Is the California Resale Royalty Act for Art Alive or Dead?

The California Resale Royalty Act is a lightening rod for controversy in the art world.  It provides that a living artist (or his or her estate or heirs) is entitled to 5% of the resale of the artist’s work.  There are a number of conditions that apply, including the fact that either the artist or owner of the work lives in California, or that the sale takes place in California, and the sale must occur during the artist’s life or within 20 years of the artist’s death.  Although the Act is well-intentioned, it can be difficult to ascertain and enforce rights, and creates headaches for art dealers, galleries, and collectors.

Recently, a number of California artists sued Christie’s and Sotheby’s for millions of dollars, alleging that the auction houses had conspired to conceal California ties to art transactions in order to avoid paying royalties to artists.  In May of 2012, California District Court Judge Jacqueline Nguyen ruled that the Act violated the United States Constitution’s Commerce Clause, which affords the federal government with the power to regulate economic activity between states.   On its face, the ruling, which dismissed the lawsuits with prejudice, appeared to be a victory for galleries everywhere and a defeat for artists.

But Judge Nguyen was subsequently transferred to the appellate court, and the case was reassigned to Judge Michael Fitzgerald to oversee post-appellate issues.  The artists filed a motion to stay the application of the original order pending an appeal in order to allow continued enforcement of the Act.  In an interesting decision, Judge Fitzgerald found that there was nothing to stay, because although Judge Nguyen’s decision dismissed the case between those litigants, she did not have the power to bind any other parties to the district court level decision that found that the Act is invalid.

As such, the Act remains in place and must be followed until an appellate court finds otherwise.  So the battle continues, and we will continue to follow this interesting litigation.

If you would like further information, please write to Mike Bono at



No Coverage for Spouse of Alleged Abuser (NJ)

Generally, when an insured is subject to a claim of sexual abuse, the claim is excluded from coverage under the insured’s homeowners’ insurance policy.  However, the law has been historically less clear on whether the spouse of an alleged sexual predator is entitled to coverage.  The Superior Court of New Jersey, Appellate Division, has recently issued a decision providing further clarity for insurers faced with this dilemma in State Farm Fire and Cas. Co. v. Gregory.

State Farm Fire and Casualty Company commenced a declaratory judgment to determine its rights when the insured-wife and husband were both named as defendants in a lawsuit by a minor claiming that she was sexually abused by the husband.  State Farm had disclaimed coverage to the insured-wife based on claims that she knew or should have known that the husband was sexually abusing the minor and she had a duty to warn the minor or her parents.

The trial court, citing to High Point Ins. Co.v. J.M., decided that the insured-wife was not entitled to coverage under the homeowners’ policy, finding that public policy precluded any coverage for the insured-wife, and the appellate court firmed.  Namely, the public policy was designed to have a spouse “remain vigilant for the protection of a child victim,” and there was no “reasonable expectations” that the insurance would provide coverage for the spouse of an abuser.

The court further ruled that the claim was excluded because the homeowners’ policy excludes bodily injury or damage that is expected or intended by “the insured.”  The court was not persuaded by the insured-wife’s argument that she did not intend the injury because it found that the term “insured” unambiguously included the insured-husband.  The court further noted that the insured-wife’s knowledge (or lack thereof) of her husband’s propensity for child abuse was irrelevant to the coverage analysis.

Thanks to Steve Kaye for his contribution to this post.  If you would like further information, please write to

NY Court Rules Softball Player Safe — For Now

In Viola v Carmel Cent. School Dist., a high school softball player was injured while sliding into second base during a game at the defendant school.  Plaintiff claimed that her injury was caused by the improper installation of the base, as the base’s pointed corner, as opposed to a side of the base, was facing first base. She was injured when her left foot hit the point of the base when sliding. The bases had been installed by the school district’s grounds crew.  The trial court denied summary judgment to the school district.

The Second Department affirmed the trial court’s decision.  While an injury from sliding is typically an assumed risk in the sport, the school district failed to show that (1) the base was properly positioned, (2) that plaintiff was aware of the improper base positioning, or (3) that it was an open and obvious condition. Further, since the school district’s witnesses testified that an improperly positioned base could be a hazard for sliding runners and that a game should be stopped to correct such a condition, the district would also have to establish that the improperly positioned base would not have unreasonably increase the risk of injury.

While seemingly at odds with prior law on the assumption of risk doctrine, Viola fits within that narrow category where a participant is found not to assume the risk of faulty equipment.

Thanks to Jung Lee for his contribution to this post.  If you would like more information, please write to


Court of Appeals Issues Important Decision on Misrepresentations (NY)

It is generally held that when an insured has made material misrepresentations in applying for an insurance coverage, an insurer later has the ability to void the policy back to inception, forming the basis to deny any claims that may arise.  But what happens when there is an additional insured under the policy — and that additional insured was not involved in the misrepresentations?

Previously, a line of decisions issued by New York appellate courts were generally interpreted to hold that claims submitted by an innocent additional insured could not be rejected due to material misrepresentations made by the named insured.  Now, however, the Court of Appeals has weighed in on the topic with an important decision for insurers.

In Admiral Ins. Co. v. Joy Contractors, when the insured, Joy Contractors, applied for its CGL policy, it represented that it specialized in drywall installation, did not carry out exterior work and performed no work above two stories in height from grade other than drywall interior work.  Subsequently, a tower crane operated by Joy collapsed, killing seven people, injuring others, and causing significant property damage.  An investigation into the claim revealed that, despite the statements made in the policy application, Joy was actually the structural concrete contractor, performing work on the building’s entire exterior with the tower crane.

Based on the misrepresentations, the insurer denied the claims that arose out of the crane collapse and filed a declaratory judgment, seeking rescission of the policy as to all parties, including various property owners and developers that were named as additional insureds.  Citing prior precedent, the lower court held that coverage could not be denied to the additional insureds based on misrepresentations made by the insured, and the Appellate Division upheld the decision.

But the Court of Appeals reversed, finding that in none of the earlier cases did the insurer actually seek rescission of the policy.  Further, the Court found that in the prior cases, the named insured’s misrepresentations did not deprive the insurer of knowledge of or the opportunity to evaluate the risks for which it was later asked to provide coverage.  In addition, in the prior cases, the additional insureds were actually named in the policy so the insurers knew their interests.  Most importantly, setting aside these distinguishing factors, the Court specifically refused to endorse the prior holdings to the extent those decisions may be read to apply to situations where an insurer seeks rescission.

If you would like further information about this post, please write to Mike Bono at


A Plaintiff’s Dream? The Unemployed Get Jury Duty Preference.

We tend to steer clear of more political discussions here at Of Interest, but every once in a while an idea comes along that we simply have to point out.  According to Fred Clark, a well-known blogger, a solution to both the unemployment problem and the boring nature of jury duty would be to give jury duty preference to the unemployed and combine jury duty with a job fair.  As if finding a fair and impartial jury isn’t hard enough…

For more information about this post, please contact Bob Cosgrove at

Insurer Stays Out of the Penalty Box in NY’s Fourth Department

Raymond Pink, his wife Michelle, and Matthew Ricci were spectators at a youth hockey game when a fight broke out in the stands and Ricci assaulted Pink. The Pinks filed a personal injury suit seeking damages for injuries caused by Ricci.

Ricci held a homeowner’s insurance policy through State Farm and notified State Farm of this claim. State Farm promptly sent Ricci a letter five days after receiving notice of the suit, reserving its right to deny and disclaim coverage. Nine days after receiving notice, State Farm advised Ricci that based on the question of coverage he had the right to select counsel to defend him at State Farm’s expense in the underlying action.  Ricci declined to do so.

Two years later, State Farm commenced a declaratory judgment action seeking a declaration of the rights of the parties under the homeowner’s policy. Ricci answered and alleged several counterclaims, most notably that State Farm had engaged in bad faith and improper conduct. State Farm moved for partial summary judgment to dismiss this counterclaim and several others. The trial court denied State Farm’s summary judgment motion as to the bad faith counterclaim.

On appeal, Ricci did not submit any opposition, but the Pinks did.  The Fourth Department ultimately granted State Farm’s summary judgment motion, stating that State Farm’s approach to clarifying its obligations under the policy was “not only permissible but advisable.” Addressing the two-year lapse between reserving the right to disclaim and filing the declaratory judgment, the court held that failure to disclaim in a timely manner is insufficient to establish bad faith. The court also noted that if State Farm had simply disclaimed coverage after two years instead of filing a declaratory judgment, the untimely disclaimer would have been ineffective with respect to the Pinks. Finally, the court noted that where a claim falls outside the scope of coverage afforded by the policy, no disclaimer is required.

Thanks to Michael Nunley for his contribution to this post.

Expert Affidavit Trumps Speculation Defense

In Rodriguez v. Leggett Holdings, LLC, the First Department reinstated plaintiff’s complaint despite the fact that plaintiff was unable to identify the cause of his fall down a set of stairs. Although defendants established their prima facie entitlement to summary judgment since plaintiff’s deposition testimony revealed that he was unable to identify the precise cause of his fall, plaintiff’s expert engineering affidavit, which attributed various defects and building code violations (without specifically referencing the code sections or precise measurements taken) as the cause of the accident, was sufficient to raise a triable issue of fact as to whether the alleged defective conditions caused the fall. Chiseling away at the proposition that a defendant is entitled to summary judgment where a plaintiff’s claims are based on speculation and conjecture, the First Department held that in this instance, summary judgment was not appropriate because plaintiff was able to identify the general site of his fall, and his expert was then able to identify defective conditions on the stairway. Plaintiffs, who now have the ability to submit expert affidavits in order to defeat motions that may have once been favorably decided for the defense, will undoubtedly rely upon this case in the First Department.

NJ: Counsel’s Inflammatory Comments Do Not Warrant A New Trial

Barbara Jones filed suit against Albert Pannici for injuries sustained in a motor vehicle accident.  In turn, Pannici filed a third-party complaint against a phantom driver he claims caused the accident.  Jones’ insurer, Allstate, intervened due to their potential liability under the Uninsured Motorist provision of Jones’ automobile insurance policy.

At trial, Allstate’s attorney made several statements to suggest that Pannici was not telling the truth as to the cause of the accident.  Specifically, in his opening and closing statements, counsel alleged that Pannici became nervous after the accident and lied about the phantom vehicle.  Additionally, during his cross-examination, counsel attempted to elicit testimony to suggest that Pannici’s status as a former police officer made it easy for him to concoct a story about the phantom vehicle.  Pannici’s attorney did not object to any of the comments made.  Ultimately, the jury returned a substantial verdict against Pannici.

Pannici moved for a new trial, arguing that Allstate’s counsel’s comments in the opening, during the cross-examination and in summation led the jury to believe that something improper had occurred and that Pannici was not being truthful.  The court disagreed with Pannici’s position and found that the comments made by counsel for Allstate did not amount to error so prejudicial as to require a new trial.  Rather, the court found that there was sufficient evidence for the jury to reject Pannici’s version of the accident.

 Thanks to Heather Aquino for her contribution to this post.

PA Superior Court: Interrogatory Responses From Another Case Are Not Hearsay

The Pennsylvania Superior Court recently held that an asbestos plaintiff’s use of interrogatories that were prepared over 30 years ago in a California case were admissible.  In Petrina v. Allied Glove, the plaintiff sued Union Carbide over the death of her husband following his exposure to asbestos dust from a joint compound that National Gypsum manufactured.  Union Carbide moved for summary judgment based on a lack of product identification.  In an attempt to defeat the motion, plaintiff’s counsel submitted answers to interrogatories filed by National Gypsum, a non-party to the case, in connection with a 1984 California case in which it was stated that Union Carbide was the exclusive supplier of asbestos to National Gypsum. The Allegheny Court of Common Pleas found that these interrogatories were inadmissible hearsay and refused to admit them. 

On appeal, the Superior Court rejected the lower court’s conclusion and noted that interrogatories may be used to create an issue of material fact to defeat a motion for summary judgment.  Here, the interrogatories could be introduced at trial in two ways.  First, a corporate representative of National Gypsum could affirm the contents of the interrogatories.  The Court also noted that the interrogatories could be admitted as prior inconsistent statements.  The Court reasoned that when National Gypsum’s representative had originally responded to the interrogatories, the responses became binding on the corporation he was answering on behalf of.  Therefore, if another National Gypsum representative offered testimony that was inconsistent with the 1984 interrogatory responses, the responses could be admitted as prior inconsistent statements.      

Thanks to Colleen Hayes for her contribution to this post.

Owner Not Liable For Unforeseeable Criminal Acts

In Rodriguez v. Camaway Realty Inc., Rodriguez was allegedly attacked by an intruder while at the defendant’s building and sued Camaway under a general negligence theory.  The lower court denied Camaway’s motion for summary judgment.  However, the appellate court reversed based on a finding that the alleged criminal activity was unforeseeable.  Both parties testified that they knew of no prior criminal activity at the premises.  Rodriguez did submit an affidavit from the building superintendent who stated that he had previously been struck by a tenant’s boyfriend, but the court noted that such an attack was insufficient to establish the necessary notice of prior criminal activity.  Therefore, the court held that the attack on Rodriguez was unforeseeable as a matter of law.

Thanks to Sandy Debbas for her contribution to this post.