California resale royalty: Going nowhere?

Last year a class of artists filed a lawsuit against auctions houses Sotheby's and Christie's in Los Angeles, California, for failing to collect their artists' 5% resale royalty (reported in Art and Artifice here and here). Then the auction houses fought back, filing a motion to dismiss the artists' case on the grounds that the resale royalty demanded by California law is unconstitutional and therefore unenforceable, which the courts have yet to rule on. 

Now, another case suggests that the legal winds may not be blowing in the auction houses' favour. Over a year ago artist Mark Grotjahn sued art collector Dean Valentine for failure to pay the resale royalty on three works of his which Valentine had sold. 

Like the auction houses, Valentine had argued that the resale royalty was unconstitutional, and that therefore he did not need to comply by paying Grotjahn. The Federal court had rejected this argument and the case had been sent back to state court, where the case was due to go to trial in less than a month, on 6 March. 

Mark Grotjahn's Untitled (Red Yellow and Blue Face 821)

But, after court-ordered mediation, a settlement was reached. The LA Times reports that Valentine agreed to pay Grotjahn US$153,255, a sum which includes the 5% resale royalty on one of the paintings sold, plus legal fees. 

Valentine said that the case was stopped because of the expense of pursuing it further, and commented 'It doesn’t change the fact that this is a terribly written law that creates massive problems. Instead of actually helping artists ... it only makes the artistic one-percent richer.' 

Nonetheless, the fact that Valentine settled, rather than play out his argument that the resale right is unconstitutional may be telling in the light of the auction houses' current case. Will Sotheby's and Christie's succeed in bringing the resale royalty down - or is the writing on the wall?