Early last week the online auctioneer Paddle 8 filed for Chapter 11 bankruptcy in the Southern District of New York, on the heels of a recent lawsuit demanding payment for works of art sold at a charitable auction last November. While the Paddle 8 bankruptcy seems to have been driven by business conditions long before the complete upheaval of the art and business world due to COVID19, it is all but certain now that the cascading closures of businesses large and small for the foreseeable future will bring a wave of bankruptcies in the months and year to come. As such, taking a closer look at the Paddle 8 situation can be instructive for art market participants of all sorts, particularly with respect to the consignment and sale of art. Put simply, most businesses are going to need to think very soon about their roles as creditors who are owed some good or service, in the hopes of avoiding becoming debtors who need the help of bankruptcy laws to reorganize or stave off liquidation.
Nicholas O'Donnell
Recent Posts
Paddle 8 Bankruptcy a Harbinger in the Time of COVID19 and the Coming Art World Crisis
Topics: Bankruptcy, Bankruptcy Code, Bankruptcy Court, consignor, U.C.C.-1 statement, New York Arts & Cultural Affairs Law, Salander O'Reilly, ArtNet, Force majeure, coronavirus, COVID-19, Chapter 11, Paddle 8, Auctionata AG, online auction, Tom Otterness, Valentine Uhovski, Rameshkumar Ganeshan, 11 U.S.C. § 541(b)(1), 11 U.S.C. § 362(a), Penumbra, G.L. c. 104A, § 2, John Ahearn, Kiki Smith, Jonas Mekas, Jim Jarmusch, Walter Robinson, Michael McClellan, security interest, N.Y. Arts & Cult. Affairs Law § 12.01, automatic stay, Acts of God, Paper Chase
No Excuses left—SPK Restitutes Han Baldung Grien to Persecuted Artist's Heirs for Reasons that Germany Denies to Jewish Victims
The Stiftung Preussischer Kulturbesitz (Prussian Cultural Heritage Foundation, or SPK) in Berlin announced that it had agreed to restitute a 1537 painting of the biblical figure Lot by Hans Baldung Grien to the heirs of Hans Purrmann, a German painter persecuted as a “degenerate” artist in the infamous Nazi action of the same name. Purrmann sold the Grien painting in 1937.
Topics: Berlin, Expressionist, Hildebrand Gurlitt, Nazi-looted art, Max Beckmann, Karl Buchholz, SPK, Stiftung Preussischer Kulturbesitz, Hermann Goering, Kirchner, Degenerate Art Action, Prussian Cultural Heritage Foundation, Raubkunst, Welfenschatz, Hans Purrmann, Neue Sachlichkeit, Freund, Han Baldung Grien, Ferdinand Möller, Bernhard Böhmer, New Objectivity, Grosz
Responsible Art Market Initiative Event in Geneva January 31, 2020—An Art Market in Evolution
For several years late January has been occasion for gatherings of the Responsible Art Market Initiative, a collective of art market stakeholders striving for consistency and standards in the international market that started in collaboration with the Art Law Centre at the University of Geneva. I have been proud to contribute to the RAM Task Force as it composed the Due Diligence Toolkit and country guides for, among other things, anti-money laundering legislation, and I am currently on the Advisory Board.
Topics: Anne Laure Bandle, Geneva, Sandrine Giroud, Christie's, Megan Noh, Art Law Centre, University of Geneva, Mathilde Heaton, Responsible Art Market, Marc-André Renold, Ralph Wyss, Deloitte, Phillips, An Art Market in Evolution, 5th European Anti-Money Laundering Directive, Artssurance, Anne-Claire Bisch-Saffioti, LINK Management, Sharon Hecker, Sarah Charles, Catherine Denoun, Rudy Capildeo, Katharina Ammann, Swiss Institute for Art Research, Sarah Allen, Hauser & Wirth, Anne-Sophie Nardon
In the Great Green Room, There was…a Shocking Theft—Historic Robbery in Dresden at State Art Collections
While the incomparable Goodnight Moon by Margaret Wise Brown and illustrated by Clement Hurd does not take place in Dresden, that is where today brought news of a robbery at the Staatliche Kunstsammlungen Dresden, the State Art Collections that house the treasures of the Free State of Saxony. Specifically, two thieves broke into the Grünes Gewölbe—the Green Vault—which holds the rarest objects of all. Headlines understandably honed in on monetary values in the hundreds of millions or even billions, but these objects are, in fact, priceless. It is a horrifying crime against a rich cultural heritage in an historic city.
Topics: Holy Roman Empire, Dresden, DDR, Gemäldegalerie Dresden, Isabella Stewart Gardner Museum Theft, Staatliche Kunstsammlungen Dresden, East Germany, Tashkent, Paris Court of Appeal, Goodnight Moon, Anne Hawley, House of Wettin, Augustus the Strong, Zwinger, Frauenkirche, Rezidenzschloss, Fürstenzug, Gottfried Semper, Grünes Gewölbe, Margaret Wise Brown, Clement Hurd, Residenzschloss, Green Vault, Thomas Crown affair, Bond villain, Marion Ackerman, Michael Kretschmer, Free State of Saxony, Freistaat Sachsen, Electorate of Saxony, Thirty Years War, Schatzkammer, Wittelsbach, GDR
France Rejects Poland’s Bad Faith Efforts to Extradite Art Dealer Alexander Khochinsky
My client Alexander Khochinsky is safely back in the United States after an eight-month ordeal spurred by Poland’s retaliation for his assertion of restitution for his mother’s property lost in Poland during the Holocaust. The rejection this month by the French courts of Poland’s request to extradite my client for prosecution in the courts of Poland—courts called out as lacking judicial independence by the European Court of Justice—was the second failed attempt by Poland to abuse the international extradition system, and came directly on the heels of being held in default in Khochinsky’s lawsuit here in the United States for damages arising out of Poland’s bad-faith extradition effort that ended in 2015. Khochinsky is represented in France by Jean-Jacques Neuer.
Topics: Alexander Khochinsky, Nazi-looted art, Red Army, extradition, FSIA, "Girl with Dove", Antoine Pesne, Poland, Przemysl, USSR, Belzec, Lviv, Uzbekistan, European Court of Justice, Paris Charles de Gaulle, Tashkent, 28 U.S.C. § 1607, 28 U.S.C. § 1605(a), Paris Court of Appeal
Heirs of Holocaust Victim Fritz Grünbaum Win Restitution of Nazi-Looted Schiele Drawings
The Appellate Division First Department in New York has affirmed the trial court’s ruling in Reif v. Nagy that the heirs of Viennese actor and Holocaust victim Franz Friedrich (Fritz) Grünbaum are entitled to the return of two Egon Schiele drawings, Woman Hiding her Face (1912) and Woman in a Black Pinafore (1911). The ruling is a momentous victory for the Grünbaum heirs, and features several recurring characters in many Nazi-looted restitution disputes. We were doubly gratified to see the First Department’s citation to our own case, Philipp v. F.R.G., 894 F.3d 406 (D.C. Cir. 2018) for the proposition that sales under duress are void and violate international law consistent with the policies of the Holocaust Expropriated Art Recovery (HEAR) Act of 2016. It is a landmark ruling and a testament to the perseverance of the Grünbaum heirs and their legal team.
Topics: Cornelius Gurlitt, Galerie St. Etienne, Nazi-looted art, Foreign Sovereign Immunities Act, Galerie Gutekunst, Holocaust, Fritz Grünbaum, NS Raubkunst, Egon Schiele, Mathilde Lukacs, Franz Kieslinger, Anschluss, Welfenschatz, HEAR Act, Ankerwycke, A Tragic Fate, Law and Ethics in the Battle Over Nazi-Looted Art, Holocaust Expropriated Art Recovery Act of 2016, Woman in a Black Pinafore, Woman Hiding her Face, Seated Woman With Bent Left Leg (Torso), Reif v. Nagy, D.C. Circuit Court of Appeals, Eberhard Kornfeld, Philipp v. F.R.G., New York Law Journal, Gutekunst & Klipstein, Jonathan Petropoulos
The U.S. Court of Appeals for the D.C. Circuit today dismissed the petition to rehear en banc last year’s landmark ruling that the heirs of the art dealers who sold the Guelph Treasure (or Welfenschatz) may pursue their claims in U.S. federal court. Defendants the Federal Republic of Germany and the Stiftung Preussischer Kulturbesitz (the SPK, or Prussian Cultural Heritage Foundation in English) had argued that claims under the Foreign Sovereign Immunities Act’s expropriation exception such as these are not violations of international law and also require a claimant to exhaust remedies abroad, a position rejected by prior decisions of the D.C. Circuit and by today’s ruling as well.
Today’s decision confirms the first-of-its kind holding last year that a German state museum must face claims based on allegations of Nazi-looted art, a direct result of Germany’s failures through its so-called Advisory (often called Limbach) Commission to address seriously and comprehensively the state of Nazi-looted art in its national collections. In the five years since denying the Guelph Treasure claimants any meaningful attention, Germany has fumbled through the Gurlitt fiasco and attempted other various distractions like its new fitful attention to colonial art (with no real progress there either). Germany has repeatedly disparaged my clients by suggesting that the matter was already "decided on the merits" before Germany's Advisory Commission. This is false. The Advisory Commission renders non-binding recommendations to state museums and has been roundly criticized for its opinions in 2014 and 2015 in particular, when my clients were denied justice. There is no small irony in having to explain this in the context of Germany's request for a do-over after last year's ruling.
Topics: Third Reich, Feist, Prussia, Germany, Nazi-looted art, Foreign Sovereign Immunities Act, SPK, Advisory Commission, Stiftung Preussischer Kulturbesitz, Hermann Goering, expropriation exception”, Nazi persecution, Boy Leading a Horse, NS Raubkunst, J.S. Goldschmidt, Prussian Cultural Heritage Foundation, forced sale, Zacharias Hackenbroch, Welfenschatz, I. Rosenbaum, Holocaust Expropriated Art Recovery Act, HEAR Act, Paul Körner, Staatliche Museen zu Berlin, Kunstgewerbemuseum
Radio Interview Examines Recent Nazi-Looted Art Court Decisions
I was pleased for the opportunity to chat with Larry Perel of KCRW in Santa Barbara about the significance of the recent ruling that the Thyssen-Bornemisza Museum in Madrid is the owner of Rue St. Honoré, effet de pluie by Camille Pissarro—notwithstanding that there was no dispute that it had been looted from the Cassirer by the Nazis. You can listen to the full audio of the radio broadcast here. I discussed the Cassirer case, the more recent decision by the United States Supreme Court not to hear further appeal of Marei von Saher’s lawsuit against the Norton Simon Museum, and other current issues concerning the restitution of Nazi-confiscated art claims. You can read more background on these cases here at the Art Law Report, or in A Tragic Fate—Law and Ethics in the Battle Over Nazi-Looted Art.
Topics: Nazi-looted art, Marei Von Saher, Camille Pissarro, Art Law Report, A Tragic Fate, Thyssen-Bornemisza Museum, Rue St. Honoré effet de pluie, Nazi-confiscated art, Larry Perel, KCRW, Santa Barbara, Madrid
Knoedler Gallery Owners May be Liable for Forgery Scandal, Jury Will Decide
The sprawling saga of the M. Knoedler & Co. Gallery forgery scandal is approaching a full decade since the storied gallery closed abruptly in 2011 (fuller background further below). The last pending civil suit related to the case is now headed for trial in July after the U.S. District Court denied a motion for summary judgment by the gallery’s shareholders that argued that they could not be responsible for the company’s liability. Judge Paul G. Gardephe of the Southern District of New York ruled that there were factual disputes on whether those shareholders indeed could be responsible for alter ego liability that can only be resolved at a trial. The court did award Defendant Michael Hammer summary judgment on the plaintiffs’ fraud, fraudulent concealment, aiding and abetting fraud, aiding and abetting fraudulent concealment, conspiracy to commit fraud, and conspiracy to commit fraudulent concealment, RICO, and RICO conspiracy claims.
Topics: Ann Freedman, Jackson Pollock, Robert Motherwell, Southern District of New York, RICO, Glafira Rosales, M. Knoedler & Co., Abstract Expressionist, Gardephe, piercing the corporate veil, Monsanto, Roundup, Michael Hammer, 8-31, Knoedler LLC, alter ego
Thyssen-Bornemisza Prevails Over Cassirer Heirs' Claim to Pissarro Taken by Nazis Despite Acts “Inconsistent with the Washington Principles”
One of the longest-running court cases in the United States about art looted by the Nazis has been decided in favor of the current possessor, the Thyssen-Bornemisza Museum in Madrid, an instrumentality of the Kingdom of Spain. The U.S. District Court in Los Angeles ruled on April 30, 2019 against the heirs of Lilly Cassirer, a German Jew whom the Nazis targeted in 1939 for a forced sale of Rue Saint–Honoré, après-midi, effect de pluie (1892). The ruling is the second time that the museum has prevailed in the District Court as the owner of the painting under Spanish law, now on the grounds the museum did not know of the painting’s looting history when it acquired the work and that it held the work publicly for long enough to become its owner even though it had been stolen. The ruling, while favorable to the museum in this case, confirms important principles about the inability of successive possessors to acquire good title to artworks stolen by the Nazis, and the importance of diligence and pursuing questions raised by red flags in the chain of title. Notable as well was the Court’s pointed criticism of Spain for failing to adhere to the spirit of the Washington Principles on Nazi-Confiscated Art, and Spain’s failure to “comply with its moral commitments.”
Topics: Walter Feilchenfeldt, Third Reich, Terezin Declaration, Gestapo, Lilly Cassirer, Claude Cassirer, Jacques Goudstikker, Nazi-looted art, Czechoslovakia, Spain, Washington Principles, Baron Hans-Heinrich Thyssen- Bornemisza, A Tragic Fate, Law and Ethics in the Battle Over Nazi-Looted Art, Reichskammer der bildenden Künste, flight taxes, Rue Saint–Honoré, Julius Cassirer, Paul Durand-Ruel, Ludwigstrasse, Dr. Cassirer and Co. Kabelwerke, Jakob Scheidwimmer, Sydney Schoenberg, Hahn Gallery, Thyssen-Bornemisza Museum, Military Government Law No. 59, Reich Chamber of the Visual Arts, Ari Walter Kampf, Eugen Kampf, Knoedler & Co. Gallery, encubridor