Suit Over Cady Noland Artwork Ends Without Significant Ruling on VARA
01/03/2017We’ve written before about conceptual artist Cady Noland, whose works command huge prices in the market, but who has a history of being highly particular about how her creations are installed, maintained, exhibited, and sold on the secondary market. This tendency has resulted, on at least two recent occasions, in litigation over her disavowal of previous works. Now, both cases have been resolved, but without significant judicial examination of the contours of an artist’s right to disavow her own creations.
The first incident, in 2012, involved Noland’s work Cowboys Milking. Our earlier blog posts contain more detail, but in short, in the fall of 2011, Sotheby’s planned to auction the work on behalf of its owner. But before the auction could proceed, Noland demanded that Sotheby’s withdraw it from the sale, saying the work had been damaged and invoking her rights under the federal Visual Artists Rights Act of 1990 (17 U.S.C. § 106A) (“VARA”). VARA governs artists’ “moral rights,” including their right to receive attribution for and preserve the integrity of their work; the relevant VARA provisions here effectively give an artist the right to “disclaim” authorship of a work by preventing the use of her name as its author in the event that the work is mutilated or otherwise modified in a way that would be prejudicial to the artist’s “honor or reputation.” 17 U.S.C. § 106A(a)(2). Faced with Noland’s disclaimer, Sotheby’s withdrew the work from auction, whereupon the owner sued both Sotheby’s and Noland, asserting that Sotheby’s had breached its consignment contract and its fiduciary duty to the owner, and that Noland had tortiously interfered with the consignment by persuading Sotheby’s to breach the agreement.
A New York state court granted summary judgment for Sotheby’s, essentially on contract grounds. The court concluded that there had been no breach because the consignment agreement permitted Sotheby’s to withdraw the work at any time before sale if, “in its sole judgment,” “there is doubt as to [the work’s] authenticity or attribution,” and here, there had been a substantial basis for such doubt. Marc Jancou Fine Art Ltd. v. Sotheby’s, Inc., 2012 WL 7964120 (Sup. Ct. N.Y. Co., Nov. 13, 2012), aff’d, 107 A.D.3d 637, 638, 967 N.Y.S.2d 649 (1st Dep’t 2013). The courts that heard the case did not need to reach the question of whether Noland’s disclaimer of authorship was valid under VARA. The “Log Cabin” Lawsuit The second Noland disclaimer case began last summer, when art collector Scott Mueller filed a complaint alleging that, during the summer of 2014, he agreed to buy Noland’s sculpture, “Log Cabin Blank with Screw Eyes and Cafe Door” through the defendant, the Germany-based Janssen Gallery. The work consists of a large wooden front façade of a log cabin with an American flag affixed over the entrance. The piece was originally intended to be displayed outdoors, and had in fact been on loan to a German museum, where it was exhibited outdoors for about ten years before Mueller contracted to buy it. During that time, the work suffered deterioration, leading the owner to arrange for its restoration; “the original logs were replaced and a new log cabin façade was constructed” by the “original fabricator” using the artist’s “original and exact specifications” and the same type of wood.
When Mueller agreed to buy the work from the Gallery, the parties apparently foresaw that the artist might react negatively to it; the sales contract, among other things, disclosed the restoration and provided that the Gallery would buy the work back from Mueller in the event that the artist “refuses to acknowledge or approve the legitimacy of the work; seeks to disassociate her name from the work; or claims that her moral rights . . . have been violated.”
That contract language proved prescient; the complaint alleges that after Mueller paid the $1.4 million purchase price, his agent wrote to Noland to inform her of the sale and the restoration, at which point Noland contacted Mueller and his agent, angrily denouncing the restoration and telling them that any future display or sale of the work “must include notice that the piece was remade without the artist’s consent, that it now consists of unoriginal materials, and that she does not approve of the work.”
Given the artist’s reaction, Mueller’s agent contacted the Gallery and invoked the buy-back provision; the Gallery tried to persuade Mueller to instead apply the purchase price to a different Cady Noland work, but Mueller insisted on a full refund. When the Gallery only refunded $600,000, Mueller sued in the Southern District of New York (Docket No. 15-CV-04827), seeking the refund of the remaining $800,000. Mueller also sued Marisa Newman Projects, LLC, an entity that he says acted as “an independent art advisor” who facilitated the sale of the work, retained the law firm who drafted the sale agreement, and received (and, following Mueller’s exercise of the buy-back, refused to return) a portion of the purchase price. Counts include a breach of contract (or in the alternative, conversion) claim against the Gallery and its owner, and claims against Newman, as the advisor, for unjust enrichment and breach of fiduciary duty. He also alleged unjust enrichment against the original owner of the work.
Now, however, the federal district court has dismissed Mueller’s case against Newman. The plaintiff drafted his fiduciary duty claim in a way that attempted to emphasize the “special relationship of confidence and trust” placed in Newman, noting that Newman retained legal counsel, provided specific factual information about the deal, gave her opinion about the risk of Noland’s disavowal, and fielded from the buyer the types of questions and requests for advice that would not “be posed to a counterparty in an arms-length business transaction.” The court, however, was not convinced; its order emphasizes the high standard under New York law for finding that a fiduciary duty exists, and concluded that the complaint did not adequately allege a fiduciary relationship between Mueller and Newman. Newman’s superior knowledge of the subject of the transaction is not sufficient to create such a duty, nor is the mere allegation that Newman provided advice on which Mueller relied; a fiduciary relationship cannot be created unilaterally.
The court also took note of the fact that the complaint did not specifically allege that Mueller retained Newman; rather, she was an independent advisor. Moreover, the court held that even if such a duty had existed, it had not been breached here. There was nothing in the contract requiring Newman, in the event of a buy-back, to return any fee she earned, nor any requirement that she help Mueller get his money back from the Gallery. And even assuming she told Mueller not to be deterred by the risk that Noland might disavow the work, that advice was not given in bad faith, self-dealing, or a conflict of interest; rather, Newman’s advice arguably benefited Mueller by helping him protect himself contractually against the risk of a disavowal. Additionally, the court observed, Mueller’s damages were not really caused by anything Newman did or didn’t do; rather, his injury is the $800,000 that the Gallery failed to refund.
The court also dismissed Mueller’s unjust-enrichment claim against Newman, reasoning that that claim must be barred since there is a contract addressing the subject matter of the dispute (even though Newman was not technically a signatory to the sale contract). The court also pointed out that the complaint did not actually allege that Mueller paid Newman anything; it said only that he paid the Gallery, and Newman then received some unknown portion of the price. Finally, the court noted there was nothing unjust about her retention of her fee.
What The Mueller Case Doesn’t—And Does—Address
Unlike the Jancou case, which named Noland herself as a defendant, the artist was not even a party to Mueller’s suit. And the case has now been resolved without significant analysis of Noland’s actions in connection with “Log Cabin”; thus, the case provides no real meaningful guidance about whether this was a valid disavowal by an artist under VARA, nor any guidance about how to restore an artwork so as to minimize the risk of such a disavowal.
However, there are a few more general takeaways here for those in the art market. The case serves as a reminder about art collectors who receive advice from experts during an art transaction. Here, the court refused to hold that Newman had acted in a fiduciary capacity in this deal, continuing a recent trend of cases where courts have generally been inclined, absent unusual circumstances, to reject the existence of a fiduciary relationship between an art dealer or advisor and a client, even where the parties have enjoyed a close relationship and where the collector placed significant trust in the other’s advice. Rather, courts view subsequent disputes between such parties as governed only by general principles of contract law, and not by the heightened standards to which fiduciaries are held under New York law. Collectors who seek the guidance of an art advisor or other expert should be forewarned that their reliance on such expert advice does not take on some kind of talismanic protection against losses if a problem with a sale arises later; rather, they will generally be better served by a comprehensive contract that addresses the risks inherent in a sale.
Also notable, here the parties apparently foresaw the possibility that the artist might object to the work’s restoration, potentially affecting the work’s value and saleability, and they sought legal advice and ultimately contracted so as to address and allocate that risk before consummating the transaction. Unfortunately, a dispute arose anyway; but the existence of the contract likely helped clarify the parties’ rights in a way that simplified the dispute. In this sense, the case reminds those who deal in artwork that seeking legal advice and engaging in comprehensive contracting proactively is a smart move; experienced art-law counsel can advise parties on how an artist’s rights under VARA might impact a contemplated restoration or transaction, and help draft sale contracts accordingly.
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