Art Dealer Professionals Beware of Purchasing Stolen Goods

May 26, 2015

By Sekou Campbell, Esq.

Judges in the District Court for the Central District of California, the Ninth Circuit Court of Appeals (twice, here and here) and Justices in the U.S. Supreme Court have heard the story of Norton Simon, a case initiated on May 1, 2007 by a family member of a victim of Nazi art looting. Indeed, legislators have even weighed in on the case by amending California Code of Civil Procedure § 338 (Assembly Bill 2765, introduced on February 25, 2010). The latest Court (from the C.D. Cal.) pronouncement states that, at least when it comes to museums, galleries, auctioneers or dealers, the ancient maxim caveat emptor (buyer beware) strictly applies to bona fide purchasers of stolen artwork. Therefore, art theft victims, or their heirs, like Marei von Saher can bring claims against art dealer professionals like the Norton Simon Museum of Art in Pasadena even after the statute of limitations has run, if the subject artwork was “subsequently purchased” and “actually discovered” within the limitations period.

Facts

Von Saher alleges that she is heir to the diptych entitled “Adam and Eve,” a pair of sixteenth century oil paintings on wood panels by Lucas Cranach taken in a forced sale by the Nazis during World War II. Von Saher’s Dutch father-in-law, Jacques Goudstikker, purchased “Adam and Eve” in 1931. After Nazi invasion of the Netherlands in May 1940, Jacques Goudstikker fled Jewish persecution to South America by ship, but died in an accident en route. He left behind a “Blackbook” containing a log of much of his art collection, which included an entry for “Adam and Eve.” In May 1945, the Allied Forces recovered, among other artwork, the looted “Adam and Eve” and returned it to the Netherlands. There, Dutch restitution law required claimants to return money (from a “forced sale,” a sale of assets far below market value) as a condition for recovery of looted artwork. Therefore, Desi Goudstikker, Jacques’ widow, did not file a restitution claim for “Adam and Eve;” she also explicitly declined to waive any claim to the subject artwork. The Dutch government retained possession of the piece until 1961, when it transferred the work to George Stroganoff-Scherbatoff without notifying the Goudstikker family. Norton Simon then purchased “Adam and Eve” from Stroganoff-Scherbatoff in 1971 and has “possessed” them ever since. Desi Goudstikker died in 1996 leaving Von Saher as the sole Goudstikker heir. “Adam and Eve” went on display for the first time on October 25, 2000 at Norton Simon. Sometime thereafter, Norton Simon and Von Saher entered an agreement to toll the statute of limitations (essentially calling timeout on the statute that limits the time when a party can bring certain claims).

Procedural History

On May 1, 2007 Von Saher filed her initial complaint (began the lawsuit). In 2010, the Ninth Circuit appellate court affirmed a district court decision that California Code of Civil Procedure § 354.3 was “facially unconstitutional” under the foreign affairs doctrine and that Von Saher’s claim was “time-barred” (filed after the statute of limitations, even considering the tolling agreement). However, Von Saher was allowed to and did amend her complaint to “allege the lack of reasonable notice to establish diligence” under California Code of Civil Procedure § 338. That statute was then amended to allow recovery of a work of fine art six years after a plaintiff “actually” rather than “constructively” discovers (meaning when a plaintiff did discover not when she should have discovered) that a “museum, gallery, auctioneer or dealer” improperly owns looted artwork. In 2014, the Ninth Circuit, reversing the Central District of California’s decision, held that such an action did not conflict with express U.S. policy on Nazi-looted art and remanded the case back to the district court to rule on the remaining arguments on Defendants’ Motion to Dismiss. The Court declined to decide on those issues but rather invited Norton Simon to provide any other reason for dismissing the claims. Norton Simon complied and that Motion was briefed throughout March of 2015. On April 2, 2015, the district court denied Norton Simon’s motion and allowed the case to move forward on the grounds discussed below.

Analysis

Under the ancient maxim caveat emptor (buyer beware), the Court held that Norton Simon was exposed to liability for “Adam and Eve” even if Stroganoff-Scherbatoff, the party Norton Simon bought the piece from, was not so exposed. The Court determined that Desi Goudstikker, Von Saher’s predecessor-in-interest, would have been barred from bringing a claim against Stroganoff-Scherbatoff had he retained possession of “Adam and Eve.” “However, it is an open question in California whether a subsequent possessor who acquires stolen property after the statute of limitations has already expired is subject to a renewed limitations period” (Von Saher, at p. 9, citing Soc’y of California Pioneers v. Baker, 43 Cal. App. 4th 774, 783 n.4 (1996) (“we need not decide whether a purchaser who acquired the item after the statute expired would be subject to a renewal of the limitations period.”); also see Naftzger v. American Numismatic Soc’y, 42 Cal. App. 4th 421, 423 (1996) (“[w]e do not decide, for example, if an owner who fails to file a lawsuit under the prior version of section 338, subdivision (c) within three years of discovering the property’s whereabouts will be time barred if the thief or subsequent possessor later moves the stolen property to an unknown location, sells, or continues to withhold the stolen property.”)). Relying on an explanation of caveat emptor from the Oregon Supreme Court in 1888, the Court reasoned that “[e]very person is bound at his peril to ascertain in whom the real title to property is vested, and, however much diligence he may exert to that end, he must abide by the consequences of any mistake.” Velzian v Lewis, 15 Or. 539, 542 (1888). In other words, as between a “sophisticated” art dealer (museum, gallery or auctioneer) and an heir, the art dealer should bear the risk of mistakenly purchasing looted Nazi artwork.

The Court further explained the fairness of its decision by distinguishing between a “remedy,” a court-imposed resolution favoring the plaintiff, and a “cause of action,” a right for a plaintiff to sue in the first instance. A statute of limitations extinguishes a “remedy.” Meaning, for example, if a defendant merely forgets to assert a statute of limitations defense, the Court can provide an award for plaintiff. If the statute of limitations period is tolled by agreement, the Court can provide an award for plaintiff. If a defendant fraudulently hides the wrongdoing during the limitations period, the Court can provide an award for plaintiff. In other words, the passage of time alone does not eliminate the right to sue, it merely may extinguish the right to recover the stolen property. On the other hand, every transfer of stolen property is a new unlawful act, governed by civil tort law. So, according to the Court’s recent decision, when Norton Simon purchased “Adam and Eve,” even if it did not know such a purchase was unlawful, it committed a new tort, and thus was subject to a new statute of limitations period. Therefore, the Court held that Von Saher could proceed on her new “cause of action” against Norton Simon, which accrued on October 25, 2000, and was tolled within the new six-year limitations period under California Code of Civil Procedure § 338.

Implications

Of course, purchasers, particularly art buyers, should be wary when entering transactions. But, this case leaves open what type of investigation suffices. Specifically, the Court briefly addressed whether “adverse possession” could or should apply in this case. “Adverse possession” is a doctrine that states, after certain requirements are met, an unlawful possessor of even stolen property obtains superior title to the relevant property as against the whole world, including the rightful owner. The rationale behind “adverse possession” is to encourage property owners to make productive use of their property and therefore defend against unlawful users or possessors. The existential threat that enabled Nazi looting suggests that, at least, in cases like Norton Simon, a very careful analysis is required before finding that a party could adversely possess Nazi-looted artwork. Therefore, the Court deferred judgment on any claims to title of “Adam and Eve,” through adverse possession or otherwise, by Norton Simon for another episode in this ongoing saga.

*About the Author:

Sekou Campbell is an attorney in private practice in Philadelphia, PA.

Sources:

• Marei von Saher v. Norton Simon Museum of Art at Pasadena, et al., CV 07-2866-JFW (JTLx) (Mar. 22, 2015).
• California Code of Civil Procedure § 338.