Heirs of Holocaust Victim Fritz Gr├╝nbaum Win Restitution of Nazi-Looted Schiele Drawings

JD Supra 12 July 2019
By Nicholas O'Donnell

The Appellate Division First Department in New York has affirmed the trial court’s ruling in Reif v. Nagy that the heirs of Viennese actor and Holocaust victim Franz Friedrich (Fritz) Grünbaum are entitled to the return of two Egon Schiele drawings, Woman Hiding her Face (1912) and Woman in a Black Pinafore (1911).  The ruling is a momentous victory for the Grünbaum heirs, and features several recurring characters in many Nazi-looted restitution disputes.  We were doubly gratified to see the First Department’s citation to our own case, Philipp v. F.R.G., 894 F.3d 406 (D.C. Cir. 2018) for the proposition that sales under duress are void and violate international law consistent with the policies of the Holocaust Expropriated Art Recovery (HEAR) Act of 2016.  It is a landmark ruling and a testament to the perseverance of the Grünbaum heirs and their legal team.

There is no question that the HEAR Act played a crucial role in the case.  Judge Ramos cited it extensively in the 2018 summary judgment ruling in favor of the Grünbaum heirs.  In this week’s ruling, the First Department noted “Courts have generally interpreted the HEAR Act liberally, focusing on the purpose for which it was enacted (see, e.g., Philipp, 248 F. Supp. 3d at 70 (the sale of art during the Holocaust by a Jewish owner was coerced and under duress, covered by both HEAR and a violation of international law such to be an exception to the Foreign Sovereign Immunities Act).”  Philipp, of course, is my clients’ (the heirs of the art dealers who sold the Guelph Treasure, or Welfenschatz) case against the Stiftung Preussischer Kulturbesitz and the Federal Republic of Germany (Germany since dismissed, pending possible review by the Supreme Court).  Just today, the D.C. Circuit Court of Appeals denied Germany’s request to keep the case on hold while its asks the Supreme Court to come to its aid.  The HEAR Act is a powerful statement of policy of getting to the merits, as Reif v. Nagy underscores emphatically. 

As I often explain when I am lecturing on the topic or discussing my book, there are certain restitution disputes that implicate a wide spectrum of recurring issues.  The Grünbaum case is one of them, and not easily summarized (I address the background at greater length in Chapter 7 of A Tragic Fate—Law and Ethics in the Battle Over Nazi-Looted Art (Ankerwycke 2017)).  The story involves post-Anschluss Vienna, the Nazis’ escalating laws (practiced in Germany, imposed on Austria) about property inventories and economic persecution, and shifting attitudes in U.S. courts.

It is also notable for the simple reason that so few cases actually end in a final judgment for claimants.  In the last 20 years cases have foundered on statutes of limitation, jurisdictional limitations, application of law more favorable to current possessors.  Indeed, the Grünbaum’s previous claim to a Grünbaum-provenance drawing was decided in favor of the current owner.  But if there is one thing about the Grünbaum case emblematic of much else perhaps it is this: I have written for years that the shrugging-emoji-statement “every case is different,” while true, is often just an excuse to force survivors and heirs to re-prove what is already known.  The Grünbaum case, after all, concerns the property of a man deported from Vienna to Dachau and murdered there (the prior litigation resulted in several subsidiary factual rulings favorable to the heirs even though the drawing’s current owner prevailed).  Yet in this latest case his heirs had to argue, again, about whether such transfers of his property were valid.  As if to make the point, the article about the decision in the New York Law Journal was entitled “NY Appeals Court Explains Why Nazi-Stolen Paintings Belong With Jewish Collector's Heirs.”  One hopes that some day such a statement will not require appellate review to be accepted. 

Grünbaum’s story is sobering.  In 1938, Franz Kieslinger, a Nazi art appraiser, inventoried Grünbaum’s collection pursuant to the then-recent property declaration law and forms. Grünbaum was arrested and imprisoned at Dachau. There, he signed a “power of attorney” in favor of his wife, Elisabeth. Fritz died in Dachau in 1941, and Elisabeth was later interned and died in another concentration camp. A collection of works including these two drawings and Seated Woman with Bent Left Leg (Torso) that was the subject of the Bakalar case were eventually found at the Galerie Gutekunst by 1956.  The gallery’s principal Eberhard Kornfeld (remember that name, if it does not yet ring a bell) claimed in the course of the litigations that he had acquired them from Mathilde Lukacs, Elisabeth’s sister.  Kornfeld later sold the works to Galerie St. Etienne in New York, which was run by Otto Kallir (himself an emigrated Viennese art dealer and an acquaintance of Grünbaum).  Several intervening parties had the drawings before Nagy.

Here a pause is warranted to discuss the Lukacs/Kornfeld sequence.  A critical aspect of the earlier litigation concerned whether Kornfeld had acquired valid title from Lukacs.  In that case (Bakalar), the U.S. District Court held that Bakalar (the current possessor seeking to quiet title to the work) failed to prove he was the owner.  The reasons for this were several, but the invalidity of the power of attorney was chief among them, as well as what the District Court regarded as the implausibility of the various explanations offered to argue that Mathilde had herself acquired good title under New York law (which does not excuse “good faith” purchases to cut off prior ownership).  Nonetheless, Bakalar prevailed in that case because he satisfied the elements of a laches defense, the legal penalty when a claimant “sits on their hands” despite awareness of enough information to bring a claim.  The Grünbaum estate’s appeals failed and that drawing remains where it was.

The role that the “power of attorney” signed by Fritz played cannot be overstated, and the appeals court did not miss the chance.  The power of attorney begins by identifying Grünbaum as: “Franz Friedrich (known as Fritz) Grünbaum, Actor in the 4th District, Vienna, Wienzeile 29,” and then, as though it were an unremarkable detail of his whereabouts, “currently Dachau” (my emphasis). Curiously, despite the notation of his presence in Dachau, it is “notarized” in Vienna. It is dated July 16, 1938.  Of this the appeals court said succinctly: “We reject the notion that a person who signs a power of attorney in a death camp can be said to have executed the document voluntarily.”  Quite. 

Against this, the appeals court confirmed the ruling of the trial court on the material issues.  First, Grünbaum’s inability to convey title to the drawings voluntarily deprived any successors of the ability to acquire that title in the first instance.  In Bakalar, the District Court had concluded the drawing was not stolen but that Lukacs had not acquired title before selling it to Kornfeld.  Here, in Reif v. Nagy, the court took a different view in an interesting way.  Where the Bakalar court accepted the notion that Kornfeld was a good faith purchase from Lukacs, the Appellate Division was having none of it.  It clearly regarded Kornfeld as a problematic figure.  Even in the preface, this week’s decision describes Kornfeld’s acquisition not as a purchase, but that at some point the works had “surfaced” at his gallery in 1956.  The court seized on what it described as inconsistencies in Kornfeld’s statements; having once claimed to have purchased them from Lukacs not knowing of the works’ Grünbaum provenance, he later acknowledged the history.  Or, to put a finer point on it, “Plainly, Kornfeld’s testimony that he did not know of the Grünbaum provenance of at least some of the Schieles in 1956 is false.” 

The significance of this disbelief is essentially dispositive.  Under Swiss law Kornfeld could, in theory, have been a good faith purchaser who would cut off the prior title claims of others.  There is little doubt in the Reif opinion that the court did not believe for a moment that Kornfeld was a good faith purchaser.  With that conclusion reached, Nagy essentially could not win because the record showed that he was actually aware of the Grünbaum claim when he bought the works (that is no disparagement of Nagy’s intentions, but to be a good faith purchaser under the law one cannot actually know of an adverse claim).

That is a charitable view of the opinion’s description of Kornfeld.  On closer reading, it is apparent that the appellate judges were quite concerned that the entire Lukacs provenance was a fiction, that Kornfeld had no evidence at all of where they had come from: “We note that there are no records, including invoices, checks or receipts documenting that the Artworks were purchased by Kornfeld from Mathilde.”  Worse:

The records purporting to show that Mathilde sold a total of 113 works of art to Kornfeld from 1952 through 1956 at best are inconclusive. Kornfeld acknowledged in his deposition that the records he produced had Mathilde’s signature and name added in pencil, while the rest of the page was written in ink. He also admitted that her name was not added contemporaneously with the purchase. Kornfeld confirmed that Mathilde’s signature on key documents was misspelled and her signature did not appear in her handwriting. Kornfeld surmised that the signature could have been her secretary’s. Petropoulos states that Kornfeld refused to allow the original documents to be examined by a handwriting expert.

One does not have to work terribly hard to read between the lines to conclude that the judges perceived a very real possibility that Kornfeld had made the whole thing up. 

The court was particularly mindful of renowned expert Jonathan Petropoulos’s work, and the fact that Kornfeld is the very same dealer whom Cornelius Gurlitt was visiting in 2012 when he was detained, leading to the search and seizure of some 1,280 objects from his Munich apartment.  As we have written at great length here, that saga is an ongoing and unresolved fiasco—yet even this lengthy court case has taken less time than Germany’s inability to address fully the Gurlitt situation the German government has also struggled with issues related to Grünbaum specifically).
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