The Supreme Court Sides with Auction Houses Over Artists

January 14, 2016

The Supreme Court of the United States has declined to hear an appeal made by several artists and artists' successors concerning unpaid royalties for the resale of their works. This decision represents the end of a lengthy and complex legal process initiated by several artists including Chuck Close and Laddie John Dill, who sued auction houses Sotheby's and Christie's and eBay for failing to pay fees for some sales that were made in California.

foreclosure, home, estate real county properties, click, date, site, office, privacy,
U.S. Supreme Court, via bluffton

California Resale Royalty Act

The California Resale Royalty Act established in 1976, determines the 5% fee that should be paid to visual artists upon every resale of their work (that's sold for over $1.000) in the state of California or by a California-based seller. The law was made under the influence of numerous European laws that protect the authors "moral rights" based on the concept of intellectual property. These regulations establish the artists' copyright and patent protection rights and guard their continuing interest in the sales of their works that are not limited to only one sale. Unlike Europe and California the rest of U.S applies what's called "a first sale doctrine" where the artists' fees and rights are restricted only to the first sale.

foreclosure, home, contact,estate real county properties, foreclosure, buildings, property, email,
Chuck Close was one of the Artists that Filed the Suit, photo by Stefan Ruiz

Artists vs. Auction Houses

Following The California Resale Royalty Act artists Chuck Close and Laddie John Dill and successors of Robert Graham and Sam Francis sued auction houses and sales websites that failed to pay royalties for the resale of their works in California. But considering these works were sold to people outside of the state, the auction houses claimed that the law should be disregarded, because it violates the American Commerce Clause that gives U.S Congress the right to regulate sales between states. Although the law guarantees the resale fees to artists if "The seller resides in California or the sale takes place in California", regardless of where the buyer is located, the District Court agreed with the auction houses and threw out the law completely. The artists' haven't given up and filed a complaint with the United States Court of Appeals. The appellate court determined in May 2015 that the part of the Resale Royalty Act that applies to sales between states is unconstitutional, but the law can still apply to the sales made in the state of California.

foreclosure, property, estate, real, county properties, home, contact, public,  email,
Christie's and Sotheby's

The Need for Unified National Policy

When Supreme Court refused to get involved on Monday (January 11th, 2016), it was officially the end of the legal battle. And while auction houses are thrilled with the decision, other art professionals have mixed feelings about the entire case. Although the artists and their hairs are not pleased with the decision that "ran roughshod over the state’s legislative policy of promoting the arts – for no good reason,” other art professionals seem to be fine with the final ruling. By saying that only the part of the law that refers to interstate commerce is unconstitutional, the court  ruled that the rest of the law is valid. This means that the law will still apply for the sales that occur completely within the California state borders. And while art professionals have ambivalent feelings about the decision, the law experts see this as an opportunity to ask for a more consistent regulation covering this field. "I would expect royalty proponents to use this result to argue the need for a unified national policy, rather than royalties in one place and no royalties in another", wrote law expert Nicholas M. O'Donnell on his lexology blog. Who knows, maybe one day there will be a national resale royalty law in America, but until then both artists and auction houses will have to follow closely where are the artworks sold and to which American state resident they are sold to.

Should artists get fees when their artworks are resold? Tell us what you think on our Facebook page.

Featured image : Auction House Paddle Bid, via williampitt

Follow These Artists

Sam Francis
Chuck Close

Follow These Galleries

Sotheby's Los Angeles

Los Angeles, United States of America

Christie's Beverly Hills

Los Angeles, United States of America