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

By Madeleine Conlin*

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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?

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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.

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*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.

 

Of Koons, Twombly, Perelman and Gagosian: Lessons to be Learned

By Jessica M. Curley (Part I) and Daniel Kokhba (Part II)

Part I: Places, lights, action

The lack of transparency in the art world can sometimes cause unease and distrust among transacting parties, as can be seen in the protracted litigation between billionaire financier Ronald O. Perelman and renowned art dealer Larry Gagosian. Former friends, who once traveled in the same social circles, and had even co-owned a restaurant together, found themselves entangled in an ongoing legal battle stemming from an exchange/sale transaction involving a Jeff Koons sculpture and a Cy Twombly painting.

The initial dispute dates back to April of 2011 when Perelman first expressed interest in the Cy Twombly painting titled “Leaving Paphos Ringed with Waves” (the “Twombly painting”), which at the time had been available for sale at Gagosian’s Gallery. Court papers filed in 2012 stated that Gagosian, whose clients include Steve Cohen and Francois Pinault, quoted a price of $8 million for the painting. Shortly thereafter, Perelman returned to the gallery to purchase the work only to find that it had already been sold to another notable art collector Jose Mugrabi, famous for his extensive Warhol collection. According to Perelman, a few months following the sale, Gagosian advised him that the Twombly painting was back on the market, this time at the increased price of $11.5 million. Even after negotiating a $1 million discount, paying a final price of $10.5 million, Perelman still felt as though he was being defrauded by the forgoing series of transactions, so he proceeded to file suit.

According to the amended complaint, Perelman asserted several legal causes of action against Gagosian including breach of contract, breach of fiduciary duty, fraud, breach of the covenant of good faith and fair dealing, unjust enrichment, and deceptive business practices under section 349 of the General Business Law. Perelman alleged that Gagosian conspired with the Mugrabi family, to take advantage of him by upwardly manipulating the market price of the Twombly painting, resulting in a second sale and commission for Gagosian and a quick profit for the Mugrabis. Perelman also accused Gagosian of undervaluing artworks, including Koon’s “Popeye” sculpture and multiple Willem de Kooning paintings that he exchanged as partial satisfaction of the $10.5 million purchase price of the Twombly.

The attorney representing Gagosian, Matthew S. Dontzin, of Dontzin Nagy & Fleissig LLP, stated in court that Perelman’s business entities, including MacAndrews & Forbes Group LLC and MAFG Art Fund, through which he acquired the art, are “sophisticated” professional art investment firms that had a “heightened duty” to engage in due diligence in selecting artworks to acquire. Typically, professional art investment firms specialize in generating returns by strategic purchase and sale of artworks, and have a fiduciary duty toward their investors to secure returns according to best practices and efforts. The attorney for Perelman, Marc Kasowitz, partner at Kasowitz Benson Torres & Friedman LLP, countered Dontzin’s claim by asserting that Perelman is not of the same “level of expertise and skill” as Gagosian, who is “probably the world’s leading and most powerful art dealer,” and thus has relied on Gagosian for over twenty years for advice on investing in art. Kasowitz went on to emphasize that Gagosian not only has “unique knowledge of the art markets,” but that he “makes those markets.”

In his ongoing quest to uncover how other deals involving Gagosian have been executed, Perelman sought unprecedented access to transaction details and even subpoenaed numerous high profile figures and institutions in the art world including members of the Mugrabi family, Gagosian himself, and Sothebys and Philips auction houses. He even apparently hired a former FBI agent experienced in the art business to interview other major collectors, dealers and artists.

Perelman has remarked that art is “a beautiful thing” and has stated that the goal of his litigious activity is to expose the “dirty” side of the otherwise prestigious world of buying and selling fine art. In response, Gagosian’s lawyers stated that Perelman was motivated by a different agenda, mainly “harassing Gagosian and disparaging the gallery”.

In 2013, presiding judge Barbara R. Kapnick suggested that the parties “get themselves together at a cocktail party in the Hamptons” and work their issues out amicably, adding that “this is a crazy case to have going on here in court.” However, the former friends chose not to settle.

Part II: Bright Line on Control and Dominance (Arm’s Length Precedent)

The December 4, 2014 decision by the Appellate Division, First Department in the high profile action entitled MAFG Art Fund, LLC et al. v. Larry Gagosian, et al offers valuable jewels of insight into the art industry and beyond on such topics as fiduciary obligation, investigation, statements about value, and contracts – constant themes underlying many art transactions and attendant disputes. The case included breach of fiduciary duty and fraud claims filed by Plaintiff-buyer against Gallery-seller in connection with a purchase agreement.

Fiduciary Obligation

A fiduciary obligation owed to seller by the dealer is often mistakenly assumed and expected in art transactions. In MAFG, the Court did not find a fiduciary obligation between Plaintiff and the Defendant gallery. “The parties operated at arm’s length when they negotiated for art works. Thus, fiduciary obligations did not exist between them. Moreover, even read liberally, the complaint does not establish that the defendants exercised control and dominance over Plaintiffs – limited liability companies who, by their own description, frequently purchased, sold and exchanged works as investments. Gagosian had no duty vis-à-vis Perelman, an active player in the art market. Accordingly, parties to this and similar transaction should not assume a fiduciary duty, especially when both sides are sophisticated participants in the art market.

Investigation

The false expectation of fiduciary obligation can contribute to sloppy due diligence and lack of investigation. The Court in dismissing the fraud claim recognized the absence of such investigation. The lesson here is to conduct independent investigation before closing on a transaction. Meaning, if Perelman was uncertain of the fair market price for the works he was exchanging for the Twombly or if he did not believe the Twombly offered to him was priced fairly, he had a duty to conduct independent research into the prices.

Statements of value

The Court interestingly notes, “[a]s to the claim that defendants misrepresented the value of certain art works, statements about value of art constitute [a] ‘non-actionable opinion that provide[s] no basis for a fraud claim’”. (Internal citation omitted).   This pointed sentence is a warning to buyers and their advisors and may impact the viability of similar future fraud claims predicated on misrepresentations relating to value.

Contract

In MAFG, Plaintiff claimed that Defendants breached the covenant of good faith and fair dealings by entering into a subsequent agreement that decreased Defendants’ incentive to be involved in resales thereby adversely affecting Plaintiff. The Court refused to interpret the purchase agreement in this manner because subsequent agreement and resale were not covered in the agreement. Granted, many art transactions are regrettably entirely undocumented at great risk to the parties involved. However, even when the parties cross the threshold of handshake to written agreement, they should ensure to document in sufficient detail all provisions, contingencies and expectations.

Review

Friendship is not a defense and should not be used or relied upon while making business decisions involving any sums of money, especially millions of dollars. Careful drafting, review offering plans, negotiation, contemplations and incorporation of expectations and contingencies, and coordination of due diligence by counsel seem like an implicit lesson from the resulting litigation and decision. A dose of preventive medicine may help reduce the risk of litigation. Hamptons may help too.

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About the Authors:

Jessica M. Curley is a post-graduate fellow at Center for Art Law, and a recent graduate from the Benjamin N. Cardozo School of Law, admission to the NY State Bar pending. Curley is pursuing her interest in art law and financial regulation. She may be reached at jessicamcurley@gmail.com or 858.822.9410.

Daniel S. Kokhba, Esq. is a Partner at Kantor Davidoff, Mandelker, Twomey, Gallanty & Olenick, P.C. and focuses his practice on civil litigation, art law and employment law. He may be reached at Kokhba@kantordavidoff.com or 212-682-8383

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