The True Cost of Authentication Litigation

July 2013Art & Advocacy

It is now more than six years since the Pollock-Krasner Foundation ceased its authentication services, and well over a year since the Warhol authentication board disbanded. Since 2006 the art market has seen the voluntary demise of numerous authentication boards, including those for works by Alexander Calder, Roy Lichtenstein, Jean-Michel Basquiat, and Keith Haring. Many speculated that the absence of these boards would have a deleterious effect on the art market, presumably because there would be no means by which to authenticate the purported works of the affected artists.

Bear in mind that these authentication boards are a recent creation. They are fundamentally an outcropping of the estates of deceased artists that seek to retain control over the body of those artists’ work. In this way, such authentication boards attempt to re-create the French legal concept, known as droit moral (or moral rights), which bestows upon the artist, among other things, the right to authenticate his or her own works. Upon the artist’s death, this right passes to an heir or designee. Droit moral, however, is not a concept that has gained ground in the U.S.; therefore, the effort to voluntarily compel the market to accept only one authenticator for an artist plainly did not find great success. The art market operated without such boards for hundreds of years. Surely it will once again operate just fine without them. Indeed, most artists have never had an authentication board, nor in the case of U.S. artists would the concept of droit moral even be applicable, yet somehow the market still finds a way to determine what art is authentic and what value it has. The market will weigh the value of any given opinion of authenticity, and value will derive from the weight given to such opinion or opinions. As the Appellate Division, First Department astutely observed in Thome v. Alexander & Louisa Calder Found., 70 A.D.3d 88, 890 N.Y.S.2d 16 (1st Dep’t 2009), neither inclusion in a catalogue raisonné nor a court order declaring an artwork authentic will have any effect on the value of an artwork if the marketplace does not respect that catalogue or agree with the court decision.

It is not the lack of art authentication boards that will burden the art market. Rather, it is the lack of willingness on the part of uninterested experts to opine on the authenticity of artwork that could have the most impact on the market. As art lawyers, we have heard experts voice their fears of rendering any opinions on authenticity for fear that a negative opinion will engender litigation from the disappointed party, alleging anything from product disparagement and slander of title to anti-trust violations.

An expert retained to render a decision on authenticity may, and in fact should, require that the parties first enter into a hold-harmless agreement wherein the party seeking authentication waives any claims against the expert and covenants not to sue. Such an agreement has been upheld in New York. Lariviere v. Thaw, 2000 N.Y. Slip Op. 50000(U) (Sup. Ct. N.Y. County June 26, 2000). It should be noted that a federal district court in New York declined to uphold the hold-harmless agreement between the parties in Simon-Whelan v. Andy Warhol Found. for the Visual Arts, Inc., No. 07 Civ. 6423(LTS), 2009 WL 1457177 (S.D.N.Y. May 26, 2009) case. In the Simon-Whelan case, the court found that the allegations of fraud and intentional wrongdoing in the solicitation of the hold-harmless agreement by the Warhol Foundation were sufficient to state a claim for invalidating that agreement. In this way, the Simon-Whelan decision was well in keeping with the decision in Lariviere, where the court noted that such an agreement is void where it purports to grant exemption from willful or grossly negligent acts, or where a special relationship exists between the parties. It was a most unusual situation alleged in the Simon-Whelan case, however, where the plaintiff alleged that he was fraudulently induced to submit his work for authentication and to enter into a hold-harmless agreement. Generally, an art owner seeks out an authenticator, rather than the other way around.

But authentication experts have expressed that it is not their fear that a hold-harmless agreement will not be upheld because they engaged in intentional wrongdoing that keeps them from consenting to authentication engagements. Rather, they fear the thousands of dollars it will cost to defend themselves before a court finally upholds the agreement and dismisses the case. One solution to this fear of unfounded litigation is to include in any hold-harmless agreement a fee-shifting clause that would require an unsuccessful claimant to pay the costs and attorney’s fees of the expert.

Another solution is new legislation that has been recently drafted and proposed by the Art Law Committee of the Association of the Bar of the City of New York. This proposed legislation, which is now undergoing review by the Legislative Committee of the Association, does several things. First, it defines an authenticator covered by the new law as a person recognized as having expertise regarding the artist for whom an opinion is sought, or as having expertise in uncovering facts that serve as a direct basis for an opinion as to authenticity. Thus, connoisseurship, as well as historical, technical, and scientific basis for opinion, are all preserved and protected. The definition makes clear that covered authenticators include authors of catalogues raisonné and other scholarly works, while excluding those who have a financial interest in the work for which the opinion is to be rendered (other than compensation for actual authentication services). Next, the proposed legislation requires that claims against authenticators be stated with particularity and that the elements of each claim must be proven by clear and convincing evidence. Thus, both the elements of pleading and the burden of proof would be raised for such claims, immediately alerting prospective claimants that they will bear a heightened burden. And if that were not enough to dissuade meritless claims, the highlight of the proposed legislation is that it would permit the authenticator to recover her reasonable attorney’s fees, costs, and expenses if, and to the extent, the authenticator prevails in an action brought against her.

This proposed legislation also has the advantage of applying to what might be referred to as the “gratuitous” expert. Indeed, several cases that have been brought against experts for defamation or disparagement arose in the context of an expert who was not retained to give an opinion on authenticity. For example, in Hahn v. Duveen, 133 Misc. 871, 234 N.Y.S. 185 (Sup. Ct. N.Y. County 1929), the art dealer Joseph Duveen was sued for defaming an artwork. Duveen had not been retained to render an opinion on authenticity. Rather, during an interview in which the reporter asked him what he thought of Hahn’s painting, Duveen remarked that the real work was in the Louvre. Obviously, there had been no prior request for an opinion and no opportunity to enter into a hold-harmless agreement. The proposed legislation would protect such a gratuitous expert, as long as he or she meets the definition of “authenticator” under the language of the legislation.

On the other hand, an expert authenticator may yield a great deal of power over an artwork’s value. The market and the law should want to protect authenticators who act diligently and in good faith, not the ones who scheme, self-deal, or make arbitrary or reckless determinations. The proposed legislation does this in several ways. First, it excludes as an authenticator someone who has a financial interest in the artwork for which the opinion is being rendered. Second, it protects persons who are recognized for expertise, and not impersonal boards or board members who may have no particular expertise. Third, it raises the burdens of pleading and proof. This will presumably serve to deter those who are merely unhappy to learn their art is not authentic from bringing claims, but not deter those with true claims of malicious behavior, fraud, and self-dealing. Finally, the shifting of attorney’s fees should the claimant lose will hopefully be a strong deterrent to claimants who have nothing to lose by bringing a case and everything to gain from a good-faith authenticator who would rather settle with a payout of some kind than go through the rigors of litigation, even if she would win at the end of many years in court. Moreover, under the proposed legislation, an expert who loses a lawsuit would not be entitled to recover legal fees, thus making sure that experts continue to exercise appropriate care when speaking about the authenticity of an artwork.

In sum, the demise of authentication boards has never posed any threat to the art market, but the threat of litigation against expert authenticators does. And while authenticators may obtain some level of protection from well-crafted engagement agreement, the new legislation proposed by the New York City Bar Association’s Art Law Committee provides the broader protections that the market needs to openly evaluate art and should serve as an example of how the law can effectively aid the art market in making rational valuation decisions, not by mandating what is or isn’t authentic, but by fairly protecting those with the ability to guide the market to make such determination.

1 Jacob Weisfeld, Cardozo Law School Class of 2013, assisted with research for this article.