NY City Bar tackles “Hot Topics in Art Law 2014”

March 18, 2014

By Megan E. Noh, Esq.

On  12 March 2014, the New York City Bar Association hosted a well attended panel on “Hot Topics in Art Law 2014,” moderated by the chair of its Art Law Committee, Dean Nicyper (Flemming Zulack Williamson Zauderer LLP).  The panel was comprised of three speakers:  Judith Bresler (Withers Worldwide; author of the treatise Art Law: The Guide for Collectors, Investors, Dealers and Artists), Stacy Lefkowitz (Volunteer Lawyers for the Arts), and Howard Spiegler (Herrick, Feinstein).

Judith Bresler addressed the context for the proposed addition of § 13.04 to New York’s Art and Cultural Affairs Law, explaining that an increasingly litigious environment has a chilling effect on art experts and authenticators. Further,  when these individuals are afraid to render their opinions of authenticity, it has a chilling effect on transactions and the marketplace, inviting fakes and forgeries to enter into the stream of commerce. The proposed legislation, designed to provide greater protections for authenticators, was approved by the City Association of the Bar in January 2014, and introduced as a Bill on 11 March 2014. (Text of the proposed Bill is available online).  The Bill defines  an “authenticator” as a person who is recognized as having expertise regarding the artwork in question, who has rendered an opinion of authenticity  in good faith, and who does not not have a personal financial interest in the artwork itself or in the underlying transaction (other than being paid for his/her services in rendering the opinion).  If enacted, § 13.04 would add three forms of protection for authenticators: 1) a plaintiff suing an authenticator would be required to specify the facts supporting each part of each claim (exposing frivolous claims for their lack of merit), 2) the plaintiff would be required to prove his/her claim by clear and convincing evidence (a higher burden than preponderance), and 3) the authenticator could recover legal fees if successful in defending the claim. 

Next, Stacy Lefkowitz spoke on the topic of the law applicable to art consignment transactions. She explained a clear divide in the law: artists consigning their own work receive the protection of NYACAL 12.01 (amended in 2012, partially in response to the Salander O’Reilly fraud, to provide more “teeth” through stronger definitions and enforcement provisions with cross-references to the Estates, Powers & Trusts Law, as well as the requirement of much more specific waiver language), whereas artists consigning artworks by other artists and non-artists consigning artworks receive the lesser protection of the Uniform Commercial Code. Lefkowitz also discussed the subject and jurisprudential interpretation of due diligence required by merchants acting as purchasers of artwork, including some of the common “red flags” that may suggest that a transaction is not commercially reasonable.  Finally, Lefkowitz emphasized the ability of consignors to file UCC-1 financing statements as a proactive protection, as when properly filed, such a statement will ensure that a consignor’s interest supersedes that of other creditors.

Howard Spiegler then reviewed recent developments in repatriation and restitution, including Cambodia’s recovery of statues from Sotheby’s (through settlement of a forfeiture action) and the Metropolitan Museum of Art (by agreement), as well as the December purchase by the Annenberg Foundation of Hopi objects sold at the Paris auction house Drouout for return to the tribe.  With respect to restitution of Nazi-looted Art, Spiegler outlined the aspects of New York law that cause many to view it as a favorable forum for art recovery, such as its application of a “demand and refusal” rule to trigger the statute of limitations, its minimal burden of proof, and its fundamental rule that even good faith purchasers may not obtain good title to stolen property.   Mr. Spiegler also reviewed recent restitution cases, including Baklar v. Vavra (in which a Schiele drawing was at issue), In re Flamenbaum (concerning a thirteenth century gold tablet), Cassirer v. Thyssen-Bornemisza Collection Foundation (a dispute concerning a Pissarro painting), and Chabad v. Russian Federation (a suit to recover religious texts). Spiegler closed by noting that the first “Gurlitt Horde” case has recently been filed in the U.S. District Court for the District of Columbia; this is the first of what the art law community anticipates will be many similar claims arising from the recent discovery of this trove of artworks.

The panelists’ presentations were followed by a spirited “Q&A” session, during which Dean Nicyper and audience members posed some insightful questions.  The program was an excellent review of recent developments in the art law arena, and those who attended will surely be watching the news for further updates to the legislation and cases that were covered.

About the Author: Megan E. Noh, Esq. is the Director of Bonhams Trusts & Estates department in New York. She may be reached at 212.461.6521 or megan.noh@bonhams.com.

Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.