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When Artists Skyrocket: the Fine Art Sale versus Consignment Conundrum

Updated: Mar 26, 2020

Catching a shooting star is one of the joys of collecting fine art.

You catch an artist early, and watch them go from obscurity to adulation, along the way riding the wave of popularity and reveling in your talent-spotting brilliance.

If you miss the opportunity, the curve of popularity accelerates quickly, the market takes hold, artworks become scarce and prices skyrocket, the ship having sailed, the horse having bolted, its too late to get on board.

Sometimes, though, trying to hold on too tight has its consequences.

Such may be the case regarding the works of Derek Fordjour.

Hailing from Memphis Tennessee, Fordjour, who works in film, sculpture, works on paper and painting, was in relative obscurity when, in 2014, he was spotted by Lower East Side gallerist Robert Blumenthal.

According to the Complaint recently filed as Robert Blumenthal Gallery, LLC v Derek Fordjour (650795/2020; New York Supreme Court), Blumenthal maintains that, in 2014, he met the then unknown Fordjour on a studio visit and "...recognized that Fordjour possessed an artistic vision and that he could become a successful artist..."

Having spotted a potential shooting star, Blumenthal, then "... set out to foster Fordjour’s career, providing gallery representation and financial support...".

And when the relatively unknown artist needed funds, Fordjour agreed to commit twenty paintings to Blumenthal in exchange for $20,000.

Fordjour memorialized the agreement by emailing Blumenthal the following:

"As discussed, for the sum of 20k I commit 20 works, 15 paintings (oil and or acrylic on panel) and 5 works on paper, ranging in size from 60 x 44 to 72 x 40. Bearing in mind that I am committed to two shows this fall, one opening Sept. 5th in Brooklyn and the other Nov. 8th in Los Angeles, I will plan to have all works complete in time for Art Basel Miami 2014. I will be respectful of time commitments; however, my first commitment is to producing quality works. I trust that you will appropriately flexible [sic] regarding any necessary amendments, regarding time along these lines."

Blumenthal maintains that he assisted Fordjour further by taking other works by Fordjour on consignment, exhibiting works and also lending Fordjour money and financing exhibitions and installations.

In April 2015, Fordjour's 'CONCATENATION', a work from the same year, appeared in a Sotheby's exhibition celebrating, in collaboration with Drake, "...influential Contemporary black American artists..." .

According to Blumenthal's complaint, Fordjour was effuse in his praise for Blumethal, writing in a 2016 email:

"And we have a good relationship. So I worry less. For sure. You came along

and believed in me and gave me opportunity and put your money where your mouth was at a crucial time. I will always be grateful for that.”

And then, in response to Blumenthal:

"Same here dude. You can do no harm here. I owe you the works. I will make

good. It’s a crackhead deal. I was a crackhead. Thankfully you’re a friend.

At the time Fordjour's works were selling for $2,000 or higher (as Fordjour's Motion to Dismiss Blumenthal's Complaint, filed March 18, 2020, maintains).

Fordjour delivered between thirteen and fifteen of the works to Blumenthal pursuant to the agreement. There appears to be somewhat of a dispute, as Blumenthal's Complaint says thirteen and Fordjour's Motion to Dismiss says fifteen.

Fordjour's star rose.

In May 2017 his works hit the secondary fine art market. Phillips sold Fordjour's 'Untitled (Girl with Trophy)', a 60 x 52 in. oil on wood panel, for $8,125 on a high estimate of $12,000.

Then in November 2018, his 'No.36', a 2014, 30 x 24 in. oil pastel, acrylic and newspaper on canvas, sold for $37,500 on a high estimate of $7,000.

From there the only way was up.

His 'Agency and Regulation (Study)', a 60 x 40 in. acrylic and oil on panel, sold at Phillips in September 2019 for $137,500 on a high estimate of $60, 000.

'Green Horn', a 2017, 60 x 42 1/8 in. oil pastel, charcoal, acrylic, cardboard and newspaper mounted on canvas, went for GBP 137,500 on a high estimate of GBP 137,000.

According to Blumenthal's complaint, Fordjour's "... work is now collected by celebrities such as Beyonce, Jay Zee, and Drake, and it is also included in numerous museum collections, including but not limited to LACMA, Studio Museum of Harlem, the Perez Art Museum, the Dallas Museum of Art and the Whitney Museum of Art..."with his "works on paper... [selling]... in the neighborhood of $250,000 each...".

Fordjour, as stated in the Motion to Dismiss, "...decided to part ways with...[Blumenthal]..., and has declined to deliver additional works to the Gallery."

So, deprived of his seven or five works of art, and with Fordjour now the elusive rising fine art star, Blumenthal filed suit in the New York Supreme Court, maintaining that the agreement with Fordjour was a sale, that the $20,000 paid was an advance on the works, and claiming $1,450,000 in damages being the "...fair market valuation of the works not delivered..."; $250,000 a piece for the works on paper and $100,000 for the paintings.

According to Blumenthal, it was his gallery who helped Fordjour make the market for his works of art and garner the recognition he enjoyed. Ultimately, an agreement is an agreement, and Fordjour did not deliver.

An agreement, yes, but what type of agreement. A sale or a consignment?

Did Fordjour agree to sell the works outright to Blumenthal or was he merely consigning the works?

Fordjour's attorneys jumped on this in their Memorandum of Law supporting Fordjour's Motion to Dismiss Blumenthal's Complaint. For Fordjour, this was nothing but a consignment, not only entitling Fordjour to terminate it at any time but also to require return of the works of fine art already delivered to Blumenthal or the proceeds of any sale, which they duly did in a letter to Blumenthal dated March 7, 2020.

For Fordjour, Blumenthal's $20,000 was simply an advance on the consignment, it being:

"...a common practice in the art world: an artist consigns his work to a gallery, receives an advance in exchange for the gallery’s right to sell that work, and then receives a portion of the proceeds once the work is sold...".

After all, there is nothing in the 'agreement' which says anything about a sale. All it says is "...for the sum of 20k I commit 20 works..."

So, was this a sale or a consignment?

Article 9 of the Uniform Commercial Code (UCC) defines 'Consignment', in material part, as "...a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and...the in goods of that not an auctioneer...and is not generally known by its creditors to be substantially engaged in selling goods of others...".

A sale under Article 2 of the UCC can either be a 'sale or return' or a 'sale on approval'. In the Fordjour-Blumenthal case we would, as far as Fordjour's attorneys are concerned, be dealing with a 'sale or return' as their premise for consignment is that the works were received by Blumenthal for exhibition and sale, with Blumenthal recouping its $20,000 advance through its commission on sale.

Fordjour needs a legal argument to succeed in dismissing the Complaint. A dispute of fact will not assist him. So his attorneys make the argument in support of the Motion to Dismiss that "...[c]onsignment relationships are not only favored by custom...[in the fine art world]..., they are presumed by law.".

In making this argument they rely on §12.01 of the New York Arts and Cultural Affairs Law (ACAL), New York's fine art consignment statute, which provides that:

"Notwithstanding any custom, practice or usage of the trade, any provision of the uniform commercial code or any other law, statute, requirement or rule, or any agreement, note, memorandum or writing to the contrary...(a) Whenever an artist...delivers a work of fine art of such artist's own creation to an art merchant for the purpose of exhibition and/or sale on a commission, fee or other basis of compensation, the delivery to and acceptance thereof by the art merchant establishes a consignor/consignee relationship as between such artist .....and such art merchant with respect to the said work...." (our emphasis).

Artists' outright sales of works of fine art to dealers for purposes of resale are rare in the United States, but not unheard of. The reason for it should be obvious. Dealers either do not have, or do not want to commit the capital or assume the risk of buying works, which they can equally take on consignment, a 'sale-or-return', and share in the upside of the sale by taking a percentage of the sales when the work sells, or returning it if it doesn't.

Fordjour's primary argument in the Motion to Dismiss sits squarely within the four corners of ACAL. Since this was a delivery by an artist to a dealer for the purpose of sale, the transaction is deemed to be a consignment and not a sale. The artwork itself remains trust property in the hands of the dealer, and any proceeds received by the dealer on sale of the work of fine art are trust funds in the dealers hands for the artist's benefit (ACAL § 12.01 (a)(ii) and (iii)).

Fordjour's attorneys go further, though, in referencing In re Friedman, (64 A.D.2d 70, 71-72 (2d Dep’t 1978)), where, even though the agreement with the dealer predated the New York consignment statutes, the New York Supreme Court accepted in evidence that "... consignment of art, not sales, are the prevalent business arrangement between artists, or their estates, and art dealers..."

They also rely on Wesselmann v. Int’l Images, Inc., (657 N.Y.S.2d 284, 288) to buttress ACAL § 12.01(a)(iv) which provides that even if the dealer buys for his own account the work of fine art remains trust property until such time as the work is paid for in full.

Moreover, where the dealer then sells the work to a third party before having paid the artist in full for the work, "...the resale proceeds are trust funds in the hands of the consignee... [dealer]... for the benefit of the consignor [...artist...] to the extent necessary to pay any balance still due to the consignor."

So here, the transaction with Blumenthal would be a consignment. The works of fine art already delivered by Fordjour to Blumenthal would be trust property, and proceeds of any on-sale, trust proceeds to the extent due to Fordjour.

Moreover, since the law recognizes a consignor to have a superior right to possession over a consignee, Fordjour would be entitled to terminate the consignment arrangement, and claim return of the delivered, unsold artworks and the proceeds of any works of fine art sold.

So the argument goes.

Interestingly, neither the Complaint nor the argument in support of the Motion to Dismiss appears to mention what Blumenthal actually did with the works. Were they purchased for the Gallery's own account? The ACAL deemed consignment argument seems to stack up when one considers that the suit was brought in the Gallery, and not Blumenthal's personal name.

In Fordjour's attorneys' own words, Blumenthal, "... whose “globe-trotting” lifestyle has been satirized on a popular art-themed Instagram page, opened the Gallery in 2014 after spending the previous decade “amassing a collection” of art that he kept on display in his home...".

Could, or should Blumenthal have brought the suit in his own, and not the Gallery's name and would he then be able to by-pass the ACAL deeming provisions?

But consignment or not, it would seem that the disposition of this case may come down to a question of fact as to whether Blumenthal paid for the works of fine art in full. Paying $20,000 for 20 artworks in Fordjour's attorneys' eyes was half or less of what the works were then worth.

But is that determinative of whether he bought them for resale or for his own account, and if for his own account, that the works were paid for in full? Does bargaining for less than what the works were worth at the time of a sale make that any less a purchase price?

We think not. After all, Fordjour himself, you may recall, said "...[i]t’s a crackhead deal. I was a crackhead. Thankfully you’re a friend...".

At the least it seems there remains a dispute of fact which may deter the court form dismissing the Gallery's arguments at this stage .

But one gives pause for Blumenthal's approach. Should he not have been content with his thirteen or fifteen Fordjour works? In the circumstances, quite the bargain.

Yet he now runs the risk of this being a consignment in its truest sense, and anything short of showing that these works were own account purchases or not for resale, may give the Gallery, and ultimately Blumenthal the very short end of the stick.

Perhaps a shooting star too far? Only time and the court will tell.

** This article is intended to be informational only, and does not constitute legal advice. Competent, specific legal advice from a suitable, licensed attorney, should always first be obtained before taking any action, and the information in this article should not be relied upon independently of that advice.


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