Philipp v. Federal Republic of Germany

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ALAN PHILIPP, et al.,
Plaintiffs,
v.
Civil Action No. 15-00266 (CKK)
STIFTUNG PREUSSISCHER
KULTURBESITZ,
Defendant.
MEMORANDUM OPINION
(July 26, 2021)
Plaintiffs Alan Philipp (“Philipp”), Gerald G. Stiebel (“Stiebel”), and Jed R. Leiber
(“Leiber”) (collectively the “Plaintiffs’), are the legal successors of the estates of members of a
Consortium comprised of three art dealer firms based in Frankfurt, Germany – J.&S.
Goldschmidt, I. Rosenbaum, and Z.M. Hackenbroch. Plaintiffs Philipp and Stiebel indicate that
their ancestors, Zacharias Max Hackenbroch and Isaac Rosenbaum, respectively, were the
owners or co-owners of two [of the three] art dealer firms. First Am. Compl., ECF No. 14, ¶¶
1, 17-18. Plaintiff Leiber [who was added in the First Amended Complaint] is the heir of Saemy
Rosenberg, who co-owned the I. Rosenbaum art dealer firm. First Am. Compl., ECF No. 14, ¶
19. The First Amended Complaint explains further that Philipp, Stiebel, and Leiber are
“assignees of the claims of Julius Falk Goldschmit . . . and authorized agents for the heirs of
Arthur Goldschmidt, who together were the sole owners of the J.&S. Goldschmidt[,]” the third
art dealer firm. Id. at ¶ 20.
Plaintiffs allege that Defendant Stiftung Preussischer Kulturbesitz (“SPK”) is in
wrongful possession of a collection of medieval relics known as the Welfenschatz, which was
1
sold by the Consortium – under coercion, as part of the Nazi persecution of the Jewish sellers –
on June 14, 1935 to the State of Prussia through the Dresdner Bank. Plaintiffs Philipp and
Stiebel initially filed their lawsuit against the Federal Republic of Germany (“Germany”) and
SPK, although Germany has since been dismissed from the case. This case is currently before
this Court on Plaintiffs’ [56] Motion for Leave to File a Second Amended Complaint, which is
opposed by Defendant SPK.1 For the reasons set forth herein, Plaintiffs’ [56] Motion for Leave
to Amend is DENIED. A separate Order accompanies this Memorandum Opinion.
I. Legal and Procedural Background
This Court incorporates by reference the background set forth in its [26] Memorandum
Opinion, which granted in part and denied in part Defendants’ [18] Motion to Dismiss the
Plaintiffs’ First Amended Complaint. See Philipp v. Fed. Republic of Germany, 248 F. Supp.
3d 59, 70-72 (D.D.C. 2017) (concluding that Plaintiffs’ claims fell within the exception to the
domestic takings rule adopted in Simon v. Republic of Hungary, 812 F.3d 127 (D.C. Cir.
2016)).2 Defendants filed a [27] Notice of Appeal to the United States Court of Appeals for
the District of Columbia Circuit (“D.C. Circuit”), and the case was stayed in this Court while
1
In connection with this Memorandum Opinion and the accompanying Order, the Court
considered: (1) Plaintiffs’ [56] Motion for Leave to File Second Amended Complaint (“Pls.’ Mot.
to Amend”) and the exhibits attached thereto; Plaintiffs’ [56-1] Memorandum in support thereof
(Pls.’ Mem.”); Defendant’s [57] Opposition to Plaintiffs’ Motion for Leave to Amend the
Complaint (“Def.’s Opp’n”) and the exhibits attached thereto; Plaintiffs’ [58] Reply to Defendant’s
Opposition to Motion for Leave to Amend (“Pls.’ Reply”) and the exhibits attached thereto;
Plaintiffs” [14] First Amended Complaint (“First Am. Compl.”); Plaintiffs’ proposed Second
Amended Complaint; and the entire record in this case. In an exercise of its discretion, the Court
finds that holding oral argument in this action would not be of assistance in rendering a decision.
See LCvR 7(f).
2
Defendants filed a [12] prior Motion to Dismiss the [original] Complaint, but that motion was
denied without prejudice when Defendants consented to the filing of Plaintiffs’ First Amended
Complaint. See January 14, 2016 Minute Order.
2
the interlocutory appeal was pending. The D.C. Circuit’s opinion in Philipp v. Federal Republic
of Germany, 894 F.3d 406 (D.C. Cir. 2018), noted that the appeal raised a novel question insofar
as the court was asked to decide “for the first time whether seizures of art may constitute ‘takings
of property that are themselves genocide.’” Philipp, 894 F.3d at 411 (quoting Simon, 812 F. 3d
at 144). The D.C. Circuit concluded that they could be and affirmed the application of the
expropriation exception to sovereign immunity as well as this Court’s exercise of subject matter
jurisdiction. The Circuit Court did however vacate this Court’s denial of immunity to Germany
and directed that Germany be dismissed.
Shortly thereafter, Defendants filed their [43] Motion to Stay Pending Petition for Writ
of Certiorari to the United States Supreme Court, which was granted by this Court’s [47] Order.
The Supreme Court granted certiorari and issued its decision in Federal Republic of Germany
v. Philipp, 141 S. Ct. 703, 715 (2021), holding that “the phrase “rights in property taken in
violation of international law,” as used in the FSIA’s expropriation exception, refers to
violations of the international law of expropriation and thereby incorporates the domestic
takings rule.” As the Supreme Court explained, the international law of takings governs
“confiscation of the property of foreigners, but measures taken by a state with respect to the
property of its own nationals are not subject to these principles.” Id. at 710 (internal quotation
marks omitted). Furthermore, contrary to the D.C. Circuit’s decisions in Simon and Philipp, the
FSIA’s expropriation exception invoked only the narrow doctrine of “international law
governing property rights,” rather than broadly incorporating international human-rights norms
like the law of genocide. Id. at 711-712. The D.C. Circuit’s judgment was vacated, and the
case was remanded for further proceedings. The Supreme Court explicitly declined to consider
the heirs’ alternative argument “that the sale of the Welfenschatz is not subject to the domestic
takings rule because the consortium members were not German nationals at the time of the
3
transaction” and stated that the Court of Appeals should direct the District Court to “consider
this argument, including whether it was adequately preserved below.” Id. at 716
On March 16, 2021, the D.C. Circuit issued its [53] Mandate and attached Judgment
indicating that - consistent with the Supreme Court mandate - this case was remanded to this
Court, with instructions to “consider whether the sale of the Welfenschatz is not subject to the
domestic takings rule because the consortium members were not German nationals at the time
of the transaction, including whether this argument was adequately preserved in the District
Court.” See Mandate and attached Judgment.
A few days thereafter, the parties filed their [54] Second Joint Status Report, indicating
a proposed briefing schedule for Plaintiffs to move for leave to amend their Complaint.
Defendant anticipates “renewing its motion to dismiss the then-operative complaint, as
determined by the Court’s ruling on the motion for leave to amend.” Second Joint Status Report,
ECF No. 54, at 2. Plaintiffs’ Motion for Leave to Amend is now ripe for consideration by this
Court.
II. Legal Standard for a Motion to Amend
In cases where plaintiffs have already amended their Complaint, Federal Rule of Civil
Procedure 15(a)(2) provides that “a party may amend its pleading only with the opposing party’s
written consent or the court’s leave [and] [t]he court should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a)(2); see Willoughby v. Potomac Elec. Power Co., 100 F.3d 999,
1003 (D.C. Cir. 1996), cert den., 520 U.S. 1197 (1997) (finding that leave to amend a complaint
is within the court’s discretion and should be freely given unless there is good reason to the
contrary); Firestone v Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996) (noting that it is an “abuse
of discretion” to deny leave to amend without sufficient reason).
“When evaluating whether to grant leave to amend, the Court must consider (1) undue
4
delay; (2) prejudice to the opposing party; (3) futility of the amendment; (4) bad faith; and (5)
whether the plaintiff has previously amended the complaint.” Howell v. Gray, 843 F. Supp. 2d
49, 54 (D.D.C. 2012) (citing Atchinson v. District of Columbia, 73 F.3d 418 (D.C. Cir. 1996)).
“Within these bounds, a district court has discretion to grant or deny leave to amend under Rule 15(a).”
Atchinson, 73 F.3d at 426; see also Foman v. Davis, 371 U.S. 178, 182 (1962) (“[T]he grant or denial
of any opportunity to amend is within the discretion of the District Court, but outright refusal to grant
the leave without any justifying reason . . . is not an exercise of discretion.”) The party opposing the
amendment bears the burden of coming forward with a colorable basis for denying leave to
amend. Abdullah v. Washington, 530 F. Supp. 2d 112, 115 (D.D.C. 2008).
III. Analysis of Arguments
In this case, Plaintiffs allege that the impetus for their proposed addition of “allegations
about Nazi German’s policies with regard to nationality, and specific allegations about the
nationality of the specific victims in this case” is based on the “recent change in the governing
law.” Pl.’s Mem., ECF No. 56-1, at 8.3 Plaintiffs propose adding a new section captioned “The
Nazis and the Question of German Nationality[,]” which “expands upon facts that the Plaintiffs
had no necessity to allege under the prior standard of law (although they did)[.]” Id. at 9.
Defendant alleges that the proposed amendments fall into the following categories: (1)
amendments to make the complaint conform to the removal of Germany as a defendant and
striking claims that have been dismissed: (2) revisions reflecting the “passage of time since the
First Amended Complaint was filed more than five years ago;” (3) “pages of new allegations
about Nazi ideology, particularly focusing on statements by Nazi officials about whether they
3
Page numbers referenced herein are to the page numbers assigned by the Electronic Case Filing
(“ECF”) system.
5
believed Jews could be true German citizens;” (4) a “recharacteriz[ation] [of] the facts about
the Consortium’s legal status” with a focus on the individual owners; and (5) new facts about
two of the art dealers, alleging the Rosenbaum and Rosenberg were “Dutch nationals, or
functionally stateless.” Def.’s Opp’n, ECF No. 57, at 18-19. Defendant does not object to an
amendment with regard to categories (1) and (2) above, although Defendant contends it is
unnecessary. Id.
Plaintiffs contend however that the proposed amendment “does not change the core
substance of the case,” but instead, it “provides additional facts relevant to a determination of
whether Plaintiffs’ relatives were German at the time of the forced sale[.]” Id. at 10. Plaintiffs
assert further that there is “no delay in pleading allegations under a standard that did not
previously exist[,]” as the law “changed in February 2021;” the mandate was issued in March,
and the instant Motion was filed in April.” Id. at 11. Nor is there “prejudice” as discovery has
not yet commenced, and there is “certainly no bad faith.” Id.
Absent from Plaintiffs’ Motion is any discussion of the Supreme Court’s mandate
(reflected in the Circuit Court’s Judgment), which instructs this Court to consider “whether the
sale of the Welfenschatz is not subject to the domestic takings rule because the consortium
members were not German nationals at the time of the transaction” and also “whether this
argument was adequately preserved in the District Court.” See Mandate, ECF No. 54 and
attached Judgment (referencing the Supreme Court opinion). On its face, allowing Plaintiffs to
amend their First Amended Complaint now - subsequent to a mandate directing that this Court
consider whether the argument was adequately preserved before this Court - appears to violate
the letter and spirit of the mandate with regard to that issue of preservation.
Defendant asserts that “[w]hen the Supreme Court remands to a lower court to decide
6
whether a party preserved an alternative theory (and to decide the merits of that theory if they
did), the lower court lacks the authority to let that party introduce an unpreserved theory.”
Def.’s Opp’n, ECF No. 57, at 8. “If [Plaintiffs’] prior briefs and complaints did not adequately
raise the alternative theory of jurisdiction, then it is too late to do so with another amended
complaint. And if their prior briefs and complaints did adequately raise that theory, then there
is no need for an amendment.” Def.’s Opp’n, ECF No. 57, at 8. Defendant argues further that
“Rule 15 leads to the same place” as Plaintiffs’ “new proposed allegations were known to them
for years and could have been alleged when they filed their first two complaints over five years
ago.” Def.’s Opp’n., ECF No. 57, at 8. Accordingly, this Court will consider the Plaintiff’s
request for leave to amend in the context of both the Supreme Court’s mandate and also pursuant
to the Rule 15(a) standard.
A. The Mandate Prevents the Amendment of the First Amended Complaint
“When a case is remanded . . . from the Supreme Court with specific instructions, th[e
lower] court must confine its review to the limitations established by the Supreme Court’s
remand order.” United States v. Loredo-Torres, 164 Fed. App’x 523, 524 (5th Cir. 2006), cert
den., 547 U.S. 1173 (2006). This “mandate rule” is an “even more powerful version of” the
law-of-the-case doctrine that applies when a case is remanded to a district court from a higher
court. Duberry v. District of Columbia, 316 F. Supp. 3d 43, 51 (D.D.C. 2018) (quoting LaShawn
A. v. Barry, 78 F.3d 1389, 1393 n.3 (D.C. Cir. 1996)). Pursuant to the mandate rule, lower
courts must “honor the decision of a superior court in the same judicial system,” id., and refrain
from “revisit[ing] issues ‘decided either explicitly or by necessity implication’ by the higher
court.” Duberry, 316 F. Supp. 3d at 51 (citing United States ex rel. Dep’t of Labor v. Ins. Co.
N. Am., 131 F.3d 1037, 1041 (D.C. Cir. 1997)). Accordingly, district courts may not “do
7
anything which is contrary to either the letter or spirit of the mandate construed in the light of
the opinion of the court deciding the case.” United States v. Slatten, Crim. No. 08-360 (RCL),
2014 WL 610970, at *1 (D.D.C. Feb. 18, 2014) (alterations and internal quotation marks
omitted) (quoting Yabloonski v. United Mine Workers of Am., 454 F. 2d 1036, 1038 (D.C. Cir.
1971)).
Defendant relies upon several cases to illustrate how this mandate rule bars Plaintiffs
from amending their First Amended Complaint, under this scenario where this Court was
instructed to see whether an argument [that the members of the Consortium were not German
nationals] was adequately preserved. See e.g., F. Hoffmann-LaRoche, Ltd. v. Empagran S.A.,
542 U.S. 155, 175 (2004) (vacating a decision by the D.C. Circuit and remanding with
instructions for the Circuit to “consider” an alternative suggested by plaintiffs, in the event that
the respondents had “properly preserved the argument”). On remand in that case, the D.C.
Circuit directed the parties to brief the two questions and ultimately held that plaintiffs had
preserved the alternative theory because they raised it in their existing complaint, Empagran,
S.A. v. F. Hoffman-LaRoche, Ltd., 388 F.3d 337, 340-43 (D.C. Cir. 2004), and they had also
“advance[ed] it in briefs or oral arguments at every stage [district court, D.C. Circuit, and
Supreme Court] in this litigation. Id. at 343-44.4 Compare West v. Gibson, 527 U.S. 212, 217-
23 (1999) (where plaintiff argued before the Supreme Court that the Seventh Circuit’s decision
could be affirmed under an alternative theory of exhaustion of claims, and rather than
4
Defendant notes that the D.C. Circuit concluded that defendants had waived the argument that
plaintiffs’ theory was waived, because they had “never suggested to the District Court or to this
court that the alternative claim was waived.” Def’s Opp’n, ECF No. 57, at 22 n.6; see Empagram,
388 F.3d at 344. In contrast, Defendant alleges that it “has pointed out at every stage of
proceedings that Plaintiffs did not dispute that the Consortium, the art-dealer firms, or the
individual owners of the dealerships were German nationals in 1935. Def.’s Opp’n, ECF No. 57,
at 22 n.6 (referencing MTD Reply at 5; Appellants’ Reply Brief at 11 n.8).
8
considering that argument, the Supreme Court directed the Seventh Circuit to “determine
whether these [theories] have been properly raised and, if so, decide them.”) On remand in
West, the Seventh Circuit reviewed plaintiff’s prior briefs and determined that plaintiff had not
argued that he had exhausted his claims, but rather, he had argued that exhaustion was
unnecessary and thus, plaintiff had not preserved the alternative theory. Gibson v. West, 201
F.3d 990, 992 (7th Cir.2000) (“Thus, far from arguing that he had satisfied the requirement of
exhaustion with respect to compensatory damages, Gibson argued that he did not have to do
so.”)
In In re Johns-Manville Corp., 600 F.3d 135, 147 (2d Cir. 2010), where the Second
Circuit was instructed to “address only properly preserved arguments on remand,” that court
found that plaintiffs had “forfeited” an alternative theory by not adequately raising it at any time
before the case reached the Supreme Court. The Second Circuit recognized that waiver
principles are ordinarily “prudential rather than jurisdictional,” and accordingly, courts would
have the discretion to consider alternative arguments that were not strictly preserved. Id. This
principle was however outweighed by the remand order whereby the Supreme Court “itself
decided, in its discretion, that forfeited arguments should not be considered,” which barred
plaintiffs from raising their unpreserved alternative theory on remand. Id.Defendant notes that in these cases they cited, “courts following the Supreme Court’s
instruction to determine whether a party preserved an alternative theory raised in the Supreme
Court have done so based on the operative complaint and the arguments found in the parties’
briefs in earlier stages of the case.” Def’s Opp’n, ECF No. 57, at 24 (emphasis in original).
Defendant asserts that if the alternative theory was not raised in those pleadings, “the Supreme
Court’s mandate barred lower courts from considering it, even if normal rules of litigation might
9
allow the party to present its belatedly raised theory.” Id; see generally Invention Submission
Corp. v. Dudas, 413 F.3d 411, 414-15 (4th Cir. 2005) (affirming district court’s dismissal of
complaint and denial of leave to amend and noting that had district court permitted plaintiff to
amend the complaint, it would have violated the court’s remand order, which required
dismissal); see also Parmalat Capital Fin. Ltd. v. Bank of Am. Corp., 671 F.3d 261, 270-71 (2d
Cir. 2012) (per curiam) (holding that the district court erred on remand by considering an
alternative theory that was not previously raised). In Parmalat, that appellees argued that the
mandate could have “reasonably” been read as allowing consideration of an alternative basis
for denying mandatory abstention. Id. at 270. The Second Circuit noted that in determining
whether an issue may be open for reconsideration on remand, the trial court “should look to
both the specific dictates of the remand order as well as the broader sprit of the mandate.” Id.(internal quotation marks omitted). In that case, the Second Circuit concluded that it was “not
reasonable [for the district court] to construe the mandate as allowing alternative, dispositive
bases for denying abstention[.]” Id. at 271.
In their Reply, Plaintiffs cite several cases to support the proposition that, [w]hen an
open question remains on remand, the mandate rule does not preclude amendment of a
complaint.” Pls.’ Reply, ECF No. 58, at 9; see Silverman v. Teamster Local 219 Affiliated
Health and Ins. Fund, 725 F. App’x 79, 81 (2d Cir. 2018) (noting that a mandate is “controlling
only as to matters within its compass” and when issues are left open, a lower court may dispose
of a case on grounds that were “not dealt with” by a remanding court). In Silverman, the
mandate directed the district court to conduct “further proceedings in accordance with the
opinion of [the Circuit] Court.” Id. (citation omitted). Because nothing restricted the district
court there from considering LMRA preemption, the court did not violate the mandate when it
10
permitted amendment of the complaint. Id. Silverman differs factually however from the
instant case, as the mandate here makes clear that the only issue possibly remaining in this case
is whether the takings rule applies or not, including a necessary inquiry into whether Plaintiffs
preserved this argument at all. Plaintiffs assert that because their proposed amendments
“address nationality,” they are “by definition within the mandate.” Id. Plaintiffs’ assertion
glosses over the specific language of the mandate requiring an inquiry into whether there was
preservation of the argument before this Court. Furthermore, Plaintiffs will be permitted to
address nationality (and preservation of this issue) in the context of any opposition to
Defendant’s proposed motion to dismiss.
Plaintiffs also cite Owner-Operator Indep. Drivers Ass’n v. U.S. DOT, 316 F. Supp. 3d
201, 206 (D.D.C. 2018), a case that is factually inapposite. In Owner-Operator Indep. Drivers,
the district court dismissed the case against the five plaintiff commercial truck drivers and their
industry association, and the D.C. Circuit reversed in part, concluding that two of the five drivers
had standing to seek damages. The district court noted that the D.C. Circuit remanded only two
plaintiffs’ damages claims and thus, the court could neither consider claims by the association
nor could the remaining individual plaintiffs seek damages. Id. The court found however that
“[t]he Circuit did not limit [the two plaintiffs’] standing to seek damages to FCRA, or otherwise
preclude them from seeking damages under the Privacy Act.” Id. The court denied without
prejudice the two plaintiffs’ motion for leave to file an amended complaint and directed the
plaintiffs to file an renewed motion to amend, consistent with the mandate. Id. 5
5
Plaintiffs cited a third case, Simpson v. Socialist People’s Libyan Arab Jamahiriya, 326 F.3d 230,
235 (D.C. Cir. 2003) (where the D.C. Circuit permitted a plaintiff to amend her complaint on
remand and she then added her husband’s estate as a co-plaintiff). While the defendant argued
that this violated the mandate rule, the court determined that the issue of whether the plaintiff could
add her deceased husband’s claims was not before the Court of Appeals and thus, the addition of
11
In the instant case, the Supreme Court recognized that Plaintiffs may not have preserved
their alternative argument and upon remand to the Court of Appeals, this Court was directed to
consider this issue. Permitting Plaintiffs to amend their First Amended Complaint now to
include additional facts and theories is inconsistent with the instruction that this Court determine
whether any alternative argument by Plaintiffs had been preserved. Both the “dictates of the
remand order” and the “spirit of the mandate” require that this Court look at the record in this
case (which existed at the time the mandate was issued), including Plaintiffs’ operative First
Amended Complaint, in order to carry out its determination as to whether Plaintiffs’ argument
was adequately preserved. Accordingly, this Court finds that the Supreme Court mandate does
not permit amendment of Plaintiffs’ First Amended Complaint. The Court turns now to the
standard under Rule 15(a).
B. Rule 15(a) Does Not Permit the Amendment of the First Amended Complaint
Leave to amend should be “freely given” unless there is a good reason to deny it, “such
as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue
or allowance of the amendment, . . . ” Foman v. Davis, 371 U.S. 178, 182 (1962). Plaintiffs
argue that the Court should grant leave for an amendment of their First Amended Complaint
because of a recent change in law and the absence of delay, prejudice or bad faith. These points
are discussed below.
the estate could not violate the mandate rule. Id. Plaintiffs in the instant case contend that because
the Supreme Court “never considered the question of whether Plaintiffs could amend their
Complaint[,]” [as this issue was not before that Court] the amendment “in no manner violates the
mandate rule.” Pls.’ Reply, ECF No. 58, at 10. Again, the Court notes that Plaintiffs’ contention
ignores the specific language of the mandate regarding whether there was a preservation of this
sole possible legal theory.
12
1. There is No Change in Law and therefore, Plaintiffs’ Delay in Requesting an
Amendment is Undue Delay
Plaintiffs argue that they “had no reason to allege particular facts concerning the
nationality of Goering’s victims – although they did – because circuit law at the time . . . focused
on the Nazis’ takings of art without regard to the so-called “domestic takings” rule.” Pls.’ Mem.,
ECF No. 56-1, at 12 (citing cases). Plaintiffs here elected to rely on a different theory, which
was accepted by the D.C. Circuit when it decided this case on the novel issue that “seizures of
art may constitute ‘takings of property that are themselves genocide.’” Philipp, 894 F.3d at 411
(quoting Simon, 812 F.3d at 144). Plaintiffs assert that, after the Supreme Court’s decision in
this case, they should now be entitled to amend their First Amended Complaint to address
“recent changes in governing law.” Pls.’ Mem., ECF No. 56-1, at 11, citing Minnick v. Cal.
Dep’t of Corr., 452 U.S. 105, 126 (1981) (observing that petitioners “have the right . . . to amend
their pleadings in light of the developments of the law that have occurred since the original
complaint was filed.”); Lewis v. Cont’l Bank Corp., 494 U.S. 472, 482 (1990) (when a case is
mooted by a “change in the legal framework governing the case,” it is appropriate to “remand
for further proceedings in which the parties may, if necessary, amend their pleadings or develop
the record more fully.”) Furthermore, Plaintiffs’ argument that there was no delay associated
with their requested amendment is contingent on their allegation that there has been a change in
law.
This Court rejects Plaintiffs’ argument that there was a change in law that excuses delay,
as the applicability of the domestic takings rule pre-dates the Supreme Court’s decision, and the
Supreme Court’s unanimous rejection of Plaintiffs’ arguments in this case does not constitute
new law. Compare Petworth Holdings, LLC v. Bowser, 333 F.R.D. 297, 299 (D.D.C. 2019)
(where leave to amend was granted under Rule 15(a) because Defendants failed to demonstrate
13
delay, prejudice or futility). In that case, two years after the plaintiff filed its complaint, the
Supreme Court issued a decision in another case overruling a decades-old Supreme Court case
and eliminating “any exhaustion requirement for § 1983 takings claims[.]” Id. at 299 (internal
citations omitted). The Honorable James E. Boasberg noted that, ‘[i]ndeed, Defendants
themselves concede that – at the very least – “it is not clear” that Plaintiffs could have previously
brought a § 1983 claim seeking monetary damages.” Id. at 300 (internal citation omitted).
Defendant notes that Plaintiffs were provided notice regarding Defendants’ argument
about domestic takings in Defendants’ motion to dismiss the Complaint (which was denied
without prejudice in light of Plaintiffs’ amendment of their Complaint). Furthermore, in
Defendants’ motion to dismiss the First Amended Complaint, Defendants asserted that – under
Plaintiffs’ own allegations - the Consortium, its constituent firms, and the individual owners of
the firms were German nationals. Def.’s Opp’n, ECF No. 57, at 13 (citing Second Motion to
Dismiss, ECF No. 18, at 28-31). Moreover, Defendant argued that “Simon did not abrogate the
domestic-takings rule in this different factual context, because Simon concerned the theft of
personal property (like food, clothing, and housing) essential to survival — straightforward acts
of genocide as that crime is defined in international law — not the negotiated sale of an art
collection for millions of dollars.” See generally Second Motion to Dismiss, ECF No.18, at 32-
34. Defendant notes that “Plaintiffs did not ask to amend their complaint again to add new
allegations addressing Germany and SPK’s domestic-takings argument.” Def. Opp’n., ECF No.
57, at 13.6 Instead, Plaintiffs waited until after the Supreme Court rejected their argument
(based on genocide) to request an amendment of their First Amended Complaint.
6
Defendant notes further that when the case was pending in the D.C. Circuit, Defendants
“highlighted that Plaintiffs had not raised this alternative argument.” Def.’s Opp’n, ECF No. 57,
at 31 (referencing Appellant’s Reply at 11 n.8).
14
On certiorari, the Supreme Court repudiated the approach taken by the D.C. Circuit,
relying instead on the domestic takings rule. As the Supreme Court explained, the international
law of takings governs “confiscation of the property of foreigners, but measures taken by a state
with respect to the property of its own nationals are not subject to these principles.” Fed.
Republic of Germany v. Philipp, 141 S. Ct. 703, 710 (2021) (internal quotation marks omitted).
Defendant submits that “[c]ontrary to Plaintiffs’ suggestions in their motion to amend, nothing
in the Supreme Court’s decision changed existing law,” Def.’s Opp’n, ECF No. 57, at 15, and
in fact, the Supreme Court noted that the “domestic takings rule” rested on understandings with
“deep roots not only in international law but also in United States foreign policy.” Fed. Republic
of Germany v. Philipp, 141 S. Ct. at 710 (the domestic takings rule is a principle of law that has
“endured” for decades). Accordingly, in this case, where the domestic takings law was apparent
to all parties from the time the initial Complaint was filed, any delay by Plaintiffs in requesting
amendment of their First Amended Complaint is undue delay. Accordingly, leave to amend
pursuant to Ruel 15(a) shall be denied. “Leave to amend is properly denied when the plaintiff
was aware of the information underlying the proposed amendment long before moving for leave
to amend the complaint.” Onyewuchi v. Gonzalez, 267 F.R.D. 417, 420 (D.D.C. 2010)).
In this case, rather than entirely dismissing the case, the Supreme Court observed that
Plaintiffs had “noted” an “alternative argument. . . that the sale of the Welfenschatz is not subject
to the domestic takings rule because the consortium members were not German nationals at the
time of the transaction.” Id. at 715 (citing Respondents’ Br. at 27-28). The Supreme Court
also noted Defendants’ position that Plaintiffs had not raised this issue below. Id. at 716 (citing
Petitioners’ Br. at 19 n.7). Accordingly, the Supreme Court directed that this argument be
considered, “including whether it was adequately preserved below.” Id.15
Defendants have proffered persuasive authority for this Court to conclude that there is
no “change in law” warranting an amendment and further that undue delay weighs against an
amendment. This Court need not decide now whether Plaintiffs waived their alternative
argument about the domestic takings rule. Instead, Plaintiffs’ argument regarding their status
as German nationals [based on allegations in their First Amended Complaint] may be considered
in the context of an opposition to Defendant’s proposed motion to dismiss.7
2. Considerations of Bad Faith by Plaintiffs and Prejudice to Defendant
Plaintiffs assert in one sentence in their Motion that “[t]here is certainly no bad faith.”
Pls.’ Mem., ECF No. 56-1, at 11. Defendant argues however that Plaintiffs’ failure to allege
facts they knew at the time of prior complaints is unjustified and may show a “dilatory motive
or bad faith[.]” Def.’s Opp’n, ECF No. 57, at 28 (citing Williams v. Savage, 569 F. Supp. 2d
99, 108 (D.D.C. 2008)). Plaintiffs claim that they had no reason to allege particular facts
relevant to nationality because “circuit law at the time (as well as every other federal court to
consider the question) focused on the Nazis’ takings of art without regard to the so-called
“domestic takings” rule.” Pls.’ Mem., ECF No. 56-1, at 12. Defendant points out that the
original Complaint and First Amended Complaints were filed before the D.C. Circuit decided
Simon, and even after Simon, the “parties continued to litigate . . . how Simon applied to the
different facts of this case[,]” and in fact the D.C. Circuit noted that this case raised a novel
question “whether Simon’s rationale applied to alleged seizures of art.” Def.’s Opp’n, ECF No.
57, at 30; see Philipp, 894 F.3d at 411. While Defendant speculates about Plaintiffs’ strategy
in deciding not to earlier amend their Complaint to include details they now propose adding,
7
Nor does this Court address herein the futility or not of Plaintiffs’ allegations about nationality,
as those allegations will be addressed in the context of the Defendants’ motion to dismiss.
16
Def.’s Opp’n, ECF No. 57, at 33-34, this Court makes no finding of bad faith as to Plaintiffs’
motivation.
Plaintiffs assert that there is no prejudice because Defendant has not yet filed an answer
and discovery has not begun. Pls.’ Mem., ECF No. 56-1, at 11. In terms of the burden imposed,
Defendant explains that Plaintiffs’ proposed amendments are “substantial, changing their
characterization of the Consortium, . . . , suggesting new facts and theories about the residency
or nationality of some of the owners of some of the Consortium’s constituent firms, . . ., and
introducing new allegations about the details of German citizenship law, . . . “ Def.’s Opp’n,
ECF No. 57, at 38. While Defendant questions the merit and impact of these allegations,
Defendant asserts that “responding to them now will require new expert opinions and substantial
legal and factual investigations.” Id. This, in turn, will further delay this six-year old case. The
Court finds that Defendant has sufficiently established that there will be prejudice to the
Defendant in permitting an amendment of the First Amended Complaint. Accordingly,
Defendants have demonstrated both undue delay and prejudice, which warrants denying
Plaintiffs’ Motion for Leave to Amend under Rule 15(a).
IV. Conclusion
Plaintiffs’ [56] Motion for Leave to Amend shall be denied based on this Court’s
interpretation of the remand order whereby this Court shall determine if Plaintiffs’ argument
about German nationality “was adequately preserved below,” in light of the record that existed
when the mandate was issued, which includes consideration of Plaintiff’s operative First
Amended Complaint. Plaintiffs’ theory that its proposed amendment is based on a “change of
law” is rejected by this Court. Accordingly, pursuant to Rule 15(a), leave to amend shall be
17
denied also based on undue delay and prejudice to the Defendant. 8 A separate Order
accompanies this Memorandum Opinion.
____________/s/__________________
COLLEEN KOLLAR-KOTELLY
UNITED STATES DISTRICT JUDGE
8
Defendant does not object to Plaintiffs’ amendment of the First Amended Complaint to indicate
that Germany is no longer a defendant, to strike claims that have been dismissed, and to reflect the
passage of time since the First Amended Complaint was filed by adding a paragraph about the
return to unrelated artwork to another claimant in 2020. See Defendant’s Opposition, ECF No. 57,
at 18 -19.
18