California Tried to Give Artists a Cut. But the Judges Said No.

The artist Laddie John Dill, a plaintiff in a class-action lawsuit from 2011 seeking royalties under state law. Mr. Dill said of artists: “If they’re starting out and something goes up for auction, I think they should get a piece of it.”CreditStephanie Diani for The New York Times

By Amanda Svachula

July 11, 2018

A federal appeals court has ruled that visual artists will no longer be entitled to royalties from resales of their work in California — a decision that may discourage other states from considering royalty laws.

The ruling, issued on Friday, addressed a 1977 law, the California Resale Royalties Act, the only of its kind implemented in the United States. The law benefited visual artists, who, unlike composers, filmmakers or writers, do not receive a share of any future sales under copyright law. California residents selling work in or out of state, or others selling their work in California, were entitled to earn 5 percent of the price of any resale of their artwork over $1,000. (For deceased artists, royalties went to estates or heirs.)

After a seven-year battle, prompted by class-action lawsuits, the United States Court of Appeals for the Ninth Circuit in San Francisco restricted the state law to resales occurring in 1977, on the grounds that the statute was pre-empted by the federal copyright law that went into effect on Jan. 1, 1978.

The state law stemmed from droit de suite, the French concept of offering artists compensation for future sales. Variations of resale royalty laws for artists have been implemented worldwide, in dozens of countries including Australia, and most of the countries in the European Union, but all attempts at creation of a United States law have failed.

The artists Chuck Close and Laddie John Dill, among others, filed the three class-action lawsuits, against Sotheby’s, Christie’s and eBay, for failing to pay these royalties in California. But in 2012, a district court struck down the law, and in 2015, the Ninth Circuit ruled that the statute could survive if it only applied to resales in California.

On Friday, the court said that the state law conflicts with the federal copyright law’s first-sale doctrine that claims once a copyright owner sells work a first time, they lose control over future sales.“This quixotic action, which was based on an obviously unconstitutional statute, is finally nearing its end,” the auction house Sotheby’s said in an email statement. Christie’s said in a statement that it “is pleased with the court’s decision.”

Representatives for eBay did not respond to requests for comment.

The court also remanded the 1977 claims to the district court. Ira Bibbero, a lawyer arguing for the artists, appeared to be looking on the bright side, saying he was pleased to fight for these artists and to enforce the act for that one-year span.

This type of legislation has been introduced in Connecticut, Florida, Illinois, Iowa, Maine, Michigan, Nebraska, New York, Ohio, Rhode Island and Texas, but no laws ever made it through, except in California.

Nicholas O’Donnell, a partner at the Boston-based firm Sullivan & Worcester, who has written about the case in his firm’s Art Law Report, said it would now be up to Congress to do something about art royalties, but he sees any action as unlikely.

Chuck Close, who was also among the plaintiffs suing Sotheby’s, Christie’s and eBay in 2011 for failing to pay royalties in California.CreditCharles Sykes/Invision, via Associated Press

Representative Jerrold Nadler, Democrat of New York, championed unsuccessful bills for federal droit de suite laws in 2011, 2014 and 2015. In 2014, the issue became especially contentious as arts organizations and auction houses, including Sotheby’s and Christie’s, became mired in political lobbying.

The 2011 lawsuits do not specify particular sales of art, as the action sought to force auction houses to name the identities or locations of sellers, proceedings usually kept secret. Mr. Dill, a plaintiff on the case, said he wanted to stand up to the large auction houses for the sake of helping young artists capitalize on their work.

“If they’re starting out and something goes up for auction, I think they should get a piece of it,” he said, though he added that royalties from auctions sometimes also just don’t add up to much — he’s made from a few hundred dollars to the $2,500 range.

The artist Robert Rauschenberg, a central figure in the fight for the statute’s implementation in the 1970s, often referenced his own experiences to champion the law. (He sold a collage, “Thaw,” to the collector Robert Scull for $800 — the work was later sold at auction for $85,000.)

In recent years, a few cases — all high-profile, with established artists pursuing royalty rights — have come to light, raising questions in the industry about whether the law benefits everybody, specifically struggling artists. In France, a study of droit de suite demonstrated that around 70 percent of royalty payments went to famous artists like Picasso. In 2012, the famous collector Dean Valentine agreed to a settlement to pay royalties from the sale of a few of the painter Mark Grotjahn’s pieces.

Under the state law, a seller was supposed to seek out the artist, but if the artist couldn’t be traced, the seller was to give the royalties to the California Arts Council. That council then distributed them. If it couldn’t find the artist in 90 days, it was to use the money to fund art for public buildings.

Up until 2012, when the council suspended the administration of the act because of litigation, a spokeswoman said, the organization helped to trace 555 artists or their heirs and distributed $256,144 to them since 1977. It kept $50,839 of royalties for those artists it could not trace.

When contacted this week, the council could not provide information as to which public art projects this money funded.

At the national level, in 2014, the Artists Rights Society was among those lobbying in favor of resale royalties. In an email statement, its president, Theodore Feder, said the group was still hopeful that a federal droit de suite law might be implemented to “enable artists to participate in the ongoing economic exploitation of their works in our country.”

As for the application of the new ruling, Mr. Dill, one of the original plaintiffs, said he will not be pursuing royalties for any of his works sold in 1977.

“I personally am not going to delve into it, because it was a long time ago,” he said.