Guest Column: Courts Would Likely Back Berkshire Museum Deaccession

By Rinaldo del Gallo IIIGuest Column
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Until events of late, I had never heard of the word "deaccession." The recent controversy of the Berkshire Museum, a story that has made its way into the Boston Globe and New York Times changed all that. Deaccession is basically a $10 word for selling off part of a museum's collections, and it's controversial.
 
Mr. Van Shields, a man that I know personally and respect, undoubtedly knows of the controversy that happened when the Delaware Art Museum deaccessioned some of its art. Making matters worse, when the Delaware Art Museum was to sell "Isabella and the Pot of Basil," Christie's auction house expected the work to fetch between $8.4 million and $13.4 million. In fact, the bidding stalled out at a disappointing $4.25 million. Perhaps the museum should consider reserves, which command a minimum price.
 
There are various ethical codes of museum societies, such as the American Alliance of Museums and the Association of Art Museum Directors. In a joint statement, both organizations said, "One of the most fundamental and longstanding principles of the museum field is that a collection is held in the public trust and must not be treated as a disposable financial asset." This may be an aspiration of the profession, and perhaps part of its code of ethics, but it is not binding law. Nonetheless, violating these canons could lead to sanctions, which in practicality would mean no loans from other museums that belong to these associations. That said, it is all too human to want to bail the water out of a sinking boat, and not existing might be too high a price for not being anathema.
 
And backpedaling seems almost immediate. While deaccession to pay off bills is a no-no, deaccession is not prohibited even by their own ethical codes in other situations. Under these ethical codes, "proceeds from a deaccessioned work are [to be] used only to acquire other works of art – the proceeds are never used as operating funds, to build a general endowment, or for any other expenses." In this world of ethics, it's OK to sell off works you own to acquire capital to purchase other "superior" works, to thin redundant works, or focus on a particular genre of art. For instance, in 1970, when the New York Metropolitan Museum of Art learned that Velazquez's portrait of Juan de Pareja was up for auction, they sold off pieces of its modern art collection bequeathed by Adelaide de Groot, a practice which is considered acceptable.
 
It is not inherently obvious why selling art to stay financially viable is unethical, while selling donated art for "better" art is moral.
 
How will this case turn out if anybody sues the Berkshire Museum under some "breach of a fiduciary duty," "waste of corporate assets," a violation of the museum's charter, or some like theory? I  suspect that if this case were ever litigated, it will come out the way it did in Dennis v. Buffalo Fine Arts Academy where the museum won. Unless the purpose of the corporation has some surprisingly limited scope in its corporate charter (articles of incorporation) which is highly unlikely, the deaccession will not be an "ultra vires" act, another $10 expression meaning an act outside the scope of the corporate charter.
 
Nor is there likely to be some type of fiduciary obligation that a court will recognize. If one gives something to a nonprofit with no strings attached, once they alienate the property, they lose all control. A classic famous local case is when the people that formerly owned The Berkshire Eagle, the Millers, gave land by Pontoosuc Lake to the YMCA. If one just gives them the land without restrictions, during a financial crunch period, the YMCA can sell the land and give up Camp Sumner and the Ponterrill recreational facility. It is totally legal. If interested parties want to stop the Berkshire Museum from selling the art, they better find some covenants and restrictions that went with the donations — if the donations were given free and clear and outright, I doubt there is much that can be done to stop it in court. 
 
The Board of Directors of the Berkshire Museum would likely be subject only to the business judgment rule. As the Dennis court put it, "The business judgment rule applies to both profit and non-profit corporations, and states that those actions taken by a board of directors in good faith in the exercise of honest judgment and within legitimate corporate purposes cannot be overturned by a court." 
 
It is a highly deferential standard and if the paintings are sold in a commercially reasonable manner and used to further the mission of the Berkshire Museum, it will not be violated. But even in the unlikely event plaintiffs were able to convince a court to use the more taxing "breach of a fiduciary obligation rule" under a "public trust" theory (which I have not found in any reported deaccession case), it would be hard to convince a court that it was a breach of a fiduciary obligation to sell valuable pieces of artwork when confronted with a possible financial implosion jeopardizing ongoing viability.
 
Rinaldo Del Gallo III is a local attorney whose columns have been published in newspapers across the country.

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North Adams Regional Reopens With Ribbon-Cutting Celebration

By Tammy DanielsiBerkshires Staff

BHS President and CEO Darlene Rodowicz welcomes the gathering to the celebration of the hospital's reopening 10 years to the day it closed. 
NORTH ADAMS, Mass. — The joyful celebration on Thursday at North Adams Regional Hospital was a far cry from the scene 10 years ago when protests and tears marked the facility's closing
 
Hospital officials, local leaders, medical staff, residents and elected officials gathered under a tent on the campus to mark the efforts over the past decade to restore NARH and cut the ribbon officially reopening the 136-year-old medical center. 
 
"This hospital under previous ownership closed its doors. It was a day that was full of tears, anger and fear in the Northern Berkshire community about where and how residents would be able to receive what should be a fundamental right for everyone — access to health care," said Darlene Rodowicz, president and CEO of Berkshire Health Systems. 
 
"Today the historic opportunity to enhance the health and wellness of Northern Berkshire community is here. And we've been waiting for this moment for 10 years. It is the key to keeping in line with our strategic plan which is to increase access and support coordinated county wide system of care." 
 
Berkshire Medical Center in Pittsfield, under the BHS umbrella, purchased the campus and affiliated systems when Northern Berkshire Healthcare declared bankruptcy and closed on March 28, 2014. NBH had been beset by falling admissions, reductions in Medicare and Medicaid payments, and investments that had gone sour leaving it more than $30 million in debt. 
 
BMC was able to reopen the ER as an emergency satellite facility and slowly restored and enhanced medical services including outpatient surgery, imaging, dialysis, pharmacy and physician services. 
 
But it would take a slight tweak in the U.S. Health and Human Services' regulations — thank to U.S. Rep. Richie Neal — to bring back inpatient beds and resurrect North Adams Regional Hospital 
 
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