Grossman LLP | As Two Schieles Sell at November Auctions, Debate Continues Over Holocaust-Era Restitution Issues
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  • As Two Schieles Sell at November Auctions, Debate Continues Over Holocaust-Era Restitution Issues
    During the first week of November, two works by Egon Schiele sold at auction—one at Christie’s and one at Sotheby’s. This blog post examines the troubled stories behind these works, the way the two sales unfolded, and what they can teach us about the current state of art restitution efforts.

    The Grünbaum Collection

    Fritz Grünbaum was an Austrian songwriter and cabaret artist who performed in dozens of operettas, theatrical productions, and even a handful of early films during the first three decades of the twentieth century.  By the time he reached the height of his success, Grünbaum had also amassed an extensive art collection.  But Grünbaum and his wife were Jewish, and their fortunes fell as the Nazi regime rose.  In 1938, Fritz was sent to a concentration camp in Dachau, where he died in 1941.  The following year, his wife died in a concentration camp in Minsk.  Historical documents show that, shortly after Grünbaum’s 1938 arrest, Nazi agents inventorying his art collection listed more than 400 works, including 81 by Austrian Expressionist pioneer Egon Schiele; only five of Grünbaum’s Schiele works were listed by title.  There is also evidence that some of those 400-plus works were then deposited with a storage and transport company, Schenker & Co., but again, the works are not listed by title.

    Beyond this, little is known for certain about what happened to Grünbaum’s art collection.  The next confirmed sighting of any of his works came in the 1950s, when several were sold by a Swiss dealer named Kornfeld.  Kornfeld claimed that he obtained the works from Mathilde Lukacs, the sister of Mrs. Grünbaum.

    “Seated Woman”

    Kornfeld’s gallery, Galerie Gutekunst, sold one Schiele piece, a 1917 drawing known as “Seated Woman with Bent Left Leg (Torso),” to the Galerie St. Etienne.  From there, it made its way through good-faith sales to Massachusetts businessman David Bakalar, who paid just $4,300 for it in 1963.  In the late 1990s, two Grünbaum heirs began asserting claims to works believed to have been part of the Grünbaum collection.  So when Bakalar consigned “Seated Woman with Bent Left Leg (Torso),” to Sotheby’s for auction in 2005, the heirs informed Sotheby’s that they—not Bakalar—held rightful title to the drawing, and the sale was halted.

    Years of litigation ensued, including two appeals to the Second Circuit.  In the end, the U.S. District Court for the Southern District of New York found that Bakalar had traced the provenance back to Mathilde Lukacs, Grünbaum’s sister-in-law, who was also Jewish.  The court concluded that, “While an inventory [of an art collection by Nazi agents] may have been a preliminary step in the looting of Jewish property, it is not proof that the Drawing was seized. Indeed, the Drawing was not specifically catalogued in the inventory and may not have even been among the unnamed works of art in Grunbaum’s apartment. In any event, Lukacs’ possession of the Drawing after World War II strongly indicates that such a seizure never occurred. Accordingly, what little evidence exists—that the Drawing belonged to Grunbaum and was sold by one of his heirs after World War II—suffices to establish by a preponderance of the evidence that the Drawing was not looted by the Nazis.”  The heirs had also argued an alternative theory that even if the Drawing had remained in the family, “Bakalar cannot establish that Lukacs acquired possession in a manner that permitted her to convey title to Galerie Gutekunst.”  On this point, the district court agreed with the heirs.  But even though Bakalar had failed to adequately show that Lukacs had valid title to the Drawing at the time she sold it to Kornfeld and Galerie Gutekunst, Bakalar ultimately prevailed on the basis of laches—essentially, that Grünbaum’s heirs had simply waited too long to bring their claims.  See Bakalar v. Vavra, 819 F. Supp. 2d 293 (S.D.N.Y. 2011).

    The Second Circuit declined to review the district court’s conclusions about Bakalar’s tracing of the work’s provenance.  Instead, the appellate court affirmed Bakalar’s title based solely on the district court’s ruling that the heirs’ claims were defeated by laches.  See Bakalar v. Vavra, 500 Fed. App’x 6 (2d Cir. 2012).  Under New York law, the court explained, the equitable doctrine of laches applied if Bakalar could show that: (1) the heirs were aware of their claim to the drawing; (2) they inexcusably delayed in taking action; and (3) Bakalar was prejudiced as a result.  The Second Circuit reviewed the district court’s conclusions on these points under a fairly deferential standard of review—that is, it would not reverse unless the district court had made a “clear error”—and concluded that “there is no clear error in the findings that Vavra and Fischer’s ancestors knew or should have known of a potential claim to the Drawing, that they took no action in pursuing it, and that Bakalar was prejudiced in this litigation as a result of that delay.  It was therefore sound to recognize Bakalar’s title on the basis of his laches defense.”  The heirs sought review by the Supreme Court, which denied certiorari in 2013.  See Vavra v. Bakalar, 133 S. Ct. 2038 (2013).  Thus, the holding for Bakalar based on laches became the final substantive word from the federal courts.

    So this fall, Bakalar and Sotheby’s returned to the course of action that had sparked the litigation in the first place: an auction. “Seated Woman” was included in Sotheby’s Impressionist & Modern Art Evening Sale on November 4.  The Sotheby’s catalog includes Mathilde Lukacs-Herzl’s name in the work’s provenance, and the auction house’s description contains a note:

    At one time it was claimed that the present work was looted from Fritz Grünbaum or his widow… however, the New York trial court found that the drawing had never been looted by the Nazis and in a decision affirmed by the appellate court, confirmed the current ownership of the drawing.

    While the court proceedings are over, the heirs continue to dispute the history of “Seated Woman.”  For example, the New York Times cited an expert hired by the heirs during the litigation; he questions Kornfeld’s story about whether the work came from Mathilde Lukacs at all (noting discrepancies in Kornfeld’s documentation and the fact that Kornfeld did not name her as the source of the works until decades after her death).  The expert also noted that, even if the works did come to Kornfeld through Lukacs, she did not have valid title to them.  The heirs’ counsel points out that some of the heirs’ expert testimony was excluded by the federal district court and thus did not inform the court’s factual findings.  See also Bakalar v. Vavra, 851 F. Supp. 2d 489 (S.D.N.Y. 2011) (denying motion to reopen expert discovery).

    “Town on the Blue River”

    Sotheby’s auctioned “Seated Woman” earlier this month.  The following day, just a few miles away, Christie’s offered for auction another Schiele work, a 1910 watercolor known as “Stadt am blauen Fluss (Krumau)” (“Town on the Blue River”).  Like “Seated Woman,” “Town on the Blue River” is believed to have once belonged to Fritz Grünbaum and was later sold through Kornfeld’s gallery, Gutekunst, in the 1950s.

    But as the New York Times recently pointed out, the circumstances of the Christie’s sale were quite different than those of Sotheby’s Schiele.  According to Christie’s, “Town on the Blue River” was offered pursuant to a restitution agreement between the consignor (the estate of Ilona Gerstel) and Grünbaum’s heirs.  The arrangement treats the work as looted art and provides compensation to the heirs while allowing a buyer at auction to obtain clear title to the work.  As a result, a lawyer for the heirs said they “completely support the sale” and noted that several Holocaust-related charities would be beneficiaries of the Gerstel Estate.

    Interestingly, the work’s provenance in the Christie’s catalogue does not list Mathilde Lukacs at all, instead listing Schenker & Co., the storage and transport company, as the connecting link in the provenance chain (after Grünbaum and before Kornfeld’s gallery Gutekunst). In their litigation against Bakalar, the Grünbaum heirs had taken the position that Schenker & Co. was effectively an instrumentality of the Nazi regime, providing the logistics behind the Nazi’s systematic looting of Jewish property.

    One Grünbaum heir praised “efforts by the Gerstel family and by Christie’s… to reach out affirmatively to the Grünbaum family” and cited the parties’ actions as “examples of the way this tragic set of issues should be addressed.”  Robert M. Morgenthau, a former Manhattan District Attorney who has played a role in other high-profile restitution cases, reportedly praised the Christie’s settlement as the “embodiment of the spirit of the Washington Conference Principles on Nazi-Confiscated Art.”  On the other hand, at least one commentator has questioned whether the provenance included in the Christie’s catalogue is, in a sense, “rewriting history” by completely omitting Lukacs from the provenance, thereby effectively choosing one version of the work’s conflicted past over another; that article quotes the author of the Schiele catalogue raisonné, who stated: “to the best of my knowledge, this work was sold by Mathilde Lukacs, the sister-in-law of Fritz Grünbaum, to the Galerie Kornfeld in 1956. I was very surprised to see that the name ‘Schenker’ was substituted for that of Lukacs in Christie’s published provenance. I asked Christie’s if they had any documentation proving Schenker’s ownership of Stadt am blauen Fluss, but so far they have failed to provide any.”  Christie’s reportedly defended its decision by saying it is clear that “for some period of time Schenker & Co had custody and control over the Grunbaum collection” and that Lukacs’s title to the works is “not sufficiently reliable” to include in their catalogue.

    Implications in the Arena of Art Restitution

    The back-to-back sales of these two Schiele works highlight the continuing complexity of Holocaust-era art restitution.  The differing stances of Christie’s and Sotheby’s, two giants in the art world, show that there are no simple answers when an artwork’s true history is shrouded in the past.  Sotheby’s handling of the Bakalar piece relied heavily on the rulings of federal courts, while Christie’s handling of the Gerstel piece perhaps sought to account for the inherently tragic circumstances surrounding art owned by European Jewish collectors during the years before and during World War II.

    The fates of these Schiele works have been closely watched by many in the art world—not least by other museums and collectors whose holdings include works once owned by Fritz Grünbaum.  These works serve as a stark reminder that restitution matters continue to unfold not only in the courtroom, but in the public eye… and on the art market.  As this blog has observed already, the art world is paying increased attention to options for voluntary, negotiated restitution of possibly looted artworks, since such arrangements can avoid litigation expenses and are sometimes preferable to parties for both moral and publicity reasons.

    As a closing note then, consider the final outcomes of these auctions.  Both Schiele works sold at their respective auctions.  Both buyers obtained works with reasonably clear title from a legal perspective.  The two provenance statements show marked differences, and neither can fully convey the uncertainty and conflicting evidence underpinning the story of Fritz Grünbaum’s art; the Sotheby’s provenance statement presents the work as passing from Fritz to his sister-in-law and thence to post-war dealers, while the Christie’s provenance omits any mention of Lukacs and instead notes that the work spent time in the hands of Schenker & Co. during the Nazi era.  And the bottom line?  “Seated Woman” sold for $1.325 million—squarely within Sotheby’s pre-auction estimate of $1.2 to $1.8 million.  In contrast, “Town on the Blue River” sold for $2.965 million—more than double Christie’s pre-auction estimate of $800,000 to $1,200,000.  While one cannot read too much into the final hammer prices (which were undoubtedly the result of myriad factors), they do suggest a question that goes beyond legal technicalities—is it possible that some buyers might find more comfort in, and place higher value on, owning a work that has acknowledged and sought a resolution for its difficult past?