Case Review: Reif, et al. v. The Art Institute of Chicago (2023)

February 13, 2024

Fragment. Egon Schiele, "Russian War Prisoner"(1916)

By Amanda Buonaiuto

Introduction

The legal case Reif, et al v. The Art Institute of Chicago,^[1] brought by the heirs of Fritz Grünbaum, a prominent Jewish cabaret performer and art collector. Grünbaum’s heirs sought declaratory judgment, conversion, and replevin in connection with the alleged theft of Egon Schiele’s masterpiece, Russian Prisoner of War (1916).

The plaintiffs claimed that the artwork was unlawfully seized by the Nazi regime during Grünbaum’s imprisonment in the Dachau Concentration Camp. While he was held in captivity, he was coerced into signing a power of attorney, granting his wife, Elisabeth Herzl, the authority to complete Jewish Property Declarations under duress. This manipulation led to the outright confiscation and sale of Grünbaum’s entire art collection, with the proceeds benefiting the Nazi Party.

A significant development occurred on November 24, 2023, when the Southern District of New York granted The Art Institute of Chicago’s motion to dismiss. The court’s decision raises complex legal questions surrounding the restitution of stolen art, historical injustices, and the responsibility of cultural institutions in preserving the legacy of victims of Nazi persecution.

Procedural History

The legal saga of Reif v. The Art Institute of Chicago traces its origins to 1999, when Leon Fischer and Milos Vavra, Grünbaum’s heirs, discovered that Grünbaum’s art collection had survived World War II. This occurred when the District Attorney Robert Morgenthau seized Schiele’s Dead City III (1911), a work in Grünbaum’s collection, from the Museum of Modern Art (MoMA). The painting was on loan from the Leopold Museum Private Foundation. However, MoMA contested the seizure, invoking New York’s Arts and Cultural Affairs Law, which exempts works of fine art from seizure while on display in a museum. The court accepted this argument, resulting in an unsuccessful attempt by Grünbaum’s heirs to reclaim the painting.

Another legal dispute faced by Grünbaum’s heirs involves the drawing Seated Woman with Bent Left Leg (Torso) (1917). In the 1960s, David Bakalar, a North American sculptor acquired this art piece for his private art collection, and in 2004, he consigned it to Sotheby’s for sale. The artwork was later auctioned. However, the purchase was halted after the heirs contested the title of the drawing. In 2006, the possessor of the artwork filed a lawsuit to clarify the title in the Federal Court in New York.^[2] The District Court maintained the title and ownership in the possessor’s favor, resulting in no restitution for the Grünbaum’s heirs.

On January 24, 2006, as part of the Bakalar litigation, the Grünbaum’s heirs made a demand to the Art Institute of Chicago, requesting the return of the painting Russian Prisoner of War‘. This was because the artwork in Reif v. The Art Institute of Chicago and the piece in Bakalar v. Vavra were both part of a common collection before they were eventually sold to Bakalar (Grünbaum’s Schieles sold by Mathilde Lukacs to Gallery Gutekunst & Klipstein in 1956)^[3]. The defendant declined to return the artwork.

In 2012, Fischer appointed Reif and Fraenkel as executors of his estate in a last will and testament. Three years later, Reif, Fraenkel, and Vavra filed an action against the art dealer Richard Nagy.^[4] A verdict was reached to return two works of art painted by Schiele, Woman in a Black Pinafore (1911) and Woman Hiding Her Face (1912) to the Grünbaum heirs.

The legal disputes involving Grünbaum’s heirs continued in 2022, with evidence suggesting that seven Schiele art pieces belonging to Fritz Grünbaum had been trafficked through New York. Legal civil suits were initiated in the New York Supreme Court. In an innovative approach, almost all of these prosecuted institutions,^[5] except for The Art Institute of Chicago, acknowledged that the art pieces were, indeed, looted and opted to voluntarily return them. This scenario led to the dismissal of the legal claims, with the exception of the Reif v. The Art Institute of Chicago case. 

Legal Issues

A fundamental question that arose in the Reif v. The Art Institute of Chicago proceedings revolved around the applicable statute of limitations. Despite arguments invoking both New York and Illinois laws, the court, operating under diversity jurisdiction, adhered to New York’s statute of limitations.

Applying New York’s statute of limitations, the plaintiffs’ claims against the defendant are time-barred. As the plaintiffs in the case seek the return of the artwork, rather than damages, the shorter statute of limitations of three years applies. The clock begins to run after the plaintiffs have demanded return of the chattel and such demand has been refused. In this case, it began on February 3, 2006, when the defendant refused by email to return the artwork during the Bakalar litigation. Therefore, it expired on February 3, 2009, long before the plaintiffs brought the action in New York state court in December 2022.

Additionally, it can be asserted that the Holocaust Expropriated Art Recovery Act (HEAR Act) does not save the plaintiffs’ time-barred claims.^[6] Typically, the HEAR Act reinstates causes of action that might otherwise have faced time limitations, allowing for a six-year revival period after the Holocaust victim or heir initially becomes aware of the identity and location of a Nazi-stolen artwork. Nevertheless, the HEAR Act does not revive causes of action in instances where the prospective claimant or a predecessor-in-interest was aware of a potential claim after 1999, had the opportunity to file a timely claim, but opted to defer bringing the claim for more than six years. Here, in the Reif v. The Art Institute of Chicago case, Grünbaum’s heirs were aware of the whereabouts of the artwork, yet did not initiate a suit in time to reclaim the painting Russian Prisoner of War.

In summary, the claims arose after 1999 (on February 3, 2006); the applicable limitations period was three years and elapsed on February 3, 2009, before the HEAR Act was enacted on December 16, 2016.

Not only are the plaintiffs’ claims time-barred, but they are also impeded by the doctrines of laches and collateral estoppel. Consequently, the plaintiffs are prevented from relitigating certain issues already addressed in the Bakalar v. Vavra case. Despite the party’s arguments about differences between the cases and the artworks involved, as well as differences in the collectors, the court underscored the parallels in the issues at hand.

Highlighting the similarities, the court pointed out that the Grünbaum heirs were already cognizant of their claim, akin to the circumstances in Bakalar v. Vavra, where David Bakalar, the plaintiff, sued Milos Vavra and Leon Fischer, the Grünbaum heirs who now serve as the plaintiffs in the current case against the Art Institute of Chicago. The court noted that in both instances, there was an inexcusable delay in taking action and Bakalar suffered prejudice as a result of this delay. Therefore, the application of collateral estoppel and laches stands firm, further complicating the pursuit of the plaintiffs’ claims.

Court’s Decision 2023 and the 2024 Developments

Based on the legal arguments presented, on November 24, 2023, Judge John G. Koeltl of the Southern District of New York ruled in favor of the defendant and granted the Art Institute of Chicago’s motion to dismiss. On December 15, 2023, the plaintiffs, represented by Dunnington Bartholow & Miller LLP, submitted motions before the presiding Judge, John G. Koeltl, seeking either a motion to reconsideration or a motion for leave to amend.

“Because leave to amend is governed by a more liberal standard than reconsideration, the Grünbaum Heirs hope to persuade the Court that even if reconsideration is not warranted, leave to amend would serve justice.”Ft7 ^[7] 

The decision to pursue the reversal emanated from three arguments. Firstly, it aimed to particularize allegations suggesting that the Art Institute of Chicago had received “red flag” warnings in 1966 upon acquiring the artwork in question, thereby reviving the Grünbaum Heirs’ time-barred claims through the HEAR Act. Secondly, it sought to include a claim for a constructive trust based on the defendant’s subsequent loss of possession of the painting to the Manhattan District Attorney after the filing. Lastly, it aimed to introduce allegations asserting that the Art Institute of Chicago had waived its statute of limitations defenses under the New York Civil Practice Law and Rules (CPLR) by pursuing a counterclaim against the Grünbaum Heirs for attorney’s fees, a counterclaim for a declaratory judgment motion, and securing a gag order preventing cooperation with law enforcement. Dowd affirmed that those allegations should be properly weighed and considered, in order for the dismissal decision to be altered.

On January 5, 2024 the defendant filed a memorandum in opposition to the motions. The Art Institute of Chicago, represented by Wilson Sonsini Goodrich & Rosati contests the plaintiff’s arguments, alleging that the motion to reconsideration was untimely or a rehash of lost arguments and therefore should be considered as incorrect. In response to the motion for leave to amend, the defendant raised four main arguments: 

“(…) (1) the Grünbaum Heirs forfeited claims by failing to articulate theories of accrual of statutes of limitations earlier; (2) leave to amend would be futile; (3) AIC’s counterclaims did not waive its statute of limitations defenses; and (4) the PSAC fails to plead a viable claim for a constructive trust.”

On 16 January 2024, the Grünbaum heirs submitted a reply memorandum of law in further support of motion for reconsideration, the defendant arguments should be rejected considering the subsequent reasons.   

1. The first motive is that in the dismissal decision of the Reif, et al v. The Art Institute of Chicago case, the Judge failed to recognize that New York mandates a higher level of diligence for museums and art dealers to achieve good faith status under the Uniform Commercial Code. In other words, the Court overlooked the defendant’s bad faith in 1966 when it acquired the Russian War Prisoner given that the U.S. government issued warnings to it against purchasing, without checking provenance, potentially-stolen artworks created prior to 1946 that were in Europe after 1932. It can be also stated that neglecting the defendant’s awareness of the “red flag” information also resulted in the mistaken belief that the Grünbaum Heirs’ claims were timely in Illinois in 2006, an erroneous conclusion as New York’s “demand and refusal” accrual rule applies to good faith purchasers without notice of theft, a status which the Art Institute of Chicago did not hold under New York substantive law. Applying the correct rule (New York’s substantive “bad faith” accrual rule), the Grünbaum heirs’ claims were time-barred in 1969, however the HEAR Act is able to resuscitate them.
2. According to the Grünbaum’s heirs the decisions acquired in the Reif v. Nagy’s case should have been followed in the Reif, et al v. The Art Institute of Chicago case, unless there was “persuasive evidence” indicating that the New York Court of Appeals would have ruled differently. However, this scenario did not unfold, thus the second argument is that the Court overlooked multiple times the plaintiff’s invocation of the Erie Doctrine. Specifically, in Nagy the New York substantive law was applied to determine that the Nazis had unlawfully taken Fritz Grünbaum’s art collection while he was held in the Dachau Concentration Camp. As seen before, in the present case, the defendant was not considered a bad faith purchase, contradicting Nagy. Additionally, Nagy determined that Bakalar did not carry collateral estoppel implications for the Grünbaum heirs’ claims to artworks listed in the 1956 Gutekunst & Klipstein catalog. The ruling in AIC failed to recognize Nagy‘s imposition of limits on Bakalar‘s collateral estoppel effect and its allowance for the Grünbaum heirs’ claims to advance. Lastly, Nagy determined that Mathilde Lukacs’ missing testimony could not have been probative as a matter of law. Under the Erie doctrine, this legal conclusion is binding upon the present Court.
3. The third reason why the defendants’ argument should be dismissed is that the Court overlooked its obligation, under substantive New York law to consider, in evaluating a laches defense, whether the Art Institute of Chicago suffered any prejudice from the purported inaction of the Grünbaum heirs at the time of the Russian War Prisoner acquisition. By neglecting to consider specific circumstances, the Court failed to address that the defendant couldn’t demonstrate in 1966 a prejudice caused by the inaction of the Grünbaum heirs. Therefore, laches defense isn’t applicable to AIC under New York law because the defendant’s lack of awareness was solely due to their failure to exercise required diligence, not due to any action or inaction of the Grünbaum heirs.

The plaintiffs alleged that if the previous motives are not accepted as a reply to the “Omnibus motion Opposition” of the defendants and reverse the dismissal decision in ACI, the reasons placed in the reply memorandum of Law in further support of motion for leave to amend should be considered because of the following technical arguments. 

First Motion Imposing the harsh penalty of forfeiture of valid and timely claims for failing to guess at the defendant’s unarticulated statute of limitations defense would be manifestly unjust. This injustice occurs because the Grünbaum heirs have consistently argued that the HEAR Act preempted New York’s statute of limitations and that the Illinois statute of limitations expired prior to 1999. 

Second Motion According to the Grünbaum heirs, the motion for leave to amend would be not futile since it would prove a point that the dismissal decision did not adjudicate and that would defeat the defendants’ statute of limitations, collateral estoppel and laches defenses. The plaintiffs seek to establish that the purchase of the Art Institute of Chicago was done with bad faith. This scenario leads to the conclusion that the Grünbaum heirs’ amended complaint is timely as explained in the Motion to Reconsideration.

Third Motion The Art Institute of Chicago argues that it did not waive its statute of limitations defenses for a declaration of legal title to the painting in question. However, this argument should be dismissed since the defendant did waive statute of limitations defenses by seeking attorney’s fees, asserting counterclaims against the Grünbaum heirs for declaratory judgment and  also an injunction against cooperating with law enforcement authorities. 

Fourth Motion The Proposed Second Amended Complaint (PSAC) should be granted because the defendant seeks to impede the plaintiffs from recovering the stolen painting, which they have legal title, that is currently in the Manhattan District Attorney’s possession. Thus the remedy of a constructive trust is available timely and warranted under New York law for the Grünbaum heir’s. 

January 17, 2024, the plaintiffs filed a letter of motion seeking oral argument. Later, in February 22, 2024, the New York Assistant District Attorney Matthew Bogdanos, submitted a 160 pages application as proof of Fritz Grunbaum’s heirs’ ownership of Russian War Prisoner. In this document, it was also requested the restitution of the painting to the plaintiffs. 

The most recent development in the case dates back to February 28, 2024, when in the latest Memorandum Opinion and Order, the Court affirmed that all the arguments raised by the parties were considered and due to the mentioned reasons, the plaintiffs’ arguments were either moot or without merit. Therefore, the Grünbaum’s heirs motion for reconsideration and motion for leave to file a second amended complaint were denied.

Conclusion

The procedural history of the Reif v. The Art Institute of Chicago case reveals a complex web of legal disputes dating back to 1999, with various attempts by Grünbaum’s heirs to reclaim stolen artworks. This legal saga exposes the challenges inherent in seeking restitution for art stolen during periods of historical atrocities.

While the court’s decision to dismiss the case aligns with legal technicalities, it fails to address the broader moral imperative of rectifying historical injustices.The court’s decision to dismiss the case on the basis of time-barred claims and laches is contentious. The application of laches and collateral estoppel, based on similarities with the Bakalar v. Vavra case, may be seen as overly rigid, potentially limiting the pursuit of justice in unique circumstances.

Therefore, the need for a more nuanced and comprehensive legal framework that considers the exceptional circumstances surrounding Holocaust-related art restitution is notable. Reevaluating the legal issues presented in such cases and ensuring they do not unduly restrict the pursuit of justice would be essential steps toward a more just and fair solution: embracing the examples set by the other museums and institutions that have undertaken voluntary artwork restitutions.

Additional Readings

Amanda Buonaiuto, US Museums Return Nazi-Looted Schiele Artworks to the Heirs of Fritz Grünbaum, Cᴇɴᴛᴇʀ ғᴏʀ Aʀᴛ Lᴀᴡ (2023), https://itsartlaw.org/2024/01/31/us-museums-return-schiele-artworks-to-the-heirs-of-fritz-grunbaum/.

The Lost Collection of Fritz Grünbaum, Gʀᴜ̈ɴʙᴀᴜᴍ Cᴏʟʟᴇᴄᴛɪᴏɴ (2023), https://www.collectiongruenbaum.com/wp-content/uploads/2016/10/JK-1839.pdf.

Raymond J. Dowd, Nazi Looted Art and Cocaine: When Museum Directors Take it, Call the Cops, Rutgers Journal of Law and Religion (2013), http://lawandreligion.com/volume-14.

Raymond J. Dowd, Buyer Beware and Trusts Ex Maleficio:  Traditional Common Law Protections For Owners of Stolen or Lost World-War II Era Artworks Should Be The International Norm, Not Letting Thieves and Accomplices Keep The Loot, Ius Commune Conference Maastricht (26 November 2021), https://lootedart.com/web_images/pdf2021/workshop_14_Dowd.pdf.

About the author

Amanda Buonaiuto (Center for Art Law Legal Fellow Spring 2024) is a Brazilian lawyer who specialized in the restitution of Nazi-looted art during her L.L.M at the University of Bonn. Amanda’s academic journey together with a global perspective shaped by her international background provides her with a significant understanding of the legal complexities within the Art Law field.

Sources:

1. Reif v. The Art Institute of Chicago, No. 1:23-cv-02443-JGK, (S.D.N.Y., Nov. 24, 2023). ↑
2. Bakalar v. Vavra, 237 F.R.D. 59 (S.D.N.Y. 2006). ↑
3. Mathilde Lukacs, Lexikon der Österreichischen Provenienz Forschung, https://www.lexikon-provenienzforschung.org/en/lukacs-mathilde (last accessed Jan. 25, 2024). ↑
4. Reif v. Nagy, 106 N.Y.S.3d 5 (N.Y. App. Div. 2019). ↑
5. The prosecuted institutions include the Morgan Library & Museum, Ronald Lauder private collection, Sabarsky Trust, Santa Barbara Museum, and MoMA. ↑
6. Holocaust Expropriated Art Recovery Act, Pub. L. No. 114-308, 130 Stat. 1524 (codified at 22 U.S.C. § 1621), https://www.congress.gov/114/plaws/publ308/PLAW-114publ308.pdf. ↑
7. Reif, et al. v. The Art Institute of Chicago, No. 1:23-cv-02443-JGK, (S.D.N.Y., Nov. 24, 2023).
8. The presence of the painting Russian War Prisoner in the 1925 Würthle Gallery catalog indicated that the Art Institute of Chicago would have been aware of its origins if they had conducted thorough provenance research in 1966.