This year was a big year for art litigation as a number of cases have shifted the landscape for art owners, museums, and other key stakeholders. In his year-end review, Bill Charron, Chair of Pryor Cashman’s Art Law Group, comments on some of the key art law decisions from 2019, and discusses their potential implications in 2020 and beyond.  

World War II-Era Art Restitution Claims

The enactment of the Holocaust Expropriated Art Recovery (HEAR) Act of 2016 has changed the lens through which courts now view art restitution claims arising out of the context of World War II. A key question in these cases is whether art was transferred by Jewish owners during that time period while under legally recognized “duress.” Traditionally, U.S. laws have recognized thefts or forced sales by Nazis to constitute duress.

While the HEAR Act itself is a statute of limitations law, its stated policies have been embraced by some courts as constituting a basis to expand the concept of duress. This was apparent in recent New York State Court cases, including Reif v. Nagy and Frenk v. Solomon. In Reif, the courts viewed the possible rescuing of a husband’s Egon Schiele art collection by his wife pursuant to a power of attorney to have been an act of duress because the power of attorney was executed in a concentration camp. In Frenk, the lower court, in dictum, expressed the view that an art collector fleeing Germany in 1933 and entrusting his wide-ranging collection to a known dealer for safekeeping was not an act of legal “entrustment” because the collector was fleeing a turbulent environment.

In contrast to these New York State Court cases, New York Federal Courts have more narrowly construed the concept of duress. In Zuckerman v. Metropolitan Museum of Art, the lower court rejected the argument that a Jewish owner who, before fleeing Fascist Italy in the 1930s, took more than a year to negotiate the sale of his Picasso painting to a buyer in France, did so under “duress” when viewed through the lens of the HEAR Act. And in Bakalar v. Vavra, the federal courts reached precisely the opposite conclusion of the state courts in Reif v. Nagy on the exact same set of facts. 

In view of these disparate results, those dealing in art with provenance that includes 1930’s-era transactions in Europe should be particularly cautious. The concept of duress and the meaning of “voluntariness” of art sales that occurred in stressful and dangerous environments will continue to be the subject of litigation.

Fake and Forged Art Claims

In 2016, the art world eagerly anticipated a jury verdict concerning the Knoedler Gallery fake art scandal in the case of De Sole v. Knoedler Gallery. That case settled mid-trial without a verdict. In 2019, the art world again excitedly awaited a jury verdict in the case of Hilti v. Knoedler Gallery. The Hilti case, which was handled by Pryor Cashman on behalf of the purchaser of a fake “Mark Rothko” painting, settled just before trial was to begin this past summer.

While the parties in these cases reached “mutually satisfactory” settlement terms, the state of indecision concerning the conduct of Knoedler in selling fake art, and the conduct of the wealthy buyers of fake art from Knoedler, is decidedly unsatisfactory for the art market. Questions of burdens of diligence and risks of loss remain unresolved, although the New York Federal Court in Hilti did previously rule that an allegedly sophisticated buyer of art was entitled to rely on the good reputation of a gallery like Knoedler in buying art, without conducting independent diligence into the information the gallery had provided.

In addition, the Hilti case serves as a caution to gallery owners to take care in following corporate formalities with their businesses. Before the parties settled, the ultimate gallery owner in Hilti, Michael Hammer, had been ordered to stand trial and potentially answer for Knoedler’s alleged misconduct under the doctrine of “corporate veil-piercing.”

The Knoedler saga is now closed; Hilti was the final case to address that scandal. But other scandals involving fake art have been increasing in recent years, so buyers would be wise to seek appropriate counsel before conducting any due diligence and purchasing or selling artwork.

Copyright “Fair Use” Art Claims

Visual art appropriation continues to be a hot-button issue. In the 2019 case of Andy Warhol Foundation For the Visual Arts, Inc. v. Goldsmith, a New York Federal Court determined that Warhol’s rendition of a photograph of the singer, Prince, constituted non-infringement of copyright by fair use because, in essence, Warhol’s work first strikes reasonable observers as “A Warhol” and not as the particular photographed image of Prince. Taking loose guidance from the U.S. Appeals Court for the Second Circuit’s landmark 2013 “fair use” decision in Cariou v. Prince, the court in Goldsmith found that: “The humanity Prince embodies in Goldsmith’s photograph is gone” from Warhol’s work, and that Warhol’s work was “transformative.”

Goldsmith reflects that “fair use” cases in New York will largely turn on interpretations of the inner meanings, as well as opinions about the “aesthetics,” of visual art. Those interpretations and opinions may conclusively belong to a single judge (or to a panel of judges). Decisions like Goldsmith, which lack bright-line guidance for future parties and courts, indicate that artists and copyright holders will continue to litigate over these complicated issues.

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