Pryor Cashman Prevails Before Second Circuit In Significant Art Law Case Involving Egon Schiele Drawing

Wall Street Journal 11 October 2012

NEW YORK, Oct. 11, 2012 /PRNewswire via COMTEX/ -- The Second Circuit Court of Appeals has affirmed today in its entirety a judgment that Pryor Cashman obtained for its client in a significant and long-running art law dispute.

The case, Bakalar v. Vavra, has been litigated for over seven years and involves the question of who owns a drawing by the artist Egon Schiele, known as Seated Woman With Bent Left Leg (Torso). The ownership dispute was between Pryor Cashman client David Bakalar, who purchased the drawing in the early 1960's from a gallery in Manhattan, and heirs to the alleged former owner of the drawing, a Viennese cabaret singer named Fritz Grunbaum who was murdered by the Nazis in 1941.

Grunbaum was a known collector of Egon Schiele works. The heirs to Fritz Grunbaum alleged that the drawing had been stolen by the Nazis after Grunbaum's arrest in Vienna in 1938. However, while there was no direct evidence that Grunbaum had ever actually owned the drawing or that the drawing had ever been confiscated by the Nazis or their agents, there was compelling evidence that the drawing had been sold by Grunbaum's sister-in-law, a woman named Mathilde Lukacs, in Switzerland in 1956. Pryor Cashman obtained this evidence through international Hague Convention discovery procedures from the Swiss art dealer who had purchased the drawing from Lukacs, and who produced all of his records from that time period and also testified in the case.

Relying on that important piece of evidence, Judge Pauley of the U.S. District Court for the Southern District of New York found as a matter of inference that Grunbaum more likely than not did once own the drawing, but also agreed with Pryor Cashman's argument that the drawing had not been stolen by the Nazis and had instead remained with the family. Pryor Cashman successfully argued that same point on appeal to the U.S. Court of Appeals for the Second Circuit.

The ruling is particularly significant because Bakalar was required to disprove Nazi theft under controlling New York law, which strictly holds that good faith purchasers of property (like Bakalar) can never take good title if the property was once in the hands of a thief. Such burden-shifting is rare in the United States.

The Grunbaum heirs had alternatively alleged that if Lukacs did possess the drawing after World War II, then she had stolen the drawing from the Grunbaum estate. Here Pryor Cashman successfully argued under New York's so-called "laches defense" that the heirs and their predecessors, i.e., their parents and grandparents who had more direct knowledge of the situation and who knew Lukacs, had unreasonably delayed in pursuing such a claim against Lukacs and had consequently allowed the critical evidence to disappear, thereby unduly prejudicing Bakalar's ability to disprove that Lukacs herself had been a thief.

"The Court's ruling is significant in holding that the laches defense, and the question of delay in gathering evidence, does not reset with each successive generation," says James A. Janowitz, a senior partner in Pryor Cashman's Litigation Group, and counsel for Mr. Bakalar. "The duty to search and act in a timely matter should rest with the first generation to lose the property."

The Second Circuit's ruling regarding the laches defense is particularly significant to New York's prominent art market. While New York strictly favors the rights of dispossessed former owners over the rights of good faith purchasers of stolen property, the laches defense provides an important measure of balance so that good faith purchasers may defend their title against stale or frivolous claims, when there is very little direct evidence concerning the situation.

"This ruling offers very important protection for good faith buyers and sellers of art in New York," adds William L. Charron, also a partner in Pryor Cashman's Litigation Group and co-counsel for Bakalar. "The ruling should also be highly instructive for cases nationwide where a laches defense is asserted."

To read a copy of the Second Circuit's October 11, 2012 decision, please click here. To read a copy of the District Court's August 17, 2011 decision, please click here.

Pryor Cashman Litigation Group Partners James Janowitz and William Charron and associate Mona Simonian represented Bakalar throughout the entire course of the litigation.

Pryor Cashman LLP ( ) is an independent full-service law firm with over 120 attorneys in its main office at 7 Times Square in New York City and an office in Los Angeles. With broad and sophisticated transactional and litigation practices, Pryor Cashman provides a wide range of services to meet the varying legal needs of businesses and individuals. The firm has well-established relationships with firms throughout the U.S. and the rest of the world to serve its national and international clients.

SOURCE Pryor Cashman LLP
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