U.S. v. Wally

• Decision Date: 30 September 2009
• Docket Number: No. 99 Cv. 9940(LAP).,99 Cv. 9940(LAP).
• Parties: UNITED STATES of America, Plaintiff, v. PORTRAIT OF WALLY, a Painting by Egon Schiele, Defendant In Rem.
• Court: U.S. District Court — Southern District of New York

663 F.Supp.2d 232

UNITED STATES of America, Plaintiff, v. PORTRAIT OF WALLY, a Painting by Egon Schiele, Defendant In Rem.

No. 99 Cv. 9940(LAP).

United States District Court, S.D. New York.

September 30, 2009.

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Barbara Ann Ward, Sharon Cohen Levin, U.S. Attorney's Office, New York, NY, for Plaintiff.

Arvin Maskin, Konrad Lee Cailteux, Weil, Gotshal & Manges LLP, New York, NY, for Republic of Austria.

Ronald Jaray, Richmond, CA, Stephen M. Harnik, Law Office of Stephen M. Harnik, William M. Barron, Alston & Bird LLP, New York, NY, for Leopold-Museum, Privatstiftung.

Evan A. Davis, Cleary Gottlieb Steen & Hamilton, LLP, New York, NY, for Museum of Modern Art.

Howard Neil Spiegler, Lawrence Michael Kaye, Herrick, Feinstein LLP, New York, NY, for Henry S. Bondi, Sophie Goldstein, Joshua B. Isaac, Shauna Isaac, Marc Isaac, Ralph Italie, Bertha Katzenstein, Ruth Rozanek, Allison Rozanek.

OPINION and ORDER

LORETTA A. PRESKA, Chief Judge.

This protracted dispute stems from the alleged theft of Portrait of Wally ("Wally" or "the Painting"), a painting by renowned Austrian artist Egon Schiele, from Lea Bondi Jaray ("Bondi"). The Government, and Bondi's Estate (the "Estate"), contend that after the Germans occupied Austria in 1938, Friedrich Welz, a Nazi, stole Wally from Bondi, a Jewish owner of a Viennese art gallery, and the Painting has remained stolen property ever since. The Government and the Estate further assert that claimant the Leopold Museum (the "Museum"), knowing Wally was stolen or converted, nonetheless shipped it into this country in violation of the National Stolen Property Act ("NSPA"), 18 U.S.C. § 2314 (1994), thereby rendering the Painting subject to civil forfeiture pursuant to 18 U.S.C. § 545, 19 U.S.C. § 1595(a) (c), and 22 U.S.C. § 401(a).

All parties now move for summary judgment.¹ The Museum seeks an order striking the Seizure Warrant whereby Wally was seized at the outset of this action, granting the Museum's claim to Wally, and releasing the Painting to the Museum. (Dkt. no. 219). The Government and the Estate seek a judgment declaring Wally forfeit.² (Dkt. no. 257.) I conclude that there is a triable issue of fact as to whether Dr. Leopold, and thus the Museum, knew that Wally was stolen when they imported it to the United States. Accordingly, both motions are DENIED.

I. BACKGROUND

A. Factual Backround³

Egon Schiele painted Wally in 1912. (Joint 56.1 Stmt. ¶ 2.) The oil-on-wood painting measures 32.7 x 39.8 cm and depicts Valerie Neuzil, Schiele's primary model and his lover from about 1911 until he married Edith Anna Harms in 1915. (Id. ¶¶ 3-4, 47; Third Am. V. Compl. ¶ 1.) The artist inscribed only "EGON SCHIELE, 1912" on the work. (LM 56.1 Stmt ¶ 16; Third Am. V. Compl. ¶ 1.) In the decades following World War II, Schiele became one of the most prominent Austrian artists of the twentieth century. (LM Counter 56.1 Stmt. ¶ 5.) Hence, in 2002, the Painting was valued in excess of $2 million. (Joint 56.1 Stmt. ¶ 137.)

Bondi, an Austrian Jew and owner of an art gallery in Vienna (the "Wurthle Gallery") acquired Wally some time before 1925. (Joint 56.1 Stmt. ¶¶ 6-8.) Thereafter, although she occasionally showed it in exhibitions, Bondi primarily kept Wally hanging in her own apartment. (Id. ¶ 10.) In 1937, because of financial difficulties, she began negotiating the sale of the Würthle Gallery to Friedrich Welz ("Welz"). (LM 56.1 Stmt. ¶ 2.) However, the parties failed to reach an agreement at that time. (Id.)

In March of 1938, in what is known as the Anschluss, German troops occupied Austria and annexed it to Germany. (Joint 56.1 Stmt. ¶ 11.) Pursuant to German Aryanization laws prohibiting Jews from owning businesses, the Würthle Gallery was designated as "non-Aryan" and subject to confiscation. (Id. ¶ 14; Joint Counter 56.1 Stmt. ¶ 3.) Around March 13, 1938, Bondi reopened negotiations for the sale of the Würthle Gallery to Welz. (Joint Counter 56.1 Stmt. ¶ 3.) She ultimately sold it to him for 13,550 Reichsmarks. (LM 56.1 Stmt. ¶ 4.; 3/10/08 Levin Decl. Ex. 11 at LM 1662.)

While the Government and the Museum dispute whether this transaction was voluntary, there is no doubt that Welz became an official member of the National Socialist German Workers, or Nazi, Party shortly thereafter. (Joint Counter 56.1 Stmt. ¶¶ 4; Joint 56.1 Stmt. ¶ 15-16.) He subsequently obtained permission to Aryanize the Würthle Gallery on March 15, 1939. (Joint 56.1 Stmt. ¶ 13.) The following month, Bondi and her husband emigrated to England. (LM Counter 56.1 Stmt. ¶ 20; LM 56.1 Stmt. ¶ 1.)

i) Wally transferred to Welz

The circumstances under which Welz gained possession of the Painting are hotly contested. The Government contends that in 1939, on the eve of Bondi's escape to England, Welz went to her apartment to discuss the Würthle Gallery. (Joint 56.1 Stmt. ¶¶ 17, 20.) He saw Wally hanging on the wall and demanded that Bondi hand it over. (Id. ¶ 18.) She resisted, explaining that the Painting was part of her private collection and had never been part of the gallery. (Id.) However, she ultimately relented at the behest of her husband, who reminded her that they intended to flee Austria and that Welz could prevent their escape. (Id.) Welz did not compensate her for the Painting. (Id. ¶ 19.)

The Museum, on the other hand, raises a host of evidentiary objections to the Government's narrative, discussed in Part 11(B) (ii)(2)(b) infra, contending that it is pure fiction. The Museum maintains, and the Government disputes, that Bondi sold Wally to Welz as part of the Würthle Gallery in 1938, more than a year before she left for England, in exchange for 200 Reichsmarks. (LM 56.1 Stmt. ¶ 5; LM Counter 56.1 Stmt. ¶¶ 18-19.)

ii. Welz acquires Schiele works from the Riegers

In 1938, Dr. Heinrich Reiger, a Jewish dentist and well-known collector of Schiele's works, approached Welz to negotiate the sale of his art collection to finance his emigration from Austria. (LM 56.1 Stmt. ¶¶ 11-12.) In or about 1939 or 1940, Welz acquired Schiele drawings and paintings from Dr. Rieger. (Joint 56.1 Stmt. ¶¶ 21-23.) Dr. Reiger and his wife, Berta, did not escape the Holocaust; they died in the Theresienstadt concentration camp in or about 1942. (Joint 56.1 Stmt. ¶ 25.)

iii. United States forces gain possession of Wally

United States forces occupied Austria in May 1945, after the end of World War II in Europe. (Joint 56.1 Stmt. ¶ 26.) They arrested and detained Welz for approximately two years. (3/10/08 Levin Decl. Ex. 11 at LM 0584.) They also seized Welz's property, including artworks he acquired from Bondi and the Rieger collection. (See Joint 56.1 Stmt. ¶ 33; 3/10/08 Levin Decl. Ex. 11 at LM 0584.) While the parties dispute the timing and circumstances of the seizure (LM 56.1 Stmt. ¶ 14; Joint 56.1 Stmt. ¶¶ 32-33), they acknowledge that, by military decree, United States forces were authorized to seize various categories of property, including property belonging to the Third Reich, Austrian Public Institutions, and all persons detained by the military. (Joint 56.1 Stmt. ¶ 27.) Nor do they dispute that Wally was among the seized property. (LM Counter 56.1 Stmt. ¶ 32.)

United States Forces in Germany and Austria were directed to restore works of art that had been taken from Austria by Germany or from other countries into Austria or Germany "to the government of the country from which it was taken or acquired in any way . . . upon submission of satisfactory proof of its identifiability by the claimant government." (Joint 56.1 Stmt. ¶ 28.)⁴ The Reparations, Deliveries, and Restitution Division ("RDR") of the U.S. Forces was charged with executing this task. (Id. ¶ 30.)

On or about May 16, 1947, Robert Rieger, Dr. Rieger's son, engaged attorneys Dr. Oskar Mueller ("Mueller") and Dr. Christian Broda ("Broda") to help him and his niece, Tanna Berger (collectively, the "Rieger heirs"), recover property the Nazis had taken from their family. (Id. ¶¶ 43-44.) Broda wrote to the RDR, requesting that it prevent Welz from reacquiring or hiding art he had obtained from the Rieger collection, including Schiele works identified as "Liebespaar" ("Lovers"), "Kardinal und Nonne" ("Cardinal and Nun") and "Bildnis seiner Frau" ("Portrait of His Wife"). (Id. ¶ 48.) Broda's letter made no explicit reference to a Schiele painting called "Portrait of Wally" or depicting Valerie Neuzil. (See id.)

iv. United States Forces Deliver Wally to the BDA

Broda also wrote to Dr. Otto von Demus ("Demus"), Director of the Bundesdenkmalamt, the Austrian Federal Office for the Preservation of Historical Monuments (the "BDA"), seeking that entity's assistance in locating Rieger's Schiele collection. (Id. ¶ 49.) He attached a preliminary list of artworks, which included a painting entitled "Bildnis seiner Frau" ("Portrait of His Wife") but none entitled "Portrait of Wally" or described as depicting Valerie Neuzil. (Id.) In August of 1947, Mueller also wrote the BDA, noting that several Schiele works, including "Portrait of his Wife," remained missing. (Id. ¶ 50.)

In November of 1947, the RDR reported that it had possession of several "paintings" claimed by the Rieger heirs, including "Embrace," "Cardinal and Nun," and "His Wife's Portrait" by Egon Schiele. (Id. ¶ 51; see also 3/10/08 Levin Decl. Ex. 11 at LM 0589-0590.) On or about December 4, 1947, it released fourteen "paintings" United States forces had seized from Welz to the BDA, as representative of the government of Austria, in an agreement (the "Receipt and Agreement") whereby the BDA agreed to "h[o]ld [them] as Custodians pending the determination of the lawful owners thereof." (Joint 56.1 Stmt. ¶ 52; 3/10/08 Levin Decl. Ex. 11 at LM 0211.) The three Schiele paintings listed in the schedule attached to the Receipt and Agreement are "Embrace," "Cardinal and Nun," and "His Wife's Portrait." (3/10/08 Levin Decl. Ex....