An important qualifier to the discussion about deaccessioning and the Detroit Institute of Arts is that although DIA is a subdivision of the bankruptcy debtor (Detroit), that debtor is not any old commercial entity.  Rather, Detroit is a municipality, and municipal and state debtors are governed by slightly different rules than private parties.

The underlying reason for all this is the Tenth Amendment to the U.S. Constitution, which states “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”  The Tenth Amendment is the source of a wide range of disputes concerning the power of the federal government as compared to that of the states, but in this case it expresses itself in 11 U.S.C. § 904 (Chapter 9 of the Bankruptcy Code), the law that governs municipal bankruptcies:

Notwithstanding any power of the court, unless the debtor consents or the plan so provides, the court may not, by any stay, order, or decree, in the case or otherwise, interfere with—

  1.  any of the political or governmental powers of the debtor;
  2.  any of the property or revenues of the debtor; or
  3.  the debtor’s use or enjoyment of any income-producing property.

The basic reason for this is simple: whereas a corporation is a creation of the law, or an individual seeks protection of bankruptcy in exchange for certain sacrifices, no U.S. federal court can ever, beyond a certain point, dictate to a state or its subdivisions how to exercise the powers traditionally exercised by states—because of the Tenth Amendment.

So a simpler case would be a bankruptcy court ordering a city not to hold an election, something that would likely not be upheld.  Here, it is probably too early to tell, but if the city proposed to sell the DIA collection and the court withheld its approval, the city might have a Tenth Amendment/Chapter 9 argument to be allowed to sell.  Conversely, if the city did not wish to sell but its creditors asked the court to compel the sale over the city’s objection, there too the city might prevail on the grounds that such an order is beyond the power of the bankruptcy court.  Whether the maintenance of an art museum is within that exception could turn out to be important.

Incidentally, although Detroit Emergency City Manager Kevyn Orr has proposed the possibility of selling DIA’s collection, another aspect of Michigan state law could complicate such a plan (which, to be clear, has been floated but not decided upon).  Specifically, Bill Schuette, the Attorney General of Michigan has opined that DIA cannot sell its collection to aid in the repayment of the city’s debts, because the collection is held in the public trust.  This is a fascinating wrinkle on the AAMD view of deaccession, which is in and of itself only an industry standard.  Here, Schuette has said, “[t]he collection of the Detroit Institute of Arts is held by the city of Detroit in charitable trust for the people of Michigan, and no piece in the collection can thus be sold, conveyed or transferred to satisfy City debts or obligations.”  Schuette is not a legislature, and he is not the Bankruptcy Court, but his statements set up a possible dispute between the Michigan AG (which would have standing to argue about the management of DIA) and the City of Detroit, with DIA perhaps caught in the middle.

A pending bill in the Michigan Senate could complicate the question even further.  On June 11, 2013, the Michigan Senate passed Bill 0401, which reads:

(1) An art institute may not deaccession from its collection or sell, lease, pledge, mortgage, or otherwise encumber art that is accessioned to or otherwise held in the collection of the art institute except in accordance with the code of ethics for museums published by the American alliance of museums or a successor organization.   (2) A facility owned by a municipality in which the primary art collection of an art institute is exhibited shall be used principally to exhibit, preserve, and maintain the art collection; may not be leased, pledged, mortgaged, or otherwise encumbered; and may not be sold unless the sale is in connection with the relocation of the art collection to a comparable facility within the same municipality.

One might well assume that this bill was passed with the impending bankruptcy in mind, but suppose it is passed before DIA and/or Detroit make any decisions or proposals?  If it were, the bankruptcy court could well read the new law to cut the other way.  That is to say, whether DIA and Detroit wanted to sell some or all of the art, or its creditors did, the court might look at the state law and conclude that (1) the federal court is bound by the statute because of the Tenth Amendment and § 904, and (2) as a result, no one could authorize the sale.  Many steps down the road to be sure, but something to watch and keep in mind.

If there is any remaining doubt about the strength of people’s feelings on the topic, witness esteemed critic Peter Schjeldahl’s advocacy for selling the DIA’s collection, followed by his quick retraction of that suggestion, followed by a general feeding frenzy about whether he did the right thingDeaccessioning debates are not for the faint of heart….

For additional, excellent coverage of the DIA question, I recommend Donn Zaretsky’s commentary.  He is decidedly critical of the AAMD’s view on deaccession—but he also has probably the best-informed site on the topic and covers the differing voices well.