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03 Oct 2018

Authenticator liability: New York State Court finds in favour of Catalogue Raisonné

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Earlier this year, a New York Supreme Court judge dismissed the London-based Mayor Gallery’s $7.2 million claims against the Agnes Martin Catalogue Raisonné LLC (AMCR) authentication committee for excluding 13 works from the French artist’s catalogue raisonné.

The saga began when Mayor Gallery sold those 13 works by Agnes Martin to four different collectors prior to AMCR’s formation in 2012. When the collectors then tried to get their purchased artworks authenticated and included in the artist’s catalogue raisonné by AMCR, all those submissions were rejected. Without inclusion in the catalogue, the collectors had a slim chance of reselling those works at any reputable auction house or galleries. Therefore, they turned to Mayor Gallery for redress and the gallery had to provide either a refund or a promise to do so if it did not prevail in an action against AMCR. Mayor Gallery then issued proceedings alleging that AMCR had failed to show an adequate level of care in their authentication process and were liable for the gallery's losses of refunding the sale prices of the works in question.

As a common practice, the authentication committee required the collectors to sign an examination agreement not to take legal action from their final decision whether or not to include the artworks in the catalogue raisonné. Mayor Gallery therefore put forward a novel argument of "product disparagement" that such exclusion had resulted in an unfair devaluation of the artworks. It was also argued that the long standing dispute between the gallery owner and the chairman of the committee had motivated a prejudicial decision by AMCR.

In the ruling, Judge Andrea Masley held that there was no evidence of "malice" in AMCR's decision and that the committee is "not required to turn over any information other than its decision to accept or decline to include the submitted work by letter, and does not have to grant any person an opportunity to rebut its decision." Furthermore, in an unusual step, the judge awarded the committee the full cost of their legal fees to be paid by the gallery.

Move in favour of authenticators?

Will this ruling set a new precedent that can be used as a shield for art scholars and agents from having to defend themselves against disgruntled galleries in the future? The court did recognise that, under the examination agreement, the authentication board was allowed a broad discretion in their decision making process and the fee-shifting provision was considered enforceable. As a result, the court held that Mayor Gallery has to pay legal fees for the authenticators.

This is an important development in light of the ongoing proliferation of lawsuits in the art market where frustrated art galleries file claims against artists' foundations that offer authentication services. Many of such foundations have become deterred from offering an opinion on a work's authenticity for fear of being sued. The costs of defending the claims has led some of them—including foundations of Andy Warhol, Jean Michel Basquiat, Alexander Calder and Keith Haring—to disband their authentication committees entirely.

The value of official authentication committees, as opposed to independent experts, is far from an uncontentious issue in the art market. However, it is undeniable that authenticators play an important role in many jurisdictions, assuring a certain level of confidence that an artwork is genuine. There has been a limited attempt in the state of New York to legislate on limiting legal liability of art authentication opinions by securing legal fees for successful defendants in lawsuits related to art authentication decisions. Against this background, this decision has the potential to warn art owners to think carefully about cost implications of going to the court when they are not happy with an authentication board's decision about an artwork.

Equally, there are valid concerns that there should be legal redress for owners of artworks, frustrated by having their art purchases rendered worthless due to rejection by authentication boards. This is especially the case when such decisions often lack transparency and are free from other regulatory scrutiny. The frustration may be enhanced when there is perceived personal grudge or conflict of interest, as was the case with Mayor Gallery's conflict with Arne Glimcher, the chairman of AMCR. Therefore, litigation also plays its role as a check and balance in such a self-regulating market, and to ensure that actors in the art market behave in good faith.

Given that the need to strike a balance between these competing interests through legislation is without a concrete solution yet, it was hoped that the decision in Mayor Gallery v AMCR would offer future guidance. While Judge Masley's emphasis on the examination agreement may give some comfort to authenticators that proper drafting of agreements at the outset of authentication may limit their exposure to legal liabilities, there still remain legal uncertainties.

Firstly, this decision has limited precedent value coming from a single trial-level state court. Further, Mayor Gallery's case was only dismissed because they had not proved actual loss—for example, it would have been different if the transactions between Mayor Gallery and the collectors had been rescinded at the time of issuing the claim. Consequently, the substantive questions were left unaddressed with regards to (i) whether an exclusion from a catalogue raisonné amounts to a public statement for the purposes of "product disparagement" claim or (ii) whether the waiver provisions the in Examination Agreement are enforceable. Therefore it remains for another day how the courts would approach balancing the need to encourage healthy communications between authenticators and art owners in the art market whilst protecting the integrity of art experts' opinions.

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