Ninth Circuit Court of Appeals Narrows California Resale Royalty Act In Latest Decision in Artist Class Action Suit

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A recent court decision weakened the nation’s strongest laws protecting artists’ pay.

The California Resale Royalties Act, put into place in 1976-1977, offers resale royalty rights to artists whose work is purchased then later resold in California.  It previously also provided royalties to the artist if the seller was a resident of the state but the sale took place elsewhere.

It is currently the only law of its kind in the United States, although they are commonplace in Europe and around the world.

While the California law (CRAA) still stands, it has been significantly narrowed thanks to the May 2015 decision handed down by the Ninth Circuit Court of Appeals.

While some artists will still receive a percentage of profits made of a resale of their original art, this now only applies if the sale takes places within the confines of California.

This means that California residents who choose to resell art through a dealer or auction in another state can avoid paying these proceeds to the artist.

ninth circuit court of appeals

The mission of the Ninth Circuit Court of Appeals is to provide an impartial forum for the just and prompt resolution of cases through the uniform and coherent application of the Constitution and the laws of the United States of America

The Court’s Decision

The Ninth Circuit Court of Appeals upheld CRAA in 1981, and artists celebrated the decision as a victory for their rights.  California auction houses and galleries have resented the law for years, however.  They claim that it puts a burden on California businesses that competition in New York, Chicago and other major cities didn’t have to deal with.

CRAA requires sellers to withhold five percent of the total sales price for the artist. If the artist cannot be located by the dealer, the money then goes to the California Arts Council.

After seven years, if it remains unclaimed by the artist it goes into a special fund for acquiring fine art for nonprofit museums in the state.

There are a number of exemptions to the law, as well.

Resales for less than $1,000 are exempted, as are pieces created by artists who died prior to 1983.

This lawsuit began when a number of artists and their representatives filed class-action suits against out-of-state auction houses including Christie’s, Sotheby’s and eBay for failing to pay the proper royalties on sales of art that belonged to California residents.

In 2012, a district court threw CRAA out entirely, claiming that the clause regarding out-of-state sales was unconstitutional.

The latest Ninth Circuit decision agreed with the provision being unconstitutional, but chose to simply remove it from the law and leave the rest of the in-state resales provisions intact.

Related:
Bleak Outlook for California Resale Royalties Act in Court
Federal Judge Finds California Resale Royalty Act Unconstitutional

American Artists Under The Gun

France was the first country to adopt this type of royalty provisions for fine art sales when it passed what has come to be known as the droit de suite in 1920.

According to the United States Copyright Office, more than 70 countries and almost all industrialized nations have some type of law regarding resale royalties for artists.

In December of 2011, a bill known as the Equity for Visual Artists Act of 2011 was introduced in Congress. This law is based on the same concepts as CRRA, but would provide artist resale royalties nationwide.  It targets only auction houses with annual sales of more than $25 million.

Under this law, three and a half percent of any sale over $10,000 would go to the artist and three and a half percent would go toward funding nonprofit museums and fine arts organizations. Since its introduction more than three years ago, however, the bill has remained stalled in Congress.

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Currently, American artists — including painters, photographers and sculptors — are at a significant disadvantage when compared to those in Europe or a number of other regions.

With laws in place that tie the artists to his creation throughout his lifetime, major European artists receive royalties on both the first and any subsequent sales of their art, so long as the sell meets the minimum qualifications.

In the United States, the artists only receives payment for the initial sale, unless they are covered by the California law. Proceeds from any subsequent sales of the work benefit only owner of the art and the gallery or auction house where it was sold.

While California is currently the only state with royalty laws relating to visual art, this type of law isn’t unheard of. Authors and composers in the U.S. already benefit from copyright laws that provide ongoing income streams.

In fact, the percentages used in EVAA are based on what songwriters are paid for sales of their music through BMI, ASCAP and other performing rights organizations.

Whether this bill is ever passed in Congress remains to be seen, however.

Based on reactions across the nation to the Ninth Circuit decision, it seems this isn’t something that American artists can look forward to any time soon.

 

Legal contributor Leah B NewmanAbout the Author: Leah Newman is a freelance legal writer based in Nashville, Tennessee.
You can follow Leah on Twitter @LeahBNewman

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