Case Review: Droit de suite… not so sweet

September 27, 2018

revised Sept. 28, 2018.

By Ethan T. Ashley

Case study: Close v. Sotheby’s, Inc., No. 16-56234, The Sam Francis Foundation v. Christie’s, Inc., No. 16-56235 and The Sam Francis Foundation v. eBay Inc., No. 16-56252. 2018 WL 3322222 (9th Cir. July 6, 2018).

The Conflict

How do artists make money when their works are sold at auction? What responsibility, if any, does the law have to ensure that artists receive compensation for their works that are sold for millions following primary sales? These questions rest at the heart of controversies surrounding the decision by the U.S. Court of Appeals for the Ninth District striking down the California Resale Royalties Act (“CRRA”) in the long-battled dispute between artist Chuck Close and the auction house Sotheby’s. In 2011, Close, accompanied by Laddie John Dill and the estate of Robert Graham, filed a lawsuit against Sotheby’s and Christie’s Auction Houses, claiming that both auction houses had violated the CRRA (see our previous article on the case here). The CRRA, which went into effect on January 1, 1977, granted artists 5% of the proceeds on any resale of their work including those at auction houses. Effectively, the CRRA was the only existing state or federal legal code upholding artist resale royalties rights or droit de suite, a practice that has long been a point of departure between American and European legal systems. As the decision of the court acknowledges, the droit de suite is a practice that was first recognized in 1920 in France and has since made its way into the legal code of most European nations. In the United States, however, the CRRA was the only existing law that upheld the practice of droit de suite, ensuring that any artist whose work was sold in California would receive a percentage of the proceeds. This most recent decision of the court marks a definitive turning point that will have long-standing impacts on the future of the American art market and the global art world.

The Decision

In brief, the opinion of the court reduces the scope of the CRRA down to a narrow time window of one year, between January 1, 1977 (the effective date of the CRRA) and January 1, 1978 (the effective date of the federal Copyright Act of 1976). The decision to reduce the time-window of the CRRA was prompted by the court’s recognition and review of the Copyright Act of 1976. The court decided that all CRRA claims made after 1978 were effectively preempted by the Copyright Act of 1976, which does not recognize artists’ rights to resale royalties. This reduction means that the CRRA will now only be applicable to claims pertaining to sales made in 1977. Any and all claims must be regarding artworks sold either in California by a U.S. citizen or by a resident of California. It is for this reason that Chuck Close, a resident of California, was able to file his complaint in New York against Sotheby’s in 2011. However, the court’s decision dismisses the claims brought against Sotheby’s that come after 1977. While auction houses in California offered American artists the opportunity to profit off of the resale of their artworks, this will no longer be the case.

What’s the impact?

Unlike music or literary works, a visual artist’s original work of art cannot be downloaded, re-licensed or re-copied. Reproduction of a particular artwork is all but impossible. An original piece of artwork has only one unique copy and the value of that work often takes on a life of its own after its exchange from artist to first owner. Resale royalties provide an artist with a means of benefiting of this change in value when their works are sold at auction for a higher price than the original sale. Oftentimes, the value of artist’s works increases later on in their career. The CRRA was the last remnant of droit de suite in the United States. In the long run, this decision will benefit big auction houses like Sotheby’s and Christie’s who will no longer have to worry about setting aside portions of their proceeds from a sale for the artist, complicating ethical considerations surrounding justness on the behalf of the artist.

The Question of Moral Rights

This decision continues to reify the controversies surrounding the larger subject of moral rights in American and European legal traditions. Whereas moral rights have a longstanding history in Europe, this is not the case in the United States. Since 1920, droit de suite has been recognized and promulgated as an extension of moral rights (droits moraux) in France. In 1928, the Berne Convention for the Protection of Literary and Artistic Works held in Switzerland extended the reach of moral rights to nearly all European powers at the time. Provisions for artists’ droit de suite were also included in the Berne Convention in Article 14ter. However, the United States would not become a part of the Berne Convention until 1989. It would also take another year for  the U.S. to adopt the Visual Artist Rights Act (VARA) of 1990. While the VARA includes provisions for authorship claims and protection of the physical artworks themselves, its application is limited and it does not account for droit de suite for artists.

The Result?

Ultimately, the Ninth Circuit’s decision to restrict the CRRA in this manner offers a final nail in the coffin of a future that includes droit de suite for artists in the American legal system, lest Congress intervenes. While multiple efforts have been made to assimilate droit de suite legislation into American federal law, most notably with the introduction of the ART Act (2014) sponsored by U.S. Senators Tammy Baldwin (D-WI), Ed Markey (D-MA), and Congressman Jerrold Nadler (D-NY), none of these efforts have succeeded. As Michael Reddy presents in his article, The Droit de Suite: Why American Fine Artists Should Have a Right to a Resale Royalty: “The primary justification for the droit de suite lies in the legal recognition of the personal link between the artist and his work, which acknowledges that art is not merely an economic asset, but is a continuing projection of the artist’s personality.” However, for many American artists who hoped for a future that included droit de suite legislation, this most recent decision suggests otherwise.

 

From the Editors:

On September 25, 2018, American Royalties Too Act of 2018 was (re)introduced to the H.R. Committee on the Judiciary. More details about the latest proposed draft are available here.

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Sources/Further Reading:

• E. Kinsella, “Ending a Seven-Year Dispute, a US Court Rules That Artists Aren’t Entitled to Royalties for Artworks Resold at Auction”, Artsy, July 9th, 2018. Available here.

• N. O’Donnell, “Au Revoir, Droit de Suite—9th Circuit Narrows California Resale Royalty Act to a Single Year’s Sales”, Sullivan Worcester’s Art Law Report, July 9th, 2018. Available here.
• I. Tarsis, “Resale Royalties: from CA to NY”, Center for Art Law, Oct. 24th, 2011. Available here.
• Michael B. Reddy, “The Droit de Suite: Why American Fine Artists Should Have a Right to a Resale Royalty”, 15 Loy. L.A. Ent. L. Rev. 509 (1995). Available here.

Acts/Statutes:

• Visual Artist Rights Act, 17 U.S.C § 106A. 
• California Resale Royalties Act, Civil Code section 986. 

About the Author: Ethan Ashley was a Summer Intern at the Center for Art Law and is now a Senior at Colby College in Waterville, ME, where he is a Philosophy and French Studies Double Major. He has studied abroad at Université Lumière Lyon-2 and conducted a summer internship at Fondation Claude Monet in Giverny, France. Ethan is planning on pursuing Law School following his graduation from Colby in 2019.