can still be seen today. Artists involved in the project included Ray Domingo, Mort Epstein, Joe Hruby, John Morrell, Edwin Mieczkowski, Julian Stanczak, Jody Trivision, Susan Todys, Phyllis Sloane and Elijah Shaw. Mort Epstein’s electric outlet (1974) on the side of the Union building on Euclid Ave. pictured six black and white electrical outlets representing Cleveland State University’s commitment to diversity. John Morrell’s “Life Is Sharing the Same Park Bench” (1969) on the east side of the Superior Building on Rockwell Ave. facing E. Ninth St. depicts four figures of different races and sexes sitting next to each other on a park bench. This image is also the logo of the Association for the Advancement of Social Work With Groups. The murals are a testament to Cleveland artists and CAAC’s contributions to and engagement in community activism.  

In an interview, Gibans remarked that artists were in desperate need of counsel in basic business skills at the time of the VLA’s founding. Gibans went on to work extensively with many notable local institutions and authored The Community Arts Council Movement: History, Opinions and Issues, a significant work about arts administration.  In the past, VLA was known for its Saturday breakfast presentations on topics such as leasing, gallery agreements, sales and intellectual property protection. The CAAC disbanded and VLA became a committee under the Cleveland Bar Association (now Cleveland Metropolitan Bar Association “CMBA”). In the late seventies, “the Cleveland VLA [numbered] approximately twelve attorneys and accountants who [met] several times a year and [were] on call to provide legal counseling and accounting services.” In its early years, VLA provided accounting as well as legal services and hosted workshops for lawyers and artists.

Today, the Cleveland VLA is also a non-profit §501(c)(3) corporation, a pro bono program under the CMBA. It is mainly supported by the Cleveland Metropolitan Bar Foundation. The contemporary mission of VLA elaborates its original mission under the CAAC to “facilitate access to legal services for Northeast Ohio artists and arts organizations, including pro bono legal representation and referrals to income-eligible artists and arts organizations in all disciplines; [d]evelop educational resources for and build a living network of the region’s lawyers, artists, and arts organizations; and [a]dvocate for a strong and vibrant arts community.” VLA serves clients mainly in northeast Ohio who are artists or non-profit art organizations. Artists and art organizations can apply on the CMBA website for legal assistance. The CMBA has expanded to its clients free public law-related education programs and social events with attorneys who are interested in the arts.

Concluding Remarks

From its early years, VLANY was a recipient of a Challenge Grant from the National Endowment of the Arts. The Challenge Grant program required organizations to raise three dollars from private sources for every federal dollar with a goal “to promote long term stability and independence for the nation’s cultural institutions.” This grant allowed VLANY to meet its increased operating costs and develop research tools in art law. In turn, VLANY was able to increase its programming and, over time, the idea of pro bono legal assistance for the arts spread across the country. Most importantly, the Challenge Grant permitted VLANY to help artists and art organizations achieve stability and independence through legal aid.

Thanks to the creation of the VLA network, artists and art organizations have had access to affordable legal assistance for over forty years now. Chicago’s LCA and the Cleveland VLA carry out the work of VLANY in their missions to provide counsel on relevant issues, referrals to local attorneys, educational workshops and resources and a network of aid in their respective regions. It goes to say that VLAs are a valuable asset to major American arts communities and every donation is valued, not the least of which is the federal funding.

Selected Sources:

  1. Legal Referrals Show Increase, 2 ART & L. 1, 1,7 (1976).
  2. History, LAWYERS FOR THE CREATIVE ARTS, https://law-arts.org/history (last visited May 19, 2017).
  3. Chicago’s L.C.A., 2 ART & L. 1, 6 (1976).
  4. Supporters, LAWYERS FOR THE CREATIVE ARTS,  https://law-arts.org/supporters (last visited May 19, 2017).  
  5. History, LAWYERS FOR THE CREATIVE ARTS, https://law-arts.org/history (last visited May 19, 2017).
  6. Author’s phone interview with Mrs. Gibans (May 18, 2017).
  7. AMERICAN INSTITUTE OF ARCHITECTS. CLEVELAND CHAPTER.  ET AL., CITY CANVASES: CLEVELAND (Cleveland, Cleveland Area Arts Council 197-?).
  8.  95-year-old Cleveland artist updates historic diversity mural for tedxcle, FRESHWATER, http://www.freshwatercleveland.com/forgood/mortepstein041212.aspx (last visited May 24, 2017).
  9. Grant Segall, John F. Morrell painted “Park Bench” mural, CLEVELAND.COM, http://www.cleveland.com/obituaries/index.ssf/2010/04/john_f_morrell_painted_park_be.html (last visited May 24, 2017).
  10. From a correspondence on May 17, 2017 with Jessica Paine, Assistant Dir., Cmty. Programs & Info., Cleveland Metro. Bar Found.
  11. About VLA., 3 ART & L. 6, 7 (1977).
  12. Volunteer Lawyers for the Arts, CLEVELAND METROPOLITAN BAR ASSOCIATION, http://www.clemetrobar.org. (last visited May 19, 2017).
  13. About VLA, 3 ART & L. 6, 6 (1977).

*About the Author: Abby Placik is a J.D. candidate at Case Western Reserve University School of Law. Prior to law school, she worked as an administrative assistant at Lawyers for the Creative Arts in Chicago, Illinois. She received her B.A. in History of Art from Bryn Mawr College in 2015. She can be reached at abby.placik@case.edu.

Disclaimer: This article is intended for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely upon the information in this article and should consult a licensed attorney.

In Matters of Probate: Trust but Verify

by Marine Leclinche*

Manet Chanteuse de Cafe Concert, La

Édouard Manet “La chanteuse de café concert” (1879)

When Anne Marie Rouart, the widow of Denis Rouart – a descendent of the French artist and art collector Henri Rouart – died on December 18, 1993, she left behind a tremendous collection of art. The French masters Manet, Morisot, Degas, Monet, Renoir, and de Corot were each included. Many of the works were also painted by Berthe Morisot, from whom the Rouart family is directly descended. By Rouart’s last will dated  October 7, 1992, she left the entire meubles meublants (furniture and decorative pieces) of her apartment in Neuilly-sur-seine, Paris, to her nephew, Yves Rouart. The rest of the art collection was left to the Académie des Beaux-Arts in Paris, which created a Rouart Foundation and transferred to the Marmottan Museum the principle artworks of the Rouart collection. As of today, four paintings remain untraceable.

This article strives to provide an overview of the long process that ensued to recover some of Mrs. Rouart’s long lost paintings, which involves both French and American Law. The Rouarts’ story, despite its complications and its link with fascinating characters, such as the Wildenstein family, is not unique, and serves as a good reminder for art collectors to carefully plan their estates.

The blurry aftermath of the estate of Anne-Marie Rouart

In November 1997, nearly four years following Rouart’s death, the principal artworks originating from the succession were taken to the Marmottan Museum in Paris, as per her will. Nevertheless some paintings left to Yves Rouart and to the Académie were unaccounted for. Part of the problem, according to journalists, was that only about forty artworks were on display at her Paris apartment, while many more were placed in different safes, including one at the Wildenstein Institute (a non-profit organization founded to do art research and edit catalogue raisonné and located in Paris). After Rouart’s death in 1993, the executors assembled her entire collection at her apartment to allegedly develop an inventory in situ. Once there, they apparently took down from the walls all the paintings on display. The removal of the paintings, either knowingly or not, affected the status of the paintings and the final accounting (to the detriment of Yves Rouart’s inheritance) because once the works were unaffixed from the wall they were no longer meubles meublants under article 534 of the French Civil Code. The paintings bequeathed to Yves Rouart became indistinguishable from those bequeathed to the Académie.

In 1997, Yves Rouart initiated a civil action before the Court of First Instance in Nanterre after he read the inventory and realized the actions taken by the executors. While Yves Rouart was trying to identify the artworks that were stored at the Wildenstein Institute, he realized that about forty additional art objects were missing from the accounting. He decided to also sue for theft, concealment and breach of trust in a Paris Criminal Court.

The saga of the missing Rouart art turned out even more incredible when the names of two famous art experts and members of the Académie des Beaux Arts in Paris became linked to the mystery. Guy Wildenstein, son of the art dealer Daniel Wildenstein, and Olivier Daulte, son of the Swiss art publisher François Daulte, were serving as the executors of Rouart’s estate.

In France, a testator can nominate as many executors as he or she wants to be responsible for the administration of the estate. Several forms of will are admissible under French law: a holograph (handwritten) will, a formal notarial will (testament authentique), a mystic will (when given to the notary in front of two witnesses in a closed and sealed envelope), and an international will (subject to the UNIDROIT Convention Providing a Uniform Law on the Form of an International Will, Washington DC, 1973). Under French Law, children of decedents have a natural right to inherit property from their parents by way of a forced heirship system (réserve hériditaire). The executor’s mission is unpaid except if a liberality (a legal deed made inter vivos or testamentary disposition in which a person transfer to another a good or goods belonging to his estate) is made as a gift or bequest (Rouart’s collection was mostly bequeathed to the Académie). The executor assumes contractual responsibility when he or she accepts the mission. This law of testamentary transfer is valid across France. In the United States, however, each state has specific surrogate law governing its law of probate. In New York for example, under Section 2307 of the New York Surrogate’s Court Procedure Act, executors are entitled to collect a fee ranging between 2 and 5% of the total amount of estate money that the executor receives and pays out. If there are several executors, the fee must be apportioned among them, based on the services rendered by each of them. A decedent’s will may also address the subject of bonds and augment the compensation that an executor may collect for his or her troubles.

The Swiss lead

In 1998, Yves Rouart was able to retrieve some of the missing works in Europe, however there were still a number of them unaccounted for. In April, when François Daulte (1924-1998), world renowned art historian and curator from Lausanne, Switzerland died, his heirs Olivier Daulte and Marianne Delafond (a curator at the Marmottan Museum) made an interesting discovery. They found artworks in his Swiss bank safe that they did not know about. Indeed, once the Estates Office in Lausanne published a notice in the press for potential creditors, Yves Rouart warned the Office of his suspicions concerning several artworks. The safe was then opened in the presence of a bailiff and twenty-four artworks originally from Rouart’s estate were discovered, substantiating Yves’ claims. Among them were a landscape by Corot titled Road descending from the town of Volterra, two portraits of Manet by Degas, the Cathedral of Strasburg by Eugène Delacroix, a Tahitian woman by Gauguin, six paintings by Manet, nine by Berthe Morisot, two by Renoir, one by Toulouse-Lautrec and the copy of an Italian painting. Terms of the settlement were not made public but thereafter, the criminal proceeding that Yves initiated in 1997 was dismissed and the parties withdrew before the Nanterre Court of First Instance in December, 2000.

Oddly enough, the Académie, which was bequeathed a large part of Rouart’s collection, neglected to file a complaint in France when it first discovered that some artworks were missing back in 1993. However in 1998, the Académie claimed ownership to the newly found artworks from Daulte’s Swiss vault.

Following the Daulte safe find, from 1998 until 2011, five paintings remained missing. However, old photos of Rouart’s apartment proved that they were on display before her death and thus subject to Yves claims. These included three Manets (La Chanteuse de café-concert, Le Portrait de Mme Manet mère, and Le Jardin de Bellevue); one Corot (La Bohémienne rêveuse); and one Morisot (Chaumière en Normandie). The Morisot was later found in the safe of the Wildenstein Institute.

In 2000, Yves Rouart and the Académie started negotiations. Fifteen artworks were given back to him, making him the owner of forty-eight artworks from the original transaction. Further discovered works were to belong to the Académie.

The Wildenstein twist

In 2011, Guy Wildenstein was accused of underestimating inheritance taxes after the 2001 death of his father Daniel in France. Investigators believed that a complex scheme was created shortly after Daniel Wildenstein’s death, enabling his heirs to hide arts and assets under the ownership of secretive trusts and move artworks between New York and Switzerland. Guy Wildenstein claimed that he was told “that the assets weren’t owned by the family but by independent trusts, and thus need not be disclosed to tax authorities.”

In January 2011, police investigators from the Central Office for the Fight against Trafficking in Cultural Goods (OCBC) seized thirty artworks that were reported stolen or missing by previous owners, during a search of the mysterious vault of the Wildenstein Institute in Paris. While Guy Wildenstein was in custody and interrogated by the Juge d’Instruction (Investigating Magistrate), he admitted that there was no inventory of the vault, which contained dozens of artworks that he did not own.

Yves Rouart, then represented by Serge Lewisch, filed a new criminal complaint against X. Under French law, a complaint against X enables a plaintiff to first file a complaint against an unnamed person: “X”, when the identity of the perpetrator is unknown. The claim, made before the Paris First Instance Court, was for concealment of theft, since Chaumière en Normandie by Berthe Morisot was found in the safe of the Wildenstein Institute after it had been missing for decades. An inquiry was launched to determine how the paintings ended up at the Wildenstein Institute. The aim was to nullify the 2000 transaction between the Académie and Yves Rouart because of the indirect involvement of the Académie in the concealment of the paintings by the executors and their fathers, after having benefited from Yves’ dispossession of his meubles meublants.

Under French law, the negotiations that lead to a transaction, such as an agreement with a museum, must be interpreted under article 2044 of the French Civil Code. In his complaint, Yves Rouart’s attorney argued that the transaction between his client and the Académie should have been be invalidated because of the dol from which his client was victim. A dol can either be a false representation, a lie or a fraudulent misstatement. Under former French law, lack of consent such as a dol, is subject to a five-year limitation period from the discovery of the defect. Guy Wildenstein attempted to counter-argue that if any artworks were found they should belong to the Académie and not to Yves Rouart, according to the 2000 deal. This argument was rejected by the Judge d’Instruction and Guy Wildenstein was eventually charged with abus de confiance (breach of trust) under article 314-1 of the French Criminal Code.

On May 2016, after a new search was launched by Swiss prosecutors in the context of the “Panama Papers” scandal, Swiss police officers and police investigators from the OCBC searched the Freeports of Geneva in relation to the Wildenstein lawsuits (Challenges, Oct. 20, 2016). Geneva Freeports are known for holding dozens of masterpieces that are exempted from custom duty and value-added tax, so long as they are not taken out of the Freeport. However, the artworks can still be sold and bought within the Freeport.

In this context, the search of the Geneva premises of Natural Le Coultre (Yves Bouvier, the owner of the company, had already been investigated in a lawsuit for fraud and concealment opposing him to the Russian billionaire Dimitri Rybolovlev), a worldwide artworks transportation company, lead to the discovery of several paintings, but according to the police report, none of them belonged to the Rouart family. Nevertheless, some unnamed Manets were found, and according to the French magazine Challenges, Yves Rouart declared that he was convinced that they were his aunt’s. This was because the Wildensteins owned very few Manets and almost none of them are currently in circulation. Most were owned by museums, while some belonged to private art collections. According to Paul-Albert Iweins, the lawyer of the Académie des Beaux Arts, the Académie now supports the investigations instigated by Yves Rouart and “is very interested by the discovery made in Switzerland” (Challenges, Oct. 20, 2016). The relationship between Yves and the Académie seems to have pacified over the years.

As for the criminal part of the lawsuit, on January 12, 2017, Guy Wildenstein was cleared of the charges of tax fraud and money laundering. However, the acquittal was granted on technical grounds. Olivier Géron, president of the 32nd chamber of the Paris Criminal Court, stated that “a tribunal cannot conclude on the existence of fraud without direct evidence” (Le Monde, Jan. 12, 2017). In addition, there were faults in French tax fraud legislation. Indeed, prior to 2011, there were no laws requiring the disclosure of assets held in a trust. The next day, the newly-created Parquet National Financier (PNF), headed by the Financial District Attorney and placed under the authority of Paris Attorney General, announced its intention to appeal the general acquittal of the Wildenstein heirs.

The Wildenstein trusts

The Wildenstein family created several trusts over many years. The offshore Delta Trust in the Bahamas, created in 1998 by Guy’s father, held almost 2,500 artworks valued around $1 billion before he died (NY Times, Sept. 30, 2016). The Royal Bank of Canada Trust Company (RBCTC Bahamas) was the trustee of the Delta Trust and started to reveal information to the Paris Court of Appeal (in 2016) after they discovered that $250 million of paintings owned by the trust were moved out of the US without their approval. RBCTC Bahamas claimed they reported the paintings to American tax authorities after the discovery of the move. The only role of the trust seemed to have been to sell off paintings to generate revenue for the family, especially for Guy Wildenstein, the beneficiary.

One argument made in defense of Guy Wildenstein, to explain the non disclosure of these trusts to French authorities, was that the trustees rather than the Wildensteins were the owners of the paintings. This was despite the fact that the family, as stated above, made “critical decisions about art sales and demands for distribution of money(NY Times, Sept. 30, 2016.) The French fiducie inspired by the Anglo-American concept of trust was introduced in French law in 2007. The fiducie is “a contract by which a company (the Settlor or constituant) transfers goods or rights to another person (the Trustee or fiduciaire) who holds these separate from his own property with the remit to manage the property for the benefit of one or more Beneficiaries.” The difference between the French fiducie and the common law trust is that, according to article 2012 the French Civil Code, the fiducie is expressly established by law or contract, whereas a trust is not necessarily contractual. According to article 2011 of the French Civil Code, the independent management of the trust was not respected by the Wildenstein family.

French Tax authorities are hoping to recover about $600 million in taxes in a civil lawsuit related to the family inheritance of Daniel Wildenstein (is this different from the tax case? or the same). Guy Wildenstein will also have to explain how “he came into possession of paintings seized by police at the Wildenstein Institute in Paris” (Artnet news, Jan. 12, 2017) and why this particular vault did not have any inventory, counter to their general practice of cataloging the contents and listing their owners (a second vault was found and had a complete inventory).

Conclusion

 For now, most of the Rouart mystery remains. Some of the artworks are still missing and the roles of Wildensteins and Daultes in this case are unclear. Nobody seems to know when and how the paintings were transferred in Switzerland (no export certificate was issued), or why Olivier Daulte, as the executor of Mrs. Rouart’s estate, did not contact Yves Rouart or the judge in charge of the complaint directly after the discovery of the twenty-four paintings in the safe of his father.

The art market is notoriously opaque and it seems, as demonstrated by the Rouart case, that no one is immune from falling under the spell of the wealth (economic, aesthetic or intellectual) that is contained in artworks. Regardless of the jurisdiction, when valuable art is bequeathed it is beneficial to appoint multiple independent executors and leave specific instructions not only as to what is to be done with the artworks but what are the artworks in the bequest. It is important to keep in mind that during estate proceedings, valuable property can and does go missing. Estate planning with updated lists of property, its locations, and information concerning the last appraisal and its value, are de rigueur to lower the risk of loss (accidental or purposeful).

Select Sources:

* About the Author: Marine Leclinche is a Spring 2017 Legal Intern with Center for Art Law. She is a LL.M candidate at Benjamin N. Cardozo School of Law. She graduated in Intellectual Property law in France (Université Paris II Panthéon-Assas, Master 2 Droit de la propriété littéraire, artistique et industrielle, Class of 2016), and now focuses on art and fashion law. She can be reached at leclinch@law.cardozo.yu.edu.

Disclaimer: This article is intended for educational purposes only. 

 

 

In the Eye of the Beholder: Appraisals of Art for Estate Tax Liability

by Emily Lanza*

Form 706 Estate Tax

Estate tax, death tax or inheritance tax? Pick one and pay up to 40% with first $5.4 mill exempt.

In February 2017, the U.S. Tax Court ruled that the estate of a deceased New York woman, Eva Franzen Kollsman, undervalued $2.4 million worth of art on the estate tax return. The assets at issue before the Tax Court were two Old Master paintings by Pieter and Jan Brueghel held by the decedent at her death. The IRS claimed before the Tax Court that the Kollsman estate underreported the values of the two Old Master paintings resulting in a $781,488 federal estate tax deficiency.

In reaching this decision, the Tax Court not only rejected but also criticized the appraisals made for the estate of the two Old Masters by George Wachter, Vice President of Sotheby’s North America and South America. The Tax Court dismissed Estate’s declaration and the valuations made by Wachter, finding that his valuations were “unreliable and unpersuasive” due to his direct conflict of interest and misconstrued analysis of the Old Master paintings. 

The opinion of the Tax Court in the Estate of Eva Franzen Kollsman v. Commissioner of Internal Revenue demonstrates the importance of having a justifiable and objective appraisal when determining the tax liability of an estate. The valuation of art is not an exact science and may change depending on the “eye of the beholder.” However, in order to determine the precise tax liability of an estate, appraisers and estate executors must adhere to Internal Revenue Service (IRS) guidelines, professional codes of ethics, and the legal requirements within the Tax Code to ensure some level of objectivity and consistency. What were the shortcomings of the appraisal conducted for the Kollsman estate and what are the lessons to be learned from this case?

Estate Tax

The federal estate tax is a tax levied against the estate of a decedent, which must be paid by the estate upon the transfer of the property. The top tax rate is statutorily set at 40%. A series of adjustments and modifications of a tax base known as the “gross estate” determines federal estate tax liability. The gross estate includes the value of all property, including real or personal property such as artwork, that the decedent owned on the date of his or her death. The value of the property included in the decedent’s gross estate is the “fair market  value” on the date of the decedent’s death. According to estate tax regulations, the “fair market value” of the property is the price at which the estate property would hypothetically change hands between a willing buyer and willing seller. In such a sale, the buyer and seller would not be compelled to buy or sell the property as such a compulsion would disproportionately raise or lower the price. Additionally, both parties would be expected to have reasonable knowledge of the relevant facts, such as the condition or history of the relevant property. The impact of subsequent events after the death of death on the fair market value depends on the particular facts of the case and whether the parties would be expected to have knowledge of the relevant facts surrounding the subsequent event. The fair market value tends to reflect the hypothetical sale price in a market in which the item is most commonly sold to the public, such as the auction market for art assets.

Next, certain allowable deductions reduce the gross estate to the taxable estate. These allowable deductions include estate administration expenses, certain debts and losses, charitable bequests, and state death taxes. Then, the tax rates are applied to the taxable estate after the total of all lifetime taxable gifts made by the decedent is added to the taxable estate. Any available credits, such as the “unified credit,” are subsequently taken to obtain the actual estate tax liability, the amount of tax paid by the estate. For estates belonging to decedents who died in 2017, they must pay tax on estates valued greater than $5.49 million, the basic exclusion amount under the unified credit for 2017 (the unified credit in 2016 was $5.45 million). The IRS adjusts the unified credit amount every year to account for inflation. The Trump administration has recently proposed to eliminate the estate tax.

Estate of Eva Franzen Kollsman v. Commissioner of Internal Revenue

As explained above, the fair market value of property held by the estate is an important factor in determining the tax liability of the estate. This was the primary issue before the Tax Court in this case. Upon her death in 2005, the decedent, Eva Franzen Kollsman, owned two 17th-century Old Master paintings at issue in this case: Village Kermesse, Dance Around the Maypole (“Maypole”) by Pieter Brueghel the Younger and Orpheus Charming the Animals (“Orpheus”) by Jan Brueghel the Elder or the Younger. Pieter Brueghel’s work was later sold by Sotheby’s for the hammer price of $2,100,000.

In September 2005, a month following the decedent’s death, the estate’s expert, George Wachter, Vice President of Sotheby’s North America and South America, valued the paintings at $500,000 for the Maypole and $100,000 for Orpheus. In reaching these values, Wachter considered the composition and subject matter of the paintings but focused much of his analysis, according to his testimony before the Tax Court, on the extreme yellow discoloration and the dirt and grime on the paintings that accumulated during years of the decedent’s smoking. Wachter’s valuation was included in the estate’s 2005 tax return. After the valuation, the paintings were cleaned by a fine art services firm, Julius Lowry Frame and Restoring Company, at the request of the estate.

 

In 2009, Maypole sold at Sotheby’s for the hammer price of $2,100,000. The executor of the estate, Jeffrey Hyland, retained Orpheus. While the estate tax return listed the fair market value of Maypole and Orpheus at $500,000 and $100,000 respectively, the IRS asserted in a notice of deficiency that the estate had underreported the value of the two paintings and the actual fair market value of Maypole was $2,100,00 and of Orpheus was $500,000, resulting in a $781,488 tax deficiency. The estate petitioned the Tax Court for a redetermination of the paintings’ fair market values.

Before the Tax Court about ten years after the initial evaluation, the estate and the IRS presented the testimony of their respective experts and their valuations of the two paintings at issue. Paul Cardile, Ph.D., an art historian with twenty-five years of experience as a fine art appraiser, served as the expert for the IRS before the Tax Court. After analyzing the testimonies of the two experts, the court rejected Wachter’s valuation, and found the value of the Maypole at $1,995,000 and of Orpheus at $375,000. The estate was found liable for the resulting tax deficiency, the amount of which to be determined later by the IRS.  

Analysis of the Estate’s Appraisal

While the Tax Court routinely weighs in on the valuation of paintings for the purpose of determining estate tax liability, the court in the case of Estate of Eva Franzen Kollsman v. Commissioner of Internal Revenue not only agreed with the analysis of the IRS’s expert but strongly objected to and criticized Wachter’s testimony referring to his valuations as unreliable and unpersuasive. Why did the estate’s appraiser incur such criticism by the Tax Court?

1. Lack of Objectivity

First, the Tax Court found that Wachter held a significant conflict of interest “that could cause a reasonable person to question his objectivity” by adjusting the valuation for his own benefit. Determining the appropriate estate tax liability greatly depends on the objectivity of an appraiser, especially in the context of assessing the fair market value of art. Such calculations demand “insider-knowledge” of the art market, and objectivity must accompany this skill and expertise in order to maintain the integrity of the estate tax framework.

IRS Revenue Procedure 96-15 outlines various conflicts of interest that an appraiser must avoid when crafting his appraisal for tax liability purposes. These prohibitions include the appraiser not inheriting property from the estate as a beneficiary or not being any part of the estate. The appraiser also cannot have been employed by the decedent, because such a relationship may color the motivations of either party. The IRS also requires the appraiser to “hold himself or herself out to the public as an appraiser,” as potentially demonstrated through membership in professional appraisal organizations. These organizations, such as the American Society of Appraisers (ASA) and the Appraisers Association of America (AAA), require their members to follow a code of ethics in order to avoid such conflicts of interest as identified by the IRS. For example, the AAA requires that its members must appraise property objectively, “independent of outside influences and without any other motive or purpose than stated in said appraisal.” The AAA offers a list of certified appraisers, who possess an extensive level of expertise, education, and experience.

In addition to the IRS procedures and ethical “carrots,” appraisers may face potential “sticks” to ensure objective and accurate work. Implemented by the Pension Protection Act of 2006, section 6695A of the Tax Code imposes a penalty on the appraiser who prepared an appraisal used for an estate tax return and the appraisal results in a substantial valuation understatement. An understatement has occurred if the reported value of the property is 65% or less of the amount determined to be the correct value. The penalty imposed is the lesser of 10% of the underpayment (or $1,000 if greater than the 10%) or 125% of the gross income received from the preparation of the appraisal. For example, if an appraisal resulted in an underpayment of $50,000 and the appraiser received $2,000 for the appraisal, the penalty imposed under section 6695A would be $2,500 as the lesser value of 10% of the $50,000 underpayment ($5,000) and 125% of the gross income of $2,000 ($2,500) for the appraisal.

The court held that Wachter’s relationship and correspondence with the estate’s executor, Hyland, during the valuation process impaired his objectivity and, correspondingly, his credibility. While Wachter was determining the fair market value estimates for the estate paintings, Wachter and Hyland apparently corresponded about the fate of the paintings. During this correspondence, Wachter, as a Vice President of Sotheby’s, solicited Hyland for the exclusive rights for Sotheby’s to auction the Maypole and Orpheus, if Hyland ever chose to sell the paintings. The Tax Court did not reveal whether or how much Wachter received for this appraisal or whether he differentiated between his two roles as an appraiser or potential seller of the paintings in this correspondence.  Under Sotheby’s terms of service according to the Tax Court, an auction sale would entitle Sotheby’s to a 20% commission on the first $200,000 of the hammer price. Presumably, the employee who would bring in property would also collect a certain fraction of the hammer price as an incentive for bringing business. It appears, according to the Tax Court, that Wachter “had a direct financial incentive to curry favor with Mr. Hyland by providing fair market value statements that benefited his interests as the estate’s residual beneficiary” and that Wachter thus “lowballed” the estimates of the paintings to reduce the estate’s tax liability. The Tax Court further found that the simultaneous timing of the valuations and Wachter’s pitch for exclusive auction rights seemed to imply that the latter influenced the former, demonstrating Wachter’s lack of objectivity.

Wachter’s actions suggest if not directly implicate the various conflicts of interest outlined in the IRS policy about appraisal procedures. While Wachter was not a direct beneficiary inheriting the paintings from the estate, his employer certainly benefited from the sale of the Maypole and the explicit or inexplicit arrangement between Wachter and Hyland. Thus, Wachter violated professional ethics requirements for objectivity with this “quid pro quo” arrangement. However, according to the Tax Court opinion and Wachter’s biography on the Sotheby’s website, he is not a member of any professional organizations that demand some sort of accountability. If Wachter’s valuation had occurred after 2006 (and not the year before), Wachter would likely have been penalized under section 6695A for the gross understatement of the painting’s value. Given the hammer price that was more than four times the value he ascribed to Maypole, Wachter valued that work well under the threshold set in the Tax Code at a quarter of the value determined by the Tax Court. While Wachter seemed to avoid any legal repercussions for his lack of objectivity, at least according to the Tax Court ruling, the estate was settled with the consequences and the adjusted estate tax liability. In order to avoid such scenarios, estates should investigate the objectivity of their appraisers and ensure some type of oversight or accountability when hiring them for this important task.

2. Exaggerating the Poor Condition of the Paintings

Second, the Tax Court objected to Wachter’s emphasis on the poor condition of the paintings when forming his valuations. In his report, Wachter described the condition of both paintings as covered in dirt and grime with extreme yellow discoloration, due to the decedent being a heavy smoker. According to Wachter, one could not be certain of the inherent value of the paintings in this condition, and he concluded that the value of the paintings should reflect the high level of risk involved in cleaning. However, the Tax Court found that such a risk was exaggerated, highlighting testimony of the conservator that the risks involved with cleaning were low. Moreover, the Tax Court pointed out that the cleaning process only took two to three hours, indicating that such a procedure was “comparatively easy and problem free.” Contrary to Wachter’s report, Cardile, the IRS expert, did not adjust for the dirty condition of the paintings as “surface dirt do[es] not affect the intrinsic value of an Old Master painting.”

Upon first consideration, accounting for the state of the painting, as Wachter did when calculating the value, appears to be a logical step in a fair market value analysis. According to IRS policies, an appraisal must include a description of the art item that states the physical condition of the work in addition to the subject, medium, size, visible marks, and provenance. In the past, the Tax Court has acknowledged the physical condition of the work and has adjusted the value accordingly. For example, in the Estate of James J. Mitchell v. Commissioner of Internal Revenue, the Tax Court placed less weight on the testimony of the IRS experts because they did not adjust their valuation of an early twentieth-century watercolor by American artist Charles Marion Russell to account for “its inferior status and for its poor paper quality and back boarding.”

While an appraiser may and should consider the physical condition of a work, Wachter’s assessment of Maypole and Orpheus was inappropriate due to the emphasis on the level of dirt – a condition that could be and was easily remedied. The cleaning and framing of Maypole and Orpheus, which occurred after Wachter’s valuations, cost the estate $4,500 and $4,350 respectively. Unlike the Russell watercolor which was painted with inherently volatile and poor materials, the dirt covering the Maypole and Orpheus was not intrinsic to the painting itself. Wachter’s emphasis on the dirt of the paintings ignores the guiding principle when determining fair market value that the hypothetical buyer and seller have “reasonable knowledge of relevant facts” affecting the potential sale. “Reasonable knowledge” includes facts acquired during the background investigation and negotiations for the sale, and in this particular case would likely involve consulting a conservator about the risks of cleaning a dirty painting. Wachter’s deep deduction in the value of the paintings to account for their dirtiness was misplaced and too substantial, for information about the actual cleaning process, which only took a few hours, was “readily discoverable.” The Tax Court did acknowledge that cleaning carries some risk but calculated only a 5% discount for the Maypole and a 25% discount for Orpheus to account for bowing, a more critical aspect of its condition. But Wachter’s inappropriate consideration of surface dirt demonstrates the importance of taking a holistic approach towards the analysis of a painting and fully accounting for all the facts that a likely buyer or seller would recognize when approaching a sale.

3. Need to Use Comparable Sales

Perhaps the most significant criticism of Wachter’s valuation by the Tax Court is the absence of comparable sales to support his analysis. “Comparables”  (or “comps”) are the recent selling prices of similar pieces of art that are used to help determine the fair market value of a piece of art, with the assumption that it will sell at a similar price of other similar works. The Tax Court referred to this omission as “remarkable” and with the absence of any comparables, “Wachter’s report lacks any objective support for his valuation figures.” According to the Tax Court, comparables of paintings by Pieter Brueghel sold between $1,040,000 and $3,331,000, and paintings by Jan Brueghel sold between $400,000 and $700,000.

The use of comparable sales provides the basic foundation for the valuation of art by offering an objective analysis of the likely market value. Cardile, the expert for the IRS, identified several comparable paintings for both the Maypole and Orpheus. Comparing the subject matter, medium, size, and the provenance (record of ownership) of similar paintings that sold prior to the date of the Kollsman estate was being appraised, Cardile could calculate the likely market price of the Maypole and Orpheus more accurately and confidently. Generally, courts, in their analysis of appraiser testimony, are likely to weigh more favorably comps that were sold closer in time to the date of valuation and are more similar in subject matter to the estate’s property than comparables that are too dissimilar to the painting at issue to provide an objective benchmark. For example, the court in Estate of Murphy v. United States found the testimony of the IRS expert to be particularly problematic and thus gave his testimony less weight than the testimony of other experts. The valuation of the IRS expert was based upon sales too remote in time, from six to nineteen years before the valuation date, while the testimony of the other experts relied upon sales only a few months before the valuation date.

When evaluating suitable comparables, courts focus on the details, such as the date of the sale and similarity in composition to the painting at issue. When an expert such as Wachter completely ignores such evidence, the court has very little information to rely upon when assessing the credibility and accuracy of a valuation and corresponding testimony. There is no reason to believe that Wachter did not know who painted Maypole and Orpheus and even those less familiar with leading artists are likely to recognize the surname Brueghel to find suitable comparables. The practice of using comparable sales in this context is so essential and commonplace that it is unclear why Wachter’s valuation was missing such a critical component. The lesson from this omission is that the strength and credibility of future appraisals depends upon finding pertinent and appropriate comps so that a court may properly analyze the proposed valuation.

Conclusion

The evasive “fair market value” is the cornerstone of determining estate tax liability. Calculating the value of a unique piece of property based upon the price of a hypothetical market transaction is an inherently difficult task. Appraisers rely upon past sales of comparable art pieces in order to predict the future activity of this market. They consider the whole piece of art, including the subject matter, condition, and provenance, from the point of view of a hypothetical buyer and seller for the fair market value analysis. Because such precise analysis requires great skill, knowledge, and years of specialized experience that members of the courts generally do not possess, the courts and accompanying legal system depend upon the objectivity of the appraisers. If such professionalism is absent, the courts and the IRS cannot administer the tax law fairly. Unfortunately for the estate of Eva Franzen Kollsman, its appraiser did not follow these principles, and the estate had to pay penalties for the omissions of its appraiser.

Selected Sources:

  1. Estate of Eva Franzen Kollsman v. Comm’r of Internal Revenue, 2017 T.C.M. (RIA) 2017-040 (2017).
  2. 26 U.S.C. § 2001.
  3. 26 U.S.C. § 2031.
  4. Treas. Reg. § 20.2031-1(b).
  5. 26 U.S.C. §§ 2053, 2054, 2056.
  6. Rev. Proc. 96-15, 1996-3 I.R.B. 41, § 8.04.
  7. Appraisers Association of America, Code of Ethics, https://www.appraisersassociation.org/index.cfm;jsessionid=15426E3A1A9207384153A96906B788A6.cfusion?fuseaction=document.viewDocument&documentid=720&documentFormatId=1353&CFID=3969729&CFTOKEN=a08c8da32b839881-B1374B0E-1C23-C8EB-805AFDB50E7E6B2D.
  8. 26 U.S.C. § 6695A.
  9. 26 U.S.C. § 6662(g).
  10. Sotheby’s, Bio of George Wachter, ttp://www.sothebys.com/en/specialists/george-wachter/bio.html.
  11. Estate of James J. Mitchell v. Comm’r of Internal Revenue, 101 T.C.M. 1435, at *14 (2011).
  12. U.S. v. Simmons, 346 F.2d 213, 217-18 (5th Cir. 1965)(finding that facts revealed during a background investigation of the decedent’s records constituted “reasonable knowledge” for purposes of determining the fair market value of property).
  13. Mary Anderson et al., Art Advisory Panel Helps Courts Sculpt Estate Valuations, 42 Est. Plan. 20, 11 (2015).
  14. Estate of Charles H. Murphy, Jr. v. U.S., No. 07-CV-1013, 2009 WL 3366099, at *18 (W.D. Ark. Oct. 2, 2009).

*About the Author: Emily Lanza is currently Counsel for Policy and International Affairs at the U.S. Copyright Office and had worked previously as a legislative attorney for the Congressional Research Service, advising Congress on intellectual property and estate tax issues. She received her J.D. in 2013 from the Georgetown University Law Center. Before her law career, she studied archaeology and worked for museums in various capacities. She can be reached at emilyla8@gmail.com.

Disclaimer: The opinions expressed here are solely of the author and do not express the views and opinions of the U.S. Copyright Office.

WYWH: Immigration Law and the Arts – NICE WORK IF YOU CAN GET IN

 

By Katherine Jennings

 

Screen Shot 2017-04-28 at 11.41.59 AM

Photo credit: Center for Art Law.

On March 9, 2017, the Center for Art Law held an Art Law Mixer addressing the timely and provocative topic of immigration issues confronted by immigrant artists with the recent issuance of EO 13769, among other anti-immigrant measures. The 45th President commenced his presidency with a barrage of Executive Orders (EOs) including EO 13769*, which was signed by Trump on January 27, 2017, and restricted travel to the U.S. from seven Muslim-majority countries and by all refugees. This EO has had far-reaching and devastating effects on immigrants including immigrant artists. It has wreaked havoc and confusion at the borders. Antagonizing foreign dignitaries, it has quickly been met with outrage and resistance by artist activists, art organizations, and lawyers.

 

The Georges Bergès Gallery, a stylish, SoHo gallery with an international focus, was the apt and welcoming site of the two-hour event, a first Center for Art Law (the “Center”) program to address immigration issues. It was composed of a wine and cheese reception and presentation by the founders of Lehach Filippa, an immigration law firm intended to serve creative professionals, followed by a Q&A. The discussion was moderated by Irina Tarsis, founder of the Center. Attendees included lawyers, artists and law students. After a brief warm up period during which attendees were encouraged “to talk to someone you didn’t come with,” Georges Bergès, the founder of the eponymous contemporary art gallery, spoke briefly to welcome all and to talk about the global perspective of his gallery. Bergès said his goal is to find authentic artists who are working in their own cultural context.

On to the substantive portion of the evening, Tarsis introduced Alejandro Filippa, Esq. and Michael Lehach, Esq, founding partners of Lehach Filippa. Lehach and Filippa spoke about the O-1 visa, commonly referred to as the “artist visa”, and the process of applying for work permits as a foreign artist. The current political climate and the effects of the anti-immigrant executive orders from President Donald Trump was also a topic of discussion. Filippa speculated that if the current precedent of an excessive number of executive orders is any indication, we will likely see more pushback and restrictions to immigration applications and processes in the future.

In order to qualify for an O-1 visa, or artist visa, an applicant must demonstrate “extraordinary ability by sustained national or international acclaim and must be coming temporarily to the United States to continue to work in the area of extraordinary ability.” Extraordinary ability in the field of arts means “distinction.” The Immigration Act of 1990 (Pub.L. 101-649, 104 Stat. 4978) was a national reform of immigration that, among other things, excluded artists and entertainers (as well as athletes and nurses) from qualifying for H-1B visas. Two new categories, O and P, were introduced for extraordinarily skilled foreigners in the arts and sciences. The 1990 legislation was created in response to the Immigration and Nationality Act of 1952 (Pub.L.), aka the McCarran-Walter Act, which was meant “to exclude certain immigrants from immigrating to America, post-World War II and in the early Cold War.

Clearly, both Lehach and Filippa enjoy their law practice and are competent, dedicated professionals. Their passion was evident as they spoke about the process of creating a solid application in order to achieve success in obtaining an artist visa. Advocating for their clients is predicated upon a solid application with supporting documentation. Involved in facilitating artist visas and residence applications, they represent foreign creative professionals who want to work in the US and creative organizations seeking foreign talent to work in their US office. Their clients are from diverse industries such as the performing arts, music, fashion, film, photography, design, fine art, journalism and more. These “extraordinary aliens” have included tattoo artists, dancers, and rappers. The client may seek Temporary Work Visas and /or Permanent Residence based on Extraordinary Ability.

Lehach and Filippa outlined the proof needed to establish a valid application for an artist visa. In addition to a detailed resume, the client should include all relevant documents regarding their awards, notable clients, publications and press, and work history. An applicant must provide at least eight references by professionals who can attest to the extraordinary abilities of the applicant. Noting that an applicant’s file can be huge, they also spoke about how they have to be from important and respected sources. Lehach noted that it would not do a client any good if he were to provide his private residence as a gallery that would show the applicant artist’s work. Rather, the gallery must be a well-known and established entity.

Another crucial component of the application is an itinerary of the events and activities in the beneficiary’s field of extraordinary ability. You must have a plan of what you will be doing, with whom and when, and it has to be concrete. This constitutes the Sponsorship aspect of the application. For example, the applicant must provide an established list of galleries who will show his or her work and a concomitant timeline. An Employer, an Agency, or an Agent is an acceptable sponsor. Finally, it is helpful for the applicant to have a portfolio as a physical manifestation of the accomplishments detailed in his or her resume.

Lehach and Filippa also spoke about the case of an application for an Artist Visa being rejected. They said it is much better to refile, than appeal, because the immigration agents can be fickle. Noting that it can often be difficult to decide what constitutes extraordinary ability, they said it is crucial to initially establish a solid case. Their law firm also deals with other immigration issues such as obtaining permanent residency, obtaining a green card, and asylum issues, and extension of artist visas.

The presentation was followed by a lively question and answer session. Both presenters showed obvious delight in their chosen field and were quick to address each question thoughtfully. One interesting tidbit revealed during the Q&A was that under the right circumstances there is even a provision for bringing an artist’s muse into the country on a visa. As for the immigration ban that instigated the theme of the evening, “a judge sitting on an Island in the Pacific” ruled it unenforceable.

*Note that on February 3, 2017, EO 13769 was given a temporary restraining order in a decision from the Ninth Circuit of the Court of Appeals. EO 13769 was revoked as of 3/16/17.

About the Author: Katherine Jennings is a lawyer and contemporary realist oil painter living in New Jersey. She has a B.A. in History from Duke University and a J.D. from Fordham University School of Law where she was an Associate Editor of the Fordham International Law Journal. Having practiced intellectual property and immigration law, she is also certified as an Art Law Mediator with VLA. She was recently accepted into the Copyist Program at the Metropolitan Museum of Art and her work may be viewed at www.katherinejenningsfineart.com.

 

WWYH: “Eyes on the NYC Department of Cultural Affairs” and Changing Policies

By Heather DeSerio*

On February 28, 2017, the New York State Bar Entertainment, Arts and Sports Law’s Fine Art’s Committee (EASL) hosted a brown bag lunch with Kristin Sakoda, Deputy Commissioner and General Counsel of the New York City (NYC or the “City”) Department of Cultural Affairs (DCLA or Department). Sakoda is a veteran at the DCLA and runs an all-female department of three attorneys. She presented to a room full of lawyers working in the arts about the DCLA’s mission the types of legal issues involved in the agency’s work, and the DCLA’s involvement in shaping the cultural policy of the City. Attendees of the event also learned about how the City administers and manages public art initiatives from the perspective of a lawyer, and the policies that shape the City’s arts-related initiatives.

Background

The creation of the Department of Cultural Affairs has an interesting story about how it became the DCLA that exists today. In 1869, a group of citizens proposed that NYC should build a museum for natural history, which led to the construction of the American Museum of Natural History. Afterwards, a number of museums began construction around the city. Next, followed the formation of an 11-member panel Art Commission in 1898, that oversaw the proposal and installation of permanent works of art, architecture, and landscape architecture on NYC owned property. Around 1934, then-mayor of NYC Fiorello La Guardia, appointed a Municipal Art Committee to advise the City on ways to stimulate New York’s cultural life during the hardships of the Great Depression. The Committee used funds from the Works Progress Administration, the emergency Relief Bureau, and other foundations. It wasn’t until 1968 that the DCLA was created within NYC’s Parks Department. In 1976, under the direction of Mayor Abraham D. Beame, the DCLA became its own department that existed separately from the Department of Parks and Recreation with its own commissioner. This was done so that the needs of the growing DCLA could be met and the Parks Department could better focus on providing for the Parks and Recreation initiatives.  

About the DCLA

The DCLA serves an important function in a city known for being one of the biggest cultural centers in the world. The annual budget on the Mayor’s Office website indicates that the DCLA is the nation’s largest municipal funder of the arts in the United States. During their 2017 fiscal year, their expense budget was $84.81 billion and a capital budget of $14.0 billion through 2018. (For more information about different breakdowns and allocations of funding for New York City see the annual budget by clicking here.)

The Department plays a pivotal role in encouraging and supporting public funding of art, artist residencies, and provides many grants to artists and institutions throughout the metropolitan area. This support contributes to New York’s diverse and robust cultural scene.

The DCLA has three primary funding divisions that provide support for the arts community. First there is the the Program Services Unit, which administers funds to groups that provide cultural experiences for NYC’s residents and visitors. The second funding division is the Cultural Institutions Unit that provides operational support (in the form of unrestricted operating grants and the payment of all energy bills – heat, light and power) for 33 major cultural institutions occupying City-owned buildings or land, such as the Metropolitan Museum of Art. The third division is the Capital Projects Unit (CPU), which provides capital in the form of grants for the design, construction, and equipment for those institutions and other cultural groups in City-owned and non-City-owned facilities. The Capital Projects are funded from the NYC’s Capital budget.

Among their other projects, the DCLA administers New York City’s program Percent for Art, which makes art accessible to the public and visible throughout NYC by commissioning and acquiring art for display in public spaces. As the title of the program implies, 1 percent of the City’s capital is made available for the commission of or acquisition of a public piece of art. There are currently over 400 acquired works displayed around NYC. Click here to view a map of all the public artwork on display that was funded through the Percent for Art Program.  A couple familiar works include the Frederick Douglass Memorial, located in Central Park West and the Triumph of the Human Spirit monument in Foley Square (near the court houses downtown). On February 15, 2017, NYC’s Office of the Mayor released a statement that Mayor de Blasio recently signed off on an increase to the Percent for Art program in the amount of 1% of the first $50 million as indicated in the bill, Intro. 1296-A.

Another key program administered by the DCLA is Materials for the Arts (MFTA). It was  created in 1978. MFTA provides nonprofit and educational organizations with free supplies to support and grow art programs citywide. The program is headquartered in a large warehouse owned by DCLA in Long Island City, New York. MFTA collects reusable materials from a host of donors, and distributes them free of charge to qualifying non-profit arts organizations, City agencies, public schools, and social, health and community service organizations that have arts programs in New York City. Individual artists qualify only if they are financially sponsored by a non-profit organization. Once an entity qualifies, they can request a shopping appointment for materials at the MFTA warehouse or can obtain items through their online listing database. The MFTA also provides training for teachers on how to creatively reuse the donated materials and integrate them into art projects. The MFTA has distributed free supplies to more than 1,900 member organizations and public schools and collected more than 1.2 million pounds of high quality reusable goods valued at $5.8 million from over 1,685 donors, according to the DCLA’s website.

The Department has many new initiatives that focus on increasing support for art institutions and artists. For instance, one of these new initiatives involves integrating art into city services involves placing individual artist to partner with DCAS in the Public Artists in Residence (PAIR) program. There is also the IDNYC Cultural Partnerships where the City offers NYC residents a free ID card that has the benefit of providing free one year membership to venues throughout the five boroughs such as the Museum of Modern Art, the New York City Ballet, the Bronx Zoo, and many more. These programs provide the public with increased  access to art programs to foster art education and more opportunities for residents to become members of cultural institutions to gain free access to museums, zoos, aquariums, and much more.  

DCLA’s Legal Counsel

The DCLA’s legal department provides guidance and support for most of the programs that the DCLA offers. More cultural institutions, museums, government, for profit and nonprofit should take note of the number of attorneys working for the DCLA. There are at least three attorneys that work together to provide support for all of DCLA’s initiatives in conjunction with the NYC Law Department. DCLA’s General Counsel handles a wide variety of issues for the City such as employment law, contracts, artist rights, leases, licensing, and legislative drafting.

The legal department at the DCLA also focuses on the City’s interest in artist rights under the 1990 Visual Artists Rights Act (VARA), 17 U.S.C. § 106A. This provision is relevant when the DCLA commissions or agrees to purchase a work of art to be displayed publicly. Artists who are commissioned by the DCLA or who sell their artwork to the City should be aware of their “VARA rights.” This is because the artist’s moral rights in the artwork are impacted when the agreement is a work for hire agreement or the City includes provisions that indicate that the City has right to control the work or remove it for safety reasons. See, this previous article VARA, Back to the Rescue of Public Art in NYC written by Irina Tarsis of the Center for Art Law, for more information about VARA rights and provide an example of issues that an artist can face with public art agreements.

The DCLA attorneys also work with city council and provide guidance in drafting legislation for the Percent for Art Legislation program by making policy decisions for the department. The lawyers at the DCLA also carefully watch issues at the national level because decisions at the federal level can impact their Department. This is especially true as the new administration is taking office and making significant changes.

Federal Funding and the DCLA

Funding for exhibits is not the only problem that cultural institutions will face. On March 16, 2017, the United State’s Office of Management and Budget, released the proposed Budget for 2018 making it clear that the current administration wants to eliminate funding for the National Endowment for the Arts (“NEA”). The state and local Department of Cultural Affairs across the country face an important question about how they will be impacted by the proposed budget cuts to the NEA. Sakoda pointed to the fact that the federal budget trickles down to the state and then to the city. If the funding received by the State is reduced by the Federal Government it will in turn have a dramatic effect on the amount of available funds that the City receives from the State. Accordingly, the reduced budget the City will receive from the State will be reflected in the City’s reduced funding for grants to artists and cultural institutions. This will result in a decline in funding for exhibitions, art development, art organizations, and other art initiatives. There will also be a reduction in the acquisition of public art, and cultural institutions will be impacted significantly at the local level if the federal budget is reduced.

One of the most concerning issues with the federal cutbacks for the NEA is the federal insurance program that the NEA provides for exhibitions. There is a common requirement in loan agreements that museums must take out insurance for artwork displayed in an exhibit. Insurance is commonly provided by the NEA’s federal insurance program. This federal insurance program plays a huge role in providing insurance for artwork and without it many exhibits would never happen in the United States because major museums across the country would be unable to get insurance on their own for the amount required to put on large exhibits. The New York Observer’s article The Masterpiece Trade: Meet the U.S. Agency That Makes Museum Blockbusters Possible noted the role the federal insurance program plays in bringing major exhibits to museums by pointing out that the Museum of Modern Art displayed a statement that indicating that the recent “‘Henri Matisse: The Cut-Outs’ exhibit from October 12, 2014–February 10, 2015, was ‘supported by an indemnity from the Federal Council on the Arts and the Humanities.’”

For more information about the role that the NEA plays in the arts in the United States please read the article, The Legislative History of NEA and NEH, written by Emily Lanza.

Conclusion

Not only with the programs the DCLA manages trickle down to artists, institutions, and organizations, even public schools will feel the effects of this blunder because they would not receive materials from the Material for Arts Program. Artists will feel the shift in the federal government’s agenda in a dramatic way and be left with little financial assistance to spur creativity and care for artwork outside of the patronage system. It will have a stifling effect on creativity, and a failure to fund the NEA will reduce the number of important exhibitions, development of important non-profit organizations, leasing and acquisition of equipment, and reusable materials for public schools that help provide the public with motivation to develop and come up with new works to be displayed and interacted with.

Without the support and expertise of the DCLA, there is a big question that plagues the future of many publicly funded organizations, institutions, and art projects. The programs that the DCLA department funds are all susceptible to be reduced in proportion to the amount of funding received from the federal government. The policies and legislative initiatives could be altered as well. At this time, there is concern about whether the proposed budget or reduction in NEA funding will be approved by Congress. There are also discussions regarding an approved budget cut’s impact among members of the legal community that work within the creative organizations and individuals.

Helpful Sources

*About the Author: Heather DeSerio (NYLS, JD Class 2017) is a Spring 2017 Legal Intern with the Center for Art Law. In her studies, she is concentrating in Intellectual Property Law. Prior to law school, she worked as a fine artist and received a Bachelor of Fine Arts in Painting from Ringling College of Art and Design. She can be reached at heather.deserio@law.nyls.edu.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely upon the information in this article and should consult a licensed attorney.

Cuba’s in the Air: The Legal Challenges to Loaning Art from Cuba due to Judgments under the State Sponsored Terrorism Exception

By Mandy Estinville*

Cuba and the United States are closer now than they have been for 50 years. In 2015, the United States officially removed Cuba from its list of State Sponsors of Terrorism. Moreover, the Obama Administration amended the Office of Foreign Assets Control (OFAC) regulations to allow for greater freedom in travel and remittances, and to permit U.S. telecommunications, media, construction, and agricultural companies to establish a physical presence in Cuba. Most recently, the United States loosened certain sanctions on Cuba, including lifting the $100 limit on bringing Cuban rum and cigars into the United States. Although future of the normalization process between the two countries is uncertain under the Trump administration, a continuation of diplomatic relations with Cuba will promote cultural exchanges, such as selling and loaning art to museums and galleries. In fact, The Art Newspaper reports that the “market for Cuban art is booming; 20th-century Modernists such as Wifredo Lam, Amelia Pelaez, and Rene Portocarrero are particularly popular.” 

Despite improved relations between the two countries, there remain many unresolved issues that may affect Cuba’s willingness to export art to the U.S. In particular, Cuba owes about $7 billion dollars in property claims to American citizens and corporations whose property in Cuba was seized by the Cuban government during the Fidel Castro administration. In addition to those claims, Cuba is responsible for default judgments totaling over $3 billion dollars for purported acts of terrorism against U.S. citizens. Until paid, judgment holders of terrorist-related claims may attempt to seize any Cuban governmental owned art that enters the U.S. for a museum exhibition.

The State Sponsor Terrorism Exception

The Foreign Sovereign Immunities Act (“FSIA”) provides that  foreign states are immune from the jurisdiction of state and federal courts. However, Congress has created certain terrorism-related exceptions to the general immunity that foreign sovereigns enjoy within the U.S. Namely, the State Sponsor Terrorism exception (“SST”) allows courts to exercise jurisdiction over claims against foreign state sponsors of terrorism that cause personal injury or death to the U.S. citizens.

Cuba was originally placed on the State Sponsors of Terrorism list in 1982 for reportedly sponsoring communist groups in other countries. After Congress enacted the State Sponsor Terrorism exception to the FSIA, many plaintiffs filed human rights lawsuits against Cuba. Consequently, in many cases, courts found Cuba liable for acts of terrorism against U.S. citizens. These cases were ex parte proceedings, which resulted in default judgments since Cuba failed to appear. In Alejandre v. Republic of Cuba, the Florida Southern District court found jurisdiction under the SST exception and held Cuba liable for the Cuban Air Force’s shoot-down of two U.S. registered civilian planes in 1996, killing four people, three of them U.S. citizens. Each plaintiff, in that case, was awarded between $16 and $17.5 million dollars in compensatory damages as well as $137.7 million dollars in punitive damages.  The Florida Circuit court  also found jurisdiction under SST exception in Hausler v. Republic of Cuba and held Cuba liable for the execution of Bobby Fuller in 1960. Mr. Fuller’s family was awarded $65 million dollars in economic losses, $35 million dollars for non-economic compensatory damages, and—notably—$300 million in punitive damages. Lastly, the court in Villoldo v. Ruz found jurisdiction under the SST exception and held Cuba liable for its role in the imprisonment and torture of Gustavo Villoldo following the Cuban Revolution. As a result, the court awarded the plaintiffs a $2.79 billion dollars judgment against the Republic of Cuba and other Cuban parties.

Enforcing Judgments Against Cuba

Although the plaintiffs in Villoldo, Hausler and other cases won sizable judgments against Cuba, the Cuban government failed to make any payments. Challenges to obtaining payment for these judgments remain since Cuba has no attachable property in the United States. Consequently, the plaintiff’s only current viable option is to go after the estimated $243.2 million dollars worth of assets previously blocked by the Kennedy administration following the Cuban Missile Crisis. These assets were originally blocked, or “frozen,” in order to prevent Cuba from using the United States banking system to transfer money to other Latin countries for use by local communist groups.

Some plaintiffs have been successful in attaching their judgment to Cuban blocked assets under section 201(A) of Terrorism Risk Insurance Act. This Act allows for the liquidation of blocked or frozen assets of a foreign state designated as a state sponsor of terrorism, or its agency or instrumentality, to satisfy a judgment against the foreign state for a claim based on SST. In fact, plaintiffs in Weininger v. Castro collected over $90 million dollars on their terrorist-related judgments against Cuba by liquidating frozen bank accounts owned by Cuban telecommunications companies. Because Cuban assets in the United States  are sparse, plaintiffs are forced to be creative in enforcing their judgments. For instance, a plaintiff unsuccessfully sought to have a $63.6 million judgment paid out of BNP’s forfeiture of funds for its criminal conduct of processing and transferring billions of U.S. dollars to and from entities in Sudan, Iran, and Cuba.

Judgments against Cuba under the State Sponsored Terrorism Act may attach to Art loaned from Cuba

A potential unintended consequence of the normalization between Cuba and the U.S. is that it may provide plaintiffs with another viable option to collect on their judgments against Cuba. Section 1610 (a) of FSIA provides limited exceptions to immunity by allowing claimants to attach their judgments to foreign state’s property in the U.S. under certain circumstances.21 Under § 1610 (a) (7), claimants with judgments related to the State Sponsor Terrorism exception can attach that judgment to any Cuban governmental property. This attachment can occur regardless of whether the property is or was involved with the claim so long as the property is in the U.S. in connection to a commercial activity.

Typically, museums can apply to protect internationally loaned artworks from seizure under the Immunity from Seizure Act (“IFSA”). This protection is not automatic, once a museum submits its application to the State Department, the President or his designee must determine whether the object is of cultural significance and whether the temporary exhibition is in the national interest.  While IFSA may protect Cuban loaned art from attachment for judgments relating to SST claims, it is unclear if the State Department will grant this immunity for Cuban loaned art under the Trump administration since the future of the normalization process between the U.S. and Cuba is uncertain. Without an approved IFSA application, it is likely that the risk of possible attachment for judgments obtained against Cuba will curtail the chances of Cuba exporting its art to the U.S. for temporary exhibits. Relatedly, Cuba recently failed to loan art to the Bronx Museum for the “Wild Noise” exhibit despite a ruling from the Obama administration granting the pieces protection from seizure. Instead, the museum exhibited pieces from private collectors and galleries. Cuba’s reluctance to loan art to museums in the U.S. may be attributed to the diplomatic uncertainties under the Trump administration.

In December 2016, Congress enacted the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act ( the “Immunity Clarification Act””), which amended the Foreign Sovereign Immunity Act in response to the Malewicz v. City of Amsterdam finding that temporary art loans for exhibits are deemed a commercial activity. This new law clarifies that the act of exporting art that has been granted immunity from seizure under IFSA for a temporary exhibit in the U.S. is not considered a commercial activity and is, therefore, immune from U.S litigation. Despite the potential for this new amendment to increase international art exchanges, Cuba may still be vulnerable to expropriation claims if it exports art that was confiscated during Fidel Castro regime. One of the exceptions carved out in the Immunity Clarification Act disallows immunity for works “taken in connection with the acts of a foreign government as part of a systematic campaign of coercive confiscation or misappropriation of works from members of a targeted and vulnerable group.” Cuba may fall under that exception since it had systematically seized all Cuban property including property belonging to American individuals and corporations without compensation after the 1959 revolution led by Castro.

The ongoing disputes and outstanding claims and judgments between Cuba and the United States are not going to disappear. It has been reported that in addition to the  claims the U.S. has against Cuba, Cuba asserts that the United States also owes Cuba billions in reparations and for the economic damage caused by the embargo as well as damages resulting from events such as the Bay of Pigs invasion. Due to the precarious nature of Cuba’s relationship with the U.S, it is imperative that Cuba resolves its outstanding judgments in the U.S. before it risks loaning any of its art to a U.S museum.

From the Editors:

Cuba CollageOn March 22, 2017, Cardozo Law School’s Art Law Society and the Fashion, Arts, Media, and Entertainment Law Center (FAME) hosted a symposium, about Cuban art and the art market called “Not Their Art! Demystifying the Cuban Plunder and Nationalization of Art, Hoping for Restitution, and Predicting the Future of the Embargo and Its Sanctions.” Abigail McEwen, a specialist in Cuban and Porto Rican art of the twenty-century, moderated the event. There were three speakers at the event: Monica Dugot, the current International Director of Restitution at Christie’s, Carmen Melian, the former Director and Senior Specialist in Latin American Art at Sotheby’s New York for 15 years, and Carl Micarelli, a New York lawyer that advises clients on compliance with with regulations from the U.S. Department of Treasury’s Office of Foreign Assets Control.

Presentations at Cardozo centered around how artworks that were confiscated (or nationalized) by the Cuban government following the Cuban Revolution and the complicated relationship between Cuba and the United States have caused long-term problems still affecting the art market. For example, Dugot spoke about how Christie’s strives to make restitution of artwork for families that have had artwork confiscated an easy process for any valid claim that arises and is supported by sufficient documentation. Melian provided many examples of how artwork has come to market outside Cuba, including one involving a Cuban priest who sold artworks that were left with the church in an effort to provide funds for the parish, other examples centered around how many artist such as Wilfredo Lam who fled Cuba left many works behind, and how many forgeries permeate the art market as artworks are being copied from photographs with Cuban art in the background. Questions of authenticity and title have presented significant problems for provenance research and have complicated even the basic determination of whether artworks were privately or state-owned property. Micarelli informed the audience about the various U.S. laws and embargos  imposed vis-a-vis Cuba that affect the art market; he warned the audience about the uncertainty of U.S. policy in relation to Cuba.

The market for Cuban artwork is said to be growing, but the sentiment of the panel was to be cautious when a buyer is going to purchase artwork that is from Cuba because of so much uncertainty surrounds ownership of the artwork that comes from Cuba.

Select Sources and Suggested Reading

  1. Julie Hirshchfield Davis, U.S. Removes Cuba From State-Sponsored Terrorism List, New York Times (May 29, 2015) https://www.nytimes.com/2015/05/30/us/us-removes-cuba-from-state-terrorism-list.html.
  2. Frequently Asked Questions Related to Cuba https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_ne.w.pdf
  3. Julie Hirshchfield Davis, Obama, Cementing New Ties With Cuba, Lifts Limits on Cigars and Rum, New York Times (October 14, 2016)  http://www.nytimes.com/2016/10/15/world/americas/obama-cuba-trade-embargo.html?_r=0.
  4. David D’Arcy, Cuba refuses to return seized art despite thaw in relations with US, The Art Newspaper (Feb. 23, 2015) http://old.theartnewspaper.com/articles/Cuba-refuses-to-return-seized-art-despite-thaw-in-relations-with-US/36940
  5. Mari-Claudia Jimenez, “RESTITUTING LOOTED CUBAN ART,” ASCA Cuba in Transition (2009), available at http://www.ascecuba.org/c/wp-content/uploads/2014/09/v19-jimenez.pdf
  6. 28 U.S.C. § 1605
  7. 28 U.S.C. § 1605A
  8. CRS Report for Congress: Cuba and the State Sponsors of Terrorism List https://www.fas.org/sgp/crs/row/RL32251.pdf
  9. 996 F. Supp. 1239 (S.D. Fla. 1997).
  10. Hausler v. Republic of Cuba, No. 02-12475, 2007 WL 6870681 (Fla. Cir. Ct.
    Jan. 19, 2007).
  11. Villoldo v. Ruz, No. 08-14505 CA-25, 2009 WL 1832603, at *2 (Fla. Cir. Ct. May
    29, 2009).
  12. Can Creditors enforce Terrorism Judgment against Cuba? https://www.fas.org/sgp/crs/terror/creditors.pdf
  13. Terrorist Assets Report for Calendar Year 2015 https://www.treasury.gov/resource-center/sanctions/Programs/Documents/tar2015.pdf
  14. Cuban Assets in U.S Frozen by Treasury, Chicago Tribune (July 9, 1963) http://archives.chicagotribune.com/1963/07/09/page/1/article/cuban-assets-in-u-s-frozen-by-treasury
  15. Terrorism Risk Insurance Act of 2002, Pub. L. No. 107-297, § 201, 116 Stat. 2322.
  16. 462 F. Supp.2d 457, 98-503 (S.D.N.Y. 2006)
  17. United States v. BNP Paribas S.A., 14 Cr. 460 (LGS) (S.D.N.Y. Apr. 30, 2015)
  18. 28 U.S.C. § 1610(a)
  19. Immunity from Seizure Act: 22 U.S.C § 2459 https://www.gpo.gov/fdsys/pkg/USCODE-2011-title22/html/USCODE-2011-title22-chap33-sec2459.htm
  20. Randy Kennedy, Bronx Museum Won’t Get Loan of Art From Cuba, New York Times (Jan. 23, 2017) https://www.nytimes.com/2017/01/23/arts/design/bronx-museum-of-the-arts-cuba-declines-to-send-art.html
  21. Malewicz v. City of Amsterdam, 517 F. Supp. 2d 322; H.R. 6477
  22. Foreign Cultural Exchange Jurisdictional Immunity Clarification Act: H.R. 6477 https://www.congress.gov/bill/114th-congress/house-bill/6477
  23.  Frances Robles, Cuba Seizures Now Present Opportunities, New York Times (Dec. 21, 2014) https://www.nytimes.com/2014/12/22/world/cuba-seizures-now-present-opportunities.html.
  24. Senior State Department Official on Cuba Claims Discussions https://2009-2017.state.gov/r/pa/prs/ps/2016/07/260666.htm

About the Author: Mandy Estinville is an attorney based in New York, NY. She can be reached at mandyestinville@gmail.com.

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