Second Circuit Sidesteps Novel Theory of Duress for Holocaust Refugees

In Zuckerman v. Metropolitan Museum of Art, the Second Circuit decides the case on the basis of laches, ruling that the delay in bringing suit was unreasonable and prejudicial to MoMA, and leaves open the question of the viability of Zuckerman’s theory of duress.

By: Jake Samuel Sidransky, staff member

This post discusses the recent case of Zuckerman v. Metropolitan Museum of Art. The District Court and Second Circuit’s decisions are available here and here.

In 1912, Paul and Alice Leffmann were wealthy Jewish residents of Cologne, Germany. The pair made their money in the rubber manufacturing industry and had sizeable assets, including a painting entitled “The Actor,” a masterpiece by Pablo Picasso presently valued at over $100 million (the Painting). The Leffmanns purchased the Painting in 1912 and exhibited it throughout Germany until at least 1929.

The rise of fascism in Germany changed the Leffmanns’ lives dramatically. In 1935, the implementation of the Nuremberg Laws forced the Leffmanns to transfer virtually all of their assets to non-Jewish Germans and the Nazi regime. During this time, the Leffmanns arranged for a non-Jewish acquaintance to keep the Painting in his home in Switzerland, where it would be protected from Nazi confiscation.

The Leffmanns fled to Italy in the spring of 1937 amid increasing Nazi persecution of Jews. The process cost them a great deal. First, a flight tax, implemented by the Reich to seize assets from fleeing Jews, charged 25% of the family’s wealth as reported the previous year. The Leffmanns had involuntarily transferred or liquidated most of their assets since they last reported their wealth. Thus, the tax likely assessed a much higher percentage of the family’s actual wealth and ultimately cost the Leffmanns approximately 120,000 Reichsmark (approximately $877,000 in 2019 Dollars). Second, to move funds from Germany to Italy without the knowledge of Nazi authorities, the Leffmanns engaged in a sham real estate transaction that cost them an additional 62,000 Reichsmark (approximately $453,000 in 2019 Dollars).

Over time, the conditions in Italy became unsafe for Jews as the Italian regime increased its cooperation with the Nazis. By April of 1938, the Leffmanns had determined to leave Italy for Switzerland at any cost. Desperate and in need of money, the Leffmanns sold the Painting for a grossly undervalued price of $12,000 (net of commission) (approximately $218,000 in 2019 Dollars) to Kate Perls, a Parisian art dealer.

In October 1938, the Leffmanns fled to Switzerland. Unable to remain in Switzerland, the family ultimately fled to Brazil. Their flight to Brazil through Switzerland saved their lives. Their escape would not have been possible without the proceeds of the sale of the Painting.

In 1952 the Museum of Modern Art accepted the Painting as a donation. From 1952 until 2011 the Painting’s provenance listing stated that Paul Leffmann owned the Painting in 1912 and that a German private collection owned the Painting from 1912–1938. Not until 2011 did MoMA acknowledge the Leffmanns’ ownership through 1938 and their transfer of ownership during the Nazi era.

Laurel Zuckerman, the Leffmanns’ great-grandniece, sued MoMA in 2016 to replevin the Painting on the theory that good title never passed to MoMA. Zuckerman argued that the 1938 sale was void for duress because the Leffmans sold the painting out of fear for their lives and used the proceeds of the sale to secure passage to Brazil. Judge Preska of the Southern District of New York dismissed the case on the merits. The court determined that New York law should apply and that, under New York law, the facts as Zuckerman pled them were insufficient to prove duress.

Under New York law, to void a contract on the ground of economic duress, a plaintiff must plead and show that the transaction was procured through a wrongful threat that precluded the exercise of free will.

Regarding the first prong, Judge Preska ruled that:

“[A]lthough the Leffmanns felt economic pressure during the undeniably horrific circumstances of the Nazi and Fascist regimes, that pressure, when not caused by the counterparties to the transaction (or the Defendant) where the duress is alleged, is insufficient to prove duress with respect to the transaction.”

Regarding the second prong, the court ruled that Zuckerman failed to plead that the Leffmanns entered into the transaction by force that precluded the exercise of free will. The court based this determination on evidence that the Leffmans spent several years looking to sell the Painting, rejected several offers to purchase the painting, and had additional assets that provided financial alternatives.

The Second Circuit affirmed, but not on the merits. Rather than reach the issue of the cognizability of Zuckerman’s novel claim of circumstantial economic duress, the court decided the case on the basis of laches. The doctrine of laches protects defendants against unreasonable, prejudicial delay in commencing suit.

In an opinion authored by Chief Judge Katzmann, the court ruled that the delay in bringing suit was unreasonable and prejudicial to MoMA. The court considered the amount of time that had passed since the end of the war, the Painting’s notoriety and exhibition in a major museum, and the fact that the Leffmanns had pursued other restitution claims in the post-war period. The court determined that “it is simply not plausible that the Leffmanns and their heirs would not have been able to seek replevin of the Painting prior to 2010.”

The court then found the delay prejudicial, as the 60-plus years since the end of the war “ha[ve] resulted in deceased witnesses, faded memories, and hearsay testimony of questionable value, as well as the likely disappearance of documentary evidence” (internal quotation marks omitted).

Finally, the court held that the Holocaust Expropriated Art Recovery Act of 2016 does not preclude the defense of laches. The HEAR Act encourages the return of Nazi-stolen and looted artwork by preempting state statutes of limitations and imposes a uniform nationwide six-year statute of limitations instead.

In closing, the court stated the following:

“We emphasize that each case must be assessed on its own facts: while the laches defense succeeds here, in other cases it will fail and not impede recovery for claims brought pursuant to the HEAR Act.”

The significance of the Second Circuit’s decision lies principally in the court’s avoidance of the merits of the claim. By affirming the district court’s ruling on other grounds, the Second Circuit left open the question of the viability of Zuckerman’s theory of duress. Perhaps the court would recognize the novel theory in a case where the plaintiff had just discovered a painting despite years of diligence. Alternatively, perhaps the court thought it better to wait for New York State courts to rule on the question.

If a court were to recognize circumstantial economic duress, how would the doctrine function? Would it be recognized only in cases involving those fleeing the Holocaust, or would it be broadly applicable to all instances of persecution? If it were more broadly applicable, what would the standard be? Zuckerman leaves these questions to future courts.

Jake Samuel Sidransky is a second-year student at Columbia Law School and a Staff member of the Columbia Journal of Transnational Law.  He graduated from University of Miami in 2016.