United States Court of Appeals, District of Columbia Circuit
David L. De Csepel, et al., Appellees
Republic of Hungary, a foreign state, et al., Appellants
March 6, 2017
from the United States District Court for the District of
Columbia (No. 1:10-cv-01261)
Thaddeus J. Stauber argued the cause for appellants. With him
on the briefs were Emily Crandall Harlan and Sarah Erickson
Regan Benenati argued the cause for appellees. With her on
the brief were Sheron Korpus, Michael Shuster, Michael D.
Hays, and Alyssa T. Saunders.
Before: Henderson and Tatel, Circuit Judges, and Randolph,
Senior Circuit Judge.
second time, we consider a family's decades-long effort
to recover a valuable art collection that the
World-War-II-era Hungarian government and its Nazi
collaborators seized during their wholesale plunder of Jewish
property during the Holocaust. On remand from our earlier
decision, the district court concluded that the family's
claims against the Republic of Hungary, its museums, and a
state university satisfy the expropriation exception to the
Foreign Sovereign Immunities Act and that no other provision
of the Act bars their claims. For the reasons explained
below, we affirm in part, reverse in part, and along the way,
resolve several issues regarding the Act's application to
claims seeking to recover art stolen during the Holocaust.
described the background of this case in our earlier opinion,
de Csepel v. Republic of Hungary, 714 F.3d 591, 594-
97 (D.C. Cir. 2013). For the reader's convenience, we
repeat it virtually in full.
Mór Lipót Herzog was a "passionate Jewish
art collector in pre-war Hungary" who assembled a
collection of more than two thousand paintings, sculptures,
and other artworks. Compl. ¶ 38. Known as the
"Herzog Collection, " this body of artwork was
"one of Europe's great private collections of art,
and the largest in Hungary, " and included works by
renowned artists such as El Greco, Diego Velázquez,
Pierre- Auguste Renoir, and Claude Monet. Id.
Following Herzog's death in 1934 and his wife's
shortly thereafter, their daughter Erzsébet and two
sons István and András inherited the
Collection. Id. ¶ 39.
came World War II, and Hungary joined the Axis Powers. In
March 1944, Adolf Hitler sent German troops into Hungary, and
SS Commander Adolf Eichmann entered the country along with
the occupying forces and established headquarters at the
Majestic Hotel in Budapest. Id. ¶¶ 51, 60.
During this time, Hungarian Jews were subjected to
anti-Semitic laws restricting their economic and cultural
participation in Hungarian society and deported to German
concentration camps. Id. ¶¶ 44, 47, 52. As
an integral part of its oppression of Hungarian Jews,
"[t]he Hungarian government, including the Hungarian
state police, authorized, fully supported and carried out a
program of wholesale plunder of Jewish property, stripping
anyone 'of Jewish origin' of their assets."
Id. ¶ 54. Jews "were required to register
all of their property and valuables" in excess of a
certain value, and the Hungarian government "inventoried
the contents of safes and confiscated cash, jewelry, and
other valuables belonging to Jews." Id. ¶
55. "[P]articularly concerned with the retention of
artistic treasures belonging to Jews, " the Hungarian
government established "a so-called Commission for the
Recording and Safeguarding of Impounded Art Objects of Jews .
. . and required Hungarian Jews promptly to register all art
objects in their possession." Id. ¶ 56.
"These art treasures were sequestered and collected
centrally by the Commission for Art Objects, " headed by
the director of the Hungarian Museum of Fine Arts.
response to widespread looting of Jewish property, the
Herzogs "attempted to save their art works from damage
and confiscation by hiding the bulk of [them] in the cellar
of one of the family's factories at Budafok."
Id. ¶ 58. Despite these efforts, "the
Hungarian government and their Nazi[ ] collaborators
discovered the hiding place" and confiscated the
artworks. Id. ¶ 59. They were "taken
directly to Adolf Eichmann's headquarters at the Majestic
Hotel in Budapest for his inspection, " where he
"selected many of the best pieces of the Herzog
Collection" for display near Gestapo headquarters and
for eventual transport to Germany. Id. ¶ 60.
"The remainder was handed over by the Hungarian
government to the Museum of Fine Arts for safekeeping."
Id. After seizure of the Collection, a pro-Nazi
newspaper ran an article in which the director of the
Hungarian Museum of Fine Arts boasted that "[t]he
Mór Herzog collection contains treasures the artistic
value of which exceeds that of any similar collection in the
country. . . . If the state now takes over these treasures,
the Museum of Fine Arts will become a collection ranking just
behind Madrid." Id. ¶ 59.
for their lives, and stripped of their property and
livelihoods, the Herzog family was forced to flee Hungary or
face extermination." Id. ¶ 63.
Erzsébet Herzog (Erzsébet Weiss de Csepel
following her marriage) fled Hungary with her children, first
reaching Portugal and eventually settling in the United
States, where she became a U.S. citizen in 1952. Id.
István Herzog was nearly sent to Auschwitz but
"escaped after his former sister-in-law's husband .
. . arranged for him to be put in a safe house under the
protection of the Spanish Embassy." Id. ¶
42. Several members of his family escaped to Switzerland
while others remained in Hungary. Id. ¶ 64.
István Herzog died in 1966, leaving his estate to his
two sons, Stephan and Péter Herzog, and his second
wife, Mária Bertalanffy. Id. ¶ 42.
András Herzog was "sent . . . into forced labor
in 1942 and he died on the Eastern Front in 1943."
Id. ¶ 41. His daughters, Julia Alice Herzog and
Angela Maria Herzog, fled to Argentina and eventually settled
in Italy. Id. ¶ 64.
prior opinion, we described the family's seven-decade
effort to reclaim the Collection, including through Hungarian
courts. de Csepel, 714 F.3d at 595-96; see de
Csepel v. Republic of Hungary, 808 F.Supp.2d 113, 134-35
(D.D.C. 2011). When those efforts proved unsuccessful, the
Herzog family filed suit in U.S. district court against the
Republic of Hungary, three art museums-the Budapest Museum of
Fine Arts, the Hungarian National Gallery, and the Museum of
Applied Arts-and the Budapest University of Technology and
Economics (collectively, "Hungary"). The family
alleges that Hungary's taking of forty-four pieces of the
Herzog Collection "constituted an express or
implied-in-fact bailment contract, " and that its
failure to return them upon demand breached the bailment
contract and constituted conversion and unjust enrichment.
Compl. ¶¶ 96-110. The family seeks imposition of a
constructive trust, an accounting, and a declaration of its
ownership of the Herzog collection, all aimed at either
recovering the artwork or obtaining over $100 million in
compensation. Id. ¶¶ 111-28 & pt. V.
moved to dismiss, arguing that the suit was barred by the
Foreign Sovereign Immunities Act (FSIA). That Act authorizes
federal jurisdiction over civil actions against foreign
states, as relevant here, only in certain cases involving
expropriated property or commercial activity, and only to the
extent such jurisdiction is not inconsistent with certain
international agreements. 28 U.S.C. §§ 1604-05. The
district court denied Hungary's motion, concluding that
the expropriation exception applies to the Herzog
family's claims and that jurisdiction is not inconsistent
with agreements between the United States and Hungary. de
Csepel, 808 F.Supp. 2d. at 128-35. Hungary appealed, and
"without ruling on the availability of the expropriation
exception, " we concluded that the family's claims
satisfied the Act's commercial activity exception. de
Csepel, 714 F.3d at 597-603.
the district court, and following the close of discovery,
Hungary renewed its motion to dismiss. The district court
agreed with Hungary that the freshly developed record failed
to show that the commercial activities, i.e., the
bailment agreements, had any "direct effect" in the
United States, as required by the commercial activity
exception. de Csepel v. Republic of Hungary, 169
F.Supp.3d 143, 158-63 (D.D.C. 2016) (quoting 28 U.S.C. §
1605(a)(2)). It nonetheless again concluded that the
expropriation exception applies, and that no treaty
forecloses its application. Id. at 163-69. The court
therefore denied the motion to dismiss, except as to two
paintings-Lucian Cranach the Elder's "The
Annunciation to Saint Joachim" and John Opie's
"Portrait of a Lady"-that Hungary acquired from
third parties after the war. Id. at 165- 67.
now appeals, seeking dismissal of the claims regarding the
remaining forty-two pieces. It argues that all claims are
barred by a 1947 treaty between Hungary and the Allied Powers
and, alternatively, that the expropriation exception is
inapplicable. For its part, the Herzog family defends the
district court's decision, but asks that, should we
dismiss any of their claims, they be given leave to amend
their complaint in light of the Holocaust Expropriated Art
Recovery Act of 2016, Pub. L. 114-308, 130 Stat. 1524, which
Congress enacted during the pendency of this appeal to remove
"significant procedural obstacles" facing
"[v]ictims of Nazi persecution" seeking to
"recover Nazi-confiscated art." Id. §
2(6). We have jurisdiction under the collateral order
doctrine, see Kilburn v. Socialist People's Libyan
Arab Jamahiriya, 376 F.3d 1123, 1126 (D.C. Cir. 2004)
(holding that "denial of a motion to dismiss on the
ground of sovereign immunity" is subject to
interlocutory review under the collateral order doctrine),
and our review is de novo, de Csepel, 714 F.3d at
considering the parties' arguments, we think it helpful
to explain that the issues before us relate to two distinct
groups of art. The first-some twenty-five pieces-was never
physically returned to the family. As the district court
explained, after being seized, they were "scattered
across Nazi-occupied Europe, " and then "shipped
back" to Hungary after the war. de Csepel, 169
F.Supp.3d at 149. According to the family, these paintings
are "being held by Hungary in a custodial role"
under a bailment arrangement. Id. at 149-51, 160.
The second category-some fifteen pieces-was returned to the
family after the war, but Hungary later regained custody
through various procedures not relevant to the issues before
us. See id. at 149-51.
Foreign Sovereign Immunities Act provides that "a
foreign state shall be immune from the jurisdiction of the
courts of the United States and of the States, " subject
to certain exceptions. 28 U.S.C. § 1604. When a
"defendant foreign state has asserted the jurisdictional
defense of immunity, the defendant state bears the burden of
proving that the plaintiff's allegations do not bring its
case within a statutory exception to immunity."
Belize Social Development Ltd. v. Government of
Belize, 794 F.3d 99, 102 (D.C. Cir. 2015) (citation and
internal quotation marks omitted).
FSIA provisions are central to this appeal: the treaty
exception, which Hungary contends bars all of the
family's claims; and the expropriation exception, which
the family, echoing the district court, argues vitiates
Hungary's sovereign immunity. We consider each in turn.
the FSIA, a foreign sovereign's immunity is
"[s]ubject to existing international agreements to which
the United States [wa]s a party at the time of enactment of
th[e] Act." 28 U.S.C. § 1604. Pursuant to that
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
(alteration, citation, and internal quotation marks omitted).
As our court recently explained in Simon v. Republic of
Hungary, 812 F.3d 127 (D.C. Cir. 2016), which also
involved the Hungarian government's wartime seizure of
Jewish property-in that case, the personal property of Jews
sent to death camps-where "a pre-existing treaty is said
to confer more immunity than would the FSIA, the
treaty exception would override any of the FSIA's
exceptions to immunity under which the claims otherwise could
go forward." Id. at 135-36.
argues that the 1947 Treaty of Peace, Feb. 10, 1947, 61 Stat.
2065, 41 U.N.T.S. 135, which settled questions outstanding
between the Allied Powers and Hungary, including claims of
Hungarian nationals for property seized during the war, is
just such a treaty. Under Article 27 of the treaty, Hungary
promised to restore the property of all "persons under
Hungarian jurisdiction" who were "the subject of
measures of sequestration, confiscation or control on account
of the racial origin or religion of such persons."
Id. art. 27. Article 40 established a mechanism for
resolving "any dispute concerning the . . . execution of
the Treaty, " i.e., direct diplomatic
negotiations followed by referral to the "Heads of the
Diplomatic Missions in Budapest of the Soviet Union, the
United Kingdom and the United States of America, acting in
concert." Id. arts. 39-40. According to
Hungary, these provisions created an exclusive mechanism for
individuals seeking restitution of property expropriated by
Hungary during World War II, thereby barring additional
liability through an FSIA exception.
district court correctly noted, however, Hungary's
argument is completely foreclosed by Simon, which
holds that "while Article 27 secures one mechanism by
which Hungarian victims may seek recovery, it does not
establish the exclusive means of doing so." 812
F.3d at 137; see de Csepel, 169 F.Supp.3d at 164-65.
"The terms of Article 27, " Simon
explains, "do not speak in the language of exclusivity,
" and although "[a] sovereign generally has the
authority to espouse and settle the claims of its nationals
against foreign countries[, ] . . . it has no authority to
espouse and extinguish the claims of another
state's nationals." Simon, 812 F.3d at
137-38 (citation and internal quotation marks omitted). In
executing the 1947 Treaty, then, "the United States and
the other Allied Powers . . . lacked the power to eliminate
(or waive) the claims of another state's-i.e.,
Hungary's-nationals in the treaty's terms."
Id. at 138.
argues that the Simon court failed to consider the
Treaty's introduction, which states that the treaty
"will settle questions still outstanding as a result
of" the war. 41 U.N.T.S. 135, intro. According to
Hungary, the family's claims are barred because they were
"affirmatively 'settled'" by the treaty.
Appellants' Br. at 35. But this ignores
Simon's holding that the Allies had "no
power to settle or waive the extra-treaty claims of . . .
[Hungary's] nationals." 812 F.3d at 138.
insists that some of the family's claims are factually
distinct from those in Simon. According to Hungary,
Simon addresses only claims filed in lieu of
attempts to recover through the treaty. In this case, by
contrast, at least some of the claims concern art recovered
through the treaty process and later retaken by Hungary. As
the Herzog family observes, this is a "distinction
without a difference." Appellee's Br. at 52. Because
the Herzog family believes that Hungary failed to give them
full relief through the treaty, Simon allows them to
proceed either through the treaty or through other means like
"an Allied nation's courts." Simon,
812 F.3d at 138. Hungary points to nothing in the treaty, nor
to any principle of international law, suggesting that
claimants who attempt to use the treaty but find the relief
inadequate are either barred or estopped from bringing
extra-treaty claims. Indeed, Hungary's view of the treaty
makes little sense: as Simon explains, such a
reading would require Hungarian nationals to enforce the
treaty through Article 40, a state-to-state process, despite
having "no obvious nation to speak and negotiate on
their behalf against Hungary." Id. at 139.
rather abstruse text of the FSIA's expropriation