Recent New York Holocaust-Era Art Cases Come Out Differently


Steve and Katie talk about and compare two recent Holocaust-era art cases decided in New York, one in state court on summary judgment and one in federal court on a motion to dismiss grounds.  Both cases involve the claims of heirs to recover artwork that left the hands of Jewish owners persecuted by the Nazis, but they otherwise greatly differ.

Resources:

Reif v. Nagy, Index No. 161799:15 (First Dep’t July 9, 2019)

http://artlawpodcast.com/wp-content/uploads/2019/08/Reif-v.-Nagy-Index-No.-16179915-First-Dep’t-July-9-2019.pdf

Zuckerman v. The Metropolitan Museum of Art, No. 18-634 (2d Cir. 2019)

http://artlawpodcast.com/wp-content/uploads/2019/08/Zuckerman-v.-The-M etropolitan-Museum-of-Art-No.-18-634-2d-Cir.-2019.pdf

http://artlawpodcast.com/wp-content/uploads/2019/08/Brief-and-Special-Appendix-for-Plaintiff-Apellant-Dkt.-51-May-25- 2018.pdf

http://artlawpodcast.com/wp-content/uploads/2019/08/Brief-for-Defendant-Appellee-Dkt.-102-Jul-20-2018.pdf

http://artlawpodcast.com/wp-content/uploads/2019/08/Reply-Brief-for-Plaintiff-Appellant-Dkt.-105-Aug-3-2018.pdf


Episode Transcription

Steve Schindler: Hi I’m Steve Schindler.

Katie Wilson-Milne: I’m Katie Wilson-Milne.

Steve Schindler: Welcome to the Art Law Podcast, a monthly podcast exploring the places where art intersects with and interferes with the law.

Katie Wilson-Milne: The Art Law Podcast is sponsored by the law firm of Schindler Cohen & Hochman LLP, a premiere litigation and art law boutique in New York City. All right, Steve so we are going to give our listeners in a mini episode an update on two interesting Holocaust-related art cases that were just decided in New York that are different from each other in a lot of ways and will be interesting to compare.

Steve Schindler: And one of them was brought in our state court system and the other one was brought in our federal court system. And as you said, Katie, there are a lot of similarities but they ended very differently.

Katie Wilson-Milne: Yeah. And one was appealed on a motion to dismiss, meaning that it was a decision made by the trial court just on the complaint before any discovery or factual inquiry was made. And the other case was decided on summary judgment, meaning the court had the benefit of all of the discovery and the facts that had come out of the case to make its decision. And Steve and I think that those two postures are an interesting difference as well for deciding these types of substantive claims.

Steve Schindler: Right. In a lot of ways the case that I am going to talk a little bit about first, which was brought in the state court and was decided on summary judgment, was decided on really a full record. And it seems a lot more satisfying whether you agree with the result or not to see the court grapple with—

Katie Wilson-Milne: The merits. Yeah.

Steve Schindler: —With the merits, rather than deciding the case on a very sort of technical argument…

Katie Wilson-Milne: And on the pleadings. So one similarity in the cases is that they both revolve around the same legal claims made by the heirs of individuals who owned art in Europe and were implicated in the policies of the Third Reich. And those claims in New York are replevin and conversion.

Steve Schindler: Just as a basic primer for some of our listeners who are not lawyers, if you are trying to recover property that belongs to you, normally property that’s been stolen or somehow you have lost possession of, there are sort of two claims that you can bring. One is for conversion, which is a claim that you can bring when another person is exercising dominion over property that you have a superior right to. The claim for conversion ends in an award if you are successful of money. And then the second claim is one that we call replevin and that’s this claim based on the same set of elements but the end result of that claim is that you get to recover the property itself. And so very often in Nazi-looted art cases what the heirs of the victims of the Holocaust are claiming or seeking is to have the actual works of art themselves returned, and that’s the claim for replevin.

Katie Wilson-Milne: You know the interesting thing about these claims is as you see in these Nazi-related cases is that the possessor doesn’t have to be a wrongdoer. Right, a person can bring a claim for the return of an object that they have a lawful right to. But that doesn’t have to involve and it almost never does wrongdoing by the current possessor, because the appropriation was so long ago. So that makes these cases especially interesting because unlike a traditional civil action, where you have someone who has been wronged and then the wrong doer is the defendant, that’s almost never the case here. The wrongdoers are long, long gone. And so you have just someone who happens to have the property, is often a good faith purchaser, but under this legal scheme may not have a right to keep it.

Steve Schindler: Right. Because the principle at least in the United States, not true in Europe or certainly parts of Europe, is that a thief can never convey good title, ever. So that if property is stolen and then sold multiple times, the principle here is that the owner or the heirs of the owner have the right to recover the property, even from good faith purchasers down the line with the exception of statute of limitations.

Katie Wilson-Milne: Right snd the aspect of these claims that is unique to New York and the United States and is really significant because New York is the place where most of these claims have been litigated, is that the statute of limitations for these claims, meaning the time period in which a plaintiff can bring an action for these claims because it’s not forever, is governed by what’s the called the Demand and Refusal Rule. And that is famous for setting the statute of limitations not at the time that the wrongdoing or the adverse possession is discovered by the plaintiff but when the plaintiff decides to ask for it back and is refused. So theoretically a plaintiff could know that they have or suspect they have a right to an object and know where it is for many, many years. But that doesn’t start the time on when they can bring a claim until they decide to make the demand and it’s refused. And so that scheme only exists in New York and it has been beneficial to many plaintiffs in these types of cases.

Now one thing has changed in the statute of limitations world for these claims which is a federal act called the HEAR Act, which we talked about briefly with Nick O’Donnell on a prior podcast. And that federal legislation which was passed in 2016, sets a uniform federal statute of limitations for these types of claims, getting back objects, including art, that were taken during the Holocaust at 6 years. And that 6 year statute of limitation starts running at discovery of the wrongdoing or the adverse possession. So someone could find out all of a sudden because someone gave them new research or they see it in an exhibition catalog that this artwork exists and where it is. And that puts them on notice that they have 6 years then to make a claim. That is unlike the New York rule and there has been interesting discussion. And it is not settled how those two rules will interact because the New York Demand and Refusal Rule of 3 years arguably gave plaintiffs a very long time to bring claims whereas 6 years from discovery could potentially be a shorter time.

Steve Schindler: Right. And in both of our cases that we are going to discuss today there was—there is really no issue as to statute of limitations under either the Demand and Refusal Rule in New York, which is 3 years from the time of refusal or the HEAR Act which is 6 years.

Katie Wilson-Milne: Right. So the court side steps these issues.

Steve Schindler: Correct.

Katie Wilson-Milne: Yeah.

Steve Schindler: Let’s talk about the state court case first. And this is a case that was decided at the decision about two weeks ago that came down from the Appellate Division, First Department, which is the intermediate appellate court covering New York City. And it was a unanimous decision, written by Justice Singh, which essentially sided with the plaintiffs in that case and ordered two works by Egon Schiele returned to the heirs of a man who was the victim of Nazi persecution in Germany. And this was a case brought by Timothy Reif and David Frankel, who were themselves heirs of the estate of Franz Friedrich Grünbaum. And the case was brought against an art dealer Richard Nagy and his eponymous British company.

It’s clear that Fritz Grünbaum was a victim of Nazi persecution. He was imprisoned and ultimately murdered in the Dachau Concentration Camp. He was a well known cabaret performer, writer, actor, and director. And he was living in Vienna, Austria. He was a vocal critic of the Nazis and also a well known art collector. He was arrested by the Gestapo in 1938. Richard Nagy, who was a well known art dealer purchased two works by Egon Schiele one is called Woman in a Black Pinafore, which is a water color and glass drawing. The other is called Woman Hiding Her Face. So Nagy purchased Woman in a Black Pinafore after it was bought in at a Sotheby’s auction in June of 2014. And he purchased Woman Hiding Her Face in December 2013 from the estate of Doris Rubin, who had died a number of years earlier.

Fritz Grünbaum’s heirs found out about the location of these works when they were put up for sale at Nagy’s booth at an art fair at the Park Avenue Armory. At that point the heirs demanded the return, as we discussed is required under the New York law. And when Nagy refused to return them, they brought an action in Supreme Court, New York County. This case was ultimately decided on, as Katie mentioned before, a motion for summary judgment, which means that there was a full record that was developed after discovery and exchange of information and depositions in this case. And what’s clear in this case is that there are records showing that Grünbaum owned these two Schiele works at the time that he was sent to Dachau. As was typical and required under the Nazi regime, while he was in Dachau, Grünbaum was forced to sign both a power of attorney to his wife, Elizabeth, at the time, and who then was forced to convey all of Grünbaum’s artistic collection to an Aryan administration at the time. This was after 1938, when Jews in Germany by law were not entitled to own property and had to turn the property over to a so-called Aryan administrator, which is what was done here.

After the war, these works among others surfaced in a gallery and over time made their way to the ultimate purchaser in this case, Richard Nagy. There are really two issues that the court had to decide and that is were these works stolen by the Nazis, and in that case they were stolen works. As we said before, a thief can never convey good title to works that were stolen. If that was the case were these claims timely brought? With respect to the first question, the question of whether or not they were stolen, after reviewing a lot of evidence including expert testimony by well known historians who specialized in this area, the court concluded that these works were in fact owned by Grünbaum at the time that he died in Dachau that he never transferred them to his wife. That the only inference from that is that they were sold improperly to the Kornfeld Gallery after the war. And so the court concluded that the works were stolen.

With respect to the timing there was no claim that the case was barred by the statute of limitations because either under the HEAR Act or New York’s Demand and Refusal Rule, the case was clearly timely. But the other legal principle that comes into play in these cases is something called laches, and to some extent it is a little bit of a remedy for the potentially very long statute of limitations that grows out of New York’s Demand and Refusal Rule because under that rule if a demand and refusal doesn’t happen for decades after the theft that can be a very long time. And the reason we have statutes of limitations in the first place is to prevent the litigation of old stale claims where witnesses are no longer alive.

So we have this very long statute of limitations, but we have an equitable principle called laches where the court can look really at the conduct of both parties and make a decision whether or not the plaintiff unreasonably delayed in bringing the claim and if so was the defendant prejudiced by that delay? And that’s where the two cases that we are going to talk about differ. But when the court looked at the facts of the Reif v. Nagy case, they concluded that Mr. Nagy purchased these works only several years ago with the full understanding and knowledge as the record reflected that the works were from the Grünbaum collection. And in fact with respect to one of them, took out a title insurance policy specifically to try to ensure against a claim that might be made by the Grünbaum heirs. So when the court looked at the equitable claims of both parties with respect to the laches defense, they ruled in favor of the plaintiff. And so the end result was the plaintiffs in this case got the work back.

Katie Wilson-Milne: Yeah. So a lot of people think this is a really important decision and a bold and detailed one by the appellate division. In contrast, we have another case it was just decided in the Second Circuit, which is the Federal Appellate court in New York, and that case is both decided on very—against a very different factual background and on a very different basis. And so we’ll do some comparison of these two cases, but first I’ll give a summary.

So the case is Zuckerman v. The Metropolitan Museum of Art. The story goes way back to a wealthy German Jewish family and a Picasso painting that they owned. Paul and Alice Leffmann were prosperous German Jews before Hitler’s rise. They owned a very successful manufacturing business and had multiple properties, and they collected art. And one painting that they purchased was a painting called The Actor by Pablo Picasso, which they purchased in 1912. That is the painting that’s the subject of this particular litigation.

Steve Schindler: One significant difference I think between the two cases is that the case that you are describing Katie involves a very famous, well known work of art by Picasso and…

Katie Wilson-Milne: Right.

Steve Schindler: …The case that I described, the state court case, the Schiele case, involved two relatively small works, works on paper that over the years I think received less attention. It wasn’t cataloged well. The names changed. And we’re dealing with very, very different kinds of art.

Katie Wilson-Milne: Profiled art yeah.

Steve Schindler: And I think that’s significant.

Katie Wilson-Milne: Yeah. That’s really a good point. So The Actor by Pablo Picasso was in their hands. But then in 1937 when Germany imposed the Nuremberg laws, the Leffmanns like many German Jews were forced to sell not only their businesses but to leave Germany for safety. And they lost much of the property that they had had, as with many, with the property of people who were leaving Germany, generally, during that time. In addition they paid significant flight taxes to be able to leave Germany and you’ll hear that in a lot of these stories that it wasn’t just that Germany let Jews leave for some period of time, they imposed a significant financial burden on the right to leave. And so that option was only made available to people who had a certain amount of means.

So the Leffmanns fled to Italy. That was not their first choice, but it was where they could go. Italy was still accepting Jewish migrants at that time. It did have a significant Italian Jewish population there that the Leffmanns believed would be hospitable. But the Italian Fascist government fairly soon aligned itself with the Third Reich and began enacting the very sorts of laws targeting Jews and their property that the Leffmanns had faced in Germany. And realizing again that they would need to leave and that they needed money to do so because of the imposition on even more flight like taxes and fees. They needed to raise money and they wanted to sell the Picasso.

Now it’s worth noting that the Picasso was not with them in Italy. They had before the imposition of the Nuremberg laws and them leaving Germany had been able to get it to Switzerland somehow and had left it in the care of a non-Jewish art dealer there. So the painting had been safely there before they left Germany. It was never seized. And you know they find themselves in Italy where they do have some assets that they were somehow allowed to leave with but they have this painting in Switzerland. So they go about trying to sell it. And Paul Leffmann had been trying to sell it for quite some time and was trying to sell it at what he thought was the appropriate price and was having some trouble doing that. But he eventually sells it for a price he had previously rejected to a Paris art dealer Käte Perls, who bought the work on behalf of her ex-husband Hugo Perls and Paul Rosenberg ,who were also art dealers.

So with the Picasso money, this $12,000 at the time, which was a significant amount of money, the Leffmanns left for Switzerland but they only had temporary visas. So they were in Switzerland for a short period of time before they went to Brazil where they remained through the end of the war and then moved back to Switzerland in 1947. You know at each move first to Switzerland and then to Brazil, the Leffmanns had to pay substantial fees, taxes, bribes including a $20,000 deposit into a Brazilian bank for the privilege of going in Brazil for those period of years.

After the war, the Leffmanns worked with a lawyer to make restitution claims in Germany for the property that had been seized in Germany. There is no record and there doesn’t seem to be any dispute that they ever made any claims or inquiry into the Picasso after the war. But they did successfully restitute some of the property that had been seized in Germany before they left.

So let’s move to the painting. So the painting is bought through this dealer in Paris. And in 1939 Paul Rosenberg, one of the new owners, loaned the painting to MoMA in New York. MoMA ensured it for $18,000 so about 50% more than the Leffmanns were paid for it a year earlier. And then Paul Rosenberg consigned the painting for sale at the Knoedler Gallery of much infamy if you listen to our prior podcasts in New York City. Knoedler sold it to Thelma Chrysler Foy, a very wealthy woman for $22,500 in 1941, so, like a 70%-ish increase above what it was sold for by the Leffmanns in 1938. And in 1952 Foy donated it to the Met and it’s been there ever since.

So since 1952, this painting has been at the Metropolitan Museum of Art in New York. Now in 1967 the Met published a catalog of French paintings that included this work in it. This is a publicly available document. And it listed Leffmann as a previous owner, although it implied incorrectly that Leffmann had sold the painting before 1938 and that it belonged to somebody else in Italy, which it was later corrected but only very recently.

Steve Schindler: Right. And that’s of some significance, because it doesn’t initially when you look at it, it doesn’t indicate that this was a work that traded, so to speak.

Katie Wilson-Milne: In early 30s.

Steve Schindler: Right, which is always a red flag.

Katie Wilson-Milne: Right, or by a Jewish family in the late 30s. So that’s where it’s been at the Met and it has been on display from time to time. It has not been hidden. In 2010, we fast forward, Leffmann’s great grand niece Laurel Zuckerman demanded the return of the Picasso to her as Leffmann’s heirs from the Met. And, as maybe obvious, the Leffmanns had passed away in Switzerland I think some time in the 60s. Laurel Zuckerman claims to be the current heir of both of them. So the Met conducts an internal investigation, does its own provenance research on the painting, and refuses that demand claiming that it did have good title to the work and that the work was not stolen by the Nazis or obtained under duress.

So Zukerman didn’t like that and she sued the museum to get the painting back in 2016 under claims for conversion and replevin, like we discussed earlier on the basis that the 1938 sale by which the painting left the Leffmann’s ownership through Perls, the dealer in Paris, was made under duress. So the district court in this case, the federal district court, held that Zuckerman’s complaint failed to adequately plead duress of the sale in 1938 under New York law, which was necessary to show that title did not pass. Because duress would be the element that would make the work essentially stolen and would make it impossible for the Met, that was unquestionably a good faith donnee of a donation from its prior owner, and that that prior owner, Chrysler Foy, was a good faith purchaser from Knoedler. That is the only thing that would void that good faith purchaser status.

Steve Schindler: So maybe, Katie, it might be helpful to explain what the law of duress is in New York, because it seems to an observer of the facts of the case that these were individuals who were fleeing for their life from Nazi Germany that they were disposing of assets at a time that was not entirely favorable to themselves in order to raise money to…

Katie Wilson-Milne: Move.

Steve Schindler: …To move, to pay for the fees and bribes and things that were necessary to get themselves ultimately from Italy to Switzerland to Brazil, so why is that not duress?

Katie Wilson-Milne: Yeah. I mean it feels stressful, right, even just hearing about it. So Zuckerman claimed duress under both Italian law and New York law. And the district court, Judge Preska, did look at both Italian law and New York law on duress but decided they were essentially the same and didn’t have any different results so she didn’t really need to do a formal choice of law analysis, but if she did that would be in New York. So she looks at both. And under Italian law, because the allegations were that the sale was based on sort of a generally dangerous and threatening environment because of fascist Italy in the late 30s, not because the actual transaction was made under duress, that somehow this art dealer in Paris was pressuring the Leffmanns, or you know there is nothing related to this piece of art in particular or that transaction in particular that anyone could allege was based on duress. And I should note that this whole, this posture in the district court and then later in the Second Circuit is at a motion to dismiss stage, which means that it’s only looking at the allegations made by Zuckerman in the complaint. So it’s what she said happened. And the court says, you know, Italy does not permit duress to be found in situations like that, where it’s just a generally dangerous or threatening environment. There has to be something about the actual transaction at issue that indicates duress under those particular circumstances for that particular transaction. So the allegations weren’t specific enough and the allegations revolved around the environment in Italy in the late 30s.

Steve Schindler: So this was not like the cases that we see sometimes where you have individuals who are in Nazi Germany who are essentially forced to sell their works unwillingly to Aryan owners…

Katie Wilson-Milne: Yeah. So we should talk — once I finish describing this case, we should talk about the spectrum on which these cases lie because that’s really different, a very different circumstance.

Steve Schindler: Okay.

Katie Wilson-Milne: So under New York law the court found that because the purported cause of the duress was neither the Metropolitan Museum of Art or Chrysler Foy, who was the buyer from the Knoedler gallery, or the buyers in 1938, which were well known art dealers in Paris, but the third party Nazis and the Italian government, who weren’t even party to this transaction—that was not specific enough under New York law, which requires the duress to be caused by, somehow, the parties to the transaction, not some third unrelated party.

Interestingly, the district court chose to decide this motion to dismiss on the merits but the Met had many non meritorious defenses as well, including based on the statute of limitations and the equitable doctrine of laches. So they had made those claims, which honestly would have been much easier for the court to decide on a motion to dismiss than going into the merits of duress and what really happened in 1938. But we find out in reading the Second Circuit papers that one of the things that happened, at least, was that the Met, the defendant in this case, actually asked Judge Preska not to decide the motion to dismiss on those procedural grounds but to look at the merits, which is a—you know think what you want about the outcome of this case. In the end, that’s a pretty amazing request for the Met to make, because they’re taking a risk that the outcome on the merits will be different than the outcome on the statute of limitations or laches defense and asking the court to decide it on the merits, which might not benefit them, but they think is the right thing to do.

So Zuckerman doesn’t like this result, obviously, and she appeals the dismissal of her complaint to the Second Circuit. And the Second Circuit takes a totally different approach to this case, which is much less satisfying, you know, in some ways than how the district court went about it. So the Met argued before the Second Circuit, among other things, that the complaint could be barred on the doctrine of laches based on the substantial time lapse between the end of World War II, when the Leffmanns get back to Europe and start figuring out where all their assets went, and 2010 when this remote heir first makes this demand.

Now laches, as Steve explained earlier, is an equitable defense where the defendant, here the Met Museum, shows that the plaintiff has inexcusabley slept on her rights so as to make a decree against that defendant unfair, and that the defendant has been prejudiced in some way from that unreasonable delay. So it’s not enough that the plaintiff waited too long with no good reason, there also has to be a prejudice to the defendant from that delay. That’s important in what the Second Circuit ultimately finds here. So the Second Circuit agrees with the Met on that basis and ruled not on the merits—they didn’t address duress at all or what happened in the 1930s other than in their factual summary, but only that the delay in waiting until 2010 by Zuckerman to raise a claim to the Picasso was unreasonable and that it did prejudice the Met who had had it since 1952.

And that holding was based on the fact that the Leffmanns and then their heirs could not plausibly have been prevented from making any claims until 2010. There was no reason that was presented to the court for waiting that long, especially when, you know, the painting was sold to a well known French art dealer that the Leffmanns had sold it to directly so they knew where the painting went. It wasn’t a mystery. And then it had been on a public display first at MoMA, then at the Met. And the Leffmanns did not at any time reach out to the dealer in Paris who sold it or to anyone else to enquire about the painting, even though they had that information about who they had sold it to.

Steve Schindler: And what was the prejudice to the Met in this case?

Katie Wilson-Milne: So the second element of finding laches by the Second Circuit was not just that the delay had been unreasonable but that the Met had actually suffered from that delay in being able to litigate this claim. And that is where this opinion is a bit empty. I mean there is no factual development because this was a motion to dismiss, so there was no discovery on prejudice. But the court makes what is a very typical argument about statutes and limitations in the passage of time, which is that since 1952, when Met first got this as a good faith donnee, witnesses have died, memories have faded. It becomes increasingly difficult for the Met to defend themselves in an action like this regarding the circumstances of something that happened in 1938 in 2016 when this claim was brought. And that hat passage of time both being unreasonable on the part of the claimants and having some detriment to the Met’s ability to defend itself in this circumstance made the laches defense appropriate. And the court said alright, that’s it. We’re just deciding this on laches. We are not going to reach any of the many other issues that the parties briefed in voluminous appellate briefs.

The one other issue that they had to reach was a disagreement among the parties about the impact of the HEAR Act, which we explained briefly at the beginning of the podcast. So that act was passed by Congress in 2016. As we said, it put in place a uniform federal statute of limitations that preempted state’s statutes of limitations. But it wasn’t just that it had a lot of language about recognizing that procedural legal defenses, such as statutes of limitations, may not be appropriate and are not actually appropriate in the context of the holocaust where the passage of time between horrific acts and someone being able to bring them to court is not really the basis on which we should decide these claims. It should be on the merits. And so that set a general federal policy about how these claims should be treated, which is that they should be treated on the merits not on technicalities, that you waited 2 years too long or 5 years too long or 10 years too long.

And there are other principles like that like the Washington Principles, which we have talked about before on this podcast, that make clear that the general consensus in certain communities including the policies of the United States government is that you should not take an overly formalistic approach to these claims. So Zuckerman had argued through her lawyers that these policies and the HEAR Act made clear that the laches defense is not appropriate in cases like this. And that was undecided. That was an issue that was debated before this case. And the Second Circuit says no, while the HEAR Act preempt states statutes limitations, it explicitly does not preempt equitable defenses like laches. And in fact, in a prior draft it did and then that was taken out, and it can’t be that the HEAR Act doesn’t contemplate any equitable defenses no matter what the circumstance is.

And so now in the Second Circuit you can still bring a defense for laches, even though the HEAR Act is in place, meaning that there is always going to be an argument about the time lapse between either discovery of a work and when you bring the claim. So that is interesting and it’s not necessarily an incorrect result. The courts can consider what would be unfair if plaintiffs wait, you know, indefinitely to bring claims no matter what the prejudice. But it is still focusing courts on a more procedural aspect.

Steve Schindler: Right. Then if you compare the two cases you see that both of course involve works that were implicated and were owned by victims of the holocaust and persecution of Jews. And the state court action didn’t have any trouble considering all of the merits of the claims including the defense of laches. So it does seem a little unsatisfying to say the least that the federal claim and Second Circuit went off and decided the case on a laches defense without the benefit even of any factual discovery, because we know that laches is a very fact specific defense. What the court in the Second Circuit seemed to do was to make some findings of fact just based upon other cases and things that were not, you know, properly put in the record and to me that just seemed a little bit of a shortcut of a decision and as I said a little bit unsatisfactory.

Katie Wilson-Milne: Yeah. I mean I read the Second Circuit decision in the Zuckerman case as them really not wanting to get into the merits. Now, they absolutely could have. If you look at the appellate briefs, they are all about the merits and they are all based on — the complaint is very detailed. There is plenty of facts. All those can come in and be considered and that’s, you know, really what this is based on. And the briefs are all about the historical and contextual facts in 1938 arguing that you know they need more discovery to show that it wasn’t just that the Leffmanns wanted to leave Italy or that it was inconvenient. It was that they were fearful for their lives when they were leaving. That there were all these other things that needed to come out to be able to prove duress that they wanted time to develop on the record. And so it’s a little—it is interesting that they weren’t allowed to do that at the district court level too, that it was dismissed at a motion to dismiss. But even if we accept that that was appropriate and as a legal matter there was no duress on the face of the complaint, the Second Circuit could have still dealt with those substantive issues. And it just didn’t want to.

Steve Schindler: Right. It could have decided the duress issue at least in the same way that the district court did on the facts of the complaint. I would point out that both cases had excellent lawyering. You know, very experienced lawyers on both sides. The state court case had Ray Dowd, who has bought a lot these restitution cases for the plaintiff and Thad Stauber representing the defendants, both very experienced lawyers and law firms that did really an excellent job. And similarly in the federal case Herrick Feinstein representing the plaintiff who is, you know, one of the leading firms in that space…

Katie Wilson-Milne: Bringing these kind of restitution claims. And WilmerHale representing the Met, and they have always done an amazing job. I think what’s interesting is you look at least in the Second Circuit briefing, you know, you see this different approach that Herrick and Wilmer take in the briefing. So the Zuckerman briefs, which, you know, Herrick wrote were all about, “what is the right policy here?” And I didn’t read Zuckerman’s arguments as being, “this is the technical law. You must follow this. I think it was much more, “here is the circumstance of what happened. Here is what the current policy is. This is the right thing to do.” And in fact they end their reply brief by telling the Second Circuit this is just the right thing to do.

Steve Schindler: Yeah.

Katie Wilson-Milne: That’s an interesting approach. I mean, in a way it’s compelling, but as a lawyer it’s unusual. The courts are not places where we tell judges to just do the right thing. We tell them to follow the law and be careful and fair about it.

Steve Schindler: Right. But on the other hand, when the other side is invoking a laches defense, to some extent you are asking the court to do the right thing. The court has a lot of discretion in applying that defense and it’s—I remember, you know, cases that I’ve worked on as a young lawyer where the laches defense was the Hail Mary pass. I mean, no one really seriously considered it in most cases. Now in these Nazi type cases where so many years have passed, it has become a defense of choice but it’s not something that is sort of lightly—

Katie Wilson-Milne: Well to be fair, I mean, the Met took a much more legal approach than Zuckerman did in their briefing, but it did focus on the merits. I mean unlike the Second Circuit the Met’s briefing looked at the Leffmanns circumstances as a very wealthy family that clearly continued to have money through all the years they lived in Brazil. And so that they were focused on the circumstances around duress and you know the freedom of the sale, that it was to someone who was a neutral reputable Paris art dealer, that it was for a large sum of money. You know, that the Nazis never touched this piece. It never went through government hands or government pressure.

Steve Schindler: And that made it different than the state court case.

Katie Wilson-Milne: Exactly. So the Met did brief those meritorious issues, not just laches. And I don’t read their papers as even focusing that much on laches because I think they assumed the court would focus on what the district court focused on and that was incorrect. So I think when Zuckerman’s brief said you know do the right thing or this is the consensus or the policy, even if it’s not technically the law, they weren’t just speaking to laches. They were speaking to the entire circumstances and all the claims. The Second Circuit obviously didn’t respond to that.

Steve Schindler: Did it make a difference do you think that the defendant in the Zuckerman case was a public museum? Does that factor into it?

Katie Wilson-Milne: I mean I think for me it factors into it or I would be lying if that wasn’t something in my head when I am weighing the fairness of all these things. The court of course does not address that. But I think lurking behind this are a few key differences between these cases which are outcome determinative. And one of them is that in 1952 this work of art went to a public institution where scholars from all over the world can study it, people from all over the world used to be able to go and see it for free but now New Yorkers can see it for free. And, you know, people from the rest of the world can pay $20, and that maybe feels like where this painting should be, right, as a significant work of art in the canon. And the alternative was that Zuckerman, you know a very remote relative who was not actually a legal heir of the Leffmanns until she went to the Surrogate’s Court in New York to petition to be a legal heir in New York for the purposes of this lawsuit. You know, tt would go into her private hands and perhaps she would sell it, you know, at Sotheby’s or Christie’s and it would be gone from public view. And so it feels like so much time has passed. Do we want this painting to remain in the public eye, or do we want it to go behind closed doors? So that’s—I think that is an interesting difference. And obviously in the Grünbaum case that decision didn’t have to be made. That wasn’t lurking behind anything.

Steve Schindler: No I mean and in fact the facts were very different on the defendant side in that case, because Nagy was keenly aware and he wasn’t prejudiced at all by the passage of time, which was really just a few years since he acquired it. And really in contrast to The Actor, which was very well known work by Picasso that was on public display, the Schiele works had more or less disappeared from the market for many, many years and so there was no…

Katie Wilson-Milne: Loss really.

Steve Schindler: Right. And also from the heirs’ point of view it wasn’t until the works surfaced at a booth at the Armory and were being offered for sale that they knew where they were. And so they immediately made a demand. And so the equities of both the undue delay with respect to bringing the claim and also the prejudice to the defendant were very, very different in the two cases and not surprisingly the laches defense was not accepted in the state court case. And in the Grünbaum case, the efforts of the defense council was to try to throw doubt on whether or not the works were actually owned by Grünbaum at the time of his death or whether or not somehow through his wife and sister-in-law they managed to get these works out of Germany and eventually sell them to the Kornfield Gallery. But the court kind of reacted to these arguments as being entirely speculative and essentially just trying to sow doubt on the central proposition that the works were confiscated by the Nazis before Grünbaum died. They were still confiscated by the Nazis at the time he died and therefore they were just stolen works of art. And however they may they went back into the stream of commerce—

Katie Wilson-Milne: Doesn’t matter.

Steve Schindler: It didn’t matter. They were still stolen works of art and a thief can never convey good title and that’s the bottom line.

Katie Wilson-Milne: Yeah. I also thought it was interesting that in the state court, they were willing to look at this case from scratch. They were aware of prior precedent, including about Grünbaum’s own art, but they did not feel compelled to decide this case in the same way based on laches or you know based on whether this sister that you mentioned of Grünbaum’s wife had actually somehow come into legal possession and sold this work herself. It just—it was not going to look at that past precedent as important, and it didn’t need to because it was factual.

Steve Schindler: It’s a very well written decision, and since it was unanimous I am not aware that there is any ability to appeal it to the court of appeals, but it may very well be the end for that case.

Katie Wilson-Milne: Yeah. And of course I guess there is a possibility that in the Zuckerman case in the Second Circuit that she could appeal to the Supreme Court, but we know that the Supreme Court takes almost no cases and has already declined to take cases like this recently.

Steve Schindler: Yeah it seems highly unlikely.

Katie Wilson-Milne: So I think that’s it for them.

Steve Schindler: Alright. And that’s it for today’s podcast. Please subscribe to us wherever you get your podcasts and send us feedback at podcast@schlaw.com and if you like what you hear give us a five-star rating. We are also featuring the original music of Chris Thompson. And finally, we want to thank our fabulous producer Jackie Santos for making us sound so good.

Katie Wilson-Milne: Until next time, I’m Katie Wilson-Milne.

Steve Schindler: And I’m Steve Schindler bringing you the Art Law Podcast, a podcast exploring the places where art intersects with and interferes with the law.

Katie Wilson-Milne: The information provided in this podcast is not intended to be a source of legal advice. You should not consider the information provided to be an invitation for an attorney-client relationship, should not rely on the information as legal advice for any purpose, and should always seek the legal advice of competent counsel in the relevant jurisdiction.


Music by Chris Thompson.  Produced by Jackie Santos.