Statute with limits?

Few will admit it, but we will: It's fun to say "I told you so."

In 2010, Gov. Arnold Schwarzenegger signed into law Assembly Bill 2765, legislation purporting to address challenges faced by individuals seeking to recover stolen works of art. The new law expanded the time in which a lawsuit can be brought to restore possession to the wronged owner and altered when the clock on such claims starts to run. In particular, AB 2765 doubled the length of the statute of limitations from three years to six years for any claims seeking recovery of fine art from museums, galleries and auctioneers - whether or not the plaintiff, the artwork or the defendant was located in California.

In these pages, we previously explained why AB 2765 was an unwise and perhaps unconstitutional development. See "Statute Without Limits?," Aug. 20, 2010. We noted that AB 2765 appeared to be targeted to changing the outcomes in two pending cases, one where the district court had already found the claims for recovery time-barred under then-applicable law and one where the court had yet to reach the statute of limitations issue. Now a federal district court has agreed.

In Cassirer v. Thyssen-Bornemisza Collection Foundation, Judge Gary Allen Feess of the Central District of California dismissed a claim for recovery of a work of art as time-barred, even though the claim would have been timely under the new limitations period. No. 05-cv-03459-GAF-E (C.D. Cal. May 24, 2012). A painting by the French impressionist Camille Pissarro had once been owned by Lilly Cassirer Neubauer, but the Nazi regime forced Neubauer to relinquish the painting in exchange for an exit visa from Germany in 1939. Following World War II, Neubauer sought compensation for the lost Pissarro, ultimately receiving a monetary settlement from the German government in 1958, but she never located the missing painting. In 1976, the Pissarro ended up in the collection of a Baron Thyssen-Bornemisza, who loaned the painting to the Spanish government in 1988. Spain purchased the painting outright in 1993, and it has been on display at the Thyssen Bornemisza Collection Foundation in its Madrid museum since then.

Neubauer's heirs, the claimants in Cassirer, alleged that they learned of the painting's whereabouts in 2000, and requested that Spain return the painting. After Spain refused, the claimants filed suit seeking recovery of the painting in federal court in Los Angeles - but not until 2005. Under the statute of limitations then in effect, the Cassirer claimants had to bring suit within three years of learning of their claim; they hadn't, so their claim would be time-barred. However, AB 2765 passed while the Cassirer litigation was pending, imposing a six-year limitations period and making the claim to the Pissarro timely. At the time, the Cassirer case was before the 9th U.S. Circuit Court of Appeals on an interlocutory appeal of a threshold jurisdictional question. When the jurisdictional appeal was resolved and the case remanded to the district court, the stage was set for a confrontation over the new statute of limitations.

The defendant foundation made numerous arguments for why AB 2765 was invalid, so that the original three-year limitations period should apply - claiming violations of due process, equal protection, and the First Amendment and preemption under the foreign affairs doctrine. The district court rejected all but one of these, finding that AB 2765 ran afoul of the federal government's exclusive power to regulate the foreign affairs of the U.S. It may seem odd that a state statute of limitations governing claims to personal property impinges on the federal government's foreign affairs power. However, as the Cassirer court found, this result was effectively dictated by the 9th Circuit's decision in Von Saher v. Norton Simon Museum, 592 F.3d 954 (9th Cir. 2010). That decision had affirmed dismissal of claims for recovery of two paintings possessed by the Norton Simon Museum that had changed hands during the Nazi era on the ground that the claims were time-barred. Notably, a key proponent of AB 2765 was the attorney for the Von Saher claimants and the case was pending on petition for certiorari before the U.S. Supreme Court at the time of AB 2765's passage.

Von Saher involved the state Legislature's prior attempt to extend the statute of limitations for actions for the recovery of works of fine art. Code of Civil Procedure Section 354.3 had extended to Dec. 31, 2010, the limitations period for claims to works alleged to have been stolen during the Holocaust era. The paintings at issue in Von Saher had been taken from their original owner in 1940 by the Nazis during their occupation of the Netherlands. The Allies recovered them and returned them to the Dutch government. But the original owner never filed a claim for restitution, and the Dutch government eventually sold them; the Norton Simon Museum later acquired the paintings. Decades later, the original owner's heir (Von Saher) sought return of the paintings, ultimately filing suit and relying on the extended statutory period afforded by Section 354.3.

However, as the Supreme Court has explained, "the foreign affairs doctrine provides that state laws may not intrude into the field of foreign affairs which the Constitution entrusts to the President and the Congress." Accordingly, the 9th Circuit held in Von Saher that the federal government alone has the power to establish remedies for war-related disputes. And in the years immediately following World War II, the U.S. had pursued a formal policy of "external restitution," by which it returned Nazi-stolen artworks to their countries of origin rather than to individual owners.

In the intervening decades, the U.S. worked extensively with the international community to create a comprehensive system to address Holocaust-era art restoration. As Section 354.3 permitted non-California residents to bring suit against non-California museums and galleries, the 9th Circuit concluded the "real purpose" of the statute was to "provide relief for Holocaust victims and their heirs" and to "create a friendly forum for litigating Holocaust restitution claims." That is, Section 354.3 was an expression of California's "dissatisfaction with the federal government's resolution (or lack thereof) of restitution claims arising out of World War II" - making the statute an unconstitutional incursion into the federal government's exclusive power to conduct foreign affairs.

The recent Cassirer decision from the Central District held that, under Von Saher, California may not seek to provide a particular legislative remedy for Holocaust-era art claims. Of course, unlike Section 354.3, AB 2765 did not on its face target Holocaust-era restitution claims; the new statute applied to any claims for recovery of fine art from museums, galleries and auctioneers. But the Cassirer court nonetheless found that the "real purpose" of AB 2765 was to create a friendly forum to litigate Holocaust restitution claims, "open to anyone in the world to sue a museum or gallery located within or without the state" of California. Delving into the history of AB 2765, the court noted that the bill was drafted in response to the Von Saher decision; that the "'idea' for the legislation came from Von Saher's counsel"; and that the legislative history of the bill expressed a desire to assist a class of claimants "that the Legislature has already intended to protect." The court concluded that, despite being drafted to create an appearance of conformity with areas of "traditional state responsibility," the content of AB 2765 and the context of its enactment established otherwise. So the court found the new limitations period was an impermissible incursion on the province of the federal government and therefore it was preempted under the foreign affairs doctrine.

The Cassirer decision has already been appealed, so the final chapter is yet to be written. In the meantime, it is difficult to disagree with the Central District's conclusion that AB 2765 was not legislation of general applicability based on sound policy, but a lawyer-driven effort to affect the outcomes in pending litigation, and, in the process, to render California a magnet for art restitution litigation. The 2010 legislation sought to arm a particular class of claimants with legal weapons not enjoyed by other civil litigants, and so subjected its targets - galleries, dealers, auctioneers and museums (including many non-profit institutions) - to more costly and drawnout lawsuits than would otherwise be the case. We suggested here two years ago that the bill was a "legislative solution in search of a problem." The Cassirer court came to the same conclusion, noting that the legislative history of the bill "contains no discussion that would explain the sudden recognition of art theft as a widespread problem requiring legislative action."

Told you so.

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