Gallery Consignment |
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allery Z* has been around for 15 years in the same, fabulous location, right in the center of town next to other upscale shops and eateries. Five years ago, you set a goal for yourself that when you were satisfied with your work, you would take the chance and visit the gallery owner. Having your work displayed in Gallery Z would be your own personal mark of success. You envision yourself as one of the "elite" group of local artists who exhibit there.
The gallery owner is widely recognized as a success, a hardworking supporter of the local arts community, kind of a local celebrity. The gallery is doing so well, in fact, that the owner has decided to open a new location in a ritzy new shopping center that is currently under construction.
Perfect timing, you say to yourself. You've been doing shows around the country, sold your work to other galleries nationwide. You now consider yourself a nationally recognized artist and are ready to make your move. A phone call to Gallery Z actually puts you in touch with the owner. You feel honored that he has heard of you. He's looking for "fresh" new work and would like to see yours.
The big day approaches. You prepare your best work for presentation. He carefully examines it but says nothing for a time. You're about to run out the front door when he turns to you and says pensively, "Why haven't you come to me before?"
You get the feeling that you'll never get paid. You might be right. How could this happen? Was this a scam? What recourse do you have? Didn't you do everything right? |
When it comes time to talk business, you feel kind of dizzy. The owner offers you consignment at a 60/40 split in his favor. You're a little surprised that he didn't offer you 50/50, since he called your work "evolved and deep." But you understand, you've never exhibited locally, so your work hasn't yet proved itself in this area.
You've dealt with consignment before without any major problems. You hurry through the paperwork. You've priced your work carefully, and at 40 percent of retail, you'll be making a nice profit. You anticipate a long, rewarding relationship. You have no doubt your work will sell quickly. After all, this is Gallery Z.
Your exhibit opens with all the local fanfare you envisioned. A warm opening with local press. Proud friends and family congratulate you. Things are looking up.
The press lasts a couple of weeks. You get good reviews. Friends comment on seeing your work at Gallery Z. It makes you feel good.
But the excitement is over and now it's time to wait until your work sells. You've got two retail shows coming up; you've got to get off of cloud nine and throw yourself into your work again. Occasionally, you stop by the gallery, just to check on your work. They've moved it to make room for other new artists, but you like the new spot. They seem to be taking good care of it. The owner isn't at the gallery much, with the recent opening of Gallery Z's second location. With renewed enthusiasm, you go back to work. You are so busy that you don't have time to think about the gallery.
After the shows, you stop in to see the owner and check on your work. It's not there. It must have sold! The owner is not there, so you ask the salesperson. "Oh ... yes, two pieces just sold," she says. She is not aware of who bought them and refers you to the owner. But you know the drill, it'll be another few weeks before you get paid. You decide not to be a pain, and just wait for your check.
Two months go by. No check. No phone calls. You decide to call the owner. He's not available, so you leave a message. Two more weeks go by and you're starting to worry.
You decide to visit the other store. You haven't yet seen the new shopping center; you've been so busy preparing for your shows that you haven't paid much attention. You arrive there to find that Gallery Z is one of only three shops that are occupied in the new center, the rest are vacant. There aren't many cars in the parking lot. Something doesn't seem right.
You find out one week later by mail that the owner of Gallery Z has filed for bankruptcy. You are horrified. The letter says the owner will make every attempt to pay you in full, but you think talk is cheap. Apparently, your work has sold. You have not received any money, and the owner is in deep financial trouble. Paying you for your work is probably the least of the gallery owner's troubles. He's got creditors bigger than you. He's got high rent in an upscale shopping center that is less than half full. He remains in business, while being protected from your attempts to collect your money.
You get the feeling that you'll never get paid. You might be right. How could this happen? Was this a scam? What recourse do you have? Didn't you do everything right?
Is This a Scam?
There is no simple answer. Bankruptcy can happen to anyone. Often, it happens to some of the best-intentioned, most well-established businesses. While there are gallery owners out there who operate "below level," it is certainly not the norm. And most galleries that file for bankruptcy are not "scam artists."
Gallery owners rarely set out to rip off the artists with whom they choose to work. |
There are hundreds -- if not thousands -- of galleries across the country. Most gallery owners are a lot like the artists they represent, many are artists themselves. They generally care deeply about works of the hand and the artists who create them.
Some of the finest galleries in the country work with artists on a consignment basis. For galleries with high overhead costs, there is no choice but to take work on consignment. Most galleries pay on time, holding the proceeds of the sale of the work in trust until the artist is paid, as instructed by law. Some galleries pay late. But more and more galleries are finding themselves the victims of rising overhead costs or expansion-gone-haywire. Consequently, artists find themselves getting the short shrift and both parties become bitter.
In the above example, both parties meant well, but both failed to do enough research before committing themselves.
Mismanaged expansion can quickly diminish a business' cash flow, even if the gallery had been successful for many years. In our hypothetical example, the start-up costs for the new gallery were staggering. High overhead meant high prices, too high for the surrounding community to support.
While not all gallery bankruptcies follow along this particular path of decline, this scenario has become a model for business failure.
Gallery owners rarely set out to rip off the artists with whom they choose to work. "Be very cautious," said Dorothy Manou, executive director of the Philadelphia Volunteer Lawyers for the Arts, "many galleries don't have great cash flow. Start small, consigning one or two items.
"In general people try to do the right thing," added Manou, "and there is no easy way for an artist to find out that the gallery may be in trouble prior to consigning their work."
Most galleries are run by reputable people with the best intentions. And bankruptcy is not the norm. |
If you decide to consign your work to a gallery, document everything, says Laura Clark, marketing director for The Real Mother Goose galleries. Owners Stan and Judy Gillis operate the gallery's three locations in Portland, Ore.
"At any given time, we are dealing with 1,000 artists," Clark added, "so we have a relatively sophisticated receiving system. Any consignments or purchases are documented immediately and both parties have to sign off. In addition, we conduct inventory every quarter. I feel that any credible gallery should care as much as the artists do about handling the work."
As someone who's been in the gallery business for over 10 years, Clark was able to offer a few bits of advice to artists who are thinking of entering a consignment agreement.
Also, check the local newspaper for notices of bankruptcy filings. These notices are usually printed on Sunday, so if you normally read the paper, it can't hurt to get into the habit of checking to see if any local galleries have filed. If nothing else, it can give you a better handle on your local economic climate.
Lisa Jacobs, Long Beach, Calif.-based metal furniture and accessories artist, recommends consigning work only to local galleries, where you're able to drop by to check on your work, or take it back if you smell foul play. "It's a good idea to be able to establish a friendship with a gallery owner," says Jacobs. "I will only consign my work if I feel that I like the person, and that they like me. I realize that anyone can hit hard times, but I feel I'm less likely to be burned if I've established a personal relationship.
"I had consigned some pieces to a gallery in San Francisco (about 900 miles away)," she recalled. "While on an unrelated visit, I decided to drop in on this gallery to check on my work. I was shocked to see that it was marked up by 200 percent and being used as a display rack for clothing! I removed it that day."
That experience not only prompted Jacobs to consign to local galleries only, but she's also added a clause to her consignment contract that puts a cap on what the gallery can charge for her work.
Consignment is only a small part of her business, Jacobs says, but that wasn't always the case. "Consignment is not 'a big, bad thing.' It's how many of us got started, and I'm not about to stop doing it. But artists need to research galleries before they just hand them their work. I've made that mistake myself."
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Then, in September, she received a notice saying the gallery had filed for Chapter 7 bankruptcy. When she attempted to get her work returned, the gallery claimed that some pieces were missing, and claimed that others were never in their possession. Luckily, she was able to have a friend physically remove most of her unsold work from the gallery.
Carlstrom is currently in litigation with this gallery for payment of sold work and to reclaim the remainder of her unsold work. "I was one of the gallery's top 20 creditors, so filed as a 'secured' creditor, I feel my claim was 'secured' by my artwork."
Filing as a secured creditor would give Carlstrom an advantage over other unsecured creditors, but the owner claims the artwork in question never existed in her gallery. Since the artwork in question cannot be found, it will be difficult for Carlstrom to maintain her current filing status. The gallery's lawyers have requested that Carlstrom change her filing status to "unsecured," but she refuses. Carlstrom says she's got the paperwork to prove it and has even set out to find who purchased it.
Deann Lunan of the National Consumer Law Center admits that every case is very different, and Carlstrom's status will depend on agreements that were made at the time Carlstrom consigned the work. "If there is no physical property, but money is owed, that is generally an 'unsecured' claim."
Even if Carlstrom is able to prove that the gallery sold her artwork, and she is awarded a judgment, she'll still have to stand in line behind larger secured creditors. She isn't sure how much money, if any, she'll see as a result of her suit, but she says she's willing to keep up the fight simply to prove her point.
Minnesota folk artist Julia Taylor no longer sells through consignment, but realizes that it's an "alluring prospect for emerging and growing artists, especially if it's a terrific store. My advice is to get out of the consignment business ASAP. If you're talented, you'll grow out of it," she says, "but if you must consign your work, call another artist who exhibits at the gallery. Cut to the chase. Ask them if they are paid on time when their work sells."
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Few craft artists take the time to fully understand consignment agreements and the laws that are designed to protect consignors from non-payment and bankruptcy. Check with your state attorney general's office for more information on consignment laws in your state.
Even though the laws are complicated and different in every state, most provide that any works of art delivered to any art dealer are presumed to be delivered under a consignment arrangement unless the artist has been paid in full on or before delivery.
Most state statutes also provide that the art dealer holds all consigned artwork, as well as the proceeds from the sale of artwork, in trust for the benefit of the artist. This means that an art dealer or gallery owner would be responsible for any loss, damage or theft of the consigned artwork that could have been avoided if the dealer or gallery owner had exercised the utmost caution. Many states, however, impose strict liability upon the dealer for loss or damage (i.e., the art dealer will be liable even if the damage was unavoidable).
State statutes require the artist and dealer or gallery owner to enter into a written consignment. They suggest that agreement contracts contain the following information:
Nearly all statutes provide that consigned artwork is protected against the dealer's or gallery's creditors, including the trustee in a bankruptcy.
However, once a gallery files for bankruptcy, it becomes a federal case, governed by federal laws.
One safeguard, which has been a subject of debate as to whether it goes far enough in protecting artists' interests in consignment agreements, is provided by Article 9 of the Uniform Commercial Code.
The purpose of the Article 9 filing requirement is to give notice to interested parties (upon entering a consignment agreement) that certain property is subject to outstanding interests. The filing requirement gives notice to creditors, lending institutions and the like that work sold in the gallery is subject to a consignment agreement between the gallery and the craftsperson.
The process is arduous, and requires the filing of financing statements with the secretary of state in every state where the consigned work is located, paying filing fees each time, giving notice to the consignee's creditors and many other prerequisites.
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In any bankruptcy case, artists say they feel much better if the gallery owner is up front about what's happening. "If you don't have the right information, you immediately think the worst," said Jacobs. "I'm more likely to be sympathetic to the gallery's problems if the owner has enough respect for me to tell me the truth."
Clark, who once worked for a long-established gallery that went under, said the first thing the staff did was get together and inform the artists. The staff attempted to pull the gallery back together and get financing. but was unsuccessful. "The artists were very supportive. Eventually they had to pull out and move on, but that communication went a long way and it ended amicably."
Most galleries are run by reputable people with the best intentions. And bankruptcy is not the norm. But when it happens, artists often have to stand in line behind other creditors when payments are distributed.
Fighting for your rights as a creditor is a frustrating and time-consuming process and general information is not easy to find. If you receive a notice that you are listed as a creditor in a bankruptcy, find out immediately about the "creditor's committee" and be present at its meetings. If you cannot be present, try to send someone else.
General public information on the rights of creditors in a bankruptcy is sparsely available. Why? Because businesses that become creditors are usually larger than the typical crafts business, and have their own lawyers. Craftspeople may not have this option, so the burden of getting information lies with you.
Go to your local library, contact your local bar association, Volunteer Lawyers for the Arts, or visit the Federal Bankruptcy Court in your area.
*Gallery Z is a fictitious name.
Bernadette Finnerty is the editor of The Crafts Report.