Claims by Mendelssohn Bartholdy Heirs over Picasso “Madame Soler” Dismissed, Court Finds No FSIA Jurisdiction After Evidentiary Hearings

Art Law Report 1 July 2014
By Nicholas O'Donnell

The U.S. District Court for the Southern District of New York has dismissed claims for ownership of Madame Soler by Pablo Picasso, currently at the Pinakothek der Moderne in Munich.  Just as the relevance of Judge Jed Rakoff’s comments over another art restitution case brought by the heirs of Paul von Mendelssohn Bartholdy unexpectedly came to the fore recently, Judge Rakoff’s decision is now the most recent in a line of frustrations for the heirs of Mendelssohn Bartholdy, a victim of Nazi persecution in Berlin in the 1930s.  The ramifications of this case may be fairly narrow, however, as the case was premised on allegations of specific transactions in New York rather than general allegations about the conduct of Germany.  The claimants could appeal, or perhaps turn to the Limbach Commission if they could be heard (the Pinakothek is a subdivision of Germany for jurisdictional analysis, but it’s unclear at first blush if the Commission would view this claim as within its province).

The plaintiffs are Julius Schoeps, Edelgard von Lavergne-Peguilhen, and Florence Kesselstatt (the same claimants against the Museum of Modern Art over Boy Leading a Horse and Le Moulin de la Galette, both also by Picasso), and heirs of Paul von Mendelssohn-Bartholdy.  They alleged that Mendelssohn Bartholdy, a Jewish banker in Berlin, consigned Madame Soler to Berlin art dealer Justin K. Thannhauser in 1934.  That consignment, alleged the plaintiffs, was not of Mendelssohn Bartholdy’s free will, but was rather only because of intensifying persecution as a Jew in Berlin after the Nazis’ ascension to power (persecution quite specific to him because of his family and name, a history set out in great detail in the Complaint).  Faced with the loss of his livelihood and financial stability, he liquidated his considerable art collection.

The lawsuit (link to the Complaint here) was not against Bavaria as the political descendent of Nazi Germany (which it is not, it is one of the Bundesländer of the Federal Republic of Germany, and all the actions alleged in the 1930s against Mendelssohn Bartholdy were in Berlin, then part of Prussia).  Rather, the plaintiffs alleged that Bavaria had acquired the paintings in 1964 by purchasing it in New York—from Thannhauser.  This acquisition, said the plaintiffs, was negligent given Bavaria’s knowledge of Mendelssohn Bartholdy’s persecution and flight from Germany in 1937.

This dynamic created both opportunities and problems for the plaintiffs.  Where many claimants run up against post-war transactions that effectively laundered title when a “good faith purchaser” was involved, there is no such effect in New York.  So if Bavaria, or anyone else, buys a stolen painting in New York, it cannot acquire good title.  But the painting is not in New York any more, it is in Munich.  So the plaintiffs needed a basis under which to acquire jurisdiction over the defendant.  To do so, the turned to the Foreign Sovereign Immunities Act (FSIA), the basis for many if not most WWII art restitution litigation in the United States involving art that is overseas.

Here, however, the plaintiffs took a tack somewhat different from many claimants.  The Altmann v. Republic of Austria line of cases argue that when a painting has been taken in violation of international law and was in the hands of a sovereign, a U.S. court will have jurisdiction (the expropriation exception).  These plaintiffs, had they framed the case in that way, could have run up against the act of state doctrine, however—Mendelssohn Bartholdy was a German citizen deprived of his property by the then-recognized government of Germany.  As deplorable as the actual events were, they parallel, for example, the Soviet expropriation of Van Gogh’s Night Café that was recently held to be an act of state and beyond the reach of federal jurisdiction.  There is some question (having not been tested so far as I know) whether a court would apply that to German Jews that were effectively stateless by that time, but it is certainly a foreseeable defense.

So the Madame Soler plaintiffs availed themselves of a different provision in the FSIA: the commercial activity exception.  That is, they alleged that the purchase of Madame Soler in New York (or at least reaching an agreement in New York concerning the purchase) constituted commercial activity that had “substantial contact” with the United States.

The case was not decided based only on the plaintiff’s allegations.  Given the jurisdictional allegations and questions, the court held evidentiary hearings, as courts often will.  After hearings, the court made findings that Kurt Martin, the then-director of the State Paintings Collection (the Bayerische Staatsgemäldesammlung), a subdivision of the Bavarian State Ministry for Education and Culture (the Bayerisches Staatsministerium für Bildung und Kultus, Wissenschaft und Kunst), obtained permission to send Halldor Soehner to New York.  The purpose of this trip was for Soehner, inter alia, “to study museums in the USA.”  The court found that Soehner had visited Thannhauser’s gallery on New York’s Upper East Side between March and May, 1964, and saw Madame Soler.  Correspondence between Soehner and Bavarian officials ensued, the court found, culminating in a trip to France and a letter (in Saint-Jean-Cap-Ferrat, France) in which Soehner confirms the purchase and price of Madame Soler for the State Paintings Collections.  Thus, the court found, Soehner had not done anything in New York to reach a binding agreement to purchase the Picasso painting, undermining the principal theory of jurisdiction.  Although the location of signing this letter agreement was not clear, the court inferred that it had been signed in New York to help Thannhauser minimize taxes.

Based on all this, the court dismissed the assertion of jurisdiction under the FSIA.  First, as noted above, it found that the agreement to purchaser Madame Soler had been reached in Europe, and could not constitute commercial activity in New York.  Second, the court found that the plaintiffs could not rely on the argument that the purchase, even if made in Europe, was “based on” commercial activity in the U.S., since its preliminary meeting with Thannhauser was “a meeting of no legal consequence.”

Lastly, the court rejected the idea that the purchase and exhibition of Madame Soler, even if wholly outside the United States, qualified as “an act outside of the United States. . .that cause[d] a direct effect in the United States.”  The court went so far as to argue the existence of an effect “on the policy-sensitive NY art market” as “balderdash.”

Since the expropriation exception was not at issue, there was no ruling on the question of Bavaria’s commercial activity in New York or the U.S. generally.  That is important to, for example, the claims by David Toren for the Max Liebermann painting found in Cornelius Gurlitt’s apartment—claims asserted against Bavaria for its actions in seizing but not restituting the paintings.  An adverse holding on that question of commercial activity might have given Bavaria grounds to attack Toren’s claims on that basis.  Instead, we will watch for developments there with interest.
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