Monday 15 October 2012

US Court of Appeal rejects Nazi theft claims

The US Court of Appeals for Second Circuit last week affirmed in its entirety the judgment of the District Court in relation to an ownership dispute concerning this 1917 drawing by Egon Schiele known as Seated Woman With Bent Left Leg (Torso):


As we reported here, the case was brought by David Bakalar who sought a declaration that he was the lawful owner of the work having purchasing it from a dealer.

On the other side, were Milos Vavra and Leon Fischer who were the heirs to Fritz Grunbaum, a prominent Austrian Jewish art collector, who owned the work before he was murdered by the Nazis in 1941. Vavra and Fischer claimed in the alternative that either (i) the work had been stolen by the Nazis after Grunbaum's arrest in Vienna in 1938 or (ii) the drawing had been stolen from the Grunbaum estate.

The District Court for the Southern District of New York awarded judgment to Bakalar on the basis of laches. In this respect, the Court noted that Vavra and Fischer ancestors' were aware of, or should have been aware of, their potential intestate rights to Grunbaum's property, and were not diligent in pursuing their claims to the work, which meant that Bakalar was Prejudiced in his ability to garner evidence to vindicate his rights in the work. The District Court also found that was not looted by the Nazis.

Vavra and Fischer appealed on the basis that that the District Court committed two errors of law bearing on the laches defense and challenged the finding that Bakalar was prejudiced by their ancestors’ delay in pursuing the work.

The Court of Appeals rejected the appeal in full finding no merit in Vavra and Fischer’s arguments. It held that there was 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 the litigation as a result of that delay. It was therefore sound to recognize Bakalar’s title on the basis of his laches defense.

This is an important decision for the New York art market which favours the rights of dispossessed former owners over the rights of good faith purchasers of stolen property, to ensure there is a balance between both parties' rights. Claims can be made by dispossessed owners, but they need to be made in good time in order not to prejudice the purchasers' ability to defend their rights.

The decision of the US Appeals Court can be found here.

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