Wednesday, April 28, 2010

A Bit More on the $8 Million Lawsuit and Blacklists

The Robins-Zwirner court battle stems from a complicated situation, as anyone who's tried to summarize it and then move on to the issues it raises can attest, including me. As noted a few days ago, I'm quoted in an article and have an op-ed (that just came out in The Art Newspaper) on one of those issues. I'll get to the op-ed in a moment, but first I'd like to clarify a few of the ideas in the article. The delightful and extremely hard-working Charlotte Burns writes:
The $8m court case between Miami collector Craig Robins and New York art dealer David Zwirner lays bare the murky intricacies of the contemporary art world. The accusations reveal the secret handshakes, blacklists and verbal agreements that dominate the market, prompting some to say it is time that the whole trade opened up. A few go as far as suggesting legislation such as droit de suite, where artists receive a fee on the resale of their work, should be extended to New York.
While it certainly must seem, from all the press (and obnoxious calls for more) about the lawsuit, that such "murky intricacies" dominate the market, the fact that this case is getting so much attention is due in no small part to its unusualness. And while I will gladly own calling, again, for New York to reconsider droit de suite legislation (or at least some parallel way to ensure visual artists receive resale royalties), I wouldn't put myself in the camp of those interested in seeing the whole trade opened up, per se. Transparency is important, as I've frequently noted and work hard to live up to in my gallery, but seeing "the whole trade opened up" could mean a wide range of things to different people. And personally, I rather enjoy the business-on-a-handshake culture of the art world. It goes, er, hand-in-hand with at least attempting to remind ourselves in the business that it's the art and personal relationships that drives it all, and not just the bottom line.

That being said, and as I noted in my first post on this case, each of the players involved in such battles is being guided/pushed in their actions by a built-in, but unnecessary, secrecy regarding the resale of contemporary artwork. Unnecessary, because there is an established way to include artists in resales and eliminate any urge toward blacklisting collectors. I'll quote from my op-ed that posted today:
If the law required collectors to share the profits from any resale, the gallery would not get caught between the furtive goals of the collector and the wishes of their artist. Indeed, in most resale arrangements all three parties (collector, gallery and artist) could be motivated to work together to ensure each makes the most money possible.
Now, to be sure, like any eventual win-win-win scenario, this would require each player at some point to give up something as well. Artists might need to reconsider lowering their initial prices before they have a strong secondary market to encourage collectors to still take the chance on their work. Galleries would have additional paperwork to do and keep track of and might lose business to other jurisdictions. Collectors would have to share the profits of any resale from their collection. The thing is, though, that if each of the three players works well together, they can all profit more in the end. Collectors will, rather than have artists resent and/or resist their resale efforts, gain a highly credible/helpful advocate for such efforts. Imagine if an artist were publicly to endorse the resale of an earlier work, how much better that would be for all much less secrecy/agreements/potential lawsuits would be much more interest could be drummed up by joint efforts...and how much more the piece could go for.

There's another thing in all this that I'd like to clarify though. The perception persists that the dirty little secret of "blacklists" is something the gallery system, in its nefarious murky ways, relishes. This is a seriously misguided read of the case in question. Let's begin with Mr. Finch's take and work back from there:
Funny how the loggorheac know-it-alls of the art blogosphere fall strangely silent when dealer Jack Tilton provides some actual inside information on the confused yet devious way the art world really works, to the point when an ugly concept like "blacklist" dominates all deals, in the blockbuster case of Robins v. Zwirner.
Mr. Finch also uses that word, "dominates" (was there an arts writing teacher somewhere who gave extra points for working that word into a sentence when talking about the market?). He also uses "devious" and "ugly" in painting his picture of the art business. But what he doesn't do is clarify who originally created and maintained the blacklist in question. Here's a clue: it wasn't the galleries. It certainly wasn't Mr. Zwirner. In fact, as the Tilton testimony Mr. Finch wanted everyone to deconstruct revealed, Mr. Zwirner was once himself blacklisted by the very person who insisted on the blacklist. Indeed, the alleged blacklist belongs to none other than the artist.

More than that, though, and very oddly, the name of the artist, Marlene Dumas, isn't even mentioned (not once) in Mr. Finch's piece. He insinuates that it's fear of repercussions from the powerful art dealer being sued that has led the bloggers to avoid the subject --"The whale Zwirner swims at the deep end, and the minnows flee" (see my post from Monday for the real story there), but he never once notes the essence of what the Tilton testimony made all too clear, that it was, as reported by Sarah Douglas, a " blacklist that the painter has been rumored to maintain, which forbids collectors who resell her work from buying new pieces of art." [emphasis mine]

Now, the lawsuit alleges that Zwirner (once he represented Dumas) enforced his new artist's pre-existing blacklist, so there's plenty to think about here all around, but I'd like to see the tone and adjectives used to describe the gallery system and art market in this reporting lightened up a bit. Like I said at the top, it's a complicated case. It behooves everyone watching and writing about it to not project the allegations and/or actual circumstances of this one case onto the entire industry. I'll have more to say on blacklists once all the facts are established, I've talked with other dealers more about them, and this particular case is resolved. As for now, though, I'd rather focus on ways of making them a thing of the past, because, again,
[T]he system of secrets so susceptible to competing interests that the art market uses in place of droit de suite or similar solutions doesn’t seem to be working out so well either. Unless you’re an attorney, that is.

Labels: art market


Anonymous Kianga Ellis said...

Thanks, Ed. It is so great to have you clear and accurate perspective on these things.

4/28/2010 10:39:00 AM  
Anonymous John Legweak said...

Hi Edward,

I appreciate the analysis you put into this issue. I can see how droit de suite would, if not lessen flipping, at least let the artist participate in profits derived from it, but I can't see how it would address the rather different issue of career-supporting vs. non-career-supporting placement of work. Would droit de suite make all affected sales three party deals (seller buyer artist) to which all three would have to agree? That sounds like it would add significant complication and impedance to the art market.

4/28/2010 12:33:00 PM  
Blogger Edward_ said...

Would droit de suite make all affected sales three party deals (seller buyer artist) to which all three would have to agree?

Not as it works anywhere that I know of. The terms would still be hashed out between the seller and buyer, and each of those parties is not subject to the artist's approval, per se. The artist would simply see part of any eventual profit. That fact, however, would hopefully make the artist a willing participant in supporting the resale.

Yes, there remain other considerations in play her (if the original buyer got a great price because the work was promised to a museum, but then he/she flips it at auction, the artist would be right to be upset), but they seem to be the exceptions more than the rule.

4/28/2010 12:52:00 PM  
Blogger George said...

What we have here is a business disagreement that is going to be be sorted out in the legal system. This happens all the time in business and just because it provides a bit of juicy gossip does not mean that the system is dysfunctional.

Droit de suite is dead in the water. It's a tax on sales requiring a bureaucracy to regulate and enforce. It's open to fraud in reporting.

Time to move on to something more interesting.

4/28/2010 01:18:00 PM  
Blogger George said...

More blather on Droit de suite: Suppose you buy a house for $100,000 and ten years later sell it for $200,000. At the sale you pay a brokerage fee to the real estate brokers involved. Do you expect to pay a percentage to the original owner because you sold the house for $100,000 more? Does the first owner even expect this?

What is the ACTUAL profit involved? Lets assume we ignore upkeep and maintenance (art insurance, shipping, storage etc, which are not trivial)

Adjusted for inflation the actual profit is closer to $75,000 (CPI adjustment 2000 to 2010 on a basis of $100,000 is $126,000 making the actual profit $74,000.)

However, suppose you held this artwork (or house) since 1980, the inflation adjusted value on the artworks original $100,000 cost is $246,000. So if you sell the artwork for $200,000 you are actually receiving $46,000 less than the artworks inflation adjusted value.

Now the IRS still says that your taxable capital gains are $100,000, conveniently ignoring inflation because they would just as soon as not have you think about it. However if you borrowed the money to buy the asset, then you are paying points for the inflation in the interest rate (which you can deduct as an expense)

4/28/2010 01:45:00 PM  
Blogger Judy Rey Wasserman said...

Cheers to you for bringing droit de suite into the Internet conversation/news re the Robins vs. Zwirner case!
As an emerging and Post Conceptual art theory founding artist the practice of droit de suite is quite attractive. It is a sort of 401k for artists.
I also think that a kind of deal might also be worked out for a primary gallery that was exclusively representing an artist and made the original sale. It seems to me that a gallery that spends time and money fostering the career of an artist should also reap some of the benefits when that artist becomes celebrated and, as Marlene Dumas did, moves on to what is considered a "bigger" gallery, like Zwirner.
Probably this could be addressed in any contract between the artist and gallery, wherein the original primary gallery that sold the work would receive a small percentage of the artist's cut of droit de suite.
Also as an artist: While I do not feel I have the right or approve the sale of a work previously sold and on the secondary market, I would appreciate it if all the owners of my works agree to the idea of lending their artwork to appropriate museum or special shows if requested. I am not sure how to convey that last idea or include it in a secondary market sale, so perhaps Edward, you will comment or blog on that.
Judy Rey Wasserman
On Twitter @judyrey

4/28/2010 01:52:00 PM  
Blogger Edward_ said...

Ignoring the fact that you violated your own admonishment "to move on to something more interesting."... ;-P

...your house example is not all that parallel, George. If the original owner was the architect and builder of the house, retained the copyright on the house, was working to steadily increase the value of the house through his/her other subsequent houses, and was in a position to advance the prestige of the sold house (in the art world, by including said work in museums exhibitions, etc.), then you'd have a closer parallel. But even then, you'd have to adjust your numbers. Taking the Rauschenberg-Scull example of the work purchased for $900 and resold for $85000, we're well past the point of suggesting there's not much "actual" profit.

4/28/2010 01:55:00 PM  
Anonymous John Legweak said...

I see, Edward. Thanks. So the idea is not that dealers would move to a free-market style (sell to whoever is first to meet the asking price or whoever puts in the highest offer) in return for droit de suite. You would leave the current system as it is but add droit de suite to migitate “undesirable” resales and motivation to go to extremes to avoid them. Dealers could continue to do what they do now to place the art, only with a kind of “insurance policy” in case of resale. Is that right?

As to George’s point of a droit de suite scheme being a non-starter due to cost/difficulty of administration, for all I know he’s right. I guess one would have to look and see how it has worked elsewhere. Certainly the simpler the fee structure the better. To me the larger issue would be, who wants the system? Artists are prima facie the biggest beneficiaries. Are they clamoring for it?

As to transparency, things like deferred compensation and residuals have been made to at least sort of work in the entertainment industry despite notoriously low overall transparency. I would hesitate to say that droit de suite, which is a lot simpler, can’t work on transparency grounds, as long as it has backing from people with clout.

4/28/2010 02:13:00 PM  
Blogger Edward_ said...

You would leave the current system as it is but add droit de suite to migitate “undesirable” resales and motivation to go to extremes to avoid them.

I think you're mixing two ideas here John. I would add droit de suite to ensure artists benefit from building their works' value. There are other steps artists can take to make sure they don't end up poor while everyone else makes a killing off them, such as keeping back one piece from each series of work, but the goal for me is to be fair to the artists and to keep them involved (and compensated) in increasing the value of the work they've already sold.

4/28/2010 02:34:00 PM  
Blogger George said...

Ed, I disagree, the house example is valid when considering the purchase and sale of a large ticket appreciating asset. The issue of the original architect/builder/owner has only a small statistical relevance. The simple facts is that architects like Frank Gehry are statistical outliers, as are artists like Rauschenberg. Most artists and architects are just scraping along.

This means that the collector must purchase more than one emerging artists work in order to have any chance of owning a piece which achieves serious price appreciation.

Further, I would suggest that a collectors initial purchase of the artwork is the force which sets in motion the potential for price appreciation. While a number of factors come into play, the initial collectors of an artists work make it possible for the artist to keep working and therefore increase the statistical probabilities of achieving enough success to come into the radar of the Museums etc.

In the current case with Marlene Dumas, since the collector Robins evidently owns a number of her paintings he has been instrumental in her success through his support. Now we might fairly assume that Ms Dumas thinks that her success is because she is a great artist, right?

But if she has a blacklist which is in part prejudiced against collectors who resell her paintings, then we me must assume she is actively taking part in controlling or maintaining her pricing. Her pricing trajectory, one which has increased in a large part because of the support from collectors like Robins, might take on a new shape if sufficient supply (paintings for resale) were to come into the marketplace. Simply put, the blacklist is an attempt at price manipulation.

My point about inflation was only intended to illustrate that determining profit can have several interpretations, not that profit doesn't exist.

4/28/2010 02:50:00 PM  
Anonymous John Legweak said...

Thanks for the clarification Edward. I can see now I was reading more into your droit de suite proposal than you were intending.

4/28/2010 03:38:00 PM  
Anonymous nemastoma said...

To an outsider, the entire episode seems as absurd as the blacklisting of the House Un-American Activities Committee during McCarthyism. But the latter was truly frightening. I think Marlene Dumas should be happy so many people want to buy her art. I guess she must not have found much thrill in playing musical chairs as a child. She could have learned that everyone should have a renewed chance at being the last player left in the game, the winner.

4/28/2010 05:19:00 PM  
Blogger namastenancy said...

I sort of understand this - after rereading it a couple of times. But doesn't it all boil down to who is going to make the most money out of this case? I hate to sound cynical but I think that it's all about who is going to have the most once all the flying fur dies down. Person A wants to make a pile of money from art. Person B wants to buy that art, raise it a few aces and resell it for more moolah. Where does the buck ultimately stop?
Or am I missing the point?

4/28/2010 07:06:00 PM  
Anonymous Anonymous said...

For the average artist, in the average gallery, is any of this really that important? No. Most work sold at galleries doesn't make it to the secondary market, ever. I wonder though, why the system couldn't support an informal droit de suite. Ed, do you know of any collectors that give back to artists just because? It's a weird gesture to be sure: "Hey, guess what? Remember that painting of yours I bought for 3 thousand dollars, twenty years ago? Great painting. Well, I just sold it for 35 thousand dollars! Here's a thousand dollars for you. Now let's go have lunch. Then visit your studio. I'd love to see the new work."


4/28/2010 09:28:00 PM  
Anonymous Brian Dupont said...

I am a bit surprised that more 'blue chip' artists haven't tried to incorporate a contractual droit de suite when selling their works on the primary market. In Dumas's case it would be as simple as stating that if the purchaser is going to sell a painting of hers before X number years after the purchase, they must offer it back to her or her agent at the price they paid (or the price adjusted for inflation) first. Gifts to institutions would be exempt. It would not be perfect, but upon finding that the painting had been sold without offering it back to the artist there would be a clear breach of contract, and would the resulting claim for damages be any more upsetting than a blacklist?

4/28/2010 10:20:00 PM  
Blogger Iris said...

All this talk about money, lawsuits, blacklists etc.. all in relation to art just makes me feel queasy... why is this obsession? I would suggest that all sides concerned would consider: maybe there is something better they can do with their time and money - instead of suing and/or requiring more money, maybe help a village in a third world country, or speak up for world peace and the cessation of conflict anywhere in the world? What good does art do if it's just another tool for accumulation of power into the hands of the wealthy and more wealthy I ask?

But thanks for bringing it up, Ed, it gives us perspective and insight into the way things (still) are.

4/29/2010 08:44:00 AM  
Anonymous Anonymous said...

Let us not forget, this was the artist's, blacklist.
Let's not give this more power than it deserves and use it as evidence that the entire gallery system is evil.
It just goes to show you that there are all kinds of people in every profession.

4/29/2010 10:41:00 AM  

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