Art Authentication and the Law

artnet news and Spencer's Art Law Journal just published an interesting article on art authentication and the risks taken by authenticators, and should their opinions be protected as well as unintended consequences of potential protection.

The below block quote is only a portion of the article, follow the below source link to read the full article.  Well worth the time.

artnet and Spencer's Art Law reports

This essay addresses efforts to protect expert opinion about the authenticity of visual arts, thereby encouraging these opinions. In the past few years, there have been several proposals to amend New York law to provide protection for legal claims against experts for their opinions. Currently, another proposal to amend the law is being considered. It attempts to protect expert opinion by stating that the opinion is not a warranty of authenticity upon which the expert could be subject to liability. This proposed legislative approach may not fully protect the expert and could have the nasty side-effect of reducing existing statutory warranty protection for the art.

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Opinions About Art–Why Are They in the Public Interest?

Recently there has been a renewed effort to promote a New York state law protecting art experts from lawsuits. But why it is more important to single out art experts—among all professionals—for protection? Why are their opinions more deserving of protection than those of bond rating agencies, restaurant reviewers or doctors?

Expert opinions about art are essential to the business of buying and selling art, which is a substantial contributor to the New York economy. Scholarship about art, expressed in articles, lectures, and exhibits, is also of great interest to many members of the public. But art experts are uniquely vulnerable to lawsuits because they are asked to provide yes or no opinions—not that the piece is “probably" by Picasso. There is also a First Amendment value at stake—the U.S. Supreme Court has recognized that opinions and other ideas are entitled to constitutional protection.1

Opinions about art arise in two ways. Experts may be asked for opinions when a work being offered for sale, especially if the work does not have an extensive history of public exhibition. In this situation, experts can demand a “no-sue" agreement as a condition of providing an opinion. But the same scholars also write books and articles, or volunteer their unsolicited views, and in those situations the expert cannot obtain a “no-sue" agreement in advance from either art owners or future readers.

Legal exposure for the expert can arise whether the expert's opinion about the art is positive or negative. If the expert's opinion is positive, and relied on by a buyer, but later turns out to be incorrect, the disgruntled buyer may seek to hold the expert accountable for the initial, positive opinion. If the expert's opinion is negative, the current owner may claim that the expert has improperly disparaged the property or interfered with a prospective sale. Most professionals need to be concerned principally with malpractice liability, which makes them responsible to their clients and requires them observe reasonable standards of due diligence, but art experts have faced claims from upstream or downstream owners who have wanted the experts to be required to prove that their opinions are correct, and not merely that they followed standard industry practices in their evaluation of the artwork.

Back to the Future

There is a perception that the reluctance of experts to voice negative opinions is a new problem created by an increase in art values, art fraud, or litigious owners. This mis-impression may be due to a few high-profile announcements by experts that they would cease giving opinions to avoid the possible expense of legal fees.

Yet the same need for legal reform was identified in 1966 by New York State Attorney General Louis J. Lefkowitz, who advocated a state law granting qualified immunity to “accredited" art experts who judge art works to be false, unless the disgruntled seller proved bad faith by the art expert. 50 years ago, there was the same perception that art fraud was on the rise, and that a law was needed to encourage experts to freely express negative opinions, because “[u]nder present conditions, many art experts are reluctant to give opinions."2 Ironically, the Art Dealers Association of America opposed that proposal because it excluded dealers from the proposed accreditation and immunity.3 Artists including Jacques Lipchitz testified in support of the Attorney General's proposal.4 But the proposal failed, and the statute that is now the Arts and Cultural Affairs Law was enacted in 1966 without immunity for experts.

Unfortunately, as discussed below, the legislation now being proposed offers experts more limited protection than the 1966 proposal, and potentially undercuts fundamental protections for art buyers.5

Key Features of the New York Arts and Cultural Affairs Law

The “express warranty" provision is the key protection for non-dealer art buyers contained in the New York Arts and Cultural Affairs Law (“non-merchants," in the terminology of the statute). It provides that certificates of authenticity “or any similar written instrument" are deemed to be express warranties upon which buyers may rely as guarantees of authenticity (at least within the four-year statute of limitations). This protection was initially enacted by the legislature in 1966, and augmented in 1981 and 1990 with even more stringent warranties for multiples. The purpose was to address dealers who claimed that representations about art were mere “opinions" and not warranties, and to require sellers to be more explicit about disclaimers. As the legislative history explained, “[t]here is no doubt that the price paid is usually based upon the buyer's assumption that . . . words of description are intended as a representation or warranty. This bill would remove any doubt in this regard by putting the burden on the seller to make his intention clear."6

This express warranty applies only in sales from dealers to non-dealer collectors for unique works (for multiples, it applies to all sales). Dealer-to-dealer sales are governed by the generally applicable warranty in the Uniform Commercial Code for all sales of goods, which does not specifically address the role of certificates of authenticity for fine art.

Courts have recognized the practical reality that attributions are subject to change, and held that, at least for unique works of art (as opposed to multiples), a dealer that had a “reasonable basis in fact" at the time of sale is not liable under the New York Arts and Cultural Affairs Law for the warranty, even if the work is later shown to be inauthentic.7 Some dealers also explicitly inform buyers at the time of sale that a change in expert opinion will not be grounds for a refund. But where there is no such disclaimer, buyers can often rely on expert opinions and still have warranty claims if the work is proven not to be as it was represented to be in all material respects.

Proposed Legislative Amendments (Purportedly to Protect Experts) Actually Undercut Key Protections for Art Buyers

Unfortunately, the proposed amendments to protect experts may destroy this valuable protection for art buyers.

The proposed legislative amendments to the warranty standard address situations where the expert provides a positive opinion or otherwise makes a statement of fact that turns out to be inaccurate. The proposed amendments state that certain warranty provisions in the Arts and Cultural Affairs Law “shall not apply to an authenticator's opinion or information concerning a visual art multiple or work of fine art."8 In other words, statements made in these authenticators' expert opinions could not serve as the basis for a warranty claim.

That is a change that shields dealers as well as authenticating experts. The amendments do not merely create an exemption from the warranty for claims against authenticating experts, who are defined in the proposed amendment as recognized experts with no financial interest in the work of art at issue.9 A simpler amendment proposed by the Art Law Committee of the New York City Bar Association in 2013 explicitly stated that it only raised the bar for claims against authenticating experts.

Instead, the proposed amendments state that expert opinions do not give rise to a warranty—period.  Thus, if a dealer sells a work, attributing it to a particular artist, based upon an expert's opinion, and three years later the work is discovered to be a fake, the purchaser will demand a refund from the dealer. But the proposed amendments seem to say (perhaps inadvertently) that the buyer would not have a warranty claim—against anyone—because the parties relied on an expert opinion. If that is not the intention of the proposed amendments, the proposal should be revised, and if it is the purpose, it needs to be disclosed and debated, because it is a significant change in the law. Under existing law, a disclaimer of warranties would need to be explicitly stated in sales documents.

It is fair to amend the law to make it clear that an opinion by an expert with no financial interest in the artwork is not a warranty backed up by the expert's bank account. Experts who not receive any portion of the purchase price cannot be expected to provide a refund of the purchase price for the art if they turn out to be mistaken. No scholar could afford to create a catalogue raisonné if doing so constituted a warranty of authenticity for every work included. This clarification in the law of warranties would be especially helpful to artist-established or estate-established foundations and authentication boards, who are often attractive, but inappropriate, targets of lawsuits by disgruntled purchasers, especially if the seller who received the purchase price is overseas, out of business, or, years later, having paid taxes and business expenses, no longer has the sale proceeds.

Source: artnet