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Bryan Cave's Scott Hodes
The art of making an art deal used to involve a handshake, but these days it increasingly involves litigation.
"A handshake, unfortunately, doesn't cut it any more," said Alan Effron, a litigation partner at New York's Pelosi Wolf Effron & Spates. "The stakes are so much higher in the art world, and there are so many well-funded people."
With art pieces becoming increasingly expensive, deals crossing more borders and a growing number of people acquiring art, lawyers said they are seeing more lawsuits.
In response, Bryan Cave is forming a team of lawyers to handle such cases, while lawyers at several other firms said they are spending more time on disputes in the art world.
Scott Hodes, a partner in the Chicago office of Bryan Cave, said he is assembling a team of two dozen lawyers in order to create a group specializing in art-related matters. The lawyers will have expertise in areas such as taxes, estate planning, contracts, insurance and intellectual property, he said.
Hodes said he would not be surprised if more lawyers from other firms got involved in art law.
"Lawyers tend to get involved where there is lots of money involved, and they also tend to get involved when people get into disputes," Hodes said. "A long, long time ago there were no lawyers to speak of in Japan because the Japanese would bow to another person, and a deal was a deal. It was that way in the art business for a long, long time."
Effron said the relationship among artists, galleries and dealers has, traditionally, been very informal and involved little paperwork. But with growing prices and many relationships lacking longevity, he said he has seen more lawsuits.
"I've seen litigation increase on each of those sides of the triangle," he said. "A lot of art world participants are reluctant to acknowledge the role that financial aspects play. ... But I think a lot of them are rethinking that."
Effron said his firm has tried to respond by being proactive and ensuring that clients have adequate protection in place to prevent problems. Because a growing number of deals cross state and national borders, there is also more attention being paid to ensure all contracts are enforceable, he said.
Lawyers said a number of recent high-profile cases have highlighted the need for more caution when dealing with art, such as the case involving Salander-O'Reilly Galleries. The New York gallery was ordered closed in October 2007 after dozens of suits from people claiming they were not paid for artworks they consigned to it.
Hodes, recently, won judgment against a couple's insurance carrier after claims that their artworks were stolen or not sold according to contract by a Chicago gallery. The husband-and-wife team had spent more than $1 million buying art and consigned the pieces to the gallery for sale. Frigon v. Pacific Indemnity Co., No. 1:05CV-06214 (N.D. Ill.).
Just recently, a prominent art expert, the late Roxanna M. Brown, was arrested in Seattle and indicted on federal wire fraud charges in a case involving stolen antiquities from Asia.
Brown was accused of allowing her electronic signature to be used so collectors could claim tax deductions. The investigation involved several California museums, which were raided in January as part of the investigation. She died while in custody on May 14. U.S. v. Brown, No. CR-08-00554 (C.D. Calif.).
Virginia Rutledge, who chairs the Art Law Committee at the Association of the Bar of the City of New York, said she has seen more awareness in the field recently about the importance of protecting artwork. But sometimes, there is still not enough paperwork, or contracts are not detailed enough to offer necessary legal protections. For example, this year, she saw a one-page document for a piece worth more than $2 million, she said.
In addition to sloppy contracts, Rutledge said more people without a history in collecting are getting involved, which has led to increased activity in the art market. All those factors have led to more lawsuits, she said.
"The stakes rise with the prices," she said. "Not surprisingly, people often become more litigious when millions of dollars are involved."
Thomas R. Kline, a partner in the Washington office of Houston's Andrews Kurth, said he is increasingly dealing with disputes involving artworks.
"My practice was a mostly restitution practice but has broadened in recent years partly because people call me with all kinds of disputes," he said.
Kline said he has seen some progress in the field, such as better service by the major auction houses, but that there is still a lot of room for improvement.
