Forced Sales: The Economic Duress Argument in Recent Cases on Nazi-Looted Art
Several recent claims on the restitution of Nazi-looted art have been based on an argument of economic duress, which challenges the validity of sales made under the pressure of persecution and economic hardship faced by Jews during World War II.[1] Heirs of Jews who sold their artworks to flee Nazi Germany argue that their descendants were systematically deprived of their rights and property, often creating conditions
that made it impossible for them to sell their assets at fair market prices.[2] Courts have been reluctant to face the issue of forced sales of art sold by Jews in economic distress, instead dodging the issue by resolving such claims under procedural or technical grounds.[3] With pending cases of Nazi-looted art that rest on claims of duress, courts may soon be forced to confront the duress argument.
A lawsuit has been filed by the heirs of Karl Adler, seeking the return of a 1904 painting by Pablo Picasso, Woman Ironing (la repasseuse), from the Solomon R. Guggenheim Foundation.[4] The painting was allegedly sold under duress when Adler and his wife fled Germany in the 1930s to escape Nazi persecution.[5] The Adlers, who led a prosperous life before the war, lost their business, livelihood, and financial assets and were stripped of their economic and legal rights.[6] As they attempted to immigrate to Argentina, they sold the painting to generate the large amounts of cash needed for short-term visas.[7] While the painting was valued at $14,000 in 1931, Adler sold it in 1938 for a reduced price of $1,500.[8] The plaintiffs argue this was a “fire sale price” due to the economic pressures faced by Jews to flee Germany.[9] Heinrich Thannhauser, a leading art dealer of Picasso who purchased the painting from the Adler’s, insured the painting for $20,000 when it was exhibited at the Stedelijk Museum in Amsterdam the year after.[10] The Guggenheim Foundation disputes the claim of duress, asserting that the sale was fair at the time. The Foundation points out that Thannhauser was himself Jewish and facing a similar plight, and that the art market was depressed during a time of war.[11]
In a similar case, the heirs of Max Emden, a Jewish department store magnate, sued the Museum of Fine Arts in Houston, Texas, for the return of two paintings, including Bernadro Bellotto’s 1753 painting, The Marketplace at Pirna.[12] The heirs argue that the painting was sold under duress in 1938 to the Führermuseum, a museum that Hitler planned to open in Austria.[13] At the time, Emden’s assets had been frozen, and his company was eventually liquidated.[14] The artworks were ultimately found by the Monuments Men, and two of the artworks were sent to Germany, which ultimately returned them to Emden’s heirs in 2019 after Germany’s Advisory Commission deemed it was a forced sale.[15] The other artwork in dispute was mistakenly sent to the Netherlands to a collector who had a claim on an artwork of the same title, and eventually ended up in the Museum of Fine Arts’ collection.[16] The Museum of Fine Arts disputes their duress claim, arguing that the painting was sold at a fair-market price through the dealer of his choice.[17] The lawsuit was ultimately dismissed, citing the role of the Netherlands in the matter, and invoking the Act of State doctrine, which prevents courts from overturning legal decisions of foreign governments.[18]
The argument of duress is not unique to the context of Nazi-looted art. Duress operates as a defense in contract law to invalidate agreements made under coercive circumstances, preventing one party from acting with free will.[19] Even if secondary owners acquired artworks after the questionable transactions, a finding of duress could break the chain of title, ultimately forcing the return of artworks to the heirs of the original owners. However, courts have been hesitant to decide cases on the merits of the duress argument, instead resolving claims on procedural grounds, such as the statute of limitations[20], which limits the period in which a lawsuit can be filed, or the doctrine of laches[21], which bars claims made after an unreasonable delay. Other cases have been dismissed on the grounds of sovereign immunity, which protects states and their agencies from lawsuits.[22] There is currently no clear legal standard for determining whether a sale was made under duress in the context of Nazi-looted art, and the resolution of this issue could foresee a flood of new claims.
The Washington Conference Principles on Nazi-Confiscated Art, formalized during the Washington Conference on Holocaust Era Assets in 1998 in Washington, D.C., formalized international consensus on Nazi-looted art restitution.[23] Representatives from forty-four countries, along with participants from NGOs and art market observers, gathered to discuss the issue.[24] The resolution emphasized the importance of international collaboration in identifying and researching Nazi-looted art and promoting “just and fair solutions” for the return of artworks to their pre-war owners.[25] Congress has taken measures to provide redress for victims of Nazi-related crimes in U.S. courts. The Holocaust Victims Redress Act of 1998 urges all governments to make good faith efforts to facilitate the return of private and public property to rightful owners in cases where there is reasonable proof that assets were confiscated during Nazi rule.[26] The Holocaust Victims Redress Act of 2016 (the “HEAR Act”) allows victims of Nazi persecution and their heirs the opportunity to recover artworks that were confiscated or misappropriated by the Nazis.[27] Additionally, the Justice for Uncompensated Survivors Today (“JUST”) Act of 2017 requires reporting on the actions of foreign countries regarding Holocaust-era assets and related issues.[28]
As time passes, claimants seeking restitution for Nazi-looted art face technical barriers before pursuing substantive arguments. The principle that a thief cannot pass good title means that one cannot have good title to an artwork if it has been stolen.[29] The statute of limitations provides an exception to this rule, extinguishing a claim that is time-barred.[30] However, courts have differing approaches to tolling the statute of limitations.[31] In Menzel v List, the New York Supreme Court established the “demand and refusal” rule.[32] According to this rule, the statute of limitations does not begin to run until the original owner demands the artwork back and the demand is refused.[33] At this point, a subsequent good faith buyer becomes a bad actor for retaining a stolen artwork. In Menzel, the plaintiffs sought the return of a painting by Marc Chagall, Le Paysan a L’echelle, which they left abandoned in their apartment in Brussels when they escaped to the United States in 1941.[34] The subsequent owner purchased the painting in good faith from an art gallery.[35] The court ultimately ruled in favor of the Menzels, returning the artwork to the pre-war owners.[36]
In other jurisdictions outside of New York, the statute of limitations is usually tolled based on the Discovery Rule, which considers whether the plaintiff could have reasonably discovered the location and owner of the stolen artwork.[37] The Discovery Rule is harder to overcome than the Refusal Rule because courts interrogate the publicity and accessibility of the artwork and place an affirmative duty to investigate an artwork’s location at an early stage. However, even if the exception applies, a defendant can still assert laches, which serves as the last barrier by protecting against unreasonable delay in commencing a lawsuit that has caused prejudice to the defendant.[38] As a result, there is a delicate balance and considerable court discretion in determining whether a claim falls within the Statute of Limitations and can therefore move on to pursue substantial claims.
In Zuckerman v. Metropolitan Museum of Art, the Second Circuit dismissed an art restitution claim on the grounds of laches despite the plaintiff’s argument of duress under New York law.[39] The plaintiff, a relative of the original owners of Pablo Picasso’s painting titled The Actor, contended that the sale was void because it was taken under duress.[40] The original owners, German-Jewish collectors Paul and Alice Leffmann, sold the painting to obtain funds to flee Fascist Italy after having already fled Germany and losing much of their property.[41] The court did not address the issue of duress, as it found that the complaint was time-barred due to the Leffmanns’ unreasonable delay in not pursuing the painting’s return when it was on public display at the Metropolitan Museum of Art in the years prior.[42]
In Federal Republic of Germany v. Philipp, the heirs of a group of Jewish art firms were barred from suing Germany under a duress argument due to sovereignty immunity.[43] The group contested ownership of several dozen medieval relics and devotional objects dating back to the Holy Roman Empire, which were sold to Prussia in 1935 at a reduced price with the support of Adolf Hitler.[44] The heirs argued that the sale was coerced, constituting an act of genocide and therefore a violation of international human rights law.[45] They stated that “the confiscation of property was one of the conditions the Third Reich inflicted on the Jewish population to bring about their destruction.”[46] In 2021, the U.S. Supreme Court held that the lawsuit was barred, finding that the relevant phrase in the foreign sovereignty immunity exception, “rights in property taken in violation of international law,” applied to property law and not human rights law, such as the law of genocide.[47]
In Europe, some cultural institutions have begun to address claims of economic duress. The heirs of Curt Glaser, a Jewish art historian who sold his collection before fleeing Germany in 1933, brought claims against European and American institutions.[48] Glaser sold most of his art in two auctions when he was forced out of his home after being removed from his job at the Berlin State Library.[49] The Dutch Restitutions Committee, the Prussian Cultural Heritage Foundation in Berlin, the Museum Ludwig in Cologne, and the city of Basel all concluded that Glaser’s collection was sold because of Nazi persecution and agreed to return or compensate for the artworks in their collections.[50] However, American museums, such as the Metropolitan Museum of Art and the Museum of Fine Arts, Boston, repeatedly rejected Glaser’s heirs’ claims, even though the artworks were sold in the same auctions.[51] The museums argue that there is not enough evidence to prove that Glaser sold his artworks under duress, suggesting that his decision to sell the art could have been influenced by other factors in his personal life.[52]
As Nazi-looted art restitution based on claims of economic duress gains attention, courts may be compelled to address the duress argument directly. The Terezin Declaration, an international agreement ratified in 2009 by the United States and forty-six other nations, asserts that the “just and fair” solutions outlined in the Washington Conference Principles should extend to artworks sold under duress.[53] The HEAR Act permits civil claims or causes of action for the recovery of artwork “because of Nazi persecution,” a phrase which remains open to interpretation.[54] Every Nazi-looted art case presents its own set of circumstances. Some cases involve physical theft, while others may involve more indirect claims of aggression. When examining economic duress claims for Nazi-looted art, courts may consider factors such as the language of the contract, the relative power between the parties, the fair market value at the time of the sale, and the professionalism of recipient parties. It remains to be seen how courts will ultimately define the parameters of duress claims of Nazi-looted art.
Footnotes
