Motion to Dismiss; Personal Jurisdiction; Alter Ego Theory; CPLR 3211(a); CPLR 4511
By: Miles Works | Staff Writer
In 1939, as the Nazis approached France, Mr. Stettiner was forced to flee his Parisian home, leaving behind a valuable painting, Seated Man with a Cane(1918). The Nazis looted and sold the painting. After Nazi artwork sales were declared null and void in 1946, a French court ordered the painting’s return. Despite reasonable efforts by Stettiner and his heirs, the artwork remained elusive until it resurfaced at a 1996 Christie’s auction in London, as a misidentified painting. There, Defendant International Art Center (“IAC”), under the direction of its’ principal and sole shareholder Davide Nahmad (“Nahmad”), purchased the painting. After Plaintiff, Stettiner’s sole heir discovered the painting, and made two unsuccessful attempts demanding its return from both Defendants IAC and Nahmad, he commenced the present action seeking its return pursuant to the Holocaust Expropriated Art Recovery Act of 2016 (the “HEAR Act”). The Court initially dismissed the complaint against Defendants IAC and Nahmad for lack of personal jurisdiction, but granted leave to substitute the Plaintiff with Mr. Gowen in his capacity as limited ancillary administrator of Mr. Stettiner’s estate. In the present action, the Plaintiff argued that the Court acquired personal jurisdiction over Defendants IAC and Nahmad under both CPLR 302(a) and the alter ego theory. The Defendants moved the Court to dismiss the complaint pursuant to CPLR 3211(a), and moved the Court to take judicial notice of Swiss and French laws pursuant to CPLR 4511.
The Court denied the Defendants’ motion to dismiss holding that it acquired personal jurisdiction over IAC on two grounds. First, the Court acquired personal jurisdiction under CPLR 302(a)(1) because IAC enlisted Helly Nahmad and Helly Nahmad Gallery in New York to sell the painting IAC held title to, and therefore “transact[ed] any business within the state.” Second, the Court had also acquired personal jurisdiction under CPLR 302(a)(2) because IAC “commit[ed] a tortious act within the state” when IAC failed to answer Plaintiff’s two demands for the paintings return, thereby giving rise to a cause of action.
The Court further held that it acquired personal jurisdiction over Nahmad under the alter ego theory. To obtain personal jurisdiction under this theory, the complaining party must establish that the owners of the entity, through their domination of it, “abus[ed] the privilege of doing business in the corporate form to perpetrate a wrong” against the Plaintiff. The Court found that the Defendant Nahmad completely dominated IAC, such that the court could not “determine a substantial difference between the two defendants.” The Court reasoned that IAC was formed by a law firm associated with the infamous “Panama Papers,” linked to conspicuous shell corporations, and IAC failed to adhere to corporate formalities, such as maintaining an independent board of directors. Furthermore, the Court highlighted that Nahmad was the principal and sole shareholder of IAC, that he used the IAC to conceal his name and perpetuate a wrong. He was also quoted in the New York Times as saying, “The International Art Center is me personally.”
The Court then struck down all of the Defendants’ other grounds for dismissal. To justify the denials, the Court emphasized the overarching principle that “one party cannot hide its assets outside of New York so as to render any judgment obtained in New York unenforceable.” Accordingly, the Court denied the Defendants’ other motion to take judicial notice of foreign laws pursuant to CPLR 4511 and held that the HEAR “will not be replaced by a choice-of-law analysis.” The Court noted that “international comity” was of no import because applying French or Swiss laws would effectively deny the Plaintiff any chance of recovery. Further, the Act of State doctrine does not apply here because the State of New York has interests in adjudicating claims involving artwork stolen during the Nazi regime which weigh against deferring to Swiss or French law. Therefore, the Court held that New York’s substantive law applied to the ownership dispute. “New York markets are not now, and shall not become, a safe harbor for the fruits of property pillaged during the course of the Nazi genocide.”
Gowen v. Helly Nahmad Gallery, Inc., Index No. 650646/2014, 5/8/2018 (Bransten, J.)