The validity of the California Resale Royalty Act (the “RRA,” Civil Code Section 986), a 1976 law that requires resellers of fine art to pay a royalty of 5 percent to the artists behind the works, has again come under attack in a dispute between a group of artists and Christie’s Inc., Sotheby’s Inc., and eBay, Inc. The group of artists, which includes painter Chuck Close, brought three related proposed class actions in 2011 in the Central District of California, Estate of Robert Graham v. Sotheby’s Inc., 2:11-cv-08604, The Sam Francis Foundation v. Christie’s Inc., 2:11-cv-08605, and The Sam Francis Foundation v. eBay Inc., 2:11-cv-08622. The cases all involve allegations that the auction houses failed to honor their payment obligations under the RRA.
The defendants’ first attempt to strike down the RRA failed in May 2015, when the Ninth Circuit upheld the law in The Sam Francis Foundation v. Christie’s Inc., but restricted its application under the Commerce Clause to in-state art sales. After the Supreme Court declined to review the Ninth Circuit’s decision, the auction house defendants filed a motion in the Central District of California arguing that the RRA is preempted by federal copyright law because it seeks to regulate the same subject matter. According to the auction houses, the first-sale doctrine ordinarily protects resellers of copyrighted works from paying royalties. The artists responded in an opposition motion on Monday, asserting that the first-sale doctrine only serves to protect resellers from copyright infringement claims.