Art Law

Ruling on Disputed Schiele Drawing Offers Collectors Protection Against Some Ownership Claims

screen shot 2012 10 12 at 1 08 31 pm Ruling on Disputed Schiele Drawing Offers Collectors Protection Against Some Ownership Claims

Egon Schiele, ‘Seated Woman With Bent Left Leg (Torso),’ 1917. (Courtesy Pryor Cashman LLP)

Yesterday, the Second Circuit Court of Appeals affirmed a lower court’s decision in a seven-year legal dispute over the ownership of a drawing by Egon Schiele, saying the current owner of the drawing could keep it despite a claim by heirs of a collector killed during World War II that it had once been stolen from his estate. The case gives a measure of relief, in some instances, to people who buy art in good faith and then have their ownership questioned by allegations that the art was once stolen.

The subject of the suit is Schiele’s Seated Woman With Bent Left Leg (Torso), a drawing in the artist’s signature muted colors of a seated woman wearing undergarments and black lace-up boots.

The current owner, David Bakalar, purchased the drawing in the early 1960s from a gallery in Manhattan. The heirs to Fritz Grunbaum, a Viennese cabaret singer who was murdered by the Nazis in 1941, claimed the work had been confiscated following his arrest in 1938.

Under a New York law, someone who buys a work of art that has at any point been stolen can’t have “good title,” even if the person bought the work in good faith. Thus, the heirs claimed, Mr. Bakalar didn’t have good title, and the work should be given to them.

Unfortunately for the heirs, the court ruled that they had been unable to prove that the drawing had in fact been stolen by the Nazis. According to a statement by Mr. Bakalar’s attorneys, James Janowitz and William Charron of Pryor Cashman, there was “compelling evidence” that, after Grunbaum’s death, the work had been sold by Grunbaum’s sister-in-law, showing that the work had remained in the family.

Particularly important in this case, though, is the court’s decision regarding New York’s so-called “laches defense,” a regularly used defense in ownership disputes made by good-faith buyers to protect themselves against frivolous claims.

The heirs argued that if the sister-in-law did own the drawing, then she had stolen it from Grunbaum’s estate. But Mr. Bakalar claimed, via his lawyers, under New York’s “laches defense”—which aims to bar cases in which there has been a lengthy delay in filing a claim—that that argument was made a few generations too late and that crucial evidence had disappeared. The parents and grandparents of the heirs would have been in a better position to make the argument since they had more direct knowledge of the situation, the appellate court affirmed.

Regarding the laches defense, Raymond Dowd of Dunnington, Bartholow and Miller LLP, the attorneys for the heirs, rejected Mr. Bakalar’s arguments, saying the laches doctrine is a “classic ‘sit on your hands’ defense,” which traditionally has placed a very heavy burden for claimants, as reported in a May story in The Art Newspaper. Mr. Dowd said his clients were not aiming to eliminate the procedure, but wanted to put the burden on the buyer to show that they exercised due diligence when acquiring the work. Attorneys for Grunbaum’s heirs were not immediately available for comment.

The implications of the case were deemed important enough by the Art Dealer’s Association of America, the Society of London Art Dealers and U.K. dealer Richard Nagy that they jointly submitted an amicus curiae, or “friends of the court” brief that argued against limiting the Laches doctrine.

“The court’s ruling is significant in holding that the laches defense, and the question of delay in gathering evidence, does not reset with each successive generation,” said James A. Janowitz, a senior partner at Pryor Cashman, in a statement. “The duty to search and act in a timely matter should rest with the first generation to lose the property.”

While New York generally tends to favor the rights of dispossessed former owners over the rights of good-faith purchasers, this reconfirmation of the laches defense should provide some peace of mind to people who buy art in good faith against people making claims when a great deal of time has passed since alleged thefts.