Order of Business At Auction, Red Flag or Paddle?

December 5, 2019

Steven Brooks, a collector of Old Masters, says that a painting he bought from Sotheby’s for £57,600 in 2004 (about $90,000 today) is worthless because it was once owned by the war criminal Hermann Goering, and might have been looted by the Nazis. The painting, Allegorical Portrait of a Lady as Diana Wounded by Cupid, is by the 18th-century French artist, Louis-Michel van Loo. The Goering connection came to light in 2010, when Brooks sought to sell the painting at Christie’s. When Christie’s specialists discovered that Goering had bought the work in 1939, Christie’s refused to accept it for auction, citing concerns about being able to convey good title.

In a complaint filed against Sotheby’s in California on March 21, Brooks alleges that Sotheby’s should have researched the provenance and informed potential buyers that the work had been owned by Goering; that the Goering connection creates “a cloud on title” that renders the painting unsalable and without value; and that Sotheby’s refuses either to put it up for auction or refund his money.

The case is unusual in many respects. First, it is standard practice for auction catalogues to contain Conditions of Sale, Terms of Guarantee, and Glossaries of Terms. A typical* Sotheby’s catalogue from 2001 states, under Conditions of Sale:

The following Conditions of Sale and Terms of Guarantee are Sotheby’s, Inc. and the Consignor’s entire agreement with the purchaser relative to the property listed in this catalogue…

By participating in any sale, you acknowledge that you are bound by these terms and conditions.

1. [A]ll property is sold “AS IS” without any representations or warranties by us or the Consignor as to merchantability, fitness for a particular purpose, the correctness of the catalogue or other description of the…provenance…of any property…and no statement anywhere, whether oral or written,…shall be deemed such a warranty, representation or assumption of liability.

In addition to the contractual issues, there are questions about the alleged cloud on title. Indeed, there is no indication that the painting was looted, only that a Nazi bought it. According to Laura Gilbert, reporter with The Art Newspaper writing about this dispute, the lot description for the work in the 2004 Sotheby’s catalogue contains no provenance information for the years between 1906 and 1987. In a separate inquiry, Christie’s was unable to determine the whereabouts of the painting between 1906 and 1939, prior to Goering’s acquisition. No one with a Holocaust era claim of ownership has stepped forward or been identified. Steven Thomas, an art law expert at Irell & Manella (not involved in the case), stated that it’s almost unheard of in Holocaust-related litigation to say that there’s a cloud on title when there’s no claimant. “That the painting was owned by Goering doesn’t mean it was looted.” In all fairness, the fact that it was owned by Goering and the timing of his purchase does raise some red flags.

While the Christie’s position on the 2013 consignment is understandable the allegations against Sotheby’s may be too weak to help Mr. Brooks. The case could clarify “the responsibility of a major auction house with respect to knowing what it sells before it sells” and if “collectors can have an expectation of minimal due diligence prior to [such auction houses] putting a work on the market,” says Brooks’s lawyer, Thomas LoSavio of Low Ball & Lynch. Or perhaps buyers should do their own due diligence and pay more attention to auction terms and conditions before lifting a paddle. Private dealers say they will not touch a work if its ownership cannot be traced between 1933, when the Nazis came to power, and 1945. “A gap in dates is a red flag,” says David Tunick.

Art law experts expect Sotheby’s to fight the case, rather than settle, in order to establish a precedent in this new area.

Sources: The Art Newspaper, May 2, 2013; Sotheby’s Catalogue: The Robert E. Crawford Collection, October 13, 2001
*This author has not had the opportunity to examine the 2004 Sotheby’s catalogue.