Brief on Appeal Case 18-0634, United States Court of Appeals for the Second Circuit



Link to Download the Brief on Appeal 18-0634-cv Estate of Alice Leffmann v The Metropolitan Museum of Art 

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TEXT ONLY
 extract from the Summary of Argument 

(the complete Brief of Appel  Case 18-634, Document 51, 05/25/2018, 2311707 can be consulted here)

SUMMARY OF ARGUMENT
Imagine yourself a German Jew residing in Florence in 1938. Having
fled Germany after the Nazis robbed you of your home, business and all
assets that they could identify, you soon find Adolf Hitler parading through
your new neighborhood with full military support and the backing of the
Fascist-Italian leadership. Needing quick cash to allow you and your wife to
flee again, you arrange a sale, for well under fair value, of your last remaining
asset of worth. You either sell or face an unspeakable fate.
That is the precise circumstance endured by Paul Leffmann, Plaintiff’s
great granduncle. In dismissing the Complaint, the District Court concluded
that “[f]or failure to allege duress under New York law, the motion to dismiss
is granted.” (SPA-3). In reading that plain holding, one would presume that
this matter involved a run-of-the-mill, open-market transaction in New York.
However, this was a desperate act of survival during the most horrific of
circumstances.
To take a step back, Paul and Alice Leffmann were a Jewish couple
thriving in Germany until the Nazis ravaged all semblance of peace and
normalcy. Paul and Alice were forcefully stripped of almost all of their
wealth, their livelihood and their property by the Nazis. They fled to Italy
4
where they hoped to find a safe haven and a new home. Instead, they were
confronted with an increasingly anti-Semitic Fascist regime.
Not long after Paul and Alice arrived in Florence, Mussolini and Hitler
formed a strong alliance, and Fascist Italy began to keep careful track of the
German Jews there, including the Leffmanns. In February 1938, the Fascist
government announced that it would closely observe newly-arrived Jews such
as the Leffmanns; in May 1938, the Italian Police, allied with the Gestapo,
arrested scores of Jews in Florence, and then Hitler, himself, marched in a
grand parade through Florence — mere blocks from where the Leffmanns
resided. By June 1938, the writing was very clearly on the wall that a
systematic wave of anti-Semitic legislation and activity was on the precipice
of crashing down, and the Leffmanns’ lives were, again, in immediate danger.
And indeed, by July 1938, the Leffmanns submitted their “Directory of
Jewish Assets,” as required by the Reich; and by September 1938, Italy
codified racial laws forbidding aliens like the Leffmanns from residing in
Italy. Paul and Alice were forced to flee for their lives again, this time to
Switzerland, which refused to grant them permanent residency, and then to
Brazil where they waited out the war.
5
The Leffmanns’ story is like that of many other Jews from Germany in
the 1930’s — except, unlike most, they survived. How did they survive? In
large part, due to the funds raised by the sale of their last valuable asset, a
masterwork by Pablo Picasso entitled “The Actor” (L’Acteur) (the
“Painting”). In June 1938, Paul Leffmann sold the Painting, for well below
its value, to French art-dealers who took advantage of the mounting life-and-
death pressures facing the Leffmanns. This was a transaction made for the
purpose of raising funds to finance flight.
Through the underlying action, Plaintiff, on behalf of the estate of Alice
Leffmann, seeks to regain rightful possession of the Painting, which is
currently in the permanent collection of, and on display at, the Museum. The
tax-exempt Museum, which received the Painting as a donation to hold in
trust for the public, has refused to return it, resulting in this lawsuit. The
Museum moved to dismiss the action on, inter alia, procedural defenses of
the statute of limitations and laches. The Museum went so far as to
concurrently move in Surrogate’s Court, more than six years after Plaintiff
was duly appointed as the “Ancillary Administratrix” for the Leffmann estate,
to vacate her appointment. This effort and the Museum’s subsequent motion
for re-argument were rejected by the Surrogate’s Court.
6
Nevertheless, the District Court denied Plaintiff her day in court,
holding that New York law on duress shuts down any avenue for relief. In
reaching this conclusion, the District Court erred in several, critical respects.
First, the District Court treated this action as a generic claim of
contemporary, economic duress, failing to examine Paul’s sale of the Painting
through the prism of the dire circumstances enveloping Europe between 1933
and 1945, and the precise and concrete threats facing the Leffmanns in 1938.
That the Leffmanns are alleged to have sold the Painting to avoid the wrath of
virulent Nazi and Fascist persecution needs to be a primary consideration.
As set forth herein, that the Holocaust Era is unique, and that artworks
lost during that era as a result of persecution (including through a duress sale)
must be returned to their owner, is a key tenet of U.S. policy and law. This
key tenet, now recognized by the courts as policy and codified by Congress
through the Holocaust Expropriated Art Recovery (HEAR) Act of 2016,1 was
aptly captured by Stuart Eizenstat, the Special Adviser to the Secretary of
State for Holocaust Issues (and former U.S. Ambassador to the European
Union), at the Washington Conference on Holocaust-Era Assets of 1998,
1 Holocaust Expropriated Art Recovery Act of 2016, Pub. L. No. 114-308,
130 stat. 1524 (2016).
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where 44 nations convened and produced the “Principles on Nazi-Confiscated
Art”:
We can begin by recognizing this as a moral matter — we should not apply the ordinary rules designed for commercial transactions of societies that operate under the rule of law to people whose property and very lives were taken by one of the most profoundly illegal regimes the world has ever known.
See http://fcit.usf.edu/HOLOCAUST/RESOURCE/assets/art.htm.
Here, the District Court, in disregard of U.S. policy, improperly treated
the 1938 Holocaust Era duress sale as an ordinary, commercial transaction.
Second, the District Court not only failed to properly account for the
historical circumstances and U.S. policy, but it mischaracterized the
circumstances specifically facing the Leffmanns as alleged in the Complaint,
wrongly drawing inferences against Plaintiff on a motion to dismiss. For
example, a pivotal finding by the District Court was that the Leffmanns had
“other financial alternatives” to selling the Painting as evidenced by the “fact
that the Leffmanns spent several years looking to sell the Painting, rejected
other offers and had additional assets including properties in Italy that they
sold to an Italian businessman in 1937.” Each of the italicized phrases
distorts Plaintiff’s well-pled allegations, each injecting normalcy into an
imbalanced transaction made out of fear and necessity.
8
Third, the District Court misstated New York law in finding that for a
duress claim to be sustained, “the defendant must have caused the duress,”
foreclosing any possibility of third-party duress regardless of the
circumstances. This erroneous statement of the law resulted in the Court’s
holding that, despite the “undeniably horrific circumstances” confronted by
the Leffmanns, Plaintiff cannot possibly state a claim for duress unless the
“counterparties to the transaction,” or the Museum, itself, were the source of
the duress. It would shock the conscience if the law categorically barred a
claim for relief because the seller was compelled to sell by a third party (even
the Nazis and Fascists) rather than by the buyer who knowingly took
advantage of the situation. New York law and U.S. policy do not require that
unconscionable result and, rather, demand a finding that the 1938 Transaction
(as defined herein) is void.
Fourth, in the event that this Court affirms the District Court’s ruling
that New York precludes a claim of third-party duress in the circumstances
pled in this case and despite U.S. policy, New York law would be inconsistent
with Italian law, which would then apply here in evaluating the 1938
Transaction. Though New York law should govern the ultimate transfer to
9
the Museum, Italy — where the Leffmanns endured the pressure and historic
wrongs that forced their sale — has a great interest in the 1938 Transaction.
Fifth, if Italian law governs, the 1938 Transaction would be void,
despite the District Court’s conclusion to the contrary. Italian statutory law
provides that a transaction is void when contrary to law, public morality or
public order. A sale by Jews who tried to liquidate their assets for well below
fair value in order to flee for their lives would be considered a sale contrary to
public order and morals. Moreover, though the District Court held that the
1938 Transaction was not made under duress because the Leffmanns had
endured only “generic, indiscriminate persecutions of fascism,” such a finding
inaccurately depicts Italian law, fails to analyze the circumstances through the
lens of historical context (even with Italy as a signatory to the Terezin
Declaration and the Washington Principles), and, critically, neglects to
comprehend that there was nothing “generic” happening here. Specific
people, including the Leffmanns, were targeted using specific strategies and
tools.
The District Court’s dismissal of Plaintiff’s case — before she had a
chance to present the evidence of the Leffmanns’ plight and the historic
struggle that they were enduring — is wrong as a matter of law, is premised
10
on misstatements of factual allegations, is contrary to U.S. policy, and should
be reversed.
STATEMENT OF THE CASE
Paul Leffmann purchased the Painting in 1912 and thereafter presented
it at a variety of exhibitions in Germany. During this time and until the start
of the Nazi period, Paul and Alice lived in Cologne, Germany. (A-33 ¶9,
10).2
Beginning in 1933, the world the Leffmanns knew began to shatter.
Adolf Hitler came to power, and racist laws directed against Jews were
enacted and enforced, leading to the adoption of the Nuremberg Laws on
September 15, 1935, depriving all German Jews of the rights and privileges of
German citizenship, ending any normal life for Jews in Germany, and
relegating them to a marginalized existence, a first step toward their mass
extermination. (A-33-34 ¶11).
The Nuremberg Laws 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 their assets. Through this
2 “A-__” refers to the Joint Appendix, “SPA-__” refers to the Special Appendix and “ADD-__” refers to the Addendum of foreign legal authorities.
11
process, Jewish workers were dismissed, and businesses belonging to Jews
were forcibly transferred to non-Jewish Germans, who “bought” them at
prices officially fixed and well-below market value. By April 1938, the Nazi
regime moved to the final phase of dispossession, requiring Jews to register
their assets and then moving to possess all such assets. (A-34 ¶12).
On September 16, 1935, the Leffmanns were forced to sell their home
to an Aryan German corporation. On December 19, 1935, Paul and his
Jewish partner were forced to transfer ownership of their rubber
manufacturing company to their non-Jewish minority business partner. On
July 27, 1936, Paul was forced to sell his real estate investments to another
Aryan German corporation. Paul had no choice but to accept nominal
compensation. These were not real sales, but essentially thefts by Nazi
designees of substantially everything the Leffmanns owned. (A-34 ¶13).
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. For this reason only, the Painting
was saved from Nazi confiscation. (A-35 ¶14).
Paul and Alice found themselves faced with the threat of growing
violence, imprisonment, and possibly deportation and death. To avoid the
12
loss of their remaining property — not to mention their lives — they began
liquidating their remaining assets in Germany to enable them to escape. The
Leffmanns fled in the spring of 1937, by which time the Nazi regime had
already put in place its network of taxes (including a massive “flight tax”
required to obtain an exit permit), charges, and foreign exchange regulations
designed to arrogate Jewish-owned assets to itself. Consequently, upon their
escape, the Leffmanns had been dispossessed of most of what they once
owned. (A-35, 37 ¶15-16, 19).
Italy 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. (A-37 ¶20).
In light of the ever-tightening regulations governing the transfer of
assets, emigrants sought alternative means of moving their funds abroad. In
December 1936, the Leffmanns did so by purchasing a house and factory in
Italy for an inflated price of RM 180,000 and pre-agreeing to sell the property
back to a designated Italian purchaser, at a considerable loss, upon their
arrival in Italy a few months later. In April 1937, the Leffmanns crossed into
Italy, going first to Milan and then to Florence. Their hope was that life there
13
could go on in some form of normalcy. Shortly after their arrival, as pre-
agreed, the Leffmanns sold their newly-acquired property at a substantial loss
— for 456,500 Lira (or about 61,622 RM) — and rented a home in Florence.
(A-37-38 ¶21-23).
It soon became clear that the persecution was about to engulf them in
Italy as well. In April 1936, Italy and Germany adopted the Italo-German
Police Agreement providing for the exchange of information, documents,
evidence, and identification materials by the police with regard to all
emigrants characterized as “subversives,” which included German Jews
residing in Italy. The Gestapo could compel the Italian police to interrogate,
arrest and expel any German Jewish refugee. On November 1, 1936,
Mussolini announced the ratification of the Rome-Berlin Axis. During the
summer and fall of 1937, the head of the Italian Police and Mussolini
accepted a proposal from the notorious General Reinhard Heydrich, the chief
of the Security Service of the Reichsführer (the “SS”) and the Gestapo, to
assign a member of the German police to police headquarters in various cities,
including Florence. This facilitated the Nazi efforts to check on
“subversives,” i.e., Jewish individuals. (A-38-39 ¶24-26).
14
By the fall of 1937, anti-Semitism dashed any illusions about a longer
stay in Italy for the Leffmanns. Germany and Italy began to prepare for
Hitler’s visit to Italy. In October, the Ministry of the Interior created lists of
German refugees residing in Italy’s various provinces. This marked a turning
point in the 1936 Italo-German Police Agreement, with the Gestapo
requesting these lists so that it could monitor “subversives” in anticipation of
Hitler’s visit. On February 17, 1938, every newspaper in Italy published a
Government announcement which stated that “[t]he Fascist Government
reserves to itself the right to keep under close observation the activity of Jews
newly arrived in our country.” Nazi police officials were posted at thirteen
Police Headquarters in border towns, ports, and large cities to conduct
interrogations and house searches. (A-39-41 ¶27, 29-30).
As the situation grew increasingly desperate for Jews living in Italy, it
became clear that the Fascist regime’s treatment of Jews would soon mimic
that of Hitler’s Nazis. Paul and Alice had to make plans to leave. They
wanted to go to Switzerland to find refuge, but, as was well-known at the
time, passage into Switzerland did not come easily or cheaply. They had no
choice but to turn their limited assets into cash; Paul had to liquidate his
masterpiece, The Actor. This was not something that he wanted to do. Back
15
in September 1936, even as the Leffmanns had been forced by the Nazis to
part with nearly everything they owned, Paul rejected an overture from
notorious art dealer, C.M. de Hauke of Jacques Seligmann & Co. (whom the
U.S. State Department later identified as a trafficker in Nazi-looted art).
Nearly two years later, on April 12, 1938, Paul, in a more desperate state,
reached out to de Hauke asking him if he would be interested in purchasing
the Painting. (A-40 ¶28, 33).
Just days after writing to de Hauke, the situation in Italy grew even
worse. From April 24-26, General Heydrich, SS Reichsführer Heinrich
Himmler (whom Hitler later entrusted with the planning and implementing of
the “Final Solution”) and SS General Josef Dietrich, the commander of
Hitler’s personal army, went to Rome to complete preparations for Hitler’s
visit. There were over 120 Gestapo and SS officers in Italy — primarily in
Florence, Rome, and Naples. The Gestapo officials and Italian police
continued investigations and surveillance of “suspicious persons” until the
end of Hitler’s visit. The Italian police carried out the arrests. Many German
Jewish residents fled in anticipation and as a result of these arrests. (A-41-42
¶34).
16
On May 3, Hitler arrived for his official state visit, traveling to Rome,
Naples, and Florence. The Italian people turned out in the tens of thousands
to greet him with parades and military displays. The streets were covered in
thousands of Nazi swastika flags, flowerbeds were decorated in the shape of
swastikas, and photographs of Mussolini and Hitler were made into postcards
and displayed in shop windows. In Florence, city officials made an official
postmark that commemorated Hitler’s visit. Mail sent during that time was
stamped “1938 Il Führer a Firenze” and decorated with swastikas. (A-42 ¶35).
For the Leffmanns, the time to flee was quickly approaching. Needing
to raise as much cash as possible, Leffmann responded to a letter from de
Hauke, telling him that he had already rejected an offer obtained through
another Paris dealer, presumably Käte Perls, for U.S. $12,000 (net of
commission). (A-42-43 ¶36).
Violence was increasing, and the persecution of Jews was on the rise.
All foreign Jews in Italy, including the Leffmanns, risked arrest and had
reason to fear possible deportation and death. Just days after telling de Hauke
that he had rejected Käte Perls’ low offer, in late June 1938, Leffmann sold
the Painting at the very price he told Perls and de Hauke he would not
consider (the “1938 Transaction”). With his back against the wall, he
17
accepted Käte Perls’ offer of U.S. $13,200 (U.S. $12,000 after a standard ten
percent selling commission), who was acting on behalf of her ex-husband,
Hugo Perls, also an art dealer, and art dealer Paul Rosenberg, with whom
Perls was buying the Painting. (A-43 ¶37).
On July 26, 1938, Frank Perls, Käte’s son, wrote to automobile titan
Walter P. Chrysler Jr., asking if he would be interested in The Actor. Having
just acquired a Picasso masterpiece from a German Jew on the run from Nazi
Germany living in Fascist Italy for a low price that reflected the seller’s
desperate circumstances and the extraordinary prevailing conditions, he
described the work as having been purchased from “an Italian collector” —
an outright lie. (A-43 ¶38).
In July 1938, the Leffmanns submitted their “Directory of Jewish
Assets” forms detailing their assets, which the Reich required all Jews (even
those living abroad) to complete. The penalties for failing to comply included
fines, incarceration, prison, and seizure of assets. Meanwhile, the plight of
the Jews in Italy worsened. In August 1938, enrollment of foreign Jews in
Italian schools was prohibited. A Jewish census, in which the Leffmanns
were forced to participate, was conducted in preparation for the Italian racial
laws. The Italian government increased surveillance because of the fear that
18
Jews would transfer their assets out of Italy or emigrate and take their assets
with them. A series of anti-Semitic publications were released, among them
the infamous “Manifesto degli scienziati razzisti” (“Manifesto of the Racial
Scientists”), which attempted to provide a scientific justification for the
coming racial laws, and the venomous magazine, “La difesa della razza”
(“The Defense of the Race”). A number of regional newspapers published
lists of many of the names of Jewish families residing in Florence. (A-43-44
¶39-40). On September 7, 1938, the first anti-Semitic racial laws were
introduced in Italy, including “Royal Enforceable Decree Number 1381.” All
“alien Jews” who arrived in Italy after January 1, 1919 had to leave within six
months or face forcible expulsion. Bank accounts opened in Italy by foreign
Jews were immediately blocked. Italy’s measures had become extremely
draconian, and in some instances even harsher than the corresponding
measures enacted in Germany. (A-44 ¶41).
The Leffmanns frantically prepared for departure. Switzerland became
even more difficult to enter beginning in 1938. In April, the Swiss
government began negotiations with the Germans regarding the introduction
of the notorious “J” stamp. On August 18-19, 1938 the Swiss decided to
19
reject all refugees without a visa. On October 4, 1938, with an agreement
reached on the adoption of the “J” stamp, they imposed visa requirements on
German “non-Aryans.” Receiving asylum was virtually impossible, and
German and Austrian Jews could only enter Switzerland with a temporary
residence permit, which was not easy to obtain. (A-44-45 ¶42).
Sometime before September 10, 1938, the Leffmanns managed to
obtain a temporary residence visa from Switzerland, valid from
September 10, 1938 to September 10, 1941. In October 1938, just days after
the enactment of the racial laws expelling them from Italy, the Leffmanns fled
to Switzerland. By the time they arrived, the Anschluss and other persecutory
events had triggered a rising wave of flight from the Reich. Consequently,
Swiss authorities required emigrants to pay substantial sums through a
complex system of taxes and “deposits” (of which the emigrant had no
expectation of recovery). (A-45 ¶43-44).
In October 1938, all German Jews were required to obtain a new
passport issued by the German government stamped with the letter “J” for
Jude, which definitively identified them as being Jewish. As German citizens
who required a passport to continue their flight, the Leffmanns had no choice
but to comply. The Leffmanns temporarily resided in Switzerland, but,
20
unable to stay, prepared to flee yet again, this time to Brazil and, again,
needed to spend much of their remaining funds to obtain the necessary
documentation and visas to enter. On May 7, 1941, the Leffmanns, still on
the run, immigrated to Rio de Janeiro where they lived for the next six years.
Had the Leffmanns not fled for Brazil when they did, they likely would have
suffered a much more tragic fate. (A-45-46 ¶45-47).
Given the various payments required to enter Switzerland and then
Brazil, the Leffmanns needed the $12,000 they received from the sale of the
Painting in order to survive, as it constituted the majority of the Leffmanns’
available resources as of June 1938. (A-46 ¶47).
The Leffmanns were not able to return to Europe until after the war. In
1947, they settled in Zurich, Switzerland. Paul died in 1956 at the age of 86,
leaving his estate to his wife, Alice, who died in 1966, leaving her estate to 12
heirs (all relatives or friends). (A-46 ¶48-50).
The immediate history of the Painting after Perls and Rosenberg
purchased it in June of 1938 is unclear, but it is known that Rosenberg loaned
the Painting to the Museum of Modern Art in New York in 1939. In the
paperwork documenting the loan, Rosenberg requested that MoMA insure the
Painting for $18,000 (a difference of $6,000, or a 50 percent increase over
21
what had been paid to the Leffmanns less than a year earlier). Sometime prior
to October 28, 1940, the Painting was consigned for sale by Rosenberg to the
well-known M. Knoedler & Co. Gallery in New York, New York. On
November 14, 1941, M. Knoedler & Co. sold the Painting to Thelma Chrysler
Foy for $22,500 (a difference of U.S. $9,300, or a 70 percent increase from
the price paid to Leffmann). Foy donated the Painting to the Museum in
1952, where it remains today (the “1952 Transaction”). The Museum
accepted this donation. (A-47 52-54).
The Museum’s published provenance for the Painting was manifestly
erroneous when it first appeared in its catalogue of French Paintings in 1967.
Instead of saying that Leffmann owned the Painting from 1912 until 1938, it
read as follows: “P. Leffmann, Cologne (in 1912); a German private
collection (until 1938) . . . ,” thus indicating that Leffmann no longer owned
the Painting in the years leading up to its sale in 1938. This remained the
official Museum provenance for the next forty-five years, including when it
was included on the Museum’s website as part of the “Provenance Research
Project,” which is the section of the website that includes all artworks in the
Museum’s collection that have an incomplete Holocaust Era provenance.
From 1967 to 2010, the provenance listing was changed numerous times. It
22
continued to state, however, that the Painting was part of a German private
collection and not that Leffmann owned it from 1912 until 1938. (A-48 ¶57-
59).
In connection with a major exhibition of the Museum’s Picasso
holdings in 2010, the Museum changed the provenance yet again. Despite
purported careful examination, as of 2010, the provenance of the Painting
continued erroneously to list the “private collection” subsequent to the
Leffmanns’ listing. In October 2011, only after correspondence with
Plaintiff, the Museum revised its provenance again, finally acknowledging the
Leffmanns’ ownership through 1938 and their transfer of it during the
Holocaust Era. (A-48-49 ¶60-61, 63).
On September 8, 2010, Plaintiff’s attorneys wrote to the Museum,
demanding the return of the Painting. The Museum refused. Plaintiff brought
suit in October 2017, in correlation with the expiration of a standstill
agreement, which had been tolling any statute of limitations. (A-51 ¶66-67;
A-2). On November 30, 2016, the Museum filed a motion to dismiss the
Complaint pursuant to Rule 12(b) of the Federal Rules of Civil Procedure
based on the following grounds: (i) lack of standing; (ii) failure to allege
duress; and (iii) the claims are time-barred under the statute of limitations and
23
laches. The Museum also petitioned in Surrogate’s Court, corollary to their
argument as to standing, to vacate the appointment of Plaintiff as ancillary
adminstratix. Upon Plaintiff’s motion, the Surrogate’s Court dismissed the
Museum’s motion (and rejected its subsequent motion for re-argument).
On February 7, 2018, the District Court dismissed the Complaint for
failure to allege duress under New York law. The District Court did not
address the Museum’s arguments as to the statute of limitations and laches.
The District Court also held that the Museum’s challenge as to standing was
moot as the Museum had conceded that issue at oral argument due to the
determinations made by the Surrogate’s Court.
STANDARD OF REVIEW
This Court reviews de novo a district court’s granting of a Rule
12(b)(6) motion to dismiss for failure to state a claim for relief. See Doe v.

Columbia Univ., 831 F.3d 46, 53 (2d Cir. 2016).






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Location: New York, État de New York, États-Unis

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