De Csepel v. Republic of Hungary ( 2022 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
DAVID L. de CSEPEL, et al.,
Plaintiffs,
v. Civil Action No. 10-1261 (JDB)
HUNGARY, et al.,
Defendants.
ORDER
This case involves a group of family members, all descendants of renowned art collector
Baron Mór Lipót Herzog, who claim ownership of certain artworks in a collection seized by the
World War II-era Hungarian government and its Nazi collaborators during the Holocaust. See
Am. Compl. [ECF No. 141] ¶¶ 1–2, 6–8, 106. Plaintiffs commenced this action twelve years ago,
see Compl. [ECF No. 1] at 27; since then, the parties have filed numerous dispositive motions,
three appeals, and a petition for certiorari. See de Csepel v. Republic of Hungary, 27 F.4th 736,
741–42 (D.C. Cir. 2022) (“de Csepel IV”). After the D.C. Circuit’s latest decision remanding the
case to this Court, defendants—a group of museums in possession of the contested artworks and
Magyar Nemzeti Vagyonkezelő Zrt. 1 (“MNV”)—now move to stay the litigation because they
intend to file a petition for certiorari seeking review of the D.C. Circuit’s decision. See Mem. of
P. & A. in Supp. of Defs.’ Mot. to Stay Activity Before the District Ct. Pending Resolution of
Defs.’ Forthcoming Pet. for a Writ of Cert. [ECF No. 199-1] (“Mot. to Stay”) at 1–2. Plaintiffs
oppose this request, arguing that a stay is not warranted. See generally Pls.’ Mem. of P. & A. in
Opp’n to Mot. to Stay [ECF No. 202] (“Opp’n”). Because the relevant factors do not support
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MNV’s name translates to “Hungarian National Asset Management, Inc.” de Csepel IV, 27 F.4th at 741.
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staying proceedings at this time, the Court will deny defendants’ motion.
Background
In its latest decision, the D.C. Circuit thoroughly set out the factual background and
procedural history of this case, and the Court will incorporate that summary by reference. See de
Csepel IV, 27 F.4th at 739–42. As relevant here, the D.C. Circuit held that (1) although the
Republic of Hungary has been dismissed as a defendant, this litigation may nonetheless proceed
pursuant to Federal Rule of Civil Procedure 19(b) because the remaining defendants are so aligned
with Hungary that they will adequately protect Hungary’s interests, id. at 748–52; and (2) that the
Foreign Sovereign Immunities Act (“FSIA”) does not require prudential exhaustion in suits against
foreign states, so plaintiffs were not required to exhaust their potential remedies in Hungary before
filing suit in the United States, id. at 753. The court of appeals declined to review “the district
court’s determinations of jurisdiction over individual artworks” and remanded the case to this
Court for further proceedings. Id. at 753–54.
After receiving the parties’ views, the Court set a schedule for further motions, including
defendants’ proposed motion to dismiss on the issue of domestic takings, the parties’ proposed
cross-motions for summary adjudication on choice of law, and defendants’ proposed motion for
summary judgment on the issues of comity and statute of limitations. See Scheduling Order, June
21, 2022 [ECF No. 200] at 1. Defendants now move to stay that schedule pending their
forthcoming petition for certiorari. Specifically, defendants report that they will seek review of
the D.C. Circuit’s decision holding:
(1) that neither Federal Rule of Civil Procedure 19 nor the Supreme Court’s
decision in Republic of Philippines v. Pimentel, 533 U.S. 851 (2008), bar this action
from going forward where the owner of the claimed property and the sources of
Plaintiffs’ injuries is immune and it is undisputed that its interests will be adversely
affected if the case continues[; and] (2) that non-immune sovereigns may not raise
a defense of international comity (exhaustion), even though the Seventh Circuit
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recognizes it is a defense available to non-immune sovereigns, see Fischer v.
Magyar Államvasutak Zrt., 777 F.3d 847, 857–58 (7th Cir. 2015), and the Supreme
Court recognizes that such entities must be treated like private parties, see Cassirer
v. Thyssen-Bornemisza Collection Found., 142 S. Ct. 1502, 1508–10 (2022).
Mot. to Stay at 1–2. The petition is due to be filed on August 8, 2022. Id. at 1.
Legal Standard
“[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time for itself, for counsel, and
for litigants. How this can best be done calls for an exercise of judgment, which must weigh
competing interests and maintain an even balance.” Air Line Pilots Ass’n v. Miller, 523 U.S. 866,
879 n.6 (1998) (alteration in original; citation omitted). A party seeking a stay must show that the
stay is warranted upon consideration of four factors: “(1) the likelihood that the party seeking the
stay will prevail on the merits . . . ; (2) the likelihood that the moving party will be irreparably
harmed absent a stay; (3) the prospect that others will be harmed if the court grants the stay; and
(4) the public interest in granting the stay.” Loving v. IRS, 920 F. Supp. 2d 108, 110 (D.D.C.
2013) (quoting Cuomo v. Nuclear Regulatory Comm’n, 772 F.2d 972, 974 (D.C. Cir. 1985) (per
curiam)).
With respect to the first factor, the movant “need not always establish a high probability of
success on the merits,” Cuomo, 772 F.2d at 974; some courts have concluded that, “instead, so
long as the other factors strongly favor a stay, such remedy is appropriate if ‘a serious legal
question is presented,’” Loving, 920 F. Supp. 2d at 110 (quoting Citizens for Resp. & Ethics in
Wash. v. Off. of Admin., 593 F. Supp. 2d 156, 160 (D.D.C. 2009)). But to succeed under this
formulation, the possibility of irreparable harm to the moving party “must be both certain and
great,” and the movant “must show that the injury complained of is of such imminence that there
is a clear and present need for equitable relief to prevent irreparable harm.” Wis. Gas Co. v. FERC,
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758 F.2d 669, 674 (D.C. Cir. 1985) (cleaned up; citation omitted).
Analysis
Defendants argue that they have satisfied all four factors, so the Court should exercise its
discretion to stay this litigation. See Mot. to Stay at 8. Plaintiffs, naturally, disagree on all counts.
See Opp’n at 8. The Court will address the factors in turn.
I. Presentation of a Serious Legal Question
Defendants do not argue that they are likely to succeed on the merits of their petition, see
Mot. to Stay at 8; instead, they contend that the petition “will present serious legal questions”
regarding the Court’s jurisdiction over “agency or instrumentality defendants[] when the
sovereign . . . is immune” and “the role of international comity” in proceedings under the FSIA,
id. at 8–9. Defendants also assert that “there is a high likelihood certiorari will be granted” because
the Supreme Court has granted certiorari regarding “two recent D.C. Circuit[] decisions”
addressing claimants’ failure to exhaust domestic remedies as a ground for abstention. Reply Br.
in Supp. of Mot. to Stay [ECF No. 204] (“Reply”) at 2 (cleaned up); see Philipp v. Federal Republic
of Germany, 894 F.3d 406 (D.C. Cir. 2018), vacated, 141 S. Ct. 703 (2021), and Simon v. Republic
of Hungary, 812 F.3d 127 (D.C. Cir. 2016), abrogated by Fed. Republic of Germany v. Philipp,
141 S. Ct. 703 (2021). In both Philipp and Simon, the Supreme Court called for the views of the
Solicitor General, who recommended granting certiorari on the exhaustion issue. Reply at 2–3;
see Br. for United States as Amicus Curiae at 1, 30–34, Fed. Republic of Germany v. Philipp, No.
19-351 (Sept. 11, 2020); Br. for United States as Amicus Curiae at 1, 25–27, Republic of Hungary
v. Simon, No. 18-1447 (May 26, 2020). Although the Supreme Court ultimately did not pass on
the exhaustion issue, defendants argue that the Solicitor General’s involvement in Philipp and
Simon “confirms this is a serious legal question,” and that the likely involvement of the Solicitor
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General in this case “increases likelihood that certiorari will be granted” here. Reply at 3, 6–7.
Even assuming that defendants are correct about the seriousness of the legal issues they
will present, the Court concludes that a stay is not warranted at this time. Where the party seeking
a stay does not argue that it has a “high probability of success on the merits,” some courts observe
that a stay may nevertheless be appropriate if the petition presents a “serious legal question”—but
only “so long as the other factors strongly favor a stay.” Loving, 920 F. Supp. 2d at 110 (citation
omitted); see also In re Special Proc., 840 F. Supp. 2d 370, 372 (D.D.C. 2012) (“It is only when
the other three factors tip sharply in the movant’s favor that the standard for success on the merits
changes.”). Indeed, some judges in this District have reasoned that “[a] showing of irreparable
harm is crucial” in order for the court to issue a stay, and “[f]or harm to be ‘irreparable’ . . . the
injury must be both certain and great.” Fed. Trade Comm’n v. Boehringer Ingelheim Pharms.,
Inc., 241 F. Supp. 3d 91, 97 (D.D.C. 2017) (first alteration in original) (quoting Fed. Trade
Comm’n v. Church & Dwight Co., Inc., 756 F. Supp. 2d 81, 86 (D.D.C. 2010)). Accordingly, the
Court will move on to assess whether defendants are likely to face irreparable harm if a stay is not
imposed.
II. Likelihood of Irreparable Harm to Defendants
Defendants first argue that they will be irreparably harmed if they are forced to “face
judicial proceedings before a district court that might not have jurisdiction.” Mot. to Stay at 14.
They note that the rights of a party entitled to sovereign immunity are “irretrievably lost” if that
party is forced to litigate, id. (quoting Richardson-Merrill, Inc. v. Koller, 472 U.S. 424, 431
(1985)), a loss that defendants assert is “beyond remediation and is the essence of irreparable
injury,” id. That argument has considerably less force here, given that the litigation has been
ongoing for twelve years already. Moreover, defendants do not intend to seek certiorari on the
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question whether MNV—an agency or instrumentality of Hungary—is entitled to sovereign
immunity, nor will they contend that Hungary—an immune sovereign—remains a party in this
action. Instead, defendants report that they plan to present two issues unrelated to the sovereign
immunity of any party presently litigating before this Court: whether this case may continue
without Hungary’s participation, and whether this Court may consider the defense of international
comity. See id.; Opp’n at 14 (explaining that this Court and the D.C. Circuit “have held
definitively” that the remaining defendants “are not immune from jurisdiction,” and that the
petition, “even if granted, will not change those conclusions and grant Defendants immunity”).
Thus, there is no defendant in this suit facing the irreparable injury of being forced to litigate
despite being entitled to sovereign immunity.
Defendants instead assert that, because the remaining defendants do not own the paintings
that are the subject of this litigation, “injunctive relief cannot be fashioned here that would affect
‘only the remaining defendants, and not [the immune sovereign].’” Reply at 4 (alteration in
original) (quoting Broidy Cap. Mgmt., LLC v. Qatar, No. CV 18-2421-JFW(Ex), 2018 WL
6074570, at *10 (C.D. Cal. Aug. 8, 2018)), aff’d, 982 F.3d 582 (9th Cir. 2020). Thus, because any
relief awarded by the Court would come from the immune Hungary, rather than “the non-immune
defendants who do not own the property and lack independent budgets,” id., Hungary’s interests
are still implicated. But this purported injury is premised on a legal theory—that the remaining
defendants cannot adequately defend Hungary’s interests—which the D.C. Circuit has
conclusively rejected. See de Csepel IV, 27 F.4th at 750 (concluding that Hungary’s sovereign
interests “are so aligned with those of the remaining defendants that the latter will vigorously
protect Hungary’s interests by pressing their own”); id. at 752 (concluding that “alternative forms
of relief,” such as monetary damages or declaratory judgment, are “available here” to “mitigate”
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any prejudice to Hungary (citation omitted)). If litigation continues in this Court, there is no threat
that Hungary will be forced to defend its interests and effectively lose the protection of its
sovereign immunity, and there is no argument that any of the defendants presently litigating before
this Court are entitled to sovereign immunity. Accordingly, at present there is no likelihood of
irreparable harm on the basis of sovereign immunity.
Defendants also contend that proceedings in this Court “will be unnecessary or, at the very
least, significantly narrowed” if the Supreme Court grants their petition for certiorari and rules in
their favor. Mot. to Stay at 14. This is true, but it is highly speculative. See Boehringer Ingelheim
Pharms., 241 F. Supp. 3d at 97 (“For harm to be irreparable . . . the injury must be both certain and
great.” (emphasis added) (citation omitted). The harm that defendants assert is, at present,
theoretical. See Loving, 920 F. Supp. 2d at 111. If further developments occur—and particularly
if the Supreme Court grants defendants’ petition—the Court’s calculus would certainly change
because the parties would face different burdens and potential harms than they face at the present
juncture. Were the Supreme Court to grant certiorari, the Court would entertain a renewed motion
seeking a stay. Cf. Helmerich & Payne Int’l Drilling Co. v. Bolivarian Republic of Venez., 185
F. Supp. 3d 233, 250 (D.D.C. 2016) (explaining that the court “may reconsider” staying case
“should the Solicitor General recommend granting certiorari”). But absent such a change in status,
the Court concludes that denying the motion to stay will not cause harm—let alone irreparable
harm—to defendants.
III. Possibility of Harm to Plaintiffs
Defendants next assert that plaintiffs “will suffer no meaningful harm from a short stay”
while the Supreme Court considers defendants’ petition. Mot. to Stay at 15. Plaintiffs, defendants
contend, are “successors-in-interest, a generation or two removed from the siblings alleged to have
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suffered the property loss”; this litigation “will be based on documentary evidence and expert
reports,” rather than live witness testimony, so a stay presents no risk of lost evidence; and
plaintiffs “waited to file this suit until seventy years after the end of World War II, even though
[they] knew of the artworks’ location all of that time.” Id.; see also Philipp v. Fed. Republic of
Ger., 436 F. Supp. 3d 61, 68–69 (D.D.C. 2020) (granting motion to stay pending petition for
certiorari based in part on similar considerations). Thus, a “few months” of waiting will not
prejudice plaintiffs. Mot. to Stay at 15.
Plaintiffs vigorously dispute this assessment, which they claim “wholly ignores the reality
of the Communist era in Hungary” and plaintiffs’ previous attempts to recover the artworks
through legal processes in Hungary. Opp’n at 15–16 & n.8. Because of their advanced ages
(Angela and Julia Herzog are 89 and 84 years old, respectively), the already-lengthy history of this
litigation, and the possible length of time necessary for the Supreme Court’s consideration,
plaintiffs assert that a stay would certainly cause them harm. Id. at 16–17. In response, defendants
point out that plaintiffs requested a stay pending their petition for certiorari in August 2018;
moreover, that stay request came in even more prejudicial circumstances, since the parties had
already briefed a motion to dismiss and had to file supplemental briefings after plaintiffs’ petition
was denied. Reply at 5. Thus, defendants argue, “staying activity now, before the parties expend
significant time and resources” briefing motions in this Court, would eliminate the possible need
for supplemental briefing should the Supreme Court grant defendants’ petition. Id.The Court acknowledges, and to some extent shares, plaintiffs’ interest in moving this case
forward. But the central harm plaintiffs claim they will suffer—an increase in the overall length
of this litigation—“relies heavily on delay that predates and is unrelated to the filing of th[e present]
petition for certiorari and[,] as such, . . . does not demonstrate harm attributable to a stay while the
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Supreme Court decides on” the anticipated petition. Philipp, 436 F. Supp. 3d at 69. Plaintiffs do
not argue that their litigation position will be weakened—as by the loss of evidence or a potentially
avoidable expenditure of funds—if the matter is stayed. Cf. id.; Loving, 920 F. Supp. 2d at 111–
12 (denying motion stay in part because granting it would require plaintiffs to face a “Hobson’s
choice” of expending time and money on potentially unnecessary compliance with order or risking
the loss of professional licensure). Thus, although the Court is sympathetic to plaintiffs’ position,
this factor weighs only slightly against granting defendants’ motion and staying this litigation.
IV. Public Interest
Finally, defendants argue that the public interest is best served by staying this case to ensure
that “foreign sovereigns are not inappropriately subject to suit in the United States” and because
denying the stay would “hamper” that important goal. Mot. to Stay at 13. Plaintiffs again point
out that defendants have not expressed an intent to appeal the D.C. Circuit’s conclusion that none
of the remaining defendants is entitled to sovereign immunity. See Opp’n at 17. And the Court,
once again, agrees with plaintiffs: only Hungary—now a non-party—is entitled to sovereign
immunity, and requiring the Museums and MNV to litigate during the pendency of their petition
will not threaten Hungary’s sovereign immunity. Although defendants rely on Judge Kollar-
Kotelly’s decision to stay proceedings during the pendency of a petition for certiorari in Philipp,
see Mot. to Stay at 17–18, the petition in that case did address a foreign sovereign’s immunity
from suit, see Philipp, 436 F. Supp. 3d at 69; Opp’n at 18. Even then, however, Judge Kollar-
Kotelly concluded that the public interest in preserving sovereign immunity stood “in equipoise”
with the public interest in “prompt resolution of claims stemming from Holocaust-era crimes,
including confiscation of art.” Philipp, 436 F. Supp. 3d at 69–70. Here, there is no concern that a
sovereign might be stripped of its immunity, but the same public policy supporting prompt
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resolution of Holocaust-related claims is present. Accordingly, the public interest factor weighs
against staying this litigation.
Conclusion
In sum, although defendants’ anticipated petition for certiorari may well present serious
legal questions, the remaining factors—the likelihood of irreparable harm to defendants, the
possibility of harm to plaintiffs, and the public interest—do not favor staying litigation at this
juncture. As noted above, however, these considerations may change should the Supreme Court
grant defendants’ petition. Therefore, upon consideration of [199] defendants’ motion to stay, and
the entire record herein, it is hereby
ORDERED that [199] defendants’ motion to stay is DENIED.
SO ORDERED.
/s/
JOHN D. BATES
United States District Judge
Dated: August 1, 2022
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