Artists Win Circuit Rehearing of Calif Royalty Law

The full 9th U.S. Circuit Court of Appeals has agreed to an 11-judge rehearing of the constitutionality of a California law that required art galleries to pay artists a commission for resale of their work.

A majority of the appeals court’s voting judges agreed Thursday to reconsider a 2012 ruling that struck down the law as a violation of the dormant commerce clause of the U.S. Constitution by imposing royalties from transactions that occur outside California, between non-California parties.

The rehearing boosts the chance for revival of three class action lawsuits by artists Chuck Close, Laddie John Dill and the estate of Robert Graham and the Sam Francis Foundation.  Their lawsuits seek to recover royalties of 5 percent on the resale of all fine art sold in the state or put up for auction by California residents.

Former U.S. District Judge Jacqueline Nguyen, then in Los Angeles, issued the 2012 ruling in favor of Christies Inc., Sotheby’s Inc. and eBay Inc.  Nguyen, who has since been appointed to the 9th Circuit, did not participate in the deliberations or vote for the en banc rehearing, according to the court order.

In August, a three-judge panel assigned to the original appeal asked lawyers for both sides to argue whether the case should simply be heard by the en banc court without waiting for a three-judge panel opinion.  That panel included Judges Ferdinand Fernandez, N. Randy Smith and Mary Murguia.

The 9th Circuit previously upheld the statute in 1981.

The Royalties Act is unique to California in the United States, although similar laws apply in Europe, according to an analysis by the Cooley law firm.

Auction houses and galleries are responsible for paying a 5 percent fee to the artist and if the artist cannot be found, the fee goes to the California Arts Council.

Along with Nguyen, Judge Kim Wardlaw did not participate in the vote of the 29-judge court.

Case: Sam Francis Foundation v. Christies, Inc., No. 12-56067


En banc order

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