Update: California Artist Resale Rights

In the past I have posted on the California Resale Royalties act.  Currently, California is the only state with droit de suite requirements (click HERE, HERE and HERE to read earlier AW posts on the CA law).  Recently there has been a law suit by auction houses trying to overturn the 35 year old state law.  Fellow appraiser Karen Hanus-McManus, AAA sent me some information on the law, and the recent decision to overturn the legislation.  With the exception of California, under our copy right laws, once an artist sells a piece all future sales revenues go to the seller and nothing to the artist.

Thomson Reuters reports the sporadically enforced droit de suite law in California has been overturned in a recent lawsuit brought by Sotheby's and Christies. The Judge ruled the law interfered with the Commerce Clause of the US Constitution. Appeals are expected.

Thomson Reuters reports

Nguyen defused the threat on Thursday in fascinating fashion. The judge agreed with lawyers for the auction houses (Skadden, Arps, Slate, Meagher & Flom for Christie's; Morrison & Foerster and Weil, Gotshal & Manges for Sotheby's) that California's law violates the Commerce Clause of the U.S. Constitution because it's an attempt by one state to control commerce outside of its borders. "Under its clear terms, the (Resale Royalties Act) regulates transactions occurring anywhere in the United States, so long as the seller resides in California. Even the artist -- the intended beneficiary of the CRRA -- does not have to be a citizen of, or reside in, California," Nguyen wrote. "For these reasons, the court finds that the (law) has the 'practical effect' of controlling commerce 'occurring wholly outside the boundaries' of California even though it may have some 'effects within the state.' Therefore, the (law) violates the Commerce Clause." (Skadden's Jason Russell made the Commerce Clause argument for the auction houses at oral arguments before Nguyen in March.)

The curious thing is that it took 35 years for the Resale Royalties Act to be struck down as unconstitutional. As Nguyen recounts in her ruling, California's legislative counsel wrote an opinion letter way back in the 1970s, when the state was drafting the law, noting that if California attempted to extend resale royalties to sales outside of the state, the act would be invalid under the Commerce Clause. (The state's concern, however, was that if it limited resale royalties to sales within the state, art dealers would stop doing business in California.) Though commentators on California's law often mentioned the Commerce Clause, defenses based on federal pre-emption and the Fifth Amendment's takings provision tended to get more attention.

Source: Thomson Reuters and Gallerist NY