2. When Appraisals Are Required
4. Release Forms and Other Precautions
Should a museum provide monetary appraisals for donors or prospective donors?1 In the past, this question prompted much discussion. On the one extreme are those who view the practice as an essential service in the competition for important donations. On the other extreme, such museum activity is looked on as a practice bordering on illegality. We need to examine the question in the context of the times. Although the practice may have been quite common years ago, it now must be more closely scrutinized in light of the increasing importance to donors of the tax consequences of their gifts and in light of significant recent changes in our tax laws in this area.2 Decisions about museum policy on providing monetary appraisals should be made within narrowed legal parameters on the basis of what is the right thing to do in order to maintain the integrity of the charitable gift process. For museums, this is, or should be, the overriding concern.
One basic fact that is frequently overlooked by donors and museum staff alike is that in any gift situation, the museum is an interested party. The museum is the donee or prospective donee. Invariably an appraisal is being sought for tax purposes, and the Internal Revenue Service wants impartial appraisals. One from a donee is immediately suspect. When this is explained to donors, many gratefully look elsewhere for their appraisals. This self-interest problem of the donee museum was recognized in the Tax Reform Act of 1984.3 Under that legislation, effective 1985, a museum donee is disqualified from appraising, for federal income tax purposes, property that is over a certain value and that is contributed to the museum. More will be said later about these particular situations (see this chapter’s Section A.4, “The ‘Qualified Appraisal’ ”).
Prompted by perceived abuses in valuation, within the last five years, Congress has passed legislation raising the qualifications necessary for those wishing to perform appraisals for federal charitable tax deduction purposes.4 The new rules seek to cure past problems (1) by specifying minimum education and experience requirements for an appraiser, (2) by regulating the contents and process of valuation used in the appraisal itself by requiring the use of generally accepted professional appraisal standards, and (3) by imposing penalties on both the appraiser and the donor for significant overvaluations. These provisions are discussed in more detail in this chapter’s Section A.4, “The ‘Qualified Appraisal.’ ”5
Since 1985, museum staff is legally precluded from offering appraisal services for the donor’s tax needs for a deduction of an object or group of like objects valued at over $5,000. This left the possibility of providing tax valuations for lower valued items. In light of the new tighter regulatory scheme, many recognize that providing such services is simply too risky. Consider that most museum staff members are not specially trained or qualified to perform appraisal services. Over the last several decades, appraising has become professionalized through self-regulated standards and through the institution of training and certification programs, although appraising is still not subject to governmental licensing.6 It is not difficult to imagine a situation where a donor’s museum-provided valuation of an object at $2,000 was later determined to be faulty through a formal professional appraisal that valued the object to be closer to $20,000. In that case, the museum’s valuation methodology and staff qualifications and indeed its perceived motivations could be questioned by both the donor and the IRS.
To assist donors, some museums pay for third-party appraisals of donated objects. They argue that this is a courtesy deserved by a donor and that the procedure affords the donor a more creditable opinion. There is much to be said for this practice, but it also involves major drawbacks. If appraisals are provided to all donors, the service can prove to be costly and beyond a museum’s budget. If appraisals are provided to only certain donors, the selection criteria can be difficult to draft. If a particular appraiser is routinely used, his or her impartiality may be open to question. For example, under the previously mentioned Tax Reform Act of 1984, not only is a museum donee (and its employees) disqualified from acting as an appraiser in certain gift situations, but “an appraiser who is regularly used by … [the donee museum] and who does not perform a majority of his or her appraisals made during his or her taxable year for other … [clients] is also disqualified.”7 In other words, when deciding whether to provide a donor with an outside appraisal, the museum should consider whether there is a pattern of regularity that would cause a reasonable person to question the independence of the appraiser. If the answer could be yes, common sense indicates that the situation should be avoided. One additional consideration should not be forgotten. For some donors, an appraisal is a matter of vital interest. The closer the museum is to the appraisal process, the greater is the likelihood that the museum could be drawn into controversy if appraisal results are disappointing.8
Many museums establish a general policy that they will not pay for the appraisal needs of their donors. This is perhaps the easiest solution for museums, but it too has drawbacks. Some prospective donors may be offended and go elsewhere, and true hardship cases can arise. However, hardship cases can usually be handled intelligently on an individual basis when museums understand the earlier described pitfalls and are comfortable defending publicly, if necessary, each deviation from standard policy.
Even if a museum’s policy does not permit the giving of monetary valuations, knowledgeable staff members can still offer certain practical advice to members of the public. IRS Publication 561, Determining the Value of Donated Property, explains when appraisals are necessary to support a claimed charitable contribution tax deduction, lists what should be included in an appraisal, and describes how the IRS reviews appraisals. Information also is given on methods of valuing various types of property. Staff members familiar with the publication can, in appropriate cases, call it to the attention of donors or prospective donors. A current copy of Publication 561, which is online at the IRS website (www.irs.gov), is a handy reference to have available.9
In some situations, museum staff may feel uncomfortable about an apparent intention on the part of a donor to inflate grossly the value of his or her gift for tax purposes.10 Suppose, for example, that a donor has sent the museum an unsolicited copy of an appraisal obtained on a proposed gift. (In this situation a “qualified appraisal” is not required; hence, there is no need for the donor to give the museum any notice of the appraisal process.) The museum staff members are shocked to see the appraisal figure. In such a case, merely placing the appraisal in the museum’s file, and saying nothing, could be viewed as contributing to the suspected manipulation. The museum could be accused of the same complicity if it destroys its copy of the appraisal and says nothing. This is a difficult situation, and the museum may decide it must take a more active role. Sometimes just informing a prospective donor that a known appraisal might not withstand an IRS audit has a salutary effect. Alternatively, the gift can be declined. A polite refusal can convey a message as effectively as a dogmatic judgment.
Another situation involves the museum’s position when it is asked to sign the “donee acknowledgment” in Section B of IRS Form 8283, “Noncash Charitable Contributions” (a form used for deducting noncash gifts). On the form, appraisal values are listed, but under Part IV of Section B, the donee museum is asked only to acknowledge receipt of the described donated objects. Suppose the museum is shocked by the appraisal value? IRS regulations regarding this form clearly state that the signature of the donee museum does not represent concurrence in the appraised value of the contributed property—the signature only acknowledges receipt of the described property by the museum on the date given on the form. IRS regulations place the burden of substantiating the valuation figure on the donor and the “qualified” appraiser, who must also sign the form. If the museum has serious reservations about the value that appears on the form, it should proceed with caution and seek advice from its own tax counsel. Even though the values in question are technically not its problem, exceptional circumstances may warrant discreet action by the museum in an effort to avoid serious consequences for an apparently misinformed or possibly mal-intentioned donor.11 If the museum keeps quiet, it might risk being implicated in the alleged wrongdoing.
There may be more than one acceptable way for all museums to handle the appraisal question. Nevertheless, these comments are worth mentioning:
1. For the guidance of staff, the museum should establish in advance a general rule that is in accord with current IRS regulations regarding appraisals. A strictly ad hoc approach makes the museum more vulnerable and can result in unfairness to donors, embarrassment to staff, and possible liability for the museum.
2. The general rule should afford the museum a reasonably practical way to avoid abuses, and museum staff should understand the underlying reasons for the rule so that truly unusual situations that warrant special consideration can be identified.
3. There should be an avenue of appeal to designated museum officials for exceptions to the general rule. Before an exception is granted, its precedential effect should be weighed carefully.
Appraisals are not necessary to support every claimed charitable contribution deduction:
• If the property donated is worth $500 or less, minimal documentation of value is needed. Often a description of the property will suffice.
• If the property exceeds $500 in value but does not exceed $5,000 in value (and if similar items given to all charitable donees in the year do not have an aggregate value in excess of $5,000), IRS regulations require that certain information, such as the fair market value of the contributed property and the method used to determine value, be filed with the tax return. This information can be in the form of a professional appraisal signed by an appraiser, but a formal appraisal is not always the only alternative.12 In some instances, fair market value may be established with some certainty by supplying evidence to the IRS of contemporary sales of similar property at public auction. If the museum is aware of published records of such sales, there is no reason why these cannot be called to the attention of a donor who requests assistance. As a rule, the museum should supply such references with the caution that additional research by the taxpayer may be in order to confirm the relevance of the published sales to the gift at issue and/or to verify that the published sales reflect market conditions similar to those that would govern the valuation at issue.
• Under the Tax Reform Act of 1984, if the amount claimed as a charitable deduction by a taxpayer for a year exceeds $5,000 for any single item or exceeds $5,000 for the aggregate of items of a similar nature given by the taxpayer to all charities, then the taxpayer must fulfill certain statutorily prescribed appraisal requirements. If these statutory requirements are not followed, the charitable deduction will be disallowed. The requirements are explained more fully in this chapter’s Section A.4, “The ‘Qualified Appraisal.’ ”
• Current IRS regulations should always be consulted when the issue is the documentation needed to support a noncash charitable contribution. This is a matter that is subject to frequent modification.
The purpose of an appraisal for tax purposes is to establish the fair market value of the donated property as of the date of the contribution. “Fair market value is the price at which property would change hands between a willing buyer and a willing seller where neither is under any compulsion to buy or sell and both are cognizant of the relevant facts.”13 As explained earlier, a formal appraisal must be sought when fair market value exceeds $5,000 or may be sought when the donor cannot establish fair market value, within the $500–$5,000 range, using readily obtainable figures of comparable sales or replacement costs.
The weight given to an appraisal depends first and foremost on the completeness of the report—the facts given to support the conclusion of the appraiser. The qualifications of the appraiser and the appraiser’s demonstrated knowledge of the property in question are also considered as well as the methodology used. When an appraisal is required by the IRS, or when a donor elects to obtain a formal appraisal, the following information, where relevant, should be provided:
1. A description of the property in sufficient detail for a person who is not generally familiar with the type of property to determine that the property appraised is the property that was (or will be) contributed
2. The physical condition of any tangible property
3. The date (or expected date) of contribution
4. The terms of any agreement or understanding entered into (or expected to be entered into) by or on behalf of the donor that relates to the use, sale, or other disposition of the donated property, including, for example, the terms of any agreement or understanding that
a. Temporarily or permanently restricts a donee’s right to use or dispose of the donated property
b. Earmarks donated property for a particular use
c. Reserves to, or confers upon, anyone (other than a donee organization or an organization participating with a donee organization in cooperative fundraising) any right to the income from the donated property or to the possession of the property, including the right to vote donated securities, to acquire the property by purchase or otherwise, or to designate the person having the income, possession, or right to acquire the property
5. The name, address, and taxpayer identification number of the qualified appraiser and, if the appraiser is a partner, an employee, or an independent contractor engaged by a person other than the donor, the name, address, and taxpayer identification number of the partnership or the person who employs or engages the appraiser
6. The qualifications of the qualified appraiser who signs the appraisal, including the appraiser’s background, experience, education, and any membership in professional appraisal associations
7. A statement that the appraisal was prepared for income tax purposes
8. The date (or dates) on which the property was valued
9. The appraised fair market value (FMV) on the date (or expected date) of contribution
10. The method of valuation used to determine FMV, such as the income approach, the comparable sales or market data approach, or the replacement cost less depreciation approach
11. The specific basis for the valuation, such as any specific comparable sales transaction
Art objects. The following are examples of information that should be included in a description of donated property. These examples are for art objects. A similar detailed breakdown should be given for other property. Appraisals of art objects—paintings in particular—should include all of the following information:
1. A complete description of the object, indicating the:
a. Size,
b. Subject matter,
c. Medium,
d. Name of artist (or culture), and
e. Approximate date created.
2. The cost, date, and manner of acquisition.
3. A history of the item, including proof of authenticity.
4. A professional quality image of the object.
5. The facts on which the appraisal was based, such as:
a. Sales or analyses of similar works by the artist, particularly on or around the valuation date.
b. Quoted prices in dealer’s catalogs of the artist’s works or works of other artists of comparable stature.
c. A record of any exhibitions at which the specific art object has been displayed.
d. The economic state of the art market at the time of valuation, particularly with respect to the specific property.
e. The standing of the artist in his profession and in the particular school or time period.14
If the claimed deduction for an item, or group of similar items, of property donated within the tax year is more than $5,000 (other than money or publicly traded securities), the donor must obtain a “qualified appraisal” in order to attain favorable tax consequences. As used in the above sentence, the phrase “similar items” means property of the same generic category or type, such as paintings, photographs, books, coins, and pottery; the property need not have been donated to the same donee. The qualified appraisal must contain the information described in the preceding section, it must relate to an appraisal made not earlier than sixty days before the date of contribution of the appraised property, it must not involve a “prohibited appraisal fee,” and it must be prepared, signed, and dated by a “qualified appraiser.” A “prohibited appraisal fee” normally is one based on a percentage of the appraised value of the property.15 Since the passage of the 2006 Pension Protection Act,16 all appraisals prepared after August 17, 2006, must be conducted in accordance with “generally accepted appraisal standards,” a term that is not defined in the law. The interim guidance provided by the IRS provides a working definition. An appraisal will be treated as having been conducted in accordance to such standards if, for example, the appraisal is consistent with the substance and principles of the Uniform Standards of Professional Appraisal Practice (USPAP) adopted by the Appraisal Standards Board of the Appraisal Foundation.17
Rules governing a “qualified appraiser” were tightened in 2004 and then, again, in 2006. Now the “qualified appraiser” has to meet all of the following requirements.
1. The individual either:
a. Has earned an appraiser designation from a recognized professional appraiser organization for demonstrated competency in valuing the type of property being appraised, or
b. Has met certain minimum education and experience requirements.… For property other than real property, the appraiser must have successfully completed college or professional-level coursework relevant to the property being valued, must have at least 2 years of experience in the trade or business of buying, selling, or valuing the type of property being valued, and must fully describe in the appraisal his or her qualifying education and experience.
2. The individual regularly prepares appraisals for which he or she is paid.
3. The individual demonstrates verifiable education and experience in valuing the type of property being appraised. To do this, the appraiser can make a declaration in the appraisal that, because of his or her background, experience, education, and membership in professional associations, he or she is qualified to make appraisals of the type of property being valued.
4. The individual has not been prohibited from practicing before the IRS under section 330(c) of title 31 of the United States Code at any time during the 3-year period ending on the date of the appraisal.
5. The individual is not an excluded individual.
The following people are “excluded individuals” for purposes of being considered as “qualified appraisers.”
1. The donor of the property, or the taxpayer who claims the deduction.
2. The donee of the property.
3. A party to the transaction in which the donor acquired the property being appraised, unless the property is donated within 2 months of the date of acquisition and its appraised value is not more than its acquisition price. This applies to the person who sold, exchanged, or gave the property to the donor, or any person who acted as an agent for the transferor or donor in the transaction.
4. Any person employed by any of the above persons. For example, if the donor acquired a painting from an art dealer, neither the dealer nor persons employed by the dealer can be qualified appraisers for that painting.
5. Any person related under section 267(b) of the Internal Revenue Code to any of the above persons or married to a person related under section 267(b) to any of the above persons.
6. An appraiser who appraises regularly for a person in (1), (2), or (3), and who does not perform a majority of his or her appraisals made during his or her tax year for other persons.18
The Pension Protection Act (PPA) also provides the first ever penalties imposed on appraisers for substantially misstating the value of the appraised property. The new rules impose a penalty of up to 125 percent of the compensation received for the appraisal service. The PPA also increased the penalty on taxpayers for valuation misstatements. This amount may be as much as 40 percent of the additional tax due as a result of the misstatement.19
• As a general rule, the donor is not required to attach to the tax return a complete copy of the signed “qualified appraisal”; rather, an appraisal summary (Section B of Form 8283) is attached to the return.20 (The donor should consult IRS regulations concerning when separate copies of the appraisal summary are necessary in cases of multiple gifts involving one or more donees.) Museums should be familiar with Form 8283 and its companion Form 8282 because, as mentioned in this chapter and in Chapter XII, “Tax Considerations,” a museum usually must complete Part IV of Form 8283 when certain gifts are made to it. On Part IV of the form, the museum verifies receipt of the described property on the date of the gift specified on the form and indicates whether the museum intends to put the gift to a related use.21 A copy of the signed Form 8283 should then be kept in the museum’s accession file on the acquisition in question. If the museum disposes of any of the property described in Part IV of the form within three years22 of the date of the gift, it must file with the IRS a completed Form 8282, “Donee Information Return,” and send an information copy of the completed Form 8282 to the donor. If the item is transferred to another charitable organization within the three-year period, the museum that transfers the object must furnish the successor donee with a copy of the original Form 8283 and a copy of the Form 8282 that the transferor filed with the IRS. In turn, the successor donee must give the transferor its contact information and tax identification number and confirmation of receipt of the forms.23
There are exceptions to the reporting of disposals:
• The donee is not required to report a disposal if the donee consumes or distributes the item without payment for a purpose or function that is a basis for its charitable exemption. For example, no reporting would be required if a museum uses up, in educational demonstrations for school groups, natural history specimens included in a gift that triggered the filing of a Form 8283.
• The donee is not required to report the disposition of property listed as having an appraisal value not exceeding $500 if the statement of value was on Form 8283 when the museum signed the donee acknowledgment (Part IV of Section B of Form 8283).
Since the late 1960s the IRS has utilized the Art Advisory Panel to review valuations on artworks in estate, gift, and charitable contribution tax cases.24 Currently, twenty-five members sit on the panel, and they represent areas of expertise in traditional painting and sculpture and specialty areas of Far Eastern and Asian, primitive, and pre-Columbian art. All taxpayer cases selected for audit that include a charitable deduction for a work of art or cultural property with a claimed market value of $50,000 or more must be referred to the panel for review. Administrative support for the panel is provided by the Art Appraisal Services, an office within the IRS.
Before meetings, members of the Art Advisory Panel are provided with information packets on each claimed valuation set for review. Regarding charitable contribution valuations, the panel may accept the donor’s valuation, may recommend a lower valuation, or may recommend a higher valuation. The general pattern of panel activity in this area shows a very substantial number of valuations recommended for reduction and a very minor number recommended for higher valuation. Typically, the panel’s recommendations are accepted by the IRS, and the burden then falls on donors of contested valuations to defend their positions. The Art Advisory Panel has been effective in providing a consistent form of review in an area in which differences of opinion can vary greatly. A general complaint, however, has been that reviews take place a year or more after a contribution has been made and that this delay can make it more difficult to resolve disputes.25
In response to this complaint, the IRS initiated, as of January 15, 1996, a procedure for expedited review of statements of value of art for income, estate, or gift tax purposes. In this new procedure, “art” is defined to include “paintings, sculpture, watercolors, prints, drawings, ceramics, antique furniture, decorative arts, textiles, carpets, silver, rare manuscripts, historical memorabilia, and other similar objects.”26 The expedited procedure applies, as a rule, to an item of art that has been appraised at $50,000 or more and has been transferred as a charitable contribution. The taxpayer seeking the expedited statement of value must apply for it before filing the income tax return that first reports the charitable contribution. Completed requests filed after July 15 but on or before January 15 are processed by the following June 30. Completed requests received after January 15 but on or before July 15 are processed by the following December 31. It is the responsibility of the taxpayer to seek extensions, if necessary, for filing appropriate tax returns regarding the contribution in question. The information required of the taxpayer in the expedited process is similar to that required in a standard income tax return for a charitable contribution of that nature. There is, however, a substantial fee for requesting expedited review.27
Many times museums are asked to recommend appraisers. Such a request raises problems. Regarding appraisers of objects normally collected by museums, as noted above, there are no generally recognized governmental licensing procedures for appraisers. Since 1985, appraisers have been subject to being barred from presenting evidence or testimony in matters before the IRS if they are found guilty of aiding and abetting an understatement of tax liability.28 However, as noted above, the IRS now requires evidence of minimum education and experience. But still, when museums are asked to recommend appraisers, there is no objective test to cite as a basis for judging competence. The museum often must rely on subjective impressions of staff or word of mouth. An added concern is that the museum does not want to create the appearance that it is recommending an appraiser who could be viewed as “unqualified” if the object appraised is later given to the museum.29
The suggested approach is never to recommend just one appraiser but to offer several sources, urging the individual to investigate and make the final selection. Also, a more cautious procedure is not to have a printed list of appraisers for distribution to requestors unless the museum is prepared to review and update the list periodically. The fact that there is a prescribed list may be construed as a museum endorsement, despite a disclaimer. In addition, the existence of such a list may cause those appraisers not on the list to demand inclusion. This can raise awkward situations if the appraiser is not known to the museum or is not held in high regard.
Professional organizations of appraisers maintain online searchable databases of appraiser members qualified in specific areas, including their contact information. The Art Dealers Association of America (New York City) has for many years maintained a tightly controlled appraisal service for art.30 The American Society of Appraisers accredits its members and also provides a “Find an Appraiser” database on its website,31 as does the Appraiser Association of America.32
Invariably, an initial issue raised is whether it is appropriate for a museum to provide, gratis to the public, opinions on the authenticity of objects or works of art.33 As is so often the case, this is essentially a policy question rather than a legal one, and it must be weighed in light of a museum’s particular circumstances. Some museums view it as a public service and/or find that such activity ultimately benefits their ability to advance scholarship because through the authentication process a wide variety of interesting objects and information is brought to the attention of curatorial staff. For others, any such benefits are outweighed by undue burdens on staff time and/or by real or apparent misuse of the service by individuals or businesses.34 To ensure that a prudent policy is set, a museum must carefully balance the pros and cons in light of the museum’s resources, the type of collections it may hold, and the circumstances that may be unique to it. One statement can be made with confidence, however. A museum should have a policy on the matter, and the policy should be well promulgated among staff. When there is no policy, the museum is most vulnerable to criticism and possible liability.
If a decision is made that authentications will be given as a matter of policy, a few precautions should protect the museum and its staff from undue liability. The museum wants to avoid possible claims—claims usually based on a theory of misrepresentation, disparagement, or defamation. The lines distinguishing each of these causes of action from the other are not always clear, and what follows is a very general discussion. The purpose is to acquaint the reader with the usual issues raised by those disappointed by statements regarding authenticity and to present the usual defenses, thus providing a basis for formulating a museum’s policy on the issue of authentications.
In general, a misrepresentation is “any manifestation by words or conduct by one person to another that under the circumstances amounts to an assertion not in accordance with the facts.”35 To create liability, a misrepresentation usually must be intentional,36 but in some instances negligent misstatements can invite lawsuits. Such instances usually occur when there is direct, foreseeable harm to an individual because of a misstatement and when the injured party is considered justified in relying on the information given.37 In other words, in some situations it is reasonable to expect that the party will rely on the information.38 If this test is applied to museum situations involving authentications, two other considerations frequently bear on the “reasonable reliance” issue: (1) the fact that the authentications are given gratis and (2) the issue of whether the authentications can be construed as opinions.
Regarding the first consideration, it is commonly held that for a court to find liability for a negligent misrepresentation, the giver of the information must have a direct or indirect pecuniary interest. A direct pecuniary interest would be an authentication done for a fee, not the type of situation under discussion in this chapter. An example of an indirect interest is illustrated by the following. A physician on the way to his office meets a neighbor who is not a patient and in the course of a conversation offers some curbside medical advice. On reaching his office, the physician receives a call from another neighbor who is a patient, and he offers free medical advice. In the first instance, a truly gratis situation, all that is required is an honest “off-the-cuff” answer because one would not expect that a physician placed in such a position could do more. Thus, as a rule, it would not be reasonable for the neighbor to rely solely on that casual conversation for direction regarding treatment of his medical problem. In the second instance, however, there is indirect pecuniary benefit. The physician has in the past provided paid services to the party and may well be asked to do so in the future. In this second case, because of the established relationship, it might not be unreasonable for the caller to put more reliance on the “free advice” offered. But even the first, “truly gratis” situation might not protect a defendant. There is a strong temptation for a court to find liability when services are offered without even an indirect pecuniary benefit if there is evidence of blatant carelessness and disregard for consequences.39
As for the second consideration, authentications frequently amount to expressions of opinion, and like the gratis situation, this also can affect the reasonableness of a plaintiff’s reliance on the representation. But whether a statement is a fact or an opinion can generate much discussion. From one viewpoint, any opinion is a factual statement of an individual’s conclusions; that is, it is a statement of what is in one’s mind. If there is evidence that an opinion is not given in good faith, for some this amounts to a misstatement of fact.40 If an opinion is given in the form of a statement of fact by someone who purports to be an expert, does this justify reliance by the nonexpert? Possibly it could, on the theory that in expressing the opinion, the expert implies the existence of facts that are known to him or her to be true and that justify his or her opinion. This situation could be further colored if the expert knows or should realize that the recipient intends to rely on the opinion. As stated in Reeves v. Corning many years ago:
There is no certain rule of law by the application of which it can be determined when false representations constitute matters of opinion, or matters of fact. Each case must, in large measure, be adjudged upon its own circumstances. In reaching its conclusion, the court will take into consideration the intelligence and situation of the parties, the general information and experience of the people as to the nature and use of the property, [and] the habits and methods of those dealing in or with it, and then determine, upon all the circumstances of the case, whether the representations ought to have been understood as affirmations of fact, or as matters of opinion or judgment.41
A longer discussion of “fact versus opinion” can be found in this chapter’s Section B.3, “Defamation,” but some simple observations on curatorial conduct can be made here. Consider the following situation. Museum M routinely allows staff members to give, as part of their employment, opinions regarding authenticity. No cautions are prescribed. Curator X receives from Miss Y a letter with a photograph of an early American portrait. Miss Y explains that the portrait has been in her family for years and that it has always been attributed to the well-known artist Z. Circumstances now force her to sell many of her possessions, and she needs an expert’s opinion of the portrait. Curator X writes on the bottom of the inquiry, “Clearly, this is not the work of artist Z,” and returns the correspondence. Shortly thereafter, Miss Y sells the work for a pittance. Within months, it is resold for $50,000 as a portrait by W, a respected artist much influenced by Z.
A similar situation is presented to Curator A of the Q Historical Society. Curator A’s reply reads as follows: “After studying the photograph you sent me, I do not believe that the portrait is by Artist Z. However, this opinion is based on the limited information provided me, and it should not be relied on as definitive.” Curator A took simple precautions that make it highly unlikely that Miss Y would even threaten to sue. Curator X’s conduct, on the other hand, is such that the museum could well be drawn into a lawsuit, with the volatile issue of “reasonable reliance” as pivotal.
In summary, a museum’s exposure to a suit based on misrepresentation should be slight if some caution is exercised. The balance of this chapter, concerning the somewhat related actions of disparagement and defamation, as well as the discussion of the use of release forms, should flesh out the appropriate cautions to be taken when a museum gives, gratis, an authentication to an owner of an object.
In the preceding discussion on misrepresentation, the complained-of activity concerns communication between the giver of information and the owner of an object. However, when derogatory information about an object is conveyed to someone other than the owner, additional causes of action can arise. The most frequent are an action for disparagement and an action for defamation. We will briefly describe disparagement first and then, in the next section, defamation.
An action for disparagement is sometimes called an action for “injurious falsehood.” The gist of the alleged wrong is interference with the prospect of sales or some other advantageous use of the property. For example, if in giving an authentication a museum staff person, without the permission of the owner of the article, makes statements to third parties and discredits the quality of the article, the elements for an action for disparagement could exist.42 To prevail in an action for disparagement, the plaintiff has the burden of proving at least the following:
1. The plaintiff’s interest in the object in question
2. The nature of the derogatory statements made
3. The falsity of the derogatory statements
4. The publication of these statements to a third party (or parties) without the plaintiff’s consent
5. As a result of the publication, the incurrence of a definite pecuniary loss
There is confusion as to whether another element, that of malice or intent, must also be proved. Some experts and cases support the view that the intent of the defendant is not relevant in establishing disparagement as long as the above five elements are present. In other words, if a false statement causes pecuniary loss, there is liability regardless of intent. This view is countered by other experts and cases arguing that proof of injurious intent or malice is required. Also, some have suggested that the best rule takes the middle ground and holds the defendant liable for disparagement “only when a reasonable man would have foreseen that his statement would disparage and would have ascertained that the statement was false.”43 The issue is, understandably, still debated. Because of their very nature, disparagement cases usually involve a balancing of interests. The individual making the statement invariably claims a sufficiently important reason for the publication (usually referred to as a privilege), and this must be weighed against the interests of the complaining party. In difficult cases, the malice issue can be used by the court as the pivotal point in achieving what is perceived to be the desirable result.44
The law recognizes that certain derogatory statements should be privileged (that is, permitted without liability) because the public good to be gained by permitting free expression outweighs the harm that may be done to the individual. A few privileges are classified as absolute because they protect the individual even from inquiry into the truth of his or her statement or motivation. Absolute privilege is usually conferred by virtue of one’s office or position, which, for the public good, requires freedom from threat of suit.45 Examples would be judges or legislators, who usually enjoy absolute immunity for statements made in the course of their official proceedings. Other privileges are commonly referred to as “conditional” or “qualified.” The justification for these qualified privileges is explained as follows:
These are based upon a public policy that recognizes that it is desirable that true information be given whenever it is reasonably necessary for the protection of the actor’s own interests, the interests of a third person, or certain interests of the public. In order that this information may be freely given, it is necessary to protect from liability those who, for the purpose of furthering the interests in question, give information which, without their knowledge or reckless disregard as to its falsity, is in fact untrue.46
This second type of privilege is “conditional” or “qualified” because it can be lost if the plaintiff can show that the defendant knew the statement was false or exhibited gross disregard as to whether the statement was true or false, if there is sufficient evidence to impute improper motive, or if the extent of publication is deemed excessive.47 Thus, even though curators may believe that their motives for making certain statements are purely to advance scholarship, some degree of caution is necessary. The appearance that a curator is cocksure or “grandstanding” (seeking headlines) only invites a challenge as to whether any privilege that may exist has been misused. The test frequently used is whether the privilege has been exercised for the purpose for which it was given and has been exercised with reasonable care to ensure that no more harm be done than is necessary to accomplish the permitted end.
Occasions that may be covered by a “conditional” or “qualified” privilege include the following:
• The information protects a lawful interest of the person making the statement, other than an interest in competition for prospective pecuniary benefits.
• The person making the statement desires to protect a lawful interest of a third person or to enable that third person to protect the interest. The publication, however, must be within current standards of permissible conduct, and hence it is usually important whether the information was volunteered or was given in response to a request.
• The information affects a sufficiently important public interest, and certain communications are required to protect the public interest.
The existence of conditional or qualified privilege can be an important consideration for a museum, and here the law of the state must be examined to determine the extent and interpretation of such privileges.48 Questions of authenticity arise in a museum not just when an individual seeks the advice of a curator regarding an object but also when objects are offered for donation or purchase, when the curator is preparing a scholarly work, when the curator may be a recognized expert and his or her advice is sought by the media or an interested party, or when the museum is confronted with a situation in which a previous authentication given by a staff member is now subject to doubt. In each of these situations, the interests of the owner of the object should be weighed in light of the interest of the public, the museum, and/or other parties. This exercise, carried out in light of existing state law regarding privilege, usually guides the museum to a course of action that withstands legal challenge. If an authentication is offered, the museum wants to be able to justify it as reasonably arrived at, as noninflammatory in tone, and as publicized in a manner directed to reach those with a legitimate interest. If an authentication meets these tests, even if the plaintiff can prove that the giver of the authentication was wrong (a difficult task in itself), privilege usually provides the museum with an effective defense.
Defamation is an invasion of a person’s interest in his or her reputation. To be actionable, it requires a communication to another or others, communication that has a derogatory effect on that reputation: “A communication is defamatory if it tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.”49 Defamation can be in the forms of libel (the written word) or slander (the spoken word).50 Historically, the law has been harsher on libel than on slander, with libel actionable without proof of damage but with slander requiring such proof. This distinction is gradually fading, with many courts permitting an action for slander without proof of damage if the slander involves a major social disgrace (such as commission of a crime) or describes conduct or a condition that adversely affects the fitness of an individual to conduct his or her business or profession.51
In the authentication process, the threat of a suit for defamation could arise if, for example, the statements made about the object in question are construed to reflect poorly on the reputation of the owner of the object, an interested dealer, or a fellow critic. Defamation is primarily a matter of state law; hence, a determination of what is actionable can vary from state to state. As a general rule, however, in order to prevail in a defamation action, the plaintiff must establish the following:
• There was a false statement of purported fact.
• The false statement was injurious to the plaintiff’s reputation.
• The false statement was published by the defendant to a third party, and the third party recognized the statement as defaming the plaintiff.
• If necessary, damages have been specifically established.
Proving a cause of action for defamation can be difficult. First of all, the complained-of statement must be capable of verification. Closely allied is the issue of whether the statement is a fact or an opinion. As mentioned earlier, the law has long struggled with the distinction between fact and opinion in disparagement and defamation cases because, arguably, an opinion can be wrong yet, at the same time, can be a true representation of what an individual believes. The importance of clarifying the distinction between fact and opinion was raised to a higher level in more recent times as defendants in defamation cases put forth constitutional arguments to protect what they called expression of opinion. Either the First Amendment (free speech) to the U.S. Constitution or a similar provision of a state constitution would be cited. As of now, the U.S. Supreme Court recognizes some First Amendment applications in defamation cases. In most simplistic terms, the protection can be described as follows:
• The alleged statement of opinion addresses a matter of public concern.
• The alleged statement of opinion is expressed in terms that are probably true or false.
• If probably true or false, the terms can reasonably be interpreted as intending to convey actual facts about a person.52
In McNally & McNally v. Yarnall and the Metropolitan Museum of Art,53 a court applied these criteria in a case charging a scholar and a museum with defamation and tortious interference with business relations growing out of controversy concerning the authenticity of certain stained-glass work attributed to the artist John La Farge. The court had little trouble in classifying the controversy as a matter of public concern: “Where … as here, the statements of … [the defendant] on the authenticity and value of works attributed to La Farge affect the market for and the tax implications of donating La Farge’s works among the segment of the population that trades such works as well as the community of scholars with an interest in La Farge, such statements are of public import.”54 On the other issues—those regarding the provability of certain statements and whether those statements can reasonably be interpreted to convey actual facts about a person—the McNally case demonstrates that these tasks can be significant hurdles for a plaintiff when the authenticity of art objects is in question. Authentication of art, especially when the artist in question is dead, invariably involves “educated guessing,” and this, in turn, affects the ability to prove certain statements, as well as the difficulty in establishing that such statements can reasonably be interpreted by third parties as conveying facts about a person.
In the area of art criticism, especially when the contesting parties are experts or present themselves as experts, defamation (and disparagement) cases are difficult to win. Courts seem reluctant to discourage exchanges that can reasonably be described as scholarly debate even though the stakes may be high and tempers are not always cool. The above-mentioned McNally case is one example. Two other instances, Porcella v. Times, Inc.55 and Mount v. Sadik,56 were decided much earlier, and in both situations the courts dismissed the cases on the basis that opinion, not fact, was at issue.
In Porcella, the plaintiff presented himself as an art expert, and he frequently did appraisals and authentications for museums, collectors, and others. The defendant, in one of its magazine articles, described some of Porcella’s activities, and Porcella alleged that the article libeled him because it charged or implied that he was incompetent as an art expert and untrustworthy. The defendant’s answer was that the article fell within the limits of fair comment. The trial court dismissed the suit on motion of the defendant, and Porcella appealed. In affirming the lower court opinion, the appeals court stated the following:
Certainly plaintiff would be entitled, as any other person would be, to redress against any false statements of fact maliciously published in regard to him. However, … [o]ur analysis of the alleged libelous article convinces us that, insofar as the complaint charged it to be false, it is an expression of the publisher’s comments and opinions upon the activities of plaintiff as an art expert with a description of the entire setting in which he was active. It might well be characterized as a satirical recital by an author who made no effort to conceal his belief that there were some authenticators of paintings less reliable than others. The article, insofar as it offended plaintiff, merely expressed the author’s opinion, rather than made a false statement of any fact. Plaintiff was engaged in a field which he admits (and even boasts) was in the public domain and, as such, he was subject to comment by the public press as to his activities in that field.57
In the second case, Mount, an art critic, authenticated a portrait of George Washington as painted by Gilbert Stuart. The organization owning the portrait sent a photograph of the picture to the defendant, Sadik, a museum director, asking for his opinion. Sadik wrote in reply: “There is no possibility whatever in my opinion that your portrait of George Washington could be by Gilbert Stuart.” Later, Sadik studied the painting itself and confirmed his belief. The dispute between Mount and Sadik was widely covered by the press, and two such articles formed the basis of the defamation suit. Sadik moved to have the case against him dismissed. In granting the motion, the court said the following:
The statements in the articles attributed to Sadik are expressions of his belief, concededly differing from that of Mount, that the painting was not by Stuart. The words of Sadik as quoted or paraphrased even if construed to be a rejection of plaintiff’s views, are not defamatory. They merely indicate to the reader that Sadik and Mount have differing opinions of the painting’s origin. They do not attack Mount personally, but merely call into question one opinion he has expressed. The law of defamation has never gone so far as to provide that, once an expert has expressed an opinion, all other experts must keep silent on the matter, lest they expose themselves to legal action.58
From the above discussion of “fact versus opinion,” certain conclusions can be drawn.
• When an opinion is based on disclosed nondefamatory facts (or when such facts are assumed by the parties because the parties are knowledgeable in the area), the opinion rarely is actionable no matter how unreasonable it may be. This is because the recipient of the opinion knows what the facts are and, hence, knows what is opinion.
• When an opinion is not based on disclosed or reasonably assumed facts, there is a greater chance of liability. This is because the recipient of the opinion may reasonably conclude that the derogatory opinion is based on undisclosed defamatory facts. The reasonableness of such a conclusion usually depends on the relative sophistication of the giver of the opinion and of the recipient.
When these conclusions are applied to typical museum situations, the following guidelines emerge:
• It is better practice to recite the facts (including limitations) that form the basis for an opinion.
• In any event, the sophistication of the recipient should be considered. The more unsophisticated the recipient, the more important it is to recite the facts (including limitations) that form the basis of an opinion.
If as a public service a museum adopts a practice of providing, gratis to the public, opinions on authenticity, it should have an effective way of promulgating this policy to staff. (See a sample policy, Figure XIII.1.) In addition, it should consider the following suggestions and cautions regarding the implementation of any such policy.59
• Clarify the type of service being offered and be consistent. If the purpose is to give the owner (or the owner’s agent) a rather quick opinion from a knowledgeable staff member, arrange the process so that this is quite clear to the requestor. In other words, it should be obvious that substantial research is not being offered.
• Caution staff to confine themselves to areas of expertise.
• Decide if only oral opinions are going to be given. Some museums prefer this very informal approach.
• If written opinions are an option, establish, with professional advice, a format that lessens liability.
• Establish procedures that require requestors to verify their status as owners (or the agents of owners).
• Consider the use of release forms.
Figure XIII.1
Sample Museum Policy Regarding Appraisals/Authentications
A release form in such situations can play a positive role if its chief purpose is properly understood. The chief purpose of a release form is to put the signer on notice (and to provide evidence of such notice) that the service being offered has specific limitations. A release should not be viewed as a way to absolve the museum of any and all liability—this would be against public policy. (When a service is offered to the public, one should be able to assume that the service, as described, will be performed without serious negligence.) Accordingly, regarding a release for those who may be requesting gratis opinions on the authenticity of their objects, the release should caution the signer that the opinion is not a carefully researched one and that the opinion should not be relied on for important transactions. The “hold harmless” clause in such a release would then usually protect the museum from any damage that the signer suffers as a result of failure to heed these cautions. This is because the prime cause of the damage would have been the negligence of the owner in not heeding the cautions. But the “hold harmless” clause would offer little protection if the complained-of damage was caused by the museum employee dropping the article or if the signer could establish that the employee offering the opinion had absolutely no expertise in that type of object. In these last two examples, the causes of the damage would fall outside the described risks, and it would not be appropriate for the museum to seek, in a release form, protection from serious negligence.
Figure XIII.2
Release Form Regarding Appraisals/Authentications
An example of a release form used by an art museum follows (see Figure XIII.2). The form makes clear what is being offered, it requires the requesting party to verify ownership of the objects in question, and it provides a way to document for future reference, if necessary, the gist of an oral opinion. Like any other form printed in this book, this release form should not be adopted or adapted for internal use before a museum seeks professional advice.60
1. Note that this discussion concerns the role of the museum in providing monetary appraisals, not in providing opinions regarding authenticity. Although value directly relates to authenticity, museums can point to scholarly and educational reasons for providing opinions on authenticity that separate that activity from one that focuses on monetary value. Hence, the matter of appraisals and the matter of authentications are treated separately. Another question concerns museum employees who, on their own time, may want to serve as appraisers for a fee. The question of such outside employee activity is not discussed here, but it clearly needs to be addressed by a museum as part of a code of ethics for employees. See, for example, R. Lind, “Legal Risks Associated with Providing Expert Opinions and Authentications,” in American Law Institute–American Bar Association (ALI-ABA), Course of Studies Materials: Legal Problems of Museum Administration (Philadelphia: ALI-ABA, 1991). See also this chapter’s footnote 33.
2. Changes in opinion on the matter are reflected in various codes of ethics. The Association of Art Museum Directors, Professional Practices in Art Museums (New York: Association of Art Museum Directors, 1991, amended 2001), reads as follows: “When accepting gifts, the museum must stipulate that responsibility for securing appraisals and furnishing this information to government agencies, such as the Internal Revenue Service, rests with the donor” (paragraph 17). (The Association of Art Museum Directors’ committed to updating Professional Practices in Art Museums every ten years; accessed Apr. 14, 2011, http://www.aamd.org.) A Code of Ethics for Curators, most recently amended and promulgated in 2009 by the Curators’ Committee (CurCom) of the American Association of Museums, established as an AAM Standing Professional Committee in 1974, contains the following statement (accessed Apr. 14, 2011, http://www.curcom.org/index.php):
V. Conflicts of Interest …
D. Appraisals and Authentication:
Curators who become involved in establishing monetary value of objects or authenticating objects, expose themselves and their institutions to conflicts of interest and legal risks. Therefore curators must not prepare appraisals for any reason.
Curators should refer all interested parties directly to professional appraisers’ societies or qualified appraisers. All referrals should be made without endorsement.
Curators may estimate insurance values for loans or other internal uses and should document the sources for these estimates.
Some museums may allow curators to provide authentications under carefully controlled conditions per institutional policy (accessed Apr. 14, 2011, http://www.curcom.org/_pdf/code_ethics2009.pdf).
3. See, more specifically, Section 155a of the Tax Reform Act of 1984 (Pub. L. 98–369, 96 Stat. 494).
4. In June 2004, Senator Charles Grassley of Iowa, the chairman of the Senate Finance Committee, held hearings looking into whether donors are inflating values of charitable gifts of property for tax deduction purposes. One of the incidents investigated involved a gift of four Stradivari instruments to the Smithsonian Institution in 1997 valued at $50 million by the donor. L. Browning, “Donor’s Windfall Vexes Museum; Senate Committee Questions Actions by Smithsonian,” The New York Times, June 14, 2004. See the discussion below on suspected donor overvaluations.
5. The Pension Protection Act of 2006, Pub. L. 109-280, 120 Stat. 780 (2006), amended the definition of “qualified appraisal” and “qualified appraiser” and added new penalty provisions for overvaluations. The law now imposes a penalty on the appraiser for substantial or gross overvaluations and increases the penalties on the taxpayer. See discussion below and M. Shaines and C. Roady, “Tax and Legislative Update Including the Pension Protection Act of 2006 and Executive Compensation,” in American Law Institute–American Bar Association (ALI-ABA), Course of Studies Materials: Legal Issues in Museum Administration (Philadelphia: ALI-ABA, 2007), 113, 114.
6. The Appraisal Foundation is an educational organization founded in 1987 to foster professionalism in appraising through the establishment and promotion of appraisal standards and appraiser qualifications. The foundation’s Appraisal Standards Board promulgated the Uniform Standards of Professional Appraisal Practice (USPAP), whose general acceptance is evidenced by its frequent citation by courts and most recently the IRS in its guidance on what constitutes “generally accepted appraisal standards.” See discussion below. The mission of the Appraisal Foundation is to offer national USPAP courses and to certify qualified instructors of USPAP. Currently most states license real estate appraisers but not object appraisers.
7. See IRS regulations at 26 C.F.R. § 1.170A-13. See also IRS Publication 526, Charitable Contributions.
8. Provisions in the Internal Revenue Code (26 U.S.C. § 6662) impose additional penalties on taxpayers who substantially overvalue property reported as charitable contributions. The Pension Protection Act raised these penalties in 2006. In case the value of the claimed deduction was 150 percent of the actual value, the taxpayer is penalized 20 percent, and if the gift is overvalued by 200 percent, the penalty is 40 percent of the unpaid tax. In addition, financial penalties are now imposed for the first time directly on appraisers. That amount may be as high as 125 percent of the gross income received by the appraiser for the preparation of the appraisal. (26 U.S.C. § 6695A) See Shaines and Roady, “Tax and Legislative Update,” 114.
9. IRS Publication 526 treats the general subject of charitable contributions and is a useful companion to Publication 561.
10. See also Chapter XII, “Tax Considerations.”
11. When there is serious overvaluation in a “qualified appraisal,” the penalties imposed on the donor by the IRS involve an assessment of the “good faith” of the donor in relying on the appraisal. Accordingly, the donee museum should exercise caution before interposing itself between the donor and the appraiser. (See 26 C.F.R. § 1.6664-4, “Reasonable cause and good faith exception to section 6662 penalties.”)
12. See IRS Publication 561, Determining the Value of Donated Property, (2007) for guidance on the valuation of various kinds of property. If the object or groups of objects are worth more than $5,000, the IRS Form 8283 must be used by the donor. On that form, the museum is required to sign indicating receipt and to indicate whether or not the museum intends to put the gift to a related purpose.
13. Posner v. Commissioner, T.C. Memo 1976-216, 35 T.C.M. (CCH) 943 (1976). See also IRS Publication 561, Determining the Value of Donated Property.
14. Verbatim from IRS Publication 561, Determining the Value of Donated Property (2007).
15. There is an exception when the fee is paid to a generally recognized association that regulates appraisers. See IRS regulations for more information on the exception.
16. Pub. L. 109-280, 120 Stat. 780 (2006).
17. See IRS Notice 2006-96: Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions, Section 4(2)(1), which provides transitional guidance under Pub. L. 109-280; additional information on USPAP is available at http://www.appraisalfoundation.org. See also Shaines and Roady, “Tax and Legislative Update,” 113, 114.
18. The list of requirements for qualified appraisers and the list of excluded individuals were taken verbatim from IRS Publication 561, Determining the Value of Donated Property (2007).
19. See this chapter’s footnote 5.
20. Note that if a deduction of more than $20,000 is being claimed for donations of art (and “art” is defined broadly to include paintings, sculpture, prints, drawings, ceramics, antique furniture, decorative arts, textiles, silver, rare manuscripts, historical memorabilia, etc.), a complete copy of the signed appraisal must accompany the tax return. (See this chapter’s Section A.5, “IRS Review of Valuations.”) If the deduction claimed is more than $500,000, the formal appraisal must be attached no matter what was donated. See IRS Publication 561, Determining the Value of Donated Property.
21. The date of receipt of the gift by the museum should be interpreted to mean the date on which the last step needed to complete the gift took place. Normally, the three steps necessary to complete the gift for tax purposes are (1) evidence of donative intent, (2) control of the object by the museum, and (3) acceptance of the gift by the museum. These steps can take place in any sequence. (See Chapter IV, “The Acquisition of Objects: Accessioning,” Section F.4, “Special Tax Considerations,” for more information on when a gift is complete for tax purposes and the tax consequences of a “related use.”)
22. The Pension Protection Act of 2006 extended the requirement to file a Form 8282 from two to three years in § 1215.
23. Ibid; see IRS Form 8282 instructions.
24. The Art Advisory Panel was first authorized in 1968. Originally, the panel was composed of twelve members with expertise in paintings and sculpture. Today, the twenty-five members have wider areas of expertise. See K. Carolan, “Documenting Art Appraisals for Federal Tax Purposes,” in The Law and Business of Art, 297 PLI/Pat 787, Patents, Copyrights, Trademarks, and Literary Property Course Handbook Series, R. Lerner, ed. (New York: Practicing Law Institute, 1990), PLI Order No. G4-3851.
25. The Art Advisory Panel of the Commissioner of the Revenue, Annual Summary Report for 2010 (Closed Meeting Activity), accessed Apr. 15, 2011, www.irs.gov/pub/irs-utl/annrep2010.pdf.
26. See IRS Rev. Proc. 96-15 (1996), available at www.irs.gov.
27. Ibid.
28. See 31 C.F.R. pt. 10.
29. Note the previous comments regarding a possible disqualification of an appraiser because of close ties with a donee organization.
30. See http://www.artdealers.org/appraisals.html (accessed Apr. 15, 2011). This organization states that it has appraised art for tax purposes for more than forty-eight years.
31. See http://www.appraisers.org and look for “Find an Appraiser” link (accessed Apr. 15, 2011).
32. See http://www.appraisersassoc.org and look for “Find an Appraiser” link (accessed Apr. 15, 2011).
33. As noted in this chapter’s footnote 1, this discussion does not cover the question of museum personnel who appraise or authenticate for a fee in addition to their museum employment. Such “outside employment” raises additional ethical and legal issues and is beyond the scope of this text. For information on this question, see “A Code of Ethics for Art Museum Directors,” published by the Association of Art Museum Directors, Professional Practices in Art Museums (1991, revised 2001), which states that “[a] museum director shall not provide for a fee—or on any retainer—any certificate or statement as to authenticity or authorship of a work of art, or any statement of monetary value of a work of art”; Code of Ethics for Curators (2009), quoted in this chapter’s footnote 2; College Art Association, A Code of Ethics for Art Historians (revised as of Jan. 1995), Section VII, and also its companion document Guidelines for Professional Practice; and International Council of Museums, ICOM Code of Ethics for Museums (Paris: ICOM, 1986, revised 2004), Part 5.1, accessed Apr. 14, 2011, http://icom.museum. See also R. Lind, “Legal Risks Associated with Providing Expert Opinions and Authentications,” in American Law Institute–American Bar Association (ALI-ABA), Course of Studies Materials: Legal Problems of Museum Administration (Philadelphia: ALI-ABA, 1991).
34. As cultural objects become more valuable in the marketplace and more often the subject of request for return or restitution by countries of origin, potential liability increases for the appraiser or authenticator. A growing concern is expected and is evidenced, for example, in a comparison of the College Art Association’s Code of Ethics for Art Historians of 1973 and its revised code of ethics of Jan. 1995 (plus the companion Guidelines for Professional Practice). Since 2004, the ICOM Code of Ethics specifically advises museums providing identification and authentication of objects—when they believe or suspect an item to have been illegally or illicitly acquired, transferred, or exported—not to make that information public until the “appropriate authorities have been notified.” ICOM Code 5.1 (2004).
35. Black’s Law Dictionary (6th ed., 1990).
36. For this reason, misrepresentation is frequently associated with the tort of deceit.
37. Courts are often reluctant to find a duty of care if the resulting liability might be “an indeterminate amount for an indeterminate time to an indeterminate class.” Ultramares Corp. v. Touche, 255 N.Y. 170 and 179, 174 N.E. 441, 444 (1931). See also W. Prosser, “Misrepresentation and Third Persons,” 19 Vand. L. Rev. 231 (1966); and W. Prosser, Law of Torts § 107 (5th ed., 1984). But see Citizens State Bank v. Timm, Schmidt, and Co., 113 Wisc. 2d 376, 335 N.W.2d 361 (1983); Page v. Frazier, 388 Mass. 55, 445 N.E.2d 148 (1983).
38. The issue of reliance sometimes takes the form of finding a duty—between the plaintiff and the defendant—that requires the defendant to exercise reasonable care.
39. See International Products Co. v. Erie Railroad Co., 244 N.Y. 331, 155 N.E. 662, cert. denied, 275 U.S. 527 (1927).
40. “Fraud includes the pretense of knowledge when knowledge there is none.” Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441, 444 (1931).
41. 51 F. 774, 780 (C.C.D. Ind. 1892). An analogy can be drawn to breach of warranty cases involving misattributed art. For example, in two classic English cases—Jendwine v. Slade, 170 Eng. Rep. 459 Nisi Prius 1797, and Power v. Barham, 111 Eng. Sep. 865 K.B. 1836—different results were reached on the issue of the seller’s liability. In Jendwine, the seller’s attribution was held to be only “opinion” because the artist in question had lived centuries before. In Power, the seller’s attribution was found to be a fact or “warranty” probably because the artist in question lived more recently. The Power court refused to follow Jendwine, saying that each case must be decided on its own circumstances.
42. If the owner of the object requests the authentication, there can be no cause of action for disparagement when the information is conveyed to him or her because there is no disclosure to a third party. (The owner might have a cause of action for misrepresentation, however.) If the owner requests that the information be conveyed to someone else, this disclosure would normally be protected from suit provided the publication did not exceed the scope of the consent. On this general issue, see Restatement (Second) of Torts § 635 (1976). In Fisher v. Washington Post Co., 212 A.2d 335, 337 (D.C. 1965), an art gallery owner requested that a newspaper art critic review his new exhibition. When the review proved to be most unflattering, the gallery owner sued the newspaper. The court stated that “[h]e should not be heard to complain if the criticism so invited is not gentle” (emphasis added). See also J. Orenstein, “Show Me the Monet: The Suitability of Product Disparagement to Art Experts,” 13 Geo. Mason L. Rev. 905 (2005).
43. T. Stebbins, “Possible Tort Liability for Opinions Given by Art Experts,” reprinted in F. Feldman and S. Weil, Art Law (Boston: Little Brown, 1986), Vol. 2. Stebbins’s treatise is often cited on the subject of defamation, and his views are liberally represented here.
44. Two often-cited cases involving disparagement of art highlight the problem of balancing the interests of complaining parties and those of the public or other individuals. In Hahn v. Duveen, 133 Misc. 871, 234 N.Y.S. 185 (1929), the flamboyant art dealer Sir Joseph Duveen, after seeing only a photograph of a picture claimed to be La Belle Ferroniere by Leonardo da Vinci, declared to a newspaper reporter that the picture was a copy. The owner, who was engaged in negotiating the sale of the picture to an art museum, sued Duveen for disparagement. When a long trial proved inconclusive, Duveen settled the claim for a sizable sum of money. In Gott v. Pulsifer, 122 Mass. 235 (1877), there had been much publicity over a statue called Cardiff Gran or Onondaga Statue, which was purported to be a major archaeological find. The defendant newspaper wrote an article stating that the statue was a fake and that it had been purchased by the owner for $8. The owner, who was in the process of selling the statue for $30,000, sued the newspaper. The newspaper prevailed on the trial level, but on appeal the case was returned for a new trial on the issue of malice. Both cases raised questions of “privilege.”
45. If a museum is part of a governmental unit, inquiry should be made to see if employees, as public officials, have any form of absolute immunity from suits based on another theory—that the governmental unit has not waived its immunity regarding certain types of actions. Such immunity is not a “privilege” but is another form of effective defense.
46. See Restatement (Second) of Torts §§ 635–650A (1976). See also W. Prosser, Law of Torts §§ 114–115 (5th ed., 1984).
47. As previously discussed, scholars still debate whether malice is a necessary element for a disparagement action. In part, the controversy is due to the interaction of elements of privilege in many disparagement actions. If malice is in fact a necessary element, there should be far fewer cases requiring the defense of a conditional privilege.
48. These privileges also apply to actions of defamation. The effectiveness of such privileges, however, can be affected by federal and possibly state constitutional protections of free speech. See the discussion of these constitutional ramifications in this chapter’s Section B.3, “Defamation.”
49. Restatement (Second) of Torts § 559 (1976); Kraushaar v. La Vin, 181 Misc. 508, 42 N.Y.S.2d 857 (1943) (questioning professional competence). In some states, publicity that puts someone in a false light in the public eye may also cause an action for invasion of privacy.
50. Libel can include pictures, signs, statues, motion pictures, or even conduct that tends to defame. See, for example, Yorty v. Chandler, 13 Cal. App. 3d 467, 91 Cal. Rptr. 709 (1970); and Silberman v. Georges, 91 A.D. 2d 520, 456 N.Y.S.2d 395 (1982).
51. See Restatement (Second) of Torts §§ 570–74 (1976) and Prosser, Law of Torts, § 116A (5th ed., 1984).
52. See McNally v. Yarnall, 764 F. Supp. 838 (S.D.N.Y. 1991). The McNally court relied heavily on Milkovich v. Lorain Journal Co., 497 U.S. 1, 110 S. Ct. 2695 (1990).
53. McNally v. Yarnall, 764 F. Supp. 838 (S.D.N.Y. 1991).
54. Ibid.
55. 300 F.2d 162 (7th Cir. 1962).
56. No. 78 Civ. 2279 (S.D.N.Y. Oct. 26, 1978). See also Mount v. Sadik, No. 78 Civ. 2279 (S.D.N.Y. Apr. 7, 1980), which discusses the liability of the magazine that published a story on the controversy.
57. No. 78 Civ. 2279 (S.D.N.Y. Oct. 26, 1978), 166–67. See also Brewer v. Hearst Publishing Co., 185 F.2d 846 (7th Cir. 1950).
58. Mount v. Sadik, No. 78 Civ. 2279, slip op. at 6 (S.D.N.Y. Oct. 26, 1978).
59. Note that these remarks concern gratis opinions given at the request of owners or their agents, not the scholarly debate or scholarly article situations or other situations in which nonowners seek opinions on authenticity.
60. For more information on the subject of appraisals and authentications, see R. Lind, “Legal Risks Associated with Providing Expert Opinions and Authentications,” in American Law Institute–American Bar Association (ALI-ABA), Course of Studies Materials: Legal Problems of Museum Administration (Philadelphia: ALI-ABA, 1991); L. Wise, “Suggested Precautions to Be Taken When Giving Opinions on Works of Art,” in American Law Institute–American Bar Association (ALI-ABA), Course of Studies Materials: Legal Problems of Museum Administration (Philadelphia: ALI-ABA, 1991); B. Wolff, “The Contents of Museum Catalogues and Other Questions of Authenticity: When Can Museums Be Held Liable?,” in American Law Institute–American Bar Association (ALI-ABA), Course of Studies Materials: Legal Problems of Museum Administration (Philadelphia: ALI-ABA, 1993); S. Levy, “Liability of the Art Expert for Professional Malpractice,” 1991 Wis. L. Rev. 595 (No. 4); and F. Feldman and S. Weil, Art Law (Boston: Little Brown, 1986), 2:508–47.