Zuckerman v. Metro. Museum of Art

• Decision Date: 07 February 2018
• Docket Number: 16 Civ. 7665 (LAP)
• Citation: 307 F.Supp.3d 304
• Parties: Laurel ZUCKERMAN, as Ancillary Administratrix of the Estate of Alice Leffmann, Plaintiff, v. The METROPOLITAN MUSEUM OF ART, Defendant.
• Court: U.S. District Court — Southern District of New York

307 F.Supp.3d 304

Laurel ZUCKERMAN, as Ancillary Administratrix of the Estate of Alice Leffmann, Plaintiff,

v.The METROPOLITAN MUSEUM OF ART, Defendant.

16 Civ. 7665 (LAP)

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

Signed February 7, 2018

Howard Neil Spiegler, Ross Lawrence Hirsch, Yael Miriam Weitz, Lawrence Michael Kaye, Herrick, Feinstein LLP, New York, NY, for Plaintiff.

David William Bowker, Wilmer Cutler Pickering Hale & Dorr LLP, New York, NY, for Defendant.

OPINION

LORETTA A. PRESKA, Senior United States District Judge:

This is an action by Laurel Zuckerman, the Ancillary Administratrix of the estate of Alice Leffmann (the sole heir of Paul Friedrich Leffmann) (the "Leffmann estate"), to recover from New York's Metropolitan Museum of Art (the "Museum") a monumental work by Pablo Picasso entitled "The Actor," 1904–1905, oil on canvas, 77 1/4 x 45 3/8 in., signed lower right Picasso ("The Actor")(the "Painting"), which was owned by Paul Friedrich Leffmann ("Leffmann"), a German Jew, from approximately 1912 until 1938.

In 1937, Alice and Paul Leffmann (the "Leffmanns") fled from Germany to Italy in fear for their lives, after losing their business, livelihood, home, and most of their possessions due to Nazi persecution. In 1938, while living in Italy, the Leffmanns sold the Painting at a price well below its actual value in an effort to gather enough money to pay for passage out of Italy, which itself had become a perilous place for the Leffmanns to remain. The Museum received the Painting as a donation in 1952 and has possessed it since that time.

Plaintiff, the great-grandniece of Paul and Alice Leffmann, received Ancillary Letters of Administration CTA for the estate of Alice Leffmann from the Surrogate's Court of the State of New York, New York County, on October 18, 2010. Pursuant to 28 U.S.C. § 1332(c)(2), because Alice Leffmann was a Swiss domiciliary, the Ancillary Administratrix is deemed to be a citizen of Switzerland as well.

In this diversity suit, Plaintiff seeks replevin of the Painting, $100 million in damages for conversion, and a declaratory judgment pursuant to 28 U.S.C. §§ 2201 – 2202 declaring the Leffmann estate as the sole owner of the Painting on the grounds that good title never passed to the Museum, inter alia, because the 1938 sale of the Painting was void for duress under Italian law. (See Amended Compl. ("Am. Compl."), dated Nov. 2, 2016 [dkt. no. 8], ¶¶ 68–82.)

Defendants move to dismiss the Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6) on the following grounds: (1) lack of standing; (2) failure to allege duress under New York or Italian law; (3) ratification of the transaction; (4) the Museum received good title from a good-faith purchaser; (5) Plaintiff's claims are time-barred under the statute of limitation and laches. (See Mem. of Law in Supp. of Def. Mot. to Dismiss, ("Def. Mot."), dated Nov. 30, 2016 [dkt. no. 12].) For failure to allege duress under New York law, the motion to dismiss is granted.

I. BACKGROUND

The following facts are accepted as true for the purposes of this motion. In 1912, the Leffmanns purchased the Painting, which was one of their most valuable acquisitions. (See Am. Compl. ¶ 9.) From 1912 until at least 1929, the Leffmanns presented the Painting at a variety of exhibitions in Germany, where they were identified as the owners of the Painting. The Painting was also featured in newspaper articles, magazines, and monographs. (See id. )

During this time and until the start of the Nazi period, Paul and Alice, German Jews, lived in Cologne, Germany. They had sizeable assets, including Atlantic Gummiwerk, a rubber manufacturing company that was one of the leading concerns of its kind in Europe, which Paul co-owned with Herbert Steinberg; real estate investment properties in Cologne (Hohenzollernring 74 and Friesenwall 77); and their home located at Haydnstrasse 13, Koln–Lindenthal. The Leffmanns' home included a collection of Chinese and Japanese artifacts and other artworks, including the masterwork by Pablo Picasso that is the subject of this action. (See id. ¶ 10.)

Beginning in 1933, the world the Leffmanns knew in Germany began to change dramatically. Adolf Hitler came to power, and racist laws directed against Jews were quickly enacted and enforced, leading to the adoption of the Nuremberg Laws ("The Laws for the Protection of German Blood and German Honor") on September 15, 1935. The Nuremberg Laws deprived all German Jews, including Paul and Alice, of the rights and privileges of German citizenship, ended any normal life or existence for Jews in Germany, and relegated all Jews to a marginalized existence. (See id. ¶ 11.)

The Nuremberg Laws formalized a process of exclusion of Jews from Germany's economic and social life. It ushered in a process of eventual total dispossession through what became known as "Aryanization" or "Arisierung," first through takeovers by "Aryans" of Jewish-owned businesses and then by forcing Jews to surrender virtually all of their assets. Through this process all Jewish workers and managers were dismissed, and businesses and corporations belonging to Jewish owners were forcibly transferred to non-Jewish Germans, who "bought" them at prices officially fixed and well below market value. As a result, the number of Jewish-owned businesses in Germany was reduced by approximately two-thirds from April 1933 to April 1938. By that time, the Nazi regime moved to the final phase of dispossession, first requiring Jews to register all of their domestic and foreign assets and then moving to possess itself of all such assets. (See id. ¶ 12.)

On September 16, 1935, the Leffmanns were forced to sell their home to an Aryan German corporation, Rheinsiche Braunkohlensyndikats GmbH Köln. On December 19, 1935, Leffmann and his Jewish partner, Herbert Steinberg, were forced to transfer ownership of Atlantic Gummiwerk to Aloys Weyers (their non-Jewish minority business partner). On July 27, 1936, the Leffmanns were forced to sell all of their real estate investments to Feuerversicherungsgessellschaft Rheinland AG, another Aryan German corporation. In return, the Leffmanns had no choice but to accept only nominal compensation. Indeed, these were not real sales at all but essentially thefts by Nazi designees of substantially everything the Leffmanns ever owned. (See id. ¶ 12.) Some time prior to their departure from Germany, Paul and Alice had arranged for The Actor to be held in Switzerland by a non-Jewish German acquaintance, Professor Heribert Reiners. Reiners kept The Actor in his family home in Fribourg, where it remained for its entire stay in Switzerland. For this reason only, The Actor was saved from Nazi confiscation. (See id. ¶ 13.)

Paul and Alice, like so many other German Jews, found themselves faced with the threat of growing violence, the risk of imprisonment, and possibly deportation and death. Thus, to avoid the loss of the property they had left—and potentially their lives—they began planning their flight from Germany, liquidating their remaining assets in Germany to enable them to survive and escape. (See id. ¶ 15.) The Leffmanns fled Germany in the spring of 1937. By that time, the Nazi regime had already put in place its ever-tightening network of taxes, charges, and foreign exchange regulations designed to arrogate Jewish-owned assets to itself. Emigrants were only able to leave with a tiny fraction of their assets. Consequently, upon their escape from the Reich, the Leffmanns had been dispossessed of most of what they once owned. (See id. ¶ 16.)

One measure by which the Reich seized assets from fleeing Jews was the flight tax. Flight tax assessments were based on wealth tax declarations, which referred to wealth in the previous year and which were calculated at 25 percent of the value of the reported assets. Payment of the flight tax did not give the emigrant any right whatsoever to transfer abroad any of the remaining assets after payment of the tax. In fact, the flight tax amount typically would have been considerably higher than 25 percent of the assets actually owned at the time of emigration, as those who were persecuted by the Nazis-such as the Leffmanns—suffered dramatic financial losses in the period leading up to their emigration, so that their assets at the time of emigration would have been considerably smaller than those on which their flight tax was assessed. The payment of the flight tax was necessary to obtain the no-objection certification of the tax authorities, which in turn was necessary to obtain an exit permit. In the case of the Leffmanns, the flight tax was thus calculated at 25 percent of the assets they reported on their 1937 tax form, which would have included their total assets held in 1936. The Leffmanns paid this flight tax in the amount of 120,000 to 125,000 Reichsmark ("RM") in cash. (See id. ¶ 19.)

The Leffmanns would have preferred neutral Switzerland to Italy, as Italian Fascists were already in power and close relations with Nazi Germany had begun to develop. However, a long-term stay in Switzerland would have been virtually impossible. Italy, as opposed to Switzerland, was one of the few European countries still allowing the immigration of German Jews. So that is where the Leffmanns went, hoping that Italy's significant Jewish population would provide a safe haven from the Nazi onslaught. (See id. ¶ 20.) In light of the ever-tightening regulations governing the transfer of assets, emigrants sought alternative means of moving their funds abroad. One major avenue involved creating a triangular agreement whereby individuals who owned property outside the Reich and were in need of RM would agree to exchange the currency for property, which they would then immediately liquidate upon arrival in the new country. This is exactly the type of transaction the Leffmanns took part in when, in December 1936, they purchased a house and factory in Italy for an inflated price of RM 180,000 from the heirs of...