Bid to Bar Return of Paintings Fails

Gary Spencer
New York Law Journal
September 22, 1999

ALBANY-- The Court of Appeals ruled yesterday that Manhattan prosecutors, investigating art thefts by the Nazis, cannot prevent The Museum of Modern Art from returning two paintings to an Austrian foundation until the criminal investigation into their ownership is completed.The 6-1 decision gave broad scope to the state's Arts and Cultural Affairs Law, which prohibits "any kind of seizure" of art loaned to New York museums by out-of-state owners, applying the statute for the first time to a criminal proceeding.

Easing the fears of cultural institutions throughout the state — who had warned that enforcing a grand jury subpoena for the two paintings would discourage other owners from exhibiting their art work in New York — the Court said the language and legislative history of the statute made clear that it was meant to bar the seizure of loaned art in criminal as well as civil cases."[A] comprehensive reading of the history reveals a consistent, unyielding legislative intent to promote artistic and cultural exchanges by creating a climate in New York free from the threat of seizure by judicial process and by encouraging nonresidents to share their works of art with the public," Judge Richard C. Wesley wrote for the majority in People v. The Museum of Modern Art, No. 139.

Dissenting Judge George Bundy Smith argued the arts law does not apply to criminal cases and, even if it does, enforcement of a subpoena duces tecum to produce the paintings for the grand jury would not constitute a seizure."Certainly, the Legislature could not have intended that New York assist the free flow of stolen art under an umbrella of complete immunity from civil and criminal processes," he wrote. "Such a ruling adversely affects society as a whole, whose 'interest is best served by a thorough and extensive investigation' into potential crimes."But the majority said its ruling would not undermine the authority of prosecutors to investigate claims involving stolen art or even hinder the Manhattan investigation of the paintings loaned to The Museum of Modern Art."[T]he paintings are not necessary for the investigation," Judge Wesley said in a footnote. "The value, identity and authenticity of the paintings are not in dispute."

HEIRS ALLEGE THEFT
The case arose late in 1997, when the heirs of two Austrian Jews each claimed ownership of an Egon Schiele painting, one family claiming "Portrait of Wally" and the other "Dark City III," which had been loaned to the museum by the Leopold Foundation in Vienna. The heirs claimed the paintings were stolen by the Nazis from their original owners: Fritz Grunbaum, who died at the Dachau concentration camp, and Lea Bondi, who fled when Germany annexed Austria in 1938.After World War II, both paintings ended up in the private collection of Dr. Rudolph Leopold, a Viennese ophthalmologist. In 1994, he sold them along with 248 other Schiele paintings to the government-funded Leopold Foundation for $175 million, according to prosecutors.The museum was preparing to return the two paintings to the foundation in December 1997, when the heirs notified it of their claims and demanded that the museum retain the paintings in New York until the ownership issue was resolved. The museum refused, citing its contractual obligations to return the art, and the District Attorney's Office issued its subpoena three days later.The museum moved to quash the subpoena under Arts and Cultural Affairs Law §12.03. The law states, "No process of attachment, execution, sequestration, replevin, distress or any kind of seizure shall be served or levied upon any work of fine art" that is loaned to a New York museum.Supreme Court quashed the subpoena, but the Appellate Division, First Department, concluded the statute applied only to civil proceedings and ordered the subpoena enforced.The Court of Appeals reversed and quashed the subpoena, freeing the museum to return the paintings to Austria. "While §12.03 delineates certain types of civil process, the unconditional language preceding and following this clause 'no process' and 'or any kind of seizure' in no way suggests that the Legislature meant the delineated terms to be either exclusive or exhaustive," it said, applying the statute to criminal proceedings as well.

LEGISLATIVE HISTORY
It found the legislative history supported its broad reading, citing a 1968 memorandum by Attorney General Louis J. Lefkowitz opposing an amendment that would have allowed seizures by rightful owners seeking to recover stolen art. The attorney general said, "To puncture the exemption sought by this bill with a single major loophole would be self-defeating, since non-resident artists and patrons of the arts can exercise their free alternative to stay out of trouble by keeping their possessions safely at home."The Legislature did not adopt the "disputed owner exception" to the statute and the Court said, "The statute's 'no loopholes' approach compels our holding that [the statute] is not limited to civil process."District Attorney Robert M. Morgenthau complained the ruling was "inexplicable" as a matter of policy. "The exhibition of stolen paintings, or those of questioned provenance, does not advance the cultural life of our City," he said. "How can museums claim that they are the sources of civilized values when they ignore questions of the legitimacy of the works held in their collections or exhibited in their displays?"He said he would urge the Legislature to amend the law to "make it clear that the statute does not apply to criminal investigations."

The museum was represented by Evan A. Davis, of Cleary Gottlieb Steen & Hamilton, and the District Attorney by Chief Appellate Attorney Mark Dwyer.

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