Dateline, April 6, 2007, Chicago
Financially-troubled Fisk University has wanted to put two painting on the market for some time, but when Georgia O'Keeffe donated the paintings to Fisk back in the 1940's, she may have imposed restrictions on their disposition. The more prominent of the two paintings is Radiator Building-Night, New York, painted by O'Keeffe herself. The other is Painting No. 3 by Marsden Hartley.
Yesterday, Tennessee Attorney General Robert E. Cooper, Jr. rejected the attempted sale of Radiator Building to the New Mexico-based Georgia O'Keeffe Foundation, succeeded to by the Georgia O'Keeffe Museum, but still referred to in the legal proceedings as the foundation. Under the terms of a settlement agreement reached in February by Fisk and the O'Keeffe Foundation, Fisk was permitted to sell Radiator Building to the foundation for $7 million, if after 30 days, the Tennessee and Nashville communities did not come up with an acceptable alternative to the sale. Under that settlement agreement, Fisk was required ask the Nashville community to provide alternative funding so that the two paintings could remain in the Fisk collection. Unfortunately, alternatives were not forthcoming, but the Fisk did receive two offers to purchase the Radiator Building for $25 million.
In Attorney General Cooper's view, $7 million was too much of a bargain given the evidence that the painting was likely worth upwards of $25 million. So does that mean that Fisk now...
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can sell the painting at market value?
Absolutely not. It will likely be months or even years before the painting comes to market, if ever. The reason is rooted in the history of the gift. In 1949, Georgia O'Keeffe transferred a collection of 101 works assembled by her late husband Alfred Stieglitz to Fisk University, with apparent instructions that the collection not be sold, no works in the collection be loaned, and the collection be exhibited intact. The collection included significant early 20th paintings, as well as a work by Renoir and one by Cezanne. As of 2005, the collection had a total appraised value of $33 million, according to Christie's.
In December 2005 and before seeking court approval, Fisk approached the Tennessee Attorney General, asking whether the attorney general would object to Fisk selling the two paintings. The attorney general indicated that he would not object if Fisk used its best efforts to sell the paintings to someone located in Tennessee who would make the paintings available to the public. With the attorney general's consent in hand, Fisk proceeded to court. It was at that point, the Georgia O'Keeffe Foundation intervened, claiming it had standing and arguing that the restrictions imposed by Georgia O'Keeffe prevented the sale. The resulting dispute centered on whether the restrictions, which clearly applied to the 101 paintings, also applied to the four paintings that O'Keeffe had deeded separately. The foundation argued that if two intended paintings were sold, the sale would void the original gift, causing the entire collection to revert to the Foundation, as O'Keeffe's successor in interest.
The resulting lines of argument made to the court are extraordinary technical, relying on hollow and wooden legal doctrine. Fisk argued that when O'Keeffe transferred the collection to Fisk, she was acting as Stieglitz's executrix, meaning that she had no personal interest in the collection. The O'Keeffe Foundation, on the other hand, argued that Georgia O'Keeffe was acting in her capacity as a life tenant of the collection—meaning she had the right to possess and enjoy the collection for the remainder of her life. Based on Georgia O'Keeffe's claimed status as a life tenant, the foundation argued that as O'Keeffe's successor in interest, it stepped into her shoes. Because Georgia O'Keeffe had given up her life interest in exchange for the imposition of the restrictions—the foundation's view—it now had the right to enforce the restrictions as her successor in interest.
On October 4, 2006, a Tennessee Chancery Court issued an order granting the the O'Keeffe Foundation standing. In other words, it rejected Fisk's argument that Georgia O'Keeffe was acting as executrix and accepted the foundation's view that Georgia O'Keeffe had imposed the restrictions as a condition to disclaiming her life interest. It also denied Fisk's request for summary judgment that the no-sale condition did not apply to Radiator Building and Painting No. 3 (plus two other paintings). But adding to the confusion, the court did rule that Radiator Buildings was never owned by Stieglitz and was given by O'Keeffe to Fisk as an outright gift in her individual capacity as the owner and creator of the painting. The court concluded, however, that Georgia O'Keeffe intended that Radiator Building be subjected to the same conditions that applied to the Stieglitz collection.
At that point, Fisk and the foundation entered into the settlement agreement referred to earlier. Now that the Tennessee Attorney General has rejected sale of Radiator Building to the O'Keeffe Foundation, it is unclear what happens next. It can be inferred that the attorney general would not object to a sale at the $25 million price, particularly if Fisk used best efforts to sell it to someone in Tennessee who will make the painting available to the public. In an event, the Chancery Court still must approve the sale. The parties appear to be deadlocked.
The parties are scheduled to return to court for a July 18, 2007 trial on the merits. Fisk is likely to ask that the court apply the doctrines of cy pres or equitable deviation to Radiator Building, arguing that O'Keeffe's intent was to help the school, rather than to simply display the painting in Tennessee. Fisk would then argue that Radiator Building no longer accomplishes that purpose, and that a sale is the best way to further O'Keeffe's original intent. The O'Keeffe Foundation is likely to argue that the neither cy pres nor equitable deviation applies because the gift was a conditional rather than restricted gift. In other words, if the condition fails, the painting goes back to the donor or the donor's successor in interest--that being the O'Keeffe Foundation.
The only incentive for the O'Keeffe Foundation to support applying cy pres or equitable deviation is if it can obtain Radiator Building at a bargain price or for nothing. It is unlikely, given the Tennessee Attorney General's findings, that the court will now approve a sale for $7 million, particularly if the sale would occur over the attorney general's objections, but the court might be willing to allow a sale at some price in between $7 million and $25 million. Time is ultimately the reason for this dispute and only time will tell how the dispute is resolved.
Lesson: There is a huge lesson for donors in this story. Museums are actively competing for art collections from wealthy individuals. As a result, donors wield great power, providing them the opportunity to impose all sorts of restrictions on museums, which are designed to assure donor immortality. Donors can do this, but it is both shortsighted and wrong, as the Fisk-O'Keeffe controversy aptly demonstrates.
Donors have every right to ask for recognition when making a gift. We are also willing to concede a restriction on sale for ten or twenty years and restrictions that require any future buyer to make the art works available to the public (i.e., keeping it out of a private collector hands). But tying an institution's hands in perpetuity inevitability leads to waste and conflict. If a collection is so spectacular, the institution is unlikely to sell it. If the institution does decide to sell a collection because of a change in its mission or for financial reasons, the institution is likely to keep the collection together if the merits are still strong for doing so. But donors should stop trying to control the future from their graves. No matter how wealthy the donor was, he is still dead.
The recent controversy at the Albright-Knox Museum comes to mind. Members of the community tried to stop the sale of some 100 antiquities. The museum wanted to sell these objects because its mission focused on contemporary and modern art. Some argued that restrictions imposed by donors long ago prevented the sale, but a court rejected that argument. In the end, one of the more significant pieces—a Shiva as Brahma—was purchased by the Cleveland Museum of Art, which has a world-class collection of Indian art, for over $4 million. See Randy Kennedy, Cleveland Owns Up, NY Times, Apr. 5, 2007. This result was clearly pareto optimal. The statute is in a collection where it can best be displayed in context and the Albright-Knox now has $4 million for acquisitions of contemporary and modern art.
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