Wednesday, December 27, 2006

Fiduciary Duties When Art Is "For Sale"

On December 21, 2006, Thomas Jefferson University Medical College issued an "Announcement from Mr. Harrison Regarding 'The Gross Clinic'" regarding its sale & disposition of a famous painting that will remain in the Philadelphia area, and not be sold & moved out-of-state under a previously-negotiated private sale:

Today, in the presence of Philadelphia Mayor John Street, the Philadelphia Museum of Art and the Pennsylvania Academy of the Fine Arts announced that they have agreed to buy Thomas Eakins' The Gross Clinic from Thomas Jefferson University.

We are very pleased that The Gross Clinic will remain in Philadelphia.
It is fitting that this masterpiece join the great collections of the Philadelphia Museum of Art and the Pennsylvania Academy of the Fine Arts, where it will be made accessible to millions of people. In addition to fulfilling our fiduciary responsibility, we gave the local cultural institutions the opportunity to keep the painting. [Emphasis added.]
A news article, published December 21, 2006, reported on the announcement & the effort that resulted in its issuance. See: Frenetic 40 days to retain 'Clinic', by Stephan Salisbury, of the Philadelphia Inquirer:

Toward the end of last summer, a small group of leaders of Thomas Jefferson University and an outside lawyer decided to contact Christie's auction house in New York to arrange the sale of a painting owned by the university for more than a century, according to university officials.

This wasn't just any painting, the group knew, it was an extremely valuable asset that could help fund transformation of the university's academic programs and Center City campus. The painting, as the city and nation were to learn in November, was Thomas Eakins' masterpiece, The Gross Clinic, donated to Jefferson by alumni in 1878 and a part of the fabric of the school and the city ever since.

The surprise announcement of its sale on Nov. 10 set off a controversy at the university and in the city and launched a frenetic fund-raising drive by local institutions. On Thursday, the drive climaxed when local leaders announced they had won the prize, matching the $68 million offered by two out-of-town museums, a record for a pre-World War II American artwork

Thomas Jefferson University explains a long & extensive display of its owned artworks on its webpage entitled "The Jefferson Art Tradition":

Over its 175-year history, Thomas Jefferson University has received more than 400 paintings, sculptures, art works on paper and antique decorative arts. These works are displayed throughout the campus and numerous others are in archival storage. The majority of paintings and sculptures are portraits of Jefferson physicians and administrators, presented either by friends and colleagues of the subjects or by each year's graduating class which honors its most inspiring professor in a tradition dating from 1924.

In 1982 the University established the Eakins Gallery in Alumni Hall to feature three life-size portraits by the late 19th-century Philadelphia artist Thomas Eakins of Jefferson physicians — Professors Samuel Gross (The Gross Clinic), Benjamin H. Rand, and William S. Forbes.

The Jefferson collection also includes hundreds of historical medical works unrelated to the university such as paintings, sculptures, medals, and richly illustrated anatomical books and other works on paper. It also includes many non-medical art works such as landscapes, battle scenes, and other figurative works.

The terms & hours of public access to The Eakins Gallery are found online here.

For recent coverage of the Jefferson matter, you could listen to the following reports, broadcast on December 14, 2006:
The proposed sale of the Gross Clinic painting by Jefferson without any court-approval can be contrasted with the controversial Orphans' Court Division-approved relocation of the entire art collection of the Barnes Foundation to a new facility being built in Philadelphia.

For some background regarding the Barnes case, you could read (or hear) the following reports, among many on the topic:
In an article entitled "Eakins vs. Barnes" published on December 16, 2006, in the Broad Street Review (Philadelphia, PA) (a professor of philosophy, a former president of the Pennsylvania Academy of the Fine Arts, and a resident of Old City, Philadelphia), asserted that the two situations were fundamentally different.
Is it hypocritical to support the Barnes Foundation’s move from Lower Merion while opposing The Gross Clinic’s move from Philadelphia?

Not at all, argues the former president of the Pennsylvania Academy of the Fine Arts. The two owners in question are very different institutions with very different missions and ground rules.
Professor Riley expanded on the similarities & the differences that he perceives in the two situations:
In one respect the two cases are similar. Both the Barnes collection and The Gross Clinic have strong historical ties to Philadelphia and as such occupy substantial space in our cultural patrimony. For this reason alone, each should remain here, even if not in its current physical location. In this regard, it is specious to contend that the move from Lower Merion to the Ben Franklin Parkway is equivalent to a move from Philadelphia to Bentonville, Arkansas.

As important as this one similarity is, there are several differences of greater significance.

Paramount among these is the fact that no legal restrictions apply to Jefferson’s right to dispose of The Gross Clinic as it chooses, since it doesn’t hold the object in the public trust and since its possession doesn’t contribute directly to the institution’s primary mission as a not-for-profit organization.

In contrast, the board of the Barnes Foundation cannot act freely with respect to its assets, the most valuable of which is the priceless collection that has been on permanent display in Lower Merion. The reason why is that the Foundation is a tax-exempt entity and, as such, holds all that it possesses in the public trust.

In other words, the citizens of Pennsylvania, not just the Barnes board, have an interest in the Barnes Foundation’s assets and how they are managed. Fortunately, this public interest is protected by the Montgomery County Orphans Court.

In both the Barnes and the Jefferson situations, key concepts are the "public trust" and the "fiduciary obligations" of their respective governing boards under their charters. Both are tax-exempt, non-profit organizations, but they conduct different primary activities -- medical education versus art preservation. Professor Riley focuses on governing fiduciary duties dictated by their legal purposes.

But, if a
medical school has strayed intentionally from its primary educational purpose by owning, displaying, & promoting certain types of cultural artifacts in a public gallery over a long time (since 1982), should it be treated fundamentally different than a self-declared museum when it proposes to "deaccess" an important item in its collection?

Put another way, when does tangible property become more an artifact than an investment, and when does the public interest become a factor in its disposition by a non-profit organization?

When the board of Jefferson asserted a fiduciary duty to sell appreciated artwork in its collection, it viewed the painting as an "investment" to be maximized for the medical education of its students. When the board of Barnes asserted a fiduciary duty to deaccess & sell selected artwork, it viewed its paintings as resources to preserve remaining artifacts for display. The courts were deeply involved in the Barnes case, but not at all in the Jefferson case.

Museums take the public interest very seriously in their mission, especially when considering the periodic removal or sale of already-acquired artifacts. The Lawyers’ Committee for Cultural Heritage Preservation maintains a list of helpful preservation resources here. Some of these resources address the complicated issues involved in "deaccession" of items held by a museum:
  • Acquisition and Deacquisition of Museum Collections and the Fiduciary Obligations of Museum to the Public, by Patty Gerstenblith, 11 Cardozo J. Int’l & Comp. Law 409 (2003).
  • Deaccession: Not Such a Dirtyword, by Jason R. Goldstein, 15 Cardozo Arts & Ent. L.J. 213 (1997).
  • When It’s OK to Sell the Monet: A Trustee-Fiduciary-Duty Framework for Analyzing the Deaccessioning of Art to Meet Museum Operating Expenses, by Jennifer L. White, 94 Mich. L. Rev. 1041 (1996).
  • Deaccessioning Fine Art Works: A Proposal for Heightened Scrutiny, by David R. Gabor, 36 UCLA L. Rev. 1005 (1989).
"Deaccession" is an important issue to the International Conference of Museums (ICOM), an international organization of museums & museum professionals. Created in 1946, ICOM is a non-profit, non-governmental, member (21,000) organization operating in 140 countries, with a consultative status with the United Nations' Economic and Social Council. The cornerstone of ICOM is its ICOM Code of Ethics for Museums, 2006, (adopted 1986, amended 2001 & 2004), which sets minimum standards of professional practice & performance for museums.

ICOM's Code states that "museums hold primary evidence for establishing and furthering knowledge":
"Museums have particular responsibilities to all for the care, accessibility and interpretation of primary evidence collected and held in their collections." * * *

useums that maintain collections hold them in trust for the benefit of society and its development".
ICOM's Code addresses, in Sections 2.12-2.17, the principles & specific concerns of "deaccessioning" of items from a museum collection. Separately, ICOM's Code addresses "Respect for Communities Served" in its Section 6:
"Where museum activities involve a contemporary community or its heritage, acquisitions should only be made based on informed and mutual consent without exploitation of the owner or informants. Respect for the wishes of the community involved should be paramount."
Of course, ICOM's Code does not rise to the level of either federal or state law. But it demonstrates the complexity & importance worldwide of the "deaccession of art" issue.

Was Barnes deaccessioning art, while Jefferson was merely liquidating an investment? As non-profits, both Barnes and Jefferson are subject to the jurisdiction of the Orphans' Court Division (of the Court of Common Pleas) in Pennsylvania. The Orphans' Court is a "court of equity", with fairly broad powers to review fiduciary decisions. Despite its primary medical education purposes, Jefferson appears, for a long time, to have acted just like a museum in displaying & promoting its artwork publicly.

Should Jefferson’s board be able to act autonomously as a non-profit organization in selling that art, without any restraints imposed by the public interest?

Thankfully, the controversy in the Jefferson case did not rise to the level of litigation in the Orphans' Court Division. So we must wait until another day to see whether
a Pennsylvania non-profit organization's characterization of artwork, publicly displayed and considered special to the Commonwealth, would be governed predominantly by a fiduciary duty towards "investment" for unilateral maximization of proceeds for an unrelated purpose, or rather towards "preservation" in which the public has an interest enforceable through the courts.

In the meanwhile, I suggest that this is a matter which the Pennsylvania Legislature should address on the basic principles of preservation of artifacts versus investment in artifacts, and thereby provide both non-profit owner organizations, and the public, greater financial predictability and fewer cultural crises.