Art Law

Part 1: Acquisition

Acquisition by Purchase from Artist

What are the two main issues in acquiring art directly from an artist?

1) Satisfaction and 2) Whether a contract was actually made

Part 1: Acquisition

Acquisition by Purchase from Artist

For the issue of satisfaction, on whose satisfaction does the commission hinge? What does this evidence about art law, and how does this deviate from the norm? How do commission contracts now normally handle “satisfaction”?

1. Satisfaction hinges on that of the patron

2. This does not hinge on the “reasonable person"

3. This is an example of art exceptionalism and deviates from the norm, which is a “reasonable person standard” in terms of the meaning of satisfaction

4. Now many commissions have a section that states the artist will make reasonable changes in a good faith effort to address the objections of a patron

Part 1: Acquisition

Acquisition by Purchase from Artist

What was the significance of the Wolff v. Smith case?

Part 1: Acquisition

Acquisition by Purchase from Artist

What is the purpose of a commission agreement/contract?

1. to evidence the agreement

2. to act as a cautionary mechanism against hasty actions

3. to be a gatekeeping device

Part 1: Acquisition

Acquisition by Purchase from Artist

Are oral contracts allowed? How are oral contracts proven?

1. oral contracts are allowed

2. proven via: parties actions with respect to the other; statements made to others; any written materials (letters or checks, etc.)

Part 1: Acquisition

Acquisition by Purchase from Artist

What are the normal defenses for oral contracts? How can an oral contract be abandoned?

1. Statute of Frauds

   • oral contracts are enforceable under the statute of frauds if it is capable of being performed within one. year, even if actual performance may take long. Brockhurst.

2. Statute of Limitations

3. lack of cooperation (no person sitting for additional portrait-painting sessions) or artist acquiescence (artist agrees not to paint or complete)

Part 1: Acquisition

Acquisition by Purchase from Artist

What are two issues that arise when governments have programs that purchase or commission artwork for public buildings?

1. Location — issues pop up if a specific location inspired the artwork

2. Installation 

Part 1: Acquisition

Acquisition by Purchase from Artist

What are two examples of art exceptionalism that apply to the realm of contracts as they relate to acquisition by purchase from artist?

1. The subjective satisfaction standard

2. The reliance on oral agreements

Part 1: Acquisition

Acquisition by Purchase from Artist

Does the commissioning of art works fall under UCC 201?

No, this is viewed as a service, not a good.

Part 1: Acquisition

Acquisition by Purchase Involving Dealer or Gallery

What are six reasons to buy from a dealer rather than an auction house?

1. Confidentiality across the board

2. Set price (normally higher end, and no negotiations)

3. Not confined by the auction calendar

4. Auctions are expensive

5. Private sales can be better — if something ends up at auction, it means it likely did not sell in private

6. Dealer knows your collection and what you want

Part 1: Acquisition

Acquisition by Purchase Involving Dealer or Gallery

By whom can the art being sold by a dealer be owned?

What is a flip?

1. A dealer can sell art owned by 1) an artist, 2) the secondary market, or by 3) the dealer themself

2. A flip refers to the process of buying a piece of art and reselling it quickly for a profit. In a flip, the dealer sells a painting before they own it

Part 1: Acquisition

Acquisition by Purchase Involving Dealer or Gallery

What is the significance of the Hoffman v. Boone case?

Hoffman v. Boone dealt with how to prove an oral contract domestically.

1. Statute of Frauds generally bars oral contracts for things that are priced more than $500

2. Exceptions

   • Judicial admission — D can admit in court that there was a contract

   • Promissory estoppel — (1) clear promise (e.g., based on actions), (2) reasonable reliance (e.g., no other contracts were written), (3) unconscionable injury (needs to be more than just some flights or missing out on buying other paintings)

3. Steps to prove a contract if it was unwritten

   • Look at UCC. D could testify that there was a K = judicial admission

   • look at any paper trail

   • promissory estoppel

Part 1: Acquisition

Acquisition by Purchase Involving Dealer or Gallery

What is the significance of the Faggionato v. Lerner case?

Faggionato v. Lerner dealt with issues when the dealer is an intermediary for the seller.

1. for an intermediary to sue, they must prove a proper contractual relationship with the owner and/or the buyer (need legal authority or interest in the contract)

2. Important to document roles and contractual intent

Part 1: Acquisition

Acquisition by Purchase Involving Dealer or Gallery

What was the significance of the MAFG v. Gagosian case?

MAFG v. Gagosian dealt with causes of actions and breach of a written contract.

1. the COA for breach of fiduciary duty requires (1) fiduciary relationship, (2) misconduct by D, (3) damages directly caused by D’s misconduct

   • When is there a fiduciary relationship?

     • Defacto control and dominance

     • Arm’s-length commercial transactions do not create a fiduciary relationship

     • Fiduciary relationship is not created by superior knowledge or expertise in a field

   • What is misconduct by D?

     • Mere expressions of value are not actionable (opinions are not actionable)

     • When is an expression actionable?

       • speaker is knowledgeable and listener is unsophisticated

   • Fraud claims require a reasonable reliance on the misrepresentation

     • sophisticated investors who failed to conduct due diligence cannot demonstrate reasonable reliance

     • lack of transparency does not imply fraud

Part 1: Acquisition

Acquisition by Purchase Involving Dealer or Gallery

What was the significance of the Lindholm v. Brant case?

The Lindholm v. Brant case dealt with the good faith buyer and the entrustment exception.

The Entrustment Exception

If you (1) convey possession to (2) a merchant who deals in goods of that kind, they can (3) transfer rights to a (4) good faith buyer.

• this allows the good faith buyer to have superior ownership to original owner, under the UCC

To convey possession/entrust possession = broad “entrusting”

• handing over counts

• fraudulent or theft counts

• can include allowing the art to be released to their custody for shipment

The Good Faith Buyer

• Good Faith

  • buyer must act honestly + observe commercial standards

    • observe commercial standards = comport with the usual or customary practice in the kind of business in which the seller is engaged

      • handshake deals are okay here since that happens in the art world

    • a merchant buyer has a heightened duty of inquiry

• Lack of Knowledge

  • must purchase goods without knowledge that the sale violates the right of another

Part 1: Acquisition

Acquisition by Purchase Involving Dealer or Gallery

What is the purpose of the good faith buyer, coming out of the Lindholm v. Brant case?

The purpose is to uphold the integrity of the market

In the UK they care more about the private ownership of property — the owner keeps property in question, not the good faith buyer — Market Ouvert concept!

Part 1: Acquisition

Acquisition at Auction

Who are the players in an acquisition at auction? What are the roles of each player?

Seller = starts process; sells due to the 4 D’s (death, divorce, debt, downsizing); decides to sell, chooses auction house, negotiates consignment (including reserve price), transfers artwork to auction house for sale; seller pays auction house a seller commission (based on selling price)

Auction House = generates business and conducts auction; accepts consignment from seller, markets the auction, hosts the auction, finalizes the sale

Buyer = acquires artwork; reviews auction catalogue and conditions of sale, inspect artwork, places bids, pays and arranges for delivery; pays auction house buyer premium

Part 1: Acquisition

Acquisition at Auction

How does an artwork’s sale at auction impact its price and resale potential?

Auctions establish the true value of an item, and if a work does not sell, it is considered tainted and may not resell or could have trouble reselling

Part 1: Acquisition

Acquisition at Auction

What is the significance of William Estate v. Rabizadeh?

William Estate v. Rabizadeh raised issues of seller’s anonymity and auction house practices regarding a reserve price.

A reserve price is the lowest price the seller will sell the art for

The norm is that the reserve price will not exceed the work’s low estimate

An auctioneer can place a bid on behalf of an auction house up to the reserve price, with disclosure

• not anymore, but the auction houses keep the tradition

• bidding off the chandelier = auction house raises price to get the auction going

The reserve price is normally confidential

Part 1: Acquisition

Acquisition at Auction

What is the significance of Bexwell v. Christie?

Bexwell v. Christie raised issues of seller’s bidding at auction.

A seller cannot bid at auction, as this undermines the public trust in the auction process. 

Alternatives to this are to set a reserve price or to put in the rules of the auction that the owner may bid

Part 1: Acquisition

Acquisition at Auction

What is the significance of Veazie v. Williams?

Veazie v. Williams raised issues of an auctioneer’s duties and actions at auction.

• Can the auctioneer puff?  

  • No this is fraud when used to inflate prices 

  • Puff = using fictitious bids  

  • This is very dangerous to the trust of the statement  

  • Owners are responsible for the auctioneer’s actions (even if they did not know) 

Part 1: Acquisition

Acquisition at Auction

What are the auction house’s duties to the seller?

• The auction house enters into a fiduciary relationship  with the seller. This means they must:

  • Act in the best interest of client  -- maximize sale price  

  • Need to act in good faith  

  • be careful with optimistic projections + failure to disclose lower estimates could breach the duty 

• Seller is liable for puffery by the auction house even if the seller doesn't know that it is happening 

  • Both would benefit from puffing the price  

• Not held to a standard of “you will always make money if you sell” 

Part 1: Acquisition

Acquisition at Auction

What are the auction house’s duties to the bidder?

• The auction house owes to the bidder:

  • Duty to ensure transparency and fairness  

  • and let know if the owner is bidding  

• Auction houses have a higher standard of good faith because they bring the public together  

• No duty to disclose value to the buyer 

Part 1: Acquisition

Authenticity

What is the definition of authenticity and how is it determined?

• Authenticity is a consensus opinion at a point of time  

  • Not a permanent notion 

  • If something is not deemed authentic now, don’t destroy it since it could become authentic later 

• How to determine authenticity 

  • Provenance 

  • Scientific evidence  

  • Experts 

    • Highly subjective  

    • Old approach: someone would study the master and pick up on traits (e.g., the hands) and compare the traits to the picture 

Part 1: Acquisition

Authenticity

What is the concept of droit moral?

“Droit moral” is a rule that only the artist’s estate can verify the authenticity of a work.

• This started to become an issue when the middle class started buying art 

  • Before that, rich or church would buy art and keep it 

• Lack of formal system for authenticating art  

• A board (or authenticator) has no legal duty to authenticate something or to include something into a catalogue raisonne  

Part 1: Acquisition

Authenticity

What is the definition of a forgery?

• Intentional deception  

• Forgery = means of defrauding another by purporting all respects an authentic creation  

  • Can be a direct copy or can be in the style of _____ 

Part 1: Acquisition

Authenticity

Which case dealt with issues of forgery?

As demonstrated in Hepburn Gallery, Just because something is a forgery doesn’t mean it doesn’t have artistic value. 

• NY gallery was able to show forgeries from famous forger (not meant to be defrauding the people know since sign says “forgeries by stein” 

• But not as authentic as the true paintings. 

Part 1: Acquisition

Authenticity

What is misattribution and how is it generally handled?

• Honest, mistake in attributing the work of one artist to the wrong artist  

  • No criminal intent or deception  

• In general: if someone is expressing an opinion it is not actionable if wrong. If someone is providing a warranty it is actionable if wrong.  

Part 1: Acquisition

Authenticity

What are the three degrees of attribution for a painting and what do they mean?

• Putting a name by a painting does not create a warranty, unless there is fraud.  

  • “By Picasso” = most authentic 

  • “Attributed to” = lesser degree of authorship 

  • “In the style of” = no authorship 

Part 1: Acquisition

Authenticity

What are the three cases dealing with issues of attribution and what is their significance?

With old art, there is not enough certainty for written words (e.g., words next to paintings) to be a warranty. Jendwine.  

• If seller is representing what they believe is true, then it cannot be fraud.  

Bill of parcels can qualify as an expression of opinion not warranty. Power v. Barhman. 

Auction house is not liable for misattribution if they include a disclaimer. Weisz v. Parke  

• Buyer assumes the risk of authenticity... need to exercise caution  

• Note that lower court took a more subjective approach and said that the auction house was liable to the novice buyer but not the experienced buyer.  

Part 1: Acquisition

Authenticity

What standard did the case Dawson v. G. Malina establish?

The Dawson standard  

• Objects have to be judged with a reasonable basis in fact 

• Reasonable basis at the time and location the judgment was made 

  • Different standard for NYC v. small town Kansas  

• Used for old things or things where it is difficult to determine authenticity (e.g., Chinese artifacts)  

Part 1: Acquisition

Authenticity

What is the UCC Statutory Approach to authenticity, regaridn the creation of warranties?

• Creation of express warranties  

  • Affirmation of the fact or a promise becomes an express warranty 

  • Description of the goods that becomes part of the bargain creates an express warranty  

• No formal language about warrant or guarantee  

• Opinions don't create warranty  

• Not a great fit since art is often imprecise and inconclusive  

Part 1: Acquisition

Authenticity

What is the NY Statutory Art Law approach to authenticity, regarding the creation of warranties?

• Art merchant sell to non-merchant buyer + provides a certificate of authenticity or other statement  

  • Creates express warranty  

• Disclaimers cannot negate or limit warranty  

  • Unless reasonable  

  • Unreasonable when  

    • Does not clearly inform buyer that the seller assumes no responsibility 

    • Art work is counterfeit  

    • Information is false  

• Language used can impact guarantee  

  • “By a named author” = unequivocally by that author. 

  •  “Attributed to a named author” = from the author’s period, attributed to them, but not with certainty.  

  • “School of a named author” = from the author’s period, by a pupil or close follower, not the author. 

Part 1: Acquisition

Authenticity

What is the significance of the De Sole v. Knolder Gallery, LLC case?

• Dealers can be held liable for misrepresenting authenticity.

  •  Important that the buyer has some due diligence with high-value art 

    • If there are enough red flags they need to take some responsibility  

Part 1: Acquisition

Self-Regulation

What is the significance of the Christies v. SWCA case?

• Auction houses or dealers may include a right to rescind clause that allows the buyer to return the art work  

  • Reasonably determines = objective standard  

  • Sole discretion = subjective standard limited by good faith 

Part 1: Acquisition

Self-Regulation

What is the significance of the Kholer v. Hindman case?

• Auction houses can include a right to rescind even if their contract with the seller says that all items should be sold “AS IS” if the contract has a provision that allows the auction house to cancel sale if it determined that offering the property would expose them or the seller to liability under a warranty of authenticity. Kholer v. Hindman.  

  • That kind of clause grants broad discretion  

  • Theoretically the dealer/auction house is acting in the best interest of the seller 

Part 1: Acquisition

Liability of Authenticators

What are the main issues with authenticators?

• Competency 

• Conflicts of interest [Is the authenticator independent? Is the authenticator in any way tied to the value of the work?] 

• Authenticator or expert could be liable for making a public opinion about a piece of art 

  • e.g., making a public statement that something is not authentic  

Part 1: Acquisition

Liability of Authenticators

What is the significance of Hanh v. Duveen?

• Authenticator or expert could be liable for making a public opinion about a piece of art 

  • e.g., making a public statement that something is not authentic  

• especially if making the comments without hardcore evidence

• Courts are starting to reject “sixth sense” for authenticating art and instead want objective facts for authentication  

• Free speech does not protect people from making false statements about authentication

  • Fair comment defense requires  

    • Publication is an opinion 

    • Relates to the acts of an individual 

    • Fair such that the reader can see the facts and come to own conclusions  

    • Publication relates to a matter of public interest  

  • Malice or reckless disregard invalidates the fair comment defense  

Part 1: Acquisition

Liability of Authenticators

What is the significance of Simon-Whelan v. Warhol Foundation?

• Boards that are associated with artist-endowed foundations have conflict of interest 

  • Could limit the amount of art in the market to create a scarcity.  Warhol Foundation. 

• To have a work authenticated by a board, the party signs a submission agreement  

  • Indemnification clause + waiver of right to sue  

  • Allow the board to affix an endorsement on the work  

Part 1: Acquisition

Questions of Title

What are the (3) main types of stolen art, and what is the triangle of ownership?

• Types of stolen art  

  • War-looted 

  • Classic theft 

  • Antiques looting  

• Triangle of ownership: innocent purchaser, original owner, thief  

  • Common law: stick with the innocent purchaser 

    • Provisions of law protection of purchaser in good faith should be disregarded with nazi confiscation. Menzel.  

• Civil law: stick with the original owner  

Part 1: Acquisition

Questions of Title

What are the definitions of “booty” and “pillage/plunder”?

• Booty = private property necessary for conduct of war (e.g., food, transportation, means of communication)  

  • Legal to take during war 

    • Historically, to the victor go the spoils, and that practice granted good title 

• Pillage or plunder = private property not needed for war effort  

  • Unlawful to take 

Part 1: Acquisition

Questions of Title

Under what (3) conditions is replevin allowed?

Replevin allowed when (1) P has the right to possess (2) property wrongfully taken and (3) D wrongfully holds possession 

Part 1: Acquisition

Questions of Title

When does the clock for a replevin action start?

Describe the discovery rule, what is an example case of the discovery rule?

• SOL doesn’t run until you discover (or should have discovered) with reasonable diligence the basis of a cause of action 

  • Look at the actions of the owner  

• O’Keefe case is an example of the discovery rule 

• Most states use this  

Part 1: Acquisition

Questions of Title

When does the clock for a replevin action start?

What is the significance of the Greek Church v. Goldberg case?

• The amount of diligence required for a replevin action is fact specific, especially when applying the discovery rule

  • Sometimes no need to contact key organizations like IFAR and Interpol right after a theft. 

  • Diligence just has to be substantial and targeted.  

  • Based on Greek Church v. Goldberg. 

Part 1: Acquisition

Questions of Title

When does the clock for a replevin action start?

Describe the demand and refusal rule, and who uses it, as described by which case?

• SOL clock starts running when (1) lawful owner makes a demand for the return and (2) return is refused  

  • Look at the actions of the person who has possession   

• NY uses this, and this is significant because a lot of art passes hands in NY, as illustrated by Menzel. 

• Defense if it takes too long to demand the art back – Laches defense  

Part 1: Acquisition

Questions of Title

When does the clock for a replevin action start?

What is the significance of the Guggenheim v. Lubell case?

• Art was stolen from Guggenheim but they didn’t report it because they thought that would hinder recovery  

• Demand and refusal rule gives the most protection to the true owners of property 

• No standard way to find stolen art… would be bad for a court do set the standard  

  • NY does not require reasonable diligence to recover stolen art 

Part 1: Acquisition

Questions of Title

When does the clock for a replevin action start?

To what type of replevin rule does the laches defense apply, and when can a D use it?

• Defense for demand and refusal rule 

• Can use when  

  • (1) P waited too long to bring the claim, (2) the delay was unreasonable, and (3) the delay was prejudicial  

Part 1: Acquisition

Questions of Title

When does the clock for a replevin action start?

What is the HEAR Act?

• Federal statute that creates a 6-year SOL for a civil claim to recovery art lost during Nazi era 

  • Clock starts when person discovers the identity and location of the art work + their possessory interest 

• Does not bar a laches defense.  

Part 1: Acquisition

Questions of Title

When does the clock for a replevin action start?

Compare the Laches Defense and the HEAR act, and give an example when each wins, citing a case for each.

• Example when Laches wins  

  • P sold painting to escape to Switzerland, looked for other art (but not this piece), family member came after Met 50 years later for painting 

  •  Laches works  

    • Delay was unreasonable since knew who sold painting to + never tried to get it back 

    • Met is prejudiced since it has been so long no one knows the details now 

  • HEAR act allowed the claim to be revived, but Met can still use the Laches defense   

  • Based on Zuckerman v. Met 

• Example when HEAR wins 

  • P was forced to sell paintings, P found the art works in 2015 

    • Difficult to find because of bad provenance during Nazi times  

    • Laches defense failed since they brought this up as soon as they could 

    • This is exactly the situation HEAR is for 

    • Based on Reif v. Nagy 

Part 1: Acquisition

Questions of Title

Act of State Doctrine

Complete the sentence: US courts will not examine the validity of a foreign sovereign act within its own territory if… (4) reasons…. 

• (1) the act was done by a foreign sovereign government, 

• (2) the act occurred within the government’s territorial jurisdiction,  

• (3) the government was extant and recognized by the U.S. at the time of the suit, and  

• (4) the act did not violate any treat obligations  

Part 1: Acquisition

Questions of Title

Act of State Doctrine

When is the Act of State Doctrine used?

• Used when two private parties sue each other + one party claims they own something due to the restitution process of the other state 

• Used as a defense when party in the U.S. wants to claim ownership by saying that state didn’t have the right to take it. Menzel.  

Part 1: Acquisition

Questions of Title

Act of State Doctrine

What is the significance of the Menzel v. List case?

• Menzel case was the first Nazi-looted art restitution case in US. 

  • Allowed citizens to get art back from gallery after their art was taken from the Rosnenberg Group (Part of the Nazi Art Group) 

  • Did not fall within act of state since (1) done by nazi party not Germany, (2) happened in BE not DE (U.S. recognized BE), (3) suit was filed after the fall of third Reich, and (4) the seizures violated the Hauge convention 

Part 1: Acquisition

Questions of Title

Act of State Doctrine

What are the (2) exceptions to the Act of State Doctrine, and out of what case did they emerge?

• (a) purely commercial acts exceptions  -- when foreign government acts like a private party 

• (b) violation of international law exceptions  

• e.g., where exceptions don’t work 

  • P had art sized in Netherlands during Nazi, art got turned over to Dutch government, royal decree that people had to repay sale price of nazi sold art, P waived rights. P family now trying to get art back under art recovery statute  

  • This is barred by Act of state doctrine (exceptions do not apply) 

  • Not purely commercial act  

    • Expropriation and restitution are sovereign act 

  • Does not violate international law  

    • The decree aligned with other post-war restitution framework and did not violate international law (at the time)   

• Based on Von Saher v. Norton Simon Museum  

Part 1: Acquisition

Questions of Title

Act of State Doctrine

What is the Doctrine of Comity?

• Doctrine of comity (principle of mutual respect and recognition between legal systems) 

  • In general: if a sovereign is doing something that only a sovereign can do then they cannot be sued in U.S.  

  • This is a procedural protection... not a private right 

  • Reflects current political relationships  

  • Foreign sovereign immunity is a matter of grace and comity (assists foreign relations/ foreign affairs) rather than a const requirement, offering deference to the executive branch on for our allies in all matters, not enemies at first... at the discretion of State Dept 

Part 1: Acquisition

Questions of Title

Act of State Doctrine

What is the Foreign Sovereign Immunities Act?

• FSIA 1976 

  • Establishes when and how foreign sovereign nations can be sued in U.S. courts 

  • Presumption that foreign sovereigns have immunity unless they fall into an exception: 

    • Waiver of immunity 

    • Commercial activity carried out in U.S. 

    • Exportation of property in violation of international law  

    • Torts in U.S. 

    • State-sponsored terrorism  

• FSIA 1976 does not affect the act of state doctrine... act of state can still be a defense  

• State department can still file statements of interest urging courts to decline jurisdiction in specific cases 

Part 1: Acquisition

Questions of Title

Act of State Doctrine

Does the FSIA apply retroactively, if so how, and what case illustrates this?

• Does the FISA apply retroactively? YES

  •  Applies to claims filed after its enactment even if the underlying conduct occurred before 1976 (or 1952) 

    • “henceforth be decided” 

• e.g., Nazi took possession of paintings and sold them to a gallery in Amsterdam, in 1946 Austria nullified Nazi-motivated transactions and the government kept the paintings (even after restitution laws were enacted) 

• Based on Austria v. Altmann  

  • Opened the door to allow private U.S. litigants to bring cases in U.S. courts directly against foreign governments  

    • Beneficial since in some countries there is a high fee upfront to file a case 

Part 1: Acquisition

Questions of Title

Act of State Doctrine

What is the commercial activity exception to the FSIA, and which case deals with this?

• Key requirements for exception 

  • (1) Commercial activity carried in U.S. by the foreign state  

  • (2) An act performed in U.S. in connection with a commercial activity elsewhere 

  • (3) An act outside the U.S. in connection with commercial activity elsewhere that causes a direct effect in the U.S.  

• Nationalizing property is a sovereign act  

  • No private party can nationalize historical artifacts + regulate the export  

    • Private property can send a letter disputing ownership    

• e.g., a nation can give notice of patrimony-type ownership claim against a property without fear of being in litigation  

  • Patrimony-type ownership  

    • e.g., all antiquities found in greece are property of greek state 

    • e.g., ancient moveable monuments are owned by state, cannot be sold, and are protected wherever they are located 

      • Need permission to transfer  

• e.g., country has patrimony-type laws that all the relics belong to that country, country sends letter to auction house to stop them from selling the piece + asserting ownership  

• Based on Barnet v. Greece 

Part 1: Acquisition

Questions of Title

Act of State Doctrine

What is the exportation exception to the FSIA, and which (2) cases deal with this?

• Exportation is the government’s act of taking private property    

• Key requirements for exception  

  • (1) property taken in violation of international law 

  • (2) Activities are of a commercial nature not a sovereign nature   

• “rights in property taken in violation of international law”  

• Refers to international law of expropriation not human rights law 

• Sovereign taking of its own national’s property does not violate international law 

  • Exportations of property belonging to a country’s own nationals are covered by FDAI exportation exception 

  • e.g., During rise of Nazi regime, Jewish art firm was coerced to selling painting for 1/3 of value to German state (sale was influenced by political persecution and physical threats) 

    • Can't bring this case since German citizens got art taken by German government  

    • Genocide is a human rights law not a property law 

  • Based on Phillips v. Germany 

• Commercial activity in the U.S. includes loaning the art to a museum in the U.S.  

  • Now only applies to Nazi era claims or systematic tasking from a vulnerable groups 

    • No longer applies to temporary exhibits protected under federal immunity form seizure act (2459) 

  • Would also provide enough contacts in the U.S. (even if U.S. museum is the one that acts to show the art) 

  • Based on Malewicz v. Amsterdam 

Part 2: Ownership

Crossing Borders

What does it mean to be “crossing borders” in the context of art law?

Crossing borders means leaving one jurisdiction and entering another with potentially different approaches  

Part 2: Ownership

Classification on Import Forms

What are the main questions asked related to importation?

• What are you bringing in? 

• What is the value of what you bring in? 

• What is the country of origin? 

Part 2: Ownership

Classification on Import Forms

What are the main protocols and regulations for fine art imported into the US?

• Any object that is imported into the U.S. must be classified for customs purpose  

  • This is important for taxes 

    • Fine art tends not to be taxed while other things probably are taxed 

      • Sculpture: only the original + first 12 castings are duty free 

      • Paintings: only when there are less than 50 paintings  

• Modern art is art and can be imported duty free 

  • Positive definition of sculpture: professional productions of sculptor 

  •  Negative definition of sculpture: any articles of utility or things made by mechanical process 

  • e.g., bronze bird that doesn't really look like a bird but is a bird under modern art  

  • Based on Brancusi v. U.S. 

    • Abstract art is allowed, no longer a need for natural representation 

    • Broadened definition of sculpture beyond traditional forms 

Part 2: Ownership

Classification on Import Forms

What is an object’s country of origin and why does it matter?

• Where the item was made or where it was found 

• It matters for (1) potential tariffs and (2) special rules for the protection of cultural property 

Part 2: Ownership

Classification on Import Forms

What is the definition of an object’s value for the US Custom’s process?

• Transactional value or value for a similar item  

• For auctions the reserve amount is the value 

Part 2: Ownership

Classification on Import Forms

What is the definition of an object’s value for the US Custom’s process?

• Transactional value or value for a similar item  

• For auctions the reserve amount is the value 

Part 2: Ownership

Classification on Import Forms

What does Section 52 of the Custom form Criminalize? What happens if there is a mistake on a custom form, and what test is applied to the instance of a mistake on the form? (be sure to cite a case)

• If you fill out the custom form wrong (material mistake), the item is subject to forfeiture  

• Use the natural tendency test not the but for test  

  • Natural tendency test – a statement is material if it could influence customs officials  

  • Actual harm or causation is not required, just that statement could affect the importation process 

  • e.g., importing platter from Sicily and saying that the country of origin was Switzerland  

    • This has an issue since U.S. agrees to back up certain countries to help them save their cultural property and limit import 

      • Sicily/Italy is one of the countries that we help 

      • Switzerland isn’t one of the countries we help 

        • No reason to slow down and look at the plate more 

    • Based on Antique Platter of Gold case. 

• Innocent owner defense is not valid  

Part 2: Ownership

Cultural Property Implementation Act

What is the Cultural Property Implementation Act?

• Stems from UNESCO treaty 

  • Creates import and export restrictions for cultural property  

  • But non-self-executing and each country needs to pass their own legislation  

• Note that customs and border patrol has extra restrictions  

  • Based on country of origin and based on material used 

    • e.g., feathers   

• Cultural property has a wide breadth of meaning  

• Importing the issue not exporting  

  • Illegal export of property from another country is not a violation of U.S. import laws 

• Items imported in violation of restrictions are subject to seizure and forfeiture  

  • Gives this a lot of power  

• Civil in nature 

Part 2: Ownership

Cultural Property Implementation Act

What are the mandates of sections 307 and 308 of the Cultural Property Implementation Act?

• 308: Prohibits US import of cultural property when  

  • (1) Documented in a museum AND 

  • (2) Stolen after the effective date of the convention  

• 307: Archeological and Ethnological Material when requested by a foreign government 

  •  Requirements  

    • (1) cultural patrimony is at risk from pillage 

    • (2) protective measures have been taken  

    • (3) import restrictions would help deter pillage  

    • (4) restrictions align with international cultural interests  

  • Need a certification of law export  

Part 2: Ownership

National Stolen Property Act

What is the National Stolen Property Act?

• Criminalizes receiving, possessing, and selling known stolen property that has crossed U.S. boundaries  

• Item has to be valued at more than 5K 

• Goes after the bad actors  

• Courts may apply NSPA to property stolen abroad  

  • Stolen includes property taken form a sovereign that has clearly asserted ownership  

  • Patrimony laws are included in this  

• CPIA does not limit NSPA reach 

  • Overlap does not preclude enforcement of either  

• e.g., D was smuggling in Egyptian pieces of art.  Egypt has a law that all antiquities found after 1983 are government property. D brought the property into U.S. 

  • Can press criminal charges against D 

• Based on Shultz v. US 

Part 2: Ownership

National Stolen Property Act

What are the main questions relating to the National Stolen Property Act?

• Main questions  

  • Increasingly global market and no one knows everything  

  • Questions of symbolic interest (cultural property)  

  • Tax and money laundering issues  

Part 2: Ownership

Moral Rights

What are moral rights and to what are they traceable?

• Creator of property has non-pecuniary rights even after they sold the art to someone  

• Think as a “shadow co-ownership” interest 

• Traceable to droit moral in France 

  • Also includes right to resale proceeds, dight of disclosure, right to withdraw  

Part 2: Ownership

Moral Rights

What was the first cases in France that set up moral rights?

• Whistler was one of the first cases in France that set this up  

  • Artist is the master and proprietor of his work till such time shall please him to deliver  

  • This is different than a widget  

  • Facts: Whistler was painting commissions but stopped when not paid enough and then painted out the face and showed the painting  

    • US does not have this right  

  • Holding: Whistler is not obligated to surrender the portrait, but he is prohibited from exhibiting or using it while it remains unfinished  

Part 2: Ownership

Moral Rights

What is VARA?

• Visual Artist Right Act of 1990 

• Covers fine arts  

• Things in VARA  

  • Defines work of visual art 

  • Rights of attribution  

  • Right of integrity  

• The rights are not transferable (but can be waived)  

• Rights expire at death 

• Vara exists within copyright law 

• Only applies to pieces of art created after VARA 

  • e.g., log cabin that was created and sold pre-1990 does not have VARA protection  

    • If someone creates a derivative work (e.g., adds stain) that person is the author of the derivative work not the original author  

    • Can't use later derivative work to grandfather in VARA coverage for original work  

    • Noland v. Janseen 

Part 2: Ownership

Moral Rights

What is a visual work of art?

• VARA Positive Definition: painting, drawing, print, sculpture  

  • Need 200 or fewer signed + numbered copies  

• VARA Negative Definition: posters, applied art, motion picture, commercial art (e.g., promotional or advertising material) 

Part 2: Ownership

Moral Rights

Are works for hire covered under VARA?

• Works for hire – not covered 

  • Test for determining work for hire (Reid Test) 

    • Control over work 

      • More control from artist – more likely not made for hire 

    • Skill required 

      • Mores kill required – more likely not made for hire 

    • Assignment of duties 

      • Artists do other things – more likely for hire 

    • Benefits 

      • Getting benefits – more likely for hire  

    • Tax treatment 

      • If treat like employees in their taxes – more likely work for hire 

• e.g., people who are making sculpture in lobby (had lots of control) but had health insurance 

  • work made for hire and artists did not have moral rights  

• A normal commission agreement is not a work made for hire 

• Based on Carter v. Helmsley  

Part 2: Ownership

Moral Rights

Is applied art covered by VARA?

• Applied art – not covered 

  • Applied art is ornamentation or decoration affixed to utilitarian object 

  • Test: (1) originated as a functional object and (2) continues to serve practical purpose  

    • Not focused on artistic merits  

  • e.g., making a bus look like a big ship… but then offering rides on bus is applied art 

  • Based on Cheffins v. Stewart 

Part 2: Ownership

Moral Rights

Is uncopyrightable work covered by VARA?

• Uncopyrightable work – not covered 

  • VARA does not apply to living art 

  • Not copyrightable  

    • Not work of human authorship 

    • Not fixed (changes based on weather and season) 

  • e.g., no rights to a garden display created by an artist  

  • Based on Kelly v. Chicago Park District 

Part 2: Ownership

Moral Rights

Is unfinished work covered by VARA?

• Unfinished work – covered  

  • This is based on the copyright definition (fixed in medium) + original + minimally creative 

    • Definition does not require something to be complete  

  • Artist has moral rights to unfinished work as long as it is fixed in tangible medium  

  • e.g., artist doesn’t finish a piece of art at museum still has moral rights for that art 

  • Based on Mass MoCa v. Buchel 

• Some circuits don’t allow site specific art under VARA 

Part 2: Ownership

Moral Rights

What is the right to attribution?

• Right to (a) claim authorship,(b) prevent false attribution,(c) prevent attribution of modified works that harm their reputation  

• Relief: injunctive relief only  

  • e.g., if the artwork is taken down – no relief possible  

  • no compensation for part harm 

  • Based on Mass MoCa 

Part 2: Ownership

Moral Rights

What is the right to integrity?

• Right to prevent intentional distortion, mutilation, or modification of their work if it would harm their honor or reputation  

• Relief: can get damages 

• Examples of infringement to right of integrity 

  •  Continuing work without artist consent (especially if it goes against artist wishes) 

  • Based on Mass Moca 

• Examples of not infringement to right of integrity  

  • Covering the artwork with tarps (this is not aesthetic change) 

  • Displaying unfinished work  

    • VARA does not allow artist to control when a work is shown  

    • This might be covered under copyright  

      • Exclusive display right  

    • Based on Mass Moca 

• Conservation is not a modification  

  • Some natural materials need to be replaced 

  • VARA favors conservation  

  • VARA integrity does not cover (a) natural aging + material decay or (b) conservation 

    • Unless something is done with gross negligence  

  • Based on Noland v. Janssen 

Part 2: Ownership

Moral Rights

What is the (right) to prevent destruction?

• Right to prevent intentional or grossly negligent destruction of works with recognized stature  

• Recognized stature = high artistic quality and acknowledged by a relevant community (e.g., the art world) 

• Building exception  

  • Used to balance the right of building owners and artists 

    • If both parties agree (in writing) that work may be subject to modification + destruction à rights do not apply upon removal 

    • If can be removed without destruction  

      • Artist has rights unless 

        • Owner makes good faith to notify artist  

        • Owner gives written notice and artist doesn’t act within 90 days 

• e.g., building owner destroys graffiti art on walls without letting people know. Violated right

  • Was given max damages since had no remorse (150K per work) 

• Based on Castillo v. G and M (5Pointz) 

Part 2: Ownership

Art Loans

What are the (3) big concerns relating to art loans, what are the (2) big pros for art loans, how are they started, and as what type of diplomacy are they classified?

• Three big concerns: theft, damage, lawsuits  

• Big pros for art loans: insurance/safety, economic reasons (increase value with sales) 

• Collector can be solicited by the borrower or collector can solicit the borrower  

• Art loans are soft diplomacy  

Part 2: Ownership

Art Loans

What are the (2) main characteristics of an old art loan?

• Traditional informality is included in art loans 

• Treated like bailments not like loans  

  • Transfer of possession not ownership 

Part 2: Ownership

Art Loans

What are the (3) main questions to ask about an old art loan?

• Three questions to ask 

  • (1) is the transfer a bailment of a gift? 

    • Does this change over time?

    •  This is based on the intent of parties at the time of transfer 

    • If you give something to the church it is considered a gift not a loan 

      • Dedicated to the to God’s service  

      • Based on Escot Church 

  • (2) what is the bailee’s duty of care? 

  • (3) are there any medications(?) that apply 

Part 2: Ownership

Art Loans

What are the (3) main degrees of care that change based on the type of bailment?

• Degree of care changes  

  • Lower degree of care when bailment is at the benefit of the bailor 

  • High degree of care when bailment is gratuitous 

  • Highest degree of care when bailment is for the benefit of the bailee 

Part 2: Ownership

Art Loans

What are tenants of the old art loan understandings of timing for a loan?

• Art could be loaned for an indefinite amount of time  

  • Loan can continue past the time of death of the original person  

    • New owners have no need to reestablish ownership/redo agreement 

• Cause of action starts when someone asks for property back and the person with the art refuses to give it back  

  • Successor can make a demand for the art 

  • Hard to invoke laches defense since art person could contact the true owner  

• No reasonable time defense (e.g., requirement to ask for painting after death) 

• Based on Easte of McCagg  

Part 2: Ownership

Art Loans

What is the Arts and Cultural Affairs Law 12.03?

• NY State law that protects artwork loaned by nonresident lenders from any kind of seizure while on exhibit in NY 

  • Not limited to civil actions (can apply to criminal subpoenas) 

  • Seizure = a meaningful interference with a person’s possessory interest  

  • Applies to subpoenas duces tecum 

• Purpose was to make NY an epicenter of art and encourage people to drop off art here  

• e.g., MoMA got letter from that painting belong to two other families since it was Nazi looted art. They got a subpoena duces tecum demanding the paintings as part of a criminal investigation. MoMA was protected by the arts and cultural affair law 12.03 

• This is automatically given to all art work loaned in NY 

• Based on Grand Jury Subpoena Duces Tecum 

Part 2: Ownership

Art Loans

What is the Federal Immunity for Cultural Objects on Temp Exhibition?

• Immunity from seizures act 2459 

• Applies to artworks or cultural objects imported under agreement with US cultural or educational institutions  

  • Requirements (1) needs to be cultural significant (2) subject to an agreement between foreign owner and US (3) needs to be for a temporary exhibition  

  • Needs to be requested  

• No court may issue or enforce legal process that would deprive the institution or carrier custody or control 

• Does not bar judicial actions to enforce transportation or exhibition agreements  

• Immunity from seizures does not bar suits for declaratory relief or damages under FSIA 

Part 2: Ownership

Art Loans

What is the Foreign Sovereign Immunities Act?

• Grants property immunity for sovereign states unless there is an exception  

  • e.g., commercial activity or state-sponsored terrorism exceptions  

• The terrorism exception for property does not provide a free standing basis for attaching and executing against the property of a foreign state  

  • The property must meet additional criteria  

    • Property used for commercial activity 

• Even if a judgment exists under the terrorism exception, plaintiffs cannot seize cultural artifacts unless those artifacts are used for commercial activity in the U.S. 

• e.g., after Hamas attack (funded by Iran) there was a judgment and Ps wanted to attach and execute Iranian assets (Persepolis collection loaned to Uni. Chicago).  These cannot be attached unless the property is already exempt from immunity.  

  • The art was being held for a scholarly purpose  

• Based on Rubin v. Iran  

Part 3: Disposition

What are the (4) main reasons to dispose of art, and what are the main questions involved?

• Get rid of art because of death, divorce, debt, and down-sizing  

• Major questions are (1) when do you get rid of it and (2) will there be consideration  

  • When = inter vivos or at death 

  • Consideration = sale or gratuitous transfer  

Part 3: Disposition

Sales

Through what (2) channels can an owner sell, and what do they sign, and when does a consignment occur?

• Can sell through dealer or auction house  

• Need to sign consignment document  

• Consignment occurs when a seller delivers goods to another to hold for sale to a third party 

Part 3: Disposition

Sales

What are (5) advantages to selling through a dealer? What are the (2) main issues in selling through a dealer?

• Selling through a dealer is private, discrete, lucrative, and faster 

• Seller has more control  

• Issues: (1) dealer creditors laying claim to consigned art while in dealers possession and (2) dealers bad actions 

Part 3: Disposition

Sales

Why would an owner want to file a UCC-1 financing statement, and what does it do?

• Filing a UCC-1 financing statement can protect the consignor’s artwork from claims of the dealer creditors  

  • Perfect the security interest  

• Why would creditors think that they have a right to the consigned art? 

  • Since it is at the gallery 

Part 3: Disposition

Sales

How is consigned art treated, and why is it treated that way?

• Consigned art is treated like bailments 

  • A bailment because 

  • Consignor retains ownership, consignee has a duty of care and must return the goods, artwork is not subject to creditor claims unless title has passed 

  • Are not outside article 9 of UCC since title remains with consignor   

  • Based on Haley and Steele 

Part 3: Disposition

Sales

Does consigned art qualify as collateral?

• Consigned art does not qualify as collateral  

  • After this banks amended their loan agreements to clearly state that consigned goods are included in creditor assets  

  • Could be avoided if they filed a UCC-1 financing statement that puts consignors interest above creditors interest  

  • Phrase “now owned or hereafter acquired” did not apply to consigned artwork 

    • Kraken got lucky with this interpretation and reading  

• Based on Kraken Investments  

Part 3: Disposition

Sales

What are the potential civil claims available for a plaintiff who is harmed by a dealer’s bad actions?

• Potential civil claims: breach of fiduciary duty + breach of contract 

  • P can claim breach if D breaches contract of sale  

  • e.g., failing to let P know of a separate agreement or accepting a fee from buyer when that is not allowed under the contract  

• P has claim if D breaks fiduciary duty (does not act in Ps best interest) 

  • Fiduciary duty doesn’t always arise in sales 

  • Stronger argument for fiduciary duty if P has a close long standing relationship with Dealer  

  • e.g., P has a claim when their long-term art dealer did not notify them of the higher offer before executing agreement  

• Based on Schulof v. Jacobs 

Part 3: Disposition

Sales

How does a potential insurance claim work, when remedying an issue with a dealer’s bad actions?

• Under an “all-risk” insurance policy, coverage applies to all causes of physical loss unless expressly excluded  

  • Usually intentional acts of the policy holder are excluded  

    • Intentional bad acts by the dealer are covered since the dealer will be acting in contravention (not pursuant to the consignment agreement) and that is not reasonably foreseeable to the consignors  

    • Insurers have to prove that an exception applies  

  • Need to show that a loss occurred  

    • Demand and refusal (conversion) is enough to set this in motion  

      • This is equal to theft 

    • P has to prove loss occurred  

• e.g., was able to receive insurance compensation for dealers bad actions when the dealer basically operated a pyramid scheme and refused to give them back their paintings when they demanded their paintings back. 

• This case did not change how insurance agencies treat consigned artwork 

• Based on Frigon 

Part 3: Disposition

Auction House

Does the UCC apply to an auction house?

No

Part 3: Disposition

Auction House

What will an auction house do if they really want something, and how does this work?

• If an auction house really wants something, they will provide a guarantee  

  • You get X amount of money not matter if the work sells or not 

  • Seller pays a fee (the overage) if the hammer price exceeds the guarantee  

Part 3: Disposition

Auction House

What does it mean for an auction house to have “sole discretion”?

Auction house have sole discretion over research, testing, marketing, and withdrawal from sales 

Part 3: Disposition

Auction House

What is the concept of “recission,” as it relates to an auction house?

Auction houses contractually reserve a broad right to rescind a sale if it might lead to liability