labergereThe recent discovery in the Munich apartment of Cornelius Gurlitt of a massive trove of Nazi-looted art has drawn renewed attention to the fraught and murky world of art provenance – that is, the ownership history of art works, which can be critical for determining who holds proper title to the art. Provenance questions frequently lead to legal disputes and these disputes can take many forms – including, recently, a D&O claim against the President of University of Oklahoma, among others.

 

In May 2013, Lèone Meyer, a descendant of one of the founders of the Galleries Lafayette department store and the sole heir of her father, Raoul Meyer, filed a lawsuit in the Southern District of New York seeking to recover from the Fred Jones Museum at the University of Oklahoma in Norman, Oklahoma a painting by the French Impressionist painter Camille Pissarro. The painting, pictured above, entitled Bergère reentrant des moutons (Shepherdess Bringing in Sheep), often referred to as La Bergère, was donated to the museum as part of a large 2000 bequest by University benefactors. Background regarding the painting can be found on the Museum’s website, here.

 

Meyer claims the painting had been taken from her father’s art collection during the Nazi occupation of France in World War II and that it entered the U.S in the mid-1950s where it was sold to the benefactors by a New York art gallery.

 

Meyer’s amended complaint, which can be found here, names as defendants the Board of Regents of the University of Oklahoma; David Boren, the University’s President, who is named in both his individual capacity and his capacity as President of the University; the University of Oklahoma Foundation; several New York art galleries and related entities; and the American Alliance of Museums and the Association of Art Museum Directors.

 

The complaint, which seeks the return of the painting, alleges substantive claims for conversion; replevin; constructive trust; declaratory relief; restitution base on unjust enrichment; and two counts of breach of contract against third-party beneficiary (relating to museum and international provenance guidelines and requirements).  Background regarding the lawsuit can be found here.

 

With respect to the Board of Regents, the complaint names the Board as such. The individual members of the Board, although not named as individuals defendants, are identified by name in the complaint. The complaint alleges that the Board is a proper defendant because it has the “authority to everything, not expressly prohibited, necessary to accomplish the objectives of the school.”

 

With respect to Boren, the University President, the complaint alleges that he is responsible for “the management, control and direction” of all University entities, including the Museum. The complaint further alleges that the University’s decision to accept the gift of the painting “was authorized or ratified by Boren.” The complaint alleges further that “prior to acceptance of La Bergère, Boren and the University failed to undertake any reasonable effort to investigate proper title or provenance of La Bergère, although knowledge of La Bergere’s disputed titled and provenance was readily available using only minimal diligence.” The complaint alleges that Boren “has deprived Plaintiff of a property interest in La Bergere, first by accepting the painting without investigating proper title and provenance, and, second, by the continued possession [of the painting by the Oklahoma Foundation].”

 

Although Boren was initially named as a defendant in both his individual and his official capacity, the parties to the lawsuit stipulated to the dismissal of Boren in his individual capacity.

 

The defendants have moved to dismiss the plaintiff’s complaint. As reflected in the memorandum in support of their dismissal motion (here), the various Oklahoma defendants argue that the Southern District of New York lacks personal jurisdiction over them as they had insufficient contacts with the forum for the court to exercise jurisdiction. The Board of Regents and Boren also assert that the Court lacks subject matter jurisdiction, as they are agents of the state of Oklahoma and therefore are afforded immunity from suit in federal court under the Eleventh Amendment.

 

The defendants also assert that the plaintiff’s claims are barred by the statute of limitations and the doctrine of laches. In particular, the defendant assert that in 1953 Raoul Meyer, the plaintiff’s father, had filed a legal action in Switzerland to obtain possession of the painting, where his claims were rejected (apparently on statute of limitations ground). The defendants allege that the ruling of the Swiss court is preclusive of the plaintiff’s claims under the doctrine of res judicata and principles of international comity.  Finally, the defendants argue that New York is not an appropriate forum as almost none of the critical acts alleged took place in New York.

 

The motion to dismiss remains pending before Southern District of New York Judge Colleen McMahon.  However, in a May 13, 2014 handwritten note on a letter sent from the plaintiff’s counsel, Judge McMahon indicated that she is about to rule on the dismissal motion, expressly noting that recent Supreme Court case law “deprives the Court of jurisdiction over the OK defendants.” (Presumably she is referring to the U.S. Supreme Court’s February 2014 decision in Walden v Fiore, addressing the question of when the court in a forum state may exercise jurisdiction over a defendant from another state where all of the wrongful conduct alleged against the defendant took place outside the forum state.)

 

Even if Judge McMahon were to dismiss the Oklahoma defendants from the lawsuit on the grounds of lack of personal jurisdiction, the plaintiffs could try to refile the lawsuit in Oklahoma – subject of course to all of the other defenses on which the defendants seek to rely. But in addition to the lawsuit itself, the Oklahoma defendants are also under pressure from an entirely different direction. According to news reports (refer for example here), state legislators in Oklahoma are now calling for the Museum to return the painting to the plaintiff.  Four legislators apparently have introduced a resolution calling for the University to restore the painting to the plaintiff.

 

How all of this ultimately will turn out remains to be seen. The plaintiff’s amended complaint itself is absolutely fascinating, and I recommend it to anyone interested in an intricate tale that interweaves history and the rarified world of fine art.

 

While this dispute is of interest in and of itself, I mention it here and commend it to the attention of this blog’s readers as an example of the way that an art provenance dispute can lead to D&O claims. Unfortunately, provenance disputes are not uncommon, and when they arise, they can involve claims against the senior management and board of the entity or organization holding the disputed art work, in the same way that the claims were asserted here against the Board of Regents and against Boren.

 

How the entity’s management liability insurance policy will respond depends on a number of factors, including in particular the specific terms and conditions of the policy involved. Of particular concern is that the some carrier’s management liability insurance policies for museums contain an exclusion that could preclude coverage for loss arising from disputes over the title or provenance of art works. Others will offer defense cost only protection for provenance and title disputes subject to a restricted sublimit.

 

An additional potentially troublesome factor here from an insurance standpoint is that Boren was named as a defendant in both his individual and his official capacity. Presumably, the University’s management liability insurance policy would protect him in his official capacity, but not in his individual capacity. Fortunately, this potentially complicating issue was eliminated when the parties stipulated to the dismissal from the lawsuit of Boren in his individual capacity.

 

If nothing else, this case shows the problems that museums and others may face when the acquire art works about which ownership issues later arise. These disputes can be very costly to defend. Even if the collector is able to defeat the claim based, for example, on a technical defense, the collector may find its ability to sell the art work to be encumbered. As discussed here, the art world is becoming receptive to the purchase of title insurance as a way to protect those acquiring art from these kinds of disputes. Although obviously of interest to individual art collectors, the purchase of title insurance in connecion with the acquisition of an art work also could be particularly important for museums and other entities in light of the exclusion frequently found in D&O policies precluding (or severely limiting) coverage for disputes over title or provenance of art works.

 

Many thanks to a loyal reader for sending me a copy of the Amended Complaint from the dispute over La Bergère.

 

We May Have to Amend the Definition of Insured Person: According to a news report (here),  Hong Kong based venture capital firm Deep Knowledge Ventures (DKV) has appointed a machine learning program to its board. According to the report, the softiware is expected to have an equal vote in the firm’s investment decisions. (Special thanks to a loyal reader for a link to the news article.)

 

Today’s Grammar Question: In the title to today’s blog post, should I have omitted the comma after Provenance and before the word “and”? The use of the so-called serial comma is a matter of some dispute. As discussed here, writers using a journalistic style will omit the comma, while those using an academic style will include the comma. A review of other sources convinced me to keep the comma before the word “and” in the title. I figured I would go with it and see if anyone commented — or even noticed.