Lessons on Auction Houses from Sotheby’s and the Case of the Stolen Renoir

October 29, 2013

By Hanoch Sheps, J.D.*

Though not all art-related thefts involve multimillion dollar artworks – as portrayed in The Thomas Crown Affair remake – the theft and subsequent recent auction of a painting by French impressionist Pierre-Auguste Renoir raises a question of liability for auction houses that unwittingly offer stolen works of all kinds of media and value.

The controversy surrounding the recent sale of a stolen Impressionist painting dates back to August 2000, when Renoir’s Madame Valtat (reproduced here), a painting amongst a number of other reputable artworks, was reported as stolen from a Japanese collector. The 1903 painting depicts the wife of French fauvist Louis Valtat and portrays Madame Valtat (born Suzanne Noël) in a guarded pose.

The painting resurfaced when an anonymous consignor offered it in Sotheby’s February 2013 Impressionist and Modern Art Evening Sale in London. The piece realized a £1,049,250 ($1.61 million) hammer price; however, the original owner, is seeking the return of this work.  If the work is returned, what is Sotheby’s potential liability to the buyer?

Under New York law, auction houses may not disclaim warranty of title for the pieces they auction. (See, e.g., 6 RCNY § 2-122). Moreover, both Sotheby’s and Christie’s standard consignment agreements require the consignor to warrant that she is passing clear title, free of any liens or encumbrances. (See Ralph E. Lerner & Judith Bresler, Art Law: The Guide for Collectors, Investors, Dealers, & Artists 4th Edition. New York: Practicing Law Institute, 2012, Appendix 4-4, pg. 403). In their defense, auction houses normally require full indemnity from sellers in the event of a title dispute. Remember, a thief cannot convey good title: “[a] stolen piece of art is always stolen property no matter how much time has passed or how many subsequent ‘owners’ the piece has had.” (Read: Whose Art Is It Anyway, by Herrick, Feinstein LLP’s Mari-Claudia Jiménez). If the work is returned to the original owner, the auction house must refund the value of the piece from the buyer at the time of the return. (See: Bresler, pp. 350-51).[1]

Realizing that the sale of stolen artworks is an unfortunate reality, auction houses, such as Sotheby’s and Christie’s set limits on refunds of sale prices in their sale agreements. Given the costs and publicity associated with such cases, houses do subject consignments to intense scrutiny. Ultimately, cases like the one affecting this Renoir are rare and with sparse legal precedent. Still, any liability incurred by the auction house — if it denies the request to return the piece — remains unclear. It should be noted that at the time that this article was written no claim has been brought against Sotheby’s by the original owner seeking the return of the Renoir, although the parties were negotiating its return.

What best practices do auction houses follow in order to determine rightful ownership? Prior to any sale auction specialists typically perform due diligence by conducting both provenance and title research. Auction houses consult sources like the Art Loss Register, Interpol, Trace and IFAR in their research, but the sheer volume of lots in any one sale makes thorough research of each individual lot difficult. Unfortunately the lack of transparency in art transactions further complicates due diligence efforts, yet the expectation of thoroughness by the prospective buyer remains high. (For example, read Trust, but verify, as they say, about a lack of transparency in the art market.).

Can a prospective buyer reasonably expect that auction houses go above and beyond the industry’s best practices? After all, not only did the consignor of Renoir’s Madame Valtat asserted that the piece was legitimately purchased in 2000 with corresponding documentation, the piece was also conspicuously absent from any stolen art databases. The only certainty is that stolen art continues to seep into auctions with unsuspecting buyers and auction houses left wary, much like Madame Valtat in the contested Renoir’s portrait.