The War:
A bunch of artists, including Chuck Close and the Sam Francis estate, sued Christies and Sotheby’s for millions of dollars in back royalties under the California Resale Royalty Act. This law obligates the buyer and dealer in a fine art sale to pay the artist 5% of the sale price.This law is the only one of its kind in the U.S.
The Winner:
Sotheby’s, Christies, Art Dealers Everywhere won (so far).
The federal District Court judge found the statute pushes its tentacles too far into interstate commerce, violating the “dormant” Commerce Clause. Because the statute applies to transactions where either the artist lives or the sale takes place in California, she found its offending provisions too encompassing to save the statute. It didn’t help that the California legislators who created the law were on the record trying to impose royalty obligations on out of state sales. The law – for now –is gone. Appeals may be on the way.
Moral of the Story
Galleries, Dealers and Auction Houses: Relax – you probably don’t have to pay royalties under the California Resale Royalty Act anytime soon.
State legislators: If you hope to regulate stuff outside your state, you don’t help your cause by sticking your hopes in the legislative record.