SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK: PART 70

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DECISION

 

IN RE APPLICATION TO QUASH GRAND :

JURY SUBPOENA DUCES TECUM :

SERVED ON THE MUSEUM OF MODERN ART :

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DRAGER, J.:

The Museum of Modern Art (the "Museum") moves to quash a Grand Jury subpoena issued by the New York County District Attorney (the "People") for two paintings by the Austrian artist Egon Schiele, "Portrait of Wally" and "Dead City III" (the "Paintings").

The court must decide if the Paintings are exempt from Grand Jury process under section 12.03 of the New York Arts and Cultural Affairs Law (the "ACAL"). Even if the New York law applies, the court must then decide if the federal statute, the Immunity From Seizure Act, 22 U.S.C. § 2459 (the "IFSA"), preempts the state law with respect to works of art on loan from foreign countries.

The Paintings were among 150 works of art displayed at the Museum in an exhibition entitled "Egon Schiele: The Leopold Collection, Vienna." The collection was on loan from the Leopold Museum of Austria. The exhibition had been on a worldwide tour for three years. The collection was displayed in England, Germany, Switzerland, and Japan before coming to New York. After the Museum’s show, the collection was scheduled for exhibition in Spain.

The Museum exhibited the collection for three months, from October 8, 1997 until January 4,1998. Lowry Aff. • 6.

On December 31, 1997, the Museum received letters from persons who claimed the Paintings were stolen or otherwise misappropriated from their rightful owners during the Nazi annexation of Austria (1938-1945). Lowry Aff., • 11.

Henry Bondi wrote that his aunt, Lea Bondi, owned "Portrait of Wally" when Nazi collaborators or their agents took the painting from her apartment without her consent. The letter went on to say that Lea Bondi died in 1969, "having three years earlier attempted to regain this painting. At no time had she or the Bondi family ever consented to any sale or transfer of the painting. Accordingly, the heirs of Lea Bondi are the true and lawful owners of the painting." The Museum was asked to provide instructions as to what proof of inheritance and lawful ownership it required. In the meantime, Mr. Bondi requested that the Museum "not return the painting to the jurisdiction of the ‘lenders’ until the matter of true ownership has been clarified." Lowry Aff., Ex.C; Ringer Aff., Ex.1.

Rita Reif and Kathleen Reif, writing on behalf of the heirs of Fritz Grunbaum, stated that the painting "Dead City III" was taken from Mr. Grunbaum’s collection without his consent by Nazi agents or collaborators after his arrest in Austria. He subsequently died in the Dachauconcentration camp. "At no time have the surviving heirs of Mr. Grunbaum ever consented to any sale or transfer of the painting. Accordingly, the heirs of Mr. Grunbaum are the true and lawful owners of the painting." The claimants went on to "demand" that the Museum turn over the painting to the Grunbaum heirs and that the Museum "take no steps to move the painting to another jurisdiction, or to transfer title to or possession of the painting to anyone other than the heirs." Lowry Aff., Ex. D; Ringer Aff., Ex.2. Rita Reif and Kathleen Reif were married to men whose father was a cousin of Fritz Grunbaum. Lowry Aff. • 11.

According to a press report, the Paintings were acquired by Dr. Rudolf Leopold, an ophthalmologist and avid art collector, who amassed a large number of Schiele paintings. While appreciated by some art lovers for his recognition of the importance of Austrian Expressionists painters, he has also been criticized for his aggressive acquisition tactics. He purchased the Paintings sometime in the 1950s and 1960s. The press report suggests that at some point Lea Bondi sought Dr. Leopold’s help to recover "Portrait of Wally." Instead, he purchased it for himself. Lowry Aff., Ex. B. In any event, Dr. Leopold apparently purchased both Paintings after several intervening buyers following the war. M. Dabrowski & R. Leopold, Egon Schiele, TheLeopold Collection, Vienna, Catalogue 144, 195 ( 1997). In 1994, Dr. Leopold sold his art collection, including his Schiele collection of 250 works, to the Leopold Foundation of Vienna, Austria for $175 million. The Leopold Foundation, which is financed by the Austriangovernment, is building a museum to house the collection. Lowry Aff., Ex. B.

The Museum states that it had no knowledge of the existence of any claims with respect to the Paintings. Lowry Aff., • 7. Over the course of the last few decades, the two Paintings have been exhibited and published around the world. One of the Paintings, "Dead City III," had previously been exhibited in New York at the Guggenheim Museum. Apparently, at no time had Lea Bondi or her heirs or the heirs of Fritz Grunbaum ever filed a claim in any court for the return of either Painting. Lowry Aff., • 8.

On January 3, 1998, the Museum advised the claimants by letter that it was not in a position to pass on the "factual or legal foundation" of their claims. The claimants were told that the exhibition would close on January 4, 1998 and the Paintings would be shipped out of the country on January 8, 1998 or shortly thereafter, affording the claimants "ample time to take such action as you deem appropriate to protects your interests." Lowry Aff., Ex. F; Ringer Aff., Ex.3. On January 7, 1998, the Museum was served with the Grand Jury subpoena duces tecum at issue here. Lowry Aff., Ex. A; Ringer Aff., Ex. 4.

The success of New York’s museums in presenting first class exhibitions on a consistent basis is dependent, in part, on their ability to provide assurances to art lenders that their works will be safely returned. "Absent this protection, no lender could be secure that its treasures would return." Lowry Aff., • 21.

To satisfy this concern, for the past thirty years New York cultural institutions have relied on a state law which exempts from seizure any art lent to a cultural institution by anonresident exhibitor. (ACAL § 12.03). The Museum believed this law to be absolute and all encompassing. In contrast, the People believe that the protection of this law is limited to seizures in civil actions and does not extend to criminal investigations.

A federal law ( IFSA, 22 U.S.C. § 2459) provides similar protection, but with significant differences. The federal law extends only to works on loan from abroad. The vast majority of art borrowed by United States museums comes from lenders within the country. Lowry Aff., • 24. If the New York statute does not provide protection from criminal as well as civil proceedings, the Museum fears that the ability of New York cultural institutions to borrow art from within the country as well as from abroad will be seriously compromised. The People counter that no other state has a law comparable to ACAL § 12.03 and yet other states are not hampered in exhibiting borrowed art. Moreover, lenders will continue to want their art exhibited at internationally renowned institutions such as the Museum since such recognition enhances the value of the art. Ringer Aff., Ex. 12, Soltes Affidavit, •• 7-8.

Equally significant, the federal statute requires an application with the United States Information Agency, which must determine that the art is of "cultural significance" and that the exhibition is in the "national interest." Only after this determination is made, and the decision is published in the Federal Register, is the art safe from both civil and criminal process. Lowry Aff., • 25.

New York museums often eliminate the "time-consuming process" required in applying for protection under the federal statute, relying instead on what they believed to be the automatic protection from any kind of seizure afforded by the New York law. Lowry Aff., • 25. The Museum rarely applies for protection under the federal act, having done so in only four of itseighty-nine exhibitions in the past three years. Lowry Aff., • 26. In those four instances, the Museum sought protection under the federal law at the request of the lenders. In each case, protection under the federal law was granted. Lowry Supp. Aff., •3. The Museum did not seek protection under the federal law for the Schiele exhibition.

I

The Museum argues that the Paintings are exempt from Grand Jury process pursuant to the New York Exemption from Seizure Law, ACAL § 12.03.

That statute, which has never been the subject of court scrutiny, provides:

No process of attachment, execution, sequestration, replevin, distress or any kind of seizure shall be served or levied upon any work of fine art while the same is en route to or from, or while on exhibition or deposited by a nonresident exhibitor at any exhibition held under the auspices or supervision of any museum, college, university or other nonprofit art gallery, institution or organization within any city or county of this state for any cultural, educational, charitable or other purpose not conducted for profit to the exhibitor, nor shall such work of fine art be subject to attachment, seizure, levy or sale, for any cause whatever in the hands of the authorities of such exhibition or otherwise.

The Museum contends that the purpose of the statute is to encourage the free flow of art from around the world and within the United States for exhibition in New York, thereby enhancing the state’s position as an international cultural center. The statute provides unqualified protection from court process to art on loan from outside the state to New York cultural institutions. The statute’s prohibition against "any kind of seizure" encompasses Grand Jury subpoenas.

The People counter that the Grand Jury has been given broad powers to investigate crime. Nothing within the text of ACAL §12.03 indicates that the Legislature intended to restrict the Grand Jury power to issue subpoenas for art work covered by its provisions. Rather, the Peopleargue, the plain import of the statutory language, along with its legislative history, reveals the act was intended to apply solely to civil remedies.

The governing rule of statutory construction is that "courts are obliged to interpret a statute to effectuate the intent of the legislature, and when the statutory ‘language is clear and unambiguous, it should be construed so as to give effect to the plain meaning of [the] words’ used." People v. Finnegan, 85 N.Y.2d 53, 58 (1995) (citations omitted). The clear import of the term "any kind of seizure" leaves no doubt that the Legislature intended to prohibit any court process that would interfere with art work on loan from out of state.

A "seizure" occurs "when there is some meaningful interference with an individual’s possessory interests in . . . property." U.S. v. Jacobson, 466 U.S. 109, 113 (1984); Soldal v. Cook County, Illinois, 506 U.S. 56, 61 (1992). Similarly, in common usage, seizure is defined as "the act of taking possession of person or property by virtue of a warrant or legal authority." Webster’s New International Dictionary 2057 (3d ed., 1993). "The word ‘any’ means ‘all’ or ‘every’ and imports no limitation." Zion v. Kurtz, 50 N.Y.2d 92, 103-04 (1980). The statutorylanguage is plain and unqualified.

The fact that a Grand Jury subpoena is not considered a seizure for constitutional purposes, as the People contend, is of no import. See, United States v. Dionisio, 410 U.S. 1, 9 (1973); Matter of Grand Jury Subpoenas, 72 N.Y.2d 307, 315-16 (1988); Matter of Hynes v. Moskowitz, 44 N.Y.2d 383, 395 (1978). Although a Grand Jury subpoena may not be subject to the requirements of the Fourth Amendment necessitating a probable cause showing before items can be seized, it still results in a seizure in the ordinary sense of the word. Because ACAL §12.03 precludes "any kind of seizure," its protection is not limited to seizures protected under the Constitution.

The Grand Jury has the right to "possess and retain" subpoenaed evidence. In the absence of a court ruling limiting the issuer’s right to retain the evidence, "the prosecutor may lawfully exercise dominion and control over the evidence." Matter of Brunswick Hospital Center, Inc. v. Hynes, 52 N.Y.2d 333, 338 (1981); CPL § 610.25. The issuance of the Grand Jury subpoena for the Paintings resulted in an immediate "meaningful interference" with the lender’s "possessory interest" in the Paintings. The Paintings were scheduled to leave New York in January, 1998 to continue on tour in Spain and, ultimately, to return to Austria. Instead, they remain in New York. Thus, the subpoena effected a seizure of the Paintings.

The People further argue that a tenet of statutory construction, ejusdem generis, limits the phrase "any kind of seizure" to civil remedies. This rule "requires the court to limit general language of a statute by specific phrases which have preceded the general language." N.Y. Statutes Law § 239(b). Because all of the exemptions preceding the words "any kind of seizure" pertain to civil remedies, the People contend that this general phrase is necessarily limited to anyother civil remedy not specifically listed.

This rule of construction is intended "to save the legislature from spelling out in advance every contingency in which the statute could apply." People v. Ilardo, 48 N.Y.2d 408, 416 (1979). The rule typically applies when the final phrase of the particularized listing includes the word "other," suggesting a continuation of the same type of situation just enumerated. See, e.g., People v. Shapiro, 50 N.Y.2d 747, 764 (1980); Manhattan Pizza Hut, Inc. v. N.Y. St. Human Rts. App. Bd., 51 N.Y.2d 506, 512 (1980).

However, when the final phrase is simply another term intended to cover a different situation, ejusdem generis does not apply. See, People v. Cooperage Co., Inc., 72 N.Y.2d 579, 584 (1988). The absence of the word "other" or similar term "tends to show an independence of the various terms." N.Y. Statutes Law § 239(b) (McKinney’s Commentary 1992). Even the use of the term "any other" suggests "a broader application than if simply the word ‘other’ had been employed." Id. The statutory phrase here is "any kind of seizure," not "other seizure" or even "any other kind of seizure." The phrase is broad, unlimited and unambiguous. See, Garcia v. United States, 469 U.S. 70, 74-5 (1984).

Moreover, ejusdem generis does not apply "where it contradicts the evident intent of the Legislature." N.Y. Statute Law §239(b). Rules of statutory construction will not be used to defeat the clear intent of the Legislature or "create an intolerable loophole in a statutory

scheme" People v. Cooperage Co., Inc., supra, 72 N.Y.2d at 584. Seealso, People v. First Meridian Planning Corp., 86 N.Y.2d 608, 619 (1995).

A review of the statutory history confirms that the Legislature intended the act to provide the broadest possible protection for out of state art work on loan to New York cultural

institutions. In his Memorandum approving the bill, Governor Nelson Rockefeller stated:

Many of the most important events of the artistic year through the State consist of special shows devoted to a special theme, period, or the works of one or a group of artists. These exhibitions. . . rely in most instances on loans of works of art for their success. The promotion and continuation of these events is necessary to maintain New York’s status as the art center of the Nation and is beneficial to the general cultural atmosphere of the State.

Works of art lent by non-resident exhibitors are currently subject to seizure by legal process in the State

The bill, by exempting such works of art from legal process where their presence in the State of New York is solely by the generosity of the exhibitor and not for any commercial purpose, will go far to allay the fears of potential exhibitors and enable the State of New York to maintain its pre-eminent position in the arts.

Governor Rockefeller’s Mem Of Approval, June 22, 1968, Governor’s Bill Jacket to L. 1968, ch. 1065 at 29.

As reflected in the legislative history, the impetus for the bill was a civil law suit. A non-resident artist lent a substantial portion of his own collection to a New York State museum for exhibition. The work was seized under an order of attachment in a lawsuit brought by an art gallery. Governor Rockefeller’s Mem Of Approval, supra; Mem For the Governor From Attorney General Lefkowitz, May 20, 1968, Governor’s Bill Jacket, supra, at 3. Undoubtedly, the focus of the legislators in enacting the statute was to address the consequences of civil remedies executed against art on loan. However, the statutory history reveals that the intent of the Legislature was to provide the covered art even broader protection than from just civil remedies.

The effect of the proposed statute on stolen art work was brought directly before theLegislature. The Committee on State Legislation of the Association of the Bar of the City of New York (the "Bar Association"), in disapproving the bill, expressed concern that the statute would prevent a rightful owner from recovering stolen art. "[ I]f the plaintiff, including a resident of this State, alleges that a work on exhibit has been stolen from him or unlawfully retained by a bailee, he may nonetheless not replevy the property if the criteria of the bill are met." Mem No.122, The Association of the Bar of the City of New York, June 17, 1968, Governor’s Bill Jacket, supra, at 16 (emphasis added). The Bar Association proposed that, at the very least, an exception be made for judgment-creditors.

In rejecting this proposed modification, Attorney General Louis Lefkowitz, the bill’s sponsor, wrote, "To puncture the exemption sought by this bill with a single major loophole

. . . thus forcing ‘potential-lenders-in-good-faith’ to seek legal advice before lending their works to museums of this State, would be self-defeating, since non-resident artists and patrons of the arts can exercise their free alternative to stay out of trouble by keeping their possessions safely at home." Supplemental Mem For the Governor From Attorney General Lefkowitz, June 14, 1968, Governor’s Bill Jacket, supra, at 9.

The Attorney General, the highest law enforcement officer of the state, is presumed to have recognized the potential consequences of the statute in criminal investigations. In any event, the direct references by the Bar Association and the Attorney General to the effect of the statute on stolen art, albeit in the context of a civil action, removes any doubt that the enactmentwas intended to provide coverage for all seizures, whether in the context of a civil action or criminal investigation.

In further support of the legislative intent is the fact that the statute was initially included within the General Business Law, a substantive series of enactments replete with criminal penalties often prosecuted by the Attorney General’s office. Seegenerally, N.Y. Gen. Bus. Law, Articles 1-40. The Bar Association’s recommendation that the statute be placed within the Civil Practice Law and Rules (the CPLR) where civil remedies are typically found, was specifically rejected.

"‘In construing statutory provisions, the spirit and purpose of the statute and the objectives sought to be accomplished by the legislature must be borne in mind.’" Matter of Hogan v. Culkin, 18 N.Y.2d 330, 335 (1966) (citations omitted); Albright v. Metz, 88 N.Y.2d 656, 664 (1996); Long v. Adirondack Pak Agency, 76 N.Y.2d 416, 422 (1990); Sutka v. Connors, 73 N.Y.2d 395, 403 (1989); N.Y. Statutes § 96. The Legislature determined, in balancing policy considerations, that it was in the state’s interest to protect cultural institutions and their ability to encourage the exchange of art for the benefit of the entire populace over the needs of a few individuals to recover their art, even if the art was stolen.

The primary policy concern of this bill is not with the lenders, but with the museums and other cultural institutions of this State which are completely andthoroughly dependent upon the free flow of works of art into the State for the purpose of conducting exhibitions of major public interest. The exemption conferred by this bill upon the lenders of works of art is a small favor for the risks involved in crating, shipping and exposing these works, often of fragile construction, to large New York audiences. Considering the alternatives open to potential lenders – to keep their works at home – it would seem that the State of New York is in no morally tenable position to bargain and equivocate over the scope of this bill if the cultural welfare of the People and their cultural institutions is of any real significance to its lawmakers and if this bill serves that welfare. (Original emphasis.)

Supplemental Mem of Attorney General Lefkowitz, Governor’s Bill Jacket, supra, at 10.

The People argue that it could not have been the intent of the Legislature to extend the reach of the statute to prohibit the issuance of a Grand Jury subpoena. The Grand Jury serves a vital function in the criminal justice system and has been invested with broad investigatory powers. See, Matter of Grand Jury Subpoena, 58 A.D.2d 1, 3-4 (1st Dep’t. 1977); People v. Doe, 84 A.D.2d 182, 193, 196 (2d Dep’t. 1981). Seealso, Branzburg v. Hayes, 408 U.S. 665, 686-88 (1972). It may conduct investigations based on any kind of reliable source, including even rumor or suspicion. See, People ex rel. Travis v. Knott, 204 A.D. 379, 383 (1st Dep’t. 1923); People v. Doe, supra, 84 A.D.2d at 196; Matter of Grand Jury Subpoena, supra, 58 A.D.2d at 3.

To serve these ends, the Grand Jury is accorded the power of compulsory process for both testimonial and physical evidence. CPL §§ 190.50(3); 610.10; 610.20(2). It has generally been held not to be in the public interest to place restrictions on the Grand Jury process. See, Virag v. Hynes, 54 N.Y.2d 437 (1981). "Traditionally, our courts have afforded the Grand Jury the widest possible latitude in the exercise of these powers and insisted that in the absence of a clear constitutional or legislative expression they may not be curtailed." Matter of Grand Jury, 58 A.D.2d at 4; People v. Doe, 84 A.D. 2d at 192, citing, People v. Stern, 3 N.Y. 2d 658, 661(1958). Because ACAL §12.03 does not, on its face, restrict the power of the Grand Jury or limit a criminal investigation, the People argue that the Grand Jury subpoena must stand.

The People’s position seeks to complicate an otherwise simple statute. The statute is unqualified. It is a general rule of New York statutory construction that "the failure of the Legislature to include a substantive, significant prescription in a statute is a strong indication that its exclusion was intended." People v. Finnegan, 85 N.Y. 2d at 58; People v. Tychanski, 78 N.Y.2d 909, 911 (1991).

Even though the Grand Jury has broad authority, its powers are subject to statutory limitations. On occasion, the Legislature has determined that in balancing competing interests, the need for unfettered Grand Jury investigations must yield to other policy considerations. Where the Legislature limits those powers "it may do so explicitly or by implication."

Matter of Stern v. Morgenthau, 62 N.Y. 2d 331, 336-37 (1984).

In the Stern case, the Grand Jury sought material gathered by the State Commission on Judicial Conduct. In quashing the subpoena, the Court found that the purpose of the Commission to preserve and enhance the public’s confidence in the judiciary transcended the need to prosecute one individual. Even though the statute governing the Commission did not explicitly address Grand Jury investigations, the Court found that the Commission’s purpose was best served by encouraging the free flow of information to be held in confidence until wrongdoing was established. "The Legislature, by the provisions of the Judiciary Law has provided that the traditional powers of the Grand Jury must yield to these concerns." Id. at 339.

In some instances the Legislature has limited the authority of the Grand Jury even though the effect has been to preclude any Grand Jury investigation. In Beach v. Shanley, 62 N.Y.2d241 (1984) the court found that the Legislature intended to create an absolute privilege under the shield law for reporters ( N.Y. Civil Rights Law § 79-h), even if the act of disclosure by the informant to the reporter was itself a crime and the effect of the privilege was to stymie the investigation. The court refused to carve out an exception for Grand Jury investigations "without any qualifying [statutory] language" Id. At 251-52. Similarly, in Matter of Grand Jury Investigation of Onondaga County, 59 N.Y.2d 130 (1983), the court held that the doctor-patient privilege, which encourages full disclosure by a patient to ensure proper treatment, could not be breached by a Grand Jury subpoena, even though the effect was to thwart a homicide investigation. See also, Matterof N.Y.S. Dep’t of Taxation and Finance v. N.Y.S. Dep’t. Of Law, 44 N.Y.2d 575 (1978) (state tax returns were not subject to Grand Jury subpoena for non-tax criminal investigations).

Here, the result of quashing the Grand Jury subpoena is not nearly so drastic. The Grand Jury is not precluded from proceeding with its investigation; it simply cannot retain the Paintings . But, in point of fact, the Paintings are not needed for the investigation. The present owner, provenance, value and whereabouts of the Paintings are known. Indeed, Lea Bondi and Fritz Grunbaum are openly acknowledged by the Leopold Foundation to have owned their respective Paintings. M. Dabrowski & R. Leopold, supra, 144, 195.

The whereabouts of art work covered by this statute will always be known, even ifprivately held. After all, the owner is willing to lend the art for public viewing. The far more troubling scenario occurs when art is stolen and then held privately for years, its location unknown and undiscoverable. See, Solomon R Guggenheim Foundation v. Lubell, 77 N.Y.2d 311 (1991).

The statute merely precludes the use of a temporary exhibition as a mechanism to seize art. The People contend that in the context of a criminal investigation this result would be contrary to public policy in that it provides stolen property greater protection in New York than it might receive in its place of origin.

The distinction, of course, is that the art is only temporarily in New York. Claimants lose no potential rights they might have to the art; they simply cannot use a temporary exhibition in New York to avoid pursuing their claims where the art originated. Indeed, for the reasons discussed above, this was the very result the Legislature sought in enacting. ACAL §12.03.

Both parties have raised compelling policy concerns. Words cannot convey the horror of the Holocaust. But the tragedy of that event, although casting a pall over this matter, is not at issue here. However, it is indeed troubling if museums and cultural institutions, which are "sources of civilized values" are turning a blind eye to the exhibition of stolen art. Ringer Aff, Ex. 12, Soltes Affidavit, • 13. Conceivably a Grand Jury investigation may uncover inappropriate or unlawful practices by such institutions and lenders, but the Paintings themselves are not needed for the exploration of this issue. Moreover, it appears the museums themselves are taking recognition of the fact that as cultural institutions they must hold themselves to a higher standard. See, J. Dobrzynski, Lenders Pull Two BonnardsFrom a Show at the Modern, N.Y. Times, April 29, 1998, at C1; D. d’Arcy. Europeans Support US Museum Over Schiele Nazi Loot, 80 The Art Newspaper. April 1998, at 9.

On the other hand, the Museum argues that converting what is really a civil matter into a secret Grand Jury proceeding is not a fair mechanism for resolving the ownership issues in a case of this sort. Furthermore, to require a museum to have to verify the provenance of every piece of art on loan for a temporary exhibition would be unduly burdensome. The effect of thePeople’s action here has, according to the Museum, already discouraged some potential lenders of art. Krevitt Supp. Aff., Ex. C.

In setting public policy, it is often necessary to consider competing concerns. Resolution of these issues frequently results in compromises that will not satisfy everyone. The policy issues presented here were resolved by the Legislature. The statute has served the state well in enhancing its position as a cultural center. It is well settled "that courts are not to legislate under the guise of interpretation." People v. Finnegan, 85 N.Y.2d at 58. The legislative intent is clear and the statutory language unambiguous. In accordance with ACAL §12.03, the Grand Jury subpoena must be quashed.

II

The People also contend that the application of ACAL §12.03 to art on loan from foreign countries is preempted by the federal statute, Immunity from Seizure Act (the " IFSA"), 22 U.S.C. §2459.

The IFSA was enacted in 1965, three years before the enactment of ACAL §12.03. The federal law provides that whenever a work of art is imported from a foreign country to be exhibited at a not-for-profit cultural institution, the art will not be subject to any judicial process, state or federal, if certain requirements are met. To receive the protection of the statute, prior to importation, the President or his designee must determine that the art is of cultural significance and that the temporary exhibition is in the national interest. Notice of the decision must also be published in the Federal Register.

Pursuant to Executive Order, the Director of the United States Information Agency (the "USIA") serves as the President’s designee under the Act. The Director may consult with the Secretary of State with respect to the determination of whether the exhibition of the art is in the national interest and may consult with the Secretary of the Smithsonian Institution, Director of the National Gallery of Art and with "such other officers and agencies of the government as may be appropriate with respect to the determination of cultural significance." Ex.Ord. No. 12047,

§ 1, 43 Fed. Reg. 13,359 (1978), asamendedby Ex.Ord. No. 12388, 47 Fed. Reg. 46,245 (1982).

State law is preempted under the Supremacy Clause, U.S. Const., Art. VI, cl. 2, in three circumstances. First, Congress in its enactment can explicitly preempt state law. See, e.g., English v. General Electric Company, 496 U.S. 72, 78 (1990); People v. Pymm, 76 N.Y. 2d 511, 519 (1991).

Second, in the absence of explicit statutory language, state law is preempted if the field of regulated conduct is one Congress implicitly intended to occupy exclusively. "Such an intent may be inferred from a ‘scheme of federal regulation . . . so pervasive that Congress left no room for the States to supplement it,’ or where an Act of Congress ‘touch[es] a field in which thefederal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject. English v.General Electric Company, 496 U.S. at 79, quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

Third, state law is preempted to the extent it actually conflicts with the federal statute. See, e.g., Pacific Gas & Elec. v. Energy Resources Commission, 461 U.S. 190, 204 (1983); People v. Pymm, 76 N.Y.2d at 519; People v. Broady, 5 N.Y.2d 500, 513 (1959). Such conflict arises when it would be impossible for a private party to comply with both statutes (see, Florida Avocado Growers v. Paul, 373 U.S. 132, 142-43 (1963)) or where the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67 (1941).

Preemption is fundamentally a question of congressional intent. "[W]hen Congress has made its intent known through explicit statutory language, the courts’ task is an easy one." English v. General Electric Company, 496 U.S. at 79. Where the congressional intent must be inferred, as in the area of "field preemption," and the field includes areas that the states have traditionally occupied, "congressional intent to supersede state laws must be ‘clear and manifest’." Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977), quoting, Rice v. Santa Fe Elevator Corp., supra, 331 U.S. at 230.

The People contend that the federal statute implicitly preempts ACAL §12.03 with respect to foreign art because 1) the federal statue is so comprehensive that Congress left no room for state enactments; 2) federal interests pertaining to foreign affairs dominate; and 3) thestate statute frustrates the congressional purpose in enacting the federal statute.

The People claim the IFSA is comprehensive, fully addressing the issue of immunity from seizure for works of art on loan from abroad. Therefore, there is no room for the New York statute to address the same issue. The United States Supreme Court, however, has repeatedly refused to void state statutory requirements absent a congressional intent to preempt.

"If Congress is authorized to act in a field, it should manifest its intention clearly. It will not be presumed that a federal statute was intended to supersede the exercise of the power of the state unless there is a clear manifestation of intention to do so.

N.Y.S. Dept. of Social Services v. Dublino, 413 U.S. 405, 413 (1973), quoting, Schwartz v. Texas, 344 U.S. 199, 202-203 (1952).

Preemption may not be inferred merely because of the comprehensiveness of the federal regulatory system. "The subjects of modern social and regulatory legislation often by their very nature require intricate and complex responses from the Congress, but without Congress necessarily intending its enactment as the exclusive means of meeting the problem." N.Y.S. Dept. of Social Services v. Dublino, 414 U.S. at 415. Thus, "courts are reluctant to infer preemption from the comprehensive nature of federal regulations in the absence of an express indication by Congress" to preempt. Tap Elec. Contr. Serv., Inc v. Hartnett, 76 N.Y.2d 164, 169 (1990). See also, Hillsborough Co. v. Automated Med. Labs, 471 U.S. 707, 717-18 (1985).

Nothing within the IFSA or its supporting regulation suggests that Congress consideredthe mechanism it created necessarily to provide the exclusive means for the protection of foreign art. Moreover, the IFSA can hardly be considered comprehensive since it does not address all foreign art potentially loaned for exhibition in this country. While it provides a mechanism to protect art where an application is made under the statute, it does not require that an application for protection be made for all art entering the country. This court finds the federal statute is not comprehensive nor does it contain any implicit intent that a complementary state regulation is preempted.

The People further contend that the federal statute implicates significant foreign relations issues. Because foreign affairs is a field in which federal interests dominate, preemption of the New York statute necessarily follows.

One of the central themes of the federal statute is that before art work will be given protection under that law, the proposed exhibition must be found to be in the national interest. 22 U.S.C. §2459. In making this determination, the Director of the USIA is to confer with the Secretary of State. Ex.Ord. No. 12047, 43 Fed. Reg., 13,359 (1978), as amended by, Ex.Ord. No. 12388, 47 Fed. Reg. 46,245 (1982).

Foreign affairs clearly is an area where federal interests dominate. "[W]here the federal government, in the exercise of its superior authority in [the foreign affairs] field has enacted a complete scheme of regulation . . . states cannot, inconsistently with the purpose of Congress, conflict or interfere with, curtail or complement, the federal law, or enforce additional or auxiliary regulations." Hines v. Davidowitz, supra, 312 U.S. at 66-7.

But even in the Hines decision, the sole case relied on by the People on the issue of federal dominance, the Court did not decide that the state law under review was preempted simply because it touched upon the area of foreign affairs. Rather, the Court considered that its "primary function" was to determine whether the state law stood "as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" Id., at 67.

The involvement of foreign affairs does not necessarily lead the Supreme Court to preempt a state statute. "Only a demonstration that complete ouster of state power including state power to promulgate laws not in conflict with federal laws was ‘the clear and manifest purpose of Congress’ would justify that conclusion." DeCanas v. Bica, 424 U.S. 351, 357 (1976) (citation omitted). (California statute affecting employment of illegal aliens not preempted by Immigration and Nationality Act.) The fact that a statute concerns "an area of uniquely federal interest does not end . . . the inquiry. That merely establishes a necessary, not a sufficient, condition for the displacement of state law. Displacement will occur only where . . . a ‘significant conflict’ exists between an identifiable ‘federal policy or interest and the [operation] of state law’ or the application of state law would ‘frustrate specific objectives’ of federal legislation." Boyle v. United Technologies, 487 U.S. 500, 507 (1988) (citations omitted). See also,Clark v. Allen, 331 U.S. 503 (1947). As noted recently by a court of concurrent jurisdiction. ". . . Hines was not intended to become an absolute bar against all possible state and local legislation affecting the field of foreign affairs, however indirectly As viewed in Hines,. . . the conflict with foreign policy of the federal government must be demonstrably direct and specific before federal preemption occurs." Opusunju v. Giuliani, __N.Y.S.2d__, 1997 WL 838142, *2 (Sup. Ct., NY Co., 1997).

A review of the legislative history of the IFSA reveals that the primary purpose of the statute was not its impact on foreign affairs, but its encouragement of educational and cultural interchange. "The commendable objective of this legislation is to encourage the exhibition in the United States of objects of cultural significance which, in the absence of assurances such as are contained in the legislation, would not be made available." H.R. Rep. No. 89-1070, 89th Cong., 1st Sess., Sept. 22, 1965.

The sole purpose of the federal statute is to provide protection to art work. The law does not limit art from entering the country even if approval under the statute is not obtained. Presumably, if the issue of foreign relations was the dominant concern, a more comprehensive approach to foreign art entering the country would have been enacted. The statute merely provides protection for those who seek it; it creates no limitations for works of art not under its protection.

Exposure of citizens to works of fine art may be legitimate aims of both federal and state governments. Without a clear and manifest intent expressed by Congress to limit state regulation in this area, the federal law cannot be found to preempt the state statute because of a dominance of a federal interest.

The People’s final contention is that the state law is preempted because it frustrates the congressional purpose in enacting the IFSA.

A state statute is preempted "where . . . adherence to the State . . . law would thwart the objectives of its Federal counterpart." City of New York v. Job-Lot Pushcart, 88 N.Y.2d 163, 167 (1996). To find preemption "an irreconcilable conflict between the federal and state regulating schemes" must exist. "The existence of a hypothetical or potential conflict is insufficient to warrant the preemption of the state statute." Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982).

Quite simply, no conflict exists between the federal and the New York statutes. Both statutes seek to protect foreign art from judicial process while on loan to not-for-profit institutions. Both statutes seek to accomplish this end to advance cultural benefits to the residents of the United States and New York. The difference between the two statutes is that, under New York law, the art is given automatic protection whereas under the federal statute one must apply for protection. However, if protection is not granted under the federal law, the art is not barred from the country.

As occurs in many other areas of complementary federal/state regulation, the provisions of the IFSA provide a floor of protection by which all states and the federal government are bound. However, nothing within the federal statute precludes New York from providing greater protection. See, Atherton v. F.D.I.C., 117 S.Ct. 666, 674-75 (1997); Cal. Federal S&L Association v. Guerra, 479 U.S. 272, 285 (1987); People v. Pymm, 76 N.Y.2d at 524.

The People argue that the New York statute is at cross-purposes with the IFSA because the state law enables New York cultural institutions to avoid compliance with the federal statute. In addition, foreign owners might be more inclined to lend art to New York institutions over those of other states rather than contend with the IFSA compliance requirements. However, compliance under the IFSA is not mandatory. Moreover, New York should not be faulted for providing an atmosphere conducive to the temporary exhibition of foreign art. With its vast array of cultural institutions, New York has a unique interest in maximizing the possibility of exhibiting art on loan from other states and around the world. As a result, New York has achieved and maintained its reputation as an internationally renowned cultural center. In any event, New York’s legislative response in enacting ACAL § 12.03 does not preclude other states from granting similar protection to foreign art.

In sum, the New York statute is not preempted by the IFSA and the motion to quash the Grand Jury subpoena is granted.

This decision constitutes the opinion and order of the court.

Dated: May 13, 1998

_______________________________

Laura E. Drager

Acting Justice of the Supreme Court