David Bakalar, Plaintiff, against Milos Vavra and Leon Fischer, Defendants

This case began as a collector's response to a claim for a single drawing by Egon Schiele. Bakalar, a collector, had sold it at a Sotheby's auction in London (February 5, 2005) when the attorneys for two men sent a letter demanding that the drawing be given to them, asserting that they were the rightful heirs of Fritz Grünbaum who had owned it in Vienna before he died in the Holocaust. The sale was rescinded; Bakalar filed suit in Federal Court in New York for declaratory judgment that he was the drawing's legal owner. Bakalar had purchased it decades earlier in New York City from Galerie St. Etienne, an art gallery specializing in early twentieth-century Austrian art, and founded by Otto Kallir who emigrated from Vienna (via Paris) to America to escape the Nazis. Galerie St. Etienne, for many years, and now under the direction of Kallir's granddaughter, a Schiele expert, is still in business and very well-known.

Fritz Grünbaum had been a satirical Berlin cabaret artist who left Germany for Austria in hopes of avoiding Nazi reprisals. He was arrested in Austria days after the Anschluss, sent to Dachau and died there. Grünbaum had a large collection of works by Egon Schiele. His widow Elisabeth also was murdered during the war, and just what happened to the collection after her deportation is not clear. It is known that in the early to mid-fifties Elizabeth's sister sold over forty works from Grünbaum's collection through or to the Swiss firm of Gutekunst & Klipstein in Bern, Switzerland. (One of its principals, Eberhard Kornfeld, is still active there as an art dealer.) A number of these works then were sold to Otto Kallir for his New York gallery. The Schiele drawing that Mr. Bakalar consigned to Sotheby's appears to have been part of this group. The plaintiffs attempted to convert the lawsuit into a class action against numerous possessors and borrowers of works from the Grünbaum collection but the court rejected the attempt.

The claimants are Leon Fischer of New York City (whose grandfather was Elisabeth Grünbaum's brother) and Milos Vavra of Prague (descended from Grünbaum's sister, Elise) who obtained a 2002 Austrian document declaring that they were Grünbaum's heirs.

The district court ruled in favor of Bakalar on the grounds that he was a good-faith purchaser, in Switzerland, from Elizabeth's sister. On appeal to the U.S. Court of Appeals for the Second Circuit, the lower court decision was reversed because New York law, not Swiss law, was deemed applicable. The court said that under New York law "a thief cannot pass good title." The Appeals Court remanded the case for trial of the issue of whether Vavra and Fischer have a valid claim to the Schiele drawing and also whether Mr. Bakalar could avail himself of the defense of "laches", i.e., unreasonable delay and prejudice.

The burden of proving good title is on the current possessor.

On August 17, 2011, the District Court decided in favor of Bakalar, concluding that he holds lawful title to the Drawing and that the claimants’ counterclaims are barred by laches. On appeal to the U.S. Court of Appeals for the Second Circuit, the ruling of the District Court was affirmed, awarding judgment to Bakalar on the basis of laches. The court found that Vavra and Fischer’s predecessors who had more direct knowledge of the situation had delayed in pursuing their claim, emphasizing that the duty to gather evidence rests on the first generation and does not reset with each consecutive generation. This ruling is significant because it precludes claims by heirs who recently discovered evidence supporting their claims in favor of good faith buyers in New York.

The claimants have now filed a petition for rehearing with suggestion for rehearing en banc to reverse the judgment of the District Court.