In a somewhat unusual development, the 9th Circuit Court of Appeals has agreed to rehear en banc a dispute over the constitutionality of the California Resale Royalties Act.
Chuck Close, Laddie John Dill and the estate of the sculptor Robert Graham are challenging the rejection of their class action lawsuit against Sotheby’s, Christie’s and online auction giant eBay for violating the California law that entitles artists to claim five percent of resale royalties on any work sold for more than $1,000, so long as the seller resides or the transaction happens in California.
The law was put on the books in 1976, yet sparked few lawsuits until recently.
But in May 2012, the artists ran into a roadblock when U.S. District Judge Jacqueline Nguyen dismissed the claims as running afoul of the Commerce Clause of the U.S. Constitution.
“The following example illustrates the CRRA’s problematic reach,” wrote the judge in her opinion. “Assume a California resident places a painting by a New York artist up for auction at Sotheby’s in New York, and at the auction a New York resident purchases the painting for $1,000,000.”
Even though such a transaction happened in New York and the artist is a New Yorker, just the fact that seller is a California citizen could spark a lawsuit over royalties. Thus, the judge concluded that the “practical effect” of the law was controlling interstate commerce even though it may have some “effects within the State.”
After the lawsuit was rejected by the judge, the artists appealed it up to the 9th Circuit, which held oral arguments last April. Reportedly, a three-panel judge assigned to the case was skeptical about reviving the class action and seemed inclined to strike down the law as unconstitutional.
On Thursday, it was announced that a fuller panel of appellate judges at the 9th Circuit would rehear arguments in December. What makes that unusual is that no opinion from the 9th Circuit ever came after that April hearing. Instead, the appellate circuit has elected to skip right to the en banc hearing. Why this happened was that two recent other cases — one involving the regulation of carbon dioxide emissions and another involving a health and safety ordinance on the feeding of ducks for the purposes of foie gras — offered some potentially conflicting conclusions on how a California law may or may not discriminate against out-of-state interests.
And so, the 9th Circuit will now be giving weighty review on a decision that could not only transform the art world by figuring out if artists have a “droit de suite” to collect a fee from art sellers, but maybe go even further, possibly impacting big subjects like whether states can unilaterally impose measures like cap-and-trade to curb climate change. Stated another way, this Chuck Close painting looks one way when viewed up close, but pull back, and the microscopic designs begin to reveal something massive.