The Art Law Report

Providing timely updates and commentary on legal issues in the museum and visual arts communities

“Dumb Starbucks” Epilogue: Comedy Central Airs “Nathan For You” Episode Behind it All, Explores Parody, Commerce, and Visual Art

Posted in Copyright, Fair Use

Readers will recall the strange case of “Dumb Starbucks” earlier this year, which initially seemed to pose the question of whether a coffee shop that transparently used the marks and copyrights of Starbucks could claim fair use as an art gallery.  It turned out that the entire performance was just that, a lead up to a Comedy Central series that has since debuted.  We are not, of course, television critics, but in addition to being hillarious (and undoubtedly tongue in cheek), the full episode is an interesting platform for questions about the players and entities that can claim fair use to copyrights or trademarks over visual and creative works.  In the end, the parody/fair use question could never really be answered, but the coverage the numerous news clips that the show included is a reminder of the difficulty of applying art critical concepts to legal analysis.

The solitary coffeee shop that appeared several months ago was seemingly identical to an authentic Starbucks, except that everything simply has the word “dumb” in front of it.  The store also had a “Legal FAQ” sheet that claimed the entire enterprise was allowable as a “parody:

By adding the word ‘dumb’, we are techically ‘making fun’ of Starbucks, which allows us to use their trademarks under a law known as ‘fair use.’  Fair use is a doctrine that permits the use of copyrighted material in a parodical work without permission from the rights holder. It’s the same law that allows Weird Al Yankovic to use the music from Michael Jackson’s “Beat It” in his parody song “Eat It.” 

Our take on these FAQs was that they had few points mixed up, claiming an allowance to use trademarks by claiming fair use over copyrighted works (legally distinct concepts).  Not only that, but designs—even restaurant designs—can become associated with a particular product or services such that they can also be protected.  The real question seemed to be whether Dumb Starbucks was a parody—and whether it was even for real.  The store was closed within days, ostensibly on the order of the Health Department, and it was leaked that Nathan Fielder was behind the whole stunt for a new show called “Nathan for You.”

The premise of this show (and others in the series) is that Fielder offers to help struggling small businesses with obviously terrible ideas.  Fielder suggests to a small coffeee shop “Helio Cafe” in East Hollywood owned by Elias Zacklin that it make fun of Starbucks and avail itself of parody law (and understanding of which he gleaned from Wikipedia).  Fielder gives away the game in ptiching the idea that he wants people to be confused into thinking it might be a Starbucks.  Right on cue he consults an actual attorney who tells him that soliciting that confusion is what will expose him to liability (a side plot that underscores the importance of reading what you sign). 

Interestingly, the idea of selling “dumb” songs to parody Starbucks’s CD collections seems to have been a genuine collaborative and creative enterprise: Fielder and Zacklin actually wrote and performed some songs (an indelicate play on “I Can’t Get No Satisfaction,” for example). 

It turns out that Fielder actually did set up an art gallery in a brick and morter storefront.  The works were all transformations (mostly derogatory) of well-known corporate logos.  Clearly fair use, and frankly pretty interesting.  This was all in service of claiming status as a parody artist. 

Fielder then parted company with the original owner he had pledged to help, rented his own retail mini-mall space, and opened the store.  He tries explaining to customers that he does not have to follow health codes because it is art gallery (which is of course incorrect). 

Where it really gets interesting is as the reactions start to roll in on the store’s second day.  Predictable “what is the art”? questions from pundits followed.  Similarly interesting is the projection of visitors of their take on consumer issues onto the store and Starbucks. 

In the end, of course, the health department did step in, and that was that. 

In the final analysis, the best tribute to Fielder’s piece may be that Starbucks—which vigilantly enforces its copyright and trademarks—didn’t know what to make of it at first.  Hats off to an original idea that served as a great discussion piece for these legal issues. 

United States Abandons Finally Its Effort to Seize Mask of Ka Nefer Nefer in St. Louis, Egypt’s Plans Unknown

Posted in Civil Forfeiture, Customs, Museums

The Department of Justice has made public its plans to let the deadline pass for seeking rehearing or further review of the June, 2014 decision affirming the dismissal of its efforts to seize the Mask of Ka Nefer Nefer in the St. Louis Art Museum by civil forfeiture.  In an interview with St. Louis Post-Dispatch, United States Attorney Richard Callahan stated that “The Department of Justice will take no further legal action with respect to the mask.”

That brings to a final close the U.S. efforts to seize the mask on the theory that it had been stolen before it entered the country (which would have justified its impoundment under customs law), all because the government mixed up its deadlines.  As we suspected it might, the St. Louis Art Museum dismissed its first-filed civil suit when the government’s case was defeated by the 8th Circuit.  With little incentive to continue litigating ownership with an adversary (the U.S.) that could not win back the mask, the museum dropped its declaratory judgment case.

This does not necessarily end all wrangling over the mask.  Egypt itself, which has steadfastly maintained that the mask was taken illicitly before being imported, could still take legal action in the U.S.  Whether that would face timeliness or statute of limitations/laches issues would likely be the question Egypt first considers. 

For now, however, the battle over the mask is over, and it will remain in St. Louis. 

Creditors Strike Back With Report Valuing Detroit Institute of Arts Collection at $8.5 Billion

Posted in Detroit Bankruptcy

Weeks after the city of Detroit released its valuation expert report on the value of the full collection of the Detroit Institute of Arts by Artvest Partners, creditors opposed to the city’s plan of adjustment and the “Grand Bargain” within it have released their own appraisal.  Not surprisingly, it asserts a significantly higher value of roughly $8.5 billion, more than double the estimate in the city’s report.  New York’s Victor Wiener Associates (VWA) has apparently compiled a 50-page appraisal on behalf of Financial Guaranty Insurance Company (the Detroit News and Detroit Free Press have received copies, none are publicly available of which I’m aware. 

This report will presumably serve the inverse purpose of the city’s, namely, to argue that the $816 infusion from the Grand Bargain is an insufficient realization given the collection’s value.  Where the city will argue that extracting that amount from a collection worth somewhere between $3 billion and $4 billion is a windfall, these creditors will presumably take the view that the city could have done better.

The chances that the collection will actually be sold have dwindled to almost none.  The city cannot be forced to sell it, and Judge Rhodes has already telegraphed his dim view of selling cultural assets.  But with the headlines like water being shut off to city residents, expect large numbers like this to play into the debate at the upcoming trial over whether the city’s plan has done enough to address its many creditors and constituents. 

Audio Now Available of “Art Fairs: An Irresistible Force In The Art World?” at Sotheby’s Institute

Posted in Art Fairs, Events

I took part in a panel discussion at the Sotheby’s Institute on May 27, 2014 entitled “Art Fairs: An Irresistible Force In The Art World?” 

The audio file of the evening can now be heard here, along with a transcription of the first half of the presentation.  Moderated by Judith Prowda, the panel was comprised of Edward Winkleman, Elizabeth Dee, Richard Lehun, and me.  We reviewed the financial, practical, ethical, and legal effects that the expansion of art fairs has had on the trade. 

Reactions and reviews came in quickly as we noted previously.  Co-panelist Ed Winkleman posted his take on the evening at his blog, which you can read here.  He gave a terrific data-packed overview of art fairs, and his reflections follow up on some of the questions that were asked after the prepared remarks.  I’ve since found this write up by John Haber as well.

Eileen Kinsella wrote a cogent summary of the evening at ArtNet.  As she begins her article, “The art world can’t live with art fairs. The art world can’t live without art fairs.  That was the resounding takeaway. . . .”  The piece summarizes nicely the high points of the talk.

Kristina Nazarevskaia also penned an article about the event at galleryIntell entitled “The rise of the art fair: who wins and who loses.”  She focused on the disruptive aspects financially and developmentally, and the ethical and legal issues that those things raise.

My comments are reprinted below:

*                  *                  *

Art Fairs and the Law

The interaction between a client and a dealer, whether at a brick and mortar gallery, or an art fair, is the commencement of a legal relationship.  It might be a successful relationship, it might be strained, but that’s what it is.  So what I want to talk about tonight are some of the ways that the formation of that relationship, and its rights and duties, might be affected by the fact that it is happening at an art fair.  My focus is going to be on US and NY law given my practice, but hopefully we can issue spot on things that can arise around the world. 

It seems obvious, but the starting point is to remember where you are.  In the absence of an agreement, in most instances for the sale of art the place of the transaction will supply the law that governs that transaction.  So New York law will govern Frieze, Dutch law will govern TEFAF, and Hong Long law will govern Art Basel Hong Kong.  

The nature of an art fair also creates practical differences in the formation of that relationship.  Consider: every art sale involves some sort of diligence, whether cursory on the spot or in depth, a negotiation of the essential terms of the transaction, and an actual exchange.  A contract, after all, is an exchange of promises: I will do this if you do that.  But every contract has explicit terms and implied terms, and the practical aspects of an art fair, and the law of the place where it is, will all go into what constitutes the resulting agreement.  

Diligence and preparation.  What does the buyer have time to investigate, and what are the consequences of proceeding with the transaction?

This is as much a matter of risk management as it is a legal question.  But whether you are a dealer at a show or a buyer, your starting point has to be the rules of the show.  Is there anything in the materials in which a buyer agrees to a set of terms incorporated by reference?  That is, when you attend or pay for something, do you end up signing a form that says something like “buyers agree to abide by the rules of the X show”?  If so, those rules will be a part of your deal. 

If you are a dealer, the same will hold true most likely at the application stage.  Even without a single buyer, the dealer is probably setting foot more firmly in the location of the fair.  Art Basel, for example has a choice of law provision in its application form in favor of the location of the particular show (Canton Basel, Florida, Hong Kong). 

What is it?  What representations and warranties are inherent to a sale, and how does the dynamic of an art fair complicate how you can rely on what you have been told? 

If you’re in a Uniform Commercial Code (UCC) jurisdiction, like New York, the mere exchange of information will give rise to enforceable obligations related to that exchange if there is ultimately an agreement.

UCC 2-313 provides that

(1) Express warranties by the sellerare created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goodsand becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.

(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

(2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goodsor a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

We can well imagine how this will play at an art fair rather than a gallery.  Hundreds of people are passing a booth each hour.  Routinized conversations ensue.  The sellers give a standard litany of descriptions-they think, if they can remember.  Buyers have spoken to dozens of people that day.  Was it this dealer, or another, that talked about the condition of the paining or the location of origin.  Which conversation becomes “part of the bargain”?  So where advance homework is wise in a storefront, some system for noting what you heard from whom—or what you told whom—may matter if and when a deal is struck. 

To illustrate the point, imagine a buyer who attends a fair of rare cars on Long Island.  He talks to several sellers at the fair, but he is taken with one conversation in particular.  This Chrysler LeBaron, he is told, belonged to a certain specific individual.  Because of that, he buys the car in a handshake deal.  The handshake representation about who owned it?  “John Voigt.”  You may well laugh at the idea of being as senseless as George Costanza, but the larger point is that once you shake hands, exchange promises, make a deposit, or otherwise commit yourself, what happened in that one conversation among many could turn out to matter a great deal. 

Consider a less ridiculous scenario.  In a conversation at a booth, the buyer observes a signature at the lower portion of an etching that looks to her, a sophisticated buyer, to be Picasso’s.  She asks the dealer, what is that?  “That’s signed Picasso” he says.  Or did he say “that’s signed BY Picasso?”  or did he say “that SAYS Picasso”?  Do either remember accurately.  The buyer purchases it.  In a way that is so much less likely with an auction catalogue, there is now an issue with WHAT 2-313 warranty was made.  This scenario happened to a client of mine in a more old fashioned context, and the particulars were more easily sorted out, but the dynamic of the show makes it one to look out for. 

Here too geography will matter of course, and whether a civil law or other jurisdiction implies warranties into a contract like this. Many don’t. 

Before we leave this topic, remember that an expression of VALUE is considered an opinion, and not a statement of fact within 2-313 or other law.  But a claim of comparable sales is an expression of fact. 

Did you make an agreement?

Let’s take a step back and talk a little about the basics of contract formation in this context.  With apologies to the lawyers in the room who have done their best to forget about first year of law school, it is worth repeating that an agreement does not consist of what you think it meant, it consists ordinarily of the objective manifestation of the parties’ respective intent to be bound. 

The New York Statute of Frauds, Gen. Obligations Law § 5-701, like most, requires that any agreement must be in writing to be enforceable if “By its terms is not to be performed within one year from the making thereof  or  the  performance of which is not to be completed before the end of a lifetime.” 

The key thing to remember here is not whether it IS performed within a year, but whether it can be.

So contrast: a visitor from a civil law jurisdiction sees a contemporary work at Frieze.  She has a structured payment coming to her own business, so she needs some time to make the full payment, but she is willing to commit.  So she says I’ll give you 50% now, 30% in six months, and the rest a year from today, after which I’ll pick it up.  The dealer, happy to obtain 80% within six months, agrees.  She’s never heard of the Statute of Frauds.  But six months later he’s heard nothing, and he sues.  Strictly applying the statute of frauds, he should win, right?  Strictly, no.  a year from today is not within a year.  Cases have gone to court over this issue, and the party seeking to enforce the agreement has not always prevailed.  Good news for them recently, although addressing a different aspect of the Statute of Frauds concerning auctions (this is the Jenack case), the New York Court of Appeals reserved some choice words for relying on the SOL disingenuously:

It bears repeating in such a case as this that: The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly, made.

But here, seller in particular, beware. 

I started by teasing out some of the geographical implications on the choice of law that might apply to an art fair transaction.  But, as I like to phrase the foundation of all legal questions: so what?  Who cares where the fair is?

With regard to the most important aspect of any sale, title to the object, you will care a great deal.  Consider again a pair of scenarios, different only in geography.

First, in New York at an art fair views a striking Max Beckmannn domestic scene on consignment from an identified and reputable seller.  He views its condition, and notes its presence in the catalogue raisonné with approval.  The provenance provided is orderly and has no gaps or suspicious activity.  He buys the painting for $25 million, which is noted in the local and international press.

Two weeks later, he receives a letter from a lawyer.  The painting, the lawyer argues, was sold at the auction at Galerie Fischer in Lucerne in 1939 after being looted from a Jewish family in Frankfurt.  The provenance he was given was fictional; the catalogue raisonne confused this work with another version.  The lawyer’s client wants the painting back.  Oh, and the reputable and known seller has gone bankrupt and fled to Zimbabwe with our buyer’s money.  

Now imagine the same scenario, but at Art Cologne.  What happens, and why does it matter?

Assuming that the buyer really did not know of the painting’s history, the location will not only be important, it will probably be dispositive.  In New York and elsewhere in the United States, a thief cannot pass good title.  So purely as a matter of title, the buyer will lose the painting.  He may have some defenses like laches if the true owners knew of the painting’s intermediate location and failed to act, but that is necessarily an uphill battle, and his burden to prove AFTER a trial.

In Cologne, or Maastricht?  More than likely, as a good faith subsequent purchaser, he will keep it.  Even within the western art market, an increasingly seamless one, different places make different judgments about who should bear the risk of loss in that situation. 

World War II looting isn’t all that matters by location.  Assume fairs in the same two locations, New York and Cologne, but for a Giorgio di Chirico.  The same facts apply, but assume that in 1955, the true owner had located the painting in a Geneva gallery, sued for its restitution—and lost to a “good faith purchaser.”  Now, even in New York, the seller is not passing a thief’s title, he is passing adjudicated good title.  So the buyer may get the painting after all.

Lastly, assume the di Chirico hypothetical:  but fair number two is in Rome, where just last week, a new government passed a law declaring all Italian metaphysical art to be the national patrimony of Italy.

The buyer in New York may now be better off.  Unless it was imported to the US AFTER the patrimony designation (in which case there could be customs problems, and a visit from the Asset Forfeiture Unit of their friendly local U.S. Attorney office), it’s here and it’s probably not going back.  But within the EU?  That jurisdiction that favored good faith title may be out of luck. 

So, to foster the discussion, remember: where you are will affect whether there is a relationship, and how it plays out in the short term, and if people ever disagree.

Curiouser and Curiouser: Still More Gurlitt Paintings Found, Nazi-Looting Connections Unknown

Posted in Gurlitt Collection, Restitution, World War II

As if the Cornelius/Hildebrand Gurlitt saga needed any more complications as the world awaits the official decision by the Kunstmuseum Bern about whether to accept the appointment as Cornelius Gurlitt’s heir, even more artwork has apparently turned up.  Der Spiegel, the Frankfurter Allgemeine Zeitung, and the Wall Street Journal have reported that one picture and several sculptures in the very apartment from which the original trove was seized more than two years ago.  Among the sculptures are apparently a Degas and a Rodin.  Nothing else seems known about the works or their ownership history, or whether they might be among works that Hildebrand Gurlitt sold or acquired as “degenerate” (side note: the Victoria and Albert Museum’s copy of the Degenerate Art Action register is currently on display in New York at the Neue Galerie’s exhibition of that title.  While it is available online, it is most certainly worth a visit before the show ends).

Although in the execution it is not as hard as it would seem to understand how this could happen—the authorities presumably did not return to the apartment after the initial seizure—it raises any number of questions about the ongoing deal that Gurlitt made with prosecutors before he died.  For example, and most obviously, why didn’t Gurlitt himself disclose the existence of these works, which are hardly inconsequential?  The universe of objects in his possession is a fairly material aspect of that agreement; if Gurlitt misstated or omitted anything of significance, it could call the agreement itself into question.  Will this affect the Kunstmuseum Bern’s interest?  Presumably as the museum considers the pros and cons, the possibility that works will occasionally pop up and renew the controversy may be something the trustees would rather not deal with.

Lastly, it underscores the ongoing concern with the practicability of the deal.  In the first few months of the one-year deadline, the Task Force has announced only one conclusion, that Matisse’s Sitting Woman should be returned to the heirs of Paul Rosenberg.  As many experts have decried, that time limit seemed inadequate from the start.  If more works continue to be added to the list (and it is not yet clear whether these will be, or addede to the www.losart.de database), it will be all the more so. 

Not so Fast—Intervention into Corcoran Cy Pres Case Allowed for Current Students and Employees, “Save the Corcoran” Turned Away

Posted in Cy Pres, Museums

The Washington Business Journal‘s Rebecca Cooper tweeted today from the courtroom today that District of Columbia Superior Court Judge Robert Okun has allowed in part the motion to intervene in the Corcoran Gallery cy prés petitionReports are that current students of the College of Art + Design, as well as current Corcoran employees were allowed to intervene, while intervention was denied to the organization “Save the Corcoran” and past employees and students.

Hopefully we’ll have an opinion to digest soon, but this seems like a sensible and pragmatic result.  Intervention is ultimately addressed to the nature of the interests asserted, and how they differ from those in the proceeding.  It’s not too hard to see how the judge might be persuaded that individuals who thought they would be employees or students four weeks from now at an institution that may no longer be there have the greatest claim to a discrete injury.  Less so prior workers and students, far less so community organizations.  For now, anyway, the prospect of another “Friends of the Barnes” is off the table. 

In the meantime, the game is now afoot as to the petition itself, even with the DA’s support.  Donn Zaretsky highlights here a theme that we explored too, namely, the emphasis in the Trustees petition on the absolute need to avoid deaccessioning.  Donn picks off the inconsistencies there with his usual adroit analysis.  Also, Lee Rosenbaum picked up on a subtle issue with the Trustees petition that may now grow in significance with additional interveners: the Trustees’ brief explains eloquently (my opinion) how the National Gallery/George Washington merger is consistent with the wishes of William Corcoran.  But as Rosenbaum points out, that is not the test: it must be as near as possible

It may yet turn out to be so, but the case just got a whole lot more interesting.  

Lauder Wall Street Journal Nazi-Looted Art Editorial, Art Law Report Post, and the Response: Some Clarification and Context

Posted in Restitution, World War II

Two weeks ago, we posted an article entitled “Lauder Editorial on Stolen Art Fails the Glass House Test.”  The metaphor was not intended to be complicated: it seemed inconsistent, to put it politely, for the honorary board chairman of a museum that has resisted restitution claims by asserting, for example, the statute of limitations and the laches defense, now to say that museums that do just that are “immoral.”  Ultimately, we posited that restitution decisions are complicated and hard.  It seemed an open question for example as to what, exactly, Ronald S. Lauder’s editorial “Time to Evict Nazi-Looted Art From Museums” was designed to draw attention.  Right on cue, another article appeared calling for the return of the Camille Pissarro in the Thyssen-Bornemisza Foundation museum in Madrid (Rue St. Honoré, effet de pluie) claimed by the heirs of Lilly Cassirer.  It is clear that the June 30, 2014 Art Law Report raised more than a few hackles, but we welcome discussion and criticism.  An exchange of ideas is what we are here to foster, after all.  In the end, however, some clarification shows that there is not really a disagreement here, but rather that the response highlights frustration with civil law countries’ treatment of stolen art.

To discuss Lauder’s editorial, we examined one of the cases he cited : the ongoing dispute over La Bérgère (also by Pissarro) at the Fred Jones, Jr. Museum of Art, claimed by Léone Meyer.  Lauder also mentions the claims to two Lucas Cranach the Elder paintings (Adam and Eve) at the Norton Simon Museum that we have discussed previously, and which were recently reinstated by the 9th Circuit Court of Appeals.

In any event, the June 30, 2014 Art Law Report description of the Oklahoma case in discussing the Lauder piece was intended neither to support nor refute Meyer’s claim.  We do not represent Oklahoma or any of the Oklahoma defendants.  We do represent the David Findlay Jr., Inc. Gallery, which was initially named as a defendant (a fact disclosed in each post on the topic).  Meyer alleges that La Bérgère was sold at the David Findlay Galleries in 1956 in New York City, and that certain reports and events put the art world on notice that the painting had been stolen.  David Findlay Jr., Inc. was not incorporated until nearly thirty years later, but our client was nonetheless sued, and later dismissed, from the case.  Several other New York galleries with the name “Findlay” were also sued.  After our client was dismissed, Meyer sued the American Alliance of Museums (AAM) and Association of Museum Directors (AAMD), alleging that they had breached a contract of which she was the intended beneficiary.  Specifically, she alleged that they had failed to enforce their membership guidelines on Nazi-looted art to pressure the Fred Jones, Jr. museum to return the Pissarro.  The Fred Jones, Jr. Museum is not a member of the AAMD.  The AAMD is an association of people (directors), not museums.

The outcome of the Oklahoma case was quite straightforward: Judge Colleen McMahon of the U.S. District Court ruled that the Oklahoma defendants cannot be sued in New York.  This is because they are subject to neither “general” jurisdiction—the continuous presence in the forum of the court that makes it fair to be sued there; nor “specific” jurisdiction—the commission of a certain act in a particular place that, one’s typical location notwithstanding, allows a suit to proceed.  A major corporation might be subject to general jurisdiction because of a systematic course of business, even far afield from its base of operations.  A defendant might be subject to specific jurisdiction because it engaged in a transaction that is the subject of the lawsuit (similar to the argument that the Mendelssohn-Bartholdy heirs made in seeking to pursue the Free State of Bavaria and the Pinakothek der Moderne for Pablo Picasso’s Madame Soler).  Judge McMahon wrote, first as to the Findlay defendants:

The Court long ago concluded that the Findlay Defendants were sued as window dressing, in order to try to site the case in New York rather than in Oklahoma. 

With regard to the jurisdictional question, she held first with regard to specific jurisdiction:

No allegations in the First Amended Complaint would render the Oklahoma Defendants amenable to specific (long-arm) jurisdiction in New York pursuant to N.Y. Civ. P. Law & Rules § 302. The Oklahoma Defendants allegedly came into the possession of the Pissarro painting in 2000, when it was gifted to the University by the Weitzenhoffer family-who, according to publicly available materials, lived in Oklahoma City. Since then, the painting has been housed on the campus of the University. The First Amended Complaint pleads not a single New York based activity by the Oklahoma Defendants in connection with either the University’s acquisition or its subsequent maintenance of the painting-all of which allegedly took place in Oklahoma.

The general jurisdiction analysis was similar:

Plaintiff contends that the fact that the University has issued bonds with the assistance of Wall Street (i.e., New York-based) underwriters is sufficient to subject the Oklahoma Defendants to general jurisdiction here. That argument has been repeatedly rejected for years. . . .In fact, the proposition is so well settled that it ought to violate Fed. R. Civ. P. 11 to make the argument!

[]

I decide the pending motion on the ground of personal jurisdiction to emphasize that this matter had no business being brought before this Court in the first place. Plaintiff may wish to bring her lawsuit against the Oklahoma Defendants in Oklahoma. It is there that issues about the doctrine of sovereign immunity in relation to the University, its Trustees and its President ought to be litigated, as well as issues relating to the statute of limitations and various torts, which may well be governed by Oklahoma law.

Finally, on May 19, 2014 after Meyer requesteda status conference about the possiblity of transfer to the U.S. District Court in Oklahoma, the court responded:

I granted a motion to dismiss. If you want to refile in Oklahoma – where you should have sued in the first place – file a new motion. I am not going to “undismiss” the case against the Oklahoma Defendants so I can transfer the case – I lacked jurisdiction over them. 

And so that was that.  Meyer voluntarily dismissed the AAM and AAMD shortly thereafter, and has appealed Judge McMahon’s ruling.  Even with a relatively quick turnaround on appeal (which should not be assumed), that would at best keep the case in New York but would also ensure that any litigation over the Swiss judgment is years away at the earliest. It is that tactical decision (not to pursue the case where the painting is) that presents the greatest current delay to pursuing the painting; the museum has yet to assert any timeliness defenses even to be discussed, let alone any that have carried the day.

On July 12, 2014 a post written by Meyer’s attorney appeared entitled “Nicholas O’Donnell’s article on Ronald Lauder’s Editorial on Stolen Art and Museums Fails the Common Sense Test.”  It was posted on the Plundered Art blog, in association with the Holocaust Art Restitution Project (both endeavors we follow faithfully and admire greatly, though we found the Twitter tagline of a “slugfest” that accompanied the July 12 response to be a bit much).  The article has also since appeared at Artnet’s news feed with the milder tag “Why Ronald Lauder is Right About Nazi-Looted Art in Museums.”

Ultimately though, the post just builds up a straw man only to knock it down; it claims that the Art Law Report “repeatedly brings up a 1953 Swiss court decision involving Camille Pissarro’s La Bergère as grounds for why Léone Meyer’s claim should fail, and why Mr. Lauder’s argument is baseless,” when the Swiss judgment had little to do with the June 30, 2014 Art Law Report article, which itself takes no view at all about Meyer’s claim. Strange too that the post cites a French museum official as spokesman for the effort to support “clean museums”; most informed observers would agree that the French national museums have done more or less nothing of substance on the topic in the last two decades.

In any event, there is a strong disconnect between the June 30 Art Law Report and the reponse. First, we cited the 1953 Swiss judgment as follows, not as “grounds for why Léone Meyer’s claim should fail”:

Specifically, [Lauder] objects to the Oklahoma defendants’ refusal to return the painting notwithstanding a Swiss court decision in the 1950s that adopted the view that the painting had been stolen, but nonetheless did not order its return because the case was not brought within the required time.  Lauder argues that this tactic is inconsistent with the Washington Conference Principles on Nazi-Confiscated Art (a conference that Lauder was undeniably instrumental in organizing). 

The last sentence was actually intended as a compliment.  We went on:

An important first point is that Oklahoma did not prevail because the claim has been found to be time-barred (or because of the Swiss judgment).

The July 12 response is really focused on a different issue: the fairness of the Swiss judgment against Meyer’s predecessor in title.  That is an entirely valid perspective, and underscores the policy challenges of differing views of good faith purchasers.  In New York, title to a stolen object can never be acquired, the policy is to favor the “true owner.”  In Switzerland, a good faith purchaser will prevail; the policy is to favor the continuity of the market.  Which is better?  People of good faith disagree, “common sense” notwithstanding, and that difference is at the heart of many, if not most, restitution disputes.  Meyer clearly believes that Cristoph Bernoulli, who prevailed in 1953 under Swiss law as a “good faith purchaser” was anything but that.  If Swiss law is applied, Meyer will almost certainly lose; if a court declines to apply Swiss law she may win.  But it a question that has yet to be litigated, and it will almost certainly never be litigated in New York.  If it is, it will be years away.

More to the point we did not (and will not) say what the Oklahoma museum should do, or whether Bernoulli was, or wasn’t a good faith purchaser.  Nor did we say that Lauder was “baseless” or that that Meyer’s claim should fail.  Those matters are better characterized as differences of opinion rather than obvious matters of common sense.  Whether they can succeed in New York certianly looks very unlikely.  Readers, of course, should judge for themselves.

District of Columbia DA Supports Corcoran Cy Pres Petition, Focuses on Potential Sanctions for Deaccession

Posted in Cy Pres, Deaccession

The Washington, DC District Attorney Irvin Nathan has filed his brief concerning the Corcoran Gallery’s cy prés petition to reform the museum and College of Art + Design with the National Gallery of Art and George Washington University.  To put it succinctly, “The District supports entry of the Proposed Order because the proposed cy pres relief will allow the Corcoran’s assets to continue to be used in D.C. consistently with the charitable  purposes to which they have been dedicated.”  The brief also addresses and bears on the question of the “Save the Corcoran” motion to intervene and standing, which will be argued tomorrow (which the underlying petition will not).  The DA brief leans heavily on the downside of the alternative: deaccession leading to industry sanction, which may be a little circular.

Confronting the impracticability of the status quo (the first prong of analysis), the DA’s brief argues “The Corcoran’s current situation renders it impracticable in the short term, and likely impossible in the long term, for the Corcoran to continue its current operations and act in accordance with its charitable purposes.”  Likewise, the DA argues that the proposed change is consistent with William Corcoran’s original intent “to establish ‘an institution of Washington City, to be dedicated to Art, and used solely for the purpose of encouraging American genius, in the  production and preservation of works pertaining to the Fine Arts, and kindred objects.’”  There, the DA stressed the many comments he had received about the importance of the Corcoran’s impact within the District of Columbia itself.  It takes particular issue with the potential loss of accreditation if the Corcoran deaccessioned to shore up its finances in violation of AAM or AAMD guidelines.

Overall the brief handles the elements of cy prés thoroughly and makes a strong case (and the very fact of support from the DA or Attorney General often suffices in and of itself).  The supposedly dire consequences of de-accreditation may be overstated, however, and a little circular.  If a museum says (1) it has to reform its trust because (2) otherwise it will have to sell art, but (3) it would then be sanctioned, so (4) it has to spend the money other than how than the trust says, that does not necessarily answer the right question.  If, hypothetically, a museum had a painting worth $100 million and sold it, it would almost certainly be sanctioned by the AAMD and AAM.  Yet that could, from one perspective, be better than the museum closing altogether if all the court is concerned about is the original intent of the donor and not about the museum industry consensus (that is, a donor may well want his museum to exist as a top priority—rather than not exist).  Whether another proposal (like this one) is as close as possible, or better, is a fact intensive inquiry, but it does not seem to us that the mere fact of likely sanctions should be dispositive.  With that said, the cy prés petition seems like a thoughtful one carefully designed to head off disaster and preserve a significant cultural asset right where it is now.

Lastly, beware too much tea-leaf reading from tomorrow’s intervention hearing; if the judge is active in questioning he or she may be probing the limits of the case merely to assess the interests involved in intervention, not necessarily out of an opinion about the underlying case.

Legislative Update: HR 4103, the “American Royalties Too Act” to be Considered Next Week, Gains Sponsors

Posted in Copyright, Legislation

On February 26, 2014, Representative Jerrold Nadler (D-NY) introduced the “American Royalties Too Act”—House Resolution 4103.  HR 4103 was referred to the House Subcommittee on Courts, Intellectual Property, and the Internet on March 20, 2014.  There was also an “American Royalties Too Act” introduced in the U.S. Senate by Senator Tammy Baldwin (D-WI) on the same day. 

The bill would codify “droite de suite” rights that are available in many other countries, rights to royalties on the resale of works of art.  The ART would give visual artists 5% of the resale price if their work resells at auction for more than $5,000.  California’s efforts to regulate resales was struck down on dormant Commerce Clause grounds in 2012 when Chuck Close and others sued under the California law to recoup royalties from Christie’s, Sotheby’s and eBay.  The appeal was argued in April and awaits a decision. 

Rep. Nadler introduced a similar bill in 2011, which was never passed.  In the interim, the United States Copyright Office assembled testimony, and then issued a report on their updated analysis of resale royalties last December.  This report concluded, most relevantly, that there was “no evidence to conclusively establish that [establishing resale royalties] would harm the U.S. visual market.”  The Report thus made the 10 recommendations for resale royalty legislation.  Nadler’s bill incorporates most of the report’s recommendations, some of which changed substantially material terms from the previously-proposed legislation.  Below is a side-by-side comparison of the most material terms of the two bills.

An article by Christopher Rauschenberg (son of Robert Rauschenberg) on the Huffington Post yesterday urges passage, and notes that the House will consider the bill next Tuesday.  Julia Halperin at the Art Newspaper reported yesterday as well that Howard Coble (R-NC), chairman of the committee, stated at a July 15, 2014 hearing that he was “not uncomfortable with the concept of a resale royalty.”  Halperin also reported that the bill has gained six sponsors, including Sam Farr (CA) and Janice Schakowsky (IL).  As of this morning, the bill has a total of sixteen sponsors: Representatives Louise McIntosh Slaughter (D-NY), James Moran (D-VA), Wm. Lacy Clay (D-MO), Eliot L. Engel (D-NY), Donna M. Christensen, (D-VI), Judy Chu (D-CA), John Lewis (D-GA), Janice Schakowsky (D-IL), Ed Pastor (D-AZ), Maxine Waters (D-CA), Sam Farr (D-CA), Mark Pocan (D-WI), Theodore E. Deutch (D-FL), and Sheila Jackson Lee (D-TX).

Christie’s and Sotheby’s have lobbied against the bill. 

If there is indeed a vote on Tuesday, it would progress further than the 2011 attempt, though the Senate would still await.  In an election year (the bill must become law before the new Congress), handicapping those odds is anyone’s guess. 

Corcoran Trustees Respond to “Save the Corcoran” Motion to Intervene, Argue That Challengers Lack Distinct Interest

Posted in Cy Pres, Museums

The trustees of the Corcoran Gallery and the Corcoran College of Art +Design have responded to the recent motion by a group of students, faculty, staff, and interested supporters have filed a motion to intervene in the Corcoran’s cy prés petition to merge with the National Gallery of Art and George Washington University.  The proposed interveners, led by a group called “Save the Corcoran,” argues that the modification is unjustified and fails to take alternatives into account.  More seriously, the motion to intervene accuses the trustees of “peculiar and egregious mismanagement.”  We reviewed the motion when it was filed.  While it goes over the case against merger, the challenge they face is demonstrating a specific and particular interest not already represented by a party to the case.  One never knows, but that seemed unlikely to us.  Even if unsuccessful, however, the motion lays out a passionate case against the merger that will be in the record one way or another.

Now the trustees of the Corcoran have responded to the motion to intervene.  Not surprisingly, the response focuses on the question of discrete injury or position  According to the Washington Post, the trustees’ response includes the following passage:

At bottom, the unhappiness that [the critics] voice in their papers is no basis on which to grant them standing or the relief they request,” the Corcoran lawyers said. “Whatever the depth of their emotional response, it is no substitute for an actual, substantive interest ... Nor does it create a factual basis for allegations of mismanagement or the standing to bring those issues to the court.

Interestingly, we wondered what the position of the attorney general on the underlying cy prés would be.  In the District of Columbia, District Attorney General Irvin Nathan is responsible for charitable oversight.  He has not spoken on the issue yet so far as we know, but he is a party to the case, a fact that the trustees can be expected to cite heavily in arguing against allowing intervention.

Even if intervention is denied, of course, that will be just the beginning of whether the merger is necessary to fulfill the Corcoran’s charter “as nearly as possible.”

A hearing on the motion to intervene is scheduled for Friday afternoon, July 18, 2014.