News:

New York state trial court finds that Plaintiffs, the rightful owners of allegedly Nazi-looted art, were entitled to prejudgment interest running from the date of conversion of the artwork.

1998
1970
1945
Lexology 28 September 2021
By Baker McKenzie

Reif v. Nagy, Index No. 161799/2015 (Sup. Ct. NY County, July 12, 2021) [click for opinion]

Plaintiffs, a group of heirs, filed their operative complaint in March 2016, alleging replevin, conversion, and deceptive trade practices against Defendant, a commercial art dealer, and seeking declaratory judgment that two works of art by Egon Schiele—Woman in Black Pinafore (1911) and Woman Hiding Her Face (1912)—were the property of Plaintiffs.

The trial court dismissed Plaintiffs' deceptive trade practices claim at the motion to dismiss stage. Plaintiffs then filed a motion for summary judgment in May 2017 on their remaining replevin and conversion claims. As part of their relief, Plaintiffs sought prejudgment interest. The trial court subsequently granted Plaintiffs' motion for summary judgment.

On June 5, 2018, the court ordered Defendant to return the artworks to Plaintiffs and determined that Plaintiffs were entitled, among other things, to prejudgment interest running from November 13, 2015—the date of conversion by the dealer. The court also ordered Plaintiffs to move for an inquest on damages.

Defendant returned the artworks to Plaintiffs on July 13, 2018, but appealed the decision. Defendant then petitioned for a stay from the Appellate Division to prevent Plaintiffs from selling the artworks. The court granted the stay, but ordered Defendant to post a conditional bond of $4 million by November 2018. When Defendant failed to do so, the court vacated the stay of the sale of the artworks. The court thereafter upheld the trial court's summary judgment decision.

During the subsequent inquest on damages, the parties disagreed as to how to calculate interest. Plaintiffs argued that New York's Civil Practice Law and Rules ("CPLR") § 5001 entitled them to prejudgment interest on the value of the artworks from the date of conversion (November 13, 2015) to the date of their return (July 13, 2018) at 9% per annum based on the stipulated market value of the artworks on the date of conversion (which was $2,500,000). Plaintiffs further argued that this period should be extended from July 13, 2018 to November 4, 2018 because Defendants "blocked [Plaintiffs'] sale of the Artworks by obtaining a stay from the Appellate Division until November 4, 2018."

Defendants countered that awarding such prejudgment interest would be a windfall to Plaintiffs. Defendants argued that they should be afforded a credit in the amount of the increase in value of the artworks from $2,500,000 (i.e., the value at the date of the adjudged conversion) to $3,400,000 (i.e., the value when the artworks were returned).

The court disagreed with Defendants, holding that prejudgment interest is a matter of statute and that an award of prejudgment interest in a conversion action is required by CPLR § 5001. The court further explained that "nothing in the statute affords a credit to someone based on an increase in value of the property ...."

The court also found Plaintiffs were entitled to prejudgment interest until entry of judgment because such interest continues to accrue until entry of judgment under CPLR § 5002. Specifically, the court stated interest does not stop running when converted property is returned in a replevin action if the return is contingent upon the outcome of the lawsuit.

Katelyn Sprague of the Chicago office contributed to this summary.‚Äč


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