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February 22nd, 2018
Real Estate Developer Ordered to Pay $6.75 Million for Destroying Aerosol Artists’ Works
A New York federal court recently ordered a real estate developer to pay $6.75 million for whitewashing aerosol artists' works located at the famed 5Pointz site in Long Island City. This substantial damages award -- the first of its kind -- sheds light both on the rights of street artists in their works, and the potential liability property owners face when they seek to remove such works from their properties. Here's what you need to know.
In 2013, 21 aerosol artists sought to stop real estate developer Gerald Wolkoff and his real estate entities from destroying their aerosol works that were affixed to the developer's warehouses located at the 5Pointz site. The artists brought their claims under the Visual Artists Rights Act of 1990 ("VARA"). VARA, an addition to the Copyright Act, provides certain "moral rights" to visual artists, allowing artists to prevent the intentional distortion, mutilation, or other modification of their works if such changes will harm their honor or reputation, and to prevent destruction of works of "recognized stature" (and any intentional or grossly negligent destruction of such work is a violation of that right).
VARA provides two possibilities for works that were integrated into a building after its effective date, June 1, 1991. For works that cannot be removed without causing destruction, distortion, mutilation or other modification of the work, the artist has a moral right of integrity, and can sue to vindicate such right unless the right is waived in a signed writing (more on that below). For works that can be removed without causing such harm, VARA gives the artist an opportunity to salvage the work. If the artist fails to remove the work within specified time limits, or if the property owner could not contact the artist following a good-faith effort to do so, the property owner may destroy the work without liability to the artist.
Mr. Wolkoff, who originally encouraged the artists to create these works as part of an informal agreement, planned to demolish the warehouses to make way for luxury high-rise apartments. In November 2013, right before the court was expected to render a written opinion on the plaintiffs' preliminary injunction motion, Mr. Wolkoff painted over almost all of the artists' work. Just days later, the court issued an order denying the plaintiffs' application for a preliminary injunction, but noting that the defendants could be liable for significant monetary damages if it was later determined after trial that the works were of "recognized stature" under VARA.
Four years later, in 2017, the plaintiffs' case was tried before a jury, but in a procedural twist, just before the end of trial, the plaintiffs (with the defendants' consent) waived their jury trial rights, and the court converted the jury to an advisory jury. On the verdict sheet, the jury found the defendants violated the plaintiffs' rights in 36 of the 49 works that were at issue in the suit; in each instance, the jury found that Mr. Wolkoff acted willfully. The jury awarded $545,750 in actual damages and $651,750 in statutory damages.
By decision dated February 12, 2018, the Court, disagreeing in part with the jury, held that 45 of the 49 works were of "recognized stature." In making this finding, the court noted that these works were selected for permanence and prominence by the 5Pointz curator, and the artists' portfolios showed that their works were noted in films, television shows, newspaper articles, blogs, online videos, and on social media, as supported by expert testimony. (Of the four works that did not meet the "recognized stature" standard, two were gifted to a local bar and were not part of the curated 5Pointz collection, a third was painted not on a wall but on a rusty tin shack, and the fourth was a Halloween-themed work that was created just weeks before the whitewash and likely to be overpainted by other artists given its holiday theme.) According to the court, Mr. Wolkoff's whitewashing, without notice or a waiver of rights from the artists, was an infringement of the artists' moral rights. Unlike the jury, the court found that the plaintiffs had no actual damages since they failed to establish a market for the aerosol works, which were stories tall and painted on buildings. An award of the defendants' profits was also not available since the plaintiffs failed to meet their burden to establish the amount of profits attributable to the destruction of the works, as opposed to the success of the defendants' property development venture. As for statutory damages, due in large part to Mr. Wolkoff's obstinate behavior, the court, agreeing with the jury, found the whitewashing "willful," and awarded maximum statutory damages in the amount of $6,750,000. Notably, that award is over $5.5 million more than the advisory jury's total verdict.
Although subject to appeal, the trial court's decision in the 5Pointz case shows that property owners must carefully consider the rights of artists whose works are integrated into the buildings located on their property, and that any failure to honor artists' moral rights can result in expensive litigation, and even multi-million dollar verdicts. Although some parts of the 5Pointz case are sui generis in light of the amount of works located at the former 5Pointz site and the "recalcitrant" behavior of the defendants, property owners and artists alike should be mindful of the following key points:
"Recognized Stature" is a Relatively Low Bar: The 5Pointz case shows that the test for achieving "recognized stature" under VARA is a relatively low bar: the work does not have to be recognized in the traditional sense (such as academic review or museum exhibition) to be protected under VARA. Media coverage, and even "social media buzz" can constitute evidence of the recognized stature of a work.
Waivers and Notice Can Prevent Liability for Real Estate Owners: Under VARA, there are two ways that property owners can avoid liability for removing artwork "integrated" into their buildings after June 1, 1991. First, property owners can obtain a waiver, signed by both the artist and the building owner which specifies that installation of the work may subject the work to destruction, distortion, mutilation or other modification by reason of its removal. Such a waiver is an option only when the artwork cannot be removed from the building without being damaged. Second, if the artwork can be removed from the building, the property owner should provide written notice to the artist that she will have 90 days to remove her artwork. If the artist does not act within the 90-day period, the building owner can remove the artwork without liability. Perhaps surprisingly, these large-scale aerosol works were, according to expert testimony, removable from the buildings; therefore, it is possible that the Wolkoff defendants could have prevailed in the case had they provided 90-day notice and established that the works were removable.
If you have questions about this case, about VARA, or about any other art law matters, please contact Amelia Brankov at (212) 826 5574 or firstname.lastname@example.org or any other member of the Frankfurt Kurnit Art Law Group.
Other Art Law Alerts
Art Collaborators Settle Suit over Ownership of Works
Recently, a settlement was reached in a lawsuit over the intellectual property rights in a body of thousands of works of visual art created by a husband and wife duo. Read more.
February 7 2018
Recent NYS Sales Tax Law Change Affects Art Sales Between Related Entities
On August 14, 2017, the New York State Department of Taxation & Finance issued a Technical Memorandum, TSB-M-17(4)S, which will be of interest to many New York-area art dealers and collectors. Read more.
August 23 2017
Appraisal Relied on by Estate Undervalued Paintings by $1.77 Million
Recently, in Estate of Kollsman v. Commissioner the U.S. Tax Court held that an art collector's estate significantly underreported the value of two artworks for estate tax purposes. The problem: the estate relied on appraisals by an auction house specialist who had an incentive to "lowball" the appraisals to win the right to later auction the works. In addition to this conflict of interest, the court found that the values reported by the estate were unpersuasive because the auction house specialist exaggerated the dirtiness of the paintings and failed to adjust his appraisals after one of the works sold at auction for approximately five times more than the reported value. Here's what you need to know about the case. Read more.
April 4 2017