Thought this would be of interest to the art lovers here.
Why Are Artworks Pulled from Auction?
In May, just before Sotheby’s Impressionist and Modern evening sale was getting underway in New York, the auctioneer announced the star lot had been withdrawn. The loss of Egon Schiele’s Danaë, which was slated to sell for between $30 million and $40 million, was a significant blow: It would have accounted for at least 15 percent of the auction’s estimated total. The auction house did not say why the work was pulled, but the answer presumably had to do with the absence of bidders for the consigned painting.
Withdrawing lots from auction is far from unheard of; that one just happened to be major enough to make the news. Zoom out and you find even more smaller pieces—from fine art to Hollywood memorabilia—being withdrawn from auction prior to sale.
“It comes up a lot, but you don’t always see it making the news unless it’s a higher-value, sexier object,” said Megan E. Noh, partner at the law firm Cahill Cossu Noh & Robinson, who previously served as vice president and senior counsel at Bonhams auction house (Bonhams did not comment for this story).
Sotheby’s, Christie’s, and Phillips declined to comment on how often withdrawal occurs.
The same week that the Schiele was withdrawn, Christie’s pulled a Willem de Kooning expected to sell for between $25 million and $35 million, and Phillips pulled Gerhard Richter’s Abstraktes Bild (1994), slated to go for $15 million to $20 million, from its evening sale in New York.
So why would a work be yanked sometimes just hours prior to an auction? Are there penalties for a consignor who chooses to pull a piece? And when, if ever, would an auction house run into legal trouble when deciding to take a piece off the block?
Better Pulled than Burned
There are numerous reasons why a work might be pulled prior to auction: some of them due to market conditions, others to personal circumstances, and sometimes due to questions of legality or provenance. In the former category, a consignor might simply decide they want to keep the work or, alternatively, they get cold feet because it doesn’t look like the piece will sell. Major works are consigned months before an auction, and changes in market dynamics or personal sentiment can result in withdrawing pieces.
When faced with a lack of demand, withdrawing a piece is often the savvy move, notes Abigail Asher, an art advisor at Guggenheim Asher Associates. A piece’s public failure to sell can be “damaging in the short term” to its value, she adds, describing the hit in a piece’s price that comes after it is “burned,” to use industry parlance.
Auction houses typically charge a fee to consignors who withdraw works, as compensation for its having invested time, money, and energy into promoting the piece with the expectation of a sale. The fee depends on the contract a consignor enters into with the auction house, which are not standard. Noh described a few common ways it can be calculated: as a percentage of the low estimate; a percentage of the median estimate; or the full amount of the buyer’s premium on the low estimate, had the piece sold.
That said, in a business based largely on relationships, an auction house could very well waive the fee for a prominent consignor to stay in her or his good graces, or the auction house and consignor could mutually agree to pull a piece to avoid an embarrassing flop of a star lot. Indeed, the successful sale of a work at the high end of the market is particularly subject to timing given the demand for such pieces is automatically thinner, since very few people can afford eight-figure works, said Asher.
Title Trip-Ups
There are two main legal reasons why works get pulled: if the consignor doesn’t hold good title to the piece, or if questions are raised over its authenticity.
While auction houses will vouch for a piece’s authenticity (auction houses recognize that consignors are not experts in art history or provenance), issues of title are the responsibility of the consignor, who is expected to ensure they have good and unencumbered title, meaning there aren’t other people or organizations with a financial interest in the piece.
For example, it is a consignor, not an auction house, who would know if there is a competing claim to a consigned piece, say, because of a disputed will or divorce. Auction houses also won’t know if consigned painting has been used as collateral for a loan, giving a lender a stake in the piece should the consignor default. Imagine a situation where a piece of art used as collateral is sold and then a consignor defaults—the bank would be looking to collect the artwork from the person who bought the work at auction.
In New York, state regulations prevent auction houses from offering works in which someone other than the consignor—be it a relative or a bank—has a financial stake. In other states, an auctioneer might issue a disclaimer noting that the purchaser is only buying however much right or interest the consignor has to sell.
When disputes over title do arise, the auction house will evaluate the evidence presented and determine if there is the potential for liability on their part should the sale proceed. A dispute doesn’t always mean a work will be pulled. Settlements and agreements between people with competing claims of title to a work can sometimes be reached prior to an auction that would allow it to proceed. But that is certainly not always the case. Just one example: In 2009, Christie’s pulled a Nazi-looted work by Camille Pissarro after two descendants of the original owner disputed who held title to the piece and how to split proceeds from the sale.
Not the Real Deal
Auction houses also pull works when there is doubt to their authenticity. The most obvious cases involve instances of forgery. One humorous example involved an auction house in New Zealand that withdrew two “Claude Monet” paintings actually by the forger Elmyr de Hory. A master forger, de Hory’s fakes are valuable in their own right. But after de Hory denied forging these two particular Monets, it emerged that the forged works were, in fact, forged by someone else. Go figure.
Complex authenticity issues can also emerge when an artist disavows their work. In 2011, artist Cady Noland declared that her work Cowboys Milking (1990), due to be sold at Sotheby’s in November of that year, was no longer an authentic piece attributable to her under the terms of the Visual Artists Rights Act (VARA). Cowboys Milking is a work on aluminum, and Noland asserted that damage to the corners meant that the piece was mutilated to the point where it was no long an authentic piece by her. The declaration infuriated the consignor, collector Marc Jancou, but Sotheby’s decided to pull the work nonetheless, given that doubts had now been raised regarding its authenticity.
Alleging breach of contract, Jancou sued Sotheby’s, which said it was protected by the language of the agreement, which gave it “the right to withdraw any property before the sale and…have no liability whatsoever for such withdrawal.” A judge agreed, and the case was dismissed. The Noland suit illustrates the relatively broad latitude auction houses have to pull a piece under the terms of consignor agreements.
“Judges have generally upheld an auction house’s discretion to withdraw or rescind a sale based on its judgment about potential liability for the consignor or the house, as long as the auction house isn’t operating in bad faith,” said Noh.
So what does bad faith look like? By way of example, an auction house can’t pull a piece arbitrarily. That would mean an auction house yanking, say, Pablo Picasso’s Les Femmes d'Alger (Version “O”), simply because a random person walked in off the street claiming to have title to ahead of its auction. If that sounds improbable, it’s because that sort of thing never really happens—auction houses don’t typically operate in bad faith.
The withdrawal of works prior to auction can appear to be opaque and mysterious. And while each withdrawal is different—the exact circumstances rarely reaching the public eye—there are common legal and market mechanisms at play in them all.
—Isaac Kaplan
IW