Grossman LLP | Federal Court Rules That Met Can Keep Picasso Sold As Owners Fled Pre-World War II Europe
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    In a lengthy opinion issued earlier this week, Judge Loretta A. Preska of the U.S. District Court for the Southern District of New York ruled that the Metropolitan Museum of Art may keep a noteworthy Picasso artwork, even though its German-Jewish former owners sold it for a fraction of its actual value to finance their safe passage out of fascist Italy.  See Zuckerman v. The Metropolitan Museum of Art, S.D.N.Y. Case No. 16 Civ. 7665 (LAP), Doc. No. 36.  This decision may have significant implications for plaintiffs seeking to recover art sold under duress during the Nazi era.   

    We first wrote about this lawsuit in 2016 shortly after it was filed.  The plaintiff, Laurel Zuckerman, is the sole heir of Paul and Alice Leffmann, the painting’s former owners.  In the years leading up to World War II, the Leffmans “fled from Germany to Italy in fear for their lives, after losing their business, livelihood, home, and most of their possessions due to Nazi persecution.”  The Leffmanns managed to escape the Nazi Holocaust only by selling one of their most prized possessions for a mere fraction of its fair-market value:  Pablo Picasso’s The Actor, a “monumental” artwork that now hangs in the Met.  Using the relatively paltry proceeds of that sale, the Leffmanns financed their flight from Italy through Switzerland and, ultimately, to Brazil. 

    And now—unless Zuckerman successfully appeals—the painting will remain in the Met’s possession for the foreseeable future.  In a 50-page opinion, Judge Preska dismissed Zuckerman’s lawsuit to recover The Actor from the Met—or, in the alternative, seeking $100 million in money damages.  Despite the Leffmanns’ harrowing ordeal, which Judge Preska recounted in exacting detail, she ultimately ruled that Zuckerman’s lawsuit failed to allege that the Leffmanns parted with the painting under duress. 

    The Leffmanns bought the work in 1912 and exhibited it a number of times in Germany between then and 1929, thereby affirming publicly their ownership of the work.   Between 1933 and 1938, however, “the world the Leffmanns knew in Germany began to change dramatically.”  First, the Leffmanns were forced to sell their home to an “Aryan” German corporation.  Then, Mr. Leffmann and his Jewish business partner were forced to transfer ownership of their company, one of Europe’s preeminent rubber manufacturing concerns, to their non-Jewish minority business partner.  And some months later, the Leffmanns were stripped of their remaining real-estate investments, which were forcibly purchased by yet another “Aryan” German corporation for far less than their actual value.  “Indeed,” as Judge Preska recognizes, “these were not real sales at all but essentially thefts by Nazi designees of substantially everything the Leffmanns ever owned.” 

    Before fleeing Germany for Italy, the Leffmanns arranged for The Actor to be stored in Switzerland at the home of one of their non-Jewish acquaintances.  “For this reason only,” Judge Preska relates, “The Actor was saved from Nazi confiscation.”  As for the Leffmanns, they suffered a series of further depredations under Italy’s increasingly fascist regime; by the late 1930s, they had few assets remaining—except for The Actor.  In 1938, shortly after Hitler’s official state visit to Italy, the Leffmanns sold The Actor for $12,000 to Paris-based dealers Hugo Perls and Paul Rosenberg. 

    Later that year, after fleeing Italy for Switzerland, the Leffmanns planned their escape from Europe altogether, to Brazil.  Brazil, however, provided visas only to Jews who could transfer more than $20,000 to the Banco do Brasil.  The Leffmans’ proceeds from their sale of The Actor constituted the majority of their resources available to make the various payments, including bribes, required by Switzerland, as well as those needed to enter Brazil.  As for the fate of the painting itself, Rosenberg loaned The Actor to MoMA in 1939 and roughly three years later, in 1941, Thelma Chrysler Foy of New York bought the work for $22,500—“a difference of U.S. $9,300, or a 70 percent increase from the price paid to the Leffmanns[.]”  Foy donated the work to the Met in 1952, where it has remained ever since.

    In her lawsuit to recover the painting, Zuckerman alleged that Mr. Leffmann “was forced by the circumstances in Fascist Italy to sell [The Actor] under duress in 1938.”  Judge Preska rejected this argument, however, and on that basis alone granted the Met’s motion to dismiss the lawsuit in its entirety. 

    Preliminarily, Judge Preska ruled that New York law, rather than Italian law, governed the dispute.  New York, according to Judge Preska, has “the greatest interest in, and is most intimately concerned with, the outcome of, this litigation.”  The Actor “has remained in New York since at least 1939,” Judge Preska noted, and “[t]he Defendant Museum [the Met], a major New York cultural institution, possessed and exhibited the Painting for the past 66 years, all in New York.”  In the end, “New York’s interests surpass those of Italy, where, as here, the artwork was transferred to New York shortly after the 1938 transaction, was ultimately sold to a New York resident, and donated to a New York institution where it has remained[.]”  This ruling creates precedent supporting the application of New York law in a lawsuit brought to recover Nazi-looted art that has been in New York for decades, even if its former owners transacted the sale of such art in Europe.  As we have observed in other posts, the threshold issue of choice of law—i.e., which jurisdiction’s law will govern a dispute—is often critically important in cases involving Nazi-era art, due to substantive differences between American law and that of many European jurisdictions.  Here, however, the court opined that Zuckerman would have fared no better had Italian law governed the dispute, because both jurisdictions apply similar standards when it comes to contracts allegedly entered into under duress.

    Applying New York law, Judge Preska held that a plaintiff seeking to void a contract on duress grounds must prove that the transaction was procured by means of a wrongful threat that precluded the exercise of the plaintiff’s free will.  “Critically,” Judge Preska opined, “the defendant must have caused the duress.”  And a party seeking to void a contract on the basis of economic duress “bears a heavy burden” given that “an element of economic duress is present when many contracts are formed.” 

    In the end, Judge Preska found that Zuckerman failed to satisfy her legal burden for three reasons.  First, Zuckerman failed to plead that either the Met or the original counterparties to the underlying 1938 transaction used “wrongful” or “threatening” conduct to effect Mr. Leffmann’s sale of the work.  While the Leffmans were surely motivated by the “undeniably horrific circumstances of the Nazi and Fascist regimes,” the sale transaction itself was between private individuals, not agents of those regimes, and the buyers did not cause those circumstances.  Second, Preska ruled, Mr. Leffmann “exercised his free will” in determining whether to sell the work, as evidenced by the facts that, over the course of two years, the Leffmanns negotiated with, and rejected offers from, multiple parties before the eventual sale to Perls and Rosenberg.  And third, Zuckerman failed to plead that the Leffmanns had “no other alternative” than to engage in the 1938 sale, given that they had other assets to sell in addition to the Picasso.  The court’s rulings on duress are noteworthy given that, in the years leading up to World War II, many pieces of art changed hands not through outright theft or seizure by oppressive regimes, but in sales where the fraught political climate played a significant but indirect motivating factor. 

    Zuckerman’s counsel has stated that they intend to appeal Judge Preska’s decision.  The Met, for its part, claims that it “‘considers all Nazi-era claims thoroughly and responsibly,’ and has returned objects that appeared to have been misappropriated.”  In the meantime, the decision could have important repercussions in the arena of Nazi-era art restitution, particularly in light of the high hurdles the court applied to the plaintiff’s duress-based theory of recovery.  The case serves as another illustration of how, despite increased recognition of the way World War II changed the art world, and despite non-binding international agreements and even new federal legislation seeking to address these issues, claimants often face difficulties in successfully recovering those works through litigation.