Dean Valentine and Mark Grotjahn settle on resale royalties
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After more than a year of court filings and hearings and hundreds of thousands of dollars in legal fees, artist Mark Grotjahn and Dean Valentine, one of his earliest collectors, have settled a high-profile dispute over the payment of the resale royalty specified by California law.
Although the law providing a 5% royalty to artists whose “original” (one of a kind—not editioned) artwork is resold at a profit has been on the books since 1976, it has been widely neglected and unevenly enforced. Remarkably few lawsuits have been filed over the statute until Grotjahn pursued his case in 2010 and a different group of artists filed a class-action suit against Christie’s, Sotheby’s and EBay last fall.
Grotjahn’s case had been scheduled to go to trial on March 6. Instead, after court-ordered mediation, Valentine agreed to pay Grotjahn $153,255 to settle the case. This figure includes the 5% resale royalty (plus interest) on one painting and one drawing that the collector had bought and resold, amounting to $68,255, plus $85,000 toward Grotjahn’s legal fees.
“I’m happy it’s over,” Grotjahn said. “And I’m happy it went my way, but it wasn’t a pleasant experience. I had to put a lot of money on the line to do this. Hopefully there is an awareness now, so collectors will be more willing to pay artists when they resell their works.”
“This sends a signal to the world,” said Grotjahn’s lawyer, Lonnie Blanchard. “If you sell a painting subject to artist royalty, you have to pay it--or you run the risk of having a lawsuit filed against you and having to pay the opposing lawyers’ fees on top of it.”
Blanchard called the settlement a sign that Valentine had “exhausted all the arguments that he thought might help him,” noting that the defendant argued at different points that the law was preempted by the Copyright Act of 1976 and that the law applied to the auction house, not the collector. “He tried both arguments, and the court rejected them,” Blanchard said.
Valentine said he settled because he did the math. “The only reason this case was stopped was because of the financial downside of pursuing this all the way,” he said. “It doesn’t change the fact that this is a terribly written law that creates massive problems. Instead of actually helping artists, most of whom need healthcare, day care and help in those areas, it only makes the artistic one-percent richer.”
Valentine’s lawyer, Joshua Kaufman, said Valentine tried to settle earlier but couldn’t because “the opposing party made outrageous attorney fee demands’ of him. “It was never an issue of the 5%. What prevented an earlier settlement was that their demand for legal fees were over the top,’ Kaufman said. As for the validity or constitutionality of the law, Kaufman said “nothing was resolved,’ noting that similar arguments are now playing in the case against the auction houses.
Last month the auction houses filed a joint resolution to dismiss the class-action suit filed against them. They argued that the California law is unconstitutional because it represents one state’s attempt to regulate interstate commerce, interfering with the commerce clause of the U.S. Constitution, and because it violates ‘prohibitions on the taking of private property.’ They also revived the argument that the state law competes with the 1976 Copyright Act.
Many observers expect this case to reach an appellate court, which could give the art world some much-needed clarity by putting teeth into the law, or else by putting it out to pasture.