Artist Rights

The past few days have been interesting in the art world with the news of the Warhol Authentication Board being dissolved (see earlier post) and the news of artist rights lawsuits in California (California Resale Royalties Act) against Christie's, Sotheby's and potentially eBay.

At the moment there is little information on the suits as they were just filed, and Christie's claim they have yet to received the complaint. They and Sotheby's both released statements saying they will defend their positions and state the claims are basically meritless. The will be an interesting case and lawsuit (the LA Times states it is a class action suit, so it could be large) and given that both Christie's and Sotheby's vow to defend their positions, the eventual court outcome may significantly impact the sale of living artists works.

Bloomberg reports (as it was a rather short article, I posted in full)

Christie’s Inc. and Sotheby’s (BID) were accused in a lawsuit of failing to pay artists royalties for works either sold in California or at auction by California sellers.

The Sam Francis Foundation, the estate of Robert Graham, and artists Chuck Close and Laddie John Dill said in complaints filed yesterday in Los Angeles federal court that the auctioneers violated California’s Resale Royalties Act by failing to pay them 5 percent of the sales price for their works.

Court-stamped copies of the complaints were provided by the lawyer for the artists and weren’t immediately available from the courthouse.

The two auction houses don’t disclose whether a seller resides in California or whether a non-auction sale took place in California, which would entitle the artist or the artist’s estate to the royalty, according to the complaints. The plaintiffs seek to represent other artists in class-action cases and they seek unspecified damages.

“Although Christie’s has yet to be served with the complaint, it views the California Resale Royalties Act as subject to serious legal challenges,” Sara Fox, a spokeswoman for Christie’s in New York, said in an e-mailed statement. “Christie’s looks forward to addressing these issues in court.”

“We believe the claim is meritless and it will be vigorously defended,” Diane Phillips, a spokeswoman for New York-based Sotheby’s, said in an e-mailed statement.

In a separate complaint, the artists also accuse EBay Inc., the world's biggest online marketplace, of failing to pay the royalties they say they are due under the California law. Representatives of San Jose, California-based EBay didn't immediately respond to an e-mail seeking comment on the lawsuit after regular business hours yesterday.

The LA Times reports on the lawsuits, as well as some additional background and legal analysis.

Faced with a class-action suit over artists’ royalties that potentially would expose them to a huge cash verdict, Christie’s and Sotheby’s likely will challenge the constitutionality of the California law on which the claim is based. 

The suit in U.S. District Court in Los Angeles contends that the two big auction houses have ignored their obligation to ensure that 5% of what a seller receives should go to the artist or the artist’s heirs. The law applies to all profitable sales of more than $1,000 — if the works are by American or California-based artists and the seller is a California resident or the sale takes place in California. The royalty siphons $250 from the proceeds of a $5,000 sale and $250,000 from a $5-million sale.
“We have meaningful defenses,” Sotheby’s said in a statement Wednesday, while Christie’s said, “it views the California Resale Royalties Act as subject to serious legal challenges” and “looks forward” to making its case in court.

The courts have been down this path once before.

Eric George, attorney for plaintiffs who include artists Chuck Close and Laddie John Dill and the estate of Robert Graham,  said it’s unlikely Sotheby’s and Christie’s can argue successfully that the law is unconstitutional, since there’s a legal precedent to the contrary. Soon after the California royalty rule went into effect in 1977, a Los Angeles art dealer, Howard Morseburg, filed a test case with the support of other art dealers, contending that “the state has no business interfering” in art sales. A trial judge and the  9th U.S. Circuit Court of Appeals found otherwise, and in 1980 the U.S. Supreme Court refused to take up Morseburg’s appeal.

But some legal minds aren’t so sure that the Morseburg precedent matters anymore. Because he sued in 1977, his contention that the California law was an unconstitutional intrusion on the federal government's prerogative of making copyright law had to be weighed against provisions of the federal Copyright Act of 1909. The courts found no conflict. But the ground rules may have changed in 1978, when the Copyright Act of 1976 took effect. Writing in 1980 in the Boston College International & Comparative Law Review, Carole M. Vickers noted that the new federal copyright law specifically says that it stands “exclusively” as the law of the land on all copyright-related matters, and that “the statutes of any state” are not valid.

To read the full LA Times article, click HERE.