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Rockwell v. Trustees of Berkshire Museum

Superior Court of Massachusetts, Berkshire

November 7, 2017

Thomas ROCKWELL et al.
v.
TRUSTEES OF the BERKSHIRE MUSEUM et al. James Hatt et al., individually and derivatively on behalf of the Trustees of the Berkshire Museum
v.
Trustees of the Berkshire Museum

          MEMORANDUM OF DECISION ON PLAINTIFFS’ MOTIONS FOR PRELIMINARY INJUNCTION

          John A. Agostini, Associate Justice

         The plaintiffs, under Civil Action Number 17-0253 (" Rockwell case"), have requested by way of motion that the Court enter a preliminary injunction prohibiting the defendant, Trustees of the Berkshire Museum (" Trustees" or " Board"), from selling, auctioning, or otherwise disposing of any of the artworks that have been listed for auction commencing on November 13, 2017. The defendant Trustees have opposed this motion. The co-defendant, Maura Healey, in her capacity as Attorney General of the Commonwealth of Massachusetts (" AGO" or " Attorney General"), initially supported the plaintiffs’ request for an injunction. After the hearing, the AGO sought and was granted plaintiff-status and is seeking an injunction on behalf of the Commonwealth, but only if the other plaintiffs fail to establish standing to file such claims.

         In a related action initially filed in the Suffolk Superior Court but transferred and consolidated with the Rockwell case by order dated October 30, 2017, different plaintiffs also seek injunctive relief to prevent the sale of the artwork (" Hatt case"). The AGO is not involved in that litigation.

         A non-evidentiary hearing was held on November 1, 2017. Based upon the submissions of the parties, including the affidavits and exhibits, as well as argument of counsel, I make the following findings and rulings.

         A. BACKGROUND

         The genesis of the Berkshire Museum goes back to 1903. Philanthropist Zenas Crane donated a building that was located behind the Berkshire Athenaeum to hold and display art and artifacts for the benefit of the public. This property was transferred to the management of the Athenaeum, and the name was changed to the Berkshire Athenaeum and Museum. Although the organizations maintained separate identities and collections, there was a single board of trustees.

         Of significance, the Athenaeum was incorporated in 1871 as a library with the authority to provide " reading-room, lectures, museums, and cabinets of art and historical and natural curiosities." See St. 1871, c. 129, An Act to incorporate the Trustees of the Berkshire Athenaeum. The Act further stated that " no part of such real and personal property, or such gifts, devises or bequests, shall ever be removed from the town of Pittsfield." Id. at § 2.[1]

         In 1932, a citizens’ petition resulted in a separate legal existence for the Museum and a formal incorporation of the Trustees of the Berkshire Museum as the overseers of this entity.[2] The Act created this corporation " for the purposes of establishing and maintaining in the city of Pittsfield 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 mankind and kindred subjects by means of museums and collection, with all the powers and privileges ... set forth in all general laws now or hereafter in force relating to such corporations." See St. 1932, c.134, § 3. The Museum and the Athenaeum were now separate legal entities. As will be discussed in greater detail later in this decision, the 1932 Act establishing the Museum as a separate legal entity did not include language prohibiting its property from being removed from Pittsfield. However, it did have language that any gift or bequest would be " used in conformity with the conditions made by any donor and expressed in writing provided, that such conditions are not inconsistent with the provisions of this act." Id. at § 4.

         Over the years, the Berkshire Museum has matured and evolved into a repository of more than 40, 000 items with a large concentration of items in the natural sciences, such as fossils, minerals, and reptiles. Since the seventies, the national economic winds have eroded the Berkshire County business environment, resulting in many industries and businesses dying off or relocating. The population has shrunk and, most importantly, generous benefactors have vanished. However, to its benefit, the County has supplanted its industries with recreational and cultural attractions as it progresses to a tourist-based economy. Of course, this has created greater stress on the existing non-profit institutions as they compete for tourist dollars and donor support.

         There appears to be no dispute that the Museum is in serious financial trouble. It has operated at a deficit for many years causing it to rely on its endowment to sustain its operations. Although the extent of the financial woes is disputed, it is beyond cavil that the Museum’s financial outlook is bleak.

         Faced with these consequences, the Trustees initiated discussions, by way of a Master Planning Process (" MPP") to address the financial issues. They initially considered merging with another museum, however that was rejected, as both of these institutions had financial problems. The MPP also considered and adopted more aggressive fundraising, changes in programming, increasing ticket sales, grant writing and reduced operational costs through hiring freezes, reduced hours and reduced programming.

         According to the information before the court, the Trustees first considered the issue of deaccession as a possible option in June 2015, when they began developing the MPP. At a retreat on October 24, 2016, the Board discussed the potential items for deaccession and, most importantly, moved forward with this method of financing. A meeting in December 2016, established a timeline for the proposed deaccession. Thus, over the course of two years, the Trustees and its subcommittees held numerous meetings regarding the economic future of the Museum.

         On May 22, 2017, the Board voted to authorize the Board President to execute a consignment agreement with Sotheby’s. An agreement was signed on June 13, 2017.

         The proposed auction includes forty items, with the two garnering the most attention being the works of renowned artist and Berkshire County resident Norman Rockwell. The paintings identified as " Shuffleton’s Barbershop" and " Shaftsbury Blacksmith Shop" were personally donated by Mr. Rockwell to the Museum. Judgment on art is subjective; however, these two paintings are considered his finest works and their value is in the millions.

         Also included within the art works for deaccession are paintings from prominent artists and sculptors including Alexander Calder, Frederic Church, George Henry Durrie, William Adolphe Bouguereau and Albert Bierstadt. For all the items submitted to Sotheby’s the range of " hammer" value (the winning bid at an auction) is approximately $46, 000, 000 to $68, 000, 000. The auction of these and other art works from around the country will be scheduled on different dates, commencing on November 13, 2017. On November 13, seven works from the Museum are up for sale, including the two Rockwell paintings. Twelve more art works will be sold in auctions stretching out into March. The sale of the remaining works have not been scheduled.

         B. PARTIES AND CLAIMS

         1. Rockwell Case

         The first three plaintiffs identified in the Rockwell Complaint are Thomas Rockwell, Jarvis Rockwell and Peter Rockwell. They are the three children of Norman Rockwell and all are principal beneficiaries of the estate through testamentary trusts. The residue of the estate passed to trusts of which they are the beneficiaries. Thomas Rockwell was the executor of Norman Rockwell’s estate.

         The plaintiff Tom Patti is a prominent artist and owner of Tom Patti Design, LLC, a Massachusetts limited liability company located in Pittsfield. The company entered into a contract with the Museum for the creation and installation of two items of glass affixed to the building.

         The other plaintiffs in the Rockwell Complaint are James Lamme, Donald MacGillis, Jonas Dovydenas and Jean Rousseau. It is asserted that they are each members of the Museum and Dovydenas and Rousseau have made " substantial donations to the Museum." Membership in the Museum is afforded to any individual or family that provides a financial donation, with the level of donation determining the benefits available, including free admission, guest passes, reciprocal privileges to other museums, etc. The types of membership start with a $50 per year individual account and progress to Crane Society status for $1, 000 per year. A member has no right to participate in the management or operation of the Museum.

         The Rockwell Complaint asserts two claims: a breach of fiduciary duty, breach of trust and absence of authority under Count I, and breach of contract regarding the glass work of Tom Patti under Count II. The relief requested includes voiding the contract with Sotheby’s, and enjoining the Museum from deaccessioning the forty items for sale, as well as preventing the Museum from " modifying or otherwise altering" the glass works of Tom Patti. The Patti plaintiffs are requesting specific performance of the contract.

         The defendants in the Rockwell case are the Trustees of the Berkshire Museum and Maura Healey, in her capacity as Attorney General of the Commonwealth of Massachusetts. Initially, there were no counterclaims or cross claims asserted by the defendants; however, after the hearing, the Attorney General filed an emergency motion to " convert from defendant to plaintiff if plaintiffs lack standing" and, if so, to seek a preliminary injunction on behalf of the Commonwealth. This motion was allowed.

         2. Hatt Case

         The plaintiffs in the Hatt case are James Hatt, Kristin Hatt and Elizabeth Weinberg. All are residents of Berkshire County and James and Kristin Hatt are members of the Museum. Elizabeth Weinberg is a former member of the Museum.

         The claims raised in the Hatt litigation are breach of contract between the Trustees and its members and breach of fiduciary duty against the individual Trustees.

         The defendants in the Hatt case are the Trustees of the Berkshire Museum and each of the 22 individual trustees. The Attorney General is not a defendant in this litigation. The Attorney General did not seek plaintiff status with respect to this litigation.

         ARGUMENT

         The legal issue before the court is straightforward and well-traveled; the court must decide whether the plaintiffs are entitled to a preliminary injunction enjoining the Museum from selling or otherwise disposing of the 40 works of art under contract with Sotheby’s. A preliminary injunction is an equitable remedy, and thus is not appropriately granted in those circumstances where it would impose an unfair or inequitable advantage on one party. Cote-Whitacre v. Dep’t of Pub. Health, 446 Mass. 350, 357 (2006), abrogated on other grounds by Obergefell v. Hodges, 135 S.Ct. 2584 (2015).

         Generally, to prevail on a request for a preliminary injunction, the plaintiff must show (1) a strong likelihood of success on the merits of the claim, (2) that they will suffer irreparable harm without the requested injunctive relief, and that (3) the harm, without the injunction, outweighs any harm to the defendant from being enjoined. Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 616-17 (1980). See Planned Parenthood League of Mass., Inc. v. Operation Rescue, 406 Mass. 701, 710 (1990). In appropriate cases, the court may also consider the risk of harm to the public interest. GTE Prods. Corp. v. Stewart, 414 Mass. 721, 723 (1993). Relevant to this case, a governmental entity need not show irreparable harm in enforcing a legislative policy or statute. Commonwealth v. Mass. CRINC, 392 Mass. 79, 89 (1984).

         Before addressing the merits of a preliminary injunction, a digression is required to put in context a core issue in this case. This case is essentially about art deaccessions. According to the Association of Art Museum Directors (AAMD), deaccession is the practice by which an art museum formally transfers its ownership of an object to another institution or individual by sale, exchange, or grant, or disposes of an object if its physical condition is so poor that it has no aesthetic or academic value. Deaccession is not a pejorative term; it is an integral part of collection management in museums. The failure to periodically both pare down and complement a collection may render the art collection obsolete. Consequently, deaccession involves both artistic and financial decisions that go to the core of its mission. See generally, Michael Conforti, Deaccessioning in American Museums: II Some Thoughts for England, reprinted in A Deaccessioning Reader (Stephen E. Weil ed. 1997).

         A conflagration occurs, not with deaccession, but the purpose or reason for the deaccession. If it is used to pay for a greater work of art or to change a collection’s focus, deaccession is generally tolerated. However, if it is used for operations or capital expenses, it is discouraged, if not condemned. See Association of Art Museum Directors, Policy on Deaccessioning (October 2015). Deaccessioning items from a museum is neither illegal nor unethical per se and every proposed deaccession must be examined on its own merits.

         Generally, the art world has relied on two tools to control deaccession: self-regulation and peer-regulation. Self-regulation is simply the policies and procedures that a museum promulgates to guide its operations. The Berkshire Museum allows deaccession and has enacted specific policies for such an event. Peer-regulations relies on accreditation and professional ethics codes. Accreditation is undertaken by the American Association of Museums and ethical considerations are generally regulated by the AAMD. Peer-regulations often have been a powerful tool in shepherding the herd of museums that are considering deaccession for financial reasons. However, there are numerous examples of museums deaccessioning artwork for operating or capital costs. See Ralph E. Lerner and Judith Bresler, Art Law, A Guide for Collectors, Investors, Dealers & Artists, p. 1503-04 (4th ed. 2012). To date, the courts have played a very limited role and there is scant legal authority, statutory or case law, when a conflict of this nature arises.[3]

         The two issues before the court are (1) whether the plaintiffs (other than the AGO) have standing to assert their claims and, if the non-governmental plaintiffs have failed to establish standing, (2) whether the AGO has satisfied the requirements for a preliminary injunction.

         A. Standing

         It has long been the rule that only the Attorney General has standing " to protect public charitable trusts and to enforce proper application of their funds" and assets. Degiacomo v. City of Quincy, 476 Mass. 38, 45 (2016); Maffei v. Roman Catholic Archbishop of Boston, 449 Mass. 235, 244 n.20 (2007); Dillaway v. Burton, 256 Mass. 568, 573 (1926) (citing cases). See also G.L.c. 12, § 8. The law presumes that the Attorney General can protect public charitable trusts " more satisfactorily ... than ... individuals, however honorable their character and motives may be." Burbank v. Burbank, 152 Mass. 254, 256 (1890). Since the law authorizes only the AGO to enforce public rights in a public charity, it falls on would-be plaintiffs to demonstrate that they seek to enforce some kind of private right. See Maffei v. Roman Catholic Archbishop of Boston, 449 Mass. at 245, citing Lopez v. Medford Community Ctr., Inc., 384 Mass. 163, 167 (1981).

         The Rockwell plaintiffs, Norman Rockwell’s heirs and the beneficiaries of his trust, argue that their unique right to enforce promises made to their father gives them standing in this case.[4] But the law does not allow them as heirs or beneficiaries to enforce their father’s contracts; that responsibility generally belongs to Norman Rockwell’s estate or his trust, which are not parties to this litigation. See Kobrosky v. Crystal, 332 Mass. 452, 461 (1955) (only executor can maintain action for personal property of deceased person); Gulda v. Second National Bank, 323 Mass. 100, 103 & n.1 (1948) (trustee generally represents estate unless " existence of the trust itself" is threatened, in which case beneficiaries have standing even if trustee fails to act).

         More fundamentally, even if a legal representative of Norman Rockwell’s interests had joined this case, the claim, as presented, nonetheless only seeks to enforce Mr. Rockwell’s intent regarding the permanent domain of his two works. That private right, if it exists, is no different from the public right that may be enforced only by the Attorney General. See Dillaway v. Burton, 256 Mass. at 574 (general rule of Attorney General’s exclusive standing " has been held applicable to heirs or other representatives of such donors or grantors"). Accordingly, the Rockwell plaintiffs do not have standing to enforce any promise made to their father that would bind a public charity.

         Mr. Tom Patti contends that his unique private right to enforce his contract against the museum gives him standing in this action. It is difficult to see how the alleged breach of contract relates to the preliminary injunction the parties seek. Mr. Patti alleges that, pursuant to his contract, the Museum may not unilaterally move his artwork, and he complains that the Sotheby’s sale would cause his artwork to be unilaterally moved. To repeat: Mr. Patti’s works are not part of the forty artworks set to be sold at auction. " Not every person whose interests might conceivably be adversely affected is entitled to [judicial] review." Ginther v. Commissioner of Ins., 427 Mass. 319, 323 (1998), quoting Group Ins. Comm’n v. Labor Relations Comm’n, 381 Mass. 199, 204 (1980). A plaintiff must demonstrate injuries that are not " speculative, remote, [or] indirect, " which must be " a direct consequence of the complained action" (citations omitted). Ginther v. Commissioner of Ins., 427 Mass. at 323. Mr. Patti has failed to show any likelihood that his artwork will be unilaterally moved if the Sotheby’s sale proceeds as scheduled; his allegations are too speculative to confer standing upon him to ask the court to enjoin the sale. See id.

         The remainder of the Rockwell plaintiffs are all members of the Museum who live in Berkshire County. Two of them (Dovydenas and Rousseau) have made substantial donations to the Museum. One of them is a resident of Pittsfield. These plaintiffs variously argue that they have standing to stop the Sotheby’s sale by enforcing rights peculiar to them as members, donors, and residents of Pittsfield and Berkshire County. Unfortunately, none of these characteristics are sufficient to supply standing to enjoin the Sotheby’s sale.

         As the Attorney General conceded at the hearing, a member does not have standing to sue a public charity except in situations like those described in the Lopez case. See Lopez v. Medford Community Ctr., Inc., 384 Mass. 163. Lopez is instructive: the plaintiffs attended a board meeting to mount a coup of the nonprofit’s management by paying $2.00 to become associate members and attempting to vote out the board. Id. at 165. The board rejected the plaintiffs’ membership and the plaintiffs sued alleging corporate mismanagement and seeking a declaration of their rights as members and an injunction against the board’s enrolling new members. Id. at 165-66. The Supreme Judicial Court held that the plaintiffs did have standing to litigate their claim that the nonprofit unlawfully denied their membership. Id. at 168. The SJC, however, explained that only the Attorney General had standing to address the alleged corporate mismanagement, ruling that it was improper to take any evidence on corporate mismanagement without the Attorney General’s involvement. Id. at 167-68.

         The Lopez case perfectly illustrates that members may sue when enforcing a right or remedy only available to them, and that, otherwise, they do not have standing. See also Jessie v. Boynton, 372 Mass. 293, 305 (1977) (dues-paying members had standing where nonprofit hospital board allegedly tricked them into approving bylaws that disenfranchised them). The members in this case allege that, " [b]y planning and approving the sale, " the Trustees breached their fiduciary duty. This claim is similar to the Lopez plaintiffs’ claim of corporate mismanagement and, under Lopez, only the Attorney General has standing to bring it.[5]

         The plaintiffs who made substantial donations to the Museum argue that they have a private right to sue by virtue of their gifts that is unique from the rights of the general public. They do not, however, allege that their donations conferred any special rights upon them. Since " the Legislature has determined that the Attorney General is responsible for ensuring that ... charitable funds are used in accordance with the donor’s wishes, " it is difficult to see why a donor should also have standing to seek the same end. See Weaver v. Wood, 425 Mass. 270, 275 (1997). The donors in this case have failed to explain how their interest in enforcing the terms of their gifts is any different from the general public’s right to have those terms enforced. Accordingly, they do not have standing because the Attorney ...


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