Estate of Family Who Fled Nazi Germany Sues Met For Return of Picasso Allegedly Sold Under Duress

The estate of a family who fled Nazi Germany recently sued the Met Museum in the U.S. District Court, Southern District of New York, claiming that it was the rightful owner of a work by Pablo Picasso titled “The Actor.”

According to the complaint in Zuckerman v. The Metropolitan Museum of Art, Paul Friedrich Leffmann, a successful and wealthy businessman from Cologne, Germany, purchased the work in 1912.  After Germany’s Nazi regime implemented the Nuremberg Laws, the Leffmanns were forced to emigrate to Italy in 1937.  There, according to the complaint, they faced the same kind of persecution they suffered in Germany.  The plaintiffs further alleged that, due to the discriminatory and confiscatory laws in Italy, and the regulatory barriers associated with fleeing to countries such as Switzerland and Brazil, Lefmann, sold the Work under duress at a deep discount in 1938.  After the Work changed hands at least two more times, the Work was donated to the Met in 1952.

According to the complaint, the Met either knew and failed to disclose; or should have known that the Work had been owned by a Jewish refugee who only disposed the Work under duress because of Nazi and Fascist persecution.  In support of this allegation, the plaintiff cited, among other things, State Department efforts to warn museums, libraries, art dealers, and others to use vigilance in identifying “cultural objects with provenances tainted by World War II.”  The plaintiff also alleges that the Met published an inaccurate provenance for the Work, which indicated that Leffmann sold the Work much earlier than 1938.

According to news reports on the case, the Met is expected to argue that Leffmann actually sold the Work at market value in 1938 and was therefore, not a sale under duress.  The Met is also expected to argue that inaccuracies in the Work’s provenance were based on a former buyer’s inaccurate recollection rather than anything nefarious.

It will be interesting to see how Zuckerman unfolds.  There is no denying that the Nazi regime looted art and that many sales were made under duress.  One question is whether a valuation analysis can shed light on the issue of whether this Work was sold at the then value or under duress.  Watch this space.

Thanks to Mike Gauvin for his contribution to this post.  For more information, please email Dennis Wade at dwade@wcmlaw.com.

It’s a bird, it’s a plane, it’s… New York’s Statute of Limitations

In world where each new Marvel motion picture conquers the box office, it’s easy to forget that many of these characters grew out of the imagination of comic book artists and writers from the 1960s. Wally Wood—having the hallmark alliterative name common to many superhero alter-egos—was one of those artists that left his mark on the industry in the likes of Stan Lee and Jack Kirby. Although Wood’s life ended tragically, his style and format for comic books are still used today.

At the time of Wood’s death 1981, his will bequeathed his bank accounts to his ex-wife Tatjana Wood, but all of his published and unpublished artwork was to go to his friend, John Robinson. An aficionado and biographer of Wood, J. David Spurlock, created Wallace Wood Properties, LLC to obtain the rights from Robinson for all of Wood’s work.  In 2006, Spurlock interviewed Tatjana and noticed many pieces of Wood’s artwork in her apartment. In 2009, Spurlock reviewed a copy of Wood’s will, which explicitly bequeathed all of his artwork to Robinson. In 2013, Spurlock demanded that Tatjana return all of the artwork in her apartment, whether published or not. Tatjana refused the demand, and Spurlock commenced an action for conversion and replevin in 2014.

The district court granted Tatjana’s motion to dismiss the complaint because Spurlock’s conversion and replevin action was time-barred by New York’s 3 year statute of limitations. On appeal in the Second Circuit, Spurlock argued the action was timely based on the “demand and refusal” rule—whereby an action against a good faith purchaser of stolen property accrues once the true owner makes a demand and is refused. Because Spurlock demanded and was refused the return of Wood’s artwork from Tatjana in 2013, he argued the statute of limitations did not begin to run until 2013. In addition, Spurlock sought equitable tolling of the statute of limitations because of Tatjana’s alleged fraudulent concealment of Wood’s artwork.

In Wallace Wood Properties, LLC v. Wood, the Second Circuit Court of Appeals affirmed the district court, holding Spurlock’s conversion and replevin action is time-barred by the statute of limitations. The Court applied two important caveats to the “demand and refusal” rule. First, where the sought after property was held in bad faith or unlawfully, the limitations period begins to run immediately from the time of unlawful possession. Thus, if a party possesses property unlawfully, it is of no moment when a demand and refusal are made, only when the party took unlawful possession. Second, if the current possessor deals with the contested property openly, as if it were his/her own, then the “demand and refusal” rule does not apply.

Although Spurlock specifically alleged Tatjana was not a thief, the Second Circuit looked to the allegations in the complaint to determine whether the caveats to the “demand and refusal” rule apply. According to the Court, the complaint was permeated with allegations that Tatjana knew she was not the rightful owner of the artwork, and that she fraudulently concealed the identity and possession of Wood’s artwork. Based on these allegations, the Court held Tatjana was a bad-faith or unlawful possessor, and the statute of limitations began to run when she took possession of the contested property around 2005. Further, Tatjana’s open display of Wood’s work in her apartment indicated she considered the property her own, thereby satisfying the other caveat to the “demand and refusal” rule.

The Court may have applied the “demand and refusal” rule if Spurlock did not include such specific and detailed allegations. Instead, the verbose allegations regarding Tatjana’s bad-faith possession may have had the opposite effect of that intended by Spurlock’s attorney. Perhaps if Spurlock and his attorneys heeded the advice of Wally Wood’s famous “22 Panels That Always Work!!” (pictured below), things could have played out differently. In that work, Wood satirized what comic book artists have to do when “some dumb writer has a bunch of lame characters sitting around and talking for page after page!” Clearly, Wood was partial to more concise writing.

22 Panels That Always Work!!

Thanks to Dan Beatty for his contribution to this post. If you have any questions about this post, please call or email Brian Gibbons at Brian Gibbons for additional information.

WCM Defeats Claim For Title Coverage Under Fine Arts Dealer Policy

In a matter of first impression, WCM convinced the New York Supreme Court that a fine arts dealer all-risk policy does not provide coverage for defective title, notwithstanding the fact that the policy was silent in respect of defective title, and a very sympathetic plaintiff.

Jasper Johns is an iconic American artist who had the misfortune of having a criminal as his trusted studio assistant.  Between 2006 and 2012, James Meyer stole several works of art from Johns and secretly sold the stolen works to various art galleries and collectors under contracts prohibiting buyers from selling or publicly displaying the works for seven years or until the artist died.  Meyer explained this odd condition by telling prospective buyers he received the art as a gift and that he would be embarrassed if Johns found out he was profiting off the artist’s generosity.  At his sentencing, Meyer expressed regret for his actions for betraying his mentor.

But Jasper Johns was not Meyer’s only victim.  The galleries buying those stolen pieces were also victims.  One such victim was the plaintiff in DAE Associates, LLC d/b/a Danese Gallery v. AXA Art In. Corp. et al.  In DAE, the plaintiff was the owner of an art gallery who, in 2010, was approached by an intermediary claiming to have Untitled, 2002-2005, Acrylic on paper, 37 ¼ x 30 inches, by Jasper Johns, for sale.  He was told that the work was available on the condition that they eventual buyer keep the work private and not to loan or sell the work for seven years, or unless Jasper Johns passes away.  Like the gallerists who preceded him, the plaintiff was told that the work was a gift.

After being told the work was available, the plaintiff found a couple willing to buy the work, and sold the work to the couple for $825,000.  In the contract with the couple, the plaintiff warranted that he had marketable title to the work and promised to rescind the sale and refund the purchase price if title proved to be defective.  Three years later, the couple was approached by an FBI agent who informed them that the Jasper Johns hanging in their house was stolen.  After returning the work to its rightful owner, the couple sued the gallerist for breach of contract.  That suit, styled Perry and Donna Golkin v. DAE Associates, LLC d/b/a Danese Gallery, is currently pending in the New York Supreme Court.

In DAE, the gallery sued AXA seeking coverage under its Fine Art Dealers All-Risk policy, which provided coverage for all risks of loss or damage to insured property except as otherwise excluded.  The plaintiff argued that he suffered a loss, that the policy did not use the word “physical” and that defective title was not excluded under the policy.  AXA disagreed, and argued that the artwork, which was the insured property, suffered no loss and that the plaintiff’s loss was a purely financial one which flowed from a simple breach of contract.

AXA also argued that New York Insurance statutes recognize title insurance as a separate product and that it was not even permitted to write title insurance under New York law.  This argument was supported by the plaintiff’s admission, during his pre-suit examination under oath, that he was aware of a separate product called title insurance, but that it was an expensive product.

Based on these arguments, AXA filed a pre-answer motion to dismiss.  After the motion was fully submitted and oral arguments made, the Honorable Jeffrey K. Oing agreed with AXA and ruled that there was no coverage under the policy.  According to Judge Oing, although the plaintiff suffered a monetary loss, he did not suffer a covered loss because there was no loss to the insured property itself, the stolen Jasper Johns work.

DAE is significant because it provides insurers with reassurance that their fine arts dealers all-risk policies cannot be transformed into title insurance based on the mere fact that defective title is not mentioned in any exclusion.

AXA was represented by Dennis M. Wade and Michael A. Gauvin of Wade Clark Mulcahy.  If you have any questions, please email Dennis at dwade@wcmlaw.com.

Prominent Art Gallery Alleges It Was Sued for “Buyer’s Remorse” (NY)

A recently filed suit by art dealer Fabrizio Moretti claims art dealer David Zwirner engaged in “chicanery” and played a game of “three-card monte,” regarding the sale of a sculpture titled Gazing Ball (Centaur and Lapith Maiden) by artist Jeff Koons, pictured below.

Gazing Ball (Centaur and Lapith Maiden)

The work of art was initially marketed by Zwirner in 2013 as Edition 1 of 3 (plus an artists’ proof). In June 2014, Moretti contracted with Zwirner’s gallery to purchase #2 of 3 in the sculpture set for $2,000,000. According to the complaint, Zwirner promised Moretti the sculpture would be delivered within a year after signing the purchase agreement.

Moretti alleges his sculpture was completed in April 2015, but was misidentified as “3/3.” Moretti claims Zwirner knew the work was mislabeled, but did not attempt to correct the mistake because Zwirner wanted to sell the work as the third and final part of the set at public auction. In May 2015, #3 of 3 was listed at Sotheby’s in New York, but failed to fetch the estimated $1.8–$2.5 million listing price. According to Moretti, this failed auction heavily damaged the overall value of Koons’ work. After waiting over two years for #2 of 3, Moretti advised Zwirner it was cancelling the contract and he requested his money for the sculpture be returned. When that didn’t happen, Moretti filed suit seeking $6 million in damages, and alleging violations of New York Arts and Cultural Affairs Law, breach of contract, breach of warranties, and fraud.

Zwirner swiftly moved to dismiss the complaint in lieu of answering based on CPLR 3211(a)(1) and (7) for failure to state a claim and documentary evidence. According to Zwirner, there was no breach of contract because the purchase agreement did not contain any deadline for completion, and Moretti was required to provide notice before claiming a breach.  According to Zwirner, Moretti continued to make payments on the sculpture, showed interest in having it delivered, and only now seeks to cancel the contract because he “lost interest” in the work.

It will be interesting to see whether the court grants Zwirner’s motion to dismiss. Here, it does seem there was some “chicanery” on both sides. Moretti likely was sold on the exclusivity of Koons’ work based on the artist’s relationship with the Zwirner Gallery and the exhibition materials provided to Moretti by Zwirner. The catalogue clearly states that Gazing Ball is Edition 1 of 3 (plus artist’s proof). Yet, Moretti claims there are at least five casts of the sculpture (with more on the way), and Moretti would not have made his original purchase if all of this information was disclosed. In the world of fine art, owning a specific piece of art from a set can drastically increase the work’s overall worth because of its exclusivity. Yet, according to Moretti, Zwirner ignored this exclusivity premium by attempting to sell additional sculptures as “prototypes.”

On the other hand, there is substance to Zwirner’s claims that Moretti is simply having “buyer’s remorse.” Why would Moretti continue to make payments on the purchase agreement without requesting a deadline for the completed work? Why would Moretti inquire with Zwirner about potential resale values for Koons’ work a couple months before attempting to rescind the contract? Moretti may have determined the subjective interests that drive the art world no longer favored Koons’ work (e.g., the failed Sotheby’s auction). Upon seeing the decline in interest for similar sculptures, Moretti may be trying to hedge his bets since the sculpture was never delivered. Either way, it’s a case that we will keep an eye on because it can have profound effects on how art galleries transact business with each other.

Thanks to Dan Beatty for his contribution to this post. If you have any questions about this post, please call or email Brian Gibbons at Brian Gibbons for additional information.

Settlement Reached Over $100 Million Picasso Sculpture (NY)

A hotly contested and widely followed lawsuit involving the Gagosian Gallery, billionaire investor Leon Black and a $100 million Picasso sculpture was recently resolved, and the reports indicate the settlement involved Black keeping the sculpture.

In January of 2016, the Gagosian Gallery sued to quite title over the 1931 Picasso work, Bust of a Woman.  The gallery claimed that it had exhibited the work for the previous owner,  Picasso’s granddaughter, Diana Widmaier Picasso, for the purpose of finding a buyer.  Eventually, the gallery reached a deal with Diana to purchase the work for more than $100 million for resale to one of its clients (later revealed to be Leon Black).  However, while the work was on loan at MoMA, the gallery learned that Pelham claimed it had purchased the work for approximately $42 million, so the gallery sued for a declaration that it was the rightful owner.

Pelham counter claimed, alleging that it had previously reached a deal to buy the work from Picasso’s grandson Olivier Widmaier Picasso and his mother, Maya Widmaier Picasso.  Pelham alleged the work was purchased on behalf of the Qatar royal family for the Qatar Museums Authority.  However, when Diana learned of the sale, she convinced Maya to repudiate the deal with Pelham so that she could try to strike a better deal with her “ally,” Larry Gagosian.  It was alleged that the gallery’s claims that it was unaware of the deal with Pelham were false, as had the gallery done any due diligence, it would have known of the deal.  Instead, it was claimed that the gallery struck a secret side deal to buy the work and conspired with the Picassos in claiming that Maya had a temporary mental incapacity that made the Pelham deal invalid.

Unfortunately for the art law community, these interesting claims will not be developed further as it appears as if the Picasso’s paid Pelham to make this matter go away, with Black keeping the painting.  But no doubt a new art controversy will soon replace this one.  Please write to Mike Bono for more information.

Award Upheld Real Estate Tycoon for Knockoff Sculptures

In 2001, real estate developer Igor Olenicoff (worth an estimated $3.6 billion and one of the 500 wealthiest people in the world according to Forbes) approached artist John Raimondi about purchasing some of his sculptures for Olenicoff’s properties.  Raimondi , a well-known sculptor of steel and bronze,  provided Olenicoff with pictures, drawings, and prices for “Dian” and “Cere.”  Olenicoff passed, but as Raimondi later learned, Olenicoff instead had them copied in China.  

Raimondi discovered at least four versions of his sculptures were on display outside Olenicoff’s properties with plaques naming the artist as “Mao Tian” and sued Olenicoff.    Prior to trial, Olenicoff stipulated he was liable for copyright infringement, so the trial only concerned damages and  the jury returned an award of $640,000. 

Following the trial, Olenicoff filed a motion to set aside the verdict as against the weight of the evidence, and Raimondi filed a motion for a permanent injunction ordering the sculptures be torn down.   In upholding the verdict, the Court found the jury was properly instructed that the measure of damage to compensate the copyright owner was the reduction of the fair market value of the copyrighted work caused by the infringement.

The reduction of the fair market value of the copyrighted work is the amount a willing buyer would have been reasonably required to pay a willing seller at the time of the infringement for the actual use made by the defendant of the plaintiff’s work. That amount also could be represented by the lost license fees the plaintiff would have received for the defendant’s unauthorized use of the plaintiff’s work.  A license price is typically established through objective evidence of benchmark transactions.  The jury was presented with a history of past sales they could have used to arrive at a hypothetical transaction for the sculptures in 2010, and Raimondi testified to three transactions where he authorized parties to reproduce his sculptures in exchange for an amount of money equal to his typical profit from selling finished sculptures.

The judge also dismissed Raimondi’s motion for the works to be destroyed, stating that Raimondi has already been compensated for the ongoing rights to display the sculptures, but ordered that the sculptures should now be properly attributed. 

Thanks to Betsy Silverstine for her contribution to this post and please write to Mike Bono for more information. 

 

Artists File Another VARA Suit for Destruction of Five Pointz (NY)

Five Pointz was a warehouse in Long Island, City, Queens that became famous because it was covered with graffiti art.  The property owner actually encouraged the grafitti and allowed a “curator” to organize the various artists and their projects.

But eventually the property owner wanted to sell the warehouse to housing developers.  The artists filed suit under the Visual Artists Rights Act, which provides protection to living artists for modification of their art.  The plaintiffs sought to obtain a preliminary injunction against the property owner to protect the art and to prevent the sale of the building, but the owner of the property suddenly painted the building white in the middle of the night to cover the graffiti.  The Court denied the injunction finding that their was limited proof as to whether Five Pointz was a work of “visual art” of “recognized stature” as required by the VARA statute.

The first lawsuit, Cohen v. G&M Realty, remains pending, and now a second set of artists have filed suit in Castillo v. G&M Realty.   These artists also seek damages under VARA, alleging that they transformed a “derelict property” into a tourist mecca that attracted aspiring artists from all over the world.  Of note is that these artists also seek damage for the owner’s “whitewash” of the building.

It remains to be seen whether either of these suits can get past the original hurdles identified in the decision denying the preliminary injunction. It will also be interesting to see if these courts determine that the rights of the artists to protect their works trump the rights of a building owner to modify and sell his property.

We shall continue to follow these cases on Of Interest.  Please write to Mike Bono for more information.

McEnroe Ace’s Art Dispute Again on Appeal (NY)

We previously posted about John McEnroe’s successful replevin action arising out of his partnership with infamous fraudster Larry Salander.  That decision was recently upheld by the Appellate Division and Johnny Mac remains the rightful owner of Gorsky’s Pirate II.

Salander and McEnroe had partnered to purchase the work, but Salander later sold it without permission to Joseph Carroll, an art dealer.  The Court found that Salander had no ability to pass title because he sold the work in the name of a bogus company and not through the McEnroe and Salander partnership.  Likewise, it was a sham conveyance outside of the ordinary course of the partnership’s business and Salander had no apparent authority to act for the partnership.

The Court also found that Carroll was not protected by the UCC because he obtained the artwork in a “grossly undervalued transaction”, he failed to make sufficient inquiries as to Salander’s authority to sell the work,  and he did not “observe the reasonable commercial standards of the art trade” because of all of the red flags surrounding the transaction.   The Court rejected all of the other arguments and upheld the trial court’s decision to award the work to McEnroe.

Please write to Mike Bono for more information.

Court Dismisses Perelman’s Suit Against Gagosian Gallery (NY)

We previously posted about the litigation involving Ron Perelman’s investment group and the Gagosian Gallery.  The parties failed to heed the Court’s suggestion that they resolve the matter at a cocktail party, and instead an appellate court recently dismissed the case entirely.

The Appellate Division agreed with the trial court and found that there were no fiduciary obligations between these sophisticated parties who negotiated at arm’s length and that the gallery did not “exercise control and dominance over plaintiffs”  who were admittedly companies that frequently purchased, sold, and exchanged works of art as investments.

The Court then went even further than the trial court and dismissed the fraud claims, which alleged that the defendants misrepresented the value of certain works of art which were claimed to be supported by market data — when they were not.

The Court found that the complaint failed to state a cause of action for fraud because plaintiffs did not allege justifiable reliance.  As a matter of law, the “sophisticated plaintiffs cannot demonstrate reasonable reliance because they conducted no due diligence; for example, they did not ask defendants, “Show us your market data.””

In addition, the Court found that fraud claims against the gallery for misrepresenting the value of certain art works could not stand because “statements about the value of art constitute nonactionable opinion that provide[s] no basis for a fraud claim.”

It would have been interesting to see whether there would have been a different outcome if the case was brought by an individual collector and not an art investment group.   But in any event, this decision shows that suing an art gallery because of a perceived bad deal is an uphill battle.

Please write to Mike Bono if you would like more information.

Court Excludes Art Appraiser’s Testimony (NY)

A clothes dryer ironically causes a fire in the mansion of a clothing designer. The manufacturer of the dryer is sued for damage to original art. As often is the case during art litigation, the case turns into a battle of experts to determine the value of the art.

Last month, in Oleg Cassini Inc. v. Electrolux Home Products Inc., a New York Federal Court excluded from trial an art appraiser’s testimony despite 27 years art appraisal experience; a Bachelor of Fine Arts from Cornell University; a Master’s in Industrial Design from Syracuse University; courses at the Rhode Island School of Design; certification in appraisal from New York University; membership in the Appraisers Association of America; a license through the Uniform Standards of Professional Appraisal Practices; and previous qualification as an art appraisal expert by a Federal Court in Alaska.

The New York Federal Court found nothing wrong with the methodology used. So what happened? The expert’s valuation experience in this specific type of art (fashion sketches) was unclear; some of the appraisals were based upon photographs taken by others; the report lacked information about comparables such as date of sale, whether sold by auction or private sale, sales price, and the reason for selection; and calculations were not explained.

Experts are critical in damaged art litigation, not to mention expensive. Follow the roadmap set out in Oleg Cassini Inc. to avoid being caught at trial up a creek without an art appraisal expert.

Thanks to Betsy Silverstine for her contribution to this post.  For more information, please write to Mike Bono.