>Artist Protection Could Create Legal Headaches for Dealers

>Over at the new and very informative Georgetown Patch, Editrix-in-Chief Shaun Courtney draws our attention to the practical impact of a bill making its way through the D.C. City Council. The Artist Protection Act of 2009 has several key provisions which are designed to protect an artist from situations where, for example, an art gallery becomes insolvent during the period of time in which it is in possession of an artist’s work for sale or the proceeds from a sale. If the reader will forgive my wandering into statutory interpretation, I will try to summarize my understanding of the key provisions of the proposed legislation, for I think it is an interesting way of protecting the work of artists in an uncertain marketplace.

The language of the proposed Act makes clear that the dealer is to be considered both an “agent” and a “trustee” of the artist, holding the property in trust on behalf of its creator. The work is held in trust by the dealer until such time as the piece is sold to a bona fide purchaser. In addition, the artist’s portion of the sale of such a piece is held in trust by the dealer, and therefore cannot be seized by the art dealer’s creditors. This would not apply, of course, to situations where the artist has sold his piece to the dealer, thereby transferring title to the piece.

Another provision of the Act requires that if a dealer accepts a piece on consignment – in other words, to act as an agent on behalf of an artist – for a fee, commission, or other type of compensation, the agreement to do so must be put in writing. I know from experience that frequently such agreements are subject to a handshake or gentleman’s agreement, growing out of the habitual and customary relationship that often develops between an artist and a dealer. This will no longer be possible if and when the Act is passed, for every work of art consigned for sale will have to be the subject of a written agreement, and the agreement will need to include information regarding the value of the work of art; the time by which the artist must be paid if the work is sold; and the lowest price which the artist is willing to accept for the sale of the work.

A potential area of confusion is that the proposed Act does not indicate whether it is possible to enter into a contractual agreement for a “lot”, i.e. group, of works to be consigned. The Act does not specify whether each individual piece must be the subject of an individual contract, or whether an artist consigning, for example, five paintings can enter into a single contract with the dealer and enumerate the required information as to each piece in that document. I could foresee situations where an artist and a dealer decide to sign a single contract listing several works, things go pear-shaped, and the parties end up in court, only to find that by not listing each consigned piece as the subject of a separate contract, the dealer has unwittingly violated the Artists’ Protection Act.

The proposed Act does not lay out what is to be considered a reasonable amount of time for the consignment of a work, nor does it specify that such language must be included in the text of the consignment agreement. This would then appear to be left to the parties to decide among themselves, though I could also foresee problems with the Act’s silence on this issue. For example, if an artist has consigned a painting to a dealer, and then later is asked to send that painting to an exhibition, is the dealer entitled to hold the piece hostage, given that he is now to be considered a trustee of the painting on behalf of the artist as beneficiary? After all, when one creates a trust with a beneficiary and a trustee, the trustee has a legal duty to prevent the destruction of the property that is the subject of the trust.

Is the dealer’s fiduciary duty as a trustee, which the proposed Act makes him, vitiated by the actions of the artist as beneficiary if, in the process of removal of the painting to send to the exhibition, the painting is accidentally destroyed? The Act does not give an indication of what would happen if, for example, the artist himself physically marches into the gallery and removes the painting to send for display in an exhibition. We can presume that under normal circumstances, a court would find that by so doing the artist has breached his contract of representation with the dealer. Yet the Act creates certain ambiguities in terms of remedy, because the relationship is now one of trustee and beneficiary. Does the trusteeship then come to an end, under these circumstances? Does the gallery then continue to have a breach of contract claim against the artist, or is this waived because he is now considered a trustee?

The proposed legislation seems to alleviate a number of risks faced by artists, but it also creates a number of potential ambiguities for both sides in the artist-dealer relationship. Some portions of it – such as that requiring the artist’s permission in writing for his piece to be put on display by the dealer – are only common sense. Other portions are less clear, and could lead to more litigation. As evidenced in the Georgetown Patch piece, some dealers are reluctant to support this Act, because it creates layers of bureaucracy and red tape which do not, in the end, end up helping anyone.

I would be curious to learn from any of my readers who are familiar with similar legislation in other jurisdictions, and how enactment of it is affecting the art market locally.

Patron at an art gallery, 1957

>The DC Voting Rights Debacle

>Since its founding, the District of Columbia has existed in something of a legal limbo, what I like to call a personal fiefdom of Congress. D.C. does not have a voting representative in either the House or the Senate, only a non-voting delegate. And despite the presence of an elected mayor and city council, Congress can and does legally step in at any time and pretty much do whatever it likes to the federal city.

As has been heavily reported in the news of late, a D.C. Voting Rights bill is making its way through Congress, which would give the District a voting representative on the Hill – most likely Delegate-for-Life Eleanor Holmes Norton. President Obama has indicated that he will sign the bill when it comes to his desk. The problem here, and it is a significant one, is that this would be an unconstitutional assumption of powers by Congress to make a State, which it does not in fact have.

The District of Columbia is not a State, and under Article I of the Constitution, only the States are allotted voting rights in the House of Representatives, based on their population. Similarly, each State is also allotted two Senators irrespective of the relative size of the state. Under Article I, the District of Columbia is administered by Congress, with no voting rights in that body.

Others more informed than I have weighed in on this issue, and I will allow their arguments to persuade or dissuade readers on more carefully considered points. However I did want to draw attention to Marc Fisher’s recent piece in “The Washington Post” which is clearly misinformed. In what at first glance seems a compelling argument for D.C. voting rights in Congress, Mr. Fisher notes that:

Throughout American history, residents of the District have been denied a vote because they don’t live in a state, yet in virtually every other policy area, D.C. residents are treated precisely as if they are indeed state residents. How’s that? Well, the Constitution talks about “the several States” in several places, and nobody has sought to exclude Washington residents from the laws, benefits and responsibilities laid out in those other clauses of the document.

Examples: D.C. citizens are subject to the same laws governing interstate commerce as anyone else in the country is, yet the Constitution uses exactly the same words to give Congress the power to “regulate Commerce…among the several States” as it does in the language setting up the House of Representatives. D.C. residents similarly serve in the National Guard and the military despite the Constitution’s reference to “the Militia of the several States.” The rulings of federal courts hold sway in the District, even though the Constitution specifically defines the courts’ jurisdiction in terms of “Controversies between two or more States; between a State and Citizens of another State; between Citizens of different States,” and so on.

Finally, D.C. residents pay federal income taxes despite the 16th Amendment’s language giving Congress the power to levy taxes “among the several States.”

Mr. Fisher’s basic argument, i.e. that D.C. has been subject to federal law, is somewhat attractive to the casual observer, but is in fact the argument of a legal armchair quarterback. The applicability of Federal laws to the District does not justify the apportionment of a Congressman to a non-State, in violation of the Constitution. One example of how Federal law can apply over a territory but still not make that territory a State for the purpose of voting rights in Congress is that of the Commonwealth of Puerto Rico.

Puerto Rico, interestingly enough, has been found to be subject to the dormant provisions of the Commerce Clause, even though it is not actually a State. Puerto Ricans serve in the Armed Forces and National Guard, and were drafted to serve in World War I, World War II, Korea, etc. While it is true that Puerto Ricans do not pay all federal income taxes, they do pay many federal taxes, including federal taxes for Social Security and Medicare. There is also a Federal District Court for Puerto Rico, just as there is a Federal District Court for the District of Columbia.

I have nothing against the good people of Puerto Rico, whom I would certainly welcome into the Union should they choose to become a State. However, short-sighted Republicans like Utah Senator Orrin Hatch supporting the D.C. voting rights bill do not see the danger in what they are doing. If the right to have a voting representative in the House is established for the District of Columbia, then despite Senator Hatch’s protestations that he would not support such a measure, there would be nothing to then prevent the District of Columbia from obtaining two voting Senators as well.

The best solution for the District of Columbia, from a legal standpoint, is to return it to Maryland from whence it came, just as Arlington County – the other “half” of D.C. – was returned to Virginia, and be done with the legal fiction of a federal city. Maryland may not like it, but Maryland is generally run by socialists anyway so I am not sure why the legislature would not welcome a sudden influx of more Democrats to their fold. Alternatively, one proposal that has been floated would be to exempt D.C. residents from paying federal income tax. Personally, that is the solution I would prefer: in no time we would likely have our own Monaco on the Potomac.