Posted on July 23, 2008 by Samantha Evans

This blog will endeavor, over time, to discuss some of the major issues concerning the theft and conversion of art, artifacts, and antiquities, and what tools an aggrieved former owner of art may have to recover their prized belongings. This blog will also look at the same issues from a defense perspective, since those accused of stealing or converting art may be falsely targeted by law enforcement or they may simply want their day in court.

Insuring Against Art Theft: A Good Idea?

Anyone who has seen the famous movie The Thomas Crown Affair might attest that looting and profiting from stolen art is big business. Indeed, the Canadian news publication Globe and Mail reported in its July 5, 2008 edition that the illegal art and antiquities trade ranks third in “value,” after illegal arms and drug smuggling. The F.B.I. cites similar statistics. The Globe and Mail also reported that art thieves can expect to profit approximately 10% from their illegal activities. When one considers the continuing upward trend in the price of major artworks, it is not difficult to see why some see art theft as a way of making a lot of money very quickly.

When considering the possibility of art theft, a museum, dealer, collector, or other owner of valuable artwork would be prudent to inquire into art insurance. In this entry, we will look at recent news articles that highlight some of the complex and difficult questions that may arise in the process of determining whether to insure art.

On one hand, we have the recent July 6, 2008 clipping from CBC News concerning the theft of life-sized bronze figures in a popular sculpture called Photo Session by American realist artist J. Seward Johnson Jr., along with four bronze plaques, from a public area of Queen Elizabeth Park in Vancouver. The article questions whether the city, having failed to insure these sculptures, or most of the remainder of its municipal art for that matter, has missed the boat. The article quotes certain city employees as stating that, since there has been so little “damage” to the city’s art in the past, the cost of the insurance premiums outweigh the benefits. The article intimates that this belief is now being reexamined in light of the recent pilfering of the city’s prized works.

In the Globe and Mail article referenced above, entitled “Stop the appeasement of art and antiquities thieves,” the newspaper cites the 2004 theft of five ivory statuettes from the Art Gallery of Ontario. The article states that the gallery’s insurer offered a reward of $150,000 for the return of statuettes. This amount, which was presumably far less than the replacement value, was enough. The statuettes were returned. The article asks: Was the $150,000 a ransom? Would the payment of such sums lead to the “appeasement” of art thieves?

Ultimately, deciding whether to insure one’s art collection must be determined on a case-by-case basis. Issues of cost, value, the “uniqueness” of the art, and policy reasons may all come into play when making this decision.   

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Posted on July 14, 2008 by Samantha Evans

Unknown Buyers At Auction - Determining Who to Sue.

Despite the stock market turmoil, both high-grossing art auctions and high-rolling buyers who wish to keep their identity unknown remain a constant. This raises the following question: would a New York court, prior to filing an actual lawsuit, permit a party claiming to be the true owner of a missing artwork learn the identity of the unknowing buyer who purchased it at auction? As you may expect, the answer is: it depends.     

In In re Peters, 34 A.D.3d 29, 821 N.Y.S.2d 61 (1st Dep’t 2006), the Court stated that a party seeking pre-action discovery must establish: (1) a valid basis for seeking pre-action disclosure to aid in bringing the action (i.e., that it needs the information); and (2) that the party has a meritorious claim.   See N.Y. CPLR §§ 3012(c), 7112 for more on pre-action discovery. Notably, the statute does not require that the source of pre-action discovery be the target of the prospective action. In re Goldline Int’l, Inc., No. 2506/07, 2007 WL 3054163 (N.Y. Sup. Ct., N.Y. Co., Mar. 20, 2007).

New York courts have granted pre-action disclosure, such as depositions and document demands, to determine the identity of a potential defendant in a prospective art recovery action. For example, in Alexander v. Spanierman Gallery, LLC, 33 A.D.3d 411, 822 N.Y.S.2d 506 (1st Dep’t 2006), the Court affirmed the lower court’s decision to permit pre-action disclosure to obtain the identity of the individual or entity that purchased a sculpture allegedly stolen from the plaintiff’s home. The Court implied that pre-action disclosure of this nature is proper when the information is sought to file suit and not to determine if one exists.

However, in In re Peters, 34 A.D.3d 29, 821 N.Y.S.2d 61 (1st Dep’t 2006), the Court was not willing to grant the plaintiff pre-action discovery for this same information. There, the plaintiff was the alleged successor-in-interest to the true owner of stolen artwork. She sought pre-action discovery from Sotheby’s to learn the identity of the unknown person who purchased the subject artwork in good-faith at an auction. 

The In re Peters Court agreed that the plaintiff had a valid basis for seeking this information because she needed it in order to sue the proper defendant in a prospective action to recover the artwork. The Court explained that under New York law, one of the elements of a claim for conversion or replevin against a good faith purchaser for value is the demand and refusal rule. Stated otherwise, a plaintiff must be able to show that she made a “demand” for the return of the art from the good faith purchaser, who then “refused” such a demand. Without knowing the identity of the current owner, the plaintiff would not be able to satisfy her burden.

However, the In re Peters Court disagreed with the lower court that plaintiff had a meritorious claim. Interestingly, even though it was very early on in the litigation and the plaintiff may not have ultimately named Sotheby’s as a defendant in the prospective action, the Court was willing to entertain Sotheby’s defenses to the viability of plaintiff’s suit. Specifically, despite the fact-sensitive nature of the inquiry, the Court was persuaded that the plaintiff had unreasonably delayed in filing suit and that the suit was time-barred.  Therefore, the Court reversed the lower court’s decision to permit pre-action discovery of the unknown buyer’s identity, vacated the lower court’s order, and denied the plaintiff’s application and dismissed her petition for pre-action discovery.

The In re Peters case shows that a potential plaintiff seeking to learn the unknown identity of a buyer at auction in aid of bringing an action has to jump through certain hoops in order to have a realistic shot at pre-action discovery.   

For other commentary about discovering the identity of an unknown buyer, see our previous blog “Confidentiality Agreements Between Art Buyers and Art Galleries are Not Bulletproof.”  

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