Two for the Price of One: Recent US Legal Developments in Nazi-Looted Art
By Timothy Chung.
“Time is lost, which never will renew.”Vergil, The Georgics, Book 3. 
As those who bring claims under the Holocaust Expropriated Art Recovery Act of 2016 (the “HEAR Act”) know, time is making it hard for the heirs of Jewish art collectors to reclaim what was theirs during WWII. Following the Second Circuit’s recent decision in Zuckerman v. The Metropolitan Museum of New York in July 2019, future claimants bringing actions to recover Nazi-looted artworks might do well to bring their actions as soon as possible, lest a laches defense bars their claims despite the six-year statute of limitations set after actual discovery by the HEAR Act. The decision contrasts the determination made in another similar Holocaust-era art case also decided in July 2019, Reif v. Nagy. This article will examine the courts’ rulings regarding the HEAR Act in these two cases and their potential impact on future cases brought through the HEAR Act.
Both the controversies in Reif and in Zuckerman stem from artworks that were allegedly stolen by agents of the Third Reich during the Holocaust, and involved actions for conversion and replevin. To be sure, Nazi-looted art claims are no novelty for the courts in New York, both state and federal. However, novel issues were poised to arise following the passage of the HEAR Act in 2016, a bi-partisan law that set a uniform federal statute of limitations (six years after actual discovery) in order to “ensure that claims to artwork and other property stolen or misappropriated by the Nazis are not unfairly barred by statutes of limitations but are resolved in a just and fair manner.” In effect, the HEAR Act provides an avenue for old Holocaust-era cases to be revived and decided on their merits.
Up until the HEAR Act, most defenses were based on state statutes of limitation and on the equitable doctrine of laches, which “is based on the maxim that ‘equity aids the vigilant and not those who slumber on their rights.’ (Black’s Law Dictionary). The outcome is that a legal right or claim will not be enforced or allowed if a long delay in asserting the right or claim has prejudiced the adverse party.”
In the two recent cases, courts have had to compare the HEAR Act with the doctrine of laches, In Zuckerman, the Second Circuit was faced with the question of whether the HEAR Act should preempt equitable defenses like the doctrine of laches. There, the Second Circuit answered in the negative, contrary to one of the determinations made in Reif, that a laches defense in that case did not bar the claims of the plaintiff.  This contrast comes amidst the similarities in the legal issues raised by the parties in both cases, including the existence of duress (and therefore the inability to pass on good title), and whether the claims were timely brought.
Reif v. Nagy
Fritz Grunbaum (“Fritz”) was a famous Jewish-Viennese cabaret artist and collector who lived in Nazi Germany until the late 1930s. In his time as a collector, Fritz had amassed a collection of 81 pieces by Austrian painter Egon Schiele, including the current works in dispute, “Woman Hiding Her Face (1912)” and “Woman in a Black Pinafore (1911)” (the “Schiele Pieces.”).
Fearing severe anti-Semitic persecution, in 1938 Fritz and his wife Elisabeth “Lilly” (“Lilly”) attempted to flee to Czechoslovakia but were arrested by the Nazis. Thereafter, Fritz was imprisoned in various concentration camps, including Buchenwald and Dachau. Whilst Fritz was imprisoned at Dachau, on July 16, 1938, he was forced to execute power of attorney in favor of Lilly. Lilly was in turn forced to permit a Nazi agent, Franz Kieslinger (“Kieslinger”), to inventory Fritz’s art collection, who then valued the collection at 5,791 Reichsmarks (RM). The art collection was later deposited at a Nazi-controlled shipping company, and presumably illegally exported. On January 31, 1939, attorney Ludwig Rochlitzer (“Rochlitzer”) was appointed as the Aryan Trustee for the Grunbaums’ estate. For his work, Rochlitzer billed Lilly for 6,500 RM, which surpassed the entire value of the collection as valued by Kieslinger. Fritz and Lilly would never be reunited with the Schiele Pieces, nor with each other. In 1941, Fritz was murdered at Dachau, and Elisabeth was murdered at Maly Trostinec a year later after being sent to live in a Jewish ghetto. Fritz was survived only by his sister, Elise Zozuli, whose descendent, Milos Vavra, became a plaintiff in the present action.
In 1956, several of the Schiele pieces owned by Grunbaum ended up at Gutekunst & Klipstein Gallery (“Galerie Kornfeld”) in Switzerland. Viennese art dealer Otto Nirenstein (“Otto Kallir”), a friend of Fritz, purchased the collection from Kornfield a year later. Since then, several Schiele pieces from Fritz’s collection have become objects of legal contention, including “Dead City III” in Matter of Grand Jury Subpoena Duces Tecum Served on Museum of Modern Art, and “Seated Woman With Bent Left Leg (1917)” in the federal case Bakalar v. Vavra. In neither case were any Schiele pieces returned to the Grunbaum heirs. Then on March 18, 2016, the current plaintiffs filed suit against art dealer Richard Nagy, who had fully acquired the Schiele pieces in 2013 after the plaintiffs’ claims in Bakalar were dismissed by the Second Circuit. The New York Supreme Court granted the plaintiff’s motion for summary judgement in 2018, concluding that the Schiele Pieces belonged to Fritz and had been stolen by the Nazis. Nagy appealed the decision on the case arrived at New York’s Appellate Division, First Department.
Among other things, the appellate court affirmed that Fritz owned the Schiele Pieces prior to World War II (that it was highly unlikely someone else had acquired the pieces with good title and legally transferred them), and that Fritz did not voluntarily give up the Schiele Pieces (i.e. that the Nazis had effectively stolen them). The appellate court also held that laches did not bar the plaintiffs’ claims because there was no showing of prejudice, which is demonstrated by showing either injury, a change in position, or some other disadvantage resulting from the plaintiffs’ delay in bringing their claim. On July 9, 2019, the court affirmed the plaintiffs’ motion of summary judgment on claims of conversion and replevin.
Zuckerman v. The Metropolitan Museum of Art
Alice and Paul Leffman (the “Leffmans”) were an affluent Jewish couple living in Germany just prior to World War II. In 1912, had Paul purchased “The Actor” by Pablo Picasso (the “Picasso”), a painting that was exhibited across Germany and featured in various publications for years after.
However, in 1935 the Leffmans were forced to sell their property and businesses to Aryan corporations, and soon thereafter fled to Italy in 1937 fearing for their lives. Just prior to leaving Germany, the Leffmans made arrangements for the Picasso to be sent to Switzerland in the possession of an acquaintance. However, in the face of growing anti-Semitic policies and sentiments in Italy, the Leffmans decided to flee to Switzerland from Italy but needed to raise funds to finance their move.
On April 12, 1938, Paul Leffman contacted C.M. de Hauke, an art dealer that would later be known as one who dealt in Nazi-looted art, in an effort to sell the Picasso. In an attempt to raise as much money as possible, Leffman told de Hauke that he had previously rejected a $12,000 offer from another potential buyer for the Picasso. However, Leffman soon thereafter sold the Picasso to art dealers Kate Perls and Paul Rosenberg, for $12,000 (the “1938 Sale”). With this money, the Leffmans were able to flee to Switzerland but lost much of this money in fees and taxes for a temporary visa upon arriving there. The Leffmans shouldered additional financial burdens when they subsequently left Switzerland for Brazil, bribing their way to safety. The Leffmans resided in Brazil until 1947 when they returned to Europe and restarted their lives in Zurich, Switzerland. Before their deaths in 1956 (Paul) and 1966 (Alice), the Leffmans successfully made claims for their losses in Germany but did not make any for the Picasso.
Since the 1938 Sale, the Picasso had gone on loan to the Museum of Modern Art (“MoMA”) and been consigned to M. Knoedler & Co. Gallery in New York before finally coming into the possession of a Thelma Chrysler Foy, who donated the painting to the Met in 1952. The Picasso has resided at the Met since then. In 2010, Laurel Zuckerman, the Leffmans’ great-grandniece, demanded that the Met return the Picasso to the Leffman estate. The Met promptly refused. On September 30, 2016, Zuckerman filed suit in the Southern District of New York for claims of conversion and replevin, claiming that the 1938 Sale should have been voided because the Leffmans sold the Picasso under duress. However, in 2018, the district court dismissed Zuckerman’s claims, finding that she did not allege duress under New York law. Zuckerman appealed, and the case went to the Second Circuit. On June 26, 2019, the Second Circuit affirmed the district court’s decision, but under the separate theory that Zuckerman’s claims were time-barred by the doctrine of laches, and that the HEAR Act did not preempt a laches defense.
The Second Circuit’s decision is curious for a number of reasons. For one, it obviously contrasted with the New York Appellate Division’s decision in Reif v. Nagy by determining that the plaintiff’s claims were barred by a laches defense, despite the legislative scheme established by the federal HEAR Act. Second, the Second Circuit opted to adopt a different legal theory (the laches doctrine bars the claim) than that used by the district court (failure to allege duress) to dismiss Zuckerman’s claim, which still leaves open the question of whether the circumstances of the 1938 Sale constitute duress.
HEAR Act and the Preemption of State Doctrines
Under the HEAR Act, actions that are brought within the six-year statute of limitations are timely “[n]otwithstanding any other provisions of Federal or State law or any defense at law relating to the passage of time.” Plainly read, this would seem to preclude the use of a laches defense, which is asserted when a long delay in asserting one’s rights prejudices a defendant. In essence, the doctrine of laches would seem to relate to the passage of time and therefore would not bar timely claim brought under the HEAR Act.
However, it was the view of the Second Circuit in Zuckerman that such a reading was not in line with the original intent of the statute. In the opinion, Chief Judge Robert A. Katzmann writes that the general rule of disallowing laches when statute of limitations has been enacted by Congress does not apply to the HEAR Act. Looking at the language of the statute, he notes that the statute does not make mention of defenses at equity, which include laches. Chief Judge Katzmann then opines that allowing potential claimants to wait indefinitely before bringing a claim would be “neither just nor fair.” He concludes by writing that a previous draft of the HEAR Act did include language that explicitly precluded a laches defense, but that the final draft removed such references, indicating that Congress ultimately did not choose to prevent defendants from utilizing a laches defense. It is entirely possible that the Second Circuit was also swayed by the fact that “The Actor” was a famous piece painted by Pablo Picasso, and publicly displayed at the Met, a world-class institution for over 60 years.
It is in this determination that the two courts – the New York state courts and the Second Circuit – greatly differ. Curiously enough, in one of their briefs for the New York Supreme Court, the defendants in Reif v. Nagy referred to the same fact, that the HEAR Act bill was amended to remove explicit references to equitable defense like laches. As the Second Circuit did in Zuckerman, the Reif defendants argued that this amendment was deliberate so as to permit the use of an affirmative laches defense. Justice Charles E. Ramos of the New York Supreme Court did not agree, writing that “the [HEAR Act] is intended to apply to cases precisely like this one, where Nazi-looted art is at issue.” In this determination, it is likely that New York state policy was a concern for the courts. In affirming the Justice Ramos’ decision, the Appellate Division, First Department wrote in the opinion that New York “has a strong public policy to ensure that the state does not become a haven for trafficking in stolen cultural property, or permitting thieves to obtain and pass along legal title.”
For the Second Circuit in Zuckerman, the determinative factor in their decision was likely the fact that Congress did not include language in the HEAR Act that allowed for the use of a laches defense. As such, their determination that a laches defense could not be invoked would seem to reflect the original legislative intent of the HEAR Act. However, as noted above, the language of the HEAR Act also specifically states that claims brought within the six-year statute of limitations under the HEAR Act are timely “[n]otwithstanding any other provisions …or any defense at law relating to the passage of time.” Even in the absence of language explicitly precluding the use of equitable defenses and the doctrine of laches, it is this author’s view that the HEAR Act could be read so as to preempt the laches defense, which relates to the passage of time. The New York state courts in Reif v. Nagy were not swayed in the same way that the Second Circuit was, suggesting that this may be an issue of future contention for future Holocaust-era claims brought under the HEAR Act.
It is worth noting that the Second Circuit’s decision does not mean that a laches defense will always trump a Holocaust-era claimant who brings an action decades and decades after the conversion (theft) occurred. The Second Circuit was careful to emphasize that “each case must be assessed on its own facts: while the laches defense succeeds here, in other cases it will fail and not impede recovery for claims brought pursuant to the HEAR Act.” Indeed, it would also be a mischaracterization to say that the New York state courts would have ruled differently had they been given the same case. It is important to note that the Appellate court in Reif did not hold that the HEAR Act does preempt the laches defense. Rather, they simply determined that the laches defense did not bar the plaintiff’s claims on the basis that Nagy did not suffer a “change in position,” and that he was given notice of the plaintiffs’ claim to the Schiele Pieces. Simply put, there was no prejudice and therefore the laches defense did not apply, at least not in that case.
In the Zuckerman opinion, the Second Circuit places the ball in the courts’ end of the (excuse the pun) court by giving them the discretion to decide whether it would fair for a plaintiff to bring their claim after a certain amount of time. The question still remains: should it be left for a judge to decide? The HEAR Act sought to solve the problem of barring Holocaust-era cases on procedural grounds, but the Second Circuit ironically read into it a procedural workaround – the doctrine of laches. Furthermore, Katzmann’s fear that the preclusion of a laches defense might incentivize potential claimants to wait indefinitely before bringing forth an action might be overemphasized; under the HEAR Act, the six-year window to bring a claim starts running from the moment of actual discovery. It is also worth noting that the HEAR Act is set to expire on January 1, 2027, meaning that potential claimants do not have a great deal of time to sleep on their rights should they wish to ultimately reclaim their stolen properties.
Though it is possible that the availability of a laches defense in HEAR Act cases may still be a question for the courts, particularly in New York, potential claimants seeking to file actions are probably best served by bringing their actions as soon as possible to reduce the likelihood of their claims being time-barred. In hindsight, this may have been the exact result that the Second Circuit sought through their ruling: incentivizing claimants to bring their claims as soon as possible. Unfortunately, the tragic consequences of the Holocaust on the heirs of the persecuted Jewish families are still with us today, and those who seek to address the lingering injustices are left with few options and remedies. It remains to be seen if the HEAR Act will be interpreted to inhibit or promote future claims, but it is this author’s hope that such cases will be given the opportunity to be decided fully on their merits.
- Vergil, Georgics Book 3, Line 284 (John Dryden trans.) (1697). ↑
- Holocaust Expropriated Art Recovery (HEAR) Act of 2016, Pub. L. No. 114-308, 130 Stat. 1528. ↑
- Zuckerman v. Metro. Museum of Art, 928 F.3d 186 (2d Cir. 2019) ↑
- Reif v. Nagy, 106 N.Y.S.3d 5 (N.Y. App. Div. 2019) ↑
- HEAR § 3(2). For more Center for Art Law reading on the passage of the HEAR Act, see https://itsartlaw.org/2016/08/09/hear-and-the-guelph-treasure-recovery-efforts-restitution-in-review/ ↑
- Stacey C. Maiden, Doctrine of Laches means you are “Out of Time,” LexisNexis: Legal Newsroom (Jan. 26, 2012), https://www.lexisnexis.com/legalnewsroom/estate-elder/b/estate-elder-blog/posts/doctrine-of-laches-means-you-are-quot-out-of-time-quot ↑
- Zuckerman v. Metro. Museum of Art, 928 F.3d 186 (2d Cir. 2019) ↑
- See below for further discussion on the laches doctrine. ↑
- Reif at 2. ↑
- Id. at 3. ↑
- Id. ↑
- Id. at 3-4. ↑
- Id. at 4. ↑
- Matter of Grand Jury Subpoena Duces Tecum Served on Museum of Modern Art, 93 NY2d 729 (1999). ↑
- Bakalar v. Vavra, 819 F Supp 2d 293 (SDNY 2011). ↑
- Reif v. Nagy, 106 N.Y.S.3d 5, 14 (N.Y. App. Div. 2019) ↑
- Zuckerman v. Metro. Museum of Art, 928 F.3d 186, 190 (2d Cir. 2019) ↑
- Id. ↑
- Id. at 191. ↑
- Id. ↑
- Zuckerman v. Metro. Museum of Art, 307 F. Supp. 3d 304 (S.D.N.Y. 2018), aff’d, 928 F.3d 186 (2d Cir. 2019). ↑
- HEAR § 5(a) (emphasis added). ↑
- Zuckerman v. Metro. Museum of Art, 928 F.3d 186, 196 (2d Cir. 2019) ↑
- Id. ↑
- Id. at 189. ↑
- Defendant’s brief at 23. ↑
- Reif v. Nagy, 106 N.Y.S.3d 5, 12 (N.Y. App. Div. 2019). ↑
- Id. at 15. ↑
- HEAR § (3)(2) ↑
- Zuckerman v. Metro. Museum of Art, 928 F.3d 186, 197 (2d Cir. 2019). ↑
Additional Sources: The Art Law Podcast: Recent New York Holocaust-Era Art Cases Come Out Differently (Aug 5, 2019), http://artlawpodcast.com/2019/08/05/recent-new-york-holocaust-era-art-cases-come-out-differently/
About the author: Timothy Chung was a Summer 2019 Legal Intern for the Center for Art Law, J.D. candidate at Columbia Law School, Class of 2021, and an Editorial Staff Member of the Columbia Journal of Law and the Arts. In 2016, he graduated from Oberlin College with a double major in Latin and Creative Writing and a minor in Greek, before working as a paralegal at Fragomen, Del Rey, Bernsen & Loewy LLP. Timothy can be reached at firstname.lastname@example.org.