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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

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

Always Read Closely: New York Senate Passes Authentication Bill, But Enhanced Burden of Proof Stripped from Earlier Proposal and Fee-Shifting Is Diluted

Posted by Nicholas O'Donnell on June 22, 2015 at 7:49 AM

The New York State Senate has passed a bill relating to the liability of authenticators and appraisers. When I first saw the news it seemed like a minor development, but then I went and read the bill. It stripped out a material aspect of the bill first proposed last year that would have required plaintiffs seeking damages against authenticators to prove their case by clear and convincing evidence, a daunting standard. Heightened pleading requirements are still contained within the bill, but the attorneys’ fees provision has also been watered down, with such an award now discretionary rather than mandatory.

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Topics: Legislation, Section 13.04, Section 15.12, Hyperallergic, authentication, clear and convincing, fee-shifting, Senate Bill S6794, Warhol Foundation, attorneys' fees, preponderance of the evidence, appraiser, New York Arts & Cultural Affairs Law, authenticator, New York Senate, S1229-A

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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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