Tuesday, October 8, 2013

What are the nuts and bolts of the Attorney General’s opinion?

Dear Reader: My good friend and soon-to-be art lawyer, Dani Johnson, has generously agreed to share her thoughts and research concerning the city of Detroit, its pending bankruptcy, and the possible deaccessioning of the Detroit Institute of Arts collection. Dani's first blog entry was published yesterday, the second today and last tomorrow, Wednesday, October 9th.

Bill Schuette’s opinion points out that the museum was originally incorporated as a nonprofit corporation with a specific charitable purpose: the public exhibition of art. So, it was founded as a charitable trust, with the Founders Society serving as its trustees, the public serving as the beneficiaries, and the public exhibition of art being its charitable purpose. When the City accepted the transfer of title of the collection in 1919, the law that allowed this transfer (1919 PA 67) required that the City use the property to maintain a public art institute and continue exhibiting art to the general public. Schuette argues that under charitable trust law, the transfer was “a transfer of the Founders Society’s . . . legal title in its charitable assets to a new charitable trustee—the City.” Basically, Schuette says that in 1919, the City took over as the trustees for the museum, but the collection remains in trust for the public, and all of the City’s expenditures for the museum have been in operating that trust for the public, not on behalf of the City itself. Because of this, the collection is not a financial asset of the City or the Founders Society, and it cannot be sold to pay off any of their debts—rather, it must continue to be used for its original charitable purpose, which is the public exhibition of art.

Schuette’s arguments seem logical and well-founded. A loophole in the argument that comes to mind is the doctrine of cy pres, which allows a judge to modify a charitable purpose when the original charitable purpose is no longer feasible. Proponents of selling the artwork could argue that because of Detroit’s dire financial state, exhibiting the artwork at the DIA is no longer feasible or in the best interests of the public. However, it seems unlikely that a court would pursue that path: doing so would be to quite dramatically redefine the charitable purpose of the DIA in a way that really hasn’t been done before.

Another argument I wondered about was whether part of the collection—namely that part that was purchased with City money, rather than donated or purchased by the Founders Society—might be more vulnerable to being sold. Schuette addresses this in one of his footnotes, and says that such a notion is inconsistent with trust law. He argues that trustees must keep trust property separate from the trustee’s own property and to act otherwise would be a breach of charitable trust—the notion that the City has been in breach since 1919 is “untenable,” which Schuette argues further supports the conclusion that the entire collection exists, and always has existed, for the singular charitable purpose of the exhibition of art.

I’m surprised that this warranted only a footnote, as it seems like a legitimate concern that artwork purchased with City tax dollars would be more susceptible to sale than artwork that was donated. Is it possible that a court could find these assets to be separate, even if it means a finding that the City breached its duties as trustee? I agree that it doesn’t seem likely, but a court could decide this, and it may be a tempting way to go—selling off only artwork that was purchased with City money seems on its face reasonable and would likely garner less heat from the public than selling the entire collection or randomly choosing a few of the most valuable pieces to sell.

Tomorrow, what do Detroiters & Michiganders think should happen?

Dani Johnson is a recent graduate of Indiana University Maurer School of Law. During law school, Dani studied intellectual property law and founded the Society for Law and the Arts, a student organization that raises awareness for art law issues and career paths. Dani served as a Summer Associate at Volunteer Lawyers for the Arts in New York in 2012 and as the Trademark Office Assistant at Indiana University’s Office of Licensing and Trademarks in early 2013. Dani lives in Chicago and will soon be sworn in to the Illinois Bar. Dani may be reached at daniellekjohnson1@gmail.com


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