This is Volume 2, Issue No. 2 of Spencer’s Art Law Journal. This issue contains two essays, which will become available by posting on Artnet, starting November 2011. (Volume 2, Issue No. 3 will appear in Winter 2011/12.)
As noted in Volume 1 of this Journal, art law is an amalgam of personal property law, contract, estate, tax and intellectual property law relating to the acquisition, retention and disposition of fine art.
Opinions always matter, and certainly very much so in the art world. This issue concentrates on some of those opinions.
The first essay in this Fall issue deals with the nature of opinions about the authenticity of visual art. The second essay deals with a famous case of American import duties on "kitchen utensils," and whether a Brancusi sculpture fit this category. The judge's decision, relying on expert opinion to define art, altered the public's understanding of the meaning of modern art.
Three times a year issues of this Journal will address legal questions of practical significance to collectors, dealers, scholars and the general art-minded public.
Ronald D. Spencer
This essay is first, about the meaning of “opinion” and second, about its legal consequences. Since the 2007/8 financial crisis and its economic aftermath, the opinions of financial ratings agencies have been much in the news. Are the agency ratings like newspaper editorials, and what consequence for expert opinion in the visual arts?
Ronald D. Spencer is counsel to the New York law firm of Carter Ledyard & Milburn LLP, where he specializes in art law as Chairman of the Art Law Practice. He is expert in the legal aspects of art authentication issues and has written and edited, The Expert Versus the Object: Judging Fakes and False Attributions in the Visual Arts, (Oxford University Press, New York 2004).
Art experts, including art scholars, dealers, museum curators, authors of catalogues raisonnés and others who make decisions about the authenticity of visual art are all concerned to avoid legal claims over their decisions. This essay addresses a free-speech defense for these experts, under American constitutional law.
It is the well and truly held view that an idea can never result in liability for the person who expresses it, because ideas are so personal and subjective and because society should protect ideas as inherently beneficial, even if they are sometimes wrongheaded. In the art attribution area this unexceptional view of the value of ideas is equated with an “opinion.”
Experts who determine the authenticity of a work of art, whether in the context of the publication of a catalogue raisonné, curating an exhibition, a sale or purchase, an appraisal of value, or scholarly essay on the attribution of art, almost always describe their conclusion as their “opinion” on the authenticity or attribution of the work.
Of course, they use the term opinion because that is their judgment, evaluation, or deduction, based upon an interpretation of existing facts which they have collected and analyzed, and to which they have applied their learning and experience.
There is often another motivation for characterizing their conclusion as opinion: a desire to limit or avoid legal liability in the event their conclusion is wrong. Thus, the expert’s statement “In my opinion, the work is [or is not] by Rembrandt,” is thought, if it turns out to be incorrect, to result in legal consequences different from those resulting from the statement “The work is [or is not] by Rembrandt.” This view appears to have some support in the law. Thus, in 1974, U.S. Supreme Court Justice Lewis Powell stated, “Under the First Amendment, there is no such thing as a false idea. However pernicious an opinion may be, we depend for its correction, not on the conscience of judges and juries, but on the competition of other ideas.”(FN 1) Thus, even a false idea has become constitutionally protected free speech under the First Amendment to the American Constitution.
However, an analysis of the two statements will quickly make it apparent that they mean precisely the same thing. The addition of the words “in my opinion” to a statement of fact (“the work is not by Rembrandt”) does not change this assertion of fact, which has the quality of being true or false, into an opinion which may be “good” or “bad,” “reasonable” or “unreasonable,” “sound or unsound.” And, indeed, at a simpler level, the expert may feel he is fairly expressing his state of mind and, so long as this is so, the apparent statement of fact can never be false because the speaker/writer is only communicating what he honestly believes, without regard to whether the subject of his belief, the factual statement, is true or false. Recent American cases (from 1999 onward) with respect to opinions of credit rating agencies tend to support the expert’s view – more so with respect to opinion published for a wide audience, and less so when the opinion is given to a limited number of people. This suggests that a catalogue raisonné published for the art public would be protected opinion under the First Amendment to the American Constitution, while opinions delivered to a small number of people, say a buyer or owner of art, would not be so protected.
Two U.S. Court Decisions Attempt to Define Opinion Protected by the First Amendment of the American Constitution
In 1990, the Supreme Court of the United States in Milkovich v. Lorain Journal wrote the following:
If a speaker says, “In my opinion, John Jones is a liar,” he implies a knowledge of facts which lead to the conclusion that Jones told an untruth. Even if the speaker states the facts upon which he bases his opinion, if those facts are either incorrect or incomplete, or if his assessment of them is erroneous, the statement may still imply a false assertion of fact. Simply couching such statements in terms of opinion does not dispel these implications; and the statement, “In my opinion, Jones is a liar,” can cause as much damage to reputation as the statement, “Jones is a liar.” As Judge Friendly aptly stated: “[It] would be destructive of the law of libel if a writer could escape liability for accusations of [defamatory conduct], simply by using, explicitly or implicitly, the words ‘I think.’” It is worthy of note that at common law, even the privilege of fair comment did not extend to “a false statement of fact, whether it was expressly stated or implied from an expression of opinion.” (Restatement (Second) of Torts, §566, comment a )(FN 2)
A Negative “Opinion” on the Value of Bonds Is Protected by the First Amendment
The frequent garden-variety evaluation by financial analysts of the value of bonds and stocks seems analytically similar to an evaluation of authenticity of art. In 1999, a school district sued Moody’s Investor Services(FN 3) for publishing an article about the “negative outlook” and “ongoing financial pressures” for the school district’s bonds, claiming the article was materially false. The Tenth Circuit Court of Appeals found that if those expressions had material false components, they would not be shielded by raising the word “opinion” as a shibboleth, but the “vagueness” of the two phrases indicated that the Moody’s article constituted protected expression of opinion.
Moody’s reasoning is instructive for us in deciding whether a First Amendment defense is available for a determination on authenticity of art (whether or not expressly styled as an “opinion”) where the legal claim is that the decision was wrong and caused economic loss to the art owner by disparaging his property:
. . . evaluative opinions are those that are not provably false, and a writer or speaker may not be held liable on a defamation claim for expressing them. In contrast, deductive opinions are those that state or imply assertions that may be proven false; the First Amendment does not immunize them from defamation claims.
In some instances, defamatory statements have been deemed too indefinite to be proven true or false. For example, … the Fourth Circuit concluding that a magazine article’s statement that optimistic projections about a company’s stock were based on “hype and hope” represented the kind of irreverent and indefinite language that indicated the writer was not stating actual facts.
In other instances, courts have concluded that due to the subject matter involved, there is simply no objective evidence that could prove that an allegedly defamatory statement was false … (concluding that the statement that a product was not worth the price was not verifiable because “the worth of a given service or product is an inherently subjective measure which turns on myriad considerations and necessarily subjective economic, aesthetic, and personal judgments”).
The Moody court continued:
In contrast to these decisions, courts have also applied Milkovich to conclude that certain statements, even though couched as expressions of opinion, are provably false and therefore are not protected from defamation claims by the First Amendment. For example, the Ninth Circuit has concluded that a statement in a broadcast that a product “didn’t work” would be reasonably interpreted to refer to the performance of specific functions, a matter that could be assessed by evaluating objective evidence.(FN 4)
Standards for Separating Assertions of Fact from (Constitutionally) Protected Opinion
In 1984 a U.S. Federal Court of Appeals attempted to describe the nature of opinion in Ollman v. Evans and Novak(FN 5) as follows:
At one end of the continuum are statements that may appropriately be called “pure” opinion. These are expressions which are commonly regarded as incapable of being adjudged true or false in any objective sense of those terms. Matters of personal taste, aesthetics, literary criticism, religious beliefs, moral convictions, political views and social theories would fall within this category ....
Also, near the pure-opinion end of the continuum … are “those loosely definable, variously interpretable” derogatory remarks that frequently are flung about in colloquial argument and debate ... expressions of generalized criticism or dislike.
... Perhaps far more common ... are statements that reflect the author’s deductions or evaluations but are “laden with factual content.” The apparent proportions of opinion and fact in these “hybrid” statements varies considerably. For example, a statement that “Jones is incompetent to handle that job” suggests some factual underpinning but, on the whole, imports a fairly high degree of subjective judgment. By contrast, a statement that “Smith is a murderer” appears much closer to an assertion of objective fact.
Hybrid statements differ from pure opinion in that most people would regard them as capable of denomination as true or false, depending upon what the background facts are revealed to be. At the same time, they generally are not propositions that a scientist or logician would regard as provable facts. The hard question is whether these kinds of statements, which both express the author’s judgment and indicate the existence of specific facts warranting that judgment are within the absolute privilege for opinion.(FN 6)
In light of the above 1984 analysis by the Court in Ollman, a statement of an expert about the authenticity of a painting, even if preceded by the phrase “I think,” “I believe,” or “In my opinion,” is, at least, a “hybrid” opinion, in that it intimates the existence of specific facts and conveys the author’s judgment upon, or interpretation of, those facts. Of course, there often is also an intimation of personal aesthetic taste with respect to the art, but there can be no question that the statement is based, in large part, on express or implied facts which can be proven true or false.
The 2007/8 Financial Crisis and Rating Agency Cases and (“Mere”) Opinion
The American constitutional free speech defense of “opinion” for decisions on authenticity of art may have received recent support from a series of cases involving financial rating agencies. Since the financial crisis of 2007/8 many rating agencies received legal claims based on their ratings of various securities backed by mortgages on real estate. The rating agencies’ defense has been that their statements about the credit-worthiness of these mortgage-backed securities are constitutionally protected statements of opinion. Indeed, the general counsel for Fitch ratings agency famously told a U.S. Senate Committee investigating the collapse of Enron that the rating Fitch assigns a security is “the world’s shortest editorial”.(FN 7)
In the case of Compuware Corp. v. Moody’s Investors Services,8 Compuware sued credit rating agencies for defamation for a publicly published credit report. The Court of Appeals for the 6th Circuit held Compuware had failed to establish the constitutionally required element of actual malice. The Court stated:
A plaintiff who qualifies as a public official or public figure may recover for defamation only if he produces clear and convincing evidence that the defendant acted with actual malice. Compuware, is a public figure for purposes of First Amendment defamation analysis.
The actual-malice standard requires the plaintiff to prove that the defendant made the statement with knowledge of its falsity or with reckless disregard of its truth. “Reckless disregard of a statement’s truth” is a subjective standard, it is “not measured by whether a reasonably prudent man would have published [ ] or would have investigated before publishing,” but by whether “the defendant in fact entertained serious doubts as to the truth of [its] publication.”
“[M]ere proof of failure to investigate, without more, cannot establish reckless disregard [of] the truth”.
Put differently, a viable defamation claim exists only where a reasonable factfinder could conclude that the challenged statement connotes actual, objectively verifiable facts. A Moody’s credit rating is a (predictive opinion) dependent on a subjective and discretionary weighing of complex factors.(FN 9)
However, where Moody’s only sent its report to a select group of investors, and did not publicly disseminate its ratings report, the Compuware actual-malice standard would not be a defense. In Abu Dhabi Commercial Bank v. Moody’s Investors & Standard & Poor’s Ratings,(FN 10) an investor sued rating agencies for their financial losses in mortgage-backed investments rated by the agencies. In 2009 the Federal Court in the Southern District of New York stated:
It is well-established that under typical circumstances, the First Amendment protects rating agencies, subject to an “actual malice” exception, from liability arising out of their issuance of ratings and reports because their ratings are considered matters of public concern. However, where a rating agency has disseminated their ratings to a select group of investors rather than to the public at large, the rating agency is not afforded the same protection.
I also reject the argument that the Rating Agencies’ ratings in this case are nonactionable opinions. “[A]n opinion may still be actionable if the speaker does not genuinely and reasonably believe it (or if it is without basis in fact.) . . . plaintiffs have sufficiently pled that the Rating Agencies did not genuinely or reasonably believe that the ratings they assigned to the Rated Notes were accurate and had a basis in fact. As a result, the Rating Agencies’ ratings were not (mere opinions) but rather actionable misrepresentations.(FN 11)
The Abu Dhabi Court went on to compare [(1) a 1985 U.S. Supreme Court holding that a credit report published to five subscribers did not involve a matter of public concern because it was intended for a “specific business audience”, and (2) a refusal to allow the First Amendment defense where Moody’s ratings had been disseminated to a “select class of institutional investors”)] with cases like Compuware [above] which upheld the First Amendment defense where Moody’s had rated a publicly-held corporation.
Thus, these above-described rating agency cases seem to provide expert opinion on the authenticity of art with a free speech First Amendment defense (that is, “actual malice” must be proved by the claimant) where the opinion is a matter of “public concern” published for the public at large (such as the readers of a catalogue raisonné, newspapers, journals, etc.), while denying a First Amendment defense to an opinion given privately to a limited number of persons.(FN 12)
Even in jurisdictions outside the U.S., where there is no explicit free speech First Amendment defense for “opinion” it seems likely that courts will take note of this defense (that is, courts should not punish a “false” idea), and perhaps apply their own national version, especially in the case of authenticity opinions published for the general public (as opposed to opinion given to a specific owner) as in catalogues raisonnés, newspapers, journals and publicly published scholarly essays.New York, New York
(1) Gertz v. Robert Welch, 323 U.S. 323, 329-340 (1974).
(2) Milkovich v. Lorain Journal, 497 U.S. 1, 17 (1990).
(3) Jefferson County School District v. Moody’s Investor Services, 175 F.3d 848 (10th Cir. 1999).
(4) Id. at 852-53.
(5) Ollman v. Evans and Novak, 750 2d 970 (DC Cir. 1984).
(6) Id. at 1021-22.
(7) Report of Staff to Senate Committee on Government Affairs, Financial Oversight of Enron (2002) p. 123.
(8) Compuware Corp. v. Moody’s Investor Services, 499 F.3rd 520 (6th Cir. 2007).
(9) Id. at 525-29.
(10) Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc., 651 F. Supp. 2d 155 (S.D.N.Y. September 2, 2009).
(11) Id. at 175-76.
(12) At least one commentator has argued that courts should reject the Abu Dhabi distinction between publicly and privately disseminated credit agency ratings and, instead, should analyze ratings as commercial speech, arguing that the manner of (opinion) dissemination should not determine whether ratings qualify as a matter of public concern. And, “even if courts find that rating agencies’ communications constitute opinions, the First Amendment does not bar holding the agencies to legislatively created standards if courts also find that agencies targeted specific clients with this information.” 110 Colum. L. Rev. 1818 at p. 7 (2010). Yet another commentator: “The determinations of whether a rating is a matter of public concern and whether rating agencies are comparable to journalists both depend on the distinction between fact and opinion.” (Milkovich v. Lorraine Journal Co.) “Although the test for defamation requires that the statements be proven false, this test is misplaced in the rating agencies context because the ratings assigned are predictions about future issuances, and intuitively one cannot prove in the present that a prediction of future events is false.” 8 First Amend. L. Rev. 452 at p. 6.