Art Law Report

Proposed Amendment to New York Arts and Cultural Affairs Law Would Protect Authenticators

Posted by Nicholas O'Donnell on April 30, 2014 at 6:03 AM

It was first reported at the Appraisers Association of America’s Art Law Day in November, 2013 that the New York City Bar Association’s Art Law Committee had drafted a proposed revision to New York’s Art and Cultural Affairs Law to address the rights of authenticators. That proposal, publicized a month later, has now become an actual bill introduced in the New York State Assembly, as Senate Bill No. S06794 and Assembly Bill No. A09016. The bills were then referred to their respective committees for further deliberation.

As discussed previously, the bill is designed to address what has become a growing problem in the art world. Namely, where the authenticity of a painting is the key to its value (i.e., whether it is extremely valuable, or worthless), the appraiser or art historian rendering an opinion as to authenticity is in the crosshairs of everyone involved. The party asserting authenticity will be concerned about any statements to the contrary, while the party resisting the notion that a work is by a particular artist will want to avoid attribution of a work that may affect the value of other, indisputably authentic works. Where that much money is at stake, the stakes for everyone are raised.

This heightened tension has manifested itself in several ways. First, as everything from the ongoing M. Knoedler & Co. fallout, to the Wolfgang Beltracchi forgery has shown, the economic incentives of the art market all but ensure a continual supply of fakes and forgeries. That, in turn, makes the job of the authenticator and appraiser all that much harder. In the last several years the Warhol Foundation and the Keith Haring Foundation, most prominently, have ceased rendering opinions entirely about the authenticity of previously unattributed works because of litigation by owners who have disagreed with the foundations’ conclusions. As a business proposition, even where the foundations have prevailed, the ongoing cost of that litigation outweighed the benefits of guarding the artists’ legacy (compare the moral rights regime in Europe, for example, that gives artists’ foundations the power to compel the actual destruction of works they deem to be inauthentic, as in the recent case of a putative Chagall painting destroyed after the Chagall Committee declared that the work was not by the artist).

Even as foundations step out of the practice of authenticating, however, that still leaves appraisers in the balance. Their profession depends on their ability to state their opinion, so retreating from authentication is not an option. Yet that leaves the person with the smallest economic upside (i.e. a service fee, rather than a share of a potentially valuable work) as the target of whoever is unhappy with his or her opinion. Since the options are, generally, a binary choice, the economic incentives almost always exist for someone to pursue the appraiser. These incentives were high relative to the costs, and the fear of lengthy litigation indisputably had a chilling effect on the appraisal profession. Claims ranged from defamation, to fraud, to negligence.

This bill aims to change that. First, it applies to “authenticators,” who are defined as

A person or entity recognized in the visual arts community as having expertise regarding the artist or work of fine art with respect to whom such person or entity renders an opinion in good faith as to the authenticity, attribution or authorship of a work of fine art, or a person or entity recognized in the visual arts or scientific community as having expertise in uncovering facts that serve as a direct basis, in whole or in part, for an opinion as to the authenticity, attribution or authorship of a work of fine art.

This is expressly defined to include authors of catalogues raisonnée. The significant exception is that the authenticator may not have a financial interest in the object.

Its proposal is simple:

In any civil action brought against an authenticator that arises from or relates to the authenticator's opinion or information concerning a work of fine art, the claimant shall:

(a) specify with particularity in the complaint facts sufficient to support each element of the claim or claims asserted; and

(b) prove the elements of such claim or claims by clear and convincing evidence.

In the first instance, this is what is known as a “pleading with particularity” requirement. It is typically applied to fraud claims, and is used to put the plaintiff to a higher standard of pleading its case. The defendant must be given an opportunity to see exactly what she allegedly has done wrong, where a general allegation might suffice for another claim. An example: a plaintiff who falls on a sidewalk outside a gallery might state a claim by alleging simply that the gallery failed to clear ice and snow away, causing the slip and fall. The duty that the gallery owes the general public could be inferred as a matter of law. The case would then rest on the proof of the allegations because negligence claims ordinarily do not require particularity.

By contrast, if a buyer alleged that after purchasing a work of art, he discovered that the gallery had defrauded him, that allegation would be insufficient without more, because fraud claims require particularity. This hypothetical buyer would have to allege that on a particular day, the gallery made a specific statement of fact, which was false for specific reasons, the basis on which the buyer relied on that statement, and the particular reasons that this chain of events caused him financial harm.

This is the standard that would apply to authenticators. Moreover, whereas in a typical civil case the plaintiff need only show that her claim is more likely true than not (a preponderance of the evidence typically described as anything greater than a 50% chance), such claims would now have to be proven by clear and convincing evidence. That is a daunting standard, and one rarely met.

Lastly, to encourage even more care among would-be plaintiffs, the bill has a fee-shifting provision. Under the American Rule of legal fees, litigants in U.S. cases ordinarily bear their own legal fees, even when they win. This is in contrast to the prevailing view in Europe, for example. That has had the chilling effect described above, even on authenticators who are quite confident that they would ultimately prevail. Only where the parties have an agreement or there is a statute to the contrary can the prevailing defendant be indemnified for her fees from the plaintiff. This bill would be just such a statute, and reimburse the prevailing defendant for attorneys’ fees.

The policy of the bill is quite clear: that authenticators need much more protection than they currently have. This is a worthy balance to strike. Apart from an authentication rendered in bad faith, which is not protected by the bill, squeezing art experts does the market, galleries, and artists no favors. Indeed, it arguably encourages fakes, because the people best qualified to call them out may otherwise be afraid to speak.

Here’s hoping that the bill passes into law, and soon.

Topics: Andy Warhol Foundation, New York State Assembly, authentication, American Rule, Bill No. A09016, Art Law Day, clear and convincing evidence, Appraisal, Wolfgang Beltracchi, Art Law Committee, Chagall Committee, Appraisers Association of America, Keith Haring Foundation, New York Arts and Cultural Affairs Law, New York City Bar Association, authenticator, M. Knoedler & Co., Chagall, Senate Bill No. S06794

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