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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

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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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