Secondary liability conflict property: a new theory of property

• Pages: 119-165
• Date: 01 January 2025
• Published date: 01 January 2025
• Author: Daniella Wenger

Secondary Liability Conf‌lict Property: A New

Theory of Property

DANIELLA WENGER*

ABSTRACT

In May 2023, the Heidi Horten jewelry sale at Christie’s auction house broke

all records. However, the second half of the highly anticipated sale was can-

celed by August 31, 2023. Horten’s wealth originated via her husband, Helmut

Horten, who obtained his wealth by purchasing Jewish businesses as Jews f‌led

Germany or were deported to death and concentration camps. Christie’s loss in

this sale is representative of a bigger legal risk.

This article makes two claims: one descriptive and one normative. The article

describes the legal and moral problems associated with the sale, typically by

auction houses, of property obtained or unfairly acquired under duress or at

times of conf‌lict: what this paper calls “secondary liability conf‌lict property.”

Secondary liability conf‌lict property gives rise to legal liability and negative

reputational impacts. This article argues that by adopting a framework used in

a seemingly disparate context—corporations assessing their responsibilities for

fossil fuel emissions—auction houses can minimize harms associated with sec-

ondary liability conf‌lict property and avoid f‌inancial harm from canceled auc-

tions and negative press.

The article organizes around two case studies: Christie’s Heidi Horten jew-

elry sale and the U.S. government’s seizure of a superyacht owned by Russian

oligarch Suleiman Kerimov. The article then continues by outlining the funda-

mental principles and regulations related to conf‌lict property and distinguishes

between primary conf‌lict property and secondary liability conf‌lict property. Next,

the article provides an overview of environmental, social, governance, and cor-

porate social responsibility initiatives in the U.S. corporate setting, and surveys

auction houses’ current engagement (or non-engagement) with these programs.

Then, the article provides proposals for auction houses to change and explains

how these proposals can affect auction houses’ prof‌itability. The article then

anticipates and answers potential critiques of secondary liability conf‌lict property

and the application of environmental, social, governance, and corporate social

responsibility frameworks to auction houses. It also enumerates other normative

* Daniella Wenger is a Law Clerk in New York City. She graduated from New York University Law

School in 2024. She is grateful to her advisor, Professor Bridget J. Crawford, for her brilliant comments and

unwavering support. The views, opinions, statements, analysis and information in this article are solely the

author’s and do not necessarily ref‌lect the views of Kirkland & Ellis. © 2025, Daniella Wenger.

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reasons why auction houses should accept these proposals. Finally, the paper con-

cludes with suggesting broader justif‌ications and rationales for this proposal and

why it is a critical issue.

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

I. FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

A. HEIDI HORTEN’S JEWELRY SALE . . . . . . . . . . . . . . . . . . . 125

B. SULEIMAN KERIMOV’S SUPERYACHT SEIZURE . . . . . . . . 127

II. REGULATORY REVIEW: WHY A NEW THEORY OF PROPERTY IS

NEEDED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

A. THE PROBLEM: SECONDARY LIABILITY CONFLICT

PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

1. PRIMARY CONFLICT PROPERTY ................ ......... 130

a. Nazi-era Primary Conf‌lict Property . . . . . . . . . . . . 130

b. Russian Oligarchs’ Primary Conf‌lict Property . . . . 131

2. SECONDARY LIABILITY CONFLICT PROPERTY .............. 134

3. LEGAL ETHICS AND SECONDARY LIABILITY CONFLICT

PROPERTY ......................................... 137

B. THE (INEFFECTIVE) SOLUTION: REGULATORY TOOLS

AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

1. UNSUCCESSFUL REGULATORY SOLUTIONS: PRIMARY CONFLICT

PROPERTY ......................................... 137

2. CURRENT REGULATIONS ON PRIMARY CONFLICT PROPERTY

AND SECONDARY CONFLICT PROPERTY ................... 139

C. THE PRINCIPAL-AGENT PROBLEM AND FIDUCIARY

DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

III. INTRODUCTION TO THE ENVIRONMENTAL, SOCIAL,

GOVERNANCE AND CORPORATE SOCIAL RESPONSIBILITY

FRAMEWORKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

A. ENVIRONMENTAL, SOCIAL, GOVERNANCE . . . . . . . . . . . 142

B. CORPORATE SOCIAL RESPONSIBILITY . . . . . . . . . . . . . . . 144

120 THE GEORGETOWN JOURNAL OF LEGAL ETHICS [Vol. 38:119

C. SCOPE OF EMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

1. INTRODUCTION TO THE SCOPE OF EMISSIONS FRAMEWORK .... 145

2. APPLICATION OF SCOPE OF EMISSIONS FRAMEWORK . . . . . . . . . 147

D. ESG AND CSR IN ACTION: TWO CASE STUDIES . . . . . . . . . 148

1. CORPORATE SOCIAL RESPONSIBILITY PROGRAMS . . . . . . . . . . . 149

2. ENVIRONMENTAL, SOCIAL, GOVERNANCE PROGRAMS ........ 150

3. FURTHER ANALYSIS .................................. 151

IV. THE BOTTOM LINE .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

A. FINANCIAL, REPUTATIONAL, AND LEGAL RISK . . . . . . . . 152

1. FINANCIAL RISK ..................................... 152

2. REPUTATIONAL RISK ................................. 154

3. LEGAL, QUASI-LEGAL, AND MORAL CUSTOMER RISK ........ 155

a. Manhattan District Attorney’s Antiquities

Traff‌icking Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

b. Environmental Regulation: Scope of Emissions

Framework, CITES . . . . . . . . . . . . . . . . . . . . . . . . 157

B. FINANCIAL, REPUTATIONAL, AND LEGAL REWARD . . . . 158

1. FINANCIAL REWARD .. ................................ 158

2. REPUTATIONAL REWARD .............................. 159

3. LEGAL REWARD: REGULATORY ENTREPRENEURSHIP . . . . . . . . . 159

C. PROPOSALS FOR CHANGE . . . . . . . . . . . . . . . . . . . . . . . . 161

V. ANTICIPATED CRITIQUES AND NORMATIVE JUSTIFICATIONS

FOR CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

A. ANTICIPATED CRITIQUES FROM AUCTION HOUSES . . . . . 162

B. NORMATIVE REASONS WHY AUCTION HOUSES SHOULD

ACCEPT PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

CONCLUSION . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

2025] SECONDARY LIABILITY CONFLICT PROPERTY 121