Two pending cases have invoked the new law
A recent article in the New York Times highlights the change that the recent passage of the Holocaust Expropriated Art Recovery (HEAR) Act of 2016 has had on disputes about the timeliness of claims for allegedly Nazi-looted art. The odd part, however, is that the case cited by the Times is not one in which the HEAR Act has been invoked or argued, though it could be some day. As far as we are aware, there has been briefing on the effect of the HEAR Act in two cases, my clients’ claim against the Stiftung Preussischer Kulturbesitz (SPK) and Germany in U.S. District Court in Washington, DC, and Laurel Zuckerman’s claim as representative of the Leffmann estate in U.S. District Court in Manhattan. Only two months after its passage, the law is already changing the terms of debate.
In our case, the SPK and Germany have moved to dismiss. Among the arguments they made was that my clients’ claims were time-barred by the District of Columbia statute of limitations, an argument we opposed on its own terms last year. Promptly after the passage of the HEAR Act, we filed a letter to alert the court to the new law because it preempted the law under which the defendants had made their argument. As we argued, the HEAR Act mooted the argument as the defendants had made it. In addition, we pointed out to the court that a second argument made by the defendants had also been mooted, namely, the claim that individual claims like my clients’ conflict with U.S. policy and are thus preempted. As with the statute of limitations argument, we had opposed that point with authority like this statement by the Ninth Circuit in the Von Saher case:
Von Saher is just the sort of heir that the Washington Principles and Terezin Declaration encouraged to come forward to make claims, again, because the Cranachs were never subject to internal restitution proceedings. . . . Perhaps most importantly, this litigation may provide Von Saher an opportunity to achieve a just and fair outcome to rectify the consequences of the forced transaction with Göring during the war, even if such a result is no longer capable of being expeditiously obtained.
Von Saher v. Norton Simon Museum of Art at Pasadena, 754 F.3d 712, 723 (9th Cir. 2014). We had already argued that our clients were similarly just the sort of heirs the Washington Principles intended. Nonetheless, we cited, the new law makes clear beyond any remaining doubt that private litigation remains available. The law states as follows in subsection eight:
(8) While litigation may be used to resolve claims to recover Nazi-confiscated art, it is the sense of Congress that the private resolution of claims by parties involved, on the merits and through the use of alternative dispute resolution such as mediation panels established for this purpose with the aid of experts in provenance research and history, will yield just and fair resolutions in a more efficient and predictable manner.
Most relevant is the very first clause of the paragraph: “litigation may be used to resolve claims to recover Nazi-confiscated art.” Plain English dictates that stating something may be used means. . . .that it may be used.
In response, Defendants withdrew their statute of limitations argument but reserved the right to make it again at summary judgment. This was obviously a significant development insofar as it took an ostensibly dispositive argument off the table. The defendants’ motion on various other grounds remains under deliberation.
In New York, the Met also made a statute of limitations argument in 2016 pursuant to New York law. On January 20, 2017, Zuckerman opposed that motion with a memorandum that spotlighted the effect of the HEAR Act, also arguing that the law mooted the argument as filed. Her brief states:
Here, there is no question that: (a) the Complaint alleges that the Leffmanns lost the Painting in 1938 because of the persecution by the Nazis and their Fascist allies (e.g., Compl. ¶¶ 3, 9, 26-28, 42, 47); and (b) Plaintiff’s claim was pending as of the date of the Act’s enactment. Accordingly, pursuant to the terms of the HEAR Act, Plaintiff’s claims are timely and the Museum is barred from raising the state statute of limitations to avoid resolution on the merits.
The Met file a reply brief on February 27, in which it contested that the HEAR Act applied at all. Specifically, "The HEAR Act’s purpose is thus to revive certain claims for artworks “confiscated,” “stolen,” or“misappropriated” by the Nazis. This is not such a case."
These cases may well be just the beginning. Another test will be if and when a plaintiff brings a claim that would previously have been time-barred but which was not pending when the law was passed.
Against all this the Times article was interesting, if not quite on point. The heirs of Fritz Grünbaum have been litigating for many years, most famously against collector David Bakalar over another Schiele Drawing, Seated Woman with Bent Left Leg (Torso). That case was tried twice, once under Swiss law, once under New York law, before the trial court concluded that the drawing had not been stolen, but that the Grünbaum heirs were nonetheless barred by the doctrine of laches. Laches is a defensive concept related to but distinct from the statute of limitations. Whereas a statute of limitations is just that—a statute, that prescribes a time after which a claim may not be brought—laches is an equitable defense to be asserted and proved by the defending party. It holds that even when a claim is timely within the statute of limitations, a defendant may still prevail where he or she can show that the plaintiff delayed unreasonably in the claim such that the defendant was prejudiced. Bakalar prevailed by persuading the courts that he had been prejudiced by inaction.
The latest case referenced in the Times article is against art dealer Richard Nagy (Reif et al. v Richard Nagy, et al., Index No. 161799-2015 (N.Y. Sup. Ct.)), and it was filed in November 2015, more than a year before the HEAR Act. Nagy moved to dismiss by arguing that the question of whether the Schiele drawing had been looted was one that the Grünbaum heirs had already litigated, and lost. This is called “offensive issue preclusion”: the idea is that if you’ve had your day in court and lost on a certain question, you can’t bring it again against a different party if the issue is the same. As Nagy’s lawyer argued in the Times article, their view is that the Nagy case is, in fact, “Bakalar 2.” The Grünbaum heirs argue the opposite, that the drawing in the newer case was not covered by the rulings in the prior case and that factual inquiry and resolution is necessary about this object.
Notably, the Nagy motion was denied—before the passage of the HEAR Act—and is on appeal. That order last fall is the one that allowed the case to proceed, not anything to do with the HEAR Act. The HEAR Act may eventually come into play if Nagy makes a statute of limitations argument, or the Grübaum heirs argue that the HEAR Act also affects a laches defense, but those have not happened yet.
