Gallery (LLC) hasn't paid me for sold art. Can I sue owners for fraud?

Rusalka · #1 09-06-2019, 11:57 AM

I had original works and prints in a gallery and the owner claims he couldn't pay me promptly because the money was tied up somewhere else. Are galleries supposed to hold funds received from artwork sales in escrow, or can they use my portion of sales in their general operating fund, so that if they run short I'm out of luck? The gallery wasn't doing great with high overhead and partially supported by an investor and subsequently closed. However, I suspect the owner was paying himself too much and that's how they ran out of money. If galleries are supposed to separate artists' percentages from general profit and are not at liberty to spend that money, it would constitute fraud, and I might be able to still sue in small claims despite the LLC.

RobinZ · #2 09-07-2019, 03:45 PM

What does your contract say about when you'll get paid?

Their issues are not your issues. All that matters here is that the contract you agreed upon and signed is honored.

Rusalka · #3 09-20-2019, 04:16 PM

The question here is whether or not galleries are supposed to set funds aside received from the sale of artwork that doesn't belong to them. I guess you can call that "consignment". The gallery went out of business. It was run as an LLC. You can still go after the owners if there was fraud. So anyway, does anyone know the answer? Is it fraudulent to comingle consignment funds with general operating funds?

Artyczar · #4 09-20-2019, 06:15 PM

The gallery is typically obligated to pay you within 30 days after the sale. They have up to 30 days. What they do with that money is none of your business. They just need to pay you.

DaveCrow · #5 09-20-2019, 09:06 PM

Do you have a contract that specifies when and how you will be paid? Do you have documentation of what works of yours the gallery sold, when, and for how much?

Are you owed enough to make it worth consulting with a lawyer?

Net 30 is the typical terms for invoices and payments. This means they have thirty days to pay you or make other arrangements. There is no usual requirement for where the money comes from.

Harold Roth · #6 09-20-2019, 10:19 PM

I have not heard of a law that says they have to set aside money to pay their vendor (the artist) for the merchandise they made a profit from. There is only the obligation to pay the vendor what they are owed. And that is a contractual dispute that you could settle by taking them to small claims court for what they owe you plus legal expenses. But you would need to have some proof that they owe that money to you. I believe an email would suffice, but I am not a lawyer. You can get free legal advice from Legal Aid.

Meanwhile, to pry loose some money, perhaps consider writing a review on Yelp, saying that they did not pay you for what they bought, and send them the url to the review. File a complaint with the Better Business Bureau. Write a review for Ripoff Report. Tell them you're going to put up a website about how they didn't pay you. Etc.

RobinZ · #7 09-21-2019, 04:29 PM

Are you saying in your jurisdiction that you can't sue an LLC for what you are owed if there is no fraud? Just because the gallery itself went out of business doesn't mean the LLC is dissolved or has no assets to go after.

Rusalka · #8 09-21-2019, 09:36 PM

He said there was no money in the bank and that's why he closed. One of the owners said my money was tied up somewhere else and he can't pay me. You can only "Pierce" the corporate veil and go after the owner if fraud was involved. That's in any jurisdiction. Misappropriation of funds, in other words. Hence, my question.

Harold Roth · #9 09-22-2019, 03:38 AM

If the LLC is going bankrupt, you can get on the list of creditors. The bankruptcy trustee decides who gets paid out of the assets.

DaveCrow · #10 09-22-2019, 08:05 AM

The first thing the judge will ask you for in court is your documentation of what happened. What artwork did the gallery sell on your behalf, when did they sell it, when and how were they supposed to pay you. Do you have all this spelled out in writing, agreed to to by both parties? Contracts, receipts, etc.

Have you spoken with a lawyer? An hour consultation with a lawyer would do a lot more to answer your questions and move you towards resolution of this than asking here on this forum. We don't know the specifics of your jurisdiction and your case. A lawyer will. Piercing the corporate veil is a lot easier with a letter from a law office or an order from a judge.

RobinZ · #11 09-22-2019, 07:59 PM

Cash is only one kind of asset.

Artyczar · #12 09-22-2019, 08:49 PM

There's no misappropriation of funds. There's no reason they can't use the money from the sale on whatever they want as long as they pay you in 30 days. I'm not saying it's fair, or legal that they not pay you, these horrible things happen sometimes, but I know of no law where they are obligated to keep your profit in an escrow type situation. This sort of thing has happened to me a number of times. It's happened to a number of artists. Sometimes we get our money (and/or art) back and sometimes we don't. I hope you manage to get your money. Good luck!

contumacious · #13 09-25-2019, 02:37 PM

You may want to get on the list of creditors if they filed bankruptcy.

Rusalka · #14 10-06-2019, 11:35 PM

They haven't filed bankruptcy but the LLC has no assets. I have a printout of what sold and what is owed. No contract, but the print out is proof.

Harold Roth · #15 10-09-2019, 07:08 PM

How do you know the LLC has no assets? Did you see the bankruptcy filing? Because otherwise, it's just this guy saying he has no assets, and that doesn't mean anything.

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