Artist Resale Royalties -- New Cases under California Law

On October 17, a proposed class of artists filed three federal lawsuits against auction houses Christie’s, Inc., and Sotheby’s, Inc., and internet auctioneer eBay, Inc., alleging that the defendants sold their artwork at California auctions and on behalf of California sellers, but failed to withhold royalties due. The complaints seek class-action status to represent many other artists and allege that the auctioneers engaged in a ongoing pattern of concealing the identities and residencies of sellers who live in California, thereby avoiding the five percent royalty due as agents for the sellers. All three complaints, filed in the U.S. District Court for the Central District of California, allege violations of California’s Resale Royalties Act as well as California’s Unfair Competition Law.

Spokespersons for both Christie’s and Sotheby’s indicated that the auction houses intend to vigorously defend the lawsuits. Likely defenses will include a challenge that the federal Copyright Act preempts the California Resale Royalty Act; although reviewing courts upheld the Resale Royalty Act’s constitutionality in prior challenges based on the 1909 Copyright Act, that topic has not been substantially revisited in light of Congress’ robust amendments to the Copyright Act in 1976.

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