If a state law can't save the DIA, here's what might
Ever since Detroit emergency manager Kevyn Orr mentioned maaaaybe putting DIA gems on the table to appease creditors, the you-know-what has hit the fan.
Selling art to pay off debt is a big museum no-no, especially for one as well-regarded as the Detroit Institute of Arts.
Why, museum supporters ask, would any rich donor ever want to give money or art to the DIA again?
What’s to guarantee their gifts won’t just be auctioned off the next time the city needs cash?
And further, if the DIA is blacklisted and other cultural icons sold off, how is a post-bankruptcy Detroit supposed to become a sustainable, cultural, people-drawing city?
Randy Richardville apparently shares these concerns.
Michigan’s Republican Senate Majority Leader from Monroe has introduced a bill that would make the museum code of ethics (yes, there really is such a thing: see the American Alliance of Museums) a state law.
That bill is a long way from a sure thing. Next step is a committee meeting, probably in the next week.
But in the meantime, bankruptcy experts seem to be coming to an informal consensus.
The federal bankruptcy court, they say, will take one look at that law and say, "ha ha ha."
Nice try, Michigan. But no dice.
“State laws, whatever they are, are supplanted by the federal bankruptcy code, if you go into bankruptcy,” says John Pottow, bankruptcy law expert at the University of Michigan Law School.
Translation: big federal law crushes tiny state law. Rock beats scissors.
And Pottow says that goes for just about any state law – even if it’s in the state constitution.
There are, of course, a couple exceptions.
“You can’t murder someone in bankruptcy, even if you think it will help your creditors. So you still have to follow those laws,” he says.
Good to know.
“But generally, laws on the restrictions of what you can do with things are not going to bind a federal bankruptcy proceeding.”
So, let’s say you’re the DIA: what do you do?
Well, first off, it’s complicated. Big surprise.
“[The complexities here] are like a bankruptcy law geek’s dream,” says Pottow.
But basically, there could be two sweet little loopholes for the DIA.
1) They can say the art is a public trust.
Because trusts, according to Pottow, are the big shiny exception when creditors come calling.
“Let’s say I’m a rich uncle, and I’m holding my niece’s trust until she grows up. If I go into bankruptcy, I cannot use her trust to pay off my bills,” Pottow says.
But, he adds, there are two kinds of trusts: Trusts with a capital T, and trusts with a little t.
Some of the DIA’s paintings may be held in a capital-T Trust: there’s a written agreement in the proper legalese that says absolutely no way can the DIA sell this painting off to raise cash.
Then, there are the pieces that have a little-t trust: artwork that donors or sellers handed over to the DIA, with an unwritten understanding that, "hey, you guys are going to be kosher with this stuff and not sell it off, right?"
So it could become an issue of going through each painting, sculpture, and piece individually, rummaging through the paperwork, and figuring out which ones have a legal trust and which ones are more…flexible.
2) The long-term view
Remember the argument about serving a greater, cultural, thriving Detroit? That could actually have some legs, according to Pottow.
He says you can argue in bankruptcy court that holding on to an asset (like the DIA’s collection) will actually help your creditors make more money in the long run.
So the DIA might be able to argue that, by keeping the museum and other cultural icons afloat, the city will attract more taxpayers over time.
Of course, all of this will be haggled out in bankruptcy court, should Detroit go ahead and file for Chapter 9.
And then there’s the argument about whether the DIA should, in fact, be protected if bankruptcy happens.
“You’d think that by now everybody in Michigan…would know that virtually every city asset and contract is in play if and when Detroit runs out of money,” writes Free Press columnist Tom Walsh in a blistering piece this week.
“But apparently many people think the things they care about – be they garbage collection or Belle Isle or access to a Van Gogh painting – should be untouchable.”
We’re going to be picking up on that subject later this week.