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Art Law

Recent Developments in Art Litigation and Art Finance

“Restoring A Legacy: Rothschild Family Treasures” Exhibit Opens At Museum Of Fine Arts, Boston

Posted in Art Museums, Art Recovery/Theft, Current Art Exhibits

A new exhibition celebrating recent gifts of an exquisite European collection to the Museum of Fine Arts (“MFA”) by the heirs of Bettina Looram de Rothschild, who was a daughter of the original owners Baron and Baroness Alphonse and Clarice de Rothschild of Vienna, opened yesterday.  Bettina Looram de Rothschild’s daughter, MFA Trustee Bettina Burr, is among the donors who have made these gifts to the MFA.  The collection of 186 objects, which was looted during the Nazi era and eventually returned to its rightful owners, consists of European decorative arts, furniture, prints, drawings, paintings, and personal objects, consisting of jewelry and jeweled objects, miniatures, and rare books.

It has been reported that the Rothschild family treasures of some 3,500 pieces from the family’s palaces were discovered by Allied forces in Austria’s salt mines after World War II.  Most of the vast European collection was returned to the Rothschild family after Baroness Clarice de Rothschild traveled to the salt mines to identify the family’s art.

While the complete story of the Austrian Rothschild collection may never be pieced together, Ms. Burr noted in a recent article that about 60 pieces are listed on the Art Loss Register (a private database of lost and stolen art works) and she has “a big file, pages and pages, of 3,500 pieces.”

The Rothschild family treasures of the MFA’s new exhibition are said to evoke “the Rothschild taste,” and have been described by Thomas Michie, the MFA senior curator for European decorative arts and sculpture, as “opulent high-style French 18th-century” and “palatial when all together.”

The exhibition remains open through June 21, 2015.

Top Four Auction Houses With Online Art Trading Platforms Lead Global Online Trade Volumes Capturing $144 Million In Combined 2014 Sales

Posted in Art Finance, Art Intelligence

As recently reported by Skate’s earlier this week, four art auction houses with online art trading platforms, namely, Auctionata, Paddle8, Christie’s, and artnet.com AG, generated a combined $144 million in gross merchandise volume (“GMV”) in 2014, which represents on average a doubling of the volume of global online trade compared to 2013.

Berlin-based Auctionata came out on top with 2014 results that provided for an increase in online auction trade volume over that originally anticipated.  Auctionata captured $41 million in GMV sold, which represents a 148% increase in dollar terms to 2013.  These results catapult Auctionata into the top position as the leading global online art trading platform followed by Paddle8, Christie’s, and artnet.com AG.

Paddle8 and artnet.com AG have yet to publish their results, however, Skate’s closely tracks each firm’s online auctions and expects Paddle8 to report about $37-40 million GMV and notes that artnet.com AG is unlikely to exceed $30 million GMV for 2014.

Christie’s experienced a 60% growth compared to 2013 for its online-only sales in 2014 generating $35.1 million GMV.  For further information on Christie’s results, click here.

It will be interesting to see if these top four players for 2014 remain in their respective positions for 2015.  Indeed, the online art trading platform is quickly establishing itself as the way to collect and sell art in the 21st century.

 

 

Sotheby’s Caravaggio Controversy – Sotheby’s Specialists Prevail

Posted in Art Valuation, Litigation Issues

Sotheby’s UK prevailed recently in a court dispute over an Old Master attribution. At the heart of the dispute was a painting entitled The Cardsharps, which Sotheby’s attributed to a follower of Michelangelo Merisi da Caravaggio (1571-1610) and sold for £42,000 in 2006 on behalf of consignor, Lancelot Thwaytes.

Following the 2006 sale, it was suggested that the work was actually painted by Caravaggio himself, and thus valued at £10M. The attribution came from renowned collector and Caravaggio expert, the late Sir Denis Mahon, who declared that the painting was in fact a Caravaggio from 1595. After news of the value of the painting hit the press, Thwaytes commenced a negligence lawsuit against Sotheby’s for failing to consult with Caravaggio experts. Sotheby’s defended the suit on the grounds that many specialists had not agreed on the Old Master attribution (and many specialists remain unconvinced that it is a true Caravaggio). Ultimately the Court concluded that Sotheby’s was not negligent in attributing the painting to a follower of Caravaggio. Specifically, the Court determined “I am firmly of the view that Sotheby’s were entitled to come to the view that the quality of the Painting was not sufficiently high to merit further investigation.” Additionally, the court noted that “there is nothing disclosed on visual examination which should have counteracted Sotheby’s view that the Painting was of poorer quality than the Kimbell Cardsharps [an undisputed Caravaggio original] and did not therefore have Caravaggio potential.”

The court concluded that even if the painting had been sold with a catalog entry detailing the varying views of authenticity, the painting would not have sold for much more than the price obtained in 2006 because the weight of authority was in favor of Sotheby’s follower attribution.

Thus, while this case is evidence that reasonable minds can and do differ, the court’s ruling supports the position that the Sotheby’s specialists were correct in their original cataloging of the work.

Dispute Over Andy Warhol’s Prints of Mao Zedong

Posted in Litigation Issues

In a recently filed lawsuit in the New York Supreme Court, plaintiffs allege that certain defendants failed to deliver six out of a set of ten prints by Andy Warhol depicting Mao Zedong, for which the plaintiffs had allegedly paid in full.

In their Complaint, the plaintiffs — Marc Latamie and DM Fountain, Inc. — claim that they fully paid for the set of prints, yet Benrimon Contemporary delivered only four of the ten prints and, despite repeated demands spanning over a year and a half.

Moreover, the plaintiffs allege that Benrimon Fine Art was offering the same prints for sale to other potential purchasers after the plaintiffs had purchased the prints.

The plaintiffs have asserted causes of action for (i) breach of contract, (ii) tortious interference with contract, (iii) fraud, (iv) conversion, (v) promissory estoppel, and (vi) unjust enrichment.

Read the Complaint here.

Picasso’s Granddaughter Privately Selling Art to Finance Philanthropic Projects

Posted in Art Valuation

Marina Picasso, who inherited nearly 10,000 works of art created by Pablo Picasso – including paintings, ceramics, drawings, etchings and sculptures – is bypassing dealers and auction houses to sell the art to “finance and broaden her philanthropy.”

The New York Times recently reported that Ms. Picasso “has been regularly selling her grandfather’s works for years to support herself and her charities,” however, she seems to be “accelerating” her sale of art and  acting more aggressively to “purge herself of her legacy.”

While the private sale of artwork is not entirely unusual, Ms. Picasso’s strategy of selling an undetermined number of works “one by one, based on need” by word-of-mouth advertising is raising eyebrows in the art market.

Read more about Marina Picasso’s sales strategy and strained family history here.

More Trouble for Former Director of the Salander-O’Reilly Galleries

Posted in Art Recovery/Theft, Litigation Issues

Leigh Morse, former director of the now infamous Salander-O’Reilly Galleries, may be incarcerated again for failing to timely pay restitution to the galleries’ defrauded clients, which include celebrity clients like Robert DeNiro.  It has been reported that more than three years have passed since her sentencing but Morse has only paid $22,000 of the $1.73 M restitution order.  It is not clear why Morse has not done more to make the restitution payments.  However, Morse owns a number of properties with her husband some of which are located in Pennsylvania, a tenancy by the entireties (TBE) state.  Owning property as TBE can be used to shield assets from creditors of just one spouse.  However, TBE designation does not protect against creditors of both spouses on joint debt.  It has been reported that Morse who is the operator of Leigh Morse Fine Arts is suffering financially because of the damage her criminal past has had on her ability to sell art.  Morse is scheduled to appear in court in March.  Hopefully, she will have made some payments by then.

Fate Of The Treasured “Cranachs” Continues – Part 2 And The Act Of State Doctrine

Posted in Art Museums, Art Recovery/Theft, Litigation Issues

As noted in the below post, last week the Supreme Court of the United States (“SCOTUS”) declined to hear an art provenance case, Norton Simon Museum of Art at Pasadena et al. v. Marei Von Saher, which has a rather long history as well as the artworks at issue.  The claims involve the fate of two life-size panels, Adam and Eve (collectively, “the Cranachs”), circa 1530, painted by renowned German Renaissance artist Lucas Cranach the Elder.  The Cranachs are part of the permanent collection of the Norton Simon Museum of Art (“Museum”) in Pasadena, California.

As plaintiff in the initial action filed in the United States District Court for the Central District of California back in 2007, Marei Von Saher claims she is the rightful owner of the Cranachs, which were forcibly purchased by the Nazis from her late husband’s family during World War II.  The district court dismissed Von Saher’s complaint as insufficient to state a claim upon which relief can be granted, and such dismissal led to her appeal before the United States Court of Appeals for the Ninth Circuit.

In a detailed opinion last June, the Ninth Circuit reversed and remanded the district court’s dismissal of Von Saher’s action.  The panel held that because the Cranachs were never subject to postwar internal restitution proceedings abroad in the Netherlands, there was no conflict of Von Saher’s claims with any federal policy on recovered art.  The panel held that Von Saher’s claims against the Museum and the remedies sought did not conflict with foreign policy, and instead this was a dispute between private parties.  The panel remanded the case for “further development” on the issue of whether the litigation of the case implicated the Act of State Doctrine.

Under the Act of State Doctrine, “[e]very sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory.” Underhill v. Hernandez, 168 U.S. 250, 252 (1897).  Further, “Act of [S]tate issues only arise when a court must decide—that is, when the outcome of the case turns upon—the effect of official action by a foreign sovereign.”  W.S. Kirkpatrick & Co., Inc. v. Envtl. Tectonics Corp., Int’l, 493 U.S. 400, 406 (1990).

On remand, even if it is determined by the district court that the transfer of the Cranachs is a sovereign act, the district court also must determine the applicability of any exception to the Act of State Doctrine.  The Ninth Circuit panel recognizes that its remand places the district court in a “delicate position” and although the remand “necessitates caution and prudence, [the panel] believe[s] that the required record development and analysis can be accomplished with faithfulness to the limitations imposed by the [A]ct of [S]tate [D]octrine.”

In the next chapter of the case, in view of the Ninth Circuit’s decision, which remains intact after SCOTUS’ refusal to hear the case, it appears that Von Saher’s claims will encounter further complex legal issues on remand that could terminate the case.

For a detailed background and history of this case and the acquisition of the Cranachs by Von Saher’s late husband’s father, Jacques Goudstikker, click here.

 

California Museum Denied Cert by SCOTUS on Dispute over Looted Art

Posted in Art Museums, Art Recovery/Theft, Litigation Issues

As a result of the Supreme Court’s decision to deny cert on The Norton Simon Museum’s appeal, Marei Von Saher, descendant of Jewish relatives who fled Holland during the Holocaust, will get another day in court on claims involving the ownership of Renaissance artist, Lucas Cranach the Elder’s, life-sized diptychs of Adam and Eve (circa 1530).

Reported to be worth in excess of $24 million, the paintings have been at the center of a dispute brought to the courts by Von Saher in 2007.  According to the Ninth Circuit’s recitation of facts, Jacques Goudstikker, a Dutch Jewish art dealer and Von Saher’s father-in-law, purchased the works from the government of the Soviet Union in the ‘30s.  Thereafter, the paintings were confiscated by Herman Göring through a purchase transaction from Goudstikker’s gallery, and eventually recovered by the Monuments Men during World War II.  While Goudstikker’s widow recovered some of her husband’s collection in the ‘50s in connection with a settlement with Dutch authorities, none of the works pilfered by Göring were recovered.  After the war, the Cranach paintings were claimed by George Stroganoff Scherbatoff who argued the paintings were illegally seized by the Soviet Union decades earlier.  As a result of his claims, the paintings were returned to his family by the Dutch government.  However, the Goudskikker family was never notified of the Stroganoff claims, and thus, never provided an opportunity to dispute the claims.  In 1971, a New York art dealer purchased the works from Stroganoff.  Thereafter, the Norton Simon Museum acquired possession.   Von Saher was not aware of the diptychs’ location until 2000.

The Von Saher litigation hinges on procedural issues involving state and federal law.  However, ultimately Von Saher’s claim is a conversion claim under state law against the Norton Simon Museum.  As a result, the Ninth Circuit concluded that these claims involve a dispute between private parties and that the matter should be remanded for the lower court to determine whether state doctrine (which is applicable because Von Saher seeks a declaration that she is the rightful owner, an order to quiet title, and immediate possession of the works) could defeat Von Saher’s claims. The Ninth Circuit further noted that it will be necessary for the lower court to determine whether the return of the property to Stroganoff  by the Dutch government “constituted an official act of a sovereign.”

This is a curious case because it does not involve just the traditional statute of limitations arguments but rather involves two layers of wrongful conversion claims.  Given the number of years that have passed it will be interesting to see what evidence is produced in support of the Museum’s claim to the works.

Davos Debate: Growth of the International Art Market

Posted in Uncategorized

Last week, the Financial Times and Julius Baer hosted a debate in Davos, where writers, economists, art show producers, and collectors discussed the significant growth of the international art market, and recognized the $70 billion a year industry as a significant economic force.  Read the full article here.

Here are some high points:

Peter Aspden, arts writer for the Financial Times, remarked on the impact of globalization of the art market, suggesting that “[t]here have been enormous changes in the ecology of the art world in the last 20 years.”

Famed economist, Nouriel Roubini, “warned that as art becomes big business, it also becomes a big circus promoted by the fashion and entertainment industries” and advised that “some form of self-regulation should be introduced into the art market.”

Well-known art collector, Patrizia Sandretto Re Rebaudengo, shared her belief “that art collectors who identify, sustain and promote fresh talent are essential to the art world.”

Martin Roth, director of the Victoria & Albert Museum in London, opined that it is a museum’s role to protect quality and artists, and to provide “a stabling counterweight to the effervescence of the art market”.

DALI FORGERY: Reliance on Art Gallery Reasonable, No Duty for Art Buyer to Conduct Own Due Diligence

Posted in Uncategorized

In a recent case, the Michigan Court of Appeals ruled in an unpublished opinion that claims against Park West Galleries, Inc. for fraudulent concealment and breach of warranty could move forward despite West Galleries’ statute of limitations argument.

Time Line:

1999 – Purchase by buyer aboard cruise ship of Salvadore Dali’s Divine Comedy, complete set

2009 – Buyer attempts to sell the set and discovers that the works are not authentic by the Fine Art Register

2011 – Buyer brings suit on eleven counts including negligence, conspiracy, fraudulent concealment and breach of warranty claims.

Litigation

West Galleries argued that the claims were barred by the relevant statute of limitations because the purchase of the collection dated back to 1999.  Further, West Galleries argued that the buyer failed to do due diligence to discover the forgery.

On appeal, the Michigan Court of Appeals agreed with the buyer that (i) the state’s tolling statute, MCL 600.5855 (which tolled the statute of limitation to the time of the discovery of the fake in 2009), applied due to West Galleries’ fraudulent concealment; and (ii) the buyer was not negligent in relying on the gallery’s “promise that the art was real and the appraisal was fair.”  The court noted, inter alia, that tolling was appropriate in this case because the gallery provided the buyer a certificate of authenticity and a written appraisal at the time of purchase, which was the affirmative act of concealment that prevented the buyer from further inquiring about the piece. 

Although the buyer in this case was permitted to move forward on her claims, this case demonstrates again the importance of provenance. In this case, a prospective buyer of the collection tipped the seller that the authenticity of work offered by West Galleries was under investigation, which prompted the additional review of the work.  Provenance is key!