Art Law Report

Paddle 8 Creditors Battle Over Scope of New York Consignment Law

Posted by Nicholas O'Donnell on May 5, 2020 at 12:32 PM

Since online auctioneer Paddle 8 filed for bankruptcy protection in March, creditors of the company have begun filing their notices of claim in the bankruptcy case. One thing on which the creditors all seem to agree is that the current assets of Paddle 8 will be insufficient to cover its debts by a considerable margin. Paddle 8’s lenders and commercial landlord are by far the largest creditors, and standing out from the crowd will be difficult. The key for many consignors, therefore, will be whether they can convince the Bankruptcy Court that the money they seek is somehow distinct from the unsecured claims of the bulk of creditors. Based on filings to date, there is already considerable disagreement about the limited scope of New York’s consignment statute (N.Y. Arts & Cult. Affairs Law § 12.01) (NYACAL), the interpretation of which will be important to this and presumably many other bankruptcies to come. NYACAL protects consignment sale proceeds under certain circumstances when the artist of the work in question is the consignor—but not otherwise. For the charitable consignors, they may end up holding the bag.

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Topics: Bankruptcy Code, consignor, New York Arts & Cultural Affairs Law, Paddle 8, New American Cinema Group, UN Women National Committee UK, NYACAL, Lift Los Angeles, Penumbra Foundation

Paddle 8 Bankruptcy a Harbinger in the Time of COVID19 and the Coming Art World Crisis

Posted by Nicholas O'Donnell on March 24, 2020 at 8:59 AM

Early last week the online auctioneer Paddle 8 filed for Chapter 11 bankruptcy in the Southern District of New York, on the heels of a recent lawsuit demanding payment for works of art sold at a charitable auction last November. While the Paddle 8 bankruptcy seems to have been driven by business conditions long before the complete upheaval of the art and business world due to COVID19, it is all but certain now that the cascading closures of businesses large and small for the foreseeable future will bring a wave of bankruptcies in the months and year to come. As such, taking a closer look at the Paddle 8 situation can be instructive for art market participants of all sorts, particularly with respect to the consignment and sale of art. Put simply, most businesses are going to need to think very soon about their roles as creditors who are owed some good or service, in the hopes of avoiding becoming debtors who need the help of bankruptcy laws to reorganize or stave off liquidation.

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Topics: Bankruptcy, Bankruptcy Code, Bankruptcy Court, consignor, U.C.C.-1 statement, New York Arts & Cultural Affairs Law, Salander O'Reilly, ArtNet, Force majeure, coronavirus, COVID-19, Chapter 11, Paddle 8, Auctionata AG, online auction, Tom Otterness, Valentine Uhovski, Rameshkumar Ganeshan, 11 U.S.C. § 541(b)(1), 11 U.S.C. § 362(a), Penumbra, G.L. c. 104A, § 2, John Ahearn, Kiki Smith, Jonas Mekas, Jim Jarmusch, Walter Robinson, Michael McClellan, security interest, N.Y. Arts & Cult. Affairs Law § 12.01, automatic stay, Acts of God, Paper Chase

Bankruptcy Court Denies Creditors’ Motion to Reappraise Detroit Institute of Arts Collection

Posted by Nicholas O'Donnell on January 22, 2014 at 12:22 PM

As we predicted when it was filed, Judge Rhodes of the U.S. Bankruptcy Court for the Eastern District of Michigan denied today several creditors’ motion to appoint an independent commission to appraise the collection of the Detroit Institute of Arts (owned by the city of Detroit) as part of the city’s ongoing bankruptcy.

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Topics: Governor Rick Snyder, Judge Rhodes, Christie's, Detroit Institute of Arts, Bankruptcy Code, Michigan, Emergency Manager Kevyn Orr, Detroit Bankruptcy

Detroit Institute of Arts Deaccessioning: Municipal Bankruptcy, Existing and Proposed Changes to Michigan Law Affect Debate

Posted by Nicholas O'Donnell on August 5, 2013 at 6:20 AM

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

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Topics: Legislation, Tenth Amendment, Donn Zaretsky, Deaccession, Chapter 9, 11 U.S.C. § 904, Public Trust, Attorney General of Michigan, Detroit, Detroit Institute of Arts, Bankruptcy, Collections, Bankruptcy Code, Association of Art Museum Directors, Bill Schuette, Detroit Emergency City Manager, Kevyn Orr, Museums, Detroit Bankruptcy, AAMD

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About the Blog


The Art Law Report provides timely updates and commentary on legal issues in the museum and visual arts communities. It is authored by Nicholas M. O'Donnell, partner in our Art & Museum Law Practice.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

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