Last week, the Ninth Circuit agreed to rehear en banc an appeal of a federal court decision striking down the California Resale Royalties Act (the “Act”).
The Act required sellers to pay artists 5 percent of the resale price of all fine art sold in California or put up for sale by California residents.
In October 2011, certain artists proposed three class actions against Christie’s, Sotheby’s and eBay alleging that the auction houses failed to pay royalties owed to the artists pursuant to the Act. In May 2012, U.S. District Judge Jacqueline Nguyen dismissed the claims, finding the Act in violation of the Commerce Clause of the U.S. Constitution by impermissibly requiring royalties from transactions occurring outside California between non-California parties.