NY City Bar tackles “Hot Topics in Art Law 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.