BILL ANALYSIS                                                                                                                                                                                                    



                                                                           
           AB 2765
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 2765 (Judiciary Committee)
          As Amended August 18, 2010
          Majority vote 
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |74-0 |(May 6, 2010)   |SENATE: |34-0 |(August 25,    |
          |           |     |                |        |     |2010)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:    JUD.
           
           SUMMARY  :  Clarifies application of the "discovery rule" for  
          purposes of recovering works of fine art, as defined, and  
          extends to six years the statute of limitations for recovery of  
          works from a museum, gallery, auctioneer, or dealer.   
          Specifically,  this bill  :  

          1)Extends the statute of limitations for specific recovery of a  
            stolen work of fine art, including works taken by fraud or  
            duress, as defined, from three to six years after actual  
            discovery if the action for recovery is brought against a  
            museum, gallery, auctioneer, or dealer.  Specifies that this  
            extension of the statute of limitation will only apply to  
            works of fine art taken within 100 years prior to the  
            enactment of this statute. 

          2)Clarifies, in response to differing appellate court rulings  
            that the "discovery rule" for triggering the statute of  
            limitations for the recovery of fine art applies to property  
            taken by theft prior to 1983, when the discovery rule was  
            first codified, and further clarifies that "discovery" under  
            the discovery rule means "actual" rather than "constructive"  
            discovery. 

          3)Provides that "actual discovery" means that the claimant, or  
            his or her agent, has knowledge of the identity and  
            whereabouts of the work of fine art and sufficient information  
            to indicate that the claimant has a claim for a possessory  
            interest in the stolen work.  Specifies that "actual  
            discovery" does not include "constructive knowledge" imputed  
            by law. 

          4)Provides that the statute of limitation as set forth in this  








                                                                           
           AB 2765
                                                                  Page  2

            bill applies notwithstanding the state's "borrowing" statute  
            that permits application of another state's statute of  
            limitation under prescribed circumstances.

          5)Provides that the provisions of this bill shall apply to all  
            future and pending actions dismissed on statute of limitation  
            grounds if the judgment in that action is not yet final or if  
            the time for filing an appeal has not expired. 
           
           6)Provides that a defendant in an action to which the above  
            provisions apply may raise all equitable and legal defenses  
            and doctrines, including, without limitation, laches and  
            unclean hands. 

          7)Provides that the provisions of this bill will only apply to  
            actions commenced on or before December 31, 2017, effectively  
            creating a sunset as of that date. 

          8)States legislative findings and declarations on the state's  
            interest in determining rightful ownership of stolen art and  
            legislature's intent to clarify existing case law. Finds and  
            declares that museums and galleries have played, and continue  
            to play, an important role making collections available for  
            the benefit of the public and assisting rightful owners in  
            recovering works of stolen art. 

           The Senate amendments  : 

          1)Limit the application of bill to works of "fine art," as  
            defined, taken within 100 years prior to the date of the  
            enactment of this statute. 

          2)Clarify that the provisions of this bill will apply to future  
            actions and to pending actions that were dismissed on statute  
            of limitation grounds if the judgment is not final and time  
            for filing an appeal has not expired. 

          3)Provide that in action subject to these provisions, the  
            defendant may raise and all equitable and legal defenses and  
            doctrines, including laches and unclean hands. 

          4)Clarify the definition of "actual discovery" and specify that  
            actual discovery means knowledge of the identity and  
            whereabouts of the work of fine art and facts sufficient to  








                                                                           
           AB 2765
                                                                  Page  3

            indicate that the claimant has a possessory interest in the  
            work. 

          5)Provide that the provisions of this bill will only apply to  
            works of fine art taken within 100 years prior to enactment.

          6)Provide that the provisions of this bill will only apply to  
            actions commenced on or before December 31, 2017, effectively  
            creating a sunset as of that date. 

          7)Add legislative intent language relating to the public benefit  
            of museums and galleries and their voluntary efforts to assist  
            rightful owners in recovering works of stolen fine art. 
           
          AS PASSED BY THE ASSEMBLY  , this bill was substantially similar  
          to the version approved by the Senate, albeit it without the  
          sunset, the 100-year reach-back limitation, and the express  
          authorization of all legal and equitable defenses. 
           
          FISCAL EFFECT  :  None

           COMMENTS  :  This bill amends the statute of limitation (SOL) in  
          Code of Civil Procedure Section 338 (c) relating to the recovery  
          of stolen works of fine art.  Specifically, the measure will  
          primarily do four things:  1) clarify that the "discovery" rule  
          adopted in 1983 applies to works stolen before that date,  
          thereby clarifying disparate opinions of the California Courts  
          of Appeal on this point; 2) clarify that the discovery rule  
          adopted by the legislature was one of "actual" and not  
          "constructive" discovery; 3) extend to six years the SOL for  
          actions for specific recovery of a stolen work of fine art that  
          is brought against a museum, gallery, auctioneer, or dealer;  
          and, 4) provide that in an action subject to the six-year  
          statute of limitation, a defendant may raise all legal and  
          equitable defenses, including laches and unclean hands.  The  
          limitation periods established by this bill will only apply to  
          works of fine art that have been taken within the 100 years  
          prior to enactment.  The provisions of this bill would apply to  
          all pending and future actions commenced on or before December  
          31, 2017, including any actions dismissed because of a prior  
          statute of limitation, if the judgment in that action is not yet  
          final or if the time for filing an appeal has not yet expired.   
          The bill would apply to works of art stolen through simple  
          theft, as well as works taken by fraud or duress. 








                                                                           
           AB 2765
                                                                  Page  4


          At one level, this bill seeks to clarify competing  
          interpretations of California's statute of limitations for the  
          specific recovery of personal property.  At a deeper level,  
          however, it seeks to address a vexing problem faced by theft  
          victims who are attempting to recover works of fine art that may  
          have been stolen several years earlier, but where the victim  
          only learns the whereabouts of the work many years later.  It is  
          in the very nature of stolen art that it can circulate in the  
          private marketplace for many years before appearing in the  
          collections of a museum or gallery. By that time the SOL has  
          often long run its course.  Courts in California and elsewhere  
          have long recognized that, given the nature of stolen art, the  
          proper trigger for the SOL should be the discovery by the owner  
          of the whereabouts of the work, not the time of theft or even  
          the time of the first public display of the work subsequent to  
          the theft.  By extending the SOL to six years in such cases, and  
          clarifying that the SOL does not start running until the  
          claimant actually discovers the whereabouts of the work of art  
          and other fact indicating a possessory interest, this bill seeks  
          to create a more reasonable and equitable SOL that will permit  
          more cases to be decided on the merits. 

          However, most cases of art theft involve two innocent victims:   
          the original owner who was the victim of the theft, and the good  
          faith purchaser (including museums and galleries that perform an  
          important public benefit) who does know that the work was  
          stolen. In order to give an equitable degree of certainty to the  
          innocent purchaser, this bill expressly provides that in actions  
          subject to the six-year SOL the defendant-possessor of the work  
          of art may raise all equitable and legal defenses, including  
          laches.  Under the equitable doctrine of laches, a defendant can  
          retain possession by showing that the plaintiff unreasonably  
          delayed bringing an action for recovery and that this  
          unreasonable delay worked a detriment to the defendant.  This  
          express authorization is necessary because of existing case law  
          holding that "equitable" remedies like laches are generally not  
          available in "legal" actions like replevin, unless of course a  
          statute provides otherwise. 

          Finally, it should be stressed that this bill does not create a  
          new cause of action.  It merely modifies the statute of  
          limitation - as it applies to stolen works of fine art - for  
          already permissible actions to recover personal property that is  








                                                                           
           AB 2765
                                                                  Page  5

          wrongfully held by another.  Moreover, as the author stresses,  
          nothing in this bill speaks to the merits of a plaintiff's claim  
          to be the rightful owner of the work of art.  Rather, this bill  
          merely ensures that such claims will be decided on the merits,  
          after a full consideration of presented evidence, rather than  
          being dismissed on procedural grounds. 
          
          There is no known opposition to this bill, and it has received  
          no negative votes to this point.  The California Association of  
          Museums, and a number of individual museums, raised concerns  
          about the bill, which the author agreed to consider and discuss  
          with representatives of the museum community.  The most recent  
          amendments reflect the fruits of these discussions and have  
          apparently adequately addressed the concerns of the museum  
          community.
           

          Analysis Prepared by  :    Thomas Clark / JUD. / (916) 319-2334 


          FN:  
          0006357