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Ethical Considerations for Attorneys When Working with Artist and Art-market Participants

October 30, 2023

By Kimberly Babin

Law in general, is not only derivative of ethics, but also necessitates ethical consideration and conduct in its practice.^{^[1]}Art law is not immune to that need. In fact, art law comes with complexities and an array of unique issues surrounding artist-attorney and, artist-dealer relationships, artist rights, intellectual property, estate planning, fiduciary duties, contracts, copyright, trademark, taxes, global transactions, and other areas that often necessitate a deeper and further contemplation on ethics for art attorneys. Often referred to as the concept of legal ethics, these considerations can be written, unwritten, informal or formal, or even codified into rules which govern or guide the behavior of legal professionals including attorneys and judges.^{^[2]}

Given the distinct and specialized realm of art law, it comes as no surprise that this profession frequently confronts distinctive ethical and legal inquiries. For instance, should an art attorney, engaged with individuals in the art market, be permitted to receive artwork as compensation for their legal services? When is it obligatory for an attorney to reveal potential conflicts of interest when representing artists, museums, or galleries? How does an art attorney effectively navigate the intricacies of legal ethics in the expansive global art market? This article aims to explore the intricate ethical dilemmas and considerations that art attorneys encounter while serving a diverse array of art market stakeholders.

The Importance of Legal Ethics

The importance of legal ethics resides in shaping and forming lawyers’ behavior, professional conduct, and principles to act from.^{^[3]} Ethics are fundamental in any profession, and in the legal profession, there is a heightened importance because legal ethics establish, uphold, and safeguard the integrity, credibility, and fairness of the legal system in its entirety. Legal ethics help to ensure standards of conduct across the profession.^{^[4]} The dignity and reliability of the legal sphere depends upon adherence to these ethics which are intended to ensure fair dealing of counsel with one another and their clients, reflect an attorney’s role and responsibility to society, and the expectations of attorneys to act with diligence, dedication, and professionalism.^{^[5]} Art attorneys and other counsel that work with artists have a diverse set of art-specific legal ethics to take into consideration when navigating art-legal issues.

Unique Legal Ethics Considerations for Attorneys Working with Artists

When an attorney works with an artist or other participants in the art market – including collectors, dealers, galleries, auction houses, and museums – they are likely to face complex issues unique to the art world that attorneys should be cognizant of when it comes to legal ethics. These include the challenges surrounding art as an asset or payment, valuing art accurately, addressing conflicts of interest while ensuring full disclosure and consent, respecting fiduciary duties, investigating provenance and title issues, handling matters related to cultural property and repatriation, authentication processes and provenance expertise, safeguarding artists’ rights and artistic integrity, promoting transparency in transactions, respecting client confidentiality in high-profile cases, understanding legal and ethical obligations to galleries, museums, and cultural institutions, and navigating cross-border legal complexities in the global art market. These considerations underscore the specialized and intricate nature of art law and its vital role in maintaining the integrity of the legal profession and the art market.

While many of these considerations may not be codified or found in mainstream legal ethics because of their unique applications in art law, and may be written or unwritten, they are equally important to upholding the integrity of their role as a legal professional and the broader legal system as well as the integrity of the artist or art market participants they work with.^{^[6]}

Art as Payment for Legal Services

For instance, a distinctive challenge faced by art attorneys revolves around the decision of whether to accept artwork as a mode of compensation, a scenario that may arise when an artist or collector client seeks to settle their legal fees in this unconventional manner. Attorneys being paid in artwork is relatively uncommon, but it does happen in certain cases, particularly within the art world or when clients have valuable art assets. But is it ethically permissible for an art attorney representing clients in the art market to accept artwork as a retainer or remuneration for their legal counsel?

Art attorneys may be offered art for payment because doing so provides several potential benefits to the artist or the owner of the artwork. Accepting artwork as payment can offset the need for the client to generate additional cash which proves rather convenient when traditional payment is not possible or practical, and could avoid the hassle of sale of the art and liquidating assets, and it can be beneficial to both the client and attorney who may have a shared passion for art, and it is generally considered both legally and ethically sound.

According to the guidelines set forth by the American Bar Association (ABA), Model Rules of Professional Conduct, a lawyer may accept property in payment for services, such as an ownership interest in an enterprise or a work of art, as long as it does not involve a conflict of interest or a violation of other ethical rules. Lawyers may receive non-monetary compensation for their services, such as an ownership stake in a business venture, provided that this arrangement doesn’t involve acquiring a proprietary interest in the legal case or subject matter of the litigation.^{^[7]} However, despite the obvious benefits, accepting artwork for payment can get into the weeds of legal ethics, raising complex issues related to valuation, potential conflicts of interest, and disclosure requirements. Additionally any client with art assets and legal fees could be at risk for the other parties to stake claim in their asset or fuel dispute on whether the client’s artwork should be sold to address not only attorney’s fees, but other legal fees, and case-related debts.

In one recent case, an ongoing legal dispute involving Lisa Schiff’s art advisory business includes a disagreement over whether two valuable paintings in Shiff’s possession, by artist Ann Craven, should be sold to address her mounting fees and debts. This case serves as an example of art potentially being sold to settle legal fees, as Schiff’s attorney and the attorney overseeing creditor claims clash over the sale of artworks to address her financial obligations amid legal proceedings related to her art advisory business’s downfall.^{^[8]} Disputes such as this also can come with additional complexities, putting legal advisors in the position to consider the risk of how such transactions could impact the value and integrity of the artwork itself and the artists reputation regardless of whether it is owned by the artist, collector, and advisor, or institution.

In an article on the Artists Network website, New York based art attorney, John Cahil, points out how accepting art as payment can pose additional challenges, mentioning that additional actions may be required in accepting art as payment stating, “Valuation is an issue for making sure that the exchange is fair to the artist and to the business. It would also potentially require an appraisal for both income and sales tax purposes.”^{^[9]} If valuation and appraisals take place, those are often at a significant cost which should be considered as well.

Beyond accepting art as payment, attorneys working with artists and various art market participants may also face dealing with an intricate web of legal arenas and related ethical considerations. Artists often have legal concerns surrounding artist’s rights, copyright, trademark, intellectual property, tax considerations, censorship, trusts, contracts, and exhibition and booking agreements.^{^[10]} In turn, collectors, dealers, and other art market participants deal with similar concerns. However, beyond these typical areas of art law and practice, unique legal ethics must be considered for attorneys working with artists. Any attorney involved in advising on art related issues should be aware of these unique areas of ethical interest.

Legal Ethics in a Global Art Market

One specific area of legal ethics is awareness, consideration, and communication regarding how different nations deal with art transactions. The art market is a quickly evolving and growing complex global market, and an art attorney must be aware of this consideration and be cognizant of differing art-related laws and the nuances of different countries’ legal systems. In addition, they should be aware of how international and transnational law may impact clients.^{^[11]}

Because of the global nature of the art market, it is also important for both artists and their attorneys to be aware of how legal ethics may be seated in fundamentally different foundations and be outlined by varying codes, acts, or treaties. Legal ethics are established largely through different institutional and governmental regulations. For example, Australia looks to the Australian Bar Association’s Barristers’ Conduct Rules and the Australian Solicitors Conduct Rules.^{^[12]} While in the United States, the Model Rules of Professional Conduct define the ethical codes of the American Bar Association, which numerous state governments adopt.^{^[13]}

In the United States, Canada, Japan, and other democratic countries, an attorney typically has the dual role of representing their clients’ private interests as well as serving out their public responsibility in upholding the fair administration of justice.^{^[14]} While globalization has had many advantages for both the art market and the legal sector, it also holds the potential for conflicts to arise for artists and art attorneys amongst distinct ethical practices.

Beyond differing legal ethics, an attorney working with artists should be informed on the degree of variation in art law and regulation on a global level. The country an artwork is created, sold, or produced in, can greatly impact the artists legally and grant or deny them different rights as well. Some artists may not realize that creating, exhibiting, or selling artwork in a different country, or to a collector in another nation, may have many different implications for them legally. The nuances in these laws can be significant, even if they are both common law or civil law countries. An attorney must be diligent, knowledgeable, and aware of these issues and nuances and be able to effectively inform their artist clients.

Legal Ethics Regarding Artistic Provenance

Because of the global nature of the art market, an attorney also must consider if a specific artwork is subject to any legal claims by a foreign government as well as if the artist’s work could possibly be a stolen or looted work, or even a fake or forgery.^{^[15]} The protection of art and cultural property, which art law generally intends to foster, is recognized as a means of preserving human dignity and rights of the peoples who created it.^{^[16]} The United Nations Educational, Scientific, and Cultural Organization (UNESCO), and many other organizations and institutions across the globe, acknowledge this significance.^{^[17]} Regardless of if a case in art law involves an individual or a culture, it can have implications for humanity, human rights, and the world at large.

Exports & Imports

One area where these considerations become extremely critical is the import and export of art, and ensuring that attorney clients – whether artists, dealers, or collectors – are aware of the legal implications of a global art transaction going awry.^{^[18]} For example, the owner’s and associated dealers of a Baroque artwork valued around $2 million are finding themselves under intense legal scrutiny for a potentially fraudulent illegal export of a painting in 2019. The painting, thought to be by one of Italy’s most famous female painters, Artemisia Gentileschi, and depicting Caritas Romana (Catholic Charity), was recovered by the Italian Carabinieri Cultural Heritage Protection Squad. The work, discovered in a Vienna auction house, was being searched for under the premise that the 2019 export took place illegally by the exporters concealing the true value and author of the work.^{^[19]}

Fiduciary Duties

The art market necessitates fiduciary relationships; relationships where a person or entity has an ethical or legal duty to act in the best interest of another party. Where auction houses are fiduciaries to art dealers, art dealers have a fiduciary duty to the artists they represent, and trustees of an artist’s trust are fiduciaries to the inheritor. Executors of an artist’s estate are responsible to its heirs and art attorneys have fiduciary responsibilities to their clients, whether they be artists, dealers, auction houses, galleries, and museums.^{^[20]}

Fiduciary responsibility refers to the trust that clients place in their attorneys and the obligation the attorneys have to ethically maintain that trust. On a global level, most attorneys have a fiduciary responsibility to their client. In the United States and many other countries, attorneys have a legally binding responsibility to act in a client’s best interest, rather than themselves or another person or entity, and to fulfill their duties competently as a fiduciary duty is established between any attorney and their client. If an attorney fails to fulfill their duties, they are likely to face consequences.^{^[21]}

When an artist or other art market participant becomes a client, the fiduciary relationship and responsibility of the attorney to fulfill that duty becomes essential. Because the client is dependent on the attorney’s judgment, information, assistance, and advice, in handling their legal affairs, fiduciary duties have key factors that must be met.^{^[22]}

Fiduciary loyalty, refers to the responsibility compels a fiduciary to place the beneficiary’s interests as the utmost priority, abstaining from any actions that might detrimentally affect the beneficiary or further the fiduciary’s personal concerns and confidentiality- respecting and maintaining the privacy of all information that pertains to the beneficiary and steering clear of using this information for personal gain – are two of the main fiduciary duties and they are extremely important for attorneys working with artists and art market clients. It is important to note that confidentiality differs from attorney-client privilege. Attorney-client privilege is a legal protection with enforceable legal sanctions that prohibits attorneys from being forced to disclose privileged information. Confidentiality, on the other hand, is a professional, ethical duty.^{^[23]} Attorneys must disclose any conflicts of interest and focus solely on their client’s best interest, financially and otherwise.

Breaches of the fiduciary can arise in a variety of ways including through conflicts of interest, inadequate communication, negligence, incompetence, failure to act in the best interest of the client, unauthorized use of client funds, lack of transparency, and breach of confidentiality. Breaches can occur unintentionally, but breaches also can ensue when there is fraudulent activity, or if the fiduciary acts to benefit themselves or another party as opposed to the beneficiary, to the beneficiary’s detriment.^{^[24]} When fiduciary responsibility is breached, any attorney can be prosecuted for the violation as well as the underlying offense, or taken to civil court, potentially resulting in disbarment, suspension, probation, repremandment, or admonition. For example, in 2018, United States veteran attorney, Gary Coulter, was disbarred over multiple ethics infractions for how he handled a Southern folk art collector’s legal affairs.^{^[25]} The dispute surrounded 121 drawings by artist Thornton Dial, valued at approximately $850,000, which were found in attorney Gary Coulter’s possession – in an unsecure location – with Coulter claiming he held the drawings as collateral for unpaid legal fees owed by notable art collector and promoter Bill Arnett, who had promoted Dial’s work. Nevertheless, Coulter had also paid himself $400,000 from Arnett’s accounts without full transparency. The majority decision highlighted Gary Coulter’s two prior disciplinary actions and extensive violations of legal ethics. Coulter moved substantial sums of Arnett’s money through multiple bank accounts without establishing a necessary trust account, as mandated by legal ethics rules. Additionally, he failed to provide accurate documentation, accounting, or oversight for these transfers. The court emphasized that Coulter’s breaches were extensive, involving significant sums of money, and multiple violations over an extended period, emphasizing the seriousness of his actions. Lawyer for Atlanta art collector Bill Arnett disbarred by court (ajc.com).

Similarly, in 2021, French lawyer Claude Dumont-Beghi partially challenged her previous 2019 conviction of aggravated tax fraud and money laundering for concealing over $5 million she obtained from her client Sylvia, the widow of the renowned family-owned Wildenstein & Co. art dealership.^{^[26]}

Conclusion

Artists and other art market participants frequently seek legal advice, and as is true of all admitted to the bar, it is a part of an art attorney’s due diligence to act ethically. In the realm of art law, the importance of ethical considerations cannot be overstated. Art law is a field filled with complexities, ranging from artist-attorney and artist-dealer relationships to issues relating to intellectual property, estate planning, fiduciary duties, contracts, copyright, trademark, taxes, and global transactions. These complexities necessitate a deep exploration of ethics specific to art attorneys. While some of these ethical considerations may not be explicitly codified and spelled-out in mainstream legal ethics, they are of paramount importance in maintaining the integrity of both the legal profession and the art market. This intricate ethical landscape underscores the need for art attorneys to exercise meticulous care and ethical conduct as they navigate the art world’s multifaceted legal terrain.

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Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Readers should not construe or rely on any comment or statement in this article as legal advice. For legal advice, readers should seek a consultation with an attorney.