To Save a Life: Sales Made in Extreme Political SituationsPosted on Aug 13, 2019
Earlier this month, Judge Loretta Preska of the Southern District of New York dismissed the case of Zuckerman v. Metropolitan Museum of Art. Laurel Zuckerman, the great-grandniece of Paul Leffman, brought the case, seeking the return by the Metropolitan Museum of Art of a Pablo Picasso masterpiece, “The Actor.” Zuckerman alleged that her great-granduncle, a German Jewish businessman, was forced to sell the painting at an unreasonably low amount to fund an escape from Nazi-ruled Germany and fascist-controlled Italy. Leffman sold “The Actor”, a painting from Picasso’s Rose Period, for $12,000 to allow the family to escape to Switzerland after fleeing Hitler’s Germany to Mussolini’s Italy. Zuckerman claimed that the painting was therefore sold under duress, and sought the painting’s return to her family, 100 million dollars in damages to compensate for the loss of painting, and a declaratory judgement stating that the Leffman estate is the sole owner of the painting.
The court looked at both Italian and New York state duress law in making its decision. It found that the law of both places requires a party alleging duress to show that “a specific and concrete threat of harm…induced the victim to enter into a contract that would not otherwise have been concluded.” The court further held that “a general state of fear arising from political circumstances is not enough to prove duress.” Regarding Zuckerman’s claim, Judge Preska wrote that the sale “occurred between private individuals, not at the command of the Fascist or Nazi governments,” and not because of a “wrongful threat” by the buyers that took away Leffmann’s free will. She continued that although the Leffmans felt pressure because of the “undeniably horrific circumstances of the Nazi and Fascist regimes,” because that pressure was not caused by the counterparty to the transaction – in this case the art dealers who purchased “The Actor” – the circumstances were insufficient to prove the transaction was conducted under duress. The Met issued a statement as well, saying it seriously considers all Nazi-era claims, and, while it acknowledged Leffman’s previous ownership, it did not believe the painting had been misappropriated, and thus title to the painting rightfully belonged to the museum.
The facts of the Zuckerman case bear a striking resemblance to the case of Batsakis v. Demotsis. In that case, the plaintiff was suing under a contract that provided that the defendant owed him $2000 plus interest for the $2000 of U.S. currency he had given her years earlier in war-torn Greece. At the time of the case they had improbably met again in Bexar County Texas, and the plaintiff wanted the $2000 that the contract stated he was owed. The wrinkle was that, according to what had actually transpired, the plaintiff hadn’t given the defendant any amount of U.S. currency, and certainly not $2000. What he had given her was an amount of Greek drachma equal to approximately 25 U.S. dollars based upon the formal exchange rate.Because of the situation in war-torn Greece at the time, and the fact that the money would allow the defendant to escape and survive, she had been induced to sign a contract stating that what she had actually received was 2000 U.S. dollars that she would repay the plaintiff. The defendant claimed that the background circumstances rendered the contract invalid. The court, however, sided with the plaintiff and ordered the defendant to pay back the full amount in U.S. dollars that was stipulated in the contract. The case itself was decided under the principle that inadequate consideration does not void a contract (as lack of consideration would), but has implications for similar cases brought under claims of duress.
Although both case were decided according to the laws of their respective states (with Zuckerman including a discussion of Italian duress law for choice-of-law purposes), a somewhat more broad definition of duress is set forth in the Restatement Second of Contracts. According the §175, duress makes a contract voidable when either 1) a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, or 2) if a party’s manifestation of assent is induced by one who is not a party to the transaction (unless the other party doesn’t know of the duress and relies materially on the transaction). There seems to be room within this definition to include politically extreme situations in which a party is induced to assent to a transaction because of a threat to their life by the government, i.e. an outside party. And this is particularly so if the other party to the transaction knows the extremity of the first party’s situation and exploits this knowledge to procure facially unfair deal. Why should someone taking advantage of a difficult political situation be exempt from a duress defense?
And yet I believe both the Court of Civil Appeals of Texas and the Court for the Southern District of New York have it right. Their decision might not be good for past, or ex post, victims of political difficulty, but it is best for future, or ex ante, victims. If the duress defense could void unfair contracts made in extreme political situations, victims in those situations would never have received the money they needed to fund their escapes – and save their lives. One might ask what the odds are that transactors in that situation would be versed in American contract law, but if they were, or if they consulted a lawyer, there are certainly other things they could do with the money if they learned their contracts would be voided due to the difficult political climate in which they were transacting (this may still remain an issue for immigrants who sacrifice today in order to come to America from difficult political climates). Paintings or money stolen during the Nazi regime are different than paintings sold, willingly, at an unfair price in order to save a life. Ms. Zuckerman intends to appeal, and, although I’m sympathetic to her family’s loss of this valuable painting, I am glad that contract law allowed them to make the binding sale that saved their lives. Not everyone was so lucky.
 Batsakis v. Demotsis, 226 S.W.2d 673, 673, 1949 Tex. App. LEXIS 1910, *1 (Tex. Civ. App. 1949).