Wrangling over Rothko

Mark Rothko, Untitled (1961)

At least four years of legal wranglings over the sale of this Mark Rothko painting appear to have come to an end with little to show except substantial legal costs for all parties.

At the heart of the dispute, a confidentiality clause, which is now anything but.

By way of background, back in 2007, Marguerite Hoffman (the Plaintiff) sold this Rothko painting for $17.6 million to David Martinez (Second Defendant), via his company Studio Capital, Inc. (Third Defendant), under the terms of a letter agreement.

The agreement was signed by now defunct New York gallery L&M Arts (First Defendant) acting on behalf of Studio Capital. The relevant clause of the agreement provided that: “[a]ll parties agree to make maximum effort to keep all aspects of this transaction confidential indefinitely. In addition, the buyer agrees not to hang or display the work for six months following receipt of the painting.”

Following the 2007 sale, Studio Capital kept the painting in storage, eventually consigning it to Sotheby’s for sale in 2010. Sotheby’s auctioned the painting on 12 May 2010, and sold it for over $31 million.

Not long after, Hoffman sued L&M, Martinez and Studio Capital for damages for breach of the confidentiality clause of the letter agreement, on the basis that when she sold the Rothko painting privately, she had done so at a substantial discount in exchange for the promise of strict confidentiality, forfeiting the additional millions of dollars that the painting would have brought if sold at public auction.

Earlier this year, a Dallas jury decided that Hoffman had proved her breach of contract claim against L&M, Martinez, and Studio Capital, and awarded compensatory damages of $500,000 – far below the $22.4 million claimed by Hoffman – which the court subsequently slightly increased to $1.2 million.

As a result, the defendants filed motions for judgment as a matter of law. This is a US cause of action which argues that the evidence used to support an issue is legally insufficient and no reasonable jury could find for a party on that issue. [US lawyers: please feel free to correct this very basic summary.] 

Essentially, the court was asked whether:

(i) a reasonable jury could have found that L&M was acting as agent for Studio Capital and Martinez when it entered into the letter agreement, and that, accordingly, Studio Capital and Martinez were bound by the letter agreement;
(ii) a reasonable jury could have found that L&M breached the letter agreement;
(iii) a jury could reasonably have found that L&M’s breach of the confidentiality clause caused Hoffman damages; and
(iv) the damages Hoffman had elected to recover were legally barred under Texas law.

In respect of the first point, Studio Capital and Martinez claimed that there was no evidence that they ever communicated to L&M or to Hoffman any intent to confer any authority on L&M to enter into the letter agreement on their behalf, and that the undisputed evidence was that this did not occur. (Rather, Studio Capital and Martinez argued, L&M did not act as their agent, but, consistent with art industry practice, as an intermediary, purchasing the Rothko painting from Hoffman and then reselling it to them.)

On the second point, L&M argued that no reasonable jury could have found that the goal of the confidentiality clause was not met. And, on the third, L&M maintained that a reasonable jury could not have found that Hoffman suffered any damages as a result of their breach of the confidentiality clause because she had failed to adduce sufficient evidence of causation.

The final point was [from my point of view!] a complicated issue of the type of damages allowed for the breach of a contract under Texas law.

Earlier this month, the US District Court for the Northern District of Texas (Dallas Division) handed down its ruling on the motions.

Unfortunately for Hoffman, the court agreed with Studio Capital and Martinez. It found that there wasn't legally sufficient evidence for a reasonable jury to have found that Studio Capital or Martinez conferred any actual or apparent authority on L&M to enter into the letter agreement on their behalf. The court, therefore, went on to dismiss the action against them with prejudice.

The court did find that a reasonable jury could have found that L&M breached the confidentiality clause, and, further, that L&M’s breach of the confidentiality clause caused Hoffman's damages in the form of the lost benefit of her bargain. However, as a further blow to Hoffman, even though the jury had offered Hoffman two measures of damages and the judge had ultimately decided the appropriate sum of damages to be awarded, the court held that she was not entitled to recover under the measure of damages that she had elected.

The result of this ruling is that the Hoffman's claim against Studio Capital and Martinez is effectively over and she is barred from filing another case against them on the same claim. Moreover, Hoffman must file a new motion against L&M to alter or amend the judgment in order for the court to award her damages under an alternative measure of damages.

Four year of litigation and no additional millions to show for it....distressing.

Art Attacks

Until very recently few had ever heard of Yellowism, an art movement that gained some notoriety in October 2012, when self-proclaimed Yellowist Vladimir Umanets wrote on one of Mark Rothko's paintings at the Tate Modern.  Umanets signed his name on Rothko's "Black on Maroon" and also wrote the phrase “A potential piece of yellowism."  It is difficult to discern exactly what Yellowism is, though there is a website for the movement as well as a YouTube channel.  Blouin ArtInfo gives a critical, but thoughtful analysis of Yellowism here.  

Marcin Lodyga, Umanets' partner in Yellowism wrote that Rothko's painting at the Tate, signed by Umanets was still a work of art.  He felt it would not be Yellowism, only potential Yellowism, until the work was placed in "yellowistic chamber," at which point it would express only the color yellow and cease to be a work of art.  Umanets told the BBC, "Art allows us to take what someone's done and put a new message on it."  

Rhetoric aside, appropriation within the art world is not new.  Marcel Duchamp signed a urinal and transformed an industrial design into a work of art.  Artists like Andy Warhol and Jasper Johns incorporated images (trademarks included) from modern culture into their works as if casting a mirror out onto modern society.  However, at some point in the 1970s and continuing until today art began appropriating itself, in the form of physical "attacks" on existing works displayed in galleries and museums. 

These "attacks" present some very unique legal questions.  When someone writes on a Rothko painting or dumps a bottle of ink into Damien Hirst's pickled sheep or draws a clown face on a Goya print, does this act of destruction create a new work of art and with it new copyrights in another author?  

Copyright protects original works of authorship, giving the author exclusive rights and the ability to prevent unauthorized copies or otherwise derivative works. As for art attacks, it would seem that the question comes down to whether the new work would be seen as an unauthorized derivative, or whether the work was transformative enough, and accordingly leaning in favor of fair use.  Still, transformative use is an incredibly difficult question, and often it leaves much to the eye of the beholder.  

One must also consider the moral rights attached to certain works.  In most civil law jurisdictions and some common law jurisdictions, moral rights attach to works of art during an artist's lifetime.  Among other issues, moral rights protect the integrity of the work, barring alteration, distortion, or mutilation of the work even after it leaves the artist's possession or ownership, and even if the artist has assigned the copyrights to another.  While moral rights may not present an issue in the case of long-since deceased artists, they could certainly play an important role in attacks on the works of living artists.

Further, it seems that in most cases those who "attack" works of art are not the legal owners of the physical work of art, thus their acts constitute crimes as well as civil torts.  Even if a new copyright existed, it would likely be rendered worthless as proceeds from the copyright would be viewed as proceeds of a crime.  (In case anyone is still wondering, Umanets was arrested for what he did to Rothko's painting.)  

While art attacks might serve as an end run into the limelight for new artists, the social and legal consequences are considerable.