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Artists Fight Auction Houses at 9th Circuit

PASADENA, Calif. (CN) - The full 9th Circuit Court on Tuesday considered whether to dismantle a law that allows artists to collect resale royalties from pieces sold by Sotheby's, Christies and eBay.

The panel convened Tuesday afternoon to consider the claims of a group of artists who claim they are entitled to 5 percent royalties under the California Resale Royalties Act.

Eric George, an attorney for the artists with the Los Angeles firm Browne George Ross, said the appellate court should reverse a ruling that struck down the law as violating the Commerce Clause of the Constitution.

"In no time since its 1976 enactment has this act purported to or in anyway had the effect of regulating price, the terms of the sale [and] the conditions of the sale [out of state]," George told the court. "All this enactment has done is require that a California resident, either directly or through his agent, pay a certain levy on sales."

A three-judge panel of the 9th Circuit was skeptical of the artists' argument in April.

It appeared that some members of the en banc panel were still concerned that the state law will allow California to regulate commerce in other states.

"Could California pass a statute that says that every seller of hot dogs to a California resident has to file a certain health regulation because we want to keep Californians healthy?" Judge Susan Graber asked George.

George said that that "would not be appropriate" because then "you have conflicting regulations."

"This is why one of the hypotheticals raised by the other side doesn't wash, and it's not an appropriate comparison," George said. "It's not attempting to impose any type of regulatory measure on any other person out of state."

Sotheby's attorney Deanne E. Maynard said the court should affirm the lower court's order. She said the Resale Royalties Act regulates the sale of art in other states for no good reason other that than that those involved in the sale are California residents.

"I should be able to sell it no strings attached," Maynard said of the royalties on the artwork.

Parties to the 2011 lawsuit included painter and photographer Chuck Close, 73, known for his massive photorealist portraits; artist Laddie John Dill; heirs of California sculptor Robert Graham; and the foundation for painter and printmaker Sam Francis.

U.S. District Judge Jacqueline Nguyen ruled for eBay, Sotheby's and Christies in 2012, striking down the royalties law as violating the Commerce Clause. Nguyen is now a 9th Circuit judge.

Because the Resale Royalties Act effectively controlled commerce outside California, affecting businesses incorporated in New York, Nguyen said the law could not survive its "offending provisions," even if other parts of the statute were lawful.

Aimee Feinberg appeared for California after filing a brief in support of the artists earlier this year.

Maynard handled the argument for attorneys John C. Dwyer, who represents eBay, and Christies' attorney Jason D. Russell.

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