Heirs Sought Pre-Action Discovery From Gallery of Identity of Purchaser of Painting by Tiepolo

Court Determines If Claimants Were Entitled to Such Extraordinary Relief

Mordechai Avni, Oded Avni and Michaela Iro demanded that Sotheby’s return a painting by Giovanni Battista Tiepolo. They claimed they were all lawful heirs of Dr. Otto and Lili Fröhlich, who owned the painting prior to World War II. The Avnis asserted that the Nazis stole the painting and they filed a petition  for pre-action discovery of the individual who acquired the painting from Sotheby’s after an auction. The Avnis contended that Sotheby’s was the last known possessor of the painting and that it was put up for sale at public auction in New York on May 22, 2019.  

The Avnis detailed that the Fröhlichs resided in Austria and ran an art gallery there before they were forced to flee in 1938 and left for London. They explained that, during the late 1930s, the Nazis forbade Jews from engaging in any business activities and forced them to sell assets, often at below-market prices for the benefit of non-Jewish sellers and buyers, as well as the Nazi government. In many of those deals, the Jewish owner received nothing.

The Avnis observed that Otto transferred the painting to another art gallery in Vienna for safekeeping as a trustee in light of his forced migration and the restrictive rules barring Jews from participating in society. They contended that they had engaged in extensive research to document the history of the artwork. The Avnis submitted the  affidavit of Jonathan James Palmer, the founder of an entity that assisted individuals with recovering such lost property.

On November 22, 1938 Walter Russell was appointed as the provisional administrator of the Fröhlichs’ gallery after they fled to London. In January 1939, Robert Herzig, a proprietor from another gallery in Vienna, wrote a letter to  Russell to confirm that he had received the stock from the Fröhlichs’ gallery, which included the Tiepolo painting. Russell was subsequently dismissed as administrator for the gallery in early February 1939 and another individual, Otto Faltis, was appointed as the liquidator for the gallery. The Avnis contended that Faltis was a Nazi collaborator.

Herzig sent a letter in January 1941 to Faltis (apparently without Otto Fröhlich’s permission) requesting that three artworks be sold from Otto’s collection to cover his purported debts to Herzig’s gallery. The Tiepolo was then sold at auction in March 1941 for allegedly less than a third of the going rate for a painting by the artist.

The Avnis contended that even though the painting was allegedly sold to cover some debts, it was nevertheless a “forced sale” because Otto Fröhlich’s gallery was forced to close by the Nazis, the sale price was substantially lower as a result and Otto Fröhlich did not receive the excess proceeds.  According to them, Otto Fröhlich tried to recover the painting after World War II and he wrote a letter in March 1947 in which he expressed a desire to get certain paintings back, including the one the Tiepolo. The painting was then put into an index in Munich in August 1947; and a a notation from August 18, 1947 for the painting stated that it was “from the possession of the Gallery Dr. Otto Fröhlich.” Otto died in 1947 but he was never able to locate the painting.

The Avnis contended that the painting reappeared in 2001 when Sotheby’s offered it for sale at an auction in London. They observed that Sotheby’s described the provenance as “Property from a Distinguished Private Collection.” It next appeared on the market at another auction held by Sotheby’s in 2019 in New York. The Avnis contended that the provenance listed for the artwork in 2019 was incorrect as it listed a small family-run gallery in Germany as the former possessor instead of including Julius Bohler (Hitler’s former art dealer) as the former owner.

The Avnis insisted that if Sotheby’s had ensured that the provenance reached back far enough (the gallery in Germany was not founded until 1972), it would have likely led to more investigation into the painting’s history given the connection to the Nazis. They also maintained that the result of the incomplete provenance was that the painting was sold to another anonymous collection.

The Avnis asserted that they did not learn about the 2019 sale until June 2020 and that their representatives contacted Sotheby’s in August 2021. They detailed how they had numerous communications with Sotheby’s in an attempt to identify the current owner of the painting but they were unable to elicit that information. They maintained that they had a valid cause of action for replevin; insisted that the action was timely because there had not been a demand for the return of the artwork as they did not yet know who had the painting; and also claimed they had a valid claim for conversion.

In opposition, Sotheby’s argued that neither the Avnis nor any other Fröhlich heirs made any efforts to seek the return of the painting. The gallery claimed that it did not include the painting on a registry that could have alerted Sotheby’s or others about their claims. Sotheby’s asserted that the petition did not explain how it could have been aware of the Avnis’ claim related to the painting prior to 2021 or why they did not seek the return of the painting when it was put up for auction in 2001.

Sotheby’s argued that when it learned of the Avnis’ claims, it started an investigation into the painting and asserted that the Avnis did not have a meritorious claim. It argued that the heirs of an earlier owner, Adele Fischel, from whom the Avnis claim  Fröhlich acquired the painting, might have a claim. And insisted that Sotheby’s treats all information about participants at an auction as confidential and that it could not disclose such details without express permission from those individuals.

Sotheby’s alleged that a Viennese gallery (Galerie Sanct Lucas) purportedly held the painting as security for a debt owed by Fröhlich and the gallery—and argued that Fröhlich had no continuing claim to the painting because Galerie Sanct Lucas sold it to repay his gallery’s debts. And that is why neither the Avnis nor anyone else made a claim for the painting over the last 70 plus years.

              Sotheby’s claimed that the doctrine of laches prevented the Avnis from bringing a claim about the painting and emphasized that the painting had never been reported as looted or stolen.  Argued that the delay had prejudiced the current good faith owner and that the auction would have been paused had those claims been timely raised.  And also argued that, if the Court was inclined to grant the petition, the information disclosed should be limited to the purchase and that information about the seller at the 2019 auction was irrelevant to the Avnis’ claims.

In reply,  the Avnis emphasized that they met the standard for pre-action disclosure by alleging cognizable causes of action. They insisted that they showed that Otto Fröhlich owned the painting, that he lost possession of it because of Nazi persecution and they are his heirs.

And pointed out that Dr. Fröhlich did seek the return of his painting but was unable to get it back prior to his death in 1947.

The Avnis argued that the existence of another person who might have a claim to the painting (the heirs of Adele Fischel, who, according to them, was Dr. Fröhlich’s cousin) was not a basis to deny the petition. They also argued that the doctrine of laches had no bearing on the proceeding and that there was no unreasonable delay. The Avnis alleged that they learned about the painting in 2020 and 2021 and asserted their claim promptly thereafter.

With respect to Sotheby’s assertion that the information was confidential, the Avnis pointed out that gallery attached no policy, legal agreement or condition of sale relating to the painting or any evidence that the purchaser objected to the disclosure. They also pointed also point out that the  governing law permitted  a 6-year statute of limitations from the date of discovery for Nazi- looted artwork and so a possible conversion claim may lie against the seller.

Pre-action discovery is not permissible as a fishing expedition to ascertain whether a cause of action exists and is only available where a petitioner demonstrates that he or she has a meritorious cause of action and that the information sought is material and necessary to the actionable wrong. Generally, the determination of whether a party has demonstrated merit lies in the sound discretion of the trial court.

The Court granted the petition, finding that the Avnis stated viable causes of action for both replevin and conversion. A cause of action sounding in replevin must establish that the defendant is in possession of certain property of which the plaintiff claims to have a superior right. Conversion is the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner’s rights.

A key element for bringing those claims is knowing the identity of the person who bought the painting at the auction. That is the person to whom the Avnis must make a demand for the painting and is therefore information that is material and necessary for a forthcoming action. The Avnis cannot bring a case without that information and the Court found  that Sotheby’s, which had the information, must disclose it.

     In  the proceeding, the Avnis only had to show that they had a meritorious cause of action. The detailed evidence submitted here, including the affidavit of the investigator (Palmer), established valid claims. The Avnis alleged that they were  the rightful heirs and detailed ample facts surrounding the Fröhlichs’ flight from Austria to London.

     Sotheby’s did not sufficiently dispute that the Fröhlichs were forced to flee their home and leave their possessions due to Nazi persecution. Nor did they adequately dispute the fact that the sale of the painting occurred while the Fröhlichs were in London and they had no formal role in that sale (nor could they under Nazi-era laws).

The Court rejected the gallery’s claim that laches foreclosed the proceeding. Laches is an equitable doctrine based on fairness. Courts have invoked the doctrine to prevent  the prosecution of stale claims and the prejudice that could result. Whether the doctrine is applicable, however, depends on the facts of the case. The Court was unable to find that laches, a fact-intensive doctrine, barred the Avnis from even knowing who bought the painting at an auction. To do so, the Court would have  had to wholly reject the Avnis’ explanations as to how and when they came to learn of their possible interest in the painting as heirs of the Fröhlichs.

      The Avnis offered detailed reasons for how they came to learn about this painting. Mordechai Avni observed that he initially did not learn much about Otto and Lili Fröhlich as relatives did not want to speak about the Holocaust. He claimed that when he recently learned about Otto and Lili’s art collection, he (along with his relatives) hired an investigative firm to look into the matter. That satisfied their burden to show that laches was not applicable  to their petition, as he alleged that he took decisive steps to investigate his ancestors’ history, which led to the discovery of the painting.

The Court observed that the central case upon which Sotheby’s relied, denying a petition for pre-action disclosure for the identity of an auction winner based, in part, on laches, was not binding as it contained inapposite facts. Laches determinations are made based upon the unique facts of each dispute. In the cited precedent, the original owner had actual knowledge of the identity of the possessor of the artwork (his brother, who sold it without his permission). And that sale and subsequent loss of the artwork had more to do with an intrafamily dispute rather than a forced sale due to Nazi restrictions.

Here, the facts alleged suggested that Otto Fröhlich had little role in the sale as he had already fled to London by the time the painting was sold and the Avnis alleged the sale was conducted by a Nazi collaborator at a price well below market value. Clearly, that was a far cry from waiting around to bring a case after you know your brother took your painting.

A comparison of the facts with a more recent case also compelled the conclusion that laches was not a basis to deny Avnis’ petition. In that case the Court denied a claim for replevin based on laches where the family seeking the return of a ‘masterwork’ by Picasso could have readily determined that the artwork was prominently displayed by the Met for decades. Unlike the Picasso case, there was no evidence here that the Tiepolo artwork was universally recognized or that the identity of the owner was easily discoverable. Rather, the provenance suggested that the painting had been owned by anonymous private sellers since at least 2001 and before that  by a small family-run art gallery in Germany. The very famous Picasso painting was hanging in a very famous museum for decades; but here, a not-so- famous painting was kept under the radar for decades.

And the Picasso case dealt with the merits of a replevin action, not a pre- action disclosure proceeding. In the Court’s view that distinction was critical. There was no basis on the record to show that it was readily obvious that the Avnis knew (or should have known) about the painting and waited decades without citing a good reason. At least on the record presented, that was not a famous painting sitting in a museum and the Avnis claimed that they only recently learned that their ancestors owned an art gallery.

The Court also rejected the argument that the existence of another person or persons with a better claim to the painting compelled the Court to deny the Avnis’ petition. Sotheby’s focused on the heirs of Adele Fischer, who was purportedly Otto Fröhlich’s cousin and who died in a concentration camp. That someone else might have a claim was not a reason to withhold information about the owner of the painting. Withholding such information would prevent both the Avnis and a Fischer heir from bringing a claim for replevin or conversion. And the pending matter was about entitlement to information; whether the Avnis were entitled to the painting was not to be decided here.

The Court also granted the petition to the extent that the Avnis sought information about the seller at the auction in 2019– because the HEAR Act applies.

In 2016, Congress passed the Holocaust Expropriated Art Recovery Act of 2016. The two purposes of the HEAR Act were to ensure that laws governing claims to Nazi-confiscated art and other property further United States policy as set forth in the Washington Conference Principles on Nazi-Confiscated Art, the Holocaust Victims Redress Act, and the Terezin Declaration; and that claims to artwork and other property stolen or misappropriated by the Nazis during the Holocaust were not unfairly barred by statutes of limitations but were resolved in a just and fair manner.

In pursuit of these aims, the HEAR Act extended the statute of limitations in which a claim may be brought to six years from the time that the artwork’s identity and location, and the claimant’s possessory interest, were discovered.

Accordingly, because the Avnis claimed that they found out about their potential interest in the painting in 2020, the identity of the seller was relevant to their conversion claim. And the proceeding only involved their request to learn the identity of the seller and the purchaser at the auction. Not sought was a finding that the Avnis were entitled to recover as a matter of law—that will be the issue in a future lawsuit if the Avnis decided to bring one. Nor was the Court’s decision to be construed as an opinion on Sotheby’s actions surrounding the auctions.

Sotheby’s contention that its policy of confidentiality precluded the disclosure of this information was also not a reason to deny the Avnis’ petition. The gallery did not attach a copy of the confidentiality policy nor did it cite to binding caselaw that it was permitted to withhold that information. The Court saw no reason to permit a vague allusion to confidentiality to shield (and effectively prevent) the Avnis from pursuing their claims. While it was understandable that Sotheby’s would not freely disclose buyers and sellers to anyone who asked, that, standing alone, was not a reason to deny the Avnis’ requests for relief.

        The Avni’s submitted ample documentation to the Court to show their connection to the Fröhlichs and to document the history of the painting. In other words, this was not a situation in which someone presented a vague assertion that they had a right to a painting.  The Avnis included support for their allegations that the  painting was subject to a forced sale because of Nazi persecution and that Dr. Fröhlich sought to get back the painting after the war without ever finding out the painting’s location.  Sotheby’s claims, in the Court’s view, largely amounted to objections that could be raised as defenses in a case brought by the Avnis.   But they do not utterly refute the Avnis’ allegations.

As the Appellate Division, First Department noted in an earlier case:  “The tragic consequences of the Nazi occupation of Europe on the lives, liberty and property of the Jews continue to confront us today. We are informed by the intent and provisions of the HEAR Act which highlights the context in which plaintiffs, who lost their rightful property during World War II, bear the burden of proving superior title to specific property in an action under the traditional principles of New York law.  We also note that New York has a strong public policy to ensure that the state does not become a haven for trafficking in stolen cultural property, or permitting thieves to obtain and pass along legal title”.

The Court found only that the Avnis should have a chance to pursue their claims.  And to learn the names of the seller and purchaser at the 2019 auction.

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