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Date: 07-06-2018

Case Style:

Chuck Close v. Sotheby's Inc.

Central District of California Federal Courthouse - Los Angeles, California

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Case Number: 1656235

Judge: Jay S. Bybee

Court: United States Court of Appeals for the Ninth Circuit on appeal from the Central District of Florida (Los Angeles County)

Plaintiff's Attorney: Micahel Bowse, Ira Bibbero and Eric M. George

Defendant's Attorney: Deanne E. Maynard, Paul T. Friedman, Howard Comet and Steven A. Reiss for Sotheby's


Angela Dunning and John C. Dwyer for e-Bay, Inc.


Adam K. Lloyd, Matthew E. Delgado, Hillary A. Hamilton and Jason D. Russell for Christie's, Inc.


Steven A. Hirsch and John D. Davis, Jr. for Amici Curiae California Lawyers for the Arts and Peter Alexander

Description: The California Resale Royalties Act (“CRRA”) grants
artists an unwaivable right to 5% of the proceeds on any
resale of their artwork under specified circumstances. To that
end, the CRRA requires the seller of the artwork or the
seller’s agent to withhold 5% of the resale price and pay it to
the artist or, if the artist cannot be found, to the California
Arts Council. If the seller or the seller’s agent fails to pay the
5% resale royalty, the artist may bring an action for damages.
Plaintiffs are artists and their successors in interest
seeking resale royalties under the CRRA from the statute’s
effective date of January 1, 1977, to the present. The issue in
this case is whether plaintiffs’ claims are preempted by
federal copyright law. The district court held that they are, as
a matter of both express and conflict preemption.
We affirm in part and reverse in part. Plaintiffs’ CRRA
claims covered by the 1976 Copyright Act—i.e., those
concerning sales postdating the 1976 Act’s effective date of
January 1, 1978—are expressly preempted by 17 U.S.C.
§ 301(a). We therefore affirm dismissal of those claims.
The 1909 Copyright Act, however, has no express
preemption provision. As such, plaintiffs’ CRRA claims
covered only by the 1909 Act—i.e., those concerning sales
that occurred between the CRRA’s effective date of January
1, 1977, and the 1976 Act’s effective date of January 1,
1978—cannot be expressly preempted. Nor are they
preempted by conflict preemption. See Morseburg v. Balyon,
621 F.2d 972, 977–78 (9th Cir. 1980). Accordingly, we
6 CLOSE V. SOTHEBY’S
reverse dismissal of those claims and remand them to the
district court for further proceedings.
I. LEGAL AND FACTUAL BACKGROUND
A. The Droit de Suite
Many nations recognize the droit de suite,1 under which
artists receive a royalty each time the original, tangible
embodiment of their work is resold. The practice was first
recognized in France in 1920 and then adopted in other civillaw
jurisdictions. More recently, a number of common-law
jurisdictions have adopted some form of the droit de suite. In
those countries that recognize it, the droit de suite is
considered a moral right, albeit one with economic value. See
generally U.S. Copyright Office, Droit de Suite: The Artist’s
Resale Royalty (Dec. 1992) (“1992 Copyright Report”); U.S.
Copyright Office, Resale Royalties: An Updated Analysis
(Dec. 2013) (“2013 Copyright Report”); 2 MELVILLE B.
NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT
§§ 8C.04[A][1] & n.3 (rev. ed. 2017) (“NIMMER”).2
The droit de suite protects visual artists, who face
particular difficulty in capitalizing on their work. Literary
1 Literally, the “right of following on.”
2 There is a surprising number of articles on the droit de suite. See,
e.g., Monroe E. Price, Government Policy and Economic Security for
Artists: The Case of the Droit De Suite, 77 YALE L.J. 1333 (1968);
Alexander Bussey, Note, The Incompatibility of Droit De Suite with
Common Law Theories of Copyright, 23 FORDHAM INTELL. PROP. MEDIA
& ENT. L.J. 1063 (2013); Jay B. Johnson, Comment, Copyright: Droit De
Suite: An Artist Is Entitled to Royalties Even After He’s Sold His Soul to
the Devil, 45 OKLA. L. REV. 493 (1992).
CLOSE V. SOTHEBY’S 7
and recording artists can generally profit from their efforts by
controlling the reproduction of books or music. For visual
artists such as painters and sculptors, however, the right to
control reproduction is often not their principal source of
income. Rather, it is often the sale of their original work that
allows them to make a profit. The droit de suite gives these
artists an economic interest in subsequent sales of their
original work, thereby allowing them to capture some of its
appreciation in value after the first sale.
The droit de suite also appears in international copyright
law. Since 1948, the Berne Convention has recognized that
artists possess an “inalienable right to an interest in any sale
of the work subsequent to the first transfer by the author of
the work.” Berne Convention for the Protection of Literary
and Artistic Works art. 14ter(1), Sept. 9, 1886, as amended
Sept. 28, 1979, S. Treaty Doc. No. 99-27 (1986).
Nevertheless, the Berne Convention does not obligate its
signatories to adopt the droit de suite. Instead, the Berne
Convention makes the recognition of such rights optional, but
rewards such recognition with reciprocity: countries
recognizing the right will protect the right of each others’
artists. See Lee D. Neumann, The Berne Convention and
Droit De Suite Legislation in the United States: Domestic and
International Consequences of Federal Incorporation of State
Law for Treaty Implementation, 16 COLUM.-VLA J.L. &
ARTS 157, 159 (1992).
The United States became a signatory to the Berne
Convention in 1989, but to date, it has not adopted the droit
de suite. As early as the 1970s, Congress considered
adopting the droit de suite as part of U.S. copyright law, but
those efforts have never proved successful. A droit de suite
provision made its way into an early version of the Visual
8 CLOSE V. SOTHEBY’S
Artists Rights Act of 1990 (“VARA”), but was removed from
the bill that Congress ultimately enacted. Compare S. 1619,
100th Cong., 1st Sess. (1987), with VARA, Pub. L. No. 101-
650, §§ 601–10, 104 Stat. 5089 (1990). Instead, VARA
directed the Copyright Office to conduct a study on the
feasibility of implementing such a right in the United States.
VARA § 608(b).
In 1992, the Copyright Office issued an extensive report
concluding that there was insufficient economic or copyrightpolicy
justification to adopt the droit de suite in the United
States. See generally 1992 Copyright Report. The report
recommended that “[g]iven potential problems of preemption,
enforcement, and multiple application, any droit de suite that
is enacted in the United States should be at the federal level.”
Id. at vi; see also id. at 77–86. Two decades later, members
of Congress requested that the Copyright Office revisit the
issue, and the Copyright Office issued a second report. See
generally 2013 Copyright Report. This time, in light of “the
adoption of resale royalty laws by more than thirty additional
countries since the Office’s prior report,” the Copyright
Office endorsed “implementation of a resale royalty right in
the United States . . . as one alternative to address the
disparity in treatment of artists under the copyright law.” Id.
at 1, 3. Congress has not acted on the Copyright Office’s
recommendation.
B. The California Resale Royalties Act of 1976 (“CRRA”)
The CRRA is “the first, and thus far only, American
recognition of the droit de suite.” NIMMER § 8C.04[B].
CLOSE V. SOTHEBY’S 9
Under the CRRA, the seller of “a work of fine art”3 or the
seller’s agent must withhold 5% of the sale price and pay it to
the artist. Cal. Civ. Code § 986(a). If the seller or agent is
unable to locate and pay the artist within 90 days, the 5%
royalty goes to the California Arts Council. Id. § 986(a)(2).
In that event, the California Arts Council must attempt to
locate and pay the artist. Id. § 986(a)(5). If the artist has not
been located after seven years, the Council may then use the
funds to acquire fine art for public buildings. Id. If the seller
or agent fails to pay the 5% royalty, the artist may bring an
action for damages and attorneys’ fees. Id. § 986(a)(3).
Notably, the artist’s right to the 5% royalty may not be
waived or reduced by contract. Id. § 986(a).
As originally enacted, the CRRA applied to sales of fine
art in California or by a California seller (whether inside
California or not). Id. But, as discussed in greater detail
below, we have since limited the statute to regulate only sales
in California. Sam Francis Found. v. Christie’s, Inc.,
784 F.3d 1320, 1322 (9th Cir. 2015) (en banc). Other
conditions to the CRRA’s application include, inter alia, that
the artist must be a citizen of the United States or resident of
California; the sale must occur after the initial sale by the
artist (i.e., it must be a resale); the sale must be for $1,000 or
more; the sale cannot be for less than the purchase price paid
by the seller; and the sale must occur during the artist’s life or
within 20 years of his death. Cal. Civ. Code § 986(a)–(c).4
3 “Fine art” is defined as “an original painting, sculpture, or drawing,
or an original work of art in glass.” Cal. Civ. Code § 986(c)(2).
4 Secondary sources suggest that, though enacted over forty years ago,
the CRRA has been seldom enforced. See NIMMER § 8C.04[C][2] (“[T]he
annotated California Code reveals only a trickle of cases under this
10 CLOSE V. SOTHEBY’S
In 1977, art dealer Howard Morseburg sold two paintings
under circumstances requiring him to pay royalties under the
CRRA. Morseburg, 621 F.2d at 974–75. He then brought
suit to challenge the California law on multiple grounds,
including that it conflicted with the 1909 Copyright Act. Id.
To resolve this conflict preemption question, we relied on the
Supreme Court’s decision in Goldstein v. California,
412 U.S. 546 (1973). Id. at 977. Goldstein held that a
California statute making it a criminal offense to sell pirated
musical recordings was not preempted by the 1909 Act;
because the California statute regulated a matter not covered
by the 1909 Act and did so “in a manner that did not disturb
a careful balance struck by Congress between those matters
deserving of protection and those things that should remain
free,” there was no conflict between state and federal law. Id.
(citing Goldstein, 412 U.S. at 567–70).
Applying Goldstein, we concluded that the CRRA created
“an additional right similar to the additional protection
afforded by California’s anti-pirating statute” and therefore
did not conflict with the 1909 Act. Id. at 977–78 (“The
crucial inquiry is . . . whether the two laws [i.e., state and
federal] function harmoniously rather than discordantly. We
find no discord in this instance.”). We expressly declined,
however, to consider whether the CRRA was preempted by
the 1976 Act. Id. at 975.
section.”); John E. McInerney III, California Resale Royalties Act: Private
Sector Enforcement, 19 U.S.F. L. REV. 1, 3 (1984) (“[T]he Act is perhaps
the State’s most neglected and underused law.”); Patricia Cohen, Artists
File Lawsuits, Seeking Royalties, N.Y. TIMES, Nov. 1, 2011, at C1
(reporting that, since the CRRA’s enactment, about 400 artists had
received a total of $328,000).
CLOSE V. SOTHEBY’S 11
C. First Proceedings before the District Court and First
Appeal
In 2011, plaintiffs filed putative class-action complaints
against Sotheby’s, Christie’s, and eBay, alleging claims under
the CRRA and derivative claims under California’s Unfair
Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.
The statute of limitations for claims under the CRRA is three
years after the date of the relevant sale or one year after
discovery of that sale, whichever is longer. Cal. Civ. Code
§ 986(a)(3). Plaintiffs accordingly sought to represent two
classes: (1) a class of artists or their estates purportedly owed
CRRA royalties on sales that took place within three years of
when the actions were filed; and (2) a class of artists or their
estates purportedly owed CRRA royalties on sales that were
never disclosed to the artists and that took place more than
three years before the actions were filed—all the way back to
the CRRA’s effective date of January 1, 1977.
The district court dismissed plaintiffs’ complaints with
prejudice, holding that the CRRA’s regulation of sales
outside California violated the dormant Commerce Clause
and that the offending portion of the statute was not
severable. Estate of Graham v. Sotheby’s Inc., 860 F. Supp.
2d 1117, 1125–26 (C.D. Cal. 2012). On appeal, a majority of
this court voted to initially hear the case en banc. Sam
Francis, 784 F.3d at 1323. Sitting en banc, we agreed with
the district court that the CRRA’s regulation of out-of-state
sales violated the dormant Commerce Clause but held that the
offending provision was severable from the remainder of the
statute, such that plaintiffs still had potentially viable claims
respecting in-state sales. Id. at 1322. We remanded to the
three-judge panel to consider defendants’ alternative
arguments, including preemption. Id. The panel, in turn,
12 CLOSE V. SOTHEBY’S
remanded to the district court for it to consider defendants’
alternative arguments in the first instance. See Sam Francis
Found. v. Christie’s, Inc., Nos. 12-56067, 12-56068, 12-
56077, 2015 WL 4429309, at *1 (9th Cir. July 16, 2015).
D. Second Proceedings before the District Court
On remand, defendants again moved to dismiss, arguing
that (1) the CRRA is preempted; (2) the CRRA effects an
unconstitutional taking; and (3) eBay is not a seller or a
seller’s agent subject to the CRRA. In 2016, the district court
granted defendants’ motions and dismissed the actions with
prejudice, holding that the CRRA was preempted by federal
copyright law, as a matter of both conflict and express
preemption. Estate of Graham v. Sotheby’s, Inc., 178 F.
Supp. 3d 974, 979–80 (C.D. Cal. 2016).
With respect to conflict preemption, the district court
reasoned that the first sale doctrine, codified in the 1909
Copyright Act and reaffirmed in the 1976 Copyright Act,
“provides that ‘once the copyright owner places a copyrighted
item in the stream of commerce by selling it, he has
exhausted his exclusive statutory right to control its
distribution.’” Id. at 982 (quoting Quality King Distribs., Inc.
v. L’anza Research Int’l, Inc., 523 U.S. 135, 152 (1998)).
The court concluded that the CRRA restricted transactions
that the first sale doctrine intended to leave unrestricted and
therefore conflicted with federal law. Id. at 983–84. While
acknowledging our 1980 decision in Morseburg, the court
held that “recent decisions of the Supreme Court and the
Ninth Circuit have so eroded Morseburg that it [ ] no longer
represents a binding interpretation of the first sale doctrine
and the CRRA.” Id. at 985.
CLOSE V. SOTHEBY’S 13
In the alternative, the district court addressed express
preemption, holding that the CRRA “does no more than
broaden the distribution rights granted under the Copyright
Act” and is thus expressly preempted by the 1976 Act,
17 U.S.C. § 301(a). Id. at 989. The court noted it would
reach this same result “whether or not Morseburg is still
binding precedent” because Morseburg did not address the
1976 Act. Id. at 991. Although the court’s preemption
holdings completely disposed of all three actions, the court
proceeded to consider defendants’ alternative arguments. Id.
at 991. The court rejected defendants’ Takings Clause
argument but accepted eBay’s argument that it was neither a
seller nor a seller’s agent and therefore was not subject to
liability under the CRRA. Id. at 980. Plaintiffs appealed the
district court’s judgment in each action, and we consolidated
the appeals.5
II. ANALYSIS
“It is well-established that Congress has the power to
preempt state law.” Montalvo v. Spirit Airlines, 508 F.3d
464, 470 (9th Cir. 2007) (citing U.S. CONST. art. VI, cl. 2).
In general, there are three forms of preemption: express
preemption, conflict preemption, and field preemption.
Arizona v. United States, 567 U.S. 387, 398–400 (2012);
Retail Prop. Tr. v. United Bhd. of Carpenters & Joiners of
Am., 768 F.3d 938, 948 (9th Cir. 2014). Because Congress
has not preempted the field in copyright law, see Foad
5 We have jurisdiction pursuant to 28 U.S.C. § 1291. “We review de
novo a district court’s dismissal for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6).” City of Los Angeles v. AECOM Servs.,
Inc., 854 F.3d 1149, 1153 (9th Cir. 2017). “We similarly review de novo
questions of preemption under the Supremacy Clause.” Id.
14 CLOSE V. SOTHEBY’S
Consulting Grp., Inc. v. Musil Govan Azzalino, 270 F.3d 821,
827 (9th Cir. 2001), only two forms of preemption are at
issue here: express and conflict. Below, we first hold that
plaintiffs’ claims arising under the 1976 Act are expressly
preempted by 17 U.S.C. § 301(a). We then consider whether
what remains of plaintiffs’ claims conflicts with the 1909
Act. We conclude that Morseburg controls our conflict
preemption analysis and that plaintiffs’ claims arising under
the 1909 Act are therefore not preempted. Finally, we
consider defendants’ alternative argument based on the
Takings Clause.6
A. Express Preemption
The 1976 Copyright Act adopted, for the first time, an
express preemption provision in § 301(a) and thereby
accomplished a sea change in the relative powers of the states
vis-à-vis the federal government over copyright protection.
The House of Representatives anticipated that the preemption
provision “would accomplish a fundamental and significant
change in the present law.” H.R. REP. No. 94-1476, at 129
(1976). “By substituting a single Federal system for the
present anachronistic, uncertain, impractical, and highly
complicated dual system, the bill would greatly improve the
operation of the copyright law and would be much more
effective in carrying out the basic constitutional aims of
uniformity and the promotion of writing and scholarship.” Id.
Section 301(a) states:
6 We need not address eBay’s argument that it is not subject to the
CRRA because our express preemption holding disposes of all claims
against eBay. In this regard, we take judicial notice of the fact that eBay
did not exist and cannot be held liable for any sales of fine art that
occurred before January 1, 1978.
CLOSE V. SOTHEBY’S 15
On and after January 1, 1978, all legal or
equitable rights that are equivalent to any of
the exclusive rights within the general scope
of copyright as specified by section 106 in
works of authorship that are fixed in a
tangible medium of expression and come
within the subject matter of copyright as
specified by sections 102 and 103, whether
created before or after that date and whether
published or unpublished, are governed
exclusively by this title. Thereafter, no person
is entitled to any such right or equivalent right
in any such work under the common law or
statutes of any State.
17 U.S.C. § 301(a). In accordance with § 301(a), we have
adopted a two-pronged test to determine whether a state law
claim is preempted by the 1976 Act. Maloney v. T3Media,
Inc., 853 F.3d 1004, 1010 (9th Cir. 2017). “First, we decide
whether the subject matter of the state law claim falls within
the subject matter of copyright as described in 17 U.S.C.
§§ 102 and 103.” Id. (quotation marks omitted). “Second,
assuming it does, we determine whether the rights asserted
under state law are equivalent to the rights contained in
17 U.S.C. § 106, which articulates the exclusive rights of
copyright holders.” Id. (quotation marks omitted).
With respect to the first prong, the subject matter of
copyright encompasses “original works of authorship fixed in
any tangible medium of expression, now known or later
developed, from which they can be perceived, reproduced, or
otherwise communicated, either directly or with the aid of a
machine or device.” 17 U.S.C. § 102(a). This includes, for
example, “pictorial, graphic, and sculptural works.” Id.
16 CLOSE V. SOTHEBY’S
§ 102(a)(5). There is no doubt that plaintiffs’ claims under
the CRRA for resale royalties on works of “fine
art”—defined as original paintings, sculptures, drawings, or
works in glass, Cal. Civ. Code § 986(c)(2)—fall within the
subject matter of copyright. Plaintiffs do not dispute this
prong of the test.
The second prong is also satisfied—that is, plaintiffs’
state law claims assert rights “equivalent to rights within the
general scope of copyright as specified by section 106 of the
Copyright Act.” Maloney, 853 F.3d at 1019. To explain why
this is so, we begin with a short history of the first sale
doctrine. The Copyright Act of 1891 provided that the
copyright owner had “the sole liberty of printing, reprinting,
publishing, completing, copying, executing, finishing, and
vending” the copyrighted work. Copyright Act of 1891,
§ 4952, 26 Stat. 1106, 1107 (1891). In Bobbs-Merrill Co. v.
Straus, the Supreme Court construed the right to “vend” as
being limited to the first sale. 210 U.S. 339 (1908). Bobbs-
Merrill Company owned the copyright to the novel The
Castaway, each copy of which stated that its retail price was
$1 and that a retail sale at any lesser price would be treated as
copyright infringement. Id. at 341. R. H. Macy & Company
purchased copies of the book from wholesalers and retailed
them for less than $1, and Bobbs-Merrill sued for
infringement. Id. The Court held that Bobbs-Merrill could
not control Macy & Company’s resale of the purchased
copies: a copyright owner “who has sold a copyrighted
article, without restriction, has parted with all right to control
the sale of it.” Id. at 350.
CLOSE V. SOTHEBY’S 17
Congress codified the first sale doctrine in the 1909
Copyright Act7 and later retained it in the 1976 Act. See
Adobe Sys. Inc. v. Christenson, 809 F.3d 1071, 1077 (9th Cir.
2015). Today, § 109(a) provides that “the owner of a
particular copy or phonorecord lawfully made under this title,
or any person authorized by such owner, is entitled, without
the authority of the copyright owner, to sell or otherwise
dispose of the possession of that copy or phonorecord.”
17 U.S.C. § 109(a). “The practical effect of this language is
to significantly circumscribe a copyright owner’s exclusive
distribution right ‘only to the first sale of the copyrighted
work’ because ‘once the copyright owner places a
copyrighted item in the stream of commerce by selling it, he
has exhausted his exclusive statutory right to control its
distribution.’” Adobe, 809 F.3d at 1076–77 (quoting Quality
King, 523 U.S. at 141). One purpose of the first sale doctrine
is to effect the “common law’s refusal to permit restraints on
the alienation of chattels.” Kirtsaeng v. John Wiley & Sons,
Inc., 568 U.S. 519, 538 (2013). Another purpose is to “free[ ]
courts from the administrative burden of trying to enforce
restrictions upon difficult-to-trace, readily movable goods”
and “avoid[ ] the selective enforcement inherent in any such
effort.” Id. at 539.
In this case, plaintiffs’ CRRA claims assert rights
equivalent to the federal distribution right codified in
§ 106(3), as limited by the first sale doctrine codified in
§ 109(a). Section 106(3) grants copyright holders the
exclusive right “to distribute copies or phonorecords of the
7 Copyright Act of 1909, Pub. L. No. 60-349, § 41, 35 Stat. 1075,
1084 (1909) (“[N]othing in this Act shall be deemed to forbid, prevent, or
restrict the transfer of any copy of a copyrighted work the possession of
which has been lawfully obtained.”).
18 CLOSE V. SOTHEBY’S
copyrighted work to the public by sale or other transfer of
ownership, or by rental, lease, or lending,” while the first sale
doctrine circumscribes that right by limiting it to the first sale
of a copyrighted work.
Although the CRRA’s resale royalty right and § 106(3)’s
distribution right are not coextensive, they are equivalent.
The two rights differ in that one grants artists the right to
receive a percentage payment on all sales of artwork after the
first, while the other grants artists the right to receive full
payment on the first (and only the first) sale. But, at root,
both concern the distribution of copies of artwork and define
artists’ right (or lack thereof) to payment on downstream
sales of those copies. See NIMMER § 8C.04[C][1] (“[I]t is the
same conduct in relation to the same subject matter that
triggers either rights or immunities under both federal and
state law. It would seem to follow necessarily that the
[CRRA] is [expressly] preempted.”); David E. Shipley, Droit
de Suite, Copyright’s First Sale Doctrine and Preemption of
State Law, 39 HASTINGS COMM. & ENT. L. J. 1, 25 (2017)
(“The conduct that triggers the claim under the CRRA is the
distribution of the work. And thus, it is equivalent to a claim
for violation of the distribution right and is [expressly]
preempted.”).
The equivalence of the two rights is further underscored
by the manner in which the CRRA both expands and restricts
the federal distribution right. The CRRA expands the federal
distribution right because, whereas the first sale doctrine
limits artists’ right to payment to the first sale, the CRRA
grants artists an unwaivable right to a 5% royalty on all
downstream sales. See Cal. Civ. Code § 986(a). Indeed, the
CRRA is designed precisely to alter the first sale doctrine by
affording artists a right to at least some measure of payment
CLOSE V. SOTHEBY’S 19
on every sale after the first. At the same time, the CRRA also
restricts the federal distribution right by forbidding artists
from fully alienating copies of their artwork. In effect, the
CRRA creates an inalienable restraint on alienation.
In short, the CRRA does not merely grant an additional
right beyond what federal copyright law already provides but
fundamentally reshapes the contours of federal copyright
law’s existing distribution right. This runs counter to
§ 301(a), which precludes “all legal or equitable rights that
are equivalent to any of the exclusive rights within the
general scope of copyright,” even if they are not precisely
within the contemplation of the Copyright Act.
Plaintiffs raise a number of arguments in response. First,
they argue that the CRRA cannot be expressly preempted
because it creates a monetary, not a distribution, right.
According to plaintiffs, the CRRA governs proceeds on the
sale of art, not the distribution of art itself; a seller need only
pay the artist a royalty, not obtain the artist’s permission to
make a sale. But plaintiffs’ attempted distinction between
monetary and distribution rights takes an unduly narrow view
of § 106(3). That provision represents not merely copyright
holders’ ability to choose when to sell a copy of their work
and to whom. It also represents copyright holders’ ability to
receive payment for selling copies of their work. Even
though there are differences in how the CRRA and § 106(3)
affect artists’ right to payment—one requires a royalty on all
sales after the first, and the other contemplates full alienation
upon the first sale—there is significant overlap between the
two for the reasons explained above.
Second, plaintiffs argue that the CRRA’s resale royalty
right cannot be expressly preempted because artists can create
20 CLOSE V. SOTHEBY’S
a similar right by contract. Plaintiffs have misunderstood the
difference between a law that permits an act and a law that
compels an act. Federal copyright law protects the first sale
only and permits (by not forbidding) purely private
arrangements between an artist and a first purchaser with
respect to subsequent sales. The CRRA, however, is a
restraint on contract because the artist and the purchaser
cannot contract around the droit de suite. The artist cannot
agree to waive the 5% royalty; the only variance the CRRA
permits is for the artist and buyer to agree that the buyer (as
a future seller) will pay the artist more than the 5% royalty.
Cal. Civ. Code § 986(a) (“The right of the artist to receive an
amount equal to 5 percent of the amount of such sale may be
waived only by a contract in writing providing for an amount
in excess of 5 percent of the amount of such sale.”). The
availability of a right to future payments through a private
contract has no bearing on whether the legislative prescription
of such a right is preempted by federal law.
Third, plaintiffs argue that Morseburg should control our
express preemption analysis. Acknowledging that Morseburg
did not address the preemptive effect of the 1976 Act,
plaintiffs argue that Morseburg’s reasoning is nevertheless
dispositive of the present case. But “we emphasize[d] that
this case concern[ed] the preemptive effect of the 1909 Act
only.” Morseburg, 621 F.2d at 975. We noted that the 1976
Act became effective after the sales at issue in Morseburg’s
suit. Id. at 975 n.2. Then, in case anyone missed our point,
we recited that “our holding, as well as our reasons, to repeat,
are addressed to the 1909 Act only.” Id. at 975. Furthermore,
our reasoning in Morseburg derived from the Supreme
Court’s decision in Goldstein, and that case was grounded in
a different era of federal copyright law, before the Copyright
Act even had an express preemption provision. Morseburg
CLOSE V. SOTHEBY’S 21
did not pretend to speak to the preemptive effect of the 1976
Act and does not control our express preemption analysis
here.
Finally, plaintiffs point to the legislative history of
VARA. In enacting VARA in 1990, the House of
Representatives indicated that: “State artists’ rights laws that
grant rights not equivalent to those accorded under the
proposed law are not preempted, even when they relate to
works covered by H.R. 2690. For example, the law will not
preempt a cause of action for a misattribution of a
reproduction of a work of visual art or for a violation of a
right to a resale royalty.” H.R. REP. No. 101-514, 1990
U.S.C.C.A.N. 6915, 6931 (1990). This brief statement
postdates the 1976 Copyright Act by over a decade, and at
best, represents the House’s understanding—right or
wrong—of how existing law might intersect with the changes
proposed in VARA. It is not legislative history of the
preemption clause adopted in the 1976 Act. Nor are we
aware of any similar statement in the actual legislative history
of the 1976 Act. VARA’s legislative history does not alter
our analysis regarding the equivalence of the state and federal
rights at issue. See, e.g., Bruesewitz v. Wyeth LLC, 562 U.S.
223, 242 (2011) (“Post-enactment legislative history . . . is
not a legitimate tool of statutory interpretation;” rejecting the
use of subsequent legislative history as a test for interpreting
a preemption clause).
In short, the CRRA falls within the subject matter of the
Copyright Act and asserts rights equivalent to those found in
§ 106(3) of the Copyright Act. The CRRA is therefore
expressly preempted by § 301(a). Plaintiffs’ CRRA claims
arising after the effective date of the 1976 Act—January 1,
1978—are barred.
22 CLOSE V. SOTHEBY’S
B. Conflict Preemption
Unlike the 1976 Act, the 1909 Act contained no express
preemption provision. Our holding on express preemption
therefore does not account for plaintiffs’ claims, if any
actually exist, that arose between the CRRA’s effective date
of January 1, 1977, and the 1976 Act’s effective date of
January 1, 1978. This remaining sliver of claims is
preempted only if it conflicts with the 1909 Act. Our
decision in Morseburg, which likewise addressed sales of fine
art occurring in 1977, is squarely on point. Its holding that
the CRRA does not conflict with the 1909 Act therefore
controls our analysis of plaintiffs’ remaining claims.
Morseburg, 621 F.2d at 977–78.
Recognizing this, and following the district court,
defendants argue that Morseburg has been implicitly
overruled. Because neither the Supreme Court nor our court
sitting en banc has ever expressly overruled Morseburg, we
must look to the “clearly irreconcilable” test of Miller v.
Gammie, 335 F.3d 889 (9th Cir. 2003) (en banc). In Miller,
we set out the standards under which one panel of this court
may hold that a prior decision of the court has been
“effectively overruled.” Id. at 900. A prior decision is
effectively overruled if intervening higher authority has so
“undercut the theory or reasoning underlying the prior circuit
precedent” as to make the precedent “clearly irreconcilable”
with the intervening authority. Id. “The clearly
irreconcilable requirement is a high standard.” United States
v. Robertson, 875 F.3d 1281, 1291 (9th Cir. 2017) (quotation
marks omitted). Accordingly, “[i]t is not enough for there to
be some tension between the intervening higher authority and
prior circuit precedent, or for the intervening higher authority
to cast doubt on the prior circuit precedent.” Id. “So long as
CLOSE V. SOTHEBY’S 23
the court can apply our prior circuit precedent without
running afoul of the intervening authority it must do so.” Id.
(quotation marks omitted).
Defendants’ argument that Morseburg has been implicitly
overruled has two parts: first, they argue that Morseburg’s
reasoning is inconsistent with the Supreme Court’s reasoning
in Quality King, 523 U.S. 135, and Kirtsaeng, 568 U.S. 519;
and second, they argue that Morseburg is no longer viable
after our prior en banc decision in this case, Sam Francis,
784 F.3d 1320. In Quality King, the Supreme Court rejected
a “cramped reading” of the first sale doctrine and instead
endorsed its “broad reach”: “The whole point of the first sale
doctrine is that once the copyright owner places a copyrighted
item in the stream of commerce by selling it, he has
exhausted his exclusive statutory right to control its
distribution.” 523 U.S. at 152 (holding the first sale doctrine
applies to copies of a copyrighted work manufactured in the
United States, sold abroad, and imported back into the United
States). Similarly, in Kirtsaeng, the Court characterized the
idea that the first sale doctrine might permit a copyright
owner to “exercise downstream control” as “an absurd
result.” 568 U.S. at 544 (holding the first sale doctrine
applies to copies of a copyrighted work manufactured
abroad). The Court further stated that, “even though § 106(3)
forbids distribution of a copy of [a copyrighted work] without
the copyright owner’s permission,” “once [the] copy . . . has
been lawfully sold (or its ownership otherwise lawfully
transferred), the buyer of that copy and subsequent owners are
free to dispose of it as they wish.” Id. at 524.
Our prior en banc decision in this case held that the
CRRA’s “regulation of the conduct of the seller and the
seller’s agent is neither ‘minor’ nor a ‘regulation of the
24 CLOSE V. SOTHEBY’S
proceeds’ alone.” Sam Francis, 784 F.3d at 1324 n.1.
Defendants contrast this with Morseburg’s statement that the
CRRA “in no way restrict[s] the transfer of art works.”
621 F.2d at 977. They claim that the combination of the
Supreme Court’s broad description of the first sale doctrine
and our court’s broad interpretation of the CRRA so
undermine the foundations of Morseburg that the decision is
no longer good law.
To be sure, defendants have identified some “tension
between the intervening higher authority and prior circuit
precedent.” Robertson, 875 F.3d at 1291. But we are not
persuaded that defendants have identified “clear
irreconcilability.” The Supreme Court’s intervening
decisions in Quality King and Kirtsaeng have not altered the
first sale doctrine in any way relevant to this case. These
decisions reinforce the first sale doctrine and contain
language that might persuade us to decide Morseburg
differently if presented to us today. But the fact that we
might decide a case differently than a prior panel is not
sufficient grounds for deeming the case overruled. See Sierra
Forest Legacy v. Sherman, 646 F.3d 1161, 1189 (9th Cir.
2011); United States v. Alferahin, 433 F.3d 1148, 1156 n.3
(9th Cir. 2006). Nothing short of “clear irreconcilability” will
do.
The Morseburg panel, of course, was well aware of the
first sale doctrine. 621 F.2d at 975 (quoting § 27 of the 1909
Act). Morseburg recognized that the royalty imposed by the
CRRA “may well influence the duration of a purchaser’s
holding period of a work of fine art,” but concluded that the
“liability” represented by the royalty was not “a legal
restraint” on the seller’s right to “transfer[ ] [the work]
without restriction.” Id. at 978. The core of the first sale
CLOSE V. SOTHEBY’S 25
doctrine—that copyright holders exhaust their distribution
right over copies of their work upon the first sale—is the
same today as it was over a century ago when the Supreme
Court decided Bobbs-Merrill. The fact that the Supreme
Court has since described the doctrine in different words and
applied it in different circumstances does not make the first
sale doctrine clearly irreconcilable with Morseburg.
Defendants’ arguments concerning Sam Francis have
greater force, but we find no sure basis to declare Morseburg
overruled. Our reading of the CRRA in the prior en banc
decision at most contradicts isolated statements in
Morseburg; it does not completely undermine Morseburg’s
reasoning or mandate a different result in that case. Compare
Sam Francis, 784 F.3d at 1324 n.1 (“The [CRRA’s]
regulation of the conduct of the seller and the seller’s agent
is neither ‘minor’ nor a ‘regulation of the proceeds’ alone.”),
with Morseburg, 621 F.2d at 977–78 (“Technically speaking
such acts in no way restrict the transfer of art works. No lien
to secure the royalty is attached to the work itself, nor is the
buyer made secondarily liable for the royalty. The work can
be transferred without restriction.”). Speaking of the 1909
Act and the CRRA, Morseburg said that “[t]he crucial inquiry
is not whether state law reaches matters also subject to
federal regulation, but whether the two laws function
harmoniously rather than discordantly.” 621 F.2d at 978.
Morseburg upheld the CRRA because it represented an
“additional right” not addressed in the 1909 Act, thus
comporting with the then-existing balance between state and
federal copyright protection. As we have discussed, the 1976
Act drastically altered that balance. But the shift in the legal
landscape following the 1976 Act has no bearing on
plaintiffs’ claims arising before the 1976 Act’s effective date.
26 CLOSE V. SOTHEBY’S
In sum, Morseburg’s reasoning would be suspect today,
but it is not clearly irreconcilable with intervening higher
authority. It therefore controls our analysis of plaintiffs’
claims arising under the 1909 Act. We conclude that
plaintiffs’ claims concerning sales occurring between the
CRRA’s effective date of January 1, 1977, and the 1976 Act’s
effective date of January 1, 1978 are not preempted. On
remand, the district court should determine if any of
plaintiffs’ claims arise between January 1, 1977, and
December 31, 1977.
C. Defendants’ Takings Clause Argument
Defendants alternatively argue that the CRRA effects an
unconstitutional taking in violation of the Fifth Amendment,
as applied to the states via the Due Process Clause of the
Fourteenth Amendment. See Schneider v. California Dep’t
of Corr., 151 F.3d 1194, 1198 (9th Cir. 1998). According to
defendants, the Copyright Act grants artists a property right
in their works but only until they sell the works; after that, the
artists have no further property interest. The CRRA upsets
this arrangement by taking 5% of the proceeds on resales of
fine art and giving those proceeds to artists. Plaintiffs
respond that the CRRA, like the Copyright Act itself, merely
defines the respective rights of artists, buyers, and sellers,
thus creating property rights.
Initially, it would seem that defendants’ argument is
unavailing. To begin with, it parallels the substantive due
process argument that we rejected in Morseburg. In
Morseburg, the plaintiff art dealer argued that the CRRA
violated the Due Process Clause because he had “lost a
fundamental property right.” 621 F.2d at 979. We rejected
the argument, holding that the CRRA was “neither arbitrary
CLOSE V. SOTHEBY’S 27
nor capricious” and did “not affect fundamental rights.” Id.
Where a statute passes muster under the Due Process Clause,
“it would be surprising indeed to discover” that the same
statute violated the Takings Clause. Connolly v. Pension
Benefit Guar. Corp., 475 U.S. 211, 223 (1986). Nevertheless,
in the instant case, defendants essentially repackage the Due
Process Clause argument from Morseburg into a Takings
Clause argument.8
In some respects at least, the droit de suite resembles
legislation imposing rent control, setting a minimum wage, or
requiring a zoning permit. All of these measures impose real
economic costs on people or businesses and may result in a
wealth transfer to someone else, but they are not, for that
reason alone, a governmental taking. See id. at 223 (“In the
course of regulating commercial and other human affairs,
Congress routinely creates burdens for some that directly
benefit others. For example, Congress may set minimum
wages, control prices, or create causes of action that did not
previously exist. Given the propriety of the governmental
power to regulate, it cannot be said that the Taking Clause is
8 Defendants have argued the Takings Clause as though it were a
substantive constraint on laws the California legislature can enact. This
misunderstands the Takings Clause. That clause requires the government
to pay just compensation when it takes property for public use; it does not
disable the government in the same sense as the Constitution’s
prohibitions on “pass[ing]” a bill of attainder or ex post facto law, U.S.
Const. art. I, § 9, cl. 3, or “mak[ing]” a law infringing First Amendment
rights, id. amend. I. Were we to hold that the CRRA effected a taking for
public use, California would be liable for just compensation. The state
would have the choice of keeping the law and paying compensation, or
avoiding payment by foregoing the law. A taking by itself does not void
the law.
28 CLOSE V. SOTHEBY’S
violated whenever legislation requires one person to use his
or her assets for the benefit of another.”).
Nevertheless, we will not decide the Takings Clause
argument here. Although the CRRA applies only to sales of
fine art that occurred after its effective date, those sales might
involve fine art the seller acquired before the CRRA’s
enactment. See Cal. Civ. Code § 986(d) (“This section shall
become operative on January 1, 1977, and shall apply to
works of fine art created before and after its operative date.”).
The application of the CRRA to sales of fine art acquired
before the CRRA’s enactment suggests greater interference
with “investment-backed expectations,” Lingle v. Chevron
U.S.A. Inc., 544 U.S. 528, 539 (2005) (citing Penn Cent.
Transp. Co. v. New York City, 438 U.S. 104, 124 (1978)), and
may raise a concern under the Takings Clause. The district
court’s discussion of defendants’ Takings Clause argument
did not account for such sales. See Estate of Graham, 178 F.
Supp. 3d at 994 (“[I]t is not clear at this early stage of
litigation whether any such resales are at issue in this action.
If it turns out in discovery that Defendants did resell
Plaintiffs’ art that was originally acquired before 1976, the
Court will entertain arguments as to whether the Takings
Clause precludes Plaintiffs’ claims as to those resales.”). If,
on remand, plaintiffs’ can show that they have any remaining
claims, we will leave it to the district court to decide in the
first instance how the Takings Clause affects those claims.

Outcome: Our decision today means that the CRRA had a short
effective life. California’s statute permissibly coexisted for
exactly one year alongside the 1909 Act. Once the 1976 Act
took effect, however, the balance of state versus federal
copyright protection shifted and the CRRA was preempted by
§ 301(a). Thus, plaintiffs at most can only state claims for
the period between the CRRA’s effective date of January 1,
1977, and the 1976 Act’s effective date of January 1, 1978.
We express no opinion as to the merits of plaintiffs’
remaining claims, if any exist.

Appeal Nos. 16-56234 and 16-56235 against Sotheby’s
and Christie’s are AFFIRMED in part, REVERSED in part,
and REMANDED for further proceedings consistent with
this opinion. As no claims remain against eBay, Appeal No.
16-56252 against eBay is AFFIRMED. The parties shall
bear their own costs on appeal.

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