In a significant art law ruling, Pryor Cashman obtained judgment for its client David Bakalar in a dispute regarding ownership of art by Egon Schiele. The art was claimed to have been stolen by Nazis from the alleged original owner in Austria during World War II. Nevertheless, the art was also documented as having been sold in Switzerland in the 1950s by the alleged original owner’s sister-in-law. The evidence further reflected that other relatives of the alleged original owner, who knew of his art collection and his fate, did not pursue a stolen property claim or question the sister-in-law’s activities.
Against these facts, and very few other facts given the passage of time and loss of evidence, U.S. District Court Judge William H. Pauley III of the Southern District of New York agreed with Pryor Cashman’s argument that the claims against its client’s property should be barred under New York law by the doctrine of “laches.” According to the laches doctrine, a claim to stolen property should be barred when the claimant and her/his predecessors failed to act with reasonable diligence to pursue stolen property and to preserve material evidence, and the loss of evidence prejudices a good faith later purchaser (such as Pryor Cashman’s client) from defending title by proving that the property was not stolen.
The case, Bakalar v. Vavra, has a lengthy history. In 2006, Pryor Cashman defeated a motion for class action certification by the claimants. In September 2008, Pryor Cashman prevailed at trial under the same set of facts although analyzed according to Swiss law. In 2010, the U.S. Court of Appeals for the Second Circuit reversed and remanded for reconsideration of the record under New York law, which is more favorable to claimants than Swiss law. This second judgment in favor of Pryor Cashman’s client establishes important precedent that even under stricter New York law, a good faith purchaser is entitled to a meaningful opportunity to defend his title with evidence. If the evidence is gone, and if the alleged victim’s family was in a position to have preserved the evidence but did not do so, then the good faith purchaser should prevail.
The case has been appealed and oral argument before the Second Circuit took place on September 6, 2012.
Partners James Janowitz and William Charron, both members of Pryor Cashman’s Litigation Group, with Litigation Associate Mona Simonian, represented Bakalar in litigation.
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