Polaroid Collection: Update 9

What Did Polaroid Know, and When Did Polaroid Know It? (conclusion)

In effect, if not by intent, several iterations of the corporate entity known as the Polaroid Corporation have used the bankruptcy courts of Delaware and Minnesota to launder the world-famous Polaroid Collection by legally severing it in toto from any binding, enduring contractual relationships with the picture-makers whose work it contains.

Polaroid One600 Classic Instant Camera

Meanwhile, a mounting pile of evidence proposes that most if not all of these works were contractually encumbered at the time they entered the Polaroid Collection, and remain so to this day. Polaroid’s letters of agreement with the photographers whose work they solicited for inclusion are clearly subsidiary-rights licenses, not transfers of ownership.

Moreover, public statements by prominent figures connected to the collection indicate that Polaroid has always been well aware that those agreements prohibited the collection’s breakup and sale for profit. For example, David Ross, former director of the Whitney Museum of American Art, has attested that Polaroid sought to transfer the collection to the Whitney in the 1990s as a donation precisely because they knew that it couldn’t legally be sold. And Sam Yanes, long-time Vice President of Corporate Communications at Polaroid Corporation, states that “I thought we didn’t buy these photographs, we just bought the right to use them.” (See the two previous posts in this series for details; click here for the first, and here for the second.)

How, then, did two incarnations of the Polaroid Corporation (and the respective counsels for each) get the judiciary to endorse outright sale of the collection, not just once but twice — the first time as a whole, and the second time piece by piece? It would seem that a “don’t tell, don’t ask” policy was in operation in the relationship between two versions of the entity in possession of the collection and two bankruptcy courts in two different states. In both Polaroid bankruptcy cases, the first in Delaware in 2002 and the second in Minnesota in 2009, Polaroid didn’t tell the presiding magistrates that its contracts with the photographers were not standard bills of sale and contained encumbering clauses granting the photographers various rights “in perpetuity” — and the magistrates didn’t ask to see any documentation verifying Polaroid’s unencumbered ownership of the works.

• In the 2002 Delaware Bankruptcy Court proceedings, the original Polaroid Corporation claimed that it was still inventorying the collection — a collection it had formally inaugurated in 1970. I find it hard to believe that, after three decades, Polaroid had no basic inventory of this collection. Be that as it may, the Delaware court took this assertion at face value, accepting also Polaroid’s explanation that therefore the corporation could neither provide specifics on the collection’s contents (beyond estimating them at some 24,000 pieces) nor offer any approximation of its value. (Did they not have it insured? Surely any insurance policy would have involved at least a rough inventory and a ballpark-figure appraisal.) They presented that court with no samples of the contracts, letters of agreement, release forms, and bills of sale covering the acquired works, and the court asked for none. Nonetheless, the original Polaroid Corporation persuaded the Delaware Bankruptcy Court to declare the collection as a whole free and clear of encumbrances, and legally viable for sale as a whole to the proposed buyers, as a corporate asset of the original Polaroid Corporation.
• Now the husk of the Ponzi-scheme corporation that subsequently acquired those assets, also called the Polaroid Corporation, has provided the Minnesota Bankruptcy Court with Sotheby’s inventory of the collection and specifics on its contents (mysteriously reduced in number to some 16,000 pieces), with an estimate of its value. They offered that court no samples of the contracts, letters of agreement, release forms, and bills of sale covering the acquired works, and the court asked for none. Nonetheless, they persuaded the Minnesota Bankruptcy Court to declare the collection as a whole free and clear of encumbrances yet again, as a corporate asset of the vestigial new Polaroid Corporation, and now legally viable for sale piecemeal to the public, at auction.

This raises a number of issues that remain unresolved. Unless these get addressed straightforwardly, and quickly, a cloud will hang over the pending June 2010 auction by Sotheby’s of the collection’s holdings, and no buyers thereat will be able to rest assured that they aren’t acquiring works whose sale is based on breach of contract with its makers. Here are some of the substantive trouble zones to which the evidence points:

Did the original Polaroid Corporation and its counsel in the 2002 bankruptcy proceedings in Delaware have an obligation to disclose the contracts and letters of agreement and releases relevant to the Polaroid Collection to the Delaware Bankruptcy Court? As I’m not a lawyer, I can’t say with any authority. We know that they didn’t, however; Polaroid gave that court only a one-paragraph description of the collection in a lengthy list of assets.

Here’s the entirety of what the original Polaroid Corporation told the Delaware Bankruptcy Court about the collection in 2002:

“9. Art Objects. Polaroid maintains a collection of photographs and other art objects estimated to be in excess of 24,000 items. Polaroid has been working for the last three years, on an intermittent basis, cataloguing the collection and continues to do so. In light of this, fluctuations in the art market, and the significant expense of appraising the collection, the value of the collection remains undetermined.” (See Exhibit A, clause 9, “Art Objects.” Nota bene: In 1998, Barbara Hitchcock, then curator of the Polaroid Collection, supplied a listing of 451 photographers in the Polaroid Collection for the final print edition of International Photography: Index to Photographers, Collections, and Exhibitions, published that year by GK Hall. For motives on which I won’t speculate, Polaroid and its counsel withheld that document from the Delaware Bankruptcy Court, though it would have been easy enough to provide it.)

On this vague, unspecific basis, the original Polaroid Corporation persuaded the Delaware Bankruptcy Court to declare the collection “free and clear of liens, claims or encumbrances that may have existed at that time.” Did they thereby snooker a gullible Delaware bankruptcy court magistrate, Judge Peter Walsh, into approving the sale of the entire collection to a new owner without bothering to examine the applicable contracts? Seems possible — but I’m no lawyer. Certainly there were many questions raised about the unseemly haste of the Delaware court in this case. (See, for example, Kris Frieswick’s January 1, 2003 summary for CFO Magazine, “What’s Wrong with This Picture? Polaroid’s passage through Chapter 11 exposes how bankruptcy can give debtors too much power.”)

Did the original Polaroid Corporation and/or the Delaware Bankruptcy Court have a legal obligation in 2002 to notify the photographers that proceedings were underway that would radically redefine their contractual relationships to the Polaroid Collection by stripping them of rights in regard to their works that till then they were entitled to enjoy “in perpetuity”? Is it a violation of the law to fail to inform people with whom you have signed binding contracts that you’re petitioning the court to terminate those contracts unilaterally? Seems possible — but I’m no lawyer.

Did the current Polaroid Corporation and its counsel in the 2009 bankruptcy proceedings in Minnesota have an obligation to disclose the contracts and letters of agreement and releases relevant to the Polaroid Collection to the Minnesota Bankruptcy Court? As I’m not a lawyer, I can’t say. We know that they didn’t, however. Did they thereby lead a second bankruptcy court judge in yet another state to approve the piecemeal sale of the entire collection to new owners without bothering to examine the applicable contracts? Seems possible — but I’m no lawyer.

Did the current Polaroid Corporation and/or the Minnesota Bankruptcy Court have a legal obligation in 2009 to notify the photographers that proceedings were underway that would recertify the 2002 radical redefinition of their contractual relationships to the Polaroid Collection by revalidating the 2002 ruling that stripped them of rights in regard to their works that till then they were entitled to enjoy “in perpetuity”? Is it a violation of the law to fail to inform people with whom you have signed binding contracts that you’re petitioning the court to terminate those contracts unilaterally? Seems possible — but I’m still no lawyer.

Back in March 2009, that same Minnesota court authorized the commissioning of Sotheby’s to inventory and appraise the photographs in the collection. However, neither Sotheby’s nor the court made any public statement about the documentation that accompanies the collection, or the contractual status of any of the works it contains. We do know, however, that — due to the “rabble-rousing” of Photocritic International — Judge Gregory Kishel of the Minnesota Bankruptcy Court had examples of those contractual agreements in hand on August 27, 2009, the day he handed down his decision to allow the auction to go forward.

We know this because several photographers who sent in documentation of their work’s entry to the collection are listed as objectors in that hearing’s calendar. (Scroll to the bottom of that pdf file for their names, and mine.) Moreover, in his special report to this blog, George Slade noted that Judge Kishel specifically referred to one such agreement, one of two sent to him by Bea Nettles, but dismissed it as irrelevant while ignoring the other.

Whether that was an exercise in sound judgment remains to be seen. We have no satisfactory answer yet to the question of how the terms of Polaroid’s contracts with photographers who deposited works in the Polaroid Collection affect the plan to sell those works at auction. No bankruptcy judge, in two courts in two states, has insisted on looking over those contracts — which, by my reading (though I’m no lawyer) have now been breached twice, by two iterations of the Polaroid Corporation in collaboration with two bankruptcy courts in two states. Makes you wonder, doesn’t it?

When he gave the go-ahead for the sale of all of Petters International’s Polaroid holdings (including the photo collection) in March 2009, Judge Kishel rejected the suggestion that the sale should be delayed. “Time is money,” the Minneapolis Star-Tribune quoted him as saying. “There is an ongoing drain on resources that dictates that the sale be done quickly.” Justice delayed is justice denied, of course, but a rush to judgment is never advisable. Time may be money, but haste makes waste.

Tom Petters mug shot, October 2008

The 2002 decision by the Delaware Bankruptcy Court did not destroy the Polaroid Collection. Indeed, by approving the transfer of the collection, intact, to new owners, it led people both inside and outside the several corporations to believe that the collection was simply in transit to an eventual new home. This also explains why no alarms concerning the fate of the collection went off in the photo and art world at the time.

But that same decision set the stage for the current debacle, by approving the sale of the collection as a whole “free of encumbrances,” etc. I believe that was a judicial error, and one over which that court should feel embarrassed. The majority of those works were in fact encumbered, as the court would have been forced to acknowledge had it taken the trouble to examine the documentation. Delaware’s failure to do so became a stepping stone toward the Minnesota decision, which, building on that precedent, declared the collection not only “free of encumbrances,” etc., but available for dissection into as many parts as its sellers and marketers choose. This outcome also contradicts the evidence of the agreements, and embarrasses another court. Yet that’s where things stand.

The victims in this situation are not only the Polaroid Corporation debtors, who collectively constitute the remnants of Tom Petters’s massive scam operation, harmed by the actions of Petters and his co-conspirators. The victims are also the artists and photographers represented in the collection, who contributed work to it on the basis of formal written agreements that the Minnesota Bankruptcy Court has voided without even glancing at them. They’ve now gotten a raw deal from two incarnations of the Polaroid Corporation and two bankruptcy courts, most recently the one in St. Paul, MN. Indeed, that court has allowed the Polaroid Corporation’s counsel, George Singer, to describe these creative professionals as “rabble” in his courtroom, and has tacitly endorsed that description by not reprimanding Singer for that insult to these injured parties.

The Minnesota Bankruptcy Court’s decision in this case sets a dangerous precedent whose ramifications the court appears not to have considered carefully. For the sake of expediency, the court has put its imprimatur on the dissolution of a collection whose contents for the most part are not owned outright by the petitioning seller. In so doing, the court has endorsed the seller’s effective breach of contract in relation to thousands of artworks by hundreds of artists. As precedent, this decision will have repercussions and resonances that the court clearly has failed to envision.

Methinks the wheels of justice are grinding much too fast here, and not nearly fine enough.

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