Last week, a cathedral in Germany agreed to turn over a valuable painting to the heirs of the family from whom it was stolen during World War II.  The case marks another example of the type of negotiated restitution that has become an important factor in art disputes in recent years. 
 
The case involves a painting depicting a city square, attributed to seventeenth-century Dutch master Jan van der Heyden.  It had been owned for many years by Gottlieb and Mathilde Kraus, a prominent Jewish couple who fled Austria when the Nazis took over in 1938.  Their assets, including over 100 artworks, were subsequently seized by the Gestapo and sold; this work ended up in the collection of Heinrich Hoffman, who served as Hitler’s photographer during the war. 
 
Following the fall of the Nazi regime, the Allies confiscated a large amount of looted artwork and turned it over to the post-war Bavarian government, which was tasked with returning the works to their rightful owners.  But, as was reported in the New York Times a few years ago, archival research has recently revealed that in some cases, the Bavarian government instead gave in to pressure from prominent Nazi families, who were sometimes permitted to buy back the ill-gotten property at bargain-basement prices. 
 
That was what happened to the Kraus’s painting; in 1962, Bavarian officials permitted the work to be sold in a so-called “return sale,” for a laughably tiny sum, back to Henriette von Schirach—Hoffman’s daughter.  (Von Schirach herself had served at one time as Hitler’s secretary, and had been married to the onetime head of the Hitler Youth.)  Just a year later, Henriette sold it at auction for 50 times what she had paid for it. 
 
The buyer at auction was the Cathedral of Xanten, also known as St. Victor’s Cathedral, a sixteenth-century Catholic cathedral in Germany.   The work hung there for decades, until John Graykowski, the Kraus’s great-grandson and a lawyer in Virginia, began researching his ancestors’ art collection.  The cathedral has now agreed to hand over the work to the family, although a representative from the cathedral’s foundation was careful to emphasize that the cathedral was not admitting that it lacked good title; rather, it viewed this as a voluntary surrender “in recognition of the Nazi injustice” done to the Krauses.  Graykowski is still pursuing other works that remain unaccounted for from the massive Kraus collection.
 
One notable aspect of this story is that the parties apparently were in negotiations for eight years before reaching this result.  The case also reminds the art world that there is much we do not know about what really happened to massive amounts of artwork in the years before, during, and after World War II; in particular, the story highlights that even in the post-war years when efforts were supposedly underway to return works to their original owners, injustices continued. 
 
Meanwhile, Another Restitution Case Ends In Defeat For Jewish Heirs
 
The Xanten settlement stands in stark contrast to another dispute that ended in defeat a few months ago for the heirs of a Jewish art dealer who fled Germany in the years leading up to World War II. 
 
That case, Hulton v. Bayerische Staatsgemaldesammlungen, Docket No. 16-cv-09360 (S.D.N.Y.), involved a group of paintings once owned by Alfred Flechtheim, who was a prominent German-Jewish art dealer before the Nazi party’s rise to power.   More detail can be found in our original post (here), but in short, Flechtheim was forced to flee the country after becoming a target of Nazi persecution, leaving behind much of his property.  He died in London in 1937, having never recovered most of his property.  The artworks at issue—six works by Max Beckmann, one by Juan Gris, and one by Paul Klee—ended up in the collection of an instrumentality of the Bavarian government.  The Bavarian state claims it rightfully owns the works because they were the gift of a donor, Franke, who allegedly acquired the works in 1932, before the Nazis took power.  Flechtheim’s heirs, however, say that there is no proof of Franke’s 1932 purchase, and that to the contrary, there is evidence that the works still belonged to Flechtheim after that date.
 
In 2016, Flechtheim’s American heirs sued seeking the return of the works.  But this past fall, their case was dismissed by a federal judge who held that he lacked jurisdiction to hear the plaintiff’s claims due to the Foreign Sovereign Immunities Act, which provides that American courts can hear claims against foreign governments only under very specific and limited circumstances.  Here, the plaintiffs had argued that their case falls into an exception to the FSIA for cases where property was taken in violation of international law.  See 28 U.S.C. § 1605(a)(3).
 
But the court disagreed.  In a ruling issued this past fall, the Southern District of New York held that the facts, as pled in the complaint, do not specify exactly how these particular paintings were sold, but in any case do not adequately allege that the “taking” of the property was done by a sovereign entity, as opposed to mere conversion by a private individual.  The complaint’s allegations indicate that the paintings were likely sold by either an individual who took over Flechtheim’s gallery, or a different individual to whom he handed over the management of much of his property; but, importantly, the complaint does not say that either of those individuals were acting on behalf of or at the direction of the Nazi government.  While both individuals are alleged to have had ties to the Nazi regime, the fact that they were not acting in an official government capacity, but rather seem to have acted as opportunistic profiteers for their own economic gain, proved fatal to the Plaintiffs’ case. 
 
The Court acknowledged that this is a “morally unsatisfying” conclusion, given that the “opportunism” that allegedly cost Flechtheim his property was made possible by the Nazi regime’s cruelty; but that the result here was nevertheless consistent with long-held principles regarding the immunity of foreign governments from suit in the U.S.  Thus, the Court said, it “reluctantly” had to conclude that it lacked authority to hear this case.
 
(The Flechtheim heirs have had some success in recovering other works from the collection.  In September 2018, a Swedish museum handed over an expressionist work to the family after researching the family’s claims.  The following month, the Guggenheim Foundation restituted a Kirchner painting to the family.)
 
Contrast Between Litigation and Negotiated Settlements
 
This lawsuit demonstrates the particular challenge that the FSIA poses for claimants whose art has ended up in the hands of a foreign government, as opposed to a private individual or entity.  This is just one of the complicated threshold legal questions (others include issues such as international comity, timeliness issues, and choice of law) that often take center stage in lawsuits regarding Nazi-era art transfers. 
 
And the contrast between the Hulton litigation and the resolution of the Kraus heirs’ claim is stark.  Where parties are able to reach a negotiated settlement (see here for another recent example), the result seems more likely to be able to address the complicated historical facts and moral implications of a case, rather than being decided on the basis of a purely legal issue.