Artists Score Backhanded Win in California Resale Royalties Case, But Longer Fight Looms

Artists Score Backhanded Win in California Resale Royalties Case, But Longer Fight Looms
Artist Chuck Close
(Billy Farrell Agency)

It was a victory cloaked in the language of defeat.

The battle over resale royalties in California continued yesterday with an order from district court judge Michael W. Fitzgerald, who handed a convoluted win to supporters of the state's Resale Royalties Act, which guarantees a portion of the profits on secondary-market art sales to the original artist. Essentially, it means that the auction houses will have to keep fighting to avoid the possibility of having to pay artists royalties for reselling their work in California.

Nominally, Judge Fitzgerald denied the plaintiffs — a group of artists that includes Laddie John Dill and Chuck Close, as well as the Sam Francis Foundation — their request for a stay suspending the effects of the case until they have a chance to appeal. However, the language of the order actually narrows the previous decision by judge Jacqueline Nguyen — who left the district court after she was promoted to the Ninth Circuit Court of Appeals in May — such that it may not have much precedential effect beyond this particular case.

In the text, Judge Fitzgerald is flippant about the argument that the California law violated the Constitution's Commerce Clause. Nguyen's decision had reasoned that a California state law cannot govern art transactions that take place in New York (where the big auction houses are located) — only a federal law can do that. Judge Fitzgerald doesn't put much faith in that argument — he actually goes so far as to compare the influence of his colleague's decision to a law review article (that is to say, not influential at all). Scathingly, he wrote:

The Order will have as much or as little influence as its reasoning deserves, and a stay would neither decrease nor increase its persuasive authority.  The Court can no more “stay” the Order than it could “stay” a law review article.

So why, then, does he deny the plaintiffs their stay? Fitzgerald reasons that when Nguyen dismissed the case she did so without ordering any action. Therefore, "there is nothing for the Court to stay." As per the original decision, the Resale Royalty Act does not apply to the transactions in question because they were across state lines (at the auction houses in New York), but the law still stands for transactions within California.

The judge notes that some entities in the art world may be "emboldened by the Order to flout the Act — or continue to flout it, as the filings suggest. If so, higher courts will determine whether the Act deserves that scorn."

One of the lawyers for the plaintiffs, Michael A. Bowse of Browne George Ross LLP in Los Angeles, told ARTINFO that his original plan had been to take the request for a stay to appellate court if the plaintiffs were denied this one from the district court. However, after reading yesterday's decision, they decided to forget the stay and go ahead with the case's appeal to the Ninth Circuit. 

Bowse said that the judge's order "makes clear that other than the defendants in the cases that we have filed — Christie's, Sotheby's, and eBay — everyone else who would have been governed by this statute [dealers, collectors, and other auction houses conducting sales in California] are still bound by it."

Clearly, the fight against this California law is far from over. 

(In an interesting twist of full disclosure, Judge Fitzgerald also noted in his decision that Eric George, another lawyer from BGR involved in representing the artists, is a member of one of senator Barbara Boxer's judicial advisory committees, which recommended Fitzgerald for his current position.)