Grossman LLP | <strong >Museum Association Temporarily Relaxes Stance on Deaccessioning,</strong > <strong >Raising Possibility of More Art Sales By U.S. Museums</strong >
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  • Museum Association Temporarily Relaxes Stance on Deaccessioning, Raising Possibility of More Art Sales By U.S. Museums
    Amidst the social and economic fallout of the COVID-19 pandemic, the Association of Art Museum Directors (AAMD) has temporarily revised the guidelines it imposes on its members.  Recognizing that museums (like many other art-related businesses) are struggling to stay afloat, the AAMD is easing certain restrictions on the use of trusts, donations, and gains from endowment investments, and on the use of proceeds from deaccessioning artworks.   
    History of Deaccessioning 
    Deaccessioning—i.e., the permanent removal of an item from a museum’s collection— has been an important topic in the art market for years.  Generally, barring some special restriction associated with a specific object in the collection, a museum can sell its own property.  As one museum insider recently observed, sales of museum objects to private collectors are not unheard-of, and as it has become a more accepted option for “collection management,” the practice has become more public, with some museums even offering deaccessioned works at auction.  But there is a longstanding debate over whether museums should be limited in what they can do with the proceeds of a deaccessioning sale.
    Museum-governance organizations—including two of the most influential, the AAMD and the American Alliance of Museums (AAM)—generally have taken the position that, when a museum chooses to sell an artwork from its collection, the proceeds should only be used to acquire new works, not to cover other expenses.  This restriction is built into the ethical standards of both organizations.  AAM provides, in its code of ethics: “Proceeds from the sale of nonliving collections are to be used consistent with the established standards of the museum’s discipline, but in no event shall they be used for anything other than acquisition or direct care of collections.”  Likewise, the AAMD’s code of ethics directs that a museum director “shall not dispose of accessioned works of art in order to provide funds for purposes other than acquisitions of works of art for the collection…”  These restrictions stem from a prevailing view in the museum community that deaccessioning for other purposes is contrary to a museum’s ethical duties to hold its collections for the benefit of the public.  On the other hand, critics of such policies have long argued that museums should have the flexibility to make their own decisions about how to marshal their assets (see here and here for examples of some of the arguments that have been made on this subject).   
    Historically, members that failed to comply with the AAMD’s guidelines were subject to AAMD-imposed sanctions; those measures could include ejection from the organization or lesser punishments such as preventing a museum from receiving art loans from other member institutions.  In recent years, there have been several high-profile controversies when museums have acted contrary to these guidelines.  For example, in 2018, the struggling Berkshire Museum announced it would sell several works of art at a Sotheby’s auction to fund its operations.  Around the same time, La Salle University in Philadelphia auctioned off several works at Sotheby’s to support educational programs.  The AAMD was quick to respond with sanctions against both institutions.  Deaccessioning controversies can also lead to litigation and other legal snafus.  For example, the Berkshire Museum matter (see our previous blog post here) sparked both a lawsuit by a coalition of  plaintiffs who succeeded in temporarily halting the auction, and an investigation by the Massachusetts attorney general.  The situation eventually culminated in a ruling from the state’s highest court, permitting the sale under a carefully negotiated set of terms.
    Updated Deaccessioning Policies During the Pandemic
    Now, a pandemic and its economic fallout have left museums facing unprecedented challenges.  Many museums are closed to the public, and are laying off employees, while still needing to maintain the security of their facilities and their art (for instance, in the Netherlands, a Van Gogh painting was stolen from a museum while the museum was closed for Coronavirus-related reasons, though it is not clear whether the closure played any specific role in the theft).  As the crisis has deepened, some in the art community have been remarking about the real possibility that some museums would need to deaccession art to meet financial obligations.  
    Those predictions have proved prescient.  Last week, the AAMD announced that it will not censure or sanction any museum (or museum director) that decides to use restricted endowment funds, trusts, or donations for general operating expenses (including staff pay and benefits), and has additionally provided adjusted guidance on how a museum might allocate the proceeds from sales of deaccessioned art.  Notably, an institution may use the proceeds from deaccessioned works of art—regardless of whether the works were deaccessioned before or after the date of these resolutions—to support the direct care of the museum’s collection. 
    The President of the AAMD indicated that the organization’s goal was to provide financial options for museums struggling with long-term planning, given that “earned revenue has stopped and the future of charitable giving is unknown.”  But the AAMD also emphasized that the temporary measures are “not intended to incentivize deaccessioning or the sale of art, only to provide additional flexibility on the use of the proceeds from art that may be sold. AAMD’s longstanding principle that the proceeds from deaccessioned art may not be used for general operating expenses remains in place.”  Indeed, the AAMD is only providing a two-year moratorium on sanctions; institutions could face postponed fallout when these temporary guidelines end in 2022.  Reactions to the announcement have varied; for example, some view this only as a tragic emergency measure, while others argue that the change is long overdue.
    Responsible Transactions Involving Deaccessioned Art 
    With these longstanding restrictions on museums now temporarily eased, it is possible that the art market may see an uptick in transactions involving deaccessioned artworks from museum collections.  But potential buyers and sellers should be aware that any acquisition of art from a museum collection still needs to be done with care.  
    For both museums and potential buyers, legal advice, thorough documentation, and strategic contracting will be crucial.  And, AAMD guidelines aside, museums and collectors must make sure that any transaction also meets the legal requirements of the jurisdiction, and does not run afoul of any restrictions imposed by a museum’s donors.  Indeed, depending on the circumstances, parties might consider consulting with a state attorney general (who in many states is charged with oversight of nonprofits).  Parties should be also aware that the AAMD’s guidelines indicate that a museum contemplating such sales must have in place a publicly-accessible, board-approved policy outlining what expenses it considers as “direct care,” for purposes of how sale proceeds will be spent.  And the organization encourages museums to consult with the donors or trustees of the funds, or the donors (or heirs of the donors) of works to be deaccessioned, and to keep records of the funds and how they are used.     
    We will continue to monitor developments in the ongoing conversation about deaccession, including how this issue evolves in light of our current global coronavirus crisis.  
    ATTORNEY: Kate Lucas
    CATEGORIES: Art MarketMuseums