The Triumph of Art Over The Rational Man Standard
When I heard that the city of Detroit was going bankrupt, I was intrigued.
When I heard that the city of Detroit was going bankrupt, I was intrigued.
I recall other cities went bankrupt, but they were small or too distant to reach my radar. Detroit was much bigger than those earlier bankruptcies and because I went to university in the Midwest, I had some ties to Detroit and Michigan; so, my interest was piqued. When I started looking into the bankruptcy, I expected stories dealing with byzantine municipal offices, archaic public services and over-bloated unions, but what I actually found were articles about the Museum.
The notorious Museum is the Detroit Institute of Art or DIA. Its significance in the bankruptcy spawned questions that aren’t thought about much in law: whether the value of artwork is excepted from cold-calculated monetization of assets for the benefit of creditors and whether the value of an asset can be entwined with issues larger than money, such as pride, history and culture.
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In the middle of the beleaguered city of Detroit lies a lovely Beaux-Arts building, the DIA, which was established over 125 years ago as a “public art institute.” It houses a world-class painting and sculpture collection, including van Goghs and Renoirs, which has been described as “one of the world’s most important encyclopedic public collections of artwork.” To give you an idea of the value of the DIA artworks, one individual painting by Pieter Bruegel the Elder, “The Wedding Dance,” is reported to be worth as much as $200 million.
Considering its $18 billion debt, the big issue for Detroit was whether it would act “rationally” and sell off the DIA art collection to help pay off its debts; or whether the art works were off-limits, assets in the public trust different from typical assets sold to pay off the debts of a bankrupt entity.
The total value of the DIA artwork was estimated at $4.6 billion according to an appraisal made during the bankruptcy. That amount represented a sizeable portion of the total debt owed by the struggling city. It must have been tempting to reach into the Museum and use those assets to help ease the bankruptcy debt. That attraction was not lost on Kevyn Orr, the Emergency Manager of Detroit, who was appointed by the Governor of Michigan to act on the city’s behalf during the bankruptcy. Actually, he was the person who hired Christie’s to conduct the appraisal of the DIA collection. In Mr. Orr’s words, he was willing to “hav[e] a yard sale of DIA art” in order to get Detroit’s finances in order. It appears that early in the bankruptcy proceedings, the DIA artworks were on the auction block.
As can be expected, creditors were eyeing the DIA artworks too. They argued that the collection was a “non-core asset” and urged Detroit to sell it off to maximize the bankruptcy estate. Creditors argued that if the City were acting “rationally,” it would monetize the art collection and sell off those non-core assets to pay its debts.
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On the other hand, critics of a sale of DIA’s art argued that because the DIA acquired the artworks from contributions from funds and family treasures, the artworks were tied up with obligations to the public, making them beyond a creditor’s reach. They further argued that the DIA was established as a “public art institute” and the city had an obligation to preserve it based on the laws of trust.
The rational, law-based arguments on both sides deny the ethereal distinction of art in society.
In the end, it was those inarticulable, unearthly sentiments that saved the DIA art collection. A deal, called the “Grand Bargain,” was struck that provided an exit from bankruptcy for Detroit and saved the Museum without resorting to long, drawn out litigation based on rational arguments from opposite sides. The Grand Bargain consisted of a massive infusion of cash into the bankruptcy estate that paid off a large number of creditors without touching any of the DIA paintings and sculptures. A community effort of lovers of Detroit and of art and of history and of culture, including foundations, private donors and the State of Michigan, raised more than $800 million for Detroit’s bankruptcy estate. In exchange, the Museum building and collection were spun off into an independent charitable trust and out of the city coffers for now and the future.
I suspect many on the legal side were grateful for the Grand Bargain, because if rational arguments were the only recourse to solving the problem, the Detroit bankruptcy would linger in court for years. There is just not enough precedent and too much to argue about in a sale of public art. What is the better argument of a rational person in the context of art? The actions of the rational man so common and acceptable in the realm of law are inapt in the art world.
Detroit’s plan of adjustment was confirmed by Judge Steven Rhodes in an opinion dated November 7. Judge Rhodes comments concerning the Grand Bargain:
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The evidence unequivocally establishes that the DIA stands at the center of the City as an invaluable beacon of culture, education for both children and adults, personal journey, creative outlet, family experience, worldwide visitor attraction, civic pride and energy, neighborhood and community cohesion, regional cooperation, social service, and economic development. Every great City in the world actively pursues these values. They are the values that Detroit must pursue to uplift, inspire and enrich its residents and its visitors. They are also the values that Detroit must pursue to compete in the national and global economy to attract new residents, visitors and businesses. To sell the DIA art would only deepen Detroit’s fiscal, economic and social problems. To sell the DIA art would be to forfeit Detroit’s future.
It is lovely to think that the Museum will be the City’s bulwark against further degradation and will lead as a beacon of “culture” “education” and “civic pride” maintaining financial security and prosperity as Detroit becomes a great city once again. I don’t know if that is a reality, but I like to think so.
Madeleine Cag is an attorney at Axiom, the world’s largest and fastest growing non-traditional legal services firm. Prior to Axiom, Madeleine worked at Warner Chilcott, Cadwalader and O’Melveny & Myers.
