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New York Court Applies the HEAR Act, Orders Return of Nazi-Looted Art

May 10, 2018

Author: Brian P. Mangan

The decision in Reif v. Nagy, Sup. Ct. N.Y. City, April 5, 2018, has wide-ranging implications for litigation relating to art that was lost or stolen in the Holocaust. Justice Ramos of the Commercial Division of the Supreme Court granted summary judgment directing that two artworks looted by the Nazis during the Holocaust be returned to their true owners. This is a landmark decision and the first to truly rely on a new piece of legislation, the Holocaust Expropriated Art Recovery Act of 2016 (HEAR Act).

Background
There was no dispute between the parties that the artworks, two gouaches by Egon Schiele entitled Woman in a Black Pinafore and Woman Hiding Her Face (the Artworks), were once part of the collection of a Jewish-Viennese cabaret performer named Fritz Grunbaum. The Artworks were in the possession of a London art dealer named Richard Nagy and on display at the Park Avenue Armory in New York City when Grunbaum’s heirs (the Heirs) discovered their location. A few years earlier, the Heirs had been unsuccessful in attempts to recover another artwork that was alleged to once have been the property of Grunbaum. See Bakalar v. Vavra, 819 F. Supp. 2d 293 (S.D.N.Y. 2011) aff'd, 500 F. App'x 6 (2d Cir. 2012). The judge in Bakalar held that the Heirs’ claims were barred by the equitable defense of laches, under which a court can weigh the equities and refuse to return a chattel if the true owner had not been diligent in seeking its return and that delay prejudiced the current possessor.

The Decision
In delivering his decision ordering the return of the Artworks to the Heirs, Justice Ramos stated that “this case must be viewed in [the] context” of the recently passed HEAR Act, which codifies into law several prior statements of U.S. policy (such as the Washington Conference Principles on Nazi-Confiscated Art). The HEAR Act “expanded the timeliness for actions to recover Nazi-looted artwork to six years from the actual discovery by the claimant,” and such actions are now deemed timely “notwithstanding any defense at law relating to the passage of time.”

At its core, Justice Ramos explained, “the HEAR Act compels us to help return Nazi-looted art to its heirs.” The decision continues:

In the HEAR Act, the [Washington Conference] Principles, and the Holocaust Victims Redress Act, we are instructed to be mindful of the difficulty of tracing artwork provenance due to the atrocities of the Holocaust Era, and to facilitate the return of property where there is reasonable proof that the rightful owner is before us (Holocaust Victims Redress Act).

The Heirs’ action already would have been timely under the existing New York replevin statute (CPLR Sec. 214(3)), in which the statute of limitations runs from the time that the current possessor refuses to return a chattel after return is requested. However, it was unclear how this court would address the laches defense.

Justice Ramos granted summary judgment in favor of the Heirs based on his findings that the Artworks were the property of Grunbaum, the Artworks were looted by the Nazis, the rightful Heirs were before the Court, and Nagy had failed to establish a triable issue of fact regarding any superior claim to the Artwork. Justice Ramos summarily denied the laches defense in light of the HEAR Act, but did not address the merits of the arguments for or against its application, such as whether laches was unavailable because Justice Ramos considered it a defense at law relating to the passage of time, or because it is generally unavailable within a federally prescribed statute of limitations period.

This decision is likely to have far-reaching implications for other cases involving art lost or stolen during the Holocaust, especially for the duration of the period of applicability of the HEAR Act, which has a sunset provision of December 31, 2026. Any claims commenced after that date will be subject to the prior existing statutes of limitations unless Congress chooses to extend the Act’s applicability. Nagy’s attorneys indicated intent to appeal Judge Ramos’s decision.

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