Volume 43 | Number 1 Fall 2007
Adding Tools to the Arsenal: Options for Restitution from the Intermediary Seller and Recovery for Good-Faith Possessors of Nazi-Looted Art
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IV. Additional Approaches and Remedies Available to Good-Faith Purchasers Outside of the Courtroom
Aside from the pursuit of justice and damages in the courtroom, there are various other methods that good-faith possessors have employed to ameliorate their position after returning looted artwork. Approaches range from avoidance of conflict by an upfront return of the artwork to the protection by newly developed title insurance. The tactics discussed below produce different results, each with its own advantages and disadvantages. Most importantly, they represent various alternatives to the sometimes unsuccessful and costly adversarial system. These alternatives are likely to become more prevalent as Nazi art litigation progresses.
A. Avoidance of Litigation
Some good-faith possessors have chosen to avoid the adversarial system entirely by returning the disputed work of art to the original owner. “Since the Holocaust restitution campaign began in the mid-1990s, more than two thousand artworks have been returned to their rightful owners around the world without litigation.”159 In 2000, the North Carolina Museum of Art surprised the art world with the relatively effortless return of a valuable painting.160 Occurring on the heels of the protracted litigation battle involving SAM, the Rosenberg heirs, and the Knoedler gallery, the North Carolina Museum of Art’s approach was particularly unexpected. When confronted by the heirs of the original owner, it voluntarily returned the painting Madonna and Child in a Landscape by Lucas Cranach the Elder, a German Renaissance artist.161 At the time of the return, the value of the painting was estimated to be between US$500,000 to more than $1 million.162 The museum did not act imprudently in returning the painting; it first conducted proper research into the heirs’ claim. The museum independently investigated the provenance of the painting and contacted the Holocaust Claims Processing Office (“HCPO”) of the New York State Department of Banking to verify the heirs’ claim.163 Once sufficient evidence to support that claim had been compiled, the museum promptly offered to return the painting to the rightful owners.
Because a Deputy Director of the HCPO negotiated the voluntary return of the artwork in this case the heirs had no need even to retain counsel.164 The heirs were so impressed with the museum’s response that they chose to sell the painting back to the museum at a substantially reduced price.165 The state of North Carolina was equally impressed and awarded the Deputy Director of the HCPO a special state medal never before awarded to a non-North Carolina resident.166 This non-confrontational approach demonstrates that cooperation by museums in the more recent Holocaust-related cases increases the likelihood that the museum will ultimately retain the work of art.167
Surprisingly, voluntary return of artwork to the claimants may not always be a popular decision. Art experts heavily criticized the Bruecke Museum in Berlin when it chose to return a painting by Ernst Ludwig Kirchner valued between US$18 and US$25 million.168 The critics contended that the Nazis did not coerce the painting’s original owners to sell, but rather that the owners sold the painting because of financial difficulties during the Depression.169
While the upfront return of a disputed artwork may not always be prudent, or even popular, it will at least avoid protracted courtroom battles. The difficulty lies in weighing the costs of litigation against the immediate loss of the painting. This is an extremely fact-specific approach not suited to all situations. Nevertheless, returning disputed artwork is a serious option for good-faith possessors to consider when making a cost-benefit analysis of the alternatives.
B. Fighting Back
Although relinquishing a costly work of art to an original owner or his heirs is a sacrifice good-faith possessors are sometimes required to make, some innocent parties refuse to be made victims by unsubstantiated claims to their artwork. For example, the auction house Christie’s is considering filing suit against the last minute claimant of a Picasso painting.170 Picasso’s Portrait de Angel de Soto was being offered for auction by its owner, composer Andrew Lloyd Webber, in November 2006.171 Just three days before the scheduled auction, Julius Schoeps filed an “ambush lawsuit” claiming to be an heir of original owner, Paul von Mendelssohn-Bartholdy.172 Although a U.S. district judge dismissed the case on a jurisdictional technicality, Christie’s pulled the painting from the highly publicized auction, citing a “cloud of doubt” placed on it by the lawsuit.173 Should the lawsuit proceed, Christie’s would seek “damages for harm caused to this picture, the charity that rightfully owns it and Christie’s.”174 Christie’s asserts that Mr. Schoeps, adding insult to injury, failed even to articulate the connection between himself and the original owner.175 Christie’s has previously been a supporter of looted art restitution efforts.176 However, Christie’s stance on this claim exemplifies the position other good-faith possessors might take against alleged original owner claimants seeking to take advantage of the current pro-restitution climate.
C. Proposed Alternative Solutions
Several commentators have offered alternative solutions to alleviate the difficulties of good-faith possessors. One suggestion, originating from litigants themselves, is to collect a common pool of money to compensate those good-faith possessors who relinquish their rights to the artwork.177 Potentially, this same pool of funds could also provide payments to the original owners or their heirs who do not retrieve the artwork from the current possessor.178 This concept is modeled after an approach used by Swiss banks in other World War II restitution matters.179 While appearing to provide an agreeable compromise, funding is an obvious obstacle. The likely beneficiaries of such a fund—museums, galleries, and art dealers—have not been receptive to this concept, instead promoting a “fend for yourself” system.180 Thus, those most likely to be affected seem to have rejected a collective effort that could avoid substantial individual financial losses.
Mediation remains another important alternative181 as its flexibility could allow for compromise that would not place the entire financial burden on one party.182 It has been suggested that “[m]ediation seeks to resolve disputes, not according to the legal analysis and redress of past conduct, but according to the identification of common ground, the development of future relationships and the attainment of future goals.”183 This approach might be appropriate for addressing claims not only between original owners and current possessors, but also between current possessors and intermediary sellers.
While the lack of an international enforcement regime for mediation settlements is potentially a substantial hindrance to this alternative,184 the amount of negative publicity a party would likely receive for failure to fulfill a mediated agreement could be a motivating factor. In addition, an agreed-upon settlement in such disputes presumably would be smaller than the judgments potentially obtained through litigation. Thus, it is likely to a party’s financial advantage to negotiate a comfortable agreement and support it through completion.
D. Third-Party Participation in Settlement Agreements
The intermediary seller’s role in complicated disputes between innocent parties can take various forms. The good-faith possessor is not always able to pursue a claim against the intermediary seller, but that does not indicate that the seller is able to avoid accountability altogether. In a highly publicized dispute, Thomas Bennigson, the grandson of the original owner of Picasso’s painting Femme en Blanc, made a claim against its current owner, the art collector Marilynn Alsdorf.185 After several rounds of litigation involving jurisdictional disputes and an alleged violation of the National Stolen Property Act by Ms. Alsdorf, the parties reached a settlement.186 The painting was valued at between US$8 and US$10 million.187 Ms. Alsdorf, citing her age and desire to resolve her affairs, agreed to pay Mr. Bennigson US$6.5 million, representing 65% to 80% of the painting’s value.188
The art dealer from whom Ms. Alsdorf bought the Picasso painting also reached an agreement with the original owner’s heir.189 The dealer Stephen Hahn agreed to pay Mr. Bennigson the profit he received on the original sale of the work to Ms. Alsdorf in 1975.190 Specific details of the agreement, including the sum paid, were kept confidential.191 However, the amount paid by Mr. Hahn seemed to account for the decrease in Ms. Alsdorf’s settlement. Mr. Hahn likely felt compelled to settle after a California court permitted the plaintiff’s plea for a constructive trust against Mr. Hahn that would have prevented him from being unjustly enriched from the wrongful sale of another’s property.192
This split settlement arrangement was not unique. In 2001, the Princeton University Art Museum was successful in sharing the burden of restitution to the original owner with the dealer who sold the painting.193 The burden may not always rest on the good-faith possessor’s shoulders alone, but it may be necessary to pressure intermediary sellers with the threat of litigation in order to involve them in the negotiation process.
E. Recent Developments in Insurance
An interesting development in the insurance world last year brings a surge of hope for good-faith possessors of Nazi-looted artwork. U.S.-based Aris Title Insurance Co. spent over seven years developing an insurance product to address provenance issues of works confiscated from individuals during World War II.194 Started in 2006, the company offers a premium and indefinite term insurance policy that functions similarly to real estate title insurance.195 Aris advertises “Art Title Protection Insurance” as “the first transfer of art provenance or legal ownership risk for art.”196 Art Title Protection Insurance is designed to fill a gap in the art insurance market. Returning artwork to an original owner without pursuing all possible legal remedies, despite fulfilling the current possessor’s possible moral stance on the issue, often “falls outside the cold parameters of an insurance policy.”197 Voluntary returns, and at times other types of restitution, may not be covered by traditional art insurance.
Under Aris’s newly developed policy, the amount of the one-time premium is calculated according to the value of the artwork, as well as the artwork’s specific provenance risk profile.198 For example, a painting valued at US$1 million that has gaps in its provenance during World War II would be assessed at a rate of 5%, or in this case, $50,000.199 This amount would only be paid once, and the policy would last for the duration of the policyholder’s ownership. The policy limit is $5 million, but additional coverage may be available.200 As another limitation, Aris’s policies cover only visual art and sculpture, not cultural artifacts or antiquities.201
One of the company’s founders asserted that this insurance could have prevented Picasso’s Portrait of Angel Fernandez de Soto from being withdrawn from the Christie’s auction at the last minute.202 According to Lawrence Shindell, the company’s Chief Executive Officer, “if title insurance had been in place, we’d have been able to address the title issue, eliminate it or insure over it, so the transaction could proceed.”203
Title insurance is not a new idea. Hiscox, a Lloyd’s of London syndicate, has offered title insurance for the past twenty years.204 In contrast to Aris’s title insurance, Hiscox’s policies are significantly more expensive and require an annual renewal and premium payment.205 For example, a US$10 million policy on a Monet painting with a questionable history may cost up to $250,000 per year.206 Such a costly premium can be prohibitive for certain good-faith possessors, particularly museums.207 Most importantly, Hiscox will not insure works with questionable provenance between 1933 and 1945.208 Thus, those concerned with the provenance gap created by Nazi theft are left with only the option provided by Aris.
The increasing likelihood that a costly painting would be ordered relinquished to an original owner, leaving the good-faith possessor with few options, stimulated the development of title insurance. It remains to be seen whether these insurance policies will prove to be a popular option for those looking for financial protection from original owner claims. To date, Aris has sold only a handful of policies.209 As of 2000, not a single museum had purchased defective title policies from Hiscox.210 Regardless of its unpredictable success rate, title insurance is yet another option that was not previously available and appears to be a viable tool for good-faith possessors.
Adding to the complex world of Nazi-art-theft litigation, insurers likely would be more inclined than an average good-faith possessor to litigate against claims to the insured painting in order to avoid or diminish liability. It is also likely that the insurer would pursue subrogation of any rights to the painting in the case of payments to the insured. These dynamics could increase the overall amount of litigation, while reducing the likelihood of frivolous claims. Only time will tell.