BILL ANALYSIS SENATE JUDICIARY COMMITTEE Senator Ellen M. Corbett, Chair 2009-2010 Regular Session AB 2765 (Committee on Judiciary) As Amended April 22, 2010 Hearing Date: June 22, 2010 Fiscal: No Urgency: No TW:jd SUBJECT Civil Actions: Statutes of Limitation: Theft DESCRIPTION This bill would extend the statute of limitations from three to six years for actions against a museum, gallery, auctioneer, or dealer for specific recovery of an article of historical, interpretive, scientific, cultural, or artistic significance. This bill would provide that the statute of limitations for these types of actions begins to accrue at the time of the actual discovery of the whereabouts of the article and the facts constituting the cause of action. This bill would apply these provisions to actions based on property taken by theft prior to 1982, regardless of whether or not the action would otherwise have been barred by an applicable statute of limitation under any other provision of law in effect prior to 1982. This bill would authorize the revival of actions, and would apply to pending actions including an appeal from a prior dismissed action, against a museum, gallery, auctioneer, or dealer for specific recovery of an article of historical, interpretive, scientific, cultural, or artistic significance that would have satisfied a six-year statute of limitations based on the actual discovery of the whereabouts of the article and the facts constituting the cause of action. The revival of or application to such actions must have been dismissed in whole or in part upon the expiration of the statute of limitations existing at the time of the dismissal. BACKGROUND (more) AB 2765 (Committee on Judiciary) Page 2 of ? Prior to 1983, the statute of limitations for recovery of art or an artifact did not specify on which date the statute of limitations would begin to run - the date the item was stolen or the date of locating the whereabouts of the item. AB 2296 (Baker, Chapter 340, Statutes of 1982) clarified the statute of limitations for these causes of action and specified that the statute would run upon the discovery of the whereabouts of the article. In 1989, the Legislature, at the request of museums attempting to recover stolen art and artifacts, extended the statute of limitations to apply to actions for the recovery of any article of historical, interpretive, scientific, or artistic significance. (SB 1233 (Rogers, Ch. 467, Stats. 1989).) After 1983, courts wrestled with applying a discovery rule for these types of actions. Some courts imposed an actual notice discovery rule whereby the statute of limitations did not begin to run until the plaintiff discovered the whereabouts of the article. (See Naftzger v. American Numismatic Society (1996) 42 Cal.App.4th 421.) Other courts applied a constructive discovery rule under which the statute of limitations began to run at the time the plaintiff discovered or should have discovered the whereabouts of the article, based on the definition of constructive notice provided in Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103. (See Society of California Pioneers (1996) 43 Cal.App.4th 774; Orkin v. Taylor (2007) 487 F.3d 734; Von Saher v. Norton Simon Museum of Art at Pasadena (2008) 592 F.3d 954.) This bill would clarify the discovery rule on actions for theft of property prior to 1982. This bill also would provide for an actual discovery rule and a six-year statute of limitations of actions against a museum, gallery, auctioneer, or dealer for the specific recovery of articles of historical, interpretive, scientific, cultural, or artistic significance from a museum, gallery, auctioneer, or dealer. This bill would revive previously dismissed actions and apply to appeals of cases dismissed for the expiration of the statute of limitations in effect at the time of the dismissal. CHANGES TO EXISTING LAW Existing law provides a statute of limitations of three years for actions to recover stolen personal property. (Code Civ. Proc. Sec. 338(c).) Existing law provides that the statute of limitations pertaining to the recovery of stolen articles of historical, interpretive, AB 2765 (Committee on Judiciary) Page 3 of ? scientific, or artistic significance begins to accrue upon the plaintiff's discovery of the whereabouts of the stolen article. (Code Civ. Proc. Sec. 338(c).) This bill would extend the statute of limitations from three years to six years for actions against a museum, gallery, auctioneer, or dealer for specific recovery of an article of historical, interpretive, scientific, cultural, or artistic significance. This bill would provide that the statute of limitations for actions against a museum, gallery, auctioneer, or dealer for specific recovery of an article of historical, interpretive, scientific, cultural, or artistic significance begins to accrue at the time of the actual discovery of the whereabouts of the article and the facts constituting the cause of action. This bill would apply a six-year statute of limitations and actual discovery rule to actions for property taken by theft prior to 1982 against a museum, gallery, auctioneer, or dealer for specific recovery of an article of historical, interpretive, scientific, cultural, or artistic significance, regardless of whether or not the action would otherwise have been barred by an applicable statute of limitation under any other provision of law in effect prior to 1982. This bill would authorize the revival of actions, and would apply to pending actions including an appeal from a prior dismissed action, against a museum, gallery, auctioneer, or dealer for specific recovery of an article of historical, interpretive, scientific, cultural, or artistic significance that would have satisfied a six-year statute of limitations based on the actual discovery of the whereabouts of the article and the facts constituting the cause of action. The revival of or application to such actions must have been dismissed in whole or in part upon the expiration of the statute of limitations existing at the time of the dismissal. COMMENT 1. Stated need for the bill The author writes: This bill addresses a problem faced by persons who are attempting to recover art and other valuable objects that may AB 2765 (Committee on Judiciary) Page 4 of ? have been stolen several years ago and are only more recently on display at a museum or gallery. It is in the very nature of stolen art that it circulates underground for several years before it appears in museums and galleries, and by that time the SOL has passed. Case law in California and elsewhere has recognized that, given the nature of stolen art, the proper trigger for the SOL is actual discovery. Recent cases have divided on the question of whether the "discovery" rule that was adopted by the Legislature in 1982 applies to works stolen before 1983 (when the statute became effective) and whether the discovery intended was "actual" or "constructive." This amendment would clarify these questions for purposes of actions brought to recover art on display in a museum or gallery. In addition to these state appellate cases, a recent decision striking down a statute targeted solely at the Nazi-looted art (on foreign policy preemption grounds) also noted the confusion of the two appellate court rulings on these questions. 2. Legislative history of protecting victims of artifact theft In 1983, the Legislature provided for a statute of limitations for actions based on theft of art or an artifact to accrue upon the discovery of the whereabouts of the article. (AB 2269 (Baker, Ch. 340, Stats. 1982).) AB 2269 was enacted to address the difficulty in locating stolen art which was transferred underground for years after it was taken from the original owner. The statute of limitations was revised to accrue on the date of the discovery of the whereabouts of the artifact rather than on the date of the theft. In 1989, the Legislature replaced "art or artifact" with "any article of historical, interpretive, scientific, or artistic significance." (SB 1233 (Rogers, Ch. 467, Stats. 1989).) This revision was made in order to protect theft victims seeking to recover items of significant historical or artistic value, but with very little financial value. In 2002, the Legislature enacted a law which provided a mechanism under which victims of Nazi oppression could recover works of art. (AB 1758 (Nakano, Ch. 332, Stats. 2002).) This law removed the statute of limitations requirements for these types of actions and allowed plaintiffs to file their actions by December 31, 2010. (Code Civ. Proc. Sec. 354.3.). A recent Ninth Circuit appellate ruling in Von Saher v. Norton Simon Museum of Art at Pasadena (2008) 592 F. 3d 954 held that this statute was preempted by the federal government's powers over AB 2765 (Committee on Judiciary) Page 5 of ? foreign affairs under the Supremacy Clause. Von Saher is currently before the U.S. Supreme Court for a decision regarding this preemption; the appeal does not, however, deal directly with the statute of limitations changes proposed by this bill. The Ninth Circuit advised the plaintiff that she could amend her complaint alleging satisfaction of the three-year statute of limitations for the recovery of stolen articles of artistic significance under Code of Civil Procedure Section 338(c). It is not clear whether this plaintiff will be able to meet this burden. 3. Due diligence by plaintiff This bill would extend the statute of limitations from three to six years for actions against museums, galleries, auctioneers, and dealers for specific recovery of articles of historical, interpretive, scientific, cultural, or artistic significance. Generally, statutes of limitations are deadlines created for consistency for both plaintiffs and defendants. Plaintiffs must utilize due diligence in discovering facts giving rise to their claims and thereafter file actions on these claims within the time specified by statute. This bill would extend the time within which plaintiffs must diligently discover their claim and file suit against specified defendants. This extension is appropriate because U.S. law favors the theft victim. However, a reasonable cap, in this case six years, on the timeframe within which to bring an action for the recovery of a stolen item then protects the subsequent good faith purchaser of the item. 4. Due process for good faith purchaser This bill seeks to revive dismissed actions and affect pending appeals thereon with respect to its provisions for the six-year statute of limitations as applied to actions against museums, galleries, auctioneers, and dealers. As explained below, this provision is not contrary to due process protections. The court in Naftzger v. American Numismatic Society, supra, 42 Cal.App.4th 421 noted that a thief cannot transfer good title. (Id. at 428.) Therefore, the subsequent good faith purchaser has no claim to good title during the accrual of the statute of limitations. Upon the expiration of the statute of limitations, however, courts have found that title to real or personal property may have perfected itself, and legislative acts that AB 2765 (Committee on Judiciary) Page 6 of ? remove from the defendant title to the property effectively deprives the defendant of due process. "The reason is, that, by the law in existence before the repealing act, the property has become the defendant's. Both the legal title and the real ownership had become vested in him, and to give the effect of transferring this title to plaintiff, would be to deprive [the defendant] of his property without due process of law." (Campbell v. Holt (1885) 115 U.S. 620, 623.) However, in Chase Securities Corp. v. Donaldson, et al. (1945) 325 U.S. 304, the court clarified the holding in Campbell and reasoned that "it cannot be said that lifting the bar of a statute of limitation so as to restore a remedy lost through mere lapse of time is per se an offense against the Fourteenth Amendment." (Id. at 315.) The Chase Securities court stated that retroactive statutes could create a hardship or oppression as applied to the defendant, who could have relied on the expiration of the statute to his substantial detriment. The revival provision of this bill, however, can be distinguished from instances which unduly burden the defendant. This bill seeks to provide a remedy for plaintiffs who lost artifacts through no fault of their own. For many of these plaintiffs, the artifacts that were taken were done so through looting, oppression, duress, and theft. Many of these items move underground through various channels and transfer to owners until the items resurface at some later point, and it is difficult for these plaintiffs to trace the items to the current owners. Further, the defendants who would be affected by the revival provisions of the bill (museums, galleries, auctioneers, and dealers) are those who are sophisticated in the types of artifacts at issue, have access to methods of tracing artifact provenance, and could be seen as merely good faith purchasers rather than bona fide purchasers. "Bona fide purchaser" includes in its definition the taking of property without any knowledge of an adverse claim. In San Francisco Credit Clearing House v. C.B. Wells (1925) 196 Cal. 701, the court held that a person who purchases from one who has no right to sell cannot be considered a bona fide purchaser of goods. Pursuant to the rule of caveat emptor, the law imputes notice to the good faith purchaser; "he is conclusively presumed to have ascertained the true ownership of the property before purchasing it." (Id. at 706-707.) Many times, lost artifacts have a break in the chain of title. AB 2765 (Committee on Judiciary) Page 7 of ? For this reason, these museums, galleries, auctioneers, and dealers should be considered on notice that provenance to the artifact has not been thoroughly established and should expect an adverse claim by owners and their heirs staking claims originating during the missing time period. It is important to note that the provisions of this bill do not relate to the merits of the plaintiff's case; rather, this bill simply extends the deadline by which the plaintiff may file an action. The Legislature has numerous times before revived claims and made statute of limitations changes retroactive: AB 600 (Knox, Ch. 827, Stats. 1999, insurance claims of Holocaust victims); SB 1245 (Hayden, Ch. 216, Stats. 1999, World War II slave labor); SB 1899 (Burton, Ch. 1090, Stats. 2000, Northridge earthquake claimants); SB 1915 (Poochigian, Ch. 543, Stats. 2000, Armenian genocide victims); AB 1758 (Nakano, Ch. 332, Stats. 2002, Holocaust-era artwork); AB 2913 (Firebaugh, Ch. 1070, Stats. 2002, Bracero workers); SB 688 (Burton, Ch. 688, Stats. 2002, 9/11 victims); SB 1779 (Burton, Ch. 332, Stats. 2002, childhood sexual abuse); and SB 1678 (Dunn, Ch. 741, Stats. 2004, sexual abuse of minors). These are sympathetic cases whereby the importance of protecting the victims' rights supersedes the hardship of defending a potentially stale action by the defendants. Similarly, this bill would help to provide protection for victims that the Legislature has already intended to protect. AB 1758 removed the statute of limitations requirements for these actions and allowed plaintiffs to file their actions by December 31, 2010. (Code Civ. Proc. Sec. 354.3.) However, a subsequent Ninth Circuit appellate ruling in Von Saher v. Norton Simon Museum of Art at Pasadena, supra, 592 F. 3d 954 held that this statute was preempted by federal powers over foreign affairs under the Supremacy Clause. Victims who relied upon the provisions of Code of Civil Procedure Section 354.3 and failed to file their claim based on a different statute of limitations are now prejudiced in bringing their actions. This bill would provide the necessary remedy for these victims and other victims of historical art theft by allowing them to file their actions based upon the statute of limitations created by this bill. Since the revival provisions of this bill affect only actions for specific recovery under a statute of limitations, the issue of laches is inapplicable. To provide defendants with some amount of consistency in the law, the committee may wish to consider whether to amend the AB 2765 (Committee on Judiciary) Page 8 of ? bill to include a five-year cut off date for the revival of actions. The following amendment would accomplish this: Suggested amendment Page 4 line 13 after "prejudice," add "and must be commenced within five years of the effective date of this section," 5. Actual notice v. constructive notice This bill would declare an actual notice discovery rule for actions against a museum, gallery, auctioneer, or dealer for specific recovery of an article of historical, interpretive, scientific, cultural, or artistic significance. The statute of limitations would begin to run upon the discovery of the whereabouts of the article and the facts constituting the cause of action. The author cites the case in Naftger v. American Numismatic Society (1996) 42 Cal.App.4th 421, wherein the court held that an actual discovery rule applied to an action of a museum against an ex-employee for the return of stolen coins. The court reached this decision while pondering the application of the pre-1983 statute of limitations, which did not specify when the statute of limitations began to run - at the moment the coins were stolen or at the moment the museum realized the whereabouts of the coins. The court applied an actual discovery rule because the museum could not have known the exact whereabouts of the article until the defendant came forward with this information. This bill, though silent on this provision, applies a constructive discovery rule for actions brought against an individual, which conforms to more recent holdings regarding California's statute of limitations on stolen art work. (See Society of California Pioneers (1996) 43 Cal.App.4th 774; Orkin v. Taylor (2007) 487 F.3d 734; Von Saher v. Norton Simon Museum of Art at Pasadena (2008) 592 F.3d 954.) Concern has been raised that plaintiffs suing individuals for the recovery of stolen art work would not have the benefit of actual discovery, but would have to defend what they knew or should have known about the whereabouts and claim to ownership. The author argues that this discovery rule is adequate to protect plaintiffs since individual defendants are less sophisticated than museums, galleries, auctioneers, and dealers and have less ability to fully research the provenance of the article at issue. Additionally, this bill separates actions for taking, detaining, AB 2765 (Committee on Judiciary) Page 9 of ? or injuring any goods or chattel, including actions for specific recovery of personal property, into a separate section and does not provide any discovery rule for these actions. Carla Shapreau, Esq., a supporter of this bill with extensive expertise on claims for the recovery of historic artifacts, suggests amending the bill to provide a constructive discovery rule for these types of actions. Ms. Shapreau argues that failing to provide any discovery rule for these actions "arguably cuts back on the current protection theft victims now enjoy under Naftger v. The American Numismatic Society and appears to undermine advancements in California law as California courts have repeatedly adopted a discovery accrual rule as a fair means of limitations administration." (Citations omitted.) 6. Definition of "dealer" This bill would define "dealer" as a person principally engaged in selling "works of fine art or antiquities." Ms. Shapreau raised the concern that this definition was too limited and does not comport with the rest of the provisions of the bill. This bill would provide specific actions against dealers relating to articles of historical, interpretive, scientific, cultural, or artistic significance. Yet, articles of historic or scientific value would not be included within "works of fine art or antiquities." To address this concern, the author agreed to accept the following clarifying amendment: Suggested amendment : On page 3, line 37 after "art" delete "or antiquities" and insert ", antiquities, or articles of historical, interpretive, cultural, or artistic significance." 7. Application to property taken prior to 1982 This bill would clarify existing law that the statute of limitations for actions based on property taken by theft prior to 1982 would begin to accrue at the time of the discovery of the whereabouts of the article. The author states that one of the goals of this bill is to clarify the discovery rule that courts have wrestled with for many years. As decided in Naftger, the whereabouts of the property is the date that starts the running of the statute of limitations. AB 2765 (Committee on Judiciary) Page 10 of ? Support : Two Individuals Opposition : None Known HISTORY Source : Author Related Pending Legislation : None Known Prior Legislation : See Background; Comment 2. Prior Vote : Assembly Judiciary Committee (Ayes 10, Noes 0) Assembly Floor (Ayes 74, Noes 0) **************