Legal Analysis

The People of New York v. Museum of Modern Art 

Judge Drager of the New York Supreme Court was the first to hear the People of New York v. Museum of Modern Art, the MoMA’s legal challenge to the DA’s seizure. While, he found in favor of the museum and quashed the subpoena, the Appellate Court subsequently overturned his decision. The final 6-1 decision by the New York Court of Appeals ruled in favor of the museum, which allowed the paintings to be returned to Austria (although, as previously noted, the US government then seized one of the two).  

The case hinged on the interpretation of Section 12.03 of the New York Arts and Cultural Affairs Law: 

No process of attachment, execution, sequestration, replevin, distress or any kind of seizure shall be served or levied upon any work of fine art while the same is enroute to or from, or while on exhibition or deposited by a nonresident exhibitor at any exhibition held under the auspices or supervision of any museum, college, university, or other nonprofit art gallery, institution or organization within any city or county of this state for any cultural, educational, charitable, or other purpose not conducted for profit to the exhibitor, nor shall such work of fine art be subject to attachment,  seizure, levy or sale, for any cause whatever in the hands of the authorities of such exhibition or otherwise.[28]  

The New York District Attorney’s office chose to view the case as a criminal case and asserted that the museum was in possession of stolen property. The DA argued that Section 12.03 was only intended to apply to civil cases and should in no way inhibit the grand jury's powers in a criminal case. In fact, the forms of process referred to in the statute are all terms that relate exclusively to civil litigation (i.e., "attachment," "execution," "sequestration," "replevin," "distress," "levied upon," "levy," "sale"). [29] Moreover, the statute makes no reference to subpoenas, or warrants, or to other forms of criminal procedure; the only word that could arguably be related to criminal procedure is "seizure," but in the context of the surrounding language, the DA argued, the meaning of this word was intended to relate to civil procedure. As explained in the DA’s appellant brief, "No rule of construction . . . permits the segregation of a few words from their context and from all the rest of the section . . . for the purposes of construction."[30] The DA further asserted that it seems unlikely that the drafter of Section 12.03 would make multiple references to the various types of civil procedure and then bring all forms of criminal procedure under the term "or any kind of seizure."  

The MoMA argued that, according to the principles of statutory construction, there was no reason to believe that the original drafters of section 12.03 intended to specifically exclude criminal cases.  

A general law may, and frequently does, originate in some particular case or class of cases which is in the mind of the Legislature at the time, but, so long as it is expressed in general language, the courts cannot, in the absence of express restriction, limit its application to those cases, but must apply it to all cases that come within its terms and its general purpose and policy.[31]      

Both parties agreed that the original incentive for Section 12.03 was the perceived abuse of a civil provisional remedy by a creditor to exploit a non-resident's loan of artwork to a museum in Buffalo.[32] Nonetheless, this does not necessarily also mean that the legislature intended to exclude criminal acts from falling under the jurisdiction of the law. In fact, the legislature drafted the law broadly rather than restricting it to situations similar to that which occasioned the original drafting. Hence the choice of the phrasing "any kind of seizure" and for "any cause whatever." The burden of proof was on the District Attorney to show that the original drafters actually meant to exclude criminal acts by virtue of their failing to include them.  

The DA also argued that a subpoena does not constitute a seizure, even under criminal law. On this point, the DA cited Matter of Grand Jury Subpoenas, 72  N.Y.2d 307, 315, cert. denied, 488 U.S. 966 (1988).   

"A search and seizure is conducted abruptly, without advance notice, often with force or the threat of force. A subpoena, in contrast, remains at all times under the control and supervision of a judicial officer and may be challenged before compliance through a motion to quash. Moreover, the unannounced search and seizure of documents often results in serious social stigma . . .  [T]ypically no stigma whatsoever attaches if [a subpoena] is enforced."[33]  

The DA maintained that even if "seizure" could somehow be deemed to include criminal process, it would only include warrants, not subpoenas.  Counsel for the MoMA countered that the court’s subpoena duces tecum effectuated seizure because it required the museum to appear in court with paintings that it was contractually obligated to return to Austria.  

The DA also argued that Section 12.03 did not apply because the MoMA had not proved that the Leopold Foundation did not benefit from the exhibition—that the exhibit was conducted “not for profit.” The DA sought a financial accounting of the exhibition and from this asserted that foundation had made a profit. The contract between the museum and the foundation obliged the museum to pay most of the expenses of the exhibition, which is standard practice in the art world. In addition, the museum agreed to pay the foundation $60,000 and a percentage of the catalog sales. The foundation’s expenses amounted to between $70,000 and $75,000 USD.[34] The MoMA contended that this information was entirely unnecessary because the question of whether or not the exhibition was "conducted for profit" is one of intention, not accountancy.[35] In the MoMA’s view, the loan of a collection from the Leopold Foundation, a non-profit cultural institution, to the Museum of Modern Art, a non-profit New York museum, was quite obviously "not conducted for profit" without regard to the specific expenses or reimbursements.[36]  

The museums and galleries of New York, and perhaps of the world, breathed a collective sigh of relief when the Court of Appeals’ decision was announced. A final decision in favor of the District Attorney would have set a precedent that could have proved to be very damaging to the arts institutions of New York. Moreover, had the court ultimately allowed the DA’s seizure of the Schiele paintings, the ramifications of this case would have been huge because the DA's power to issue subpoenas is not restricted to investigations of stolen property. If the court had found in favor of the DA, then any district attorney or assistant, anywhere in the state, would be empowered to seize by subpoena works of art that he or she suspects to be evidence of a violation of some penal law provision. This would include, for example, provisions that restrict the display of obscene or indecent material.[37] No foreign museum or collector has any reason to want to risk harassment over potentially controversial works of art.  

Unfortunately, the DA’s actions, despite the MoMA’s court victory, have already done at least some damage. In fact, just one month after the seizure of the Schiele paintings, two lenders backed out of an agreement to loan paintings to the museum for a Pierre Bonnard retrospective. One of the lenders wrote to the exhibition curator saying in part: "The news of the arrest of the two Schiele paintings in your museum made me very anxious and unsure, and you certainly will understand that I'm not in a position to lend you my painting under such circumstances."[38]   

It is impossible to determine how many other lenders have foregone lending paintings or collections for the same reason, without specifically saying so. Many collectors simply do not know the complete history of ownership of all their pieces and therefore do not know if some may have been stolen at one time—during the Holocaust or otherwise.  

Moreover, if the DA of New York were allowed to seize a painting every time someone recognized, or thought that they recognized, a piece, the New York art institutions would have a major public relations and legal issue on their hands. Indeed, a claim can be made by anyone—even someone who has only heard descriptions of a painting from an aging relative or someone who has only an old, yellowing photograph of a work to substantiate a claim—and the number of claims are in fact rising.

The “Immunity from Seizure Act” 

The whole MoMA fiasco might have been avoided if the museum had initially sought federal protection for the paintings under the "Immunity from Seizure Act," which can be applied to art works "imported into the United States from any foreign country .  .  .  for temporary exhibition or display” if the U.S. Information Agency determines that the artwork, or collection, is of "cultural significance" before it is imported.[39]  However MoMA has rarely attempted to navigate the bureaucracy involved in acquiring this protection because it is time consuming and because it believed broader protection was automatically available under New York state law—except for the fact that it does not protect paintings from federal seizure.  

Since the beginning of this case, the MoMA has chosen to apply for immunity from seizure protection for all of its temporary exhibitions from outside the United States. This is both because of its own desire to avoid a repeat of the Schiele seizure, and because lenders are requiring it before they agree to send a temporary exhibition. However this protection may not be enough to allay lenders’ fear of the whims of US law enforcement and would-be claimants.  

International Legal Issues 

There are large differences between individual countries’ laws relating to stolen art; they differ in their treatment of property rights, good faith purchases, statutes of limitations, adjudication means, and cost accounting methods, among other things. 

In the United Kingdom, for example, some museums have no powers at all to dispose of works in their collection, making it difficult for a museum to take steps to restitute a painting.[40] In the UK, all national museums and galleries are founded by acts of Parliament, and Parliament dictates what these institutions can and cannot do. Because UK museums are also charities, the charity law further restricts them. Restitution matters in the UK are also complicated by a legal presumption that good title to a work of art passes to the possessor if the possessor acquired the work in good faith and the appropriate limitation period has elapsed, which is currently six years. The presumption is particularly bothersome to those concerned with restitution because the UK was never occupied during the war, and accordingly, it is more than likely that UK museums were a destination for Holocaust loot. 

Political change within a country can also complicate restitution claims. When, for example, Martha Nierenberg made a claim that involved paintings in Budapest’s Museum of Fine Arts and National Museum, the new democratic government of Hungary convened a committee of experts that, after lengthy deliberations, decided the paintings did in fact belong to Nierenberger. By this time, however, a new government had come to power in Hungary. When she approached it with the committee's findings and a proposal to settle the claim, it was unwilling to accept the previous government’s findings and instead required her to start the process over again. She was forced to seek legal counsel and file suit in Hungary, but still the Hungarian government continues to delay her request even though Hungarian law supports her right to possession of the paintings.[41] 

These two situations are not unique. Every country has its own unique laws and political issues that make restitution claims more or less easy. In general, however, the situation is particularly difficult in Eastern Europe where the many political regimes are particularly unstable. There is a much stronger assumption in favor of original owners in countries that have signed the Unidroit convention.[42] 

The Unidroit Convention on Stolen or Illegally Exported Cultural Objects  

Unidroit, the International Institute for the Unification of Private Law, is an independent intergovernmental organization that was formed to "examine ways of harmonizing and coordinating the private law of States and of groups of States, and to prepare gradually for the adoption by the various States of uniform rules of private law.”[43] It became involved with the issue of stolen art when UNESCO asked for its assistance and input on the possibility of amending Article 7 (b) (ii) of the 1970 UNESCO Convention. The problem with this Article, and with the entire 1970 Convention more broadly, is that it only applies to objects stolen from a museum or from a religious or secular public monument or similar institution; it completely disregards the rights of individual, private claimants.  

UNESCO ultimately decided that instead of amending the 1970 Convention, it would commission Unidroit to create a new convention that would address two of the most significant private law aspects of the protection of cultural property: the acquisition in good faith of cultural objects a non domino and the principles of civil law affecting the transfer of ownership of cultural property.[44] 

The resulting “Unidroit Convention on Stolen or Illegally Exported Cultural Objects” attempts to unify national laws regarding stolen cultural objects. Opened to signature in 1995, the Convention does not specifically address the issue of art loans or Holocaust restitution, but its provisions, nonetheless, would be useful in settling such claims. The Convention calls for:  

• giving priority to the dispossessed owner as opposed to the purchaser, even if that purchaser acquired the piece in "good faith,"

• specifying a limitation period for the bringing of actions under the Convention for the return of a stolen object, and

• providing compensation to the possessor of a stolen object."[45]

The basic philosophy of the Convention is laid out in Article 3 (1): "the possessor of a cultural object which has been stolen shall return it."[46] This simple statement is an important innovation for those countries that have traditionally provided protection to a good faith purchaser. This includes countries in Europe, for example the UK, as noted above, and Italy, which only acknowledges purchasers' rights.[47] This provision has made it difficult for countries that have laws that favor purchasers to sign the Convention.  

The Convention’s specification of a limitation period is another area of concern for many countries. Some have argued against all limitation periods on the grounds that they would legitimize situations that resulted from illegal acts. Others insist that a time limit, especially if it were relatively brief, would encourage potential claimants to act quickly and avoid the disturbance of a long established possession.[48] In any event, the Unidroit Convention includes two limitation periods. The first is a short period of three years that begins as soon as the claimant comes to know the location and possessor of the cultural object in question; all claims must be made during these three years. The second limitation period is an absolute period of fifty years from the time of theft, however the Convention also grants exception to this rule for any “Contracting State” that wishes to declare a longer time limit.[49] Because of this absolute time limit, Holocaust loot is not covered by the Convention.  

The inclusion of a provision concerning compensation for a purchaser of stolen art is also considered to be very innovative, and hence highly controversial. The Convention states that "the possessor of a stolen cultural object required to return it shall be entitled, at the time of its restitution, to payment of fair and reasonable compensation provided that the possessor neither knows nor ought to have known that the object was stolen and can prove that it exercised due diligence when acquiring the object."[50] Because it is not fair to make the claimant, especially if it is an individual, pay the many thousands, or millions, of dollars that a painting may be worth, the Convention also provides that "reasonable effort shall be made to have the person who transferred the object . . . pay the compensation."[51]  

The Unidroit Convention provides the basis on which countries can unify their laws regarding stolen art purchases in favor of those who have been deprived of their works. Unfortunately, because of the wide differences in opinion between "exporting" and "importing" countries as to the breadth of the Convention, many countries have not yet signed and ratified it.  
  

Commercial Analysis 

The MoMA case raised at least three substantial financial issues for museums and galleries:  

Loss of Temporary Exhibitions/Loans  

As previously noted, just one month after the DA seized the Schiele paintings, two individuals backed out of agreements to loan paintings to the MoMA, and one of the lenders specified the seizure as the reason for the decision. New York’s museums and galleries would be dealt a severe blow if numerous lenders were to take similar positions and stop allowing their pieces to travel to New York. The loss of temporary exhibitions would mean lost revenues and probably decreased fundraising possibilities. Museums count on temporary exhibitions in order to hold special fundraisers that bring in new donors and show established donors that they are making a good investment. The funds raised by temporary exhibits are crucial not only for future temporary exhibits, but also the acquisition and maintenance of permanent collection pieces.  

Loss of Jewish and Other Donors 

The simple truth is that the issue of Holocaust-era stolen art, because of its connection to the horrifyingly systematic extermination of the Jews, elicits a response that other forms of art theft do not. The Federal Magistrate and the US Customs Service did not seize anything from a Boston Museum of Fine Art exhibit of Guatemalan artifacts--artifacts that had looted from Guatemala. The government didn't even respond when the museum refused to even consider the possibility of returning the pieces to Guatemala. 

Jews and others, however, remain deeply concerned about restitution of Holocaust art. If a significant number of donors were to pull their financial support from the MoMA in protest over the handling of the Schiele claims (or other potential claims), the impact on the museum’s finances would be significant.

The Cost of Provenance Research

By prompting museums and galleries internationally to embark on an intensive and ambitious process of provenance research, the MoMA case has created a new financial burden for the art world. Indeed, provenance research is extremely costly; it involves highly labor intensive, painstaking, and time-consuming work on the part of multi-lingual curators and their assistants. Researchers must first determine if there is a questionable period in a piece’s ownership history between 1933 and 1945. Then, where such gaps are found, researchers set about trying to fill them. Of course, such research is extremely difficult, if not impossible, for a temporary exhibit’s destination museum. Instead, lenders must be called upon to provide information, whether that be one museum or several individual collectors. The burden is especially large for small and mid-size museums. As one curator of a mid-sized museum putting together an international exhibition explains: 

"We have been putting a great deal of energy into the issue of provenance. But we are a small museum and have no resources to hire additional qualified hands to do the intensive research that may be warranted. For our recent exhibition we devoted extraordinary time, 16 months, and effort to determining that neither domestic nor international loans were likely to be subject to claims. Our immunity from judicial seizure application was successful but required the peculiar Catch-22 that we guarantee there was no possibility of competing claims of ownership. If we could provide such assurance, we wouldn't need the immunity. There were works for which we simply could not get information regarding crucial years."[52]  

According to MoMA Director Glenn Lowry, the museum has two full-time staff, plus some part-time staff, working on provenance research virtually non-stop. Some of the work is parsed out to some of the other 42 curators, depending upon their expertise. But the museum (like others) does not have a specific line-item budget for this work. It comes out of the budget allocated for curatorial work, which has not been increased to reflect this added workload. 

There are still a large number of works for which little to no information is available. Over the past 60 years, a great deal of information has been lost, and that which has not been might be buried in archives and government documents that are possibly not yet declassified. Therefore, even if museums do as much provenance research as possible, claims will likely still be made, and museums will need to be prepared to take on the research and legal costs involved in sorting them out.

Recommendations 

This case had the unintended consequence of forcing the issue of Holocaust art restitution into newspaper headlines around the world. In order to ensure that lenders will continue to allow their art collections to travel overseas, the art world will need to take proactive steps to ensure that future claims are addressed in a manner that accounts for the interests of all stakeholders: claimants, destination museums and galleries, and lenders.  

Toward this end, the international art community should take the following actions:  

• Museum policies should be amended to include policies for responding to stolen art claims;

• The U.S. and key European countries should ratify the Unidroit Convention on Stolen or Illegally Exported Cultural Objects; and

• The international community should develop a mutually agreed dispute settlement mechanism for acting on stolen art claims.

• A task force should be formed to put together a travelling exhibition that would contain works of art of questionable provenance and works that have been restituted to Jewish families.  

This is an ambitious plan of action, but now is the best time to act in order to aid Holocaust victims and their descendants in claiming their possessions, as well as to help museums deal effectively with these issues when they arise.

Mediation Clause 

Mediation provides an opportunity to resolve an issue to the benefit of all parties. Mediation is usually significantly more effective than litigation; it is less time consuming and costly; and it encourages parties to work together to reach a solution rather than pitting them against one another. Unlike litigation, or even arbitration, mediation offers the prospect of something more than an all or nothing result, which is particularly important in cases like this one in which emotions run high. Mediation also offers confidentiality, which is important to museums because they do not want to be seen in the press as anything less than fully sympathetic towards victims of art theft generally, let alone Holocaust survivors or descendents.  

By including mediation clauses in their contractual loan agreements, art institutions can help encourage potential claimants to become part of a mediation process. Because potential claimants would not be party to the loan agreement, they would not be bound to any mediated agreement. Nonetheless, their participation in a mediation process ensures that their interests will be at least acknowledged, if not fully addressed.  

In the Schiele case, for example, if the claimants, MoMA, and the Leopold Foundation had agreed to seek mediation early on rather than immediately seeking legal counsel, the dispute would likely have been solved relatively quickly. It is likely that the fact that the people making the claims did not even qualify as heirs would have been determined quickly rather than only after almost two years of litigation. 

Unidroit Convention on Stolen or Illegally Exported Cultural Objects 

Of the 22 countries that have ratified the Convention, only Lithuania, Hungary, and Italy could be considered major art “importing” countries that have a stake in Holocaust-era restitution issues. France has yet to ratify the Convention, and the United States, Germany and the UK have yet to sign, let alone ratify, it. Only when all major art importing countries adopt the Convention will there be an effective foundation for the resolution of disputes involving stolen art, including Holocaust-era looted art.

Resistance to the Unidroit Convention 

There are a number of key reasons why the Unidroit Convention has met with international resistance. These include 1) issues between what are considered “export” or “art-rich” nations and “import” or “destination” nations, 2) issues between the developed countries over sovereignty and the differences between common law or civil law systems, and 3) issues within the developed countries between art dealers, museums, and auction houses and those trying to create a transparent system of transactions for the art market. Unidroit Convention drafters attempted to find a balance between these interests, yet most interested parties are still not willing to support the Convention.

“Import” vs. “Export” Nations

The majority of countries that have signed and ratified the UNESCO and Unidroit Conventions are considered art “exporting” countries. Most of these are also considered developing countries, which tend to have much richer archaeological resources than most of the developed countries. Unfortunately they do not have the funding to adequately protect their archaeological sites or enforce the cultural property laws that they have passed. 

Strategy

In the United States:
Legislative Strategy 

The Schiele case brought a great deal of attention to the issue of Holocaust-era loot. In order to capitalize on this attention, as well as the momentum created by the Washington Conference on Holocaust-Era Assets, U.S. museums should take the following steps to persuade Congress to support adoption of the Unidroit Convention:  

1)      Write letters to sympathetic members of Congress, including: 

• Senator Daniel P. Moynihan (D-NY)
• Senator Charles Schumer (D-NY)
• Representative Carolyn B. Maloney (D-NY)
• Representative James A. Leach (R-Iowa)
• Representative John J. LaFalce (D-NY)
• Representative Ken Bentsen (D-TX)
• Representative Nita M. Lowey (D-NY)
• Representative Michael P. Forbes (R-NY)

These members have expressed interest in Holocaust loot restitution, some because they are from New York, but others because of their membership on the House Committee on Banking and Financial Services, which heard testimony on February 9 and 10, 2000, regarding the restitution of Holocaust assets. (Testimony was given by Earl Powell, Director, National Gallery of Art in Washington D.C., Glenn Lowry, Director, Museum of Modern Art in New York, Lyndel King, Director, Weisman Art Museum in Minneapolis, Ron Tauber, President, Art Loss Register, Amb. Ronald Lauder, Chairman, Commission for Art Recovery, and Amb. Stuart Eizenstat, Deputy Secretary, Department of the Treasury.)  

Other government representatives who should be lobbied include:

      ·        Ambassador Stuart E. Eizenstat
·        Ambassador Ronald S. Lauder 

All of the above mentioned members of Congress, as well as Amb. Eizenstat and former Amb. Lauder, should be visited by museum directors and should receive lobby packets that include a white paper that explains the importance of ratifying the Unidroit Convention.       

Media Strategy 

In order to repair some of the damage that was done by the negative media coverage of the Schiele case, US museums need to mount a public relations campaign designed to convince the public that they are willing to do what needs to be done in order solve Holocaust restitution cases. As the NEA again comes under fire, this would be a positive image builder for the US arts community. To this end, museums should endeavor to get newspaper and magazine articles written about their provenance research and efforts to contact potential heirs. Additionally, they should seek coverage of the Unidroit Convention and its importance to both museums and claimants.  

Press representatives that should be contacted include: 

1) Arts and Entertainment Journalists for major newspapers:

• Judith H. Dobrzynski at The New York Times
• Walter V. Robinson at The Boston Globe

2) Journalists at Major Art Magazines

• Andrew Decker at ARTnews magazine
• Arts & Antiquities

Creation of Dispute Settlement Mechanism

One of the concerns that has repeatedly been expressed is the lack of an internationally, or even nationally, recognized dispute settlement mechanism to mediate claims.  

The newly formed Commission for Art Recovery of the World Jewish Congress has successfully mediated many cases within the past two years for claimants of Holocaust-era works of art. Despite this positive development, however, the Commission, ICOM, and UNESCO should work together to create an international recognized dispute settlement mechanism for art claims—a mechanism that would provide mediation to any victim of stolen art.

Footnotes: