This article examines the issues faced by the City of Detroit and the Detroit Institute of Arts when Detroit filed for municipal bankruptcy. Creditors called for the sale of the highly esteemed DIA art collection to pay outstanding municipal pension obligations. The DIA and the Michigan Attorney General viewed the collection not as an asset, but as a charitable public trust. Simply put, the City faced the question of what mattered most – pensions or paintings? Along the way, the parties and courts struggled with valuation of the art collection, a history of judicial decisions and lawmaking regarding charitable trusts with a public purpose, and the interplay of these issues with municipal bankruptcy law.
Ultimately, the parties were able to reach a “grand bargain” that was the result of creative legal thinking and remarkable philanthropy. At the behest of a bankruptcy judge, a group of philanthropists came up with a plan to donate large sums of money to the DIA, who would in turn donate to the pension fund. As a result, the collection was preserved, its legal ownership was clarified, and the pension obligation was significantly reduced.
The article calls for cultural and other charitable institutions like the DIA to conduct an audit of the legal title of their assets, suggests that professional museum organizations articulate a policy against the use of art as a municipal asset and establish penalties for violations of that policy, and encourages others similarly situated to look outside of established norms for solutions to thorny issues with legal, social and cultural ramifications.
Maureen B. Collins,
Pensions or Paintings? The Detroit Institute of Arts from Bankruptcy to Grand Bargain,
24 U. Miami Bus. L. Rev.
Available at: https://repository.law.miami.edu/umblr/vol24/iss1/3