The Second Circuit Court of Appeals has weighed in on a dispute between the Art Institute of Chicago and the heirs of a Holocaust victim, over an artwork by famed Expressionist artist Egon Schiele.  The case has implications for claimants seeking the return of lost or stolen artworks, particularly after many years have elapsed since the loss.
 

The Grünbaum Collection
 
We have written before (see here, here, and here) about the ongoing efforts of the family of the late Fritz Grünbaum to recover works from the art collection Grünbaum amassed before World War II.  Grünbaum was a Jewish songwriter and cabaret performer in Vienna before the Nazi regime rose to power in the 1930s.  He was arrested in 1938, and historical documents indicate that around this time, Nazi agents inventoried his art collection of more than 400 works, including dozens by Schiele.  After his arrest, Grünbaum was sent to a concentration camp in Dachau, where he died in 1941, and his wife died in a concentration camp in Minsk the next year.  In recent years, his heirs have taken up the challenge of trying to trace and recover artworks from his collection; they have met with mixed success, with some works being returned through litigation or voluntary arrangements with their current owners, while at least one high-profile case, Bakalar v. Vavra, ended in defeat in court for the heirs.  In that case, a court ultimately applied the doctrine of laches—which means a party was on notice of its claim but unreasonably delayed in taking action, and that delay prejudiced the other side—to hold that the family could not recover a Grünbaum Schiele from its current possessor.
 
The Second Circuit Holds That The Heirs’ Claims Can Survive A Motion To Dismiss
 
This most recent litigation is against the Art Institute of Chicago (AIC), which in 1966 purchased
Russian Prisoner of War, a 1916 painting by Schiele.  The family sued AIC in late 2022, and in court, AIC has taken the position that it is the work’s rightful owner, because AIC—just like the defendant who prevailed against the family in the Bakalar case—traces its title back to Fritz Grünbaum’s sister-in-law.  AIC has also argued that the family’s claims to the painting are barred by collateral estoppel, laches, and the statute of limitations.
 
In 2023, a federal district court dismissed the family’s claims and refused to give the plaintiffs permission to amend their pleadings to try to cure the flaws, concluding that would be futile.  See Reif v. Art Inst. of Chicago, 703 F. Supp. 3d 427 (S.D.N.Y. 2023), reconsideration denied, No. 23-CV-02443 (JGK), 2024 WL 838431 (S.D.N.Y. Feb. 28, 2024).  The family appealed to the Second Circuit, which has now issued a decision that will allow the family to proceed with the case.  Reif v. Art Inst. of Chicago, No. 24-809-CV, 2025 WL 763424, at *1–5 (2d Cir. Mar. 11, 2025).
 
First, the appellate court ruled that “the statute of limitations defense is not conclusively established” on the face of the plaintiffs’ proposed amended complaint, and they should be permitted to amend.  This ruling involves the interplay between New York’s usual three-year statute of limitations on claims for recovery of personal property, and the federal Holocaust Expropriated Art Recovery Act (the “HEAR Act”), adopted in 2016, which imposes a more forgiving six-year statute of limitations and other specific timeliness rules that can extend the timeframe for certain claims involving Nazi-era art disputes, and in some cases even resurrect certain claims that may have expired under state law.
 
The district court had held that, because the complaint’s allegations in a previous complaint “support the idea” that AIC bought the work in good faith in 1966, then the statute of limitations began to run in 2006 when AIC had refused a demand by the family to return it, and the HEAR Act did not revive plaintiffs’ claims.  But the Second Circuit held that the proposed amended complaint plausibly alleged that the HEAR Act might save plaintiffs’ claims, and plaintiffs should have the opportunity to amend.  In the anticipated new complaint, the plaintiffs apparently intend to clearly allege that AIC was not a good-faith purchaser in 1966, and that therefore the family’s claims were time-barred by the late 1960s, and could be saved by the HEAR Act.
 
The Second Circuit’s other major conclusion involved “collateral estoppel,” a legal principle that seeks to prevent the same question from being litigated in multiple cases (because that would be inefficient and potentially lead to conflicting rulings).  In New York, “collateral estoppel bars relitigation of an issue when (1) the identical issue necessarily was decided in the prior action and is decisive of the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to litigate the issue in the prior action.” 
 
Here, the district court had held that, because the Bakalar v. Vavra case, which involved a different work from Grünbaum’s collection, had concluded the heirs’ claims were barred by laches, the issue of laches could not be relitigated here.  But the Second Circuit disagreed, holding that “the preclusive effect of Bakalar on the laches issue is not apparent based solely on the allegations” in the proposed amended complaint.  The appellate court held that while the artworks come from the same collection, “the possessors of the artworks are different in significant ways that, at the motion to dismiss stage, render the application of issue preclusion improper.”  In particular, the decision noted that Bakalar was a good-faith buyer and also a layperson, while the AIC here, as a sophisticated art institution, had a better understanding and “advance opportunity” to inquire into the work’s provenance before buying it; as alleged in the family’s proposed amended complaint, AIC may have acted in bad faith and had at least enough information that it should have done more investigation prior to its purchase of this work.  The Second Circuit concluded that the differences between AIC and Bakalar “bear directly on the prejudice each defendant faced” for purposes of laches, which is always a “fact-intensive” evaluation.  And “this difference in the analysis of prejudice to AIC and Bakalar means that the laches issue adjudicated in Bakalar is not sufficiently ‘identical’ to the one in the instant case to have preclusive effect.”
 
Analysis and What’s Next
 
This recent ruling does not mean the family will prevail on the substance of their claims or defeat the AIC’s defenses; indeed, the Second Circuit was frank that as the case progresses, it may become clear that their claims are in fact time-barred, or that there are no genuine grounds to differentiate Bakalar for purposes of issue preclusion.  The appellate court simply held that those issues should not be decided at this early stage of the litigation. We’ll continue to watch the case as it unfolds.
 
The Second Circuit’s ruling is also relevant to situations where a large group of artworks were all lost under similar circumstances by an owner, and the owner (or its successor or heir) later finds itself litigating recovery cases one by one.  This is not an uncommon fact pattern in art title litigation—often, a theft or other similar wrongful loss involves not just one but several or even dozens of artworks, which may then be separately sold off (and resold repeatedly), scattering them all over the world.  The works then sometimes resurface on the market years apart, so an original owner (or its representative) must seek to reclaim each unique work piecemeal from different possessors, in different jurisdictions with different legal landscapes.  The Second Circuit here reminds litigants and courts that even if the original owner or its representative loses one such case on grounds like laches, that result does not necessarily control or dictate the results of other future cases involving artworks from the same collection; each case must be evaluated based on its own specific facts.


Egon Schiele, Russian War Prisoner, 1916, The Art Institute of Chicago, https://www.artic.edu/artworks/25342/russian-war-prisoner.