What happens when you have 20 various creditors to a dealer’s bankruptcy, who wants to opt out first? Sotheby’s, of course, is trying to opt out of the NY State Supreme Court ruling by Judge Richard B. Lowe III that blocks the sale of all art items inside the Salander-O’Reilly Gallery in New York City. Do auctioneers have a higher calling for works of art than a bank or consigner? Welcome to the vigor of the Sotheby’s/Christie’s duopoly.
Fresh off winning State approval for holding auctions of wine, the distinction of blurring the lines or embellishing the practice of auctioneering by the duopoly is well done and well thought out. In designing legal outcomes to their fashion, whether it’s expanding into new areas or preventing changes in their methods, their aggressive approach has been quite successful. However, this Court ruling would allow their claim to circumvent any legislative initiative, which is much more difficult to enact. If Sotheby’s is successful, my advice is to give your works of art to the auctioneer and then your merchandise is protected from the court and creditors. That’s a scenario that Sotheby’s and any auctioneer would love.
A filing for bankruptcy attempts to take all possible assets of the debtor and find a resolution for the creditors to the action. When given cash in lieu of art, the exchange of assets is pretty clear, even if it’s promised with an agreement. Cash can be “fungible”, art is art, and it can’t be cut up. The critical part of Sotheby’s claim could be that they as an auctioneer have a legal precedent (perhaps the U.C.C. code?) over any form of debtor. Banks may want Sotheby’s to sell it, as one good corporate citizens to another, but I guess bank liens on inventory, as well as a consigners own pieces shouldn’t measure up to an auctioneer’s claim. There are forms of relief in bankruptcy court where state filings of liens are acknowledged, but they are part of the court’s process.
In attempting to aggressively opt out of the bankruptcy, Sotheby’s can set a precedent that any claim by an auctioneer in a bankruptcy, is not part of the assets of the debtor and the location of those assets is assumed to be in their premises (when in fact it isn’t). That’s powerful legal fuel for the auctioneering business. Immunity on all claims of inventory, along with sham bidding and the buyer’s premiums are good for the duopoly and every auctioneer.
Of course the court could deny Sotheby’s claims, and it would be just a blip on the screen; but it shows that Sotheby’s is prepared and looking for opportunities. Having the ability of opening doors within the legal system requires a visionary and financial commitment. It is something that dealers and their representative organizations lack. All auctioneers may want to pay a “debt” of gratitude to the duopoly.