Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
Federal Court Judge Jacqueline Nguyen has declared the 30 year old California Resale Royalty Act unconstitutional. All you need to know about this law can be gleaned from the picture at the signing. In it, the 1976 version of Governor Jerry Brown is trying to show how hip he is by sponsoring terrible legislation that ultimately hurt the very people it was trying to help. Sounds familiar, I know.
It purported to right the injustice that occurred when a fat, wealthy, monocle-wearing art dealer sold some poor slob's work at an enormous profit while the artist toiled away unrewarded and unrecognized until long after his death. We've all heard this story. The problem is that there was no problem. Like most governmental intrusions in the free market, it was legislation (and photo-ops) in search of a problem. The act required a five percent royalty on profitable art sales to go back to the original artist if the sale occurred in California or the seller resided in California.
First, most art dealers are dedicated to raising the profile and financial well-being of artists. They are not disinterested speculators. They are, for the most part, risk-taking patrons who take loss after loss until they finally hit it big with one piece or another--maybe.
If the art starts creeping up in price (or if it skyrockets), the free market creates a scenario where the artist will benefit with his or her new works. No one is going to get screwed here. Now enter the government. The poorly-drafted legislation slowed down the art market and hurt risk takers' ability to help deserving artists. True art supporters and gallery owners I spoke with (who don't want to be named) said this law only caused problems for both gallery owners and artists. For every surprise check an artist received, the artist was actually being hurt in the long run because it just became a hassle to let the free market truly drive up prices.
Justice Nguyen did not rule on the act's fairness to artists. To her credit, she saw state legislation that attempted to regulate commerce in another state and rightly struck it down. She is now on the Ninth Circuit. Good for her--and good for the region if she keeps up this common sense.
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Dec '10
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
It's so rare to see anything good come from the 9th. Now I wonder if they'll overcompensate for one good ruling with 5-10 really atrocious opinions.
Edited on June 1, 2012 at 9:47pmMay '12
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
In social welfare state Europe they call it Droit de Suite. Even there it isn't as noxious as Gov. Moonbeam's version, the Resale Royalty Act. The former on a staggered scale(life of the artist +70 years), the latter a flat 5% fee on any artwork sold over $1000 (life of the artist +20 years).
In practical terms, that meant that if you wanted to buy a work of art for $10K in SF, on top of the price, you'd have 8.75% sales tax($875) plus another 5%($500) on top of that. Every time you sold that artwork a buyer would have to pay an additional 5%. Every time. That's a real hard selling point to a potential buyer.
Obviously, this put California art dealers at a competitive disadvantage. The RRA was great for established artists like Chuck Close and terrible for new artists. The additional costs made it far more difficult for art dealers to take risks on new artists vs. playing safe with artists who had a body of work that had an established value in the art market. This ruling is good for California art dealers and emerging artists.
Edited on June 1, 2012 at 9:58pmRe: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
You would expect nothing less in France or Germany, but in California there's a sigh of relief that we are not headed in as fast in their direction as we though before this ruling. But King Prawn is correct. They'll find some way to offset this sensible decision. It may be appealed in the 9th. They've upheld the law before but now they have to face Nguyen's thoughtful analysis. Her ruling didn't come from the 9th, but Nguyen is now there. This was left over from her stint in the Central District of California, in Federal Court.
Jun '10
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
So that's what Alec Baldwin looked like 36 years ago?
Aug '10
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
Joe Escalante
The act required a five percent royalty on profitable art sales to go back to the original artist if the sale occurred in Californiaorthe seller resided in California.
Yergh...
If it made sense for artists to retain resale rights over their creations, wouldn't it be commonplace for them to include such terms themselves in the bill of sale? What need is there to pass a law when there's freedom of contract? Artsy types are generally not shy about bargaining for contracts that protect their interests.
The very fact that politicians thought a law was necessary to force this kind of behavior shows how unnecessary the law is.
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
Here's what I want to know: How on earth was my friend Joe Escalante, the super-hip, punk rock musician, matador, and radio talk show host aware of this thirty-year old law in the first place?
Good Lord, Joe. There really is no bottom to you. Or, delightfully enough, to the subjects on which you knowledgeably post. But how do you do it?
Aug '10
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
It's the fact that he is a super-hip, punk rock musician (and a lawyer) that makes his knowledge of this law unsurprising to me.
The punk rockers I know are all pretty well plugged in to the general art scene. Musicians know graphic designers, painters, photographers, etc. (All part of la vie Bohème, n'est-ce pas?)
Whenever an activity is part of you and your friends' daily lives, you'll be more hep to the laws surrounding it.
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
Thanks guys. My talk show actually deals primarily with entertainment law and intellectual property issues.
I was very excited to see a case relating to my show highlighted in a conventional paper, rather than a niche site. My ratings are constantly reminding me what a niche I'm in. :(
And I bought a painting from my brother a couple years ago. He owns a gallery in L.A. When I saw the artist's wife at a function not long ago I proudly told her I now own the famous piece. She reminded me of the law in a kind way. Luckily my brother is as straight as an arrow. He had already paid the royalty.
Peter Robinson: Here's what I want to know: How on earth was my friend Joe Escalante, the super-hip, punk rock musician, matador, and radio talk show host aware of this thirty-year old law in the first place?
Good Lord, Joe. There really is no bottom to you. Or, delightfully enough, to the subjects on which you knowledgeably post. But how do you do it? · 1 hour ago
Aug '10
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
Does your show have a blog, or could you recommend some books on the subject?
I am not so much a talk radio person, but I do like to read!
Aug '11
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
There is also in Europe the non-assignable moral rights attaching to the artwork's copyright. I have always been of two minds of the scheme specifically, but it seems to me to make Droit de Suite even more outrageous.
Jim Ixtian: In social welfare state Europe they call it Droit de Suite. Even there it isn't as noxious as Gov. Moonbeam's version, the Resale Royalty Act. The former on a staggered scale(life of the artist +70 years), the latter a flat 5% fee on any artwork sold over $1000 (life of the artist +20 years).
Edited on Jun 1 at 12:58pm
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
Hey Peter. Here's another one. Another brother (actually an estranged step brother) can now be seen on a new show called Final Offer as the "Art Collector." I forgot about this guy. He just popped up on my TV screen yesterday.
Feb '12
Re: Dumb California Resale Royalty Act Struck Down By Smart New Ninth Circuit Judge
I wish you'd linked to the opinion. I'm curious what the reasoning could be. If a state can tax the capital gains on its citizen selling an artwork out of state, why can't it tax it and also direct that the proceeds from the tax go to the artist?