BILL ANALYSIS
AB 2765
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2765 (Committee on Judiciary) - As Amended: April 22, 2010
SUBJECT : Statute of Limitation: Recovery of Stolen Works of Art
KEY ISSUES :
1)Should the statute of limitation for recovering stolen works
of ART BE amended in order to clarify the application of
California's "discovery" rule?
2)Should the statute of limitations for recovering stolen works
of art from a museum, gallery, dealer, or auctioneer be
extended from three to six years, in order to address the
practical difficulties of bringing such actions?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This non-controversial bill amends the statute of limitation
(SOL) relating to the recovery of stolen works of art or other
objects of historical or cultural significance in order to
clarify certain ambiguities noted in recent appellate court
opinions. Most notably, this bill will clarify two critical
points: first, that the "discovery" rule adopted by the
Legislature in 1983 applies to works stolen before 1983; second,
that the Legislature adopted an "actual" rather than
"constructive" discovery rule. In addition, this bill would
extend the SOL for actions brought against a museum, gallery,
dealer, or auctioneer to six years. The bill seeks to address a
problem faced by persons who are attempting to recover art and
other valuable objects that may have been stolen several years
ago, passed through the hands of one or more bona fide
purchasers, and are then subsequently displayed in 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 long since
expired. Even when applying the discovery rule, the imputation
of "constructive" discovery - which may be appropriate in other
contexts - does not lead to equitable results when works may be
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displayed anywhere in the world and traffickers engage in
purposeful concealment. This bill would amend the SOL for
recovery of stolen art so as to clarify competing case law and
ensure more equitable results when the SOL is applied to the
theft of works of artistic, historic, and cultural significance.
There is no known opposition to this bill. The issue was
brought to the attention of the Committee as a result of a
recent 9th Circuit Court opinion noting the inconsistencies in
the California appellate courts.
SUMMARY : Clarifies application of the "discovery rule" for
purposes of recovering works of historic, artistic, and cultural
significance and extends by three 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 article of historical, interpretive, scientific,
cultural, or artistic significance from three to six years if
the action for recovery is brought against a museum, gallery,
auctioneer, or dealer.
2)Clarifies, in response to differing appellate court rulings,
that the "discovery rule" for triggering the statute of
limitations for the recovery of articles of historical,
interpretive, scientific, cultural, or artistic significance
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)Defines "actual discovery" to mean that the party bringing the
action has express knowledge of the identity and the
whereabouts of the person or entity that possesses the article
of historical, interpretive, scientific, cultural, or artistic
significance, and specifies that actual discovery does not
include constructive knowledge imputed by law.
4)Specifies that the statute of limitation as set forth in this
bill applies notwithstanding the state's "borrowing" statute
that permits application of another state's statute of
limitation under prescribed circumstances.
5)Specifies that the provisions of this bill relating to actions
against a museum, gallery, auctioneer, or dealer shall apply
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to pending actions, as specified. Specifies that previously
dismissed actions may be revived without prejudice if the
action was dismissed on statute of limitation grounds but
would not have been dismissed if the provisions of this bill
had applied at the time of dismissal.
EXISTING LAW
1)Provides, generally, that an action for taking, detaining, or
injury any goods or chattels, including actions for the
specific recovery of personal property, must be commenced
within three years. (Code of Civil Procedure Section 338 (c)
(1).)
2)Provides that a cause of action for recovery in the case of
theft of any article of historical, interpretive, scientific,
or artistic significance is not deemed to have accrued until
the discovery of the whereabouts of the article by the
aggrieved party, his or her agent, or the law enforcement
agency that originally investigated the theft. (Code of Civil
Procedure Section 338 (c) (2).)
COMMENTS : This bill amends the statute of limitation (SOL) in
CCP Section 338 (c) relating to the recovery of stolen works of
art or other objects of historical, artistic, or cultural
significance. Specifically, it will primarily do three things:
(1) it will 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) it will clarify that the discovery rule adopted by
the legislature was one of "actual" and not "constructive"
discovery; (3) it will extend to six years the SOL for actions
for specific recovery brought against a museum, gallery,
auctioneer, or dealer.
Purpose: At one level, this bill seeks to clarify competing
interpretations of California's statute of limitations for the
specific recovery of personal property. As importantly, it
seeks to address a vexing problem faced by theft victims who are
attempting to recover art and other valuable works that may have
been stolen several years ago, 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 circulates underground for several
years before it appears in museums and galleries, and by that
time the SOL has long run its course. Courts in California and
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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.
Appellate courts in California, however, have divided on two
critical questions: (1) whether the "discovery" rule that was
adopted by the Legislature in 1982 applies to works stolen
before 1983 (when the statute became effective); and (2) whether
the "discovery" rule was intended to require "actual" or
"constructive" discovery. This bill would clarify these
questions for purposes of actions for brought to recover art, or
other works of historical or cultural significance, on display
in a museum or gallery. In short, this bill would adopt the
reasoning of courts that have interpreted California's discovery
rule to (1) apply to works stolen before 1983 and (2) require
"actual" discovery. In addition, this bill would extend the SOL
for recovering works from a gallery or museum from three to six
years.
Background: Adoption of the "Discovery Rule" in California .
Most stolen art cases involve a conflict between two innocent
parties: a victim of art theft and a good faith purchaser who
did not know that he or she was buying a stolen good. (The
thief of course is typically not identifiable or can be reached
by criminal actions.) However, in such situations, the law
generally favors the theft victim, because it is a basic
principle of property law the possessor of property cannot pass
better title than he or she has. A thief does not acquire legal
title to the stolen object. Therefore, when the thief sells the
object, even to an innocent purchaser who has done no wrong, the
thief cannot transfer title to the property. Accordingly the
good faith purchaser cannot transfer any title to a subsequent
purchaser, and so on down the line of the subsequent purchasers.
While this general rule favors the original owner over
subsequent good faith purchasers, the law nonetheless recognizes
the potential inequity to the good faith purchaser and requires
the original owner to bring any action for recovery in a
reasonable period of time prescribed by a SOL. However,
especially in cases of stolen art, the theft victim may not
learn of the whereabouts of the work until long after the SOL
has expired. In this case, a strict adherence to the SOL seems
unfair to the theft victim. In an effort to balance the
competing equities, most states - either by statute or case law,
or some combination thereof - have adopted a "discovery" rule.
That is, the SOL does not begin to run until the theft victim
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discovers the whereabouts of the work and identifies its present
possessor.
California, like many other states, adopted an express discovery
rule in 1983, largely in response to the important ruling of
O'Keeffe v. Snyder (1980) 416 A.2d 862, decided by the New
Jersey Supreme Court. In that case, the artist Georgia O'Keeffe
first brought an action in replevin in 1976 to recover to three
of her paintings that had been stolen from a gallery in 1946.
By the time that O'Keeffe discovered the whereabouts of the
paintings, they were in the hands of the defendant Snyder, who
by all accounts was a bona fide purchaser who did not know that
the paintings were stolen. The trial court dismissed O'Keeffe's
complaint, claiming that New Jersey's six-year SOL had expired.
An intermediate appellate court then ruled in O'Keeffe's favor,
but it limited its ruling to the defendant's related "adverse
possession" claim. The New Jersey Supreme Court, however,
returned to the question of the proper trigger for the SOL. The
Court overruled the trial court's finding that the SOL expired
six years after the theft of the paintings, and instead
concluded that "O'Keeffe's cause of action accrued when she
first knew, or reasonably should have known through the exercise
of due diligence, of the cause of action, including the identity
of the possessor of the paintings." (416 A.2d at 870; emphasis
added.) The Court concluded that the SOL did not begin to run
at the time of theft or even when the paintings were first
publicly displayed. Rather, the SOL only began to run when
O'Keeffe knew the identity of the present possessor. A cause of
action in replevin - or for any recovery of personal property -
cannot possibly begin until the party bringing the action can
identify a possessor against whom to bring it.
In the wake of the O'Keeffe ruling a number of states, including
California, amended their replevin or other recovery statutes to
create an express discovery rule when it came to the efforts to
recover stolen works of art. The California legislature passed
its bill in 1982, and the statute became effective in 1983.
Prior to 1983, Code of Civil Procedure Section 338(c) created a
three year SOL for an action to recover personal property that
had been wrongfully taken or detained. The original statute was
silent as to whether the SOL would begin to run at the wrongful
taking or at discovery, and it did not distinguish works of art
from any other form of personal property. The 1983, however,
created a special category for a work of "art or artifact" and
expressly provided that an action for specific recovery did not
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accrue until "discovery of the whereabouts" of the "art or
artifact." (In 1989, the phrase "art or artifact" was changed
to read "article of historical, interpretive, scientific, or
artistic significance.")
Relevant Case Law And the Application of California's Discovery
Rule. One of the first cases to directly consider the scope of
the 1983 amendment was Naftzger v. American Numismatic Society
(1996) 42 Cal. App. 4th (Second Appellate District of CA).
Naftzger involved a museum's effort to recover coins that had
been stolen from the museum around 1970, though the museum did
not discover the whereabouts of the coins and their present
possessor (a bona fide purchaser who apparently had no knowledge
of the theft) until 1993. The museum attempted to recover under
the 1983 statute but the trial court dismissed the action on SOL
grounds, arguing that the "discovery" rule adopted in 1983 did
not apply to works stolen prior to that date, since the SOL
would have long since expired before the statute was adopted.
The Court of Appeal overturned the trial court and held that the
discovery rule applied to works stolen before 1983 because the
older statute contained an implicit discovery rule. The Court
reasonably assumed that when the Legislature enacted the
discovery rule in 1983 it was not creating a "new" discovery
rule; rather, similar to the reasoning in O'Keeffe, the Court
reasoned that there must have been an implicit discovery rule in
the older statute, since one cannot possibly bring an action in
specific recovery unless one can identify the whereabouts of the
object and identify its possessor. The Legislature, it would
seem, was simply making the implicit rule express in order to
avoid confusion.
About six weeks after the Naftzger ruling, the Third Appellate
District Court of Appeal issued a contrary ruling in Society of
California Pioneers v. Baker (1996) 43 Cal. App. 774. In a case
involving the theft of an engraved cane handle from a history
museum, the Third District appellate court held that the 1983
statute would not apply if the older SOL had already expired by
1983. Thus, for Society of California Pioneers, it appears that
the operative date would not be 1983 but 1980. A work stolen or
converted in 1980 would be subject to the 1983 amendment because
the old SOL had not yet expired, whereas a work stolen and
converted in 1979 might not be subject to the 1983 discovery
rule because the SOL would have expired. Nonetheless, the Third
District expressly rejected the Naftzger holding that the 1983
discovery rule applies to both pre-1983 thefts, even pre-1980
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thefts where the SOL would have expired.
No subsequent California case has reconciled the contrary
holdings of Naftzger and Society of California of Pioneers.
However, a recent opinion by the United States Ninth Circuit
Court of Appeal highlighted the conflicting views in California.
(Marie von Saher v. Norton Simon Museum (2009) 578 F.3d 1016.)
The von Saher decision did not deal directly with the discovery
provision in the statute that would be amended by this bill.
Instead, von Saher was brought under Civil Code of Procedure
354.3, a 2002 statute that purported to extend the SOL for art
stolen by Nazis during World War II. The Ninth Circuit struck
down Section 354.3 on the grounds that, by singling out art
stolen by a foreign regime, the statute was preempted under the
"foreign policy field preemption" doctrine. Although this
proposed bill does not raise this issue, since it would apply to
any stolen works, the Court noted in dictum that von Saher's
action could have been brought under general recovery statute
that is the subject of this bill. However, in doing so, the
Ninth Circuit also noted the uncertain state of this statute and
the conflicting California opinions in Naftzger and Society of
California Pioneers. Taking its cue from this decision, this
bill will attempt to reconcile those competing appellate court
rulings by effectively adopting the Naftzger rule and making it
absolutely clear that the discovery rule applies to works stolen
before 1983. Indeed, almost by definition of discovery rule
does not look to the date of the theft or conversion as the
relevant trigger.
"Actual" or "Constructive" Discovery? Another issue raised in
Naftzger was not only when the discovery rule should be applied
but whether the Legislature adopted an "actual" or a
"constructive" discovery rule. Under an "actual" discovery
rule, the SOL does not start running until the plaintiff
discovers the whereabouts of the stolen object and the identity
of its present possessor. Thus, the operative trigger is the
plaintiff's actual knowledge of the facts necessary to bring an
action for specific recovery. "Constructive" discovery - like
"constructive knowledge" in other areas of law - is imputed as a
matter of law if the person through reasonable diligence could
have discovered the relevant facts. For recovery of most kinds
of personal property, the appropriate standard is often
"constructive" discovery. This reflects a traditional view that
a person who has a right to bring a cause of action should not
sit on that right. In order to bring some peace of mind to a
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bona fide purchaser who wants to quiet title, the court may
impute "constructive" knowledge, and hence constructive
discovery, as a matter of law. Such imputations are especially
common in adverse possession cases, where the rightful owner not
only has an obligation to bring an appropriate action in a
timely manner, but also has an obligation to take note of
whether others are openly acting as the lawful owners of the
property. However several leading cases, in California and
elsewhere, have concluded that stolen art is not like other
kinds of property, especially given that such thefts are often
accompanied by deliberate efforts to conceal the work and its
provenance. (See e.g. Solomon Guggenheim Foundation v. Lubell
(1990) 550 N.Y.S. 2d 618; Natfzger, supra at 432-434.)
Extending the SOL to Six Years For Actions Against Museums and
Galleries. Finally, in addition to reconciling differing court
opinions on the application and meaning of California's
discovery rule, this bill would also extend the SOL for the
limited purpose of bringing a cause of action for stolen works
that are in the possession of a museum, gallery, dealer, or
auctioneer. The existing three year SOL was adopted for the
recovery of personal property that had been wrongfully taken or
converted more generally. But as noted above in the discussion
of actual discovery, stolen art and other objects of historical
and cultural significance entail more complex legal problems
that justify a longer period of time. According to attorneys
who litigate stolen art cases (see below), the three-year period
is often too short to take "into account the difficulties that
claimants continue to experience in discovering the underlying
facts and finding counsel to litigate their cases." (Attorneys
are sometimes reluctant to take such difficult cases, especially
when the action is only for recovery for the object and not for
any monetary damages.) Moreover, six years seems more or less
consistent with other states, which range from a minimum of
three years (including California) to a maximum of ten years.
New York does not rely on any prescribed period and instead
adopts a "demand and refusal" rule: that is, the statute of
limitation is not triggered until the plaintiff demands that the
defendant return the work and the defendant refuses. Some
scholars have suggested that a SOL for stolen art should be
eliminated altogether. (Steven Bibas, "The Case Against
Statutes of Limitations for Stolen Art," 103 Yale L. J. (1994).
This bill does not go that far, and it only extends the statute
to six years for works held by museums, galleries, and
professional dealers. The rationale for not extending the SOL
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as to non-professional buyers reflects the fact that museums,
galleries, and dealers are sophisticated purchasers who deal in
a large volume of works and are typically insured. However, the
individual good-faith purchaser who makes a one-time purchase
would justifiably enjoy quiet title after the existing and
shorter period of three years.
ARGUMENT IN SUPPORT : E. Randol Schoenberg, an attorney and
leading expert in cases concerning stolen art works, writes that
"AB 2765 is a much-needed resolution of several long-standing
splits and disagreements in the law concerning stolen art
works." According to Schoenberg, "one of the principal
difficulties with stolen art cases is the great lack of clarity
in the procedural law. Often this leads to years of difficult
preliminary litigation, as the parties and the courts attempt to
determine what the law should be. Ambiguities in the procedural
law frequently lead the parties to abandon or settle their
otherwise valid claims for recovery of stolen artwork." In
addition to resolving the issue of whether California's
discovery rule applies to thefts occurring before 1983,
Schoenberg believes that this bill will clarify "that
'discovery' means 'actual,' not 'constructive' discovery."
Finally, Schoenberg notes that lengthening the statute of
limitations from three to six years for brining actions against
a museum or gallery "take[s] into account the difficulties that
claimants continue to experience in discovering the underlying
facts and finding counsel to litigate their cases. In this
bill, the Legislature reaffirms its commitment to the rule that
a thief cannot convey good title, and that stolen art should be
returned to its original, rightful owner."
REGISTERED SUPPORT / OPPOSITION :
Support
E. Randol Schoenberg, Esq.
Opposition
None on file
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334
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