Book Review: “Art Law: A Concise Guide for Artists, Curators, and Art Educators”(2016)

 

By Wylie Rechler*

Screen Shot 2017-07-27 at 11.38.45 AMEver wonder about the processes, complexities, and challenges revolving around an artist’s journey from studio to international renown? Or a collector’s campaign from inheritance to resale of an artwork with questionable title? Or a museum’s interactions with an artist’s intricate and controversial body of work so as to make it comprehensible for visitors? Michael E. Jones’ new book Art Law: A Concise Guide for Artists, Curators, and Art Educators (2016), provides a comprehensive overview of the loopholes and technicalities of the art market, including their historical transformations from it’s origin to the present day. Rich with examples and applications, Art Law compartmentalizes the often perplexing and convoluted legal concepts surrounding the art world into a digestible package of approaches. As a lawyer raised by an artist, Jones demonstrates a comprehension of the business and legal challenges artists face daily. Additionally, the author’s experiences as a “visual fine artist, art collector, consultant to museums, advisor to artists rights societies and individual artists, board trustee for an art college, author of an intellectual property rights book for artists, judge, university professor,” and more greatly contribute to his straightforward and intelligible explanations of complex and intricate notions (Preface, xi). 

 

Jones’ first chapter starts at the very beginning with “The Professional Artist’s Life”—an outlined examination chronicling the technical components of the contemporary visual artist’s career. From the importance of workspace and materials and marketing techniques, to taxes and estate planning, this chapter contains all the relevant legal concepts that apply to artists’ creative processes.  

The second chapter explores what the author terms “the gallery-auction-house-collector-major museum-complex” using examples of artists who have achieved entry into the exclusive bubble of the art market and those who have not, including … . This chapter offers an in-depth synopsis of the historical evolution of Western art through each major, instrumental artistic movement and school beginning with the Middle Ages’ concept of artist guilds. Jones then takes us to the Renaissance period—distinguished by the Medici patronage, innovations in oil painting techniques, and the importance of apprenticeships—followed by Neoclassical era’s emphasis on the academies and salons as the taste-makers of this time. Following this, we are informed about the impact of the invention of photography and innovations in printmaking. Subsequently, we are introduced to the first man to bring “financial leverage into the art market,” Paul Durand-Ruel (1831-1922) (P. 30) and the American ex-pat siblings who operated an artist salon out of their living room, Gertrude and Leo Stein. The Steins are highlighted as an example of how collectors, academics, and patrons can also serve as mentors and, thus, further impact the market for a particular artist. Jones moves on to discuss both the domestic and international impact of the 1913 Armory Show in New York City as a forum for the exchange of ideas. Here, Jones profiles collector, gallerist, and patron Peggy Guggenheim in her role as patron and taste-maker of the 20th century art world. The author notes that, after and around this time, art historians and writers—Clement Greenberg and Meyer Schapiro—also affected the market, in their capacity as artist promoters. Greenberg’s 1969 book Art and Culture grappled with the substance, significance, and historical context of Modernism in an unprecedented way. Jones concludes this chapter by discussing the emergence of photography and the Pop Art movement alongside developments within the art market, particularly the New York gallery scene. This section thoroughly details how the development of the art market paralleled each era’s art process—the medium used, the style in vogue, the training required, and the dialogue that revolved around the movement, the audience or the consumers of each new creative wave—and leans more toward being an art historical chapter as it closely examines the context of an art movement’s conception and how this shaped the art market as we know it today.

The third chapter chronicles the history of the American museum and its varying organizational structures, including incidents involving public disapproval of museum leadership. Museums appear to be a house of scholarship, exposure, and exhibition for all interested in diving deeper into cultural history of their society and that of others. Quoting the International Council of Museums (ICOM), Jones cites that museums are “in the service of society and its development… for the purposes of education, study, and enjoyment.” (47).  Quite often these instances of conflict and disapproval revolve around intolerant and disrespectful actions of the cultures of the museum’s visitors. Jones highlights the 2015 controversy concerning the Museum of Fine Arts Boston’s inviting visitors to come to the museum and dress up in a replica of the kimono worn by Camille Monet in Claude Monet’s La Japonaise. After protests and accusations of cultural appropriation and insensitivity, the museum cancelled this program and released an apology statement to those offended. Jones also discusses the broader issue of offensive objects on curated display, such as the Confederate flag. The Virginia Museum of Fine Art owned an adjacent parcel of land next door to the museum on it that it rented to the Sons of the Confederate Veterans. As it turns out the land housed a chapel which had served as the site for treating wounded Confederate soldiers during the Civil War. During their lease, the Sons of the Confederate Veterans flew a Confederate flag at the front of the building to symbolically commemorate their ancestors. The museum’s board criticized this gesture as a reversion to the promotion of the discriminatory and unjust Civil War-era ideologies of the Confederacy. The board reasoned that the front yard was the improper context for the exercising of this particular viewpoint and forced its removal. These two instances in American museum history grapple with the fiduciary responsibilities owed by a cultural institution to the public. There exists much ongoing debate over how broadly and narrowly the responsibilities of a museum should be interpreted. In addition to fiduciary duty to educate the public, Jones discusses the organizational structure of museum operations, which includes a board of directors, the adherence to the museum’s own code of ethics, and the necessity of holding onto a highly valuable art collection as a public trust.

Chapter Four, “Acquisitions: Good Title, Theft, Forgery, and Authentication,” delves into the issues regarding the transaction of an artwork, including provenance and appraisal. Jones begins by discussing the importance of a sound provenance prior to purchasing art by providing the logical first example of clouded title—a stolen work of art. In addition to database resources, such as the UK-based for-profit Art Loss Registry, the U.S. government is constantly trying to remedy the plight of those suffering from art crimes. In response to the Isabella Stewart Gardner Museum heist (in 1990), legislation passed in the mid-1990s made it a federal crime to steal art objects both older than 100 years and worth more than $5,000 or simply worth more than $100,000. Jones explains that a theft could be made by someone close to the artist, such as a gallery assistant.  Jones moves on to discuss how each state’s statute of limitations could impact an individual bringing a claim on account of a wrongly possessed artwork. He references O’Keefe v. Snyder—a case in which artist Georgia O’Keefe sought the return of paintings she’d made years prior from an adverse possessor who had acquired it as a bona fide purchaser. Jones also highlights the 1970 UNESCO Convention, as it circulated a code of ethics with respect to participating countries’ acquisitions of art objects. Under this code, U.S. museums run by federal agencies are not to acquire art objects illicitly removed from their country of origin (61).

In addition, this chapter examines the challenges and methodologies behind art authentication. When the scholarly evidence of art experts has contradicting results or proves uncertain, those seeking to authenticate a work of art can now turn to scientific analysis. From analyzing strokes and mark-making from high resolution images of Pieter Bruegel’s drawings to testing the chemical components of Jackson Pollock’s “Matter” paintings, scientists have made great strides in developing authentication techniques. Due to innovations in authentication, there has been a rising trend in lawsuits brought against art institutions for denial or neglect of authenticity. For example, Mr. Lancelot William Thawytes brought suit against Sotheby’s London for under-estimating the value of a painting he consigned that Sotheby’s sold as attributed to a student of Caravaggio’s. Sir Denis Mahon, the buyer of the work, took several measures to restore and authenticate the painting. He ultimately found it to be a genuine Caravaggio and priced somewhere between £10 and £15 million. He paid only £42,000 for it at auction. Jones reminds his readers that the underlying risk behind all authentications is that “there is no absolutely undeniably objective nor infallible test to determine authenticity” (66).

The author appropriately dedicates the entire fifth chapter to the examination of the “ethical and legal challenges of Nazi-era art and cultural property,” organized as an overview of the evolution of confronting the impact of the Nazi regime on the highly valuable personal property of its victims (77). Jones aptly begins with the 2012 discovery of Cornelius Gurlitt’s hoard of over 1,300 artworks passed down from his grandfather, the Nazi art dealer Hildebrand Gurlitt. (Cite Vanity Fair article). Jones explains that discoveries, such as this one, reveal the great amount of work that is being done and that will need to be implemented in the  future. Two statutes enacted in 1998 by Congress were intended to help these efforts: the Holocaust Victims Redress Act promoting the return of stolen property and the Nazi War Crimes Disclosure Act ordering the declassification of Nazi records pertaining to war crimes. In addition to discussing forward-thinking legislation, Jones chronologically walks his readers through six landmark cases that demonstrate the challenges of the Nazi-era art restitution cases—Price v. United States, Menzel v. List, Solomon R. Guggenheim v. Lubell, Bakalar v. Vavra, the Portrait of Wally, and the Republic of Austria v. Altmann. Additionally, Jones highlights other instances of the repatriation of cultural property not involving Nazi-era claims. These include the Elgin Marbles from Greece, the head of King Sargon II from Iraq, a Cambodian mythical statute auctioned at Sotheby’s New York, and Native American religious and art objects on display in American institutions. Jones has managed to package a dense amount of case law and legislative information in a digestible format.

The sixth chapter details the complexities of contract formation within the context of buying, consigning, and selling art in today’s global market. From Article 2 of the Uniform Commercial Code, to the requirements of a valid contract—including offer and acceptance, consideration, etc.—Jones covers every principle of contract law that applies to the exchange of artworks. He introduces the components of Visual Artists’ Rights Act (VARA), discusses what happens when a party breaches or fails to perform their end of the bargain, and explains which remedies are available to the victim of a breach or nonperformance. The author even goes as far as to provide templates of two different kinds of commonly formed art contracts—a sample consignment agreement and a sample exhibit contract (104-116).

The following three chapters tackle the significance of artists’ rights in today’s cultural climate. First, Jones outlines the benefits and challenges of those artists seeking to enforce the reproduction rights of their artworks. The seventh chapter presents an overview of the dynamics of the circulation of “the tangible expression of an idea, not the idea itself” (119). Jones provides a brief history of the Copyright Act, including its compliance to the Berne Convention—in which American artists receive copyright protection from the approximately one hundred participating countries—and the Universal Copyright Convention—where American artists receive an additional twenty-five years of copyright protection. Jones also explains the requirements for a work to be eligible for copyright protection. For example, the creativity criterion demands that the work must be produced by “an exercise of human element” (123). The topic of copyright infringement is demonstrated through three well-known art law cases—Rogers v. Koons, Cariou v. Prince, and Leibovitz v. Paramount Pictures Corp. The eighth chapter explores artists’ rights independent of copyright laws—these moral rights “protect an artist’s non-economic interests” and apply “after the art is sold or transferred” (143). In addition to discussing how American moral rights laws for artists relate to European ones, Jones gives examples of case law within this body of law operates. See Mass. MoCA v. Buchel. The ninth chapter reviews first amendment concerns with respect to artistic expression, starting with censorship practices dating back to the sixteenth century when Pope Pius ordered artists to paint fig leaves to conceal the nudity of the figures depicted in Michelangelo’s Sistine Chapel frescoes. A more recent example that illustrates this controversy occurred when John D. Rockefeller Jr. commissioned Diego Rivera to paint a mural at Rockefeller Center. Rivera effectively breached his contract to paint a man at a crossroads by instead depicting Vladimir Lenin. Rivera was fired and the mural destroyed. The chapter also discusses the intersections of freedom of expression with defamation, obscenity, privacy violations, and trademark infringement, illustrated by the challenges faced by Robert Mapplethorpe, Arne Svenson, Robert Indiana, and more.

In the tenth and final chapter Jones concludes by reviewing the different avenues through which artists can receive funding: federal agencies, state councils promoting the arts, crowdfunding, and foundations established either by private collectors or artists. In addition to listing examples of grant sources, Jones provides a thorough examination of the ways through which an artist could go about applying and receiving such funds. Furthermore, Jones relates back to his first chapter by including applications of the law to various disputes regarding such private foundations supporting the arts. These foundations—the Robert Rauschenberg Foundation and the Barnes Foundation, for example—have faced lawsuits ranging from fiduciary responsibilities and compensation, to partnerships with other successful foundations.

While the cases Jones makes references to cases that might not have the freshest shelf life, this is case law that should be known and understood by every individual who is considering a career in or involving art law. Jones’s constant references to historical events and the evolution of ideas provides a wonderful insight for his readers. Not only has the author successfully penned a crash course in contract law, copyright law, property law, and Western art history in one extensive yet concise two hundred-page book—but he also applies each and every important legal concept to the ever-changing, always exciting art market.

About the Author: Michael C. Jones is a professor emeritus in the University of Massachusetts Lowell College of Fine Arts, Humanities, and Social Sciences. He conducts research in areas including intellectual property law for artists, international applications of copyright law, and sports law. Art Law is his fourth publication on the topic.  

Disclaimer: Book reviews are no substitute for reading and interacting with the book reviewed.

*About the reviewer: Wylie Rechler is a Summer 2017 Legal Intern with the Center for Art Law. She is a rising 2L, J.D. Candidate at the Benjamin N. Cardozo School of Law and graduated in 2016 from Cornell University with a B.A. in art history. While at Cornell, she studied art and business abroad at the Sotheby’s Institute of Art in London. She can be reached at rechler@law.cardozo.yu.edu.

Folding the White Cube: What Is Transforming the Gallery Scene in NYC?

by Alexandra Terrell*

Screen Shot 2017-07-19 at 4.29.31 PMSpeaking at a Stropheus Art Law event entitled “Letting Go of Brick and Mortar: The Future of the Gallery” in September 2016, Josh Baer noted that the notorious art scene in the Big Apple has always changed cyclically. He questioned, “How many [galleries] are going to be flourishing 5, 10, 20 years from now? I’m going to say not many. And it’s always been that way.” Several quintessential New York City galleries affirm Baer’s prediction. On Stellar Rays, Andrea Rosen Gallery, and Mike Weiss Gallery, amongst others, have recently closed their doors for good. Small and midsize galleries, which often play a pivotal role in helping promote emerging artists (JTT with Damon Zucconi and Sargent’s Daughters with Cy Gavin are two examples), have a hard time surviving New York City’s ever-changing and always-demanding “make it or else” zeitgeist, much like the artists they represent. With an influx of artist-types comes gentrification, followed by higher property taxes, and when the lease expires, a higher rental rate to renew. When these increases in overhead become unsustainable, galleries often move to more affordable areas, starting the cycle all over again. Today, some might call the process hypergentrification because it seems to have heightened and accelerated, with property taxes and rental rates skyrocketing to stratospheric levels and landlords unwilling to negotiate longer-term leases.

The Internet plays an important role in the changing art market, as do art fairs—galleries are no longer the sole source of viewership for an artist. Artists often display their work directly to an audience online, eliciting sales and promoting their work without the help of a gallery. As Michael Foley of Foley Gallery aptly puts it, “The things that gallerists have embraced over the years as additional tools may ultimately be our undoing.”  At the same time, however, the gallery offers a viewing experience that the dimensionless white space of the Internet cannot. It’s impossible to smell the paint or perceive a piece’s physical presence through the interface of a computer screen. To reconcile the innovations of the Internet age and costly real estate with the necessity of what Josh Baer describes as a “chemical view of art”, new models of gallerist-artist-client relationships have arisen, expanding the ways in which art is presented to the public. However, with diversified roles and the use of non-traditional spaces, gallerists take on new legal responsibilities.

The Essence of the Problem

Gallerists in New York City list many reasons for abandoning their brick-and-mortar spaces—the rise of art fairs, the burgeoning online art market, the desire to retreat from the grind of the art-industrial complex, and the changing nature of the art itself. Some even blame closed-minded clientele. Collectors have shifted their focus to “market-tested trophy works”, often buying such works online without viewing them in person. Because these works tend to be the domain of blue-chip galleries with multiple locations, they are the ones benefitting disproportionately from the online market while small and midsize galleries suffer.

In a recent article in the New York Times, Robin Pogrebin notes a widening economic divide between small galleries and large ones. She attributes this phenomenon to the exorbitant cost of real estate as well as the proliferation of expensive art fairs. Participating in certain art fairs can cost a gallery hundreds of thousands of dollars, virtually shutting out any gallery pulling in less than seven figures annually. Economic factors are not the only barrier to showing at major art fairs. Many are quite selective when choosing exhibitors, opting for galleries that represent well-recognized artists over those that promote emerging ones. According to The European Fine Art Foundation’s 2017 Economic Report, art fairs account to up to 41% of sales across the industry. Not only do small and midsize galleries not benefit from those sales, they have also witnessed a noticeable decline in foot traffic, diminishing their overall sales and forcing them to rely more heavily on their most loyal clients. While there is no obvious response to the economic impact of art fairs and the Internet on small and midsize galleries, it is easier to pin down a solution to rising real estate costs.

In March 2016, the Center for Art Law hosted a panel at Minus Space highlighting the central role the real estate market plays in the arts. Adam Sheffer, the president of the Art Dealers Association of America, relates that “you can never underestimate the significance of the relationship between the real estate and art markets.” Over the course of the post-war period, gallery hotspots shifted around the city, from the Upper East Side to Midtown to Soho to Chelsea to Williamsburg.  Because of the rent increases in Chelsea and the Meatpacking District, galleries there began searching for alternatives. As early as 2001, galleries started making the move from Chelsea to the Lower East Side and Chinatown, where the majority of locations are smaller and are often run by independent landlords. Pierogi Gallery, run by Joe Amrhein and Susan Swenson, made the leap from Williamsburg to the Lower East Side to escape rents that are just as high as those in Chelsea. Prices in the Lower East Side range from $100-$145 per square foot, but because of the smaller spaces available, the overall costs are less. For larger spaces on the Bowery, rents can go up to $200 per square foot, likely because of the willingness of more profitable tenants—hotels and restaurants, for example—to take on such high rates in the area.

In the mid-2000s, rent in Chelsea fell between $90-$100 per square foot. Compare that to today, when rent on the “best blocks” can be $120-$145 per square foot. With spaces ranging in size from 1500 – 5000 square feet, only well-established blue-chip galleries have any hope of sustaining further increases.  Few spaces can still be found for below $100 per square foot.  One prevailing condition guarantees a bit of stability for galleries in Chelsea—retailers have been hesitant to move in. As a result, the rental rates are also highly dependent on what galleries are willing to pay. If no gallery can pay the rate, the space sits empty. With the Hudson Yards development being erected just above Chelsea, the situation may change.  However, the upside is that with these upscale residences moving in, more affluent clientele move in as well.

Rent is expected to continue to increase even in lower-priced regions—the Lower East Side, Williamsburg, and Bushwick—so galleries remain in search of less charted areas. For some, that means Harlem, for others, it means Queens. A few have gone even further outside traditional realms, changing course and representing artists in the absence of a brick-and-mortar space.

The Source of High Rental Rates

How is it that rent can continue to increase? The answer is pretty simple: there is no commercial rent control law in New York. New York City had one from 1945 to 1963, but when it expired, there was little impetus to renew it because, as James Parrott, the deputy director and chief economist of the Fiscal Policy Institute, explains, “the real estate community has always been aggressive in campaign contributions… and, by doing so, they’ve successfully prevented anything that would restrict them.”

Where rent control is nonexistent, a gallery’s saving grace can be the terms of its lease agreement.  Commercial lease agreements are often the result of an extensive negotiation process. Critical terms can make or break the leasing business. These terms include the length of the lease, the rent and any allowable increases, whether insurance, property taxes and maintenance costs are included in the rental rate or paid separately, and how disputes are to be settled.

There are two major types of commercial lease: a gross commercial lease and a commercial net lease. In a gross commercial lease, the tenant pays the landlord a fixed monthly fee. It is the landlord’s responsibility to cover all operating expenses of the building, including liability insurance and property taxes. This type of lease may initially be more expensive than a net lease, but it can protect the tenant should operating costs increase in the future. In a commercial net lease, the tenant is responsible for paying some of the operating costs of the building. These most commonly include property taxes, insurance, and maintenance, usually all based on the proportion of rentable space the tenant is leasing. When all three expenses are included, the lease is called a “triple net lease”. Negotiating these terms can be complex.

The ideal situation is one in which the tenant does not face unexpected costs in the middle of a lease. It is not uncommon for landlords to include a “Compliance with Laws” clause in the lease agreement. This clause can place responsibility on the tenant to ensure the building is up to code in compliance with the law, exposing the tenant to the expenses of unanticipated renovations and upgrades.  A tenant-friendly clause should require that the landlord warrant that the building is in compliance at the time the tenant takes possession. This limits the tenant’s responsibility for any non-compliance that existed before occupancy. If the tenant is moving into a space that was previously occupied by a similar business, the agreement should require the landlord to warrant that the space is code-compliant for the intended business activities. If the tenant agrees to take on additional compliance responsibilities, they should be very clearly specified within the lease.

Depending on which type of lease is secured, property tax increases are another variable that can desiccate a gallery’s finances. The Official Website of the City of New York provides information about how annual property tax rates are calculated. The Department of Finance determines the market value of the property, which differs depending on the class of property in question. In New York City, there are four property classes. All commercial and industrial properties, including office and retail buildings are included in Class 4. For Class 4 properties, the Department of Finance bases its market value calculation on income earning potential and expenses as well as some statistical modeling. This figure is multiplied by 45% to determine the assessed value of the property. The assessed value is then multiplied by the property tax rate—in the case of Class 4 properties, the tax rate is 10.6%. Within this calculation, the property’s market value is the biggest unknown, and it is the culprit for the escalating property taxes. Betty Cuningham, who moved her gallery to the Lower East Side in 2014, recounts, “Chelsea was getting way too expensive; our real estate taxes alone had gone from $1,500 the second year to $42,000 the last year.” With this wild card in the mix, the need for a fair lease agreement, one that might mitigate the damage of an unexpected tax increase, becomes exceedingly apparent.

The landlord, who typically has more experience in negotiations and holds greater bargaining power over the process, often drafts the final lease agreement. Under such circumstances, it is not difficult for a landlord to draft an agreement that favors his or her interests. Given the complexities involved in negotiating a commercial lease and the clear inequality of bargaining power between small business owners and real estate monoliths, a solution is required. It need not be novel. In fact, it may already exist.

Legislative Change: The Small Business Jobs Survival Act

Rewind back to the mid-1980s when City Council Member Ruth Messinger proposed the Small Business Jobs Survival Act (“SBJSA”). The SBJSA and its New York State counterpart, the Small Business Survival Act (“SBSA”), aim to rebalance the bargaining power through two major provisions. The first is that, barring certain exceptional circumstances enumerated in the SBJSA, the tenant has a right to demand a 10-year lease renewal. This counteracts the tendency for landlords to offer only shorter-term leases to capitalize on their ability to hike the rent once a lease expires. Additionally, if the tenant considers the terms of a lease renewal unacceptable, the SBJSA prescribes a very detailed arbitration process. Even at the end of that process, should the tenant remain unhappy with the agreed-upon rent, he or she can elect to pay the previous rental rate plus 10% without penalty.

The SBJSA has been discussed in City Council intermittently for the past 30 years. In recent years, the exponential rate of rent inflation and the resulting number of small business closures have brought the SBJSA back into focus. Though it would take some major lobbying to enact it, the SBJSA remains a viable solution to the devastating effects of skyrocketing real estate prices. Increased vacancies have so affected the streetscape that a website called Vacant New York has been established to document them. The dire situation has pushed City Council to discuss not only the SBJSA, but also the possibility of exempting small businesses from Commercial Rent Tax or introducing tax incentives for landlords to maintain their current rental rates. While organizations like Two Trees offer subsidies to cultural spaces to offset operational costs, there are not nearly enough available to aid every gallery in need. Instead of waiting for additional funding or legislative change, gallerists have gotten creative, crafting inventive solutions to overcome their financial plight and stay loyal to their artists and clients.

Creative Solutions and Their Legal Implications

Galleries are traditionally thought to be pristine white cubical spaces, static and permanent, changing only due to the art they exhibit. Owing primarily to the tough economic climate of New York’s real estate market, gallerists have had to be increasingly flexible, dynamic, and sometimes even nomadic. While some have chosen to relocate to evade financial straits, it seems even that is not a viable long-term solution. Many gallerists have accordingly chosen more radical revisions of their business model.

With established patronage and strong artist loyalty, some gallerists choose to move away from the City altogether and seek out cheaper locales from which to conduct their business. This has worked for Bill Brady, who owned ATM Gallery on 27th Street in NYC before moving to Kansas City to open up Bill Brady Gallery.  Then there are Monya Rowe who moved her gallery to St. Augustine, Florida and Jeff Bailey who moved to Hudson, New York. All three maintain a strong presence in the art market despite their more remote headquarters.

An increasingly popular solution to unsustainable real estate prices has been to adopt a pop-up model. In an interview with Stropheus Art Law, Sasha Wolf describes that she decided to vacate her brick-and-mortar space for a multitude of reasons. The most compelling reason for her, however, was increased freedom—both personal and economic. She retreated from public view, pulling the artists she represents with her. Her clients had few qualms about the increased privacy, but her artists rely on their works being shown to the public. To resolve this, Sasha organizes pop-up exhibitions. For her, this model offers her the opportunity to work at her own pace, maintain variety in her daily routine, and spend more time away from New York to meet with clients and artists. For her clients, it offers a greater sense of exclusivity and a more intimate transactional experience. For her artists, it allows them to have a say in choosing the space in which they show their work and maintains their public presence. In the same interview, David Dixon describes that there is certainly some appeal to showing in varied spaces. Artists can play a more curatorial role in finding a space specifically suited to their work or one that casts it in a new light. Without the pressure to keep pace with surrounding galleries, there seem to be fewer entrenched rules for a pop-up exhibition, which can be as short as a day or as long as a few weeks.

Another form of gallery ownership is the seasonal gallery, which offers a consistent physical space with temporal flexibility. One example is Topless at 91-02 Rockaway Beach Boulevard. Jenni Crain and Brent Birnbaum, co-founders and co-directors, revive the space each summer to stage four three-week shows from mid-June to late August. Running pop-up and seasonal spaces rather than year-round brick-and-mortar locations can free up a gallerist’s time and resources so that they can travel to art fairs without significant overhead.

For some gallery owners, staying afloat means diversifying the business and scaling up. This can be through the addition of a coffee shop or bookstore, or by transforming part of the space into a bar or dance venue by night. In the late 1980s, Gavin Brown had the idea to open up the bar Passerby adjacent to his West 15th Street gallery space, Gavin Brown’s enterprise. With a dance floor designed and installed by artist Piotr Uklanski, the venue attracted an eclectic mix of the subcultural elite. Even with his imaginative business model and memorable exhibitions, however, in 2014, Gavin Brown was forced to relocate when a developer bought his headquarters. In 2016, he opened a new space in a 19th-century building in Harlem after a complex renovation process.  The Knockdown Center took a different approach to diversification. It has a bar, yes, but the owners, artists Michael Merck and Tyler Myers, went one step further. They rent out parts of the 60,000 square foot refurbished brick factory for events—anything  from weddings to beer festivals.

Other galleries thrive by moving off the beaten path not only in terms of location, but also in the nature the space itself. Hood Gallery is a converted shipping container in Bushwick. Founded by Tom Koehler in 2013, the space is dry-walled and has electricity, but no heat. The unique space acts as a medium, often inspiring the final form of an artist’s exhibition. It is a space that provokes experimentation. Add to that its lack of an official website and its hidden locale, it is unsurprising that it has fashioned a scene unto itself.

Still other gallerists have put a more personal spin on the shifting landscape, bringing the gallery closer to home—or rather, into the home. Sister in Bushwick was founded by artist-curators Jenny Lee and Zuriel Waters in 2015. It is a micro-exhibition space, only 30 inches wide, situated in the front window of their apartment. When Sister has an opening, viewers wander through the apartment to socialize, but to see the art, they must go outside and look into the front window. This window setup allows the founders to show work 24/7 without any real intrusion upon their daily lives. Eddysroom, also somewhere in Brooklyn—its   address is not even listed online—is semi-private. It is accessible by appointment only, and news of opening receptions is communicated directly from the gallerist, Mr. Eddy, to prospective attendees with a request to refrain from passing the address and phone number to others. Founded by three artists, 106 Green inhabits the living room of 104 (no, not 106) Green Avenue in Greenpoint, Brooklyn and is open only on Sundays.  Artist Michael Fleming founded MOUNTAIN in 2016 and runs it out of his Bushwick apartment at 284 Siegel Street. He opens his doors for events, receptions, and by appointment. Most of these home-based artist-run galleries are not money-making ventures. Rather than profit, the goal is to interact with other artists and to foster community. It is to provide artists who have little intention of entering the mainstream with a place to show their work and generate discourse around it.

Though a seemingly straightforward response to the unaffordable commercial space, the in-home gallery comes with its own legal implications. New York City’s Zoning Resolution regulates the in-home business, or what it calls a “home occupation”. According to the by-laws, a home-based business can occupy up to 25% of the home’s space and may only sell goods produced on site. Certain types of enterprises are prohibited, though a gallery is not one of them. The problem, then, is that for most galleries, the works they sell are not created on site. As well, some galleries open up their entire home for exhibitions, showing pieces all throughout the space, not in just 25% of it. The semi-private nature of many in-home galleries makes them unlikely to attract special attention from neighbors, but there is the possibility that a complaint could throw a wrench into the operation. The Official Website of the City of New York has a complaint portal that links directly to a submission form specifically for illegal use of a residence as a business. With this in mind, the reasons to keep in-home galleries more clandestine may extend beyond simply maintaining domestic privacy.

In the midst of all this, a gallerist must consider where his or her legal responsibilities lie. With new roles come new responsibilities. In September 2016, Richard Lehun of Stropheus Art Law, speaking on the same panel as Josh Baer,  offered an overview of the hybrid gallerist’s legal obligations. A gallerist’s primary responsibility is to the artist. When gallerists free themselves from their physical space, though they may assume the role of an art advisor or dealer in the process, their responsibility to their artists remains intact. An art advisor must be loyal exclusively to the buyer, whereas an art dealer in the secondary market owes their loyalty to the seller. When a gallerist becomes all three, they could potentially face a conflict of interest that may be irresolvable.

        When a gallerist forms a relationship with an artist, he or she has special fiduciary duties to the artist. These include managing the consigned artworks, the funds held in trust, and the funds derived from the representation relationship. Where a gallerist also acts as an art advisor, which is generally the case in the contemporary art market, his or her duties multiply, and so does potential liability. Mr. Lehun details these areas of potential liability in his presentation, which can be viewed here.

 

Conclusion:

Perhaps, through it all, the shifting scene is what is best for artists. It has compelled gallerists and artist-curators alike to invent new spaces, folding the white cube of the traditional gallery and providing artists with more opportunity for curatorial experimentation. For some small and midsize gallerists, the harsh economic climate signaled their end, while for others, it harnessed their entrepreneurial spirit, driving them into unknown territory. Michele Robecchi, an editor at Phaidon, offers his take on the situation, “If you let your business be ruled by apocalyptic predictions, you’re inevitably doomed to fail.” Financial relief may come in the form of legislative change, though it is unclear when that might occur. Despite all the challenges it has faced, it seems unlikely that the brick-and-mortar gallery is going to become completely extinct anytime soon. Ultimately, these new models act to counterbalance an increasingly commercial and homogeneous art market, reserving wall space for a diverse community of emerging artists. Gallerists have found several workable models to maintain the gallery’s physical presence, and they will continue to find more to survive the times.

 

Works Cited:

About the Author: Alexandra Terrell, the May 2017 Center for Art Law intern, is a rising second-year J.D. Candidate at the Schulich School of Law at Dalhousie University in Halifax, Nova Scotia. With a B.A. in Visual Art from Yale University, she plans to pursue a legal career within the art world. She can be reached at alexandra.terrell@dal.ca.

 

Give and Take: on Jeff Koons mastering contractual and statutory relationships with other artists

By Madeleine Conlin*

15592272314_75149edb66_z.jpg

Photo by Jeff Ferzoco

Contemporary blue-chip artist and controversial figure Jeff Koons has long been known for developing concepts, then leaving the implementation of his designs to studio assistants to execute the vision. Historically studio assistants are young or mid-career artists who specialize in drawing, painting, photography, sculpture, and other mediums necessary to making their employer’s ideas a reality. Drawing inspiration from a number of predecessors and contemporaries, including French-American artist Duchamp and his readymades, Ukrainian A. Rogers, and many of the old European masters, Koons describes his art in terms of its potential to help him and others achieve “a higher level of consciousness.” However, despite his unconventional creative process, Koons does not consider the contributions of his studio workers to go beyond those of hire help, and affirms that all of his work is entirely his own since they merely follow instructions, and are not allowed creative liberties. Koons sees himself comparable to a fashion designer, who creates an idea, then employs other individuals to make the product.

Screen Shot 2017-07-07 at 2.08.52 PMThe method of producing art with help of others, perhaps better skilled, is not new and many, from Andy Warhol to Gerhard Richter, have relied on studio assistants to make art. The subject of employment and labor law in the arts is, however, less well known. In 2015, efforts were initiated by several Koons workers to form a union; however, these attempts were thwarted by a series of layoffs which continued over the course of the next few years. In July of 2016, an article in Art F City announced that many of Koons’ workers were laid off in the preceding week (the same workers had begun to form a workers union in the months just before this occurred). Based on what the anonymous source told Art F City, Delaware-incorporated company Jeff Koons LLC fired everyone who had started working for the corporation after June 1st, 2015. Another downsizing occurred recently, and the company fired half of its painting staff on June 13, 2017. This cut the number of painters down to 30 from its previous 60 person team. Some of the assistants that Jeff Koons LLC laid off in June were employed by the artist for over a decade. In all, there have been 3 reported rounds of layoffs since 2015, each around the same time of year. While the reasons for laying off all of these artist-workers were not publicly given, the first one seems to have coincided with the workers’ unionizing processes. This timing has led to speculation by some that perhaps the two actions are related.

Unions are formed to maintain a balance of power between employers and employees, and to ensure that employers uphold certain practices, some of which include fair wages, benefits, and reasonable working conditions. Union formation, however, is a complicated process. First, an individual must petition their coworkers to form an organizing committee. Then, the committee must meet with legal counsel, or with a chosen union representative. Based on this meeting, the group can decide if the union would be effective and useful in their own workplace, and if so, each must fill out a union authorization card. Union representatives and individuals from the organizing committee are responsible for garnering interest and support from roughly 75-80% of their coworkers in order to formalize the union. Once the target percentage has been reached, each interested party member must fill out and file union authorization cards with the National Labor Relations Board and petition for an election. This election request is then processed by the board, which will subsequently conduct a secret ballot election at the workplace to ensure that the majority of members actually wish to be represented by the union. If so, then the board will certify the union, which means that by law, the employer must bargain in good faith with the workers’ union. Moving forward, the union and employer can work together to address issues or concerns in the workplace, and eventually create new contracts regarding the working conditions (that again, must be voted on by every worker later on). Unionizing, while incredibly useful for balancing the power between authority figures and workers, is not an easy process — to say the least.

While it is unknown whether or not Jeff Koons LLC did indeed fire its workers for unionizing, if they did, it could mean trouble for the company. According to the National Labor Relations Act (NLRA), it is illegal for employers to:

  • Prohibit [employees] from soliciting for a union during non-work time, such as before or after work or during break times; or from distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms;
  • Question [employees] about your union support or activities in a manner that discourages [them] from engaging in that activity;
  • Fire, demote, or transfer [employees], or reduce [their] hours or change [their] shift, or otherwise take adverse action against [them], or threaten to take any of these actions, because [they] join or support a union, or because [they] engage in concerted activity for mutual aid and protection, or because [they] choose not to engage in any such activity;
  • Threaten to close [their] workplace if workers choose a union to represent them;
  • Promise or grant promotions, pay raises, or other benefits to discourage or encourage union support;
  • Prohibit [them] from wearing union hats, buttons, t-shirts, and pins in the workplace except under special circumstances;
  • Spy on or videotape peaceful union activities and gatherings or pretend to do so.

The NLRA is explicit in that union members cannot be fired for joining, starting, or partaking in the union in any way. The state of New York provides additional protection for employees through the New York State Employee Relations Act, which states that union members also have the right to organize, bargain collectively, and to strike. If Jeff Koons LLC fired its workers for their unionization efforts, the company could face legal consequences. In the earlier 2000s, Koons had as many as 120 assistants in his studio, but after cutting the staff in half more than once in the last few years, sources claim that there are only about 30 people still working for the company. There has been no account of any successful union formation. Reportedly, some of the laid off studio assistants threatened to bring legal action against Koons in 2015, but none have been reported yet. As of now, no new action has been taken, and it is unclear whether or not the union workers or any of the ex employees will be filing against Jeff Koons LLC for interfering with the unionizing process. A savvy businessman, Koons probably has his contractors sign Non Disclosure Agreements (NDAs), as none of the reporters for these cases have not been able to gather much information from the studio assistants and individuals who were fired. Jeff Koons LLC was filed with the New York State Department of Corporation in 2005 as a foreign limited liability company, and it is likely that the workers’ compensation is handled through the company, as well as other financial matters.

These labor law concerns are only the newest emerging conversations relating to Koons’ non traditional style of creation. His employment of assistants has been a topic of discussion for many years. In an interview in March 2016, in which Koons opened up about his creative process and the concepts behind his art, the interviewer asserted that he seemed not to “suffer in solitude” like some renowned artists do, and called his work “communal art.” Koons responded to this insinuation emphatically: “My work is generated from myself and it comes from a process of following my intuition and through letting things resonate over a period of time. I’ve had people around me who … I’ve been able to use to help me realize some of these different works. But at the end of the day, I’m responsible for everything. So the creative process is not communal. I’m in front of it, because it’s the gesture.” Koons takes an approach to his work that mimics the style of esteemed clothing designers, architects, or a company’s “idea man.” While he leans on other artists to assist him in creating the physical manifestation of those ideas, the art would not exist without his conceiving of it and directing his team in its implementation.

As a widely known and too-big-to-fail artist, Koons frequently stands in the public eye, and each of his pieces faces immense scrutiny, making his attention to detail and desire for perfection extremely important to the success of his work. According to Koons, one key part of grasping one of his pieces is to understand what he is trying to accomplish on a conceptual level. Koons does not place as much emphasis on the process, as on the discovery of higher states of beauty, or the bringing together of polarities through his work. It is the outcome and presentation of each piece or series that Koons finds most salient; it likely does not hurt that the financial rewards are ever-expanding. He often states that he wants his work to express broader ideas — where some artists, such as Jackson Pollock, are very focused on the motions and methods of the production of art, Koons focuses on delivering a message through design concepts: “I believe in communication. That’s how I think about the viewer. It’s not to get any response from them, other than what I put into it… the excitement, the energy. You know, I make something because I’m in awe and wonder of what that idea is and what that will be like. I’m excited by it. I just want them to feel that.” Since the outcome of the piece matters most, it needs to achieve the degree of perfection Koons envisions to succeed in his mind.

In 2012, a few years before the first round of layoffs, John Powers, a 21 year old art student who worked for Koons at an hourly rate of  $14, described his experience with Koons in the New York Times. Powers spent most of his time painting in a color-by-numbers-esque fashion. He worked three nights a week and on Saturdays for around five months, spending his time in the studio working tediously on a highly detailed piece titled, “Cracked Egg.” (The painting was accidentally destroyed in the studio and a second edition of the same piece was begun and later sold in 2003 at a London Christie’s auction for $501,933). Illustrating Koons’ perfectionism in the studio and in his creative process, Powers stated that Koons would frequently fire individuals who failed to meet his standards. Powers managed to please Koons during his painting endeavors, but he only stayed with the studio for about six months total, quitting soon after the destruction of the first version of the piece. While some, like Powers, only work for a very brief time in the studio, Koons has had a loyal following of several assistants who, until recent layoffs, had been with the studio for over 10 years.

Perhaps Koons demands a lot from his workers, but that is not necessarily unusual — many work providers have high expectations for their hirees, especially if they wish to make a profit. Based on numbers and name recognition Koons seems to succeed. Some of his works have made record prices at auction, and he is broadly recognized as one of the most financially successful living artists. One especially lucrative piece, Balloon Dog (Orange) (1994-2000), sold for $58.4 million dollars in 2013 at a Christie’s auction, setting the reported record at the time for the most expensive piece of fine art by a living artist sold at auction. Koons made five unique Balloon Dogs (Magenta, Yellow, Red, Blue, and Orange) from stainless steel with different color coatings as part of his Celebration Series, with the help of the roughly 120 assistants who worked for him at the time. Other pieces have reached similar lofty prices at various auctions, including Jim Beam – J.B. Turner Train (1986), which sold for $33.7 million, Tulips (1995-2004), which sold for $33.6 million, and many more, all of which have been purchased for upwards of one million dollars, and all created by the workers in his studio. Koons works, regularly produced as multiples, draw upon a variety of techniques and skills that are not mastered by the mastermind behind them. While his artwork is often pricey to create, since he often works with materials such as stainless steel or porcelain, the sale revenues from each piece or series can be tremendous. He does not confine himself to working with any particular gallery, but rather shows his work in various museums, galleries, and auctions houses, and even works as a contract artist for interested — and affluent — buyers.

For workers like Powers, an art student at the time of his employment, it is likely difficult to reconcile the amount of pay received and the high-pressure work environment of the Koons studio with these sale prices and the fame of the pieces, much of which is not credited to the literal makers. Current minimum wage laws in New York City (as of December 31, 2016) require companies with less than ten employees to pay at least $10.50 per hour and companies with eleven or more employees to pay at least $11.00 per hour. Koons seems to have been clearing the pay standards, at least according to the sources that spoke with Artnet News and Art F City. Many of the artists fired this year were earning about $21 per hour, a higher rate than the one Powers received for his work in 2012 ($14 per hour). The difference in the hourly rate reported in 2012 and in 2017 may be reflective of terms negotiated by Koons in 2015 with his employees to discourage them from forming a union at that time, or due to increased profit since then. Artnet News reported that according to their source, some of the individuals fired this time had also not received severance beyond the last day’s pay (which, if promised upon their initial hiring, would be another breach of the NY State Employee Relations Act). New York State laws do not mandate that employers offer benefits or wage supplements, but if they are offered verbally or in writing upon the employment of new workers, failure to comply to those agreements is considered a misdemeanor. The original reasons behind the studio assistants’ desire to form a union in 2015, and current possible explanations for firing these workers, both remain obscure.

In statements, Jeff Koons LLC has publicly attributed each round of cuts to substandard sales and downsizing, or to a lower need for labor due to smaller or fewer projects. This would be reasonable, except that Koons’ other financial actions and ongoing projects do not seem to match those claims. In 2015, the year in which the first round of cuts were made, and the same year that some of the workers began to unionize, Jeff Koons LLC spent $23.7 million on purchasing three new adjacent studio spaces in Hudson Yards, with plans to move into the larger site from their current Chelsea location. Even earlier, in 2014, Koons spent an estimated $4.85 million constructing a 21,726 square-foot mega-mansion out of two neighboring houses on the Upper East Side. Perhaps then, the cuts are not financially incentivized, but rather due to a basic lack of need for assistance in his studio. Koons stated that he was not working on any major shows in 2015, hence the layoffs, although the Gazing Ball series of paintings with sculptures went on view that year in November. Since 2015, Koons has worked on collaborative projects with Burton (2014-2016), Google (2016), and Louis Vuitton (2017-ongoing) on snowboard designs, iPhone cases, and a designer handbag collection. Other “solo” (non-collaborative) works that he has completed since 2014 include his piece Bouquet of Tulips (2016), Gazing Ball (Bottlerack) (2016), Seated Ballerina (2017), eleven new editions of previous paintings and sculptures, and various contract-based pieces. He has also reportedly become involved in the development of virtual reality-based art in the past few months. And yet, each year for the past three years, during the summer months, Jeff Koons LLC has made substantial cutbacks to his studio staff, which leads to the question, why?

Screen Shot 2017-07-07 at 2.22.14 PM

Given his impressive legal and financial footprint, it is worth remembering that Koons had to work his way up to his international stardom. He too worked various jobs similar to the positions of the studio assistants he employs now, including a position selling memberships at the Museum of Modern Art in NY, where he worked as a young man scraping to get by. He even worked as a studio assistant for Ed Paschke, where he worked so hard that he would sometimes go home with bloody fingers from stretching canvases. Koons’ baggage and meteoric rise from a MoMA public services employee to a world famous artist, as popular as he and his works have become, is constantly subjected to public scrutiny, including his record sheet as an employer.

Select Sources:

*About the Author: Madeleine Conlin is a rising Junior undergraduate at Yale University studying Psychology and English. She is spending the summer as an intern at the Center for Art Law. She can be contacted at madeleine.conlin@yale.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.

 

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.