The Ninth Circuit recently was called upon to decide awarding attorney’s fees in a case where artists were suing for unpaid royalties under the California Resale Royalties Act (“CRRA”). In the case, Close v. Sotheby’s, Inc. (decided December 3, 2018), the Ninth Circuit ordered that the Plaintiff-artists be required to pay attorney’s fees to the defendants (eBay and art auction houses) for successfully defending against claims for unpaid royalties resulting from art sales. This conclusion required a discussion of the doctrine of preemption and a determination that defendants could still be awarded attorney’s fees under CRRA despite a finding that the bulk of Plaintiffs’ claims under the CRRA were preempted by the 1976 Copyright Act.
Plaintiffs, including the well-known artist Chuck Close, brought an action claiming that they did not receive the appropriate royalties for the sale of their works under the CRRA, which had been enacted in California in 1976. Under the CRRA, the seller of a work of fine art must withhold 5% of the sale price and remit that amount to the artist. Artists who do not receive such payments can bring a claim under the CRRA, which also has a provision that the prevailing party in such an action “shall be entitled to reasonable attorney’s fees.” The Plaintiffs essentially claimed that eBay, Sotheby’s and Christie’s had failed to remit them royalties under the CRRA for as far back as 1976.
At the district court level, the artists lost and their claims were dismissed. The district court found that the CRRA, which had been enacted in 1976, was subsequently “preempted” by the 1976 Copyright Act that went into effect in 1978. Preemption occurs where a Federal statute governs a subject matter so that it is the intent of Congress to “preempt” the state from enacting a contrary law. In essence, the district court was finding that the sole remedy for the Plaintiff-artists for claiming royalties due them was under the1976 Copyright Act and not the California state CRRA. After the Plaintiff-artists appealed the trial court’s decision to the Ninth Circuit, the Ninth Circuit affirmed the trial court for the most part but did remand some of the claims of Plaintiffs back to the trial court with regard to those sales that occurred between January 1, 1977 and January 1, 1978 (the enactment of the CRRA and the effective date of the Copyright Act). After the Ninth Circuit’s ruling, the Defendants moved for an award of attorney’s fees claiming that they were the prevailing party under the CRRA. The Plaintiff-artists opposed the request claiming that since their CRRA claims had been found to have been preempted by federal law, the defendants were not entitled to attorney’s fees under the CRRA for similar reasons.
The Ninth Circuit began by noting that the CRRA allows for an attorney’s fees award to the “prevailing party” and was mandatory because of the use of the language “shall be entitled.” Nevertheless, because the attorney fee provision had only been added to the CRRA in 1982, the Court would limit its examination of an award of attorney’s fees to those claims pertaining to sales after that date.Continue Reading Royalties, Preemption and Attorney’s Fees