Originally posted 2010-11-09 10:15:18. Republished by Blog Post Promoter

[stextbox id=”info”]Raymond J. Dowd of the Copyright Litigation BlogRaymond J. Dowd, author of the Copyright Litigation Blog (and much else!), sent along this note by email concerning  a case that would probably interest to mamy LIKELIHOOD OF CONFUSION® readers.  Because he is a man of discretion and high ethical standards, he is not blogging about it — but I can!  With his permission (okay, how high can his standards be if he takes my calls?) I’m reproducing the whole thing here verbatim, but have added a couple of links.[/stextbox]

The Second Circuit has scheduled oral argument on December 8 at 10 a.m. at the U.S. Courthouse 9th Floor Ceremonial Courtroom at 500 Pearl Street in a case called Grosz v. Museum of Modern Art. My firm, together with co-counsel Rowland & Petroff, represents the heirs of George Grosz who are appealing a decision of the U.S. District Court for the Southern District of New York. My Dunnington partners Thomas V. Marino and Luke McGrath are counsel on the brief. David Rowland and Patricia Hertling of Rowland & Petroff are also on the brief. It is a major case and I will be arguing for the appellants before a three-judge panel. As in Bakalar v. Vavra the Grosz Heirs are supported by a serious and scholarly amicus brief supporting reversal written by Professors Edward McGlynn Gaffney of Valparaiso University School of Law and Jennifer Anglim Kreder of the Salmon P. Chase School of Law, Northern Kentucky University who are the nation’s leading legal experts in this area. The learned Amici are, in turn, a veritable “Who’s Who” in Holocaust scholarship, education, law and history and include the American Jewish Congress and the Commission for Art Recovery.

MoMA is represented by Charles S. Sims of Proskauer Rose LLP. Proskauer and Mr. Sims represented the Republic of Austria in Altmann v. Austria. Mr. Sims recently argued before the U.S. Supreme Court and obtained a reversal of a Second Circuit decision in Reed Elsevier v. Muchnick.

The facts as set forth below were confirmed by an expert report prepared by Dr. Jonathan Petropoulos, the world’s leading expert in Nazi art looting cases, which expert report was proferred in support of our requests to obtain discovery into MoMA’s documents relating to Alfred Flechtheim.  Dr. Petropoulos was an expert in the Altmann, Cassirer, Hungarian Gold Train and Bakalar cases. As confirmed by Dr. Petropoulos’ document analysis and scholarship, the case involves George Grosz, a Berlin-based artist famous for caricaturing Hitler during the Weimar Republic. Grosz was reviled by the Nazis, his studio was attacked and he feared for his and his family’s safety. In January 1933, just before Hitler seized power, Grosz fled Germany for New York, where he had a teaching position at the Art Students League. He left his artworks with Alfred Flechtheim, his Jewish art dealer.

Since Flechtheim was Jewish, the Nazis boycotted Flechtheim’s gallery, then took it over and liquidated it. A member of the SS named Alexander Voemel changed the name of “Galerie Flechtheim” to “Galerie Alexander Voemel” in November 1933. During his lifetime, Grosz never got a penny from the artworks he had to abandon when he fled. Grosz was severely traumatized by Nazi persecution, eventually rendered unable to work and paralyzed by fear. As a former Communist and anti-Nazi living as an art teacher in the US, he faced additional challenges, particularly during the McCarthy era. He died in 1959.

George Grosz's Portrait of the Poet Max Herrmann-Neisse (1927)
George Grosz's Portrait of the Poet Max Herrmann-Neisse (1927)

After his death, the German government awarded Grosz damages for his persecution by the Nazis and for the loss of the art collection he left behind. For decades, the circumstances of the Nazi takings of the artworks were unknown, as were the circumstances surrounding sales of artworks from Flechtheim’s estate (Flechtheim died in 1937 in London, while the Nazis were in power). In 2003, art historian and researcher Ralph Jentsch who had been diligently tracking Grosz artworks for decades, uncovered concrete evidence in Dutch and then Russian archives revealing that the artworks had been stolen from Flechtheim and that Grosz had never authorized any sales of Grosz’s works.

In 2003, the heirs of George Grosz submitted a claim to MoMA showing that title to the artworks remained in George Grosz and his heirs. For several years, the Museum and the Grosz Heirs cooperated in researching the provenance of the artworks. On April 12, 2006, MoMA’s Board of Trustees refused to return the works. In 2008, MoMA’s lawyer wrote to a lawyer for the Grosz Heirs confirming April 12, 2006 as the “refusal” date.

New York’s statute of limitations relating to stolen artwork is based on “demand and refusal”. That is, the true owner must make a “demand” and the possessor must make a “refusal”. The rule is that plaintiffs have three years from the “refusal” to sue.

The Grosz Heirs sued on April 10, 2009, just before the three years elapsed. But MoMA claimed that the refusal had occurred much earlier, based on settlement communications from MoMA’s Executive Director Glenn Lowry, who had represented to the Grosz Heirs that he had no authority to “refuse” their claims and that only the Board of Trustees had such authority.

Accepting MoMA’s arguments on a motion to dismiss, the District Court rejected the Grosz Heirs’ claims as time-barred and dismissed the case.  The District Court held that MoMA’s retention of the artworks implied a “refusal”. The District Court also found that it appeared that Alfred Flechtheim’s loss of the artworks was due to his financial irresponsibility rather than Nazi persecution. The Grosz Heirs were denied discovery into MoMA’s records relating to artworks from Flechtheim’s 1933 inventory now in MoMA’s collection.

I will be arguing on behalf of the Grosz Heirs that the District Court’s decision was erroneous.  The case was timely filed within the “demand and refusal” rule clarified in Guggenheim v. Lubell. Under New York law, a “refusal” must be authorized by the legal possessor. Settlement discussions in Holocaust cases can take years. Here, the Grosz Heirs consented to MoMA’s possession of the artworks, so the statute of limitations clock for “conversion” could not be ticking. If the District Court’s new “implied refusal” rule stands, it turns New York law on its head. It would destroy the ability of parties to work together in good faith to resolve issues, particularly where Holocaust victims or their descendants may not be represented by lawyers. Federal courts are supposed to follow New York State law, not change it.

Additionally, the District Court should have permitted discovery into documents in MoMA’s possession relating to Alfred Flechtheim’s 1933 inventory. MoMA’s Executive Director Glenn Lowry swore to Congress that MoMA’s provenance records are open to researchers. MoMA is funded by taxpayers and its assets are held in trust for the public. There is no reason for its records to be secret.

The District Court’s use of extrinsic materials and its prejudgments of the credibility of arguments relating to Alfred Flechtheim’s spoliation by the Nazis on a motion to dismiss were improper. On a motion to dismiss, the pleadings are to be given every inference in favor of the Plaintiffs, not against them. Rule 408 of the Federal Rules of Evidence forbids the use of settlement communications to prove the invalidity of a claim. The District Court’s prejudgments on these issues are so serious and fundamental as to warrant reassignment on remand.

The Second Circuit is second only to the U.S. Supreme Court in terms of prestige. This is a case with extraordinary ramifications. Either U.S. museums hold property in the public trust and remain at the service of education and taxpayers, or they are transformed into machines for the laundering of stolen art where tax breaks are doled out to the wealthy with no questions asked and taxpayers footing the bill. This case may well decide as a practical matter whether another generation of U.S. children will be viewing artworks stolen from victims of Nazi persecution having no idea who the true owners are. We hope that the Second Circuit will address the critical issue of whether the US courts will permit museums to stonewall researchers, historians and educators from conducting appropriate research. Receiving stolen property has always been a crime. The Grosz Heirs have asked the court to impose a “constructive trust” on the artworks and to force the MoMA to disgorge them, since retaining stolen property is inconsistent with the charitable, educational and scientific purposes that a tax-exempt entity is permitted to engage in. A constructive trust is a flexible, traditional remedy under New York law that avoids unjust enrichment. The statute of limitations on a constructive trust is six years.

The U.S. government is urging countries around the world to return artworks stolen from Nazi persecutees and their descendants. Abraham Lincoln’s Lieber Code, set up during the Civil War to protect an enemy’s cultural property from looting during wartime, was the inspiration for the 1907 Hague Convention which forbids looting of cultural property and of property of civilians. The Nazi looting of artworks was studied by a U.S. commission in place from 1943-1946 led by U.S. Supreme Court Justice Owen J. Roberts. The Roberts Commission and the U.S. State Department warned all U.S. art dealers, museums and colleges against acquiring artworks that entered the U.S. after 1933 and that were created prior to 1945 where such artworks had uncertain provenance.

From the beginning, U.S. museums thumbed their noses at the Roberts Commission and proceeded to acquire and accept donations of thousands of stolen or unprovenanced artworks. In 1964, the New York Times reporter Milton Esterow reported that almost 4,000 stolen artworks had been recovered in the U.S. and returned to Europe. Today, museums refuse to accept the consequences of their actions and to acknowledge that aquisition practices were, at best, reckless and at worst, criminal. It is a national disgrace that U.S. museums are not only failing to provide leadership by researching and returning stolen art in their collections, but their intransigence serves as an international inspiration to deny, particularly in Eastern Europe, important property rights that most Americans thought were secured in the Allied Victory in 1945.

Alfred Flechtheim was perhaps the leading art contemporary art dealer in Berlin during the Weimer Republic, representing such artists as Picasso, Klee, Dix, Grosz, Derain, and Belling. His image was used prominently in Nazi propanganda, including a life-sized image of him at Hitler’s infamous 1937 Degenerate Art exhibition. Yet there is practically nothing written on him in the English language, despite our most prominent and well-funded museums containing works that came from his 1933 inventory.

Museums should not be permitted to erase from the history of 20th Century Art Jews like Alfred Flechtheim by concealing the provenances of stolen artworks. The federal rules permitting disclosure of relevant documents and New York laws permitting timely lawsuits should, instead be followed. The District Court opined that the Grosz Heirs were arguing for New York law to be changed due to the special circumstances of the Holocaust. That is not the case, the arguments are based solely on controlling New York law grounded in precedents set by the New York Court of Appeals and Rule 26 of the Federal Rules of Civil Procedure which permits discovery into relevant documents – these laws and rules are applicable to all citizens and claims.

Proceedings in the Second Circuit are free and open to the public. If you have any interest, you may wish to attend.

By Raymond J. Dowd

I am a partner in the law firm Dunnington Bartholow & Miller LLP in New York City. I represent business and individual clients, mainly in copyright, trademark in business and estate-oriented litigation and licensing. I wrote Copyright Litigation Handbook (West 5th Ed 2010). The New York Law Journal called it "an indispensable guide". My practice involves art law and litigation. I serve as Vice President for the Second Circuit and General Counsel of the Federal Bar Association, the nation's premier bar association for the federal practitioner. Attorney advertising disclaimer - prior results do not guarantee success.

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