Spencer's Art Law Journal - Vol. 3, No. 2 - Fall 2012

Editor's Note

This is Volume 3, Issue No. 2 of Spencer's Art Law Journal. This Fall issue contains excerpts from a recently published book, and two essays which will become available by posting on Artnet starting November 2012.

This issue opens with an excerpt from Michael Findlay's new book, The Value of Art: Money, Power, Beauty. How the art world values art is important because the concept of "value" is at issue in art disputes, often to calculate the measure of damages for lost, stolen or damaged artwork. How value is assessed is also essential when deciding on the information disclosures and representations in art transactions.

The first essay (Stemming the Tide ... ) discusses a development in federal law that eliminates the option of using the federal Lanham Act to sue experts over statements regarding authorship or authenticity of works of art. While this legal issue was most recently decided in federal court in New York in Gilbert v. Indiana, in a lawsuit against the artist Robert Indiana, this decision also benefits experts providing expert opinions about art. Eliminating Lanham Act claims is a particularly important development, and heartening to those who care about preserving the role of scholarship in the art world, because Lanham Act claims expose defendants to liability for up to three times the amount of actual damages plus the plaintiff's attorneys' fees. Such claims were therefore disproportionately likely to place extreme pressure on experts when a disgruntled owner challenges an opinion.

The second essay (Street Photography ...) provides an introduction to the individual right of privacy and right of publicity, which is recognized in New York's Civil Rights Law. These rights often come into conflict with those of artists, particularly photographers, when they depict individuals who then object to this use of their likeness. These disputes are particularly interesting because under New York law, there is a defense that the work at issue is "art," which by its nature requires courts to decide, as a matter of law, what is "art." By focusing on a recent lawsuit against street photographer Philip-Lorca diCorcia and diCorcia's assertion of the "art" defense, the essay discusses the various ways that courts have attempted this definitional task.

Three times a year, issues of the Journal continue to address legal issues of practical significance for institutions, collectors, scholars, dealers and the general art-minded public.

THE VALUE OF ART: MONEY, POWER, BEAUTY

Prestel, Munich and New York, 2012: Excerpts from Michael Findlay's new book

By Michael Findlay

The concept of "value" is at issue in numerous art disputes, often to calculate the measure of damages for lost, stolen or damaged artwork. Understanding how value is determined in the art market is also essential when assessing the relative importance of information disclosures and representations in art transactions. This excerpt from Michael Findlay's new book, The Value of Art: Money, Power, Beauty, published this year by Prestel, provides an expert's insight on this issue. It is reprinted with the generous permission of the author and the publisher.

MICHAEL FINDLAY, a vastly experienced art dealer, is a Director of Acquavella Galleries in New York, known for major exhibitions of nineteenth- and twentieth-century masters including Pablo Picasso, Georges Braque, James Rosenquist, and Lucian Freud. Born in Scotland, Findlay began his career in New York in 1964, where he was a pioneer of SoHo's legendary gallery scene and presented important solo exhibitions of then-unknown artists such as John Baldessari, Stephen Mueller, Sean Scully, and Hannah Wilke. In 1984 he joined Christie's as its Head of Impressionist and Modern Paintings and later was named International Director of Fine Arts while serving on the Board of Directors until 2000.

What Determines the Commercial Value of Art?

Like currency, the commercial value of art is based on collective intentionality. There is no intrinsic, objective value (no more than that of a hundred-dollar bill). Human stipulation and declaration create and sustain the commercial value.

The reason that many people continue to be astonished or enraged when they hear that a particular work of art has been sold for a large sum of money is that they believe art serves no necessary function. It is neither utilitarian, nor does it seem to be linked to any essential activity You cannot live in it, drive it, eat, drink, or wear it. Even Plato considered the value of art to be dubious because it was mimesis, an imitation of reality.

If you gave most people $25 million and the choice to spend it on a six-bedroom house with spectacular views of Aspen or a painting by Mark Rothko of two misty dark-red rectangles, the overwhelming majority would choose the house. We understand the notion of paying for size and location in real estate, but most of us have no criteria (or confidence in the criteria) to judge the price for a work of art. We pay for things that can be lived in, driven, consumed, and worn; and we believe in an empirical ability to judge their relative quality and commercial value. No matter how luxurious, such things also sustain the basic human functions of shelter, food, clothing, and transport.

A body of new work by any artist is usually consistent in theme, but not necessarily in scale. What makes one painting or sculpture more or less expensive than another in this primary market is usually size. Although the artist's audience has not yet rendered an opinion about which type of work is better or more desirable than any other, and the artist may feel some smaller works are better than some larger ones, usually size wins out, and the smallest works are usually the least expensive. The larger the work, the higher the price, with the exception of paintings and sculptures that may be too large for domestic installation and require the kind of space usually found only in institutions, office buildings, shopping malls, and casinos. Such works may be proportionately less expensive because they are harder to sell.

Depending on the medium used by the artist, there may be a cost of manufacture to consider. In 1895 Auguste Rodin had to pay Le Blanc Barbedienne Foundry in Paris when he cast his Burghers of Calais in bronze. Today Richard Serra has to pay Pickhan Unformtechnik in Siegen, Germany for fabricating his vast steel Torqued Ellipses [ed. note: references to the many images reproduced in the book are omitted from this excerpt]. These costs are passed on to the first buyers of the work. Many artists create sculpture in editions. If there are five or ten copies of a sculpture, the primary market price will be less for each one than for a unique work of similar size, medium, and appearance by that artist.

Aside from these casting expenses, the cost to the artist for materials used in painting and drawing, though perhaps not insignificant, is not a consideration when it comes to pricing the works. Oil on canvas is generally known to be a highly durable medium. Short of direct trauma, it can withstand handling and extremes of temperature and humidity, as well as sun-light. Not so works on paper, which are usually priced lower to account for their greater fragility This has led to the notion that works on paper are inherently worth less than paintings, despite the fact that the secondary market in some cases has placed a higher value on works on paper than on oils by certain artists, such as Edgar Degas and Mary Cassatt.

Another rule of thumb with the primary market of works on paper is that those with color, be they rendered in oilstick, gouache, watercolor, or crayon, will be priced higher than works that are monochromatic: graphite, charcoal, or sanguine.

When it comes to making lithographs, etchings, silkscreens, and other types of editioned works on paper, costs can be considerable. Printmaking is an art that involves not only the creative talent of the artist who conceives the image, but the skill of master printers using sophisticated and expensive equipment.

The Secondary Market

Other than the purchase of new work either directly from the artist or the artist's dealer, all art purchases, whether of Dutch Old Masters, nineteenth-century English seascapes, Impressionist paintings, or Cubist masterpieces, are secondary-market transactions.

Once an artist achieves a degree of stature, a secondary market in his or her work is inevitable during the artist's lifetime. How is the commercial value of an art object decided in the secondary market when it is resold by the first owner? Most things we buy are worth less once we have used them. A car usually is, as are clothes we give to charity. In addition, appliances and electronics have less value when succeeded by newer models. When the real-estate market booms, the second owner of a home may pay more for it than the first, but in a stable market the second-hand house is likely to be worth less than a new one of the same size, design, materials, and location.

Once art passes out of the hands of the first buyer, its commercial value is largely determined by the principle of supply and demand, but it can be managed by the artist's primary dealer. When making a primary-market sale, I am sometimes asked if I will resell the work when and if the client so decides. I usually agree. By doing this dealers can participate in the pricing of secondary-market works by artists they represent.

Some art dealers, both those with galleries and "private" dealers, (sometimes operating out of their homes), represent no artists directly but buy and sell work by living artists. They may not have any direct relationship with the artist but may be very knowledgeable about the work, and by promoting it they are usually contributing to the solidity of that artist's market.

Even in the primary market, the relative availability real or imagined, of a particular artist's work is...

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