Berkshire Museum: Art auction legal issues draw focus

The question of whether The Berkshire Museum in Pittsfield can sell off 40 works of art to boost its endowment and fund an expansion is under review by the state attorney general's office, which is expected to weigh in soon on the issue.

PITTSFIELD — Once upon a time, the question of whether items owned by the forerunner of the Berkshire Museum could be sold was cut and dried.

They could not. So said an act of the state Legislature.

But that law passed in 1871, the same year Jesse James was robbing banks in Iowa and the National Rifle Association first met.

Today, the legality of the museum's plan to sell 40 works from its collection is more complicated, hanging on issues of "donor intent," a nonprofit board's fiduciary duty, state law and what it means to serve the public interest.

It's hardly hypothetical.

The state attorney general's office is expected to indicate soon whether lawyers in its nonprofits and public charities division will object.

Lawyers with that office know where the museum stands.

"We believe that no formal action is required to be taken by the Office of the Attorney General," Mark S. Gold, the museum's attorney, wrote to the office June 22, shortly before his client announced plans to shore up its finances by selling art.

"None of the objects to be sold are subject to restriction," Gold wrote.

Opponents of the sale have also been pitching their case to the attorney general's office, including three members of the family of Norman Rockwell just this past week. Two of Rockwell's paintings are expected to fetch the biggest bids at an auction less than a month away.

While the museum argues that pieces to be sold are "unencumbered," opponents of the sales are retaining attorneys, hoping to find grounds to halt the sale.

"I've been talking to a lot of lawyers," said Margaret Rockwell, manager of the Norman Rockwell Family Agency and a family spokeswoman.

Much of the strongest opposition to the sale, outside of the Berkshires, is voiced by museum administrators. Standards of the American Alliance of Museums and the Association of Art Museum Directors forbid selling items from a collection for any purpose other than the good of a collection.

But that's a professional ethic, not a legally binding one, as Gold and Van Shields, the Berkshire Museum's director, have pointed out.

Legal and museum experts interviewed by The Eagle say the sale may well proceed unless it can be shown donors gave pieces on the express condition they remain in the collection.

Still, the attorney general's office could act in some way, if it sees the sale as a bad precedent for the well-being of museums across the state, or as a violation of an nonprofit institution's need to serve the "public good."

How the office comes down on the matter may remain shrouded. It could opt to strongly advise the museum to pause the sale, one observer said, without making that public.

Carol Bosco Baumann, a museum spokeswoman, declined to say how the institution is representing its case to the attorney general's office.

"Museum leadership is unable to comment on the AG review and anything related to it," she said in an email. "The Berkshire Museum is fully cooperating with the Attorney General's review of this important issue. We respect the integrity of the process."

Donor intent

Patty Gerstenblith, a law professor at DePaul University in Chicago, said only one legal question is worth asking:

Did donors of the artwork impose formal restrictions on the pieces? If so, it would be up to the attorney general to enforce them.

"This would be the thing the attorney general is most likely looking at," she said.

Several people interviewed suggested that the two paintings donated by Norman Rockwell may pose the greatest obstacle for the museum when it comes to donor intent.

Nina Zannieri, executive director of Paul Revere House in Boston, agrees that donor intent could be an important piece of the puzzle.

Judith Wallace, a partner with the New York City law firm Carter Ledyard & Milburn LLP, said that when it comes to how donated art works can be handled, the lack of written records limits what can happen.

"The point is that the potentially unspoken preferences of a long-deceased donor are not determinative on the present day actions of a museum facing concerns the original parties may not have contemplated," she said.

"You want to come as close as you can to honoring the original agreement," Wallace said, "not just of the donor but of the recipient. That is something that is an ideal."

That goal is impeded when curatorial documents do not include clear instructions on either side.

Several lawyers noted that Sotheby's, the auction house involved in the museum sales, will want to know it can properly transfer title.

That suggests the Sotheby's legal team has examined some of the same issues being looked at by the state attorney general's office.

Dan L. Monroe, director and CEO of the Peabody Essex Museum, said the legal picture is often cloudy because it isn't common for donors to specify that works not be sold.

How high is bar?

While several experts said the attorney general's office has limited authority in a case like this, one lawyer retained by opponents of the sale believes otherwise.

Nicholas M. O'Donnell, a Williams College graduate and member of the Massachusetts law firm Sullivan & Worcester, said he believes the attorney general's office has considerable authority to intervene.

"I don't think the legal bar is very high for them to act, in accordance with what a nonprofit should be doing," O'Donnell said in a phone interview from New Zealand, where he was traveling after a business trip.

A key factor, he said, is unearthing curatorial documents from the museum. O'Donnell said he contacted the museum to request access to those papers, but did not receive a reply.

"Unless or until that's provided, there's no way to tell," he said, referring to records that could include stated wishes by donors.

Another issue is whether the legislative act from 1871 still applies. It said that "no part of such real and personal property, or such gifts, devises or bequests, shall ever be removed from the town of Pittsfield."

"I think that's still in effect," O'Donnell said. "The museum would have to demonstrate that it changed that in a legally effective way."

Though the museum filed a new statement of incorporation with the secretary of state's office in 2016, O'Donnell said that document may not insulate it from earlier restrictions.

However, another attorney who looked at the case says the restriction set in 1871 was likely voided by a later act of the Legislature in 1932, when the museum was officially separated from its long-term parent, the Berkshire Athenaeum.

Objects donated to the museum before the 1932 act, then, would have to remain in Pittsfield, said the attorney, who spoke only on background.

While the 1871 act specifies that objects must remain in Pittsfield, it doesn't bar an ownership transfer within the city. That enabled the collection to shift from the Athenaeum to the newly independent museum.

But objects donated before 1932 would still have to stay in Pittsfield, this expert said. That restriction appears to have been disregarded that same decade, when the museum removed, through deaccession, pieces from the original collection provided by founder Zenas Crane that were viewed as "lesser."

The museum would have more "wiggle room," the attorney said, with objects received after 1932.

What law allows

Under state law, nonprofits and public charities can change directions, and sell assets, if they face a financial crisis.

The attorney general's office requires a filing from nonprofit groups in turmoil.

In his June letter to Attorney General Maura Healey, Gold, the museum's lawyer, used phrasing that echoes the office's published statements on the subject.

The letter says the sale of art does not "constitute all or substantially all of its assets of the Museum."

In a detailed discussion available on the office's website, Healey says the meaning of "substantially all" is unclear. She suggests that if 75 percent of an organization's assets are to be sold, it crosses a threshold that requires review.

Because the museum does not list the value of its collection as assets, that is hard to calculate. But Gold says in his letter that based on estimates it received, the 40 works to be sold could bring as much as $75 million at auction.

For the last several years, the museum has reported assets in the range of $20 million. The value of the whole collection isn't known, but it is possible that if the remaining collection were to be calculated and added to known assets, the auction proceeds could represent 75 percent of the entire amount, according to calculations by The Eagle.

While the sale of art from a museum collection is anathema in the art world, the attorney general's office affords greater flexibility.

"An organization may conclude that a sale of underutilized assets is a good way to generate cash in order to support and enhance other aspects of the organization's charitable mission," it says.

That advisory would appear to support the course the museum is taking, but raises the question of whether it is moving to an entirely new mission.

That doesn't appear to be the case in Pittsfield, but critics of the art sale argue that by disregarding the museum world's standards on deaccessioning, the Berkshire Museum will lose its standing in the field and not be able to secure grants or traveling exhibitions.

Others, like Anita Walker, executive director of the Massachusetts Cultural Council, predict that the museum will see community and donor support erode after an auction.

And the advisory from the AG notes that court cases have limited the discretion nonprofits have to shift their focus. One standard is whether the nonprofit will see "a material change in the nature of the activities conducted by" the group.

While the Berkshire Museum will remain a museum, its "New Vision" plan calls for a focus on interactive multimedia exhibits on science and nature, away from its art collection.

Whether that constitutes a "material change" may or may not be a topic in the attorney general's office.

O'Donnell, the attorney retained by auction opponents, argues that the shift away from art is noteworthy. "It would essentially render the art part of it impossible [to sustain] or beyond repair. I do think that will come into play."

Public trust

It's far less clear, legally, what it means to operate in the "public trust" — the central expectation held of nonprofit and public charities by a division of the AG's office.

O'Donnell argues that once public trust is broken, it can't be fixed.

"We hope it's considered in that light by the attorney general," he said.

Opponents of the art sale caution that it breaks a longstanding compact museums hold to keep works available to the public.

Moving forward, they say, the sale may be legally defensible, but not morally so — nor professionally sound.

"You might be on the right side of the law, but you may be finished as a professional," said Robert N. Shapiro, an attorney who is president of the Peabody Essex Museum and is a critic of the Berkshire Museum's plan to sell art.

"Surely the AG is taking this very seriously. They are the guardians of this stewardship," Shapiro said.

Monroe, of the same museum, said the planned auction in effect turns the Pittsfield collection into a "slush fund." He and Shapiro published a commentary on the WBUR blog ARTery on Friday that is sharply critical of the Pittsfield museum's plan.

"It fundamentally undermines public trust in all museums," Monroe told The Eagle, referring to the auction. "It compromises and corrodes the underpinning of the financial support system for museums."

He added, "There is a great deal at stake for the commonwealth. It will set an incredibly low bar for nonprofit governance in this state. I know for certain that the AG's office is taking this very seriously."

"It was assumed as a given that the gifts [of art] were not only to benefit the people of Pittsfield but the American public," Monroe said.

The museum board doesn't own the works, he argues. They are stewards for their true owners: the general public.

Zannieri, the Paul Revere House executive director, said she believes museums ought to be bound by a sense of public trust.

"In the museum field, we live and die by our public trust," she said, adding that it is the reason they're tax-exempt. "We are nonprofits, therefore we are not functioning our own interest."

"Our kind of mission-based collections are pretty clear," Zannieri said. "We are the agents of the public when we care for and exhibit and share these items, just the same as we are the caretakers for the public when we take funds."

The Berkshire Museum's mission, according to articles of incorporation restated last year, is to maintain "an institution to aid in promoting for the people of Berkshire County and the general public the study of art, natural science, the cultural history of humankind and kindred subjects by means of museums and collections."

Zannieri acknowledges that moral principles and ethics come into play as well as legal ones.

As for what crosses a line into something that violates public trust, she said, "It's a little squishy."

"Legal is not necessarily moral and ethical, and vice versa," she said. "If this were simple we wouldn't still be talking about it."

Reach staff writers Larry Parnass at 413-496-6214 and Amanda Drane at 413-464-2859.

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Larry Parnass joined The Eagle in 2016 from the Daily Hampshire Gazette, where he was editor in chief. His freelance work has appeared in the Washington Post, Boston Globe, Hartford Courant, CommonWealth Magazine and with the Reuters news service.