NEW YORK—California’s 35 year-old Resale Royalty law was struck down as unconstitutional in the US District Court of Appeals, ninth district, on May 17. The law requires that artists be paid five percent of the profit when their work is sold on the secondary market and either the seller resides in the state or the sale takes place in California.
In a class action lawsuit brought against Christie’s and Sotheby’s by the plaintiffs, including the Sam Francis Foundation and the Estate of Robert Graham, Judge Jacqueline H. Nyugen ruled that the California Resale Royalties Act violated the commerce clause of the US Constitution, in that the law seeks to control commerce outside of the borders of the state—a power only permitted to the federal government.
She sided with the arguments made by the auction houses—that the state law was not viable without the ability to regulate commerce outside of California—noting that if resale royalties were “to apply only to sales occurring in California, the art market would surely have fled the state to avoid paying the 5% royalty.”
The judge cited a 1994 Supreme Court ruling to explain that “States do not have the ‘power [to] unjustifiably…discriminate against or burden the interstate flow of articles of commerce’” and that only “Congress can exercise its Commerce Clause power.”
Christie’s released a statement welcoming “the District Court’s decision to strike down the California Resale Royalty Act in its entirety on the grounds that it violated the US Constitution.” A Sotheby’s spokesperson told ARTnewsletter: “We are pleased with the decision.”
Meanwhile, Venice, Calif., artist and class action plaintiff Laddie John Dill described Judge Nyugen’s ruling as “an annoyance. The law has worked pretty smoothly in California, and it has worked in Europe for quite a few years.”
Resale royalty is called “droit de suite” in much of Europe, including France, where it was enacted into law back in 1921. The UK is the most recent nation to adopt the law, back in 2005.