the Art Law Review · 2021. 2. 3. · Art Law Review Editors Lawrence M Kaye and Howard N Spiegler...

Art Law Review

EditorsLawrence M Kaye and Howard N Spiegler

lawreviews

theArt Law

Rev

iewEditors

Lawrence M

Kaye and

How

ard N Spiegler

© 2021 Law Business Research Ltd

Art Law Review

EditorsLawrence M Kaye and Howard N Spiegler

lawreviews

Reproduced with permission from Law Business Research LtdThis article was first published in January 2021For further information please contact [email protected]


PUBLISHER Tom Barnes

SENIOR BUSINESS DEVELOPMENT MANAGER Nick Barette

BUSINESS DEVELOPMENT MANAGER Joel Woods

SENIOR ACCOUNT MANAGERS Pere Aspinall, Jack Bagnall

ACCOUNT MANAGERS Olivia Budd, Katie Hodgetts, Reece Whelan

PRODUCT MARKETING EXECUTIVE Rebecca Mogridge

RESEARCH LEAD Kieran Hansen

EDITORIAL COORDINATOR Tommy Lawson

PRODUCTION AND OPERATIONS DIRECTOR Adam Myers

PRODUCTION EDITOR Katrina McKenzie

SUBEDITOR Claire Ancell

CHIEF EXECUTIVE OFFICER Nick Brailey

Published in the United Kingdom by Law Business Research Ltd, London

Meridian House, 34–35 Farringdon Street, London, EC4A 4HL, UK© 2020 Law Business Research Ltd

www.TheLawReviews.co.uk

No photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation, nor

does it necessarily represent the views of authors’ firms or their clients. Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided

was accurate as at December 2020, be advised that this is a developing area. Enquiries concerning reproduction should be sent to Law Business Research, at the address above.

Enquiries concerning editorial content should be directed to the Publisher – [email protected]

ISBN 978-1-83862-567-2

Printed in Great Britain by Encompass Print Solutions, Derbyshire

Tel: 0844 2480 112


i

ACKNOWLEDGEMENTS

AARNA LAW

AMINEDDOLEH & ASSOCIATES LLC

ANGUS FORSYTH & CO

BERGH STOOP & SANDERS

BÜSING MÜFFELMANN & THEYE

CBM & PARTNERS – STUDIO LEGALE

CENTER FOR ART LAW

CONSTANTINE CANNON LLP

E LANDAU LAW OFFICES

ETUDE RENOLD GABUS-THORENS & ASSOCIÉ(E)S

MARCÍLIO TOSCANO FRANCA FILHO

GIANNI & ORIGONI

HAVEL & PARTNERS

HERRICK, FEINSTEIN LLP

HUNTERS LAW LLP

INSTITUTE OF ART AND LAW

LAMBRECHT LAW OFFICE

LEVANT & PARTNERS LAW FIRM

JOHAN CAMILO ALSTAD-ØHREN

PARASKEVAS LAW FIRM

POLAK & PARTNER ATTORNEYS-AT-LAW

PRYOR CASHMAN LLP

The publisher acknowledges and thanks the following for their assistance throughout the preparation of this book:


Acknowledgements

ii

QUINN EMANUEL URQUHART & SULLIVAN, LLP

RAMÓN & CAJAL ABOGADOS

SAH & CO

SIMPSONS SOLICITORS

GUSTAVO TANOUSS DE MIRANDA MOREIRA

UGGC AVOCATS

YULIANNA VERTINSKAYA

WENGER PLATTNER


iii

PREFACE ......................................................................................................................................................... viiLawrence M Kaye and Howard N Spiegler

Part I General Papers

Chapter 1 CULTURAL PROPERTY DISPUTES ...............................................................................1

Leila A Amineddoleh

Chapter 2 RECENT DEVELOPMENTS IN THE ART MARKET ...............................................11

Tom Christopherson, Emelyne Peticca, Mona Yapova and Samuel Milucky

Chapter 3 ASSIGNING BURDENS OF DILIGENCE IN AUTHENTICITY DISPUTES .......19

William L Charron

Chapter 4 ART DISRUPTION – ART AND TECHNOLOGY IN THE TWENTY-FIRST CENTURY ..........................................................................................27

Massimo Sterpi

Chapter 5 APPLICATION OF COPYRIGHT TO ART ..................................................................38

Barry Werbin

Chapter 6 MORAL RIGHTS OF THE ARTIST: A US PERSPECTIVE .......................................47

Irina Tarsis

Chapter 7 THE MEDIATION AND ARBITRATION OF INTERNATIONAL ART DISPUTES .................................................................................................................60

Luke Nikas and Maaren A Shah

CONTENTS


iv

Contents

Part II Jurisdictions

Chapter 8 AUSTRALIA ........................................................................................................................73

Janine Lapworth

Chapter 9 AUSTRIA .............................................................................................................................85

C Dominik Niedersüß

Chapter 10 BELGIUM ...........................................................................................................................96

Lucie Lambrecht and Charlotte Sartori

Chapter 11 BRAZIL ..............................................................................................................................108

Marcílio Toscano Franca Filho and Gustavo Tanouss de Miranda Moreira

Chapter 12 CANADA ...........................................................................................................................119

Alexander Herman

Chapter 13 CZECH REPUBLIC ........................................................................................................130

Filip Čabart and Vladek Krámek

Chapter 14 FRANCE ............................................................................................................................142

Jean-François Canat, Philippe Hansen, Line-Alexa Glotin and Laure Assumpçao

Chapter 15 GERMANY ........................................................................................................................154

Katharina Garbers-von Boehm

Chapter 16 GREECE ............................................................................................................................169

Dimitris E Paraskevas

Chapter 17 HONG KONG .................................................................................................................175

Angus Forsyth

Chapter 18 INDIA ................................................................................................................................189

Kamala Naganand

Chapter 19 ISRAEL...............................................................................................................................202

Meir Heller, Keren Abelow, Talila Devir and Niv Goldberg

Chapter 20 ITALY .................................................................................................................................223

Giuseppe Calabi


Contents

v

Chapter 21 JAPAN ................................................................................................................................234

Makoto Shimada and Taku Tomita

Chapter 22 NETHERLANDS .............................................................................................................244

Gert Jan van den Bergh, Martha Visser and Auke van Hoek

Chapter 23 NORWAY ...........................................................................................................................263

Johan Camilo Alstad-Øhren

Chapter 24 RUSSIA ..............................................................................................................................278

Matvey Levant, Yulianna Vertinskaya and Tatyana Alimova

Chapter 25 SPAIN .................................................................................................................................292

Rafael Mateu de Ros and Patricia Fernández Lorenzo

Chapter 26 SWITZERLAND ..............................................................................................................301

Marc-André Renold and Peter Mosimann

Chapter 27 UNITED KINGDOM .....................................................................................................313

Gregor Kleinknecht and Petra Warrington

Chapter 28 UNITED STATES ............................................................................................................324

Lawrence M Kaye, Howard N Spiegler, Yael M Weitz and Gabrielle C Wilson

Appendix 1 ABOUT THE AUTHORS ...............................................................................................345

Appendix 2 CONTRIBUTORS’ CONTACT DETAILS ..................................................................365


vii

PREFACE

We are pleased to introduce you to the very first edition of The Art Law Review. The field of art law has developed over many years to become a significant speciality in the law, as collectors, galleries, auction houses, museums and everyone else involved with art have expanded their collections and businesses throughout the world. Besides involving billions of dollars in the trade, art law has become the means by which the diverse cultures of our societies are governed and encouraged to develop.

We have invited leading practitioners in the field of art law around the world to detail the key developments in their respective countries pertaining to this dynamic and growing area of legal expertise. We have also asked that other leaders in the field focus on particular important issues in this area of law. We thank all our distinguished authors for their fine contributions. We hope you will find them informative, instructive and interesting.

By way of introduction, a brief overview of developments in this field during the past 50 years in the United States, where we practise, seems a good place to begin. Considering that English common law, upon which US law is based, originated in the early Middle Ages, the field of art law in the United States can rightly be characterised as a newborn. The roots of art law in the United States began in the form of intermittent cases in the early to mid twentieth century when visual artists began confronting problems in protecting their work – and themselves – particularly in the areas of copyright and obscenity.1 Indeed, a body of law that could be characterised as art law did not really begin to take hold in the United States until the 1960s, and even then in a most disorganised fashion. The late and renowned Professor John Henry Merryman, who in 1972 offered at Stanford Law School the first formal art law class in a US law school entitled ‘Art and the Law’, wrote a few years later that he started the course partly out of ‘a desire to determine whether “art law” really was a field’ and noted that he ‘took a good deal of ridicule from colleagues who thought the whole enterprise frivolous and insubstantial’.2

We have come a long way since then. A multitude of art law courses are now taught at US and European law schools and other institutions, such as the major auction houses.3 And although in the late 1960s and early 1970s, when we began practising art law, one would have

1 See generally Joan Kee, Models of Integrity: Art and Law in Post-Sixties America, Introduction, 1-42 (University of California Press, 2019).

2 John Henry Merryman, ‘Art and the Law, Part I: A Course in Art and the Law’, 34 Art Journal 332, No. 4, 332 to 334 (Summer 1975).

3 See, e.g., Center for Art Law, ‘Art Law Courses and Programs Worldwide’, at www.itsartlaw.org (last accessed 29 October 2020).


Preface

viii

been hard pressed to find anyone in the Martindale Hubble Law Directory designated as an ‘art lawyer’, today art lawyers proliferate in the directory; and for the New York area alone, where we practise, there are several pages listing lawyers who call themselves art lawyers.

So, what is art law? Professor Merryman observed that a primary reason for creating his new and novel art law curriculum was that ‘the growth of American art and the emergence of the United States as a major art market involved problems and interests that were sufficiently substantial and complex to call for the services of specially attuned and trained practicing lawyers’.4 Well, Professor Merryman’s observation was quite prescient, for that is exactly what has happened during the past 45 years in the United States, and indeed throughout the world. Art law became a respected discipline within the law, and more and more practitioners around the globe began to specialise in the field as the nexus between art and law became more clearly defined.5

What had previously consisted of random cases involving visual artists and emerging issues affecting the growing art market started to morph into a cogent body of law. Even before Professor Merryman started his course and wrote the textbook to accompany it (Law, Ethics and the Visual Arts), in 1966 Scott Hodes published a book on the law of art and antiquities.6 Many other texts followed.7 Art law seminars and symposia began to proliferate and now take place almost every day somewhere in the world.

As the international art market grew and became more sophisticated, so did the practice of art law and the number of practitioners who began to devote themselves to the field. Today, art law is an amalgam of myriad legal areas that academicians, practitioners, lawmakers and judges have adapted to the specific needs of stakeholders in the art world, and art law specialists have learned how to apply traditional legal principles to art market disputes and transactions as the art world became more prevalent and more complex. The stakeholders in need of special art law expertise range from the poorest artists to the most sophisticated corporations and government entities. Even a partial list is daunting: museums, collectors, importers and exporters, galleries and dealers, auction houses, living artists (and even dead ones), including digital artists, families and family offices, estates, trusts and foundations, insurance companies, appraisers, art advisers, experts, consultants, corporate art collections, and national and state governments. To address the needs of these varied stakeholders, the experts in the field have taken general legal principles and areas of practice and applied them to the unique needs of the art law stakeholders, in addition to creating new specialities uniquely applicable to art law disputes and transactions. Among many others, these include property law, the law of contracts, consignments, torts, intellectual property, tax, trusts and estates, authentication, insurance, cultural property, moral rights, resale rights, free speech, sales and other commercial law, warranties, conflicts of law, private international law, comparative law, customs, criminal law and securities law. And the list goes on.

4 Merryman (footnote 2), at 332 to 333.5 A practical and informative guide to the development of art law can be found in Kee (footnote 1). The

early roots of art law are also explored in James J Fishman, ‘The Emergence of Art Law’, 26 Clev. St. L. Rev. 481 (1977).

6 The Law of Art & Antiques: A Primer for Artists and Collectors (Oceana Publications, 1966).7 Notable among the many are Franklin Feldman and Stephen Weill, Art Works, Law, Policy, Practice (New

York Practicing Law Institute 1974); Leonard Duboff, Deskbook of Art Law (Washington DC Federal Publications, 1977); and the seminal text on art law, Ralph E Lerner and Judith Bresler, Art Law: The Guide for Collectors, Investors, Dealers & Artists (Practicing Law Institute 1989), which is now in its fifth edition.


Preface

ix

We have been practising art law since before it became a field, having started in the early 1970s. We believe our own professional journeys serve to illustrate some of the ways this area of law has grown and developed, so we would like to briefly share some of our experiences.

Larry first entered this field as a summer associate at the firm of Botein, Hays, Sklar and Herzberg in 1969. On reporting for duty at this first legal job, he was introduced to a brilliant attorney, who ended up serving as a revered mentor for both of us for many years to come, Harry Rand. Harry was representing the Weimar Art Museum, located in what was then East Germany, which was seeking to recover two paintings by Albrecht Dürer that were taken during the Second World War by US soldiers from a castle in which the paintings had been placed for safekeeping. East Germany (officially the German Democratic Republic), which owned the museum, sued a negligence lawyer residing in Brooklyn, New York, who had purchased the works from a US soldier who appeared at his door one day in 1946.

As it turned out, this was the first case of a foreign sovereign suing in the United States to recover cultural property. It involved many legal issues that took some 15 years to resolve finally in favour of East Germany, to which the paintings were ordered to be returned. The legal principles established in the Weimar Museum case continue to be cited in cases involving the recovery of artwork and other cultural property, especially those relating to the statute of limitations, and Weimar Museum stands as one of the iconic cases in this area of law.

During the pendency of the case, Howard joined Botein and started a professional relationship with Larry that has spanned many decades.

Our success in the Weimar Museum case and the publicity surrounding it attracted the interest of the Republic of Turkey, which was in a dispute with the Metropolitan Museum of Art (the Met) regarding a remarkable collection of ancient jewellery and other artefacts on display in the Met, which had been looted from caves in Turkey many years before. It turned out to be one of the leading cases involving the restitution of antiquities looted from foreign sovereigns, which led to a worldwide interest in trying to prevent such looting from countries around the world.

We sued the Met on behalf of Turkey and a six-year litigation ensued, largely spent defending dismissal motions brought by the Met on the grounds of the statute of limitations and other technical defences. But after we got past all that time-consuming and expensive motion practice, we then commenced the long discovery process, whereby we obtained information from the Met’s own files about its knowledge of the objects’ provenance or history, and its conduct in acquiring them. Nonetheless, the case presented significant obstacles for us. It was, after all, one of the first major cases brought against a major museum by a foreign government to reclaim looted cultural property. Indeed, at the time of its inception, most commentators were openly questioning how a previously undiscovered and undocumented collection of antiquities could be identified as having been looted from Turkey, let alone recovered.

However, we did prevail and the antiquities, known as the Lydian Hoard, were returned to Turkey in 1993 and exhibited at one of the great Turkish antiquity museums, the Museum of Anatolian Civilizations in Ankara, where it was greeted with great interest and excitement by Turkish visitors to the museum as well as those from other countries. We were privileged to visit the museum when the objects were displayed there, and we cannot adequately describe the excitement displayed by the Turkish viewers. Once the director revealed to them that we and our colleagues had assisted the government in securing the return of the objects, many people came over to thank us personally for helping to ensure that this important part of their heritage had been returned, to be viewed and appreciated by the Turkish people. The Lydian


Preface

x

Hoard case is considered by many as the starting point for the efforts by art-rich countries to reclaim their cultural property, which have continued and increased to this day.

As that case was ending, Botein closed shop and we joined our current firm, Herrick, Feinstein. We brought what was now a growing caseload of restitution work to Herrick, which until that time was a very successful firm that had no experience with art law. Indeed, there were still only a very few attorneys who regularly practised in this area of law.

By the mid 1990s, we were certainly known as art lawyers, particularly in the area of restituting looted antiquities to their country of origin. But then, for various reasons, the world’s attention started to turn back to the Nazi era before and during the Second World War, and it became clear that the Nazis not only committed the most horrendous crimes against humanity, but they also committed the most extensive theft of cultural property in modern human history. As restitution experts, it was a natural fit for us to become involved in cases brought to recover artworks looted by the Nazis so that they could finally be returned to the families of the victims of the Holocaust. We would like to briefly mention two of those cases.

We were retained to handle one of the first important cases involving Nazi-looted art, representing the family of an art dealer who escaped from Austria after having had one of her paintings stolen by a Nazi agent. The painting by Egon Schiele is known as Portrait of Wally. The case started when the Wally was seized from the Museum of Modern Art (MoMA) in New York by state and then federal prosecutors after it was brought to the United States as part of an exhibition of work by Schiele in the collection at the Leopold Museum in Vienna.

Even though it took more than 10 years for the Portrait of Wally case to be finally resolved, it had an enormous influence from the moment it started. The fact that a loaned artwork at MoMA could be seized by US government authorities sent shock waves throughout the world and was a major factor in causing governments, museums, collectors and families of Holocaust victims to focus their attention on Nazi-looted art. Less than a week before the scheduled trial, the case was settled on three major terms:a the Leopold Museum paid the family US$19 million, reflecting the true current value

of the painting, in return for the surrender of their claim;b a ceremony and exhibition was held at the Museum of Jewish Heritage in New York for

three weeks before Portrait of Wally was returned to Austria; andc the Leopold Museum agreed that signs would be permanently affixed next to

Portrait of Wally at the museum and wherever it might be exhibited anywhere in the world, explaining the true facts of the painting’s ownership history.

Shortly after the Portrait of Wally case commenced, we assisted the sole living heir of the renowned Dutch art collector and dealer, Jacques Goudstikker, to recover an extraordinary collection of Old Master paintings that had been looted during the Second World War by Herman Goering, who was second only to Hitler in the Nazi regime. With the adoption in 1998 of the Washington Principles, a non-binding international convention that for the first time brought together 44 nations in an effort to foster the restitution of property looted during the war, the Netherlands adopted a new restitution regime designed to right the wrongs of the past. To make a very long story very short, we assisted Marei von Saher in her Dutch restitution proceedings, and in 2006 we were able to effect the return of 200 works to her.


Preface

xi

We also became involved in major art restitution cases brought against foreign sovereigns, which involved the Foreign Sovereign Immunities Act, a law that has been used in numerous cases since then as the basis for suing foreign sovereigns to recover artworks in their possession.

Over the years, we have also developed a wide-ranging practice in non-restitution art disputes, from simple breach of contract cases to more complex disputes involving dealers, collectors, artists and other art world stakeholders covering a wide range of disputes including trademark and copyright infringement, defamation, moral and visual rights, breach of warranty, misattribution, tax and trust matters, valuations, appraisals, experts and auctions.

We also became involved in the transactional side of art law. This aspect of our practice expanded when our restitution clients began asking us to handle transactions involving the sale and other disposition of major artworks and collections we had recovered for them. The transactional side included not only private treaty sales and auction sales, but also estate planning, providing tax advice, assisting not-for-profit entities, planning nationwide and international loans and exhibitions, and advising banks and collectors on using artworks as collateral for bank loans, among many other cutting-edge art law issues.

A sampling of the varied transactional matters we have been privileged to work on is a microcosm of the range of transactional matters that specialist art lawyers came to handle as the international art market expanded. To name but a few: we represented the Neue Galerie in New York in the acquisition of the famed Woman in Gold painting by Gustav Klimt, depicted in the film of that name, which has become the Mona Lisa of that museum’s collection, regularly attracting huge numbers of visitors; we represented the European Fine Arts Foundation (TEFAF) in the creation of its New York Fall 2016 Art Fair; we represented the Malevich heirs in numerous auction sales during the course of 15 years, including the US$60 million sale of Suprematist Composition (1916), which set a world record for Russian art; we represented the Estate of Frances Lasker Brody in the historic sale of its art collection at Christie’s (the highlight of which was a Picasso masterwork, Nude, Green Leaves and Bust, which sold for a then auction record of US$106.5 million); we represented a private art collector in one of the largest transfers of Mesoamerican art to a museum, and advised the collector’s foundation dedicated to the study and advancement of Mesoamerican art; and we conducted an internal investigation on behalf of an internationally recognised art gallery concerning the authenticity of certain paintings bought and sold by the gallery.

Turning now to this Review, we open the volume with substantive chapters that present an overview of current and significant issues in some important areas of art law:a cultural property disputes;b the art market;c art authentication;d art and technology;e international copyright issues;f moral rights; andg recent trends in art arbitration and mediation.


Preface

xii

We then present reports on recent art law developments in 21 key countries. Each country’s report gives a review of hot topics, trends and noteworthy cases and transactions during the past year, then examines in greater depth specific developments in the following areas: art disputes, fakes, forgeries and authentication, art transactions, artist rights, trusts and foundations, and finally offers some insights for the future.

We hope you enjoy reading all of these excellent contributions.

Lawrence M Kaye and Howard N SpieglerHerrick, Feinstein LLPNew YorkDecember 2020


Part I

General Papers


19

Chapter 3

ASSIGNING BURDENS OF DILIGENCE IN AUTHENTICITY DISPUTESWilliam L Charron1

I INTRODUCTION

Fake and forged art are hardly new problems for the art market. As art has become more highly commoditised, however, particularly among wealthy collectors who have the means to litigate (in what can often be time-consuming and expensive processes), sales of fake and forged art have become increasingly high-stakes problems. The problem is perhaps at its zenith when a ‘sophisticated’ collector buys inauthentic art from a ‘reputable’ seller. If litigation erupts, both sides will accuse the other of having not acted reasonably to ascertain, or to more fully disclose facts concerning, the possibility of inauthentic art. This chapter discusses an emerging trend in United States law to favour the role of the sophisticated collector over that of the reputable seller in such disputes.

II BACKGROUND: THE PROBLEM OF DETERMINING ART AUTHENTICITY

An assertion or implication of an artwork’s inauthenticity by a seemingly credible source can have a devastating impact on that artwork’s market value. Owners may sue those who ‘disparage’ and devalue their art simply by stating or implying that their works are not genuine.2

Nevertheless, resolving the bottom-line question of whether an artwork is authentic is not itself a legal question. Authenticity determinations fall to experts, including most notably to connoisseurs and scholars of an artist, to provenance researchers and art historians, and to forensic scientists and materials analysts: the ‘three-legged stool’ of art authentication.3

The job of the courts is not proactively to assemble such evidence in search of the ultimate ‘truth’ about a work of art. Courts are reactive bodies, and their job is to weigh and judge the evidence that is presented by the parties through an adversarial process. Courts

1 William L Charron is a partner at Pryor Cashman LLP.2 Compare Gerald Peters Gallery, Inc. v. Stremmel, 815 F. App’x 138, 139–40 (9th Cir. 2020) (reversing

summary judgment dismissal of defamation/business disparagement claim brought by the gallery against an art dealer who criticised the painting’s authenticity), with Mayor Gallery Ltd. v. Agnes Martin Catalogue Raisonne LLC, No. 655489/2016, 2019 N.Y. Slip Op 32089(U), at *14 (N.Y. Sup. Ct. 2019) (dismissing product disparagement and similar claims against the catalogue raisonné committee for declining to include works in the catalogue raisonné because the plaintiff signed a submission agreement providing for the committee to exercise sole decision-making discretion, without ‘explanatory reasons for its decisions to include or not include works’).

3 Leila A Amineddoleh, ‘Are You Faux Real? An Examination of Art Forgery and the Legal Tools Protecting Art Collectors’, Cardozo Arts & Entm’t L.J., Vol. 34:59 (April 2016), at 72–73 (citation omitted).


Assigning Burdens of Diligence in Authenticity Disputes

20

decide which side’s particular evidence seems stronger in a given case and, thus, which side should win or lose in that case; but that does not necessarily mean that the art at issue is actually genuine. Indeed, there can be (and have been) strange and confusing decisions where artists or leading connoisseurs of artists have disavowed works as ‘by the artist’s hand’, but courts have been impressed by ‘flawless’ provenance research that strongly indicates the work did leave that artist’s studio.4

These decisions may produce eventual victories as between the litigating parties, but the art market can do little more than shrug its shoulders at the results (thereby leaving the ‘victor’ in a case with a piece of paper finding in its favour, but not necessarily with a marketable work). Some courts have openly acknowledged this problem and have declared, unabashedly, that ‘the market place is the appropriate place to resolve authentication disputes’, not courthouses.5

III THE COMFORT ZONE OF COURTS: ASSIGNING BURDENS AND RISKS

Where artwork authenticity remains an elusive judicial concept, evaluating the dynamics of sales transactions is not. Courts assign burdens of diligence and risks of loss all the time. These are societal, organisational and public policy questions that turn on the following issue: was the buyer fairly equipped to fully understand the gamble it was undertaking in

4 See Arnold Herstand & Co. v. Gallery: Gertrude Stein, Inc., 211 A.D.2d 77, 79–83 (N.Y. App. Div. 1995) (rejecting three untested ‘certifications of falsity’ by the artist, Balthazar Klossowski de Rola, and reversing summary judgment determination of inauthenticity and remanding the issue for trial because the ‘provenance here points only in the direction of authenticity’.); Greenberg Gallery, Inc. v. Bauman, 817 F. Supp. 167, 174–75 (D.D.C. 1993) (finding that, ‘more likely than not’, a mobile attributed to Alexander Calder was authentic based upon its ‘impeccable provenance’, notwithstanding ‘the great weight that must be accorded . . .’ to a leading connoisseur who rejected the work’s authenticity, and explaining that ‘[t]his is not the market, however, but a court of law, in which the trier of fact must make a decision based upon a preponderance of the evidence’.), aff’d w’out op., 36 F.3d 127 (D.C. Cir. 1994). For a case where a court seemingly over-deferred to a putative expert over the word of the artist, and allowed a case to go to trial on that basis, see Fletcher v. Doig, 196 F. Supp. 3d 817, 821–23 (N.D. Ill. 2016) (declining to exclude purportedly ‘expert’ evidence by an individual who had no familiarity with the artist’s works and who had direct financial stake in the outcome of the case because his ‘education and experience g[a]ve him the foundation necessary to opine on the provenance of a work of modern art based on his analysis of the piece and a comparison with the artist’s other acknowledged work’.).

5 Thompson v. Andy Warhol Found. for the Visual Arts, Inc., 103 A.D.3d 528, 529 (N.Y. App. Div. 2013) (citing Thome v. Alexander & Louisa Calder Found., 70 A.D.3d 88, 103 (N.Y. App. Div. 2009) (‘The point is that a declaration of authenticity would not resolve plaintiff’s situation, because his inability to sell the sets is a function of the marketplace. If buyers will not buy works without the Foundation’s listing them in its catalogue raisonné, then the problem lies in the art world’s voluntary surrender of that ultimate authority to a single entity. If it is immaterial to the art world that plaintiff has proof that the sets were built to Calder’s specifications, and that Calder approved of their construction, then it will be immaterial to the art world that a court has pronounced the work “authentic”.’)); see also Mayor Gallery, 2019 N.Y. Slip Op 32089(U), at *9 (finding that decisions not to include works in the artist’s catalogue raisonné were not ‘statements that a work is inauthentic’ but were merely decisions of non-inclusion in that catalogue raisonné). A recently launched, specialised arbitration and mediation tribunal based in The Hague, called the Court of Arbitration for Art (CAfA), promotes itself as being better able to achieve the twin goals of decisional accuracy and market legitimacy in resolving art disputes by offering specialised expert pools and international art lawyers as neutrals who are more familiar with the legal and evidentiary issues attendant to these disputes. See www.cafa.world. The author of this chapter is a founder and board member of the CAfA.



21

making its purchase? This is more familiar and comfortable ground for courts than having to ‘decide’ the authenticity of art, and this is where court decisions are more instructive to future buyers and sellers of art.

A seller of art may affirmatively represent and warrant a work’s authenticity in a sales contract, thereby providing the buyer with some measure of insurance and comfort.6 On the other hand, a seller may expressly disclaim any such representation and warranty, thereby raising a possible ‘red flag’ for the buyer from the start.7 Or the seller may say nothing on the subject of authenticity, thereby requiring statutory or common law to address the void.8

Frequently a buyer of art who had the benefit of a seller’s representation and warranty of authenticity may not discover that the work is inauthentic until after the contractual or statutory limitations (and refund) period has run.9 At that point, at least in the United States where the principle of caveat emptor (buyer beware) runs deep, the buyer is required to show some reason why it did not, and could not reasonably have, ascertained the work’s inauthenticity sooner. Effectively, that requires a buyer to allege that it was deceived and defrauded by the seller.

Fraud and deception involve, at their core, showing that material information concerning an artwork’s possible inauthenticity was deliberately misrepresented or concealed by the seller, and that the buyer was not reasonably in a position to have appreciated the problem and to have acquired more complete information for itself.10 When the buyer is wealthy and sophisticated, the questions of what it reasonably ‘could’ and ‘should’ have done to uncover evidence of fake or forged art are not necessarily black and white. When the buyer purchases from a ‘reputable’ seller who, moreover, is marketing on behalf of an anonymous current owner (which is an accepted art market norm), those questions become even murkier.

A few notable cases have recently addressed this dynamic, and buyers and sellers of art should take careful note. In particular, courts appear disinclined to credit arguments by reputable sellers that sophisticated buyers should presume that a work of art may be fake and undertake independent diligence, despite the seller’s imprimatur.

i Sophisticated buyers and non-reputable sellers: ACA Galleries v. Kinney

A sales dynamic that the federal courts in New York found relatively easy to resolve involved a sophisticated art gallery buyer and a non-reputable seller of art. In ACA Galleries, Inc. v. Kinney, the court unhesitatingly saddled the buyer with the risk of loss where it purchased fake art from an unknown seller, and where the buyer had apparently hoped to authenticate the art – and to substantially mark it up in price – later.11

6 See, e.g., Fertitta, III v. Knoedler Galler, LLC, No. 1:2014cv02259 (JPO), 2015 WL 374968, at *8–9 (S.D.N.Y. 29 January 2015) (denying motion to dismiss breach of warranty claim by the seller’s alleged agent who helped to sell fake art).

7 See, e.g., Overton v. Art Fin. Partners LLC, 166 F. Supp. 3d 388, 401 (S.D.N.Y. 2016) (discussing how ‘red flags’ or ‘warning signs’ in art deals may create heightened duties of diligence).

8 In New York, for example, there is a statutorily imposed presumption that an artwork’s authenticity is part of the ‘basis of the bargain’ and, therefore, is warranted as a matter of law by a seller who is an art ‘merchant’ selling to a non-merchant. N.Y. Arts & Cult. Aff. Law § 13.01.

9 E.g., Fertitta, 2015 WL 374968, at *8, N.Y. Arts & Cult. Aff. Law 9.10 E.g., id.; Greenway II, LLC v. Wildenstein & Co., No. 19 Civ. 4093 (JCM)(RWL), 2019 U.S. Dist. Lexis

175822, at *10 (S.D.N.Y. 8 October 2019).11 ACA Galleries, Inc. v. Kinney, 928 F. Supp. 2d 699 (S.D.N.Y. 2013), aff’d, 552 F. App’x 24 (2d Cir. 2014).



22

The seller in ACA, an individual and non-dealer of art from North Carolina, contacted the buyer-gallery in New York by email with an offer to sell a purported Milton Avery oil painting.12 The seller shipped the painting to the gallery for an unfettered inspection.13 The gallery’s president inspected the painting, believed it to be authentic, and authorised its purchase for US$200,000, without any representations or warranties of authenticity by the seller.14 After buying the painting, the gallery then contacted the Milton Avery Foundation soliciting an authentication opinion; but the Foundation determined the work to be inauthentic.15 The gallery demanded a refund, which the seller refused to give.16 The gallery sued the seller for breach of contract/mutual mistake of fact and for fraud.17

Despite uncontested evidence that the painting was a fake, the district court awarded summary judgment dismissing the gallery’s claims.18 In particular, even assuming an intent to deceive by the seller, the court found intolerable the gallery’s conscious, and apparently strategic, avoidance of the Avery Foundation during its diligence efforts.19 The court dismissed the gallery’s breach of contract/mutual mistake of fact claim because ‘the doctrine of mutual mistake “may not be invoked by a party to avoid the consequences of its own negligence”’.20 The gallery ‘was aware of [its] limited knowledge but acted anyway’.21 The court similarly dismissed the gallery’s fraud claim because ‘a sophisticated plaintiff cannot establish that it entered into an arm’s length transaction in justifiable reliance on alleged misrepresentations if that plaintiff failed to make use of the means of verification that were available to it’.22 The court specifically found that ‘ACA cannot establish justifiable reliance because it had the opportunity to fully investigate the authenticity of the painting but failed to do so’.23

The appellate court affirmed, putting a finer point on the fact that the buyer had its eyes open to the (mis)calculated gamble it was taking:

ACA was aware that an authentication by the Foundation ‘would make the painting more saleable at a higher price’. . . . ACA could have accepted the higher price that accompanies certainty of authenticity, but chose instead to accept the risk that the painting was a forgery. The contract is not voidable merely because the consciously accepted risk came to pass.24

The result in ACA is a cautionary flag that ‘buyer beware’ operates with full force when a sophisticated buyer acquires art from a non-merchant seller who does not warrant authenticity (the proverbial ‘back of a turnip truck’ transaction). But sophisticated buyers are more likely

12 928 F. Supp. 2d at 700.13 id.14 id.15 id., at 701.16 id.17 id.18 id., at 701–04.19 id., at 702.20 id., at 701 (citation omitted).21 id., at 702.22 id., at 703 (citation omitted).23 id.24 552 F. App’x at 25.



23

to deal with reputable, merchant art dealers. How the courts assign burdens of diligence and disclosure in those transactions are more significant issues to the market. Two post-ACA cases illustrate that the buyers appear to be receiving the benefit of the doubt in such sales settings.

ii Sophisticated buyers and reputable sellers: Hilti v. Knoedler Gallery

Shortly after ACA was decided, its limits were put to the test by a formerly reputable seller of art against claims brought by a wealthy and sophisticated collector. In Martin Hilti Family Trust v. Knoedler Gallery, LLC, the buyer of a fake Mark Rothko painting sued what had been one of the most prestigious art galleries in the US (prior to its abrupt closure due to the revelation that it had been selling fake modern art for over a decade).25

The buyer had purchased the painting in 2002, and, while the gallery had warranted the art’s authenticity, the statute of limitations on that warranty had long run.26 The question, therefore, was whether the buyer had been placed on sufficient ‘inquiry notice’ that its painting was a fake such that its fraud and civil racketeering claims were also time-barred.27 The court rejected the gallery’s motion to dismiss these claims.28

The most relevant facts are that the gallery had provided the buyer with an invoice and fact sheet offering a purported provenance and exhibition history of the painting (while maintaining the current owner’s anonymity), together with a copy of a letter from the director of the Mark Rothko Catalogue Raisonné Project indicating that the painting would be included in a potential catalogue raisonné supplement.29 The gallery additionally provided a copy of a New York Times article commending the quality of the painting.30 The gallery’s president had also touted the painting as a ‘fantastic Rothko’ and had shipped the painting to the buyer in Europe so that it could ‘live with it’ before deciding whether or not to buy.31 During that time the buyer’s curator examined the painting’s aesthetics and condition and determined that it was appropriate for the buyer’s collection.32

Relying heavily on the decision in ACA, the gallery in Hilti argued that the buyer had been put on inquiry notice of inauthenticity through several purported red flags, including: (1) the buyer’s curator should have ascertained that the painting was a fake during his examination; (2) the New York Times article’s report that the painting had been exhibited at a particular fair, which was not included in the gallery’s fact sheet, should have alerted the buyer that the gallery’s purported background for the painting was false; and (3) a later essay by an art historian, which mentioned the painting and described a different provenance than that represented by the gallery, should have put the buyer on notice that the gallery’s background information about the painting had been false.33

The court in Hilti declined to extend the principle of caveat emptor to the buyer on the bases of these facts. Underlying its decision, the court found that ‘Hilti purchased the purported Rothko from Knoedler – at that time, one of the most established and reputable art

25 Martin Hilti Family Tr. v. Knoedler Gallery, LLC, 137 F. Supp. 3d 430 (S.D.N.Y. 2015). The author of this chapter represented the plaintiff in the case.

26 id., at 465–66.27 id., at 461–62.28 id.29 id.30 id.31 id.32 id.33 id.



24

galleries in the world’.34 The gallery’s reputation, its warranty, its offering of purported facts about the painting (within the accepted norm of not disclosing the current owner’s identity), and its president’s, as well as the New York Times’, proclamations of the painting’s excellence, were all hallmarks of a bona fide transaction and painting that did not give any reason, ‘as a matter of law’, to impose a heightened duty of diligence on the buyer.35 At one point the court labelled the gallery’s position as ‘frivolous’.36 Relying on an earlier, pre-ACA decision against the same gallery by another, similarly situated victim of this scandal, the court found that the buyer in Hilti had ‘no reason to suspect the authenticity of their painting’ at the time of purchase, and thus had no reason to conduct independent diligence into the painting.37

The decision in Hilti reflects an important boundary on the principle of ‘buyer beware’ in the high-stakes art market. The gallery in that case and in related cases repeatedly contended that society should not tolerate a world where wealthy buyers may spend more time test-driving a new car than testing the authenticity of a multi-million dollar painting for sale. While this argument may have sound bite appeal, it is overly facile.

For one thing, the argument disregards the fact that new cars, unlike paintings (and purported masterworks in particular), are fungible products. A potential buyer of a car can take considerable time deliberating with the comfort of knowing that there are multiple versions of the same car available to be sold. The same is not true of original art. The urgency to buy and the ‘heat’ that is brought to bear on a potential buyer of original art is qualitatively different from the ‘new car’ scenario.

Second, the diligence that must be conducted into an artwork’s authenticity (the ‘three-legged stool’ factors of connoisseurship, provenance and forensic science) is considerably more than a test drive. It seems unreasonable to impose the duty to conduct such extensive (and, with respect to scientific analysis, invasive) examinations on potential buyers of even high-value art; and it seems equally unrealistic to expect that sellers of such art would agree to hold or surrender the art for such pre-sale examinations.

Third, the role of a reputable seller in an art transaction is key. A buyer of a purported Rolls Royce from a Rolls Royce dealer is unlikely to have the car’s engine tested to ensure that it actually originated from a Rolls Royce factory; some facts seem worthy of being accepted as true at face value. The decision in Hilti evidences that the same should be true for art, particularly where a reputable dealer commands behind-the-scenes knowledge about the art’s background that will not be revealed to the buyer as a matter of market customs and norms.38

iii Somewhere between ACA and Hilti: Greenway II v. Wildenstein & Co

The reasoning of Hilti was recently embraced in the case of Greenway II, LLC v. Wildenstein & Co at the motion to dismiss stage, although with a potentially important qualification that may eventually lead this case to follow the reasoning of ACA.39

The wealthy buyer in Greenway (a trust) had purchased a painting in 1985 purportedly by Pierre Bonnard from a dealer with ‘an established reputation as an expert in French

34 id., at 461.35 id., at 461–62.36 id., at 462.37 id. (citing De Sole v. Knoedler Gallery, LLC, 974 F. Supp. 2d 274, 298 (S.D.N.Y. 2013)).38 See id., at 446 (‘Purchasers of Rosales Paintings were never told that Knoedler had repeatedly changed its

account of the provenance of the Rosales Paintings.’).39 2019 U.S. Dist. Lexis 175822.



25

Impressionist art, and particularly in the work of Bonnard’.40 Following revelation that the painting is a forgery, the buyer’s successor-in-interest sued the dealer for fraud, alleging that the dealer had expressly represented the painting’s authenticity to the buyer at the time of sale, while failing to disclose that the work was not included in the Bonnard catalogue raisonné.41

The dealer moved to dismiss upon the argument that the buyer ‘was a sophisticated collector and that he had an obligation to conduct his own due diligence’ rather than rely solely on the dealer’s representation.42 In particular, the dealer argued that the buyer should have consulted the Bonnard catalogue raisonné for itself.43 That fact, according to the dealer, should have caused the buyer to doubt the dealer’s representation of the painting’s authenticity.44

The court rejected the dealer’s argument as ‘obviously meritless’, at least at the pleadings stage.45 Relying on the dealer’s reputation and the decision in Hilti, the Greenway court found that the buyer of the painting ‘did not have a duty to look behind Wildenstein’s representations’.46 This is one of the most significant takeaways from Greenway: the dealer had basically advocated for a ruling, as a matter of law and at the pleadings stage, that sophisticated buyers of art should presumptively suspect that the art may be inauthentic and conduct independent diligence, despite a reputable seller’s approbation and even guaranty of the art’s authenticity. The Greenway court refused to go that far, explaining:

[T]he usual rule is that there is ordinarily no duty for a party to a transaction to exercise due diligence in the absence of an obvious fraud . . . . No fact alleged in the complaint tends to show that [the buyer] was or should have been on notice that Wildenstein was lying to him about the Painting’s authenticity – which is the only thing that might have triggered any duty by the [buyer] to investigate the matter further.47

Nevertheless, the court noted the possibility that discovery might show ‘the pleaded facts are wrong’, and that the buyer ‘was in fact a sophisticated collector in 1985 who knew about the Bonnard catalogue raisonné, or at least that he had the means available to learn on his own that the Painting was not included in the catalogue’.48 Were that to be the case, then the court left room for a possible summary judgment dismissal based upon the buyer’s inability to establish justifiable reliance because, as in ACA, the buyer may have consciously disregarded reasonably available information.49

The results in Greenway and Hilti should give comfort to sophisticated buyers that, at least at the pleadings stage, reliance on a reputable seller’s representation of authenticity is per se ‘justifiable’, provided there are no other pleaded facts that indicate the representation was false. The risk of caveat emptor seems allayed by a reputable seller’s guaranty.

If facts later come to light showing that the buyer had reasonable cause to doubt the seller’s guaranty, however, then the principle of ‘buyer beware’ may resurge. Just what

40 id., at *4.41 id., at *10.42 id.43 id.44 id.45 id.46 id., at *12.47 id., at *12–13 (citation omitted).48 id., at *11.49 id., at *10–12.



26

cause may be ‘reasonable’ will be case-specific. Moreover, whereas the courts in ACA were particularly troubled by the gallery-buyer’s intent to flip the art in that case after authenticating it, the court in Greenway might ultimately find that a collector-buyer who was not looking for an immediate and profitable resale may have more legitimately relied on the dealer’s representation of authenticity without doing anything further, despite information from the relevant catalogue raisonné suggesting a possible problem with the work.

IV CONCLUSION

Sophisticated buyers of art should, in the first instance, know their sellers. If the seller is reputable, then even a wealthy and sophisticated buyer should be entitled to rely on the seller’s warranty of authenticity, without presuming the warranty to be false and without conducting independent diligence. If it can be shown that the buyer appreciated a potential problem with the art’s authenticity and turned a blind eye to other reasonably available sources of information concerning the art, that buyer stands a greater risk of loss. In the absence of such facts, however, reputable sellers seem unlikely to shift the loss based upon hindsight arguments that their buyers should have viewed the sale dynamics with automatic suspicion from the start.


345

Appendix 1

ABOUT THE AUTHORS

WILLIAM L CHARRON

Pryor Cashman LLPBill Charron is a partner and co-chair of the art law practice at Pryor Cashman LLP in New York, where he represents both institutional and individual clients in a wide range of art authenticity, title and related matters. Bill has consistently been recognised as a Band I attorney in Chambers for art and cultural property law, and was recently named a ‘New York Trailblazer’ by the New York Law Journal for his groundbreaking work developing the Court of Arbitration for Art. Currently the president of the US arm of Professional Advisors to the International Art Market, a leading industry group, Bill also serves as an adjunct professor of art law at the University of Virginia School of Law.

PRYOR CASHMAN LLP

7 Times Square, 40th FloorNew York, NY 10036United StatesTel: +1 212 421 4100Fax: +1 212 326 [email protected]


ISBN 978-1-83862-567-2

theArt Law

Rev

iewEditors

Lawrence M

Kaye and

How

ard N Spiegler


the Art Law Review · 2021. 2. 3. · Art Law Review Editors Lawrence M Kaye and Howard N Spiegler...

Documents

Transcript of the Art Law Review · 2021. 2. 3. · Art Law Review Editors Lawrence M Kaye and Howard N Spiegler...