De Csepel v. Republic of Hungary

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
DAVID L. de CSEPEL, et al., )
)
Plaintiffs, )
)
v. ) Civil Action No. 10-1261 (ESH)
)
REPUBLIC OF HUNGARY, et al., )
)
Defendants. )
)
MEMORANDUM OPINION
Defendants the Republic of Hungary, the Hungarian National Gallery, the Museum of
Fine Arts, the Museum of Applied Arts, and the Budapest University of Technology and
Economics have moved, pursuant to Federal Rule of Civil Procedure 12(b)(1), to dismiss this
case for want of subject matter jurisdiction. (Defendants’ Renewed Motion to Dismiss, May 18,
2015 [ECF No. 106] (“Defs.’ Ren. Mot.").) It is defendants’ third motion to dismiss plaintiffs’
claim on jurisdictional grounds, but the first Rule 12(b)(1) motion filed and argued with the full
benefit of jurisdictional and merits fact discovery.
Plaintiffs David L. de Csepel, Angela Maria Herzog, and Julia Alice Herzog are
descendants of Baron Mór Lipót Herzog, a Jewish Hungarian art collector who assembled a
substantial art collection (the “Herzog Collection”) prior to his death in 1934. Plaintiffs allege
that Hungary and Nazi Germany seized the Herzog Collection during World War II. Plaintiffs
brought this suit alleging that defendants breached bailment agreements entered into after World
War II when they refused to return the pieces from the Herzog Collection to the plaintiffs in
2008.
On February 15, 2011, defendants filed a motion to dismiss, which this Court granted in
part and denied in part, holding that it had subject matter jurisdiction under the expropriation
exception to the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1605(a)(3). See De
Csepel v. Republic of Hungary, 808 F. Supp. 2d 113, 132-33 (D.D.C. 2011). The D.C. Circuit
affirmed in part and reversed in part. De Csepel v. Republic of Hungary, 714 F.3d 591 (D.C. Cir.
2013). Without addressing the expropriation exception, the D.C. Circuit held that plaintiffs’
Complaint alleged sufficient facts to confer subject matter jurisdiction pursuant to the
commercial activity exception to the FSIA, 28 U.S.C. § 1605(a)(2). See id. at 601. On remand,
this Court ordered discovery to proceed. (Order, Dec. 9, 2013 [ECF No. 82].) All fact discovery
is now complete.
Defendants assert that, in light of the evidence produced in discovery, plaintiffs cannot
carry their burden of proving that this Court has subject matter jurisdiction. In particular,
defendants claim that neither the FSIA’s commercial activity exception nor its expropriation
exception applies to plaintiffs’ claim.
For the reasons stated below, this Court finds that it has subject matter jurisdiction under
the expropriation exception to the FSIA, but that plaintiffs cannot show a factual basis for their
claim of jurisdiction under the statute’s commercial activity exception.
BACKGROUND
The factual history of this case has already been described in great detail by this Court
and the Court of Appeals at 714 F.3d at 594-97; 808 F. Supp.2d at 120-26; and 75 F. Supp.3d
380, 382-85 (D.D.C. 2014). The Court will therefore focus on the procedural history and facts
relevant to this motion.
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I. FACTS
Baron Mór Lipót Herzog was a Jewish Hungarian art collector who amassed a collection
of over 2,000 paintings, sculptures, and other pieces of artwork. After his death in 1934 and his
wife’s death in 1940, the Herzog Collection was divided up amongst his three children, Erzsébet
Herzog (Elizabeth Weiss de Csepel), István (Stephen) Herzog, and András (Andrew) Herzog.
(Complaint, July 27, 2010 [ECF No. 1] (“Compl.”) ¶ 39; see also Defs.’ Ren. Mot., Declaration
of Irene Tatevosyan (“Tatevosyan Decl.”), Ex. 5.)
During the Holocaust, Hungarian Jews, including the Herzogs, were required to register
their art treasuries. In 1943, the Herzog family sought to save their artworks from damage and
confiscation by hiding the bulk of the collection in the cellar of one of the family’s factories.
Sometime prior to May 23, 1944, the artworks were discovered by the Hungarian government
and its Nazi collaborators and were seized. It appears that some of the artworks were transferred
to Germany and other territories of the Third Reich, while the rest were stored in Hungary.
Several of the Herzog heirs and their families escaped from Hungary during the war:
Elizabeth fled to Portugal and settled in the United States in 1946, becoming a U.S. citizen on
June 23, 1952. Plaintiffs Angela and Julia Herzog left Hungary following the deportation and
death of their father András and settled eventually in Italy. István remained in Hungary until his
death in 1966.
Forty-four pieces from the Herzog Collection are at issue in this litigation. According to
interrogatory responses from plaintiffs, twenty-four are owned by the heirs of András Herzog,
twelve are owned by the heirs of Erzsébet Herzog, and eight are owned by the heirs of István
Herzog. (See id.) Defendants concede that forty of the forty-four artworks named in plaintiffs’
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Complaint are still in the museums’ possession. 1 They also concede that forty-two of the forty-
four properties were seized by Hungary and the Nazis during the Holocaust as part of Germany’s
campaign of genocide against the Jews. The remaining two artworks appear to have been first
acquired well after World War II. In 1952, Lucas Cranach the Elder’s “The Annunciation to
Saint Joachim” (Compl. ¶ 16(vi)) was seized by the State Security Authority from an attorney,
Dr. Henrik Lorant. (Tatevosyan Decl. at Ex. 29). The Cranach seems to have been placed in
Lorant’s house by Ferenc Kelemen, who claims to have been keeping it safe for Erzsébet
Herzog. (Id.) In 1963, John Opie’s “Portrait of a Lady” (Compl. ¶ 16(xiii)) was donated to the
Museum of Fine Arts by an individual named Endre Gyamarthy. (Tatevosyan Decl. at Ex. 32.)
It is unclear from the record how Gyamarthy came to possess the painting.
Following the conclusion of the war, certain artworks from the Herzog Collection that
had been scattered across Nazi-occupied Europe were shipped back to Hungary, consistent with
the Allies’ post-war restitution policy. (Plaintiffs’ Opposition to Ren. Mot., June 24, 2015 [ECF
No. 110] (“Pls.’ Opp’n”) at 7.) A one-party Communist dictatorship would eventually come to
power in 1948, beginning a period during which “Hungary did not recognize individual property
rights.” (Compl. ¶ 93.) However, in the years between the end of World War II and the start of
Communist rule (1946-1948), the post-war coalition government in Hungary made some effort
to return property confiscated during the Holocaust to its rightful owners.
1
Defendants state that four of the forty-four properties named in plaintiffs’ Complaint are not in
their inventories: “Fair in Szolnok City” by Lajos Deak Ebner (Compl. ¶17(v)), “Four Ancient
Egyptian Sculptures, Statues And Steles” (Compl. ¶ 16(xxxiii)), “A Terracotta Group of The
Virgin and Child” (16xxiii), and “Four ancient silver coins” (16xxxv). The evidence suggests
that at least three of the properties—the Ebner, Egyptian sculptures, and Terracotta Virgin—may
have been returned to the Herzog family’s custody in 1947. (See Tatevosyan Decl. at Exs. 12,
14, 15.) The present whereabouts of these pieces of art is unknown from the record.
4
The parties dispute how much of the art collection seized from the cellars of the Herzog
factory was actually returned to the family. As best as the Court can determine, fifteen of the
properties seized during the Holocaust were, at least temporarily, physically transferred into the
custody of the Herzog family members or their legal representatives in the late 1940s. (See
Tatevosyan Decl. at Exs. 7, 9, 10, 11, 14, 15.) All of these transfers occurred in Budapest.
Pursuant to multiple customs and smuggling laws from the 1920s prohibiting the export of
cultural patrimony, 2 the transfers were conditioned upon the explicit agreement that the paintings
remain in Hungary. (See id. at Ex. 18 (letter from Ministerial Commissioner Sandor Jeszensky
about the release of Herzog paintings noting that the “handover protocol” requires “that the art
works in question may not…be removed from the country’s territory”).) Indeed, in every known
instance in which art from the Herzog Collection was physically returned to the family, the art
was handed over in Budapest and has remained there. (See id. at Exs. 44, 45, 49.) Plaintiffs
concede that no member of the Herzog family has ever asked Hungary to return art to the United
States. (See Hearing Transcript, Dec. 2, 2015 [ECF No. 118] (“Hearing Transcript”), at 29.)
Ten additional artworks at issue in the Complaint appear to have been legally released to
the family on paper, but plaintiffs dispute whether they were ever actually returned to their
physical custody. (Opp’n at 8 (stating that “these ‘returns’ were largely on paper or short-lived,
and the vast majority of the Herzog Collection either remained in, or was ultimately returned to,
Defendants’ possession”); Tatevosyan Decl. at Exs. 8, 12, 18.) Defendants agree that at least
some of the properties that Hungary released to Herzog ownership were never physically handed
2
See Hungarian Act XIX of 1924 on Customs Law Regulations, Act, Smuggling of Prohibited
Goods, Ch. II, § 164; Act XI of 1929, The Exploration of Movable Artifacts and Other Objects
for Museum Display and Their Protection, Ch. III, § 26 (restricting the export of certain items of
cultural significance).
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over to plaintiffs or their family members. (Defs.’ Ren. Mot. at 7 (citing Tatevosyan Decl. at Ex.
17).) Plaintiffs have produced compelling documentary evidence suggesting why many of these
“paper releases” were never consummated. The financial burden of accepting and removing the
art to other countries was enormous. A December 9, 1947 Report by the Ministerial
Commissioner in charge of repatriating art collections to Hungary discusses the return of
privately owned artworks from Germany on the so-called “Art Treasure Train and the Silver
Train” in the following way:
At acceptance, the owners are obliged to pay a duty fee of 11 per cent of the value of the
privately owned artworks returned from Germany. It is understandable that the owners of
larger collections and artworks of higher value do not hurry to take out their artworks,
knowing that such items are in a good place. Thus, I still have 192 artworks in my
custody from the consignments of the Art Treasure Train and Silver Train.
(Pls.’ Opp’n, Declaration of Alycia Benenati (“Benenati Decl. II”), Ex. 6.) For those owners
who fled the Holocaust and made their new home outside the country—such as Erzsébet,
András, and their heirs—they would not only have to pay this “repatriation duty” but also an
exorbitant fee to obtain an export license. (See Tatevosyan at Ex. 18 (“According to legislation
in force…[and] latest practice, export permits are issued by the National Bank, based on the
estimate of the Museum of Fine Arts, in which case 40% of the estimated value [of the painting]
is payable for the export permit.”) Not surprisingly, this resulted in many Herzog artworks
remaining in the custody of Hungarian museums. In a memorandum dated November 10, 1947,
Dr. Gyula Ortutay, the Minister of Religion and Public Education, wrote that several pieces of
the Herzog Collection had recently been returned to Hungary from Germany, but notes that “the
artworks could only be released [to the owners] in return for the repatriation duty” and that all
but two of the pieces “remain in the care of the office of the ministerial commission to this day.”
(Pls.’ Opposition to Second Motion to Dismiss, July 25, 2014 [ECF No. 89], Declaration of
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Alycia Benenati (“Benenati Decl. I”), Ex. D.); see also Tatevosyan Decl. at Ex. 12 (museum
document categorizing Greco and Santi paintings as having been “released” but still in
museums’ custody because “repatriation duty has not yet been paid”), Ex. 18 (Memorandum
from Ministerial Commissioner stating that, while he returned certain Herzog paintings upon
payment of the repatriation duty, others “remain in my custody”).
In some cases, Hungary appears to have used the repatriation and export fees as leverage
to pressure the Herzogs into depositing or even donating certain artworks to the museums. (See
Benenati Decl. I at Ex. F (1948 memorandum from Ministerial Commissioner Jeszensky writing
that his office had “found a solution under which it is able to place works from the Herzog
collection at the disposal of the Museum of Fine Arts, as a temporary deposit, for the purpose of
exhibiting them”); Tatevosyan Decl. at Ex. 18 (“Director General István Genthon also has a
confidential suggestion whereby the export of the Herzog art works that are to be returned might
be permitted if the painting entitled ‘Christ on the Mount of Olives’ by Greco was donated to the
Museum of Fine Arts.”).) Many of the Herzog properties retained by Hungary are now listed in
the museums’ “Deposit” rather than “Core” inventories. (Tatevosyan Decl. at Ex. 1.)
Most of the artworks that Hungary did temporarily return to the Herzog family were
subsequently re-seized by Hungary in 1952 as part of a criminal action. After allegedly
discovering that the former wife of István Herzog (Ilona Kiss) had attempted to illegally smuggle
Herzog art out of the country in 1948, the Communist regime prosecuted Kiss, resulting in
forfeiture proceedings. In all, twenty artworks were seized by the state, fifteen of which are at
issue in this lawsuit. (See id. at Exs. 19-21, 77.) Hungary claims to own these properties as a
result of a legal criminal seizure. After the smuggling action, Hungary halted the return of
additional artworks to the Herzog heirs or their representatives. (See id. at Ex. 22.)
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Although Hungary appears to have retained a substantial portion of the Herzog art in a
custodial role on behalf of the family, there is evidence of one express bailment agreement,
wherein a Herzog heir directly contracted to deposit art with a museum. In a letter dated May 3,
1950, an attorney named Dr. Emil Oppler offered a list of paintings, including ten pieces of art
named in the Complaint, on behalf of Erzsébet Herzog for deposit with the Museum of Fine Arts
in Budapest. (See id. at Ex. 23.) An actual “deposit contract” seems to have been finalized,
signed, and delivered by a different Herzog attorney (Henrik Lorant) on March 30, 1951. (See id.
at Ex. 63.)
Thus, of the forty artworks in this lawsuit that defendants still possess, the properties
appear to fall into roughly four categories: (1) art acquired by defendants after the Holocaust; (2)
art confiscated during the Holocaust that was never returned to plaintiffs; (3) art confiscated
during the Holocaust that was returned to plaintiffs, and then subsequently seized back by
criminal forfeiture; and finally, (4) art confiscated during the Holocaust that was returned to
plaintiffs, and then subsequently deposited with the museums by the 1950 bailment agreement.
Over the last few decades, the Herzog heirs have sought to recover art from the Herzog
Collection from Hungary (some of it at issue in this lawsuit and some not). In 1989, Erzsébet
Herzog (who was then Elizabeth Weiss de Csepel) requested that the Museum of Fine Arts
return certain paintings to her. The Museum agreed to hand over the paintings in Budapest, but
under a preservation order such that the paintings could not leave the country—and to this day,
they remain in Hungary. (See Tatevosyan Decl. at Ex. 44; Hearing Transcript at 35.) In 1998,
Julia Herzog (heir of András) wrote to the Museum of Fine Arts from Rome, Italy to request that
several artworks not named in the Complaint be returned to her so that she could keep them in
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her Budapest apartment. (Id. at Ex. 47.) The artworks requested by Julia were apparently never
returned. (Hearing Transcript at 27.)
In 1999, Martha Nierenberg (daughter of Erzsébet) filed a lawsuit in Hungary seeking the
return of certain artworks once inherited by her mother, many of which are at issue in the present
lawsuit. In her complaint, Nierenberg claimed full ownership of all twelve artworks at issue in
the 1999 lawsuit and separately identified additional artworks in the Herzog Collection that she
attributed to her siblings. To ensure that the interests of all three Herzog siblings were
adequately represented, the heirs of István and András Herzog were brought into the lawsuit as
co-defendants. Despite the fact that their property interests had been identified in Nierenberg’s
complaint, the other heirs declined to litigate their claims. (Id. at Ex. 54.) In 2003, defendants
returned one piece of art sought in her complaint to Nierenberg’s representative in Budapest,
with the instruction that a preservation order was placed on the painting to ensure that it would
not be removed from Hungary. (Id. at Ex. 49.) In 2008, however, the Hungarian Metropolitan
Appellate Court dismissed Nierenberg’s claim for the remaining eleven artworks in its entirety. 3
II. FOREIGN SOVEREIGN IMMUNITIES ACT
Under the Foreign Sovereign Immunities Act, “a foreign state shall be immune from the
jurisdiction of the courts of the United States” unless one of several enumerated exceptions
applies. 28 U.S.C. § 1604. Plaintiffs rely on the statute's “expropriation” and “commercial
activity” exceptions to establish subject matter jurisdiction over their claim.
The expropriation exception abrogates sovereign immunity in any case where “rights in
property taken in violation of international law are in issue” and “that property or any property
3
It is unclear why plaintiffs’ Complaint only includes ten of the eleven pieces of art that were
subject to the Nierenberg lawsuit.
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exchanged for such property is owned or operated by an agency or instrumentality of the foreign
state and that agency or instrumentality is engaged in a commercial activity in the United States.”
28 U.S.C. § 1605(a)(3). The commercial activity exception abrogates sovereign immunity in any
case
in which the action is based upon [i] a commercial activity carried on in the United States
by the foreign state; or [ii] upon an act performed in the United States in connection with the
commercial activity of the foreign state elsewhere; or [iii] upon an act outside the territory of
the United States in connection with a commercial activity of the foreign state elsewhere that
causes a direct effect on the United States.”
28 U.S.C. § 1605(a)(2).
III. 1947 AND 1973 TREATIES
After World War II, Hungary and the Allies entered into a Peace Treaty in 1947. Treaty
of Peace with Hungary (1947 Treaty), Feb. 10, 1947, 61 Stat. 2065, 41 U.N.T.S. 135. The 1947
Treaty is an “international agreement[ ] to which the United States [was] a party at the time of
the enactment of” the FSIA in 1976. 28 U.S.C. § 1604. The treaty settled a number of issues
arising out of wartime hostilities, covering topics as varied as the location of Hungary's post-war
frontiers and the regulation of Hungarian railway rates. See 1947 Treaty at Arts. 1, 34. The
Treaty also contained provisions addressing the payment of compensation for (or the restoration
of) property rights and interests seized by the Hungarian government during World War II.
Article 26 pertained to property rights and interests formerly held by non-Hungarian nationals
and Article 27 addressed “persons under Hungarian jurisdiction” or Hungarian nationals. Id. at
Art. 27(1). It provided:
Hungary undertakes that in all cases where the property, legal rights or interests in
Hungary of persons under Hungarian jurisdiction have, since September 1, 1939, been
the subject of measures of sequestration, confiscation or control on account of the racial
origin or religion of such persons, the said property, legal rights and interests shall be
restored together with their accessories or, if restoration is impossible, that fair
compensation shall be made therefor[e].
(Id.)
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On March 6, 1973, the United States and Hungary entered into an executive agreement.
See Agreement Between the Government of the United States of America and the Government of
the Hungarian People's Republic Regarding the Settlement of Claims, March 6, 1973, 24 U.S.T.
522 (the “1973 Agreement”). The 1973 Agreement provided that, in exchange for the lump sum
payment of $18,900,000 by Hungary, there would be a “full and final settlement and ... discharge
of all claims of the Government and nationals of the United States against the Government and
nationals of the Hungarian People's Republic which are described in this Agreement.” Id. at Art.
1, § 1. The 1973 Agreement addressed four categories of claims, including “property, rights and
interests affected by Hungarian measures of nationalization, compulsory liquidation,
expropriation or other taking on or before the date of this Agreement” and “obligations of the
Hungarian People's Republic under Articles 26 and 27 of the Treaty of Peace between the United
States and Hungary dated February 10, 1947.
IV. HUNGARIAN LAWS
The Court has taken judicial notice of two Hungarian laws that remained in force
throughout the relevant time frame of this case. 4 First, Act XIX of 1924 on Customs Law
Regulations subjects the following individuals to criminal liability:
4
See Hungarian Act XIX of 1924 on Customs Law Regulations, Act, Smuggling of Prohibited
Goods, Ch. II, § 164; Act XI of 1929, The Exploration of Movable Artifacts and Other Objects
for Museum Display and Their Protection, Ch. III, § 26 (restricting the export of certain items of
cultural significance).
The Court took judicial notice of these laws pursuant to Federal Rule of Evidence 201. (See
Order, Sept. 1, 2011 [ECF No. 34] (granting in part and denying in part defendants’ Motion for
Judicial Notice of Documents and Facts, Feb. 15, 2011 [ECF No. 14]).) The Court now
concludes that Rule 201 was not the proper vehicle for seeking judicial notice of foreign laws;
however, it takes judicial notice that the aforementioned laws appear as Hungarian legislation,
pursuant to Rule 44.1 of the Federal Rules of Civil Procedure. See Advisory Committee Notes,
Fed. R. Evid. 201(a) (“Judicial notice of matters of foreign law is treated in Rule 44.1 of the
Federal Rules of Civil Procedure.”)
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a) any person who, despite prohibition, wilfully transports customable or custom-free
goods, the import, export, or transport of which is prohibited, across the customs border
by surpassing the customs office or the customs guard officers, or by false declaration of
goods, or by deceiving the customs office or the customs guard officers…
c) any person who, despite export prohibition, wilfully fails to return to the customs area
within the required time any goods, whether subject to customs duty or duty-free, that are
subject to export prohibition but permitted to leave the country in the course of return-
voucher or pre-registration procedures… In addition to the fines, the confiscation of the
goods shall also be ordered, regardless whether such goods are owned by the convict or
someone else.
Act XIX of 1924 on Customs Law Regulations, Act Ch. 2, Smuggling of Prohibited Goods,
§ 164.
Second, the 1929 Hungarian Act XI covers The Exploration of Movable Artifacts and
Other Objects for Museum Display (Collection, Excavation, Etc.) and Their Protection. It
mandates that “relics originating from Hungary or those significant with regards to the history of
the Hungarian nation” must be specially registered, and may “only be exported from the territory
of the country with the prior permission of the Council or the body assigned in a decree.” Id.,
Ch. III, § 26. Individuals may apply for an export permit for a given object, but for those
culturally important objects requiring registration, “the export permit may be denied without
reasoning…[and] the movable may be redeemed for some national or other public collection.”
Id. Moreover, even if the export permit for a specially classified movable is issued, the licensee
is required to pay an export fee to the National Fund of Public Collections. Id. Section 44 of the
Defendants have also moved for judicial notice of six additional Hungarian laws relating to
customs restrictions on the export of cultural patrimony and Hungarian contract law. (Motion to
Take Judicial Notice of Hungarian Laws, May 18, 2015 [ECF No. 107].) Defendants’ apparent
purpose in offering these laws is to inform the Court’s analysis under the FSIA’s commercial
activity exception as to the alleged bailment agreements between Hungary plaintiffs. Because all
six of these laws were passed after the alleged bailment agreements were executed, the Court
denies defendants’ motion on grounds of relevance.
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1929 law subjects any individual violating the terms of Section 26 to the criminal penalties for
smuggling enumerated in Act XIX of 1924. Id., Ch. VI, § 44.
V. PROCEDURAL HISTORY
In 2010, plaintiffs commenced this lawsuit, and on September 1, 2011, this Court
sustained jurisdiction under the expropriation exception to the FSIA, 28 U.S.C. § 1605(a)(3). De
Csepel, 808 F. Supp. 2d at 132-33. It noted that “defendants do not dispute that ‘rights in
property’ . . . are ‘in issue.’” Id. at 128. It further found that plaintiffs had sufficiently alleged in
their Complaint that the “the Herzog Collection was taken in violation of international law”
when “the Hungarian government, in collaboration with the Nazis, discovered the hiding place
[of the Collection] and confiscated its contents.” Id. at 129, 131. Finally, it held that there was a
“commercial activity nexus between the foreign state . . . that owns or operates the property at
issue and the United States.” Id. at 131-32. The Court did not reach the question of whether it
had jurisdiction under the commercial activity exception to the FSIA. Id. at 133 n.4.
The D.C. Circuit affirmed this Court’s jurisdictional holding on alternative grounds and
held that “the family’s claims fall comfortably within the FSIA’s commercial activity
exception.” De Csepel, 714 F.3d at 598. In assessing the commercial character of the alleged
bailment agreements between the Herzogs and Hungary, the D.C. Circuit found that a bailment is
a form of a contract, and “a foreign state’s repudiation of a contract is precisely the type of
activity in which a private player within the market engages.” Id. at 599 (citations omitted).
Thus, Hungary’s repudiation of the bailment agreements as to the Herzog Collection constituted
an act taken in connection with a commercial activity. In addition, by “drawing all reasonable
inferences from the Complaint in the family’s favor,” the Circuit Court concluded that plaintiffs
had adequately alleged that Hungary’s repudiation of the bailment agreement caused a direct
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effect in the United States. Id. at 601 (“Although the complaint never expressly alleges that the
return of the artwork was to occur in the United States, we think this is fairly inferred from the
complaint's allegations that the bailment contract required specific performance – i.e., return of
the property itself – and that this return was to be directed to members of the Herzog family
Hungary knew to be residing in the United States.”).
The appellate decision also took up defendants’ arguments that the FSIA’s treaty
exception deprived the courts of subject matter jurisdiction. The panel reasoned that the Herzog
family’s claims fell outside the scope of the 1947 Peace Treaty and 1973 Agreement—while the
treaties govern claims relating to takings during World War II, “the family’s claims rest not on
war-time expropriation but rather on breaches of bailment agreements formed and repudiated
after the war’s end.” Id. at 602. Accordingly, the panel determined that neither the Peace Treaty
nor the 1973 Executive Agreement between Hungary and the United States negated subject
matter jurisdiction. The Circuit therefore affirmed this Court’s judgment “without ruling on the
availability of the expropriation exception.” Id. at 598.
Thereafter, this Court entered a Scheduling Order setting forth deadlines for document
discovery, fact witness depositions, and expert discovery. (Order, Dec. 9, 2013 [ECF No. 82].)
Prior to the conclusion of fact discovery, defendants filed a second motion to dismiss for want of
subject matter jurisdiction. (Defs.’ Second Mot. to Dismiss, May 14, 2014 [ECF No. 86].)
Defendants argued that, based on the documentary evidence produced to date, plaintiffs had not
met their burden of production as to two elements of the commercial activity exception. After
considering the briefs filed by the parties, this Court denied the motion without prejudice in order
to allow plaintiffs to engage in additional fact discovery. See De Csepel, 75 F. Supp. 3d at 386-
87. The Court authorized Hungary to renew its motion to dismiss after plaintiffs had had an
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opportunity to conduct depositions that “could produce [facts] that would affect [the Court’s]
jurisdictional analysis.” Id. at 387; see also Al Maqaleh v. Hagel, 738 F.3d 312, 325 (D.C. Cir.
2013) (A “district court has discretion to allow discovery if it could produce [facts] that would
affect [its] jurisdictional analysis”). In its opinion, the Court also directed the parties to “address
fully the validity of the Court’s prior holding that the expropriation exception provides subject
matter jurisdiction,” which the D.C. Circuit had not addressed. Id. at 387 (“Notwithstanding a
request for supplemental briefing, defendants have provided little reason for this Court to change
its original conclusion that the seizure of the Herzog Collection during World War II brings
plaintiffs' claims under the expropriation exception.”).
Following the close of fact discovery, defendants renewed their motion to dismiss,
arguing that neither the expropriation exception nor the commercial activity exception applied to
plaintiffs’ claims. Plaintiffs filed an Opposition, defendants filed their Reply (Defendants’ Reply
in Support of their Motion to Dismiss, July 9, 2015 [ECF No. 112] (“Defs.’ Reply”)), and
plaintiffs were allowed to file a Sur-Reply in order to respond to defendants’ new argument that
none of the Hungarian museums holding the Herzog art qualified as an “agency or
instrumentality” of a foreign state as required by Section 1605(a)(3) of the FSIA. (Pls.’ Sur-
Reply, July 17, 2015 [ECF No. 115].)
The Court heard arguments on December 2, 2015, and ordered supplemental briefing on
three issues: (1) whether artwork legally released to plaintiffs after World War II could still
qualify as property “taken in violation of international law” under Section 1605(a)(3) of the
FSIA; (2) whether post-war seizures of art by Hungary’s Communist government could qualify
as independent takings under the expropriation exception; and (3) whether, under recent
Hungarian laws or regulations issued since 2013 that establish compensation programs for
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takings during World War II, any claimants have recovered property pursuant to those programs,
how many Jewish claimants have recovered property pursuant to those programs, and whether
Hungary permitted any such recovered artwork to be removed from the country. (Order, Dec. 2,
2015 [ECF No. 117].)
Plaintiffs claim subject matter jurisdiction under both the FSIA’s commercial activity and
expropriation exceptions, and the Court has elected to consider both grounds anew for a number
of reasons. First, the Court is now in a position to evaluate the factual basis of commercial
activity jurisdiction, given the extensive record of evidence obtained during discovery. Although
the D.C. Circuit has already found jurisdiction under that exception, it did so by drawing factual
inferences from the Complaint, which have now been challenged by defendants based on facts
developed during discovery. Second, the D.C. Circuit’s 2016 decision in Simon v. Hungary, 812
F.3d 127 (D.C. Cir. 2016), has provided controlling authority regarding the FSIA’s expropriation
exception. Like this case, the Simon litigation involves individuals who allege property seizures
by Hungary during the Holocaust, and the D.C. Circuit’s ruling addressed the same treaty
preclusion and exhaustion arguments raised here. Given this important precedent and the
development of a far more robust factual record, the Court is better able to scrutinize the two
relevant statutory exceptions to the FSIA to determine whether it has subject matter jurisdiction
over plaintiffs’ claim.
ANALYSIS
I. STANDARD OF REVIEW
At the outset, the Court addresses the standards by which it assesses whether, following
fact discovery, plaintiffs’ claims fall within the terms of either statutory exception.
When a foreign sovereign attacks the factual basis for subject matter jurisdiction under
one of the statute’s exceptions, “the court may not deny the motion to dismiss merely by
16
assuming the truth of the facts alleged by the plaintiff and disputed by the defendant.” Phoenix
Consulting Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000). It must, instead, “go
beyond the pleadings and resolve any disputed issues of fact the resolution of which is necessary
to a ruling upon the motion to dismiss.” Price v. Socialist People’s Libyan Arab Jamahiriya,
389 F.3d 192, 197 (D.C. Cir. 2004) (citation omitted). The Court “retains considerable latitude
in devising the procedures it will follow to ferret out the facts pertinent to jurisdiction.” Phoenix
Consulting, 216 F.3d at 40.
To the extent a defendant disputes the factual predicate for subject matter jurisdiction
under one of the FSIA’s exceptions, the plaintiff bears the burden of production to demonstrate
evidence of jurisdiction. See Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734 F.3d
1175, 1183 (D.C. Cir. 2013) (recognizing that “the plaintiff bears the initial burden to overcome
by producing evidence that an exception applies”); Agudas Chasidei Chabad of U.S. v. Russian
Federation, 528 F.3d 934, 940 (D.C. Cir. 2008). The burden of persuasion, however, “rests with
the foreign sovereign claiming immunity, which must establish the absence of the factual basis
by a preponderance of the evidence.” Chabad, 528 F.3d at 940.
In FSIA cases where the plaintiff’s claim on the merits directly mirrors the jurisdictional
standard, the plaintiff need only show that its claim is “non-frivolous” at the jurisdictional stage
and need not definitively prove its claim as it would at the merits stage. See Simon, 812 F.3d
at141 (citing Bell v. Hood, 327 U.S. 678, 682 (1946)). For example, where plaintiffs bring a
basic expropriation claim asserting that its property had been taken without just compensation in
violation of international law, that same showing is necessary to establish jurisdiction under the
FSIA’s expropriation exception. See, e.g., Helmerich & Payne Int'l Drilling Co. v. Bolivarian
Republic of Venezuela, 784 F.3d 804, 812 (D.C. Cir. 2015); Chabad, 528 F.3d at 938; see also
17
Restatement (Third) of the Foreign Relations Law of the United States § 712(1) (Am. Law Inst.
1987). When, however, the jurisdictional and merits inquiries do not overlap, there is no
occasion to apply the “exceptionally low bar” of non-frivolousness at the jurisdictional stage.
Helmerich, 784 F.3d at 812. Thus, when facts independent of the necessary elements of a
plaintiff’s substantive cause of action must be established, courts “ask for more than merely a
non-frivolous argument…[and] assess whether the plaintiffs' allegations satisfy the jurisdictional
standard.” Simon, 812 F.3d at 141.
In this case, neither the expropriation exception nor the commercial activity exception
directly mirrors plaintiffs’ claims, as both jurisdictional hurdles require elements independent of
their substantive causes of action. Expropriation jurisdiction and plaintiffs’ cause of action are
separate. As in Simon, plaintiffs assert property taken in violation of international law “only to
give rise to jurisdiction under the FSIA's expropriation exception,” not to establish liability on
the merits. Id. By contrast, the commercial activity exception and plaintiffs’ substantive claims
share one common element—both require the existence of bailment agreements; however, to
satisfy the commercial activity exception, plaintiffs must provide a factual basis for a “direct
effect on the United States” caused by Hungary’s repudiation of the commercial agreement, a
showing that bears solely on jurisdiction under § 1605(a)(2). Plaintiffs therefore benefit from the
more forgiving “non-frivolous” standard only as to demonstrating the existence of bailment
agreements with Hungary.
II. COMMERCIAL ACTIVITY EXCEPTION
Plaintiffs first argue that their claim falls within the FSIA’s commercial activity
exception to immunity. The commercial activity exception is divided into three alternative
clauses, any of which is grounds for jurisdiction: a foreign state is not immune from suit in any
18
case “in which the action is based upon” (1) “a commercial activity carried on in the United
States by the foreign state;” (2) “an act performed in the United States in connection with the
commercial activity of the foreign state elsewhere;”; or (3) “an act outside the territory of the
United States in connection with a commercial activity of the foreign state elsewhere that causes
a direct effect on the United States.” 28 U.S.C. § 1605(a)(2).
A. First and Second Clauses
Not surprisingly, plaintiffs have never before invoked either of the first two clauses as
bases for jurisdiction. Now, however, they belatedly argue that their claims are based upon
commercial acts in the United States and offer the first two clauses as alternative grounds for
jurisdiction. Neither basis has merit.
To satisfy either of the first two clauses of the commercial activity exception, a plaintiff’s
cause of action must be based upon acts in the United States. The Supreme Court first addressed
the meaning of “based upon” in the commercial activity exception in Saudi Arabia v. Nelson,
507 U.S. 349 (1993), where an American couple brought a tort action against the Saudi
government for false imprisonment outside the U.S., but argued that, because the Saudis
recruited and hired Nelson within the country to work in a hospital, the action was based upon
domestic acts. The Court rejected plaintiffs’ argument, and instead, narrowly interpreted “based
upon” to signify “those elements of a claim that, if proven, would entitle a plaintiff to relief
under his theory of the case.” Id. at 349. The phrase “requires something more than a mere
connection with, or relation to, commercial activity.” Id.; see also OBB Personenverkehr AG v.
Sachs, 136 S. Ct. 390, 392 (2015) (citing Nelson to emphasize that the commercial acts must
form the “gravamen of the complaint”). The D.C. Circuit has consistently applied Nelson’s
interpretation of “based upon.” See Odhiambo v. Republic of Kenya, 764 F.3d 31, 36-38 (D.C.
19
Cir. 2014) (rejecting plaintiff’s argument for jurisdiction under both of the first two clauses of
the commercial activity exception, because the cause of action was based on an extraterritorial
breach of contract and the only commercial acts inside the country were unnecessary to his
claim); see also Goodman Holdings v. Rafidain Bank, 26 F.3d 1143, 1145-46 (D.C. Cir. 1994)
(holding, based on Nelson, that the fact that plaintiff kept his money in banks within the U.S. was
only collaterally related to his cause of action for dishonoring a letter of credit).
Plaintiffs’ actual cause of action is not based upon Hungary’s solicitation of U.S. tourists
or other limited activities in the U.S., as they now assert (Pls.’ Opp’n at 43-44), but on the post-
war bailments and actions that took place in Hungary. Moreover, plaintiffs’ own statements
contradict their new argument. (See id. at 27 (asserting that “discovery has only confirmed that
Plaintiffs’ claims are ‘based upon’ Defendants’ repudiation of various post-war bailment
agreements”); De Csepel, 714 F.3d at 598 (quoting plaintiffs’ insistence that their cause of action
consists of “nothing more than straightforward bailment claims”).) Plaintiffs emphasize that
their Complaint asserts claims for conversion, constructive trust, accounting, and unjust
enrichment, but “every one of [these] other substantive claims…appears to stem from the alleged
repudiation of the bailment agreements.” De Csepel, 714 F.3d at 598. As the D.C. Circuit has
made plain, plaintiffs’ cause of action is based on bailments allegedly formed outside the U.S.
and breached outside the U.S. Under Nelson, the fact that Hungary’s museums also engage in
commercial activity in the U.S. is not sufficiently tethered to the “gravamen” of plaintiffs’ claim
for either of the first two clauses of the commercial activity exception to apply. 5
5
The only case plaintiffs offer in support of their overbroad interpretation of “based upon” is a
Ninth Circuit decision which pre-dates the Supreme Court’s opinions in Nelson and Sachs. See
Siderman de Blake v. Republic of Argentina, 965 F.2d 699 (9th Cir. 1992).
20
B. Third Clause—Direct Effect
To satisfy the third clause of the commercial activity exception, a plaintiff’s claim must
be based upon a commercial act outside the U.S. that “causes a direct effect on the United
States.” 28 U.S.C. § 1605(a)(2). Defendants do not dispute that Hungary’s actions took place
outside the United States, nor do they quarrel with the D.C. Circuit’s conclusion that bailment
agreements are commercial acts. They contend, instead, that evidence produced during
jurisdictional discovery demonstrates a conspicuous absence of any possible direct effect that
such alleged bailments could have had on the United States. The D.C. Circuit found such a
direct effect by “fairly inferring” from the Complaint’s bare allegations that the alleged bailment
agreements required specific performance in the United States—in this case, delivery of the
bailed artwork to the Herzogs living in the United States. Because defendants have attacked the
factual basis of that inference, this Court must “go beyond the pleadings and resolve any
disputed issues of fact the resolution of which is necessary to a ruling upon the motion to
dismiss.” Price, 389 F.3d at 197 (citation omitted).
In Odhiambo v. Republic of Kenya, the D.C. Circuit recently held that “this Court’s cases
draw a very clear line…breaching a contract that establishes or necessarily contemplates the
United States as a place of performance causes a direct effect in the United States, while
breaching a contract that does not establish or necessarily contemplate the United States as a
place of performance does not.” 764 F.3d at 40 (emphasis added). It is therefore not strictly
necessary for a contract to expressly designate the U.S. as a place of performance, as long as the
parties clearly understood it at the time the contract was executed. The Odhiambo Court
clarified the rule by discussing its application in the Circuit’s prior decision in this case:
“Hungary’s knowledge—from the moment the bailment agreement was formed—that
21
performing its contractual obligations would require it to return the artwork to owners in the
United States was crucial to the [De Csepel] Court’s finding of a direct effect.” Id.
The relevant question then is whether Hungary and the plaintiffs formed any bailment
agreements that “necessarily contemplate[d]” the U.S. as the place of performance. In other
words, did Hungary agree to any bailments that obligated Hungary—either explicitly or
implicitly—to return artwork to Herzog heirs in the United States?
The group of family members who resided in the United States is limited to Erzsébet
Herzog (who moved to the U.S. in 1946) and her heirs. 6 It is not enough for a bailment breach to
have simply caused financial injury to Erzsébet or one of her American heirs while they resided
in the United States; on the contrary, the original agreement itself must have obligated Hungary
to deliver the art (or compensation) across the ocean. See Zedan v. Kingdom of Saudi Arabia,
849 F.2d 1511, 1514 (D.C. Cir. 1988) (finding there was no direct effect in breach of contract
with American citizen employed abroad); Allen v. Russian Federation, 522 F. Supp. 2d 167,
189-90 (D.D.C. 2007). The universe of possible bailment contracts that could have plausibly
envisioned performance in the United States is thus relatively narrow: agreements by which
Hungary accepted art inherited by Erzsébet, agreements by which Hungary thought it was
accepting art inherited by Erzsébet, or agreements by which Hungary accepted art inherited by
6
András and his heirs settled in Italy, but plaintiffs point out that two of István’s heirs became
United States citizens in 1998 and assigned all of their rights in the litigation to the American
plaintiffs in 2008. These facts are irrelevant for all possible bailments here. The relevant inquiry
is the place of performance contemplated at the time of an agreement. It does not matter that
certain plaintiffs (or their ownership rights) migrated to the United States following bailment
formation.
22
other Herzogs, but nevertheless incurred an obligation to return the artwork to the Herzogs who
resided in the United States. 7
Plaintiffs have produced at least some evidence that thirty-three of the forty-four artworks
in the Complaint are being held by Hungary in a custodial role, so they may be subject to some
form of bailment. For twenty-three of those thirty-three artworks, however, the evidence of
bailment is, at best, circumstantial. (See, e.g., Tatevosyan Decl. at Ex. 1 (Herzog properties
listed in the museums’ “deposit” inventories, suggesting the pieces were loaned); id. at Ex. 13
(government memorandum referring to Herzog artwork “safeguarded” by the government); id. at
Ex. 64 (letter to Hungarian minister listing Herzog pieces being transported to museums as a
“temporary deposit”); Benenati Decl. II at Ex. 8 (Hungarian archives, listing Herzog artworks as
7
Plaintiffs argue that, at the jurisdictional stage, the Court’s inquiry should be holistic, rather
than piecemeal. (Pls.’ Opp’n at 37-38.) According to plaintiffs, defendants have sometimes
ignored the divisions of individual ownership and treated the Herzog Collection as a single
entity, so the Court should not analyze the properties piece-by-piece. In the context of the
commercial activity exception, they maintain that any bailment involving Herzog art should
qualify because Hungary allegedly understood, as a general matter, that some members of the
Herzog family resided in the United States. (Id. at 2 (arguing that defendants’ act had a direct
effect on all Herzog heirs, whatever their citizenship, because “they affected their heirs
collectively”).
Under both the law and the facts of this case, the Court finds the holistic approach to make
little sense. When the facts have warranted it, courts have applied the FSIA’s statutory
exceptions to separate events and arrangements impacting a unitary group of property, even
where individual books, paintings, or other properties may arguably constitute a single
“collection.” See, e.g., Chabad, 528 F.3d at 938-39 (where a collection of rabbinical scholarship
and books were at issue, the court separately analyzed the “Library” part and the “Archive” part
of the collection because the two portions were confiscated years apart and under different
circumstances). Second, plaintiffs have admitted that the individual artworks at issue in this case
were split up among the three siblings in 1940 and have identified precisely which siblings
inherited each artwork. (See Tatevosyan Decl. at Ex. 5.) The Herzog Collection has not enjoyed
a unified history of seizure, bailment, and custodial transfer. Each artwork (not to mention each
bailment) has followed a different fact pattern.
For purposes of commercial activity jurisdiction and the ‘direct effect’ test, it would be
nonsensical to ignore that certain paintings and bailments—by virtue of the residency of their
owners—may have plausibly required Hungary to return the art to United States, while others
could not.
23
“deposited in the custody of the Office of the Ministerial Commissioner”).) Although this type
of evidence may suggest that the twenty-three artworks are being held as constructive bailments,
the Court has no evidence upon which to find an express or implied contractual agreement that
contemplated performance in the United States. 8 The fact that defendants hold certain paintings
from the Herzog Collection on deposit is simply not enough to infer a direct effect on the United
States.
In contrast, ten artworks from the Complaint are named in an express bailment dated May
3, 1950, in which Dr. Emil Oppler offered eighteen works of art on behalf of Erzsébet Herzog for
deposit with the Museum of Fine Arts in Budapest. 9 (Tatevosyan Decl. at Ex. 23.) The 1950
Oppler bailment constitutes the only evidence in the record of an express deposit contract. In
addition, it only involves Erzsébet Herzog, who was already living in the United States in 1950,
although she would not become a U.S. citizen until 1952, and it is unclear whether all ten of the
pieces were actually owned by Erzsébet at the time of the agreement. 10
Nothing in any of the documents relating to the 1950 bailment mentions a place of
performance, a method of returning the art, the United States, or anything about Erzsébet’s
domicile. Nor would Hungary have had any reason to understand such a performance obligation
to be implied. On the contrary, all relevant evidence in the record suggests that the Museum of
8
The Court is unaware of any legal precedent finding jurisdiction under the FSIA’s commercial
activity exception without any evidence of an actual agreement or contract, and plaintiffs’
counsel was unable to offer such a case during oral argument. (Hearing Transcript at 25.)
9
Although the Oppler offer of deposit is dated May 3, 1950, and the letters of acceptance from
the government are dated May 19 and May 26, 1950, the actual “deposit contract” appears to
have been finalized, signed, and delivered by a different Herzog attorney named Henrik Lorant
on March 30, 1951. (See Tatevosyan Decl. at Ex. 63.)
10
According to plaintiffs’ interrogatory responses, Erzsébet only owned seven of the ten pieces
from the Complaint that were included in the 1950 bailment. Three of the ten were owned by her
brother András, who never had any connection to the U.S. (See Tatevosyan Decl. at Ex. 5.)
24
Fine Arts likely would have expected performance to occur in Budapest. Under Hungarian law
in 1950, an individual would have been subject to criminal smuggling charges were they to
attempt to export “movable artifacts and other objects for museum display” or “those significant
with regards to the history of the Hungarian nation” out of the country without either purchasing
a license or obtaining special permission from the government. See Hungarian Act XI of 1929,
Ch. 3, On Certain Issues with Regard to Museums, Libraries, and Archives; see also Hungarian
Act XIX of 1924, Ch. 2, On Customs Law Regulations. Upon returning repatriated art to its
rightful owners in the post-war years, Hungary’s standard “handover protocol” included an
instruction prohibiting the owner from removing the art from the country’s territory.
(Tatevosyan Decl. at Ex. 18.)
Performance in Budapest is also perfectly consistent with the customs and practices
established by other transfers of art between Hungary and the Herzog family. The Court finds in
the record eleven separate times that Hungary returned confiscated art to legal representatives of
the family, totaling seventy-seven artworks released back into their custody after World War II
(the vast majority of which is not at issue in the present litigation). In every single instance, the
art was handed over in Budapest.
Most relevant of all is Hungary’s partial performance as to the 1950 bailment agreement
itself. In 1989, Erzsébet requested that the Museum of Fine Arts return to her three of the
eighteen paintings that are named in the 1950 bailment: Adoration of the Magi (Italian, 18th c.),
Adoration of the Shepherds (Italian, 18th c.), and Portrait of a Woman (Dutch, 17th c.). (See
Tatevosyan Decl. at Ex. 23; Hearing Transcript at 35 (plaintiff’s counsel admits that the artworks
“are listed in that same…May 1950 deposit agreement”).) The Director-General of the Museum
responded that an agent could pick up the paintings in Budapest, but that due to the customs
25
regulations and preservation order attached to such artifacts, they could not leave the country.
(See id. at Ex. 44 (“According to your request we will hand over the requested paintings to your
authorized agent in Budapest. Pursuant to the respective legal provisions we put preservation
order on the paintings, therefore the paintings may not be exported but may be sold in
Hungary.”).) Erzsébet apparently did not object, since her attorney picked up the paintings
within two weeks. (See id. at Ex. 45.) In 2003, the Hungarian National Gallery responded to a
request from another American Herzog heir, Martha Nierenburg, by releasing a fourth painting
from the 1950 Bailment (Munkacsy’s “Portrait of Christ”) “under protection by the Office for the
Protection of Cultural Heritage” to Nierenberg’s agent in Budapest. (Id. at Exs. 51, 52; Hearing
Transcript at 35.) None of these four paintings are at issue in this case. However, the two times
that Hungary has responded to a request to perform pursuant to the 1950 bailment, it behaved the
same way it has always behaved when returning art from the Herzog Collection: it handed over
the property in Budapest and instructed the owner not to take it outside Hungary’s borders. In
fact, all four paintings from the 1950 bailment that have been returned still remain in Hungary.
(See Hearing Transcript at 35.)
The 1950 bailment agreement contained no hints regarding Hungary’s future obligations.
But if there was any unspoken understanding at all regarding performance, it is decidedly
implausible that it obligated Hungary to return art to the United States. Given the legal
restrictions on exporting art from the country and the pattern of conduct between Hungary and
the Herzog family (including Erzsébet herself), there is no basis to conclude that either party
understood the bailment as implying such a performance requirement. 11
11
One of the Italian heirs, Angela Herzog (heir of András) admitted in her deposition testimony
that she had “never thought about” whether she would like the art returned to Italy, the United
States, or any other particular destination. (See Defs.’ Ren. Mot., Declaration of Thaddeus J.
26
Plaintiffs’ argument that export remains possible with Hungary’s consent (Pls.’ Opp’n at
40-41) misunderstands the legal standard. The relevant inquiry is whether the agreement
necessarily contemplated the U.S. as the place of performance at the time of contract formation,
not whether the requisite performance is possible after the fact. There is simply not a scintilla of
evidence that Hungary incurred an obligation—implied or express—to return any artwork to the
United States. Moreover, the fact that Hungary has the option, if it wishes, to grant a permit or
consent to export does not help plaintiffs’ case. (See Tatevosyan at Ex. 18 (letter to Hungarian
Minister reiterating that “[a]ccording to legislation in force, in the case of export the state has an
option on [repatriated art]”).) Where “the alleged effect depends solely on a foreign
government’s discretion” in performing upon an agreement, breach of that agreement can have
no direct effect on the United States. Helmerich & Payne v. Bolivarian Republic of Venezuela,
784 F.3d 804, 818 (D.C. Cir. 2015); see also Westfield v. Federal Republic of Germany, 633
F.3d 409, 415 (6th Cir. 2011) (whether the plaintiff planned to demand or move the art to the
United States was irrelevant because the dispositive issue is whether “Germany ever promised to
deliver the art to the United States” or was “obligated itself to do anything in the United States”).
Plaintiffs also maintain that they “always had the ability to request export of their
artworks to the United States.” (Pls.’ Opp’n at 41.) Nobody can stop plaintiffs from requesting
export of their art from Hungary, but it would be just that: a request, not a demand. Nothing in
the deposit agreement legally endowed plaintiffs with any future discretion over the place of
performance. In the cases from other circuits cited by plaintiffs, that is precisely the situation.
Stauber, Ex. 11.) And in fact, Angela and her sister Julia sent a letter in 1998 to the Museum of
Fine Arts requesting that it return various artworks to them. Although the Italians heirs’ request
was ultimately unsuccessful, it specifically noted that they planned to keep the returned paintings
in an apartment in Budapest. (See Tatevosyan Decl. at Ex. 47.)
27
See, e.g., Hanil Bank v. PT Bank Negara Indonesia, 148 F.3d 127, 132 (2d Cir. 1998) (finding
direct effect on the United States where letter of credit gave the plaintiff the discretion to choose
the place for payment); Adler v. Fed. Republic of Nigeria, 107 F.3d 720, 727 (9th Cir. 1997)
(finding direct effect in the United States where agreement gave plaintiff broad discretion to
name any bank for payment); see also DRFP L.L.C. v. Republica Boliviarana de Venezuela, 622
F.3d 513, 517 (6th Cir. 2010) (finding direct effect where “the parties implicitly agreed to leave it
to the bearer to demand payment of the notes anywhere,” including the United States).
There is no question that plaintiffs have presented evidence of express and implied
bailments between the Herzogs and Hungary, some of which involve Herzogs residing in the
United States. But that is not enough for the commercial activity exception to apply. There is no
evidence that the bailment agreements placed any restriction on the mode of Hungary’s
performance at the time of execution; nor any indication that the contractual relationship vested
plaintiffs with any future power to do so. The D.C. Circuit’s prior ruling in this case rested on
the inference that the bailment agreements “required [Hungary] to return the artwork to owners
in the United States.” Odhiambo, 764 F.3d at 40 (construing De Csepel, 714 F.3d at 601). 12 But
the evidence soundly refutes that inference, so the Court cannot find subject matter jurisdiction
under the FSIA’s commercial activity exception.
III. EXPROPRIATION EXCEPTION
This Court ruled in 2011 that plaintiffs’ Complaint alleged a cause of action falling
squarely within the expropriation exception, which abrogates sovereign immunity in any case
12
The De Csepel Court contrasted Hungary’s alleged promise to perform specific obligations in
the United States with a Sixth Circuit case in which the plaintiffs had not alleged that the foreign
state “ever promised to deliver the art collection to the United States.” 714 F.3d at 601 (quoting
Westfield, 633 F.3d at 415).
28
where “rights in property taken in violation of international law are in issue” and “that property
or any property exchanged for such property is owned or operated by an agency or
instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial
activity in the United States.” 28 U.S.C. § 1605(a)(3).
The D.C. Circuit did not address this Court’s conclusion, but its recent decision in Simon
v. Hungary has clarified a number of issues relevant to subject matter jurisdiction under the
expropriation exception. First, a court is not limited to solely those jurisdictional grounds under
the FSIA that overlap with a plaintiff’s substantive claim. In its De Csepel opinion, the Court of
Appeals reasoned that, because “the Herzog family seeks to recover not for the original
expropriation of the Collection, but rather for the subsequent breaches of bailment agreements,”
it was “incumbent upon [the panel] to address Hungary’s jurisdictional challenge in light of the
bailment claims the family actually brings.” 714 F.3d at 598. In Simon, though, the Circuit
found jurisdiction under the expropriation exception even though plaintiff’s substantive claims
against Hungary for acts during the Holocaust were not based on takings. 812 F.3d at 141
(“Here, the plaintiffs’ claim on the merits is not an expropriation claim asserting a taking without
just compensation in violation of international law. The plaintiffs instead seek recovery based on
garden-variety common-law causes of action such as conversion, unjust enrichment, and
restitution. The plaintiffs plead a violation of international laws only to give rise to jurisdiction
under the FSIA's expropriation exception, not to establish liability on the merits.”). The
expropriation exception is therefore not excluded as an available grounds of subject matter
jurisdiction just because plaintiffs do not bring a straightforward takings claim.
Second, Simon joined the Seventh Circuit and other courts in holding that property
seizures from Jews during the Holocaust constitute genocidal takings which violate international
29
law. Such takings, the Simon Court held, “did more than effectuate genocide or serve as a means
of carrying out genocide. Rather, we see the expropriations as themselves genocide.” Id. at 142.
It went on to cite the Circuit’s previous De Csepel opinion to elaborate on its conclusion:
The Holocaust's pattern of expropriation and ghettoization entailed more than
just moving Hungarian Jews to inferior, concentrated living quarters, or seizing
their property to finance Hungary's war effort. Those sorts of actions would not
alone amount to genocide because of the absence of an intent to destroy a people.
The systematic, “wholesale plunder of Jewish property” at issue here, however,
aimed to deprive Hungarian Jews of the resources needed to survive as a people.
Expropriations undertaken for the purpose of bringing about a protected group's
physical destruction qualify as genocide.
Id. at 143 (citing De Csepel, 714 F.3d at 594); see also Abelesz v. Magyar Nemzeti Bank, 692
F.3d 661, 675 (7th Cir. 2012) (holding that, because genocide is universally recognized as a
violation of customary international law, property seizures from Jews during the Holocaust
occupy a special category of takings exempt from sovereign immunity).
As this Court has noted, defendants do not dispute that forty-two of the forty-four
artworks named in the Complaint were originally seized during the Holocaust in furtherance of
the Nazis’ campaign of genocide in Europe, and there is no question that plaintiffs properly
characterized the art takings in their Complaint within the context of genocide. (See, e.g.,
Compl. ¶¶ 1, 59 (noting that it was “the Hungarian government and their Nazi [ ] collaborators”
that “discovered the hiding place” of the Herzog Collection and confiscated the artwork, acting
“as part of a brutal campaign of genocide” against Hungarian Jews.) Indeed, defense counsel
conceded at oral argument that the theory of genocidal takings articulated by the Seventh Circuit
in its 2012 Abelesz case (and now adopted by the D.C. Circuit) could appropriately be applied to
the facts of this case. (See Hearing Transcript at 76-77 (admitting that where property is taken
“in connection with a genocidal act” like the “treatment of the Jewish people during World War
II,” the taking may qualify as a taking in violation of international law). The Court therefore
30
finds that the forty-two paintings that were indisputably seized by the Nazis and Hungary during
World War II were “taken in violation of international law.”
Finally, the Simon ruling forecloses defendants’ treaty preclusion argument as to the 1947
Peace Treaty. The FSIA's baseline grant of immunity to foreign sovereigns is “[s]ubject to
existing international agreements to which the United States [was] a party at the time of
enactment of th[e] Act.” 28 U.S.C. § 1604. That proviso is known as the FSIA's treaty exception.
Under the treaty exception, “if there is a conflict between the FSIA and such an agreement
regarding the availability of a judicial remedy against a contracting state, the agreement
prevails.” De Csepel, 714 F.3d at 601 (quoting Moore v. United Kingdom, 384 F.3d 1079, 1085
(9th Cir. 2004)). “Any conflict between a [pre-existing] treaty and the FSIA immunity
provisions, whether toward more or less immunity, is within the treaty exception.” Abelesz, 692
F.3d at 669; accord Moore, 384 F.3d at 1084–85.
Defendants have argued that the 1947 Peace Treaty between Hungary and the Allied
Powers addresses the adjudication of claims by Hungarian Holocaust victims seeking
compensation for confiscated property. Article 27 of the 1947 Peace Treaty obligates Hungary
to provide compensation for property rights and interests taken from Hungarian Holocaust
victims. Defendants thus argue that claims relating to expropriation expressly conflict with the
Peace Treaty. (Defs.’ Ren. Mot. at 42.)
The Simon Court, however, flatly rejected Hungary’s same argument that the 1947 Peace
Treaty precluded claims for property confiscation by Hungarian Holocaust victims:
[W]e understand Article 27 to establish a minimum obligation by Hungary to
provide restoration or compensation to Hungarian Holocaust victims for their
property losses. But while Article 27 secures one mechanism by which Hungarian
victims may seek recovery, it does not establish the exclusive means of doing so.
31
Simon, 812 F.3d at 137 (emphasis added); see also Abelesz, 692 F.3d at 695-96 (adopting the
same interpretation as Simon that the 1947 Peace Treaty is not the exclusive means for
Hungarian Holocaust victims to adjudicate their claims for compensation). With the impending
Simon decision on the horizon, defendants conceded at oral argument that if the D.C. Circuit
rejected Hungary’s treaty preclusion argument in Simon, such a ruling would eliminate their
argument here as to the 1947 Treaty. (Hearing Transcript at 59.) Simon thus controls, and the
Peace Treaty is not a bar to jurisdiction under the expropriation exception.
This still requires the Court to address a number of other factual and legal arguments that
have been raised by defendants.
A. Factual Attacks on Expropriation Jurisdiction
Defendants invoke two separate factual arguments. First, they only concede that forty-
two of the forty-four artworks named in the Complaint were originally seized by the Nazis and
their Hungarian collaborators during World War II. Two of the artworks, they contend, were
first acquired years after the Holocaust, and therefore do not constitute genocidal takings that
violate international law. Indeed, Hungary appears to have acquired the Opie portrait from a
third-party donor named Endre Gyamarthy in 1963. (See Tatevosyan Decl. at Ex. 32.)
Similarly, it first obtained the Cranach painting in 1952 from the home of Henrik Lorant, a
former attorney for the Herzogs. (See id. at Ex. 29.) With regard to the latter, the evidence
suggests that in 1952, authorities for Hungary’s Communist government searched Lorant’s home
in order to “seize items of property belonging to detainee Ferenc Kelemen.” (Id.) Kelemen
confessed to having failed to properly register the Cranach painting in accordance with
Hungarian customs decrees and hiding it in various individuals’ homes, including Lorant’s
residence, in order to keep it safe for Erzsébet Herzog. (Id.)
32
There is no evidence in the record that the two paintings were among the Collection items
confiscated during World War II. Because the Opie and Cranach paintings were not seized in
furtherance of a campaign of genocide, therefore, they were not “taken in violation of
international law” during World War II. But plaintiffs argue that the two acquisitions may
qualify as subsequent, independent takings in violation of international law. (Pls.’ Supplemental
Brief, Dec. 22, 2015 [ECF No. 120] at 5-6.) Clearly Hungary’s acquisition of the Opie painting
as a donation does not constitute a taking, and the Court cannot exercise jurisdiction over it. The
situation is a bit more complicated regarding the Cranach. United States courts generally do not
consider property seized pursuant to criminal violations to be “taken.” See Bennis v. Michigan,
516 U.S. 442, 452–53 (1996); Calero–Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 680
(1974); see also Acadia Technology, Inc. v. U.S., 458 F.3d 1327 (Fed. Cir. 2006) (“When
property has been seized pursuant to the criminal laws or subjected to in rem forfeiture
proceedings, such deprivations are not ‘takings’ for which the owner is entitled to
compensation.”); Tate v. District of Columbia, 627 F.3d 904, 909 (D.C. Cir. 2010) (in domestic
takings context, seizure is not a taking if it is sanctioned by lawful government authority besides
eminent domain).
According to plaintiffs, the Communist government’s seizure of the Cranach for
Kelemen’s violation of Hungarian registration laws was pretextual, and defendants singled out
the Cranach for seizure “because members of the Herzog family….were forced to flee during the
Holocaust.” (Pls.’ Supplemental Brief at 6.) The Court does not find that the evidence supports
a claim that the seizure was a pretext for discriminating against the Herzogs, as the police
entered Lorant’s apartment in order to “seize items of property belonging to detainee Ferenc
Kelemen.” (Tatevosyan Decl. at Ex. 29.) It thus declines to exercise jurisdiction over a painting
33
that was forfeited by Hungarian citizens as a result of domestic criminal violations, years after
the Herzogs had fled the country. 13
Defendants also argue that the Court cannot find jurisdiction under the expropriation
exception for any artworks that Hungary temporarily returned to plaintiffs after the Holocaust,
before those properties were subsequently re-acquired by the state. Defendants are confusing the
jurisdictional analysis with the merits. As a general matter of takings law, the subsequent return
of property confiscated by the government does not extinguish the earlier taking; it simply
converts a permanent taking to a temporary one, altering the appropriate measure of damages.
See, e.g. First English Lutheran Church of Glendale v. Los Angeles Cty., Cal., 482 U.S. 304, 319
(1987) (after a government regulation effected a taking but was later invalidated, the taking
became temporary rather than permanent); San Diego Gas & Elec. Co. v. City of San Diego, 450
U.S. 621, 657 (1981) (Brennan, J., dissenting) (“Nothing in the Just Compensation Clause
suggests that ‘takings’ must be permanent and irrevocable.”).
Similarly, the legislative history of the FSIA makes clear that the phrase “taken in
violation of international law” refers to “the nationalization or expropriation of property without
payment of the prompt, adequate, and effective compensation required by international law.”
H.R. Rep. No. 94-1487, at 19 (emphasis added). Certainly the eventual return of a piece of art to
13
Again, plaintiffs suggest that the Court view the Herzog Collection as a unitary whole, rather
than analyze jurisdiction as to each individual painting separately. In the context of the
expropriation exception, this holistic approach might lead the Court to simply exercise subject
matter jurisdiction over the entire Collection when only forty-two of the artworks were actually
taken in violation of international law. As the Court has explained at note 7, supra, such an
analytical methodology is unsupported by the law. When the facts have warranted it, courts have
applied the expropriation exception to each property separately, even when those properties
arguably constituted a single “collection.” See, e.g., Chabad, 528 F.3d at 938-39 (court
separately analyzed the events surrounding seizures of two individual portions of a single
collection of rabbinical books).
34
its owner years after the conclusion of World War II would be a bizarre reading of “prompt,
adequate, and effective compensation.” Moreover, other FSIA cases have found a taking in
violation of international law even though the property was subsequently returned to the owner.
See Altmann v. Republic of Austria, 142 F. Supp. 2d 1187, 1203 (C.D. Cal. 2001), aff’d, 317 F.3d
954, 968 n.4 (9th Cir. 2002), aff’d, 541 U.S. 677 (2004) (finding at least two takings in violation
of international law—one when the Nazis initially confiscated paintings, and a second after
plaintiff re-acquired a painting but then was coerced to “donate” it to the Austrian gallery).
Finally, the violation of international law here was not an ordinary discriminatory expropriation,
but an act of genocide. It is puzzling to suggest that artwork confiscated during the Holocaust as
part of a campaign of genocide loses its status as property “taken in violation of international
law” because it is eventually released to its owner after years of deprivation.
The facts therefore indicate that forty-two of the forty-four artworks named in the
Complaint were “taken in violation of international law.” The Cranach and Opie paintings were
not.
B. Museums as Agencies or Instrumentalities of Hungary
Defendants also advance a number of other legal arguments why the Court should not
exercise subject matter jurisdiction under the expropriation exception. First, Section 1605(a)(3)
requires that the property at issue “is owned or operated by an agency or instrumentality of the
foreign state and that agency or instrumentality is engaged in a commercial activity in the United
States.” 28 U.S.C. § 1605(a)(3). Defendants do not dispute the fact that the Hungarian museums
are engaged in commercial activity in the United States; however, they do belatedly contend in
their Reply for the first time that the museums are not “agencies or instrumentalit[ies]” of
Hungary. (Defs.’ Reply at 22-23.) Yet, defendants have already admitted that the museums and
35
university holding all of the art are agencies or instrumentalities. (Defs.’ Answer [ECF No. 76]
¶¶ 2, 14, 15.) Since they have not amended their Answer, they are bound by their judicial
admissions. Amgen v. Conn. Ret. Plans and Trust Funds, 133 S. Ct. 1184, 1197 n.6 (2013). In
any event, defendants have offered no persuasive factual evidence to contradict their prior
admissions, and the law does not favor their position on the merits. Section 1603(b) defines an
agency or instrumentality to include “an organ of a foreign state” or an entity that is majority-
owned by the foreign state. Defendants’ citation to the D.C. Circuit’s decision in Transaero v.
La Fuerza Aerea Boliviana is unavailing. Transaero held that the Bolivian Air Force was not an
agency or instrumentality because its core functions were governmental, rather than commercial.
30 F.3d 148, 151 (D.C. Cir. 1994). The museums at issue here are not comparable to a purely
governmental unit such as the Bolivian Air Force. Their function is largely commercial.
Defendants’ “agency or instrumentality” argument is therefore without merit.
C. Treaty Preclusion
As the Court has noted, subject matter jurisdiction under the FSIA is subject to the treaty
exception. And while the Simon decision held that the 1947 Peace Treaty does not conflict with
plaintiffs’ claims, it did not definitively address the other treaty raised by defendants: the 1973
Agreement Between Hungary and the United States. In its prior ruling, this Court declined to
interpret the 1973 Agreement as precluding expropriation-based jurisdiction, and it sees no
reason to reverse itself. Prior to this case, the 1973 Agreement had been consistently interpreted
by both signatories to only bar claims against Hungary by U.S. citizens who were citizens at the
time their claims arose. See De Csepel, 808 F. Supp. 2d at 134 (citing U.S. State Department
Legal Advisor and minutes of the 1973 Agreement negotiations). The Agreement could
therefore only plausibly govern claims by Erzsébet Herzog (Elizabeth Weiss de Csepel) and her
36
American heirs for takings that occurred between 1952 and 1973. It would not govern
confiscations that occurred during the Holocaust, when no Herzog was a U.S. citizen. Thus,
neither treaty bars jurisdiction under the expropriation exception.
D. Exhaustion
As a final argument against the applicability of the FSIA's expropriation exception,
defendants argue that there can be no jurisdiction under Section 1605(a)(3) unless plaintiffs
demonstrate that they have exhausted available domestic remedies in Hungary. 14 In theory,
defendants could assert three separate forms of an exhaustion argument in this case. Because
defendants have not always delineated with precision which theory they are relying upon, the
Court will address the possible application of each theory to plaintiffs’ claims.
First, defendants might contend that the FSIA itself imposes a statutory requirement that
plaintiffs exhaust all possible, non-futile domestic remedies before attempting to bring suit
against a foreign sovereign. The D.C. Circuit, however, has consistently held that the statute
imposes no such exhaustion obligation. See Simon, 812 F.3d at 148; Chabad, 528 F.3d at 948-
49; accord Abelesz, 692 F.3d at 678.
Second, defendants appear to argue that a plaintiff cannot actually demonstrate a
“violation of international law” as required by the expropriation exception without exhausting
domestic remedies. When a case involves a basic expropriation claim asserting that a sovereign
has taken an individual’s property without just compensation, it is plausible that no international
law violation has occurred until the plaintiff has sought compensation in a domestic forum. See
Altmann, 541 U.S. at 714 (Breyer, J., concurring); Fischer v. Magyar Allamvasutak Zrt., 777
14
Defendants’ exhaustion arguments only apply to the paintings owned by the heirs of András
and István. Defendants concede that the Nierenberg litigation adequately exhausted remedies in
Hungarian courts as to the paintings inherited by Erzsébet Herzog. (See Defs.’ Ren. Mot. at 52.)
37
F.3d 847, 857 (7th Cir. 2015). Such a rule would serve as an analogue to an element of
constitutional takings law, which requires that a plaintiff who has suffered a taking under the
Fifth Amendment must unsuccessfully attempt to obtain compensation through local remedies
before a constitutional violation has occurred. See Williamson Cty. Reg'l Planning Comm'n v.
Hamilton Bank of Johnson City, 473 U.S. 172, 194–95 (1985).
A comparable rule in international law would not apply to this case. As the Simon Court
recently explained, when the international law violation at issue is genocide, a failure to seek
compensation from the foreign state is irrelevant to the jurisdictional analysis:
As we have explained, the relevant international-law violation in this case for purposes
of § 1605(a)(3) is not the basic prohibition against an uncompensated expropriation of a
foreign national's property. Rather, the takings of property in this case violate
international law because they constitute genocide. In the context of a genocidal taking,
unlike a standard expropriation claim, the international-law violation does not derive
from any failure to provide just compensation. The violation is the genocide itself, which
occurs at the moment of the taking, whether or not a victim subsequently attempts to
obtain relief through the violating sovereign's domestic laws.
812 F.3d at 149; see also Cassirer v. Kingdom of Spain, 616 F.3d 1019, 1035 (9th Cir. 2010)
(holding that the non-compensation theory of exhaustion does not apply where “the taking was in
violation of international law because it was part of Germany’s genocide against Jews”). In this
case, as in Simon and Cassirer, the violation of international law was a “genocidal taking.” This
theory of exhaustion (which is less an exhaustion argument than a construction of Section
1605(a)(3)) is therefore inapplicable to plaintiffs’ claims.
The third and final type of exhaustion is prudential. Even if plaintiffs’ claims fit
comfortably within the expropriation exception, defendants might suggest that the Court decline
to exercise jurisdiction as a matter of international comity until plaintiffs either exhaust their
domestic remedies, or demonstrate that any such attempt would be futile. The Seventh Circuit
has found this theory of exhaustion to be persuasive in a comparable FSIA case. See Fischer,
38
777 F.3d at 859-66. The relevant rule of customary international law may be found in the
Restatement (Third) of Foreign Relations Law of the United States, which notes: “Exhaustion of
remedies. Under international law, ordinarily a state is not required to consider a claim by
another state for an injury to its national until that person has exhausted domestic remedies,
unless such remedies are clearly sham or inadequate, or their application is unreasonably
prolonged.” Restatement § 714, cmt. f.
However, this international exhaustion rule appears to only apply to “claim[s] by another
state for an injury to its own national,” id.—that is, cases where one state has adopted the claim
of its national and is opposing another state in litigation. See Interhandel (Switzerland v. United
States of America), Preliminary Objections, 1959 I.C.J. 6, 26-27 (noting that the “rule that local
remedies must be exhausted…is a well-established rule of customary international law” and
applies to “cases in which a State has adopted the cause of its national whose rights are claimed
to have been disregarded in another State in violation of international law”); see also Doe v.
Exxon Mobil Corporation, 69 F. Supp. 3d 75, 89 n.3 (D.D.C. 2014) (citing the International
Court of Justice’s interpretation of the international exhaustion rule). The D.C. Circuit construed
the rule of customary international law the same way in its Chabad decision:
But this provision [of the Restatement] addresses claims of one state against another.
Its logic appears to be that before a country moves to a procedure as full of potential
tension as nation vs. nation litigation, the person on whose behalf the plaintiff country
seeks relief should first attempt to resolve his dispute in the domestic courts of the
putative defendant country (if they provide an adequate remedy).
Chabad, 528 F.3d at 949. In contrast, Section 1605(a)(3) of the FSIA “involves a suit that
necessarily pits an individual of one state against another state, in a court that by definition
cannot be in both the interested states.” Id. There is therefore “no apparent reason,” the Chabad
39
Court concluded, “for systematically preferring the courts of the defendant state” for
adjudicating FSIA claims. Id.Thus, both international and domestic courts (including the D.C. Circuit) have reasonably
construed the prudential theory of exhaustion to be inapplicable to causes of action brought by
individuals and not states. The Court therefore respectfully disagrees with the Seventh Circuit’s
holding in Fischer and rejects defendants’ exhaustion argument based on international comity.
Because the other two theories of exhaustion are equally inapplicable, there is no reason to
decline to exercise jurisdiction based on plaintiffs’ failure to exhaust their domestic remedies. 15
CONCLUSION
For the foregoing reasons, defendants’ Renewed Motion to Dismiss is granted in part and
denied in part. A separate Order accompanies this Memorandum Opinion.
/s/ Ellen Segal Huvelle
ELLEN SEGAL HUVELLE
United States District Judge
Date: March 14, 2016
15
Even if the Court were inclined to agree with the Seventh Circuit that international comity
requires exhaustion of remedies, the Court finds that plaintiffs have adequately shown that
further efforts to seek a remedy in Hungary would have likely proved futile. First, Hungary
instituted the 2013 administrative compensation procedure three years after the beginning of this
lawsuit. Where the jurisdictional question is a matter of exhaustion, “a defendant cannot defeat
jurisdiction by simply creating a new avenue of exhaustion…of remedies that had not been
available at the time of the original filing.” Ford Motor Co. v. United States, 688 F.3d 1319,
1326 (Fed. Cir. 2012).
Second, the Hungarian Metropolitan Appellate Court’s dismissal of Nierenberg’s complaint
in 2008 reasonably suggested that any additional lawsuits filed by the other Herzog heirs would
probably have failed. Although the decision made some factual findings, it also determined that
returning the paintings to Nierenberg was made impossible by customs laws protecting cultural
patrimony. (See Defs.’ First Motion to Dismiss, Feb. 15, 2011 [ECF No. 15], Declaration of
Orsolya Banki, Ex. M, Nierenberg Decision of Metropolitan Appellate Court of Hungary.)
There would be no reason for the other Herzog heirs to think that those same laws would not
have also barred their claims for specific performance.
40