De Csepel v. Republic of Hungary
169 F. Supp. 3d 143
D.D.C.2016Background
- Plaintiffs are heirs of Baron M.L. Herzog who allege Hungary and Nazi collaborators seized most of the Herzog art collection during WWII; 44 works are at issue and defendants concede 42 were seized during the Holocaust and ~40 remain in Hungarian museums.
- After the war some artworks were returned to heirs in Budapest but subject to export restrictions, repatriation duties, preservation orders, and in many instances remained physically in museum custody (i.e., treated as deposits or constructive bailments).
- Plaintiffs sued in U.S. court (2010) asserting conversion, constructive trust, accounting, and unjust enrichment based on postwar bailment agreements and Hungary’s refusal to return works in 2008.
- The D.C. Circuit previously found jurisdiction under the FSIA commercial-activity exception and remanded; subsequent fact discovery produced documentary evidence about where and how postwar transfers occurred and the terms the museums applied.
- On renewed review the district court: (a) rejects plaintiffs’ proof of a required “direct effect” in the U.S. for commercial-activity jurisdiction as to most works; and (b) finds FSIA expropriation exception jurisdiction for 42 works seized during the Holocaust as genocidal takings, though two works were excluded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FSIA commercial-activity exception applies (direct-effect clause) | Bailment breaches were commercial acts and Hungary knew some heirs lived in U.S., so repudiation caused a direct effect in U.S. | Documentary record shows bailments were to be performed in Budapest; no contract contemplated U.S. performance so no direct effect | Denied for lack of evidence that agreements necessarily contemplated U.S. performance; commercial-activity exception fails |
| Whether FSIA commercial-activity exception applies under first/second clauses (acts in U.S.) | Museums’ commercial activities in U.S. and other contacts support jurisdiction under clauses 1–2 | Cause of action is based on extraterritorial bailments and breaches in Hungary, not U.S. acts | Clauses 1 and 2 do not apply (Nelson/gravamen rule) |
| Whether FSIA expropriation exception applies for artworks seized during WWII | Takings during the Holocaust were genocidal and thus ‘‘taken in violation of international law’’ giving jurisdiction under §1605(a)(3) | Treaties (1947 Peace Treaty, 1973 Agreement) or exhaustion/comity arguments preclude or bar such claims | Court finds expropriation exception applies to 42 of 44 works seized during Holocaust; treaties do not preclude; exhaustion/comity not required here |
| Whether museum holdings qualify as agency/instrumentality of Hungary | Museums are state agencies/instrumentalities owning/operating the property | Museums argued not agencies/instrumentalities (raised late) | Museums treated as agencies/instrumentalities (defendants judicially admitted and no persuasive contrary proof) |
Key Cases Cited
- De Csepel v. Republic of Hungary, 714 F.3d 591 (D.C. Cir. 2013) (earlier appellate decision finding commercial-activity jurisdiction from complaint allegations)
- Simon v. Hungary, 812 F.3d 127 (D.C. Cir. 2016) (Holocaust-era confiscations are genocidal takings; Peace Treaty does not preclude FSIA expropriation jurisdiction)
- Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661 (7th Cir. 2012) (recognizing genocidal takings as violations of international law for FSIA purposes)
- Chabad v. Russian Federation, 528 F.3d 934 (D.C. Cir. 2008) (plaintiff bears burden of production in jurisdictional fact disputes; agency/instrumentality and exhaustion discussion)
- Saudi Arabia v. Nelson, 507 U.S. 349 (1993) (commercial-activity exception’s “based upon”/gravamen rule)
- Odhiambo v. Republic of Kenya, 764 F.3d 31 (D.C. Cir. 2014) (direct-effect test: place of performance must be established or clearly contemplated to cause a direct U.S. effect)
- Helmerich & Payne Int’l Drilling Co. v. Bolivarian Republic of Venezuela, 784 F.3d 804 (D.C. Cir. 2015) (distinguishing jurisdictional showing from merits; discretion of foreign government undermines direct-effect claim)