Grossman LLP | Appeals Court Revives Case In Dispute Over Nazi-Looted Pissarro Work
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  • Appeals Court Revives Case In Dispute Over Nazi-Looted Pissarro Work
    07/25/2017

    In our ongoing coverage of case law involving Nazi-looted artworks, we have written before about the long-running lawsuit over a Pissarro painting, Rue St. Honore, après midi, effet de pluie. Back in 2015, we wrote about a district-court decision that dealt a possibly-fatal blow to the claimants, who were seeking to recover the work from a collection controlled by the Spanish government. Earlier in July, however, the Ninth Circuit Court of Appeals reversed that decision, meaning the painting’s claimants can continue their fight in the federal courts.
     

    The background of the case, in short, is that, prior to 1939, the work belonged to Lilly Neubauer, a German Jew. When Lilly and her husband fled Germany to escape persecution by the Nazis, they were forced to transfer the artwork to a Nazi art appraiser—for a fraction of its value—to obtain visas. After the war, the United States Court of Restitution Appeals (CORA) published a decision confirming that Lilly was the rightful owner of the painting, but Lilly could not locate the painting and believed it had been destroyed during the war. She eventually settled her claim for monetary compensation from the German government, but did not waive her right to seek restitution or return of the work itself. The painting changed hands several times and by 1976, had landed in the collection of Swiss Baron H. Thyssen-Bornemisza (who bought it in New York and kept it in Switzerland for many years); his collection was eventually loaned and then sold to a foundation controlled by the Kingdom of Spain. Rue St. Honore was publicly displayed in Madrid starting in 1992, and Lilly’s heirs (the Cassirers, who live in California) learned of its location in 2000.
     

    The heirs sued in 2005, and since then, the case has been tied up in complex issues ranging from jurisdiction to the statute of limitations; the case has already made two trips to the Ninth Circuit Court of Appeals to resolve those issues. See Cassirer v. Kingdom of Spain, 616 F.3d 1019 (9th Cir. 2010) (en banc); Cassirer v. Thyssen-Bornemisza Collection Foundation, 737 F.3d 613 (9th Cir. 2013).
     

    In 2015, the case had moved on to the issue of choice of law (that is, which jurisdiction’s law should apply to the dispute); the foundation moved for summary judgment on the ground that under either Swiss or Spanish law, the foundation has good title to the painting. Concluding that Spain “has the most significant relationship to the Painting and the parties,” the district court ruled that Spanish law should govern. That decision was essentially fatal to the Cassirer heirs’ claims because, like many European jurisdictions, Spain’s legal principles governing personal property allow a possessor of an object to obtain good title to it via “acquisitive prescription.” Specifically, under Spanish law, if someone publicly possesses the item for three years (or six years in cases of “bad faith”), and acts as its owner during that time, the possessor becomes the rightful owner in the eyes of the law. Here, since the work had been publicly displayed for more than six years in Spain, the foundation had acquired good title to the painting. (Possibly recognizing the harshness of this result, the district court did include in its order a note encouraging the foundation to look for a “mutually-agreeable resolution of this action, in light of Spain’s acceptance of the Washington Conference Principles and the Terezin Declaration, and, specifically, its commitment to achieve ‘just and fair solutions’ for victims of Nazi persecution.”)
     

    Now, however, the Cassirer heirs have prevailed in their appeal to the Ninth Circuit, which reversed the district court’s decision. As an initial matter, the court revisited the statute-of-limitations issue and ruled that a newly enacted federal law, the Holocaust Expropriated Art Recovery Act of 2016 (“HEAR Act”) now governs the timeliness of Cassirers’ claims. That law provides that claims regarding property lost during the Nazi regime are timely if they are filed within six years of when the claimant actually discovers the identity and location of the property and their possessory interest in it. Here, since the heirs filed within six years of learning where the painting was, their claims are timely under HEAR.

    Next, the court engaged in a choice-of-law analysis and ruled that Spanish property law should apply, due to Spain’s important interest in the dispute. In doing so, the court clarified that HEAR is purely a statute-of-limitations law, and does not preclude the application of substantive Spanish law in this case, nor does it foreclose the possibility that the foundation has good title to the work under Spanish legal principles of acquisitive prescription.
     

    Thus, the Ninth Circuit agreed with the district court that Spanish law should apply; but the appellate court went on to explain that, even under Spanish law, the Cassirers’ claims are not necessarily doomed. This is because Spanish law also provides that stolen property may not pass, via acquisitive prescription, to “those who purloined or stole it, or their accomplices or accessories” until the crime and any accompanying civil actions are time-barred. Here, the Cassirers argued that the foundation was an accessory (after the fact) to the theft of the painting because the foundation knew at the time it acquired the painting that the work had been stolen when TBC acquired the Painting from the Baron. Under this reading and the applicable statutes of limitation, the court explained, the foundation would need to possess the work for 26 years after 1993—i.e., until 2019—to acquire title by acquisitive prescription. The court held that the foundation could be an accessory within the meaning of Spanish law if it knowingly received and benefited from stolen property. And, the court continued, there was “a triable issue of fact” as to whether the foundation knew, when it bought the work from the Baron, that the work had been stolen during the war; the Cassirers had presented evidence of various “red flags” that should have alerted the foundation about the problematic history of Rue St. Honore, and further pointed out that the post-war CORA decision in Lilly’s favor had been available to the public for decades before the foundation acquired the work. The court also cited evidence that the foundation had published incorrect provenance about the painting, and had arguably paid below market value for the work; these facts, too, might support a finding that the foundation was aware the work had been looted by the Nazis. Given all this, the court held that the foundation was not entitled to summary judgment; a trial was needed as to whether the foundation might be an “accessory” to the theft under Spanish law.
     

    The court also rejected the foundation’s argument that it was the lawful owner of the painting because the Baron had good title to the painting when he sold it. The court ruled that because the Baron had bought the painting in New York in 1976, Spanish law would look to New York law to determine the effect of that transfer, and to Swiss law to determine whether the Baron acquired title to the Painting when he possessed it in Switzerland between 1976 and 1992. Under New York law, the court explained, a thief cannot pass good title, so the 1976 transfer did not give the Baron good title; and under Swiss law, the Baron would only have obtained title by acquisitive prescription if he possessed the painting in good faith, and there was a triable issue of fact as to whether the Baron possessed the Painting in good faith, given—again—the existence of “red flags” such as a below-market price, suggesting he may have been on notice that the work might be Nazi loot. The court cited various evidence that might indicate the Baron’s knowledge of a problem, including expert testimony that the Baron was a sophisticated collector who would be expected to “undertaken a more diligent search into the provenance of the Painting,” making his failure to do so suspicious. The court also held that the foundation was not entitled to summary judgment on the basis of laches, ruling that there was a factual dispute as to whether the delay in bringing the case was reasonable.
     

    The court applied German law in examining Lilly’s acceptance of a settlement in 1958 from the German government, and held that that did not foreclose the claims by her heirs. While she received compensation, Lilly did not waive her right to recover the actual work; rather, she simply settled claims “among the parties” to the settlement agreement, none of whom had the painting or knew of its whereabouts at that time. The court acknowledged the U.S. federal policy of respecting the finality of foreign decisions involving Nazi-looted art, but held that, because the settlement did not extinguish her right to seek restitution of the painting, the Cassirers’ claims are not at odds with federal policy.

    Thus, the Cassirers’ claims have been revived—for now—and the case will return to district court for further proceedings. The Ninth Circuit’s decision is yet another example of the complexity of litigation in the field of Nazi-era restitution. As several commentators have pointed out, there is no dispute that the Nazis wrested the work from Lilly under terrible circumstances—and yet the case has been tied up in complicated court proceedings for over a decade. The new HEAR Act played a role in resolving this appeal, but only as to one legal question among many. And due to the painting’s winding path since the war, the appellate court had to examine the impact of multiple transactions (including the 1958 settlement, the Baron’s purchase, and the foundation’s purchase), with reference to the laws of two U.S. jurisdictions (New York and California) and multiple foreign jurisdictions (including Spain, Germany, and Switzerland). The parties have now been before the Ninth Circuit three times, and there has not yet been a trial.
     

    It’s possible that, after this latest setback, the foundation might now be more willing to consider a negotiated settlement in keeping with the Washington Conference Principles, as the district court has already implored the foundation to do, and as other parties to Nazi-era art disputes have done in recent years. On the other hand, the foundation may be motivated to continue to litigate in order to combat the claimants’ suggestion that it knew the work was stolen; press reports indicate the foundation’s counsel has continued to insist that the foundation will prevail.
     

    The case also echoes more general themes in art litigation, including the fact that courts are frequently willing to hold art purchasers—especially sophisticated collectors and institutions—to task for ignoring or missing “red flags” in art deals, such as incomplete provenance information and lower-than-expected purchase prices. The adage of “buyer beware” continues to be the best practice in any art transaction, to mitigate the possibility of future claims that a work may have title or authenticity problems.