Gov. Andrew Cuomo has signed a bill that makes it a misdemeanor for an art dealer to use funds owed to an artist from the sale of an artwork to pay for gallery operating expenses and creditors. The Senate passed the bill in June, and Gov. Cuomo signed it earlier this month. Its was inspired by instances of dealers dipping into artists’ funds when experiencing financial hardship.
The bill was drafted by a subcommittee of the New York City Bar Association chaired by Dean Nicyper, and supported by the Art Law Committee of the City Bar. It used Salander O’Reilly Galleries as an example. Salander filed for bankruptcy in 2007, after more than 20 years in business. The gallery, to quote the Art Law Committee’s report, “commingled the sales proceeds that belonged to the artists, artists’ heirs and artists’ estates with the gallery’s own funds.” When Salander started having money troubles in 2005, the gallery had problems paying its artists and, by 2007, stopped paying them altogether. Millions of dollars owed to artists had disappeared, having instead gone toward keeping the gallery afloat. The gallery still remained in possession of hundreds of works consigned by their artists and artists’ estates, which were claimed by Salander’s creditors and tied up in messy litigation. The new legislation “gives teeth” (in the language of the report) to the rule that artists must be paid for the sale of their work, despite any financial difficulties their dealer may be having, and states that creditors have no claim to such funds or to consigned works.
The new law also requires that dealers pay the legal fees of artists or estates that successfully sue for undispersed funds, in addition to money that was owed. Under the new bill, “heirs, personal representatives, testamentary beneficiaries and trustees of beneficiaries of lifetime trusts” are given the same rights an artist has.
“This law is good for everyone,” said John Cahill, the chair of the Art Law Committee. “The only people it isn’t good for are the people who are dishonest. It’s something that helps New York continue to be the center of the art world.”