News:

Over eighty years after the end of World War II, crimes committed by the Nazis continue to be redressed, including in our very own Commercial Division. The Nazis are well known to have plundered with reckless abandon along the trail of their occupation. Beyond their theft of precious metals and currency, they also stole numerous famous paintings, with Hitler having a particular distaste for modern art, which he deemed “degenerate art.”

The 2014 film, The Monuments Men (starring Matt Damon), tells the story of the efforts of the Monuments, Fine Arts, and Archives program of the Allied armies to protect, and after World War II ended, to recover, cultural monuments, including fine art, plundered by the Nazis. The Monuments Men did not recover every piece of art stolen by the Nazis (the precise scope of their plunder being unknown). But even after their efforts ended, Nazi-looted art works have been returned to their rightful owners, or their heirs, including two in April of this year as a result of a landmark summary judgment decision issued by New York County Commercial Division Justice Charles E. Ramos, applying the Holocaust Expropriated Art Recovery Act.

This week’s post features an even more recent decision of the New York County Commercial Division, in which the court was faced with a motion to dismiss an action brought to recover a very valuable painting by the famous modern Italian, Jewish painter, Amadeo Clemente Modigliani (1884-1920). To set that decision in its proper context, we first need to examine the painting’s history.

The Painting and its History

At issue in Gowen v. Helly Nahmad Gallery, Inc., is the ownership of Modligliani’s “Seated Man with Cane, 1918” (the “Painting”). Oscar Stettiner (“Stettiner”), a Jewish art dealer who lived and worked in Paris during the 1930s, originally owned the Painting as part of his private collection. As the Nazi’s approached France in 1939, Stettiner was forced to flee Paris, leaving behind the Painting.

After being taken by the Nazi’s upon their occupation of France, the Painting was assigned to a Temporary Administrator and eventually auctioned off in July of 1944. Although this and all other forced sales of property by the Nazis were declared null and void in 1946, and despite Stettiner obtaining an order from the French courts in July of 1946 granting the Painting’s return to him, Stettiner and his family were unable to locate the painting prior to his death in 1948. Stettiner’s wife and two children were thereafter unable to locate the Painting despite continued efforts.

In 1996, the Painting finally resurfaced when it was misidentified as being a different painting and as having an owner other than Stettiner, when it sold at a Christie’s London auction for $3.2 million to the defendant, International Art Center, S. A. (“IAC”). In 2008, IAC attempted unsuccessfully to sell the Painting at Soethby’s New York. In 2011, Stettiner’s sole heir, Phillippe Maestracci, sent two lawyer’s letters to the defendants demanding the return of the Painting (the “Demand Letters”). The defendants never responded. The present action, seeking a declaration as to title of the Painting and asserting claims for conversion and replevin of the Painting, was commenced by George Gowen, as the Ancillary Administrator of Stetiner’s estate.

The Motion Before the Court

In a wide-ranging, eleven-part decision, Justice Eileen Bransten denied the defendants’ motion to dismiss on each of the grounds asserted: CPLR §§ 3211 (a) (1), (a) (2), (a) (3), (a) (4), (a) (5), (a) (7), (a) (8), (a) (10), 327, 1001, 1003, 3025, and 306-b.

The Court’s Personal Jurisdiction and Alter Ego Analysis

Though any one of the asserted grounds for dismissal could warrant a post on this blog, of particular interest is the court’s personal jurisdiction analysis regarding defendant David Nahmad (“Nahmad”), the billionaire patriarch of an internationally recognized art-dealing family. Specifically, the plaintiff relied on the difficult-to-establish alter ego theory; namely that Nahmad is the alter ego of IAC. In their motion to dismiss, IAC and Nahmad argued that neither is a resident or domiciliary of New York and that neither has conducted business in New York.

In analyzing the alter ego theory, the court first addressed its personal jurisdiction over IAC, a Panamanian corporation (that found itself in the Panama Papers leaks). The court held two such grounds existed. First, the court held that IAC had transacted business in New York by and through the acts of its agents, defendants Helly Nahmad (the son of David Nahmad, who pleaded guilty in 2013 to operating an illegal gambling ring) and Helly Nahmad Gallery (his famous eponymous New York City art gallery), who allegedly sold art to which IAC holds title. Second, the court held that IAC had committed tortious conduct in New York because a cause of action sounding in tort arose under New York law when Maestracci sent the Demand letters (see Solomon R. Guggenheim Foundation v Lubell, 77 NY2d 311, 316-317 [1991]).

The court then held that it acquired personal jurisdiction over Nahmad “by and through his conducting business vis-à-vis Defendant IAC and, in so doing, so perverting the corporate form such that this court cannot determine a substantial difference between the two Defendants.”  That is, the court held that Nahmad was the alter ego of IAC. In support of this holding, the court listed various factual allegations, a number of which were supported by documentary evidence, including:

• that Nahmad is the principal of IAC;
• that Nahmad holds all of IAC’s shares of stock;
• that IAC was formed by a Panamanian law firm that has “garnered a reputation for creating ‘shell companies’”;
• that Nahmad used IAC to conceal his name, and thus the owner of the Painting, to perpetuate a wrong (this allegation was supported by a New York Times article quoting Nahmad himself as saying “the International Art Center is me personally. . . . it’s David Nahmad”);
• that IAC fails to adhere to corporate formalities such as keeping regular books and records, fails to generate income, and does not have an independent board of directors; and
• that IAC is underfunded such that Plaintiff would not be able to recover reasonable costs if successful on its claim.

Take Away 

Aside from the fascinating history involved, this decision is particularly beneficial because it offers a specific list of factual allegations supporting a finding of the alter ego theory, a potentially powerful tool for plaintiffs that courts infrequently apply.

Interesting Side Note: On May 13, 2018, a separate Modigliani, the 1917 painting, “Nu Couché (Sur Le Côté Gauche), sold for $157.2 million with fees, making it the highest auction price ever for a work sold at Sotheby’s.