Lead Opinion
Opinion concurring in part and dissenting from part II.B.2 filed by Senior Circuit Judge RANDOLPH.
For the 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.
I.
We described the background of this case in our earlier opinion, de Csepel v. Republic of Hungary,
Baron 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 Andrés inherited the Collection. Id. ¶ 39.
Then 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
In 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 аt 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.
“Fearing 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 (Erzsebet 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.
In our prior opinion, we described the family’s seven-decade effort to reclaim the Collection, including through Hungarian courts, de Csepel,
Hungary 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,
Back in 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, ie., the bailment agreements, had any “direct effect” in the United States, as required by the commercial activity exception, de Csepel v. Republic of Hungary,
Hungary 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 Aсt of 2016, Pub. L. 114-308, 130 Stat. 1524, which Congress enacted during the pendency of this appeal to remove “significant procedural obstacles” facing “[vjictims 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,
Before 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,
II.
The 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,
Two 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.
A.
Under the FSIA, a foreign sovereign’s immunity is “[sjubject 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,
Hungary 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.
As the 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.”
Hungary 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 beсause 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.”
Hungary 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.” Ap-pellee’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,
B.
The rather abstruse text of the FSIA’s expropriation exception is as follows:
A foreign state shall not be immune from the jurisdiction of the courts of the United States ... in any case ... [1] in which rights in property taken in violation of international law are in issue and [2][a] that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or [b] 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). In other words, the exception has two requirements. A claim satisfies the exception .if (1) “rights in property taken in violation of international law are in issue,” and (2) there is an adequate commercial nexus between the United States and the defendants. See Agudas Chasidei Chabad of U.S. v. Russian Federation,
1.
Hungary argues that this case involves a bailment agreement, not “rights in property taken in violation of international law.” Once again, however, Simon controls. That decision holds that Hungary’s seizures of Jewish property during the Holocaust constituted genocide and were therefore takings in violation of international law. 812
This case is just like Simon. Here, as there, Hungary seized Jewish property during the Holocaust. Here, as there, plaintiffs bring “garden-variety common-law” claims to recover for that taking. In Simon, the plaintiffs’ conversion claim alleged that they “had the right to possess personal property that was taken from them by defendants,” and their unjust enrichment claim alleged that they “were deprived of their personal property by the defendants and that it would be inequitable and unconscionable for the defendants to continue to enjoy the benefits of possession and use of the plaintiffs’ personal property.” Simon,
Hungary points out that the complaint’s “causes of action make no reference to a war-time taking.” Appellants’ Br. at 22. Rather, it says, Hungary’s Holocaust expropriations are “legally, factually, and temporally distinct from [plaintiffs’] claims of post-war, non-sovereign, private party commercial bailment breachеs.” Appellants’ Reply Br. at 4.
We agree that there must be some connection between the family’s claims and Hungary’s expropriation of the Herzog collection. The Herzog family conceded as much at oral argument. See Oral Arg. Tr. 20:1-: 12 (acknowledging that property once expropriated is not forever tainted by that expropriation). But as the family also emphasizes, most of its claims do in fact involve a tight legal, factual, and temporal connection to Hungary’s .expropriation of the collection. The district court found, and Hungary concedes, that some twenty-five pieces of art were never returned to the family. See de Csepel,
Hungary аrgues that the expropriation exception is inapplicable because a bailment claim is, at its core, commercial, and commercial claims may proceed only under the commercial activity exception, not the expropriation exception. Moreover, as Hungary points out, we explained in our earlier decision that the Herzog family
Hungary cites a series of cases in which courts have rejected efforts to recast tort and takings claims as commercial claims in order to satisfy the commercial activity exception. See, e.g., Saudi Arabia v. Nelson,
We thus conclude that “rights in property taken in violation of international law” are “in issue” as to those twenty-five or so artworks taken by Hungary during the Holocaust and never returned. This, however, does not end our task.
As mentioned above, some fifteen pieces of the Herzog collection were physically returned to family members, and others were “legally released to the family on paper” (though the family “dispute[s] whether they were ever actually returned to their physical custody”), de Csepel,
We shall therefore remand to the district court for it to consider, in the first instance, the Herzog family’s claims to those pieces returned by Hungary. See Simon,
2.
Having ■ concluded that the family’s claims for at least some of the artworks satisfy the expropriation exception’s first requirement, we turn to the commercial-activity nexus requirement. It contains two clauses: where “rights in property taken in violation of international law are in issue,” then the foreign sovereign loses its immunity if (1) “that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state,” or (2) “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 district court concluded that the second clause is met here, see de Csepel,
The Republic of Hungary, however, argues that it should nonetheless be dismissed as a defendant. As it points out, unlike the first clause, which refers expressly to the “foreign state,” the second clause — the one applicable here — refers to only “an agency or instrumentality of the foreign state.” According to the Republic, thеn, only its “agencies and instrumentalities” are proper defendants, and it should be dismissed. In support, it cites Simon, which explains that “[t]he nexus requirement differs somewhat for claims against the foreign state itself (e.g., Hungary) as compared with claims against an agency or instrumentality of the foreign state.... ”
As to Simon, the family argues that we are bound not by that decision, but rather by an earlier decision of our court, Agudas Chasidei Chabad of U.S. v. Russian Federation,
The question, then, is whether we are bound by Chabad or Simon. See Helmerich & Payne International Drilling Co. v. Bolivarian Republic of Venezuela,
The question, however, is not so simple because “ ‘[blinding circuit law comes only from the holdings of a prior panel.’ ” Doe v. Federal Democratic Republic of Ethiopia,
The issue of the Russian state’s immunity was completely unaddressed by the district court and neither raised nor briefed on appeal — a deficiency that, as then-judge Scalia reminded us, deprives the court of the benefits of the adversarial system. Carducci v. Regan,
So too here. While readers of the dissent might think that the Chabad court discussed at length whether the Russian Federation should remain in the case, the court reversed the district court with no explanation at all. See Arch Trading Corp. v. Republic of Ecuador,
Indeed, Chabad’s analysis is in tеnsion with its apparent decision to extend jurisdiction from Russia’s agencies and in-strumentalities to the foreign state itself. Recall that the first clause of the nexus requirement mandates that the property be physically present in the United States, but the second does not. In Chabad, the defendants argued that it “would be quite anomalous” if the second clause could be satisfied by both a relaxed physical presence requirement and a lower level of commercial activity. Chabad,
By contrast to the Chabad court, the Simon court expressly considered and decided the question of foreign state immunity under the expropriation exception. It explained that the nexus requirement for jurisdiction over foreign states “differs” from that over agencies and instrumentali
Although this is sufficient to resolve the question, even were we not bound by Simon, we would hold that a foreign state retains its immunity unless the first clause of the commercial-activity nexus requirement is met. The FSIA carefully distinguishes foreign states from their agencies and instrumentalities. See, e.g., 28 U.S.C. §§ 1603(a)-(b) (defining the terms); 1606 (making punitive damages available against agencies and instrumen-talities but not foreign states); 1610 (establishing different procedures for property execution). Though the list of exceptions begins “[a] foreign state shall not be immune,” id. § 1605, our court has explained that the foreign state itself does not lose immunity merely because one of its agencies and instrumentalities satisfies an FSIA exception; rather, given the Act’s “presumption” that agencies and instru-mentalities have “independent status” from the foreign state, “ ‘[w]hen a state instrumentality is not immune ..., the claim is ordinarily to be brought only against the instrumentality’ ” Foremost-McKesson, Inc. v. Islamic Republic of Iran,
The same is true for the expropriation exception. A foreign state loses its immunity if the claim against it satisfies the exception by way of the first clause of the commercial-activity nexus requirement; by contrast, an agency or instrumentality loses its immunity if the claim against it satisfies the exception by way of the second clause.
To conclude that the foreign state loses its immunity if either clause is satisfied would produce an anomalous result: the court would have no jurisdiction over the agencies and instrumentalities that actually own or operate the expropriated property. That is because, although the FSIA generally allоws for “an agency or instrumentality of a foreign state” to count as a “foreign state,” id. § 1603, the agencies or instrumentalities would fail to satisfy either of the expropriation exception’s two clauses if considered to be the relevant “foreign state” throughout the exception. Take this case. The family would be unable to pursue its claims against the very entities that actually possess the Herzog collection — the museums and the university— because the collection is not “present in the United States” (clause one) nor “owned or operated by an agency or instrumentality” of the museums and the university (clause two). Thus, the expropriation exception’s two clauses make sense only if they establish alternative thresholds a
Collapsing the well-worn distinction between foreign states and agencies and in-strumentalities would likewise lead to odd results. Because a foreign state would be amenable to suit whenever its agency or instrumentality is not immune, a plaintiff would be able tо sue a foreign state with no commercial activity in the United States so long as the agency or instrumentality owning the property in issue is engaged in a commercial activity in the United States. In other words — and coun-terintuitively — a plaintiff (1) could more easily obtain jurisdiction over a foreign state if the expropriated property is possessed not by it, but by one of its agencies or instrumentalities, and (2) could sue any and all agencies and instrumentalities of a foreign state however unconnected to the United States, so long as the foreign state itself possesses the property in connection with a commercial activity carried on in the United States. This expansive reading of the expropriation exception makes little sense given that the provision targets specific .expropriated property. It is hardly surprising, then, that such a reading was rejected by Simon and the only other circuit to have addressed the question. See Garb v. Republic of Poland,
III.
This leaves three issues.
First, the remaining defendants — the museums and the university — argue that the claims of Erzsébet Weiss de Csepel, the Herzog daughter who became a United States citizen in 1952, supra at 1098, are barred by a 1973 agreement between the United States and Hungary under which Hungary paid the United States $18.9 million “in full and final settlement and in discharge of all claims of the Government and nationals of the United States against the Government and nationals of the Hungarian People’s Republic.” Agreement between the Government of the United States of America and the Government of the Hungarian People’s Republic Regarding the Settlement of Claims, Mar. 6, 1973, 24 U.S.T. 522 art. 1. Although, as the district court explained, the 1973 agreement could not have extinguished claims in any work of art taken from Erzsébet before she became a citizen in 1952, see de Csepel,
Defendants point to record evidence suggesting that other paintings may also have been taken from Erzsébet after she became a citizen. See Appellants’ Reply Br. at 10 n.7 (identifying twelve paintings). The family disagrees, claiming that only the Cranach and Opie paintings were seized after 1952. See Appellees’ Br. at 54-55 & n.15. Because we are remanding the case for other reasons, we think it best to leave it to the district court to address this issue in the first instance as part of its review of the artwork returned and retaken by Hungary.
As a general rule, appellate jurisdiction extends only to “final decisions” of a district court, 28 U.S.C. § 1291, and parties may not appeal where, as here, the district court has simply denied a motiоn to dismiss. Kilburn,
Hungary, however, has made no argument that the collateral order doctrine applies to denial of a motion to dismiss on freestanding exhaustion grounds. See Simon,
Finally, the Herzog family asks that should we dismiss any оf their claims, they be allowed to amend their complaint in light of the Holocaust Expropriated Art Recovery Act of 2016. Pub. L. 114-308,130 Stat. 1524. Passed during the pendency of this appeal, that statute rests on Congress’s finding that “[victims of Nazi persecution and their heirs have taken legal action in the United States to recover Nazi-confiscated art,” but “[tjhese lawsuits face significant procedural obstacles partly due to State statutes of limitations.” Id. § 2(6). The Act therefore preempts existing state and federal statutes of limitations for “a civil claim or cause of action ... to recover any artwork or other property that was lost ... because of Nazi persecution.” Id. § 5(a). Plaintiffs whose claims were barred by a statute of limitations now have six years from the enactment of the new statute to file their claims. Id. § 5(c). Moreover, and crucially for the Herzog family, the Act’s new statute of limitations applies to claims “pending in any court on the date of enactment of this Act, including any civil claim or cause of action that is pending on appeal.” Id. § 5(d)(1).
Defendants urge us to deny the motion becаuse, they say, the family has offered “no explanation” for its failure to bring a straightforward conversion claim from the start. Appellants’ Reply Br. at 25. Defendants cannot be serious about this, as in their opening brief they themselves identify the “explanation,” ie., the “statute of limitations obstacle that has been applied in courts around the country.” Appel
IV.
We affirm the district court’s ruling that the Herzog family’s claims to art never returned to them satisfy the FSIA’s expropriation exception. With respect to art that was returned to the Herzog family, we remand for the district court to determine whether the claim to recover each piece may proceed under the expropriation exception. We also instruct the district court to dismiss the Republic of Hungary as a defendant and to grant the Herzog family leave to amend their complaint in light of the Holocaust Expropriated Art Recovery Act. Finally, we dismiss for lack of appellate jurisdiction Hungary’s appeal from the denial of its motion to dismiss on exhaustion grounds.
So ordered.
Concurrence Opinion
concurring in part and dissenting from part II.B.2:
The majority decides that the Republic of Hungary is immune from the jurisdiction of the federal courts in this case. I disagree.
Part II.B.2 of the majority’s opinion transforms the governing jurisdictional statute to mean the opposite of what it says. That distortion of the English language is not all. The majority also dismisses a controlling panel decision thoroughly inconsistent with the majority’s conclusion that there is no jurisdiction over the Republic of Hungary. Instead of following that decision, the majority credits a later, contradictory panel decision, a decision bereft of any statutory analysis.
The two decisions dealing with the jurisdictional question presented here are Agudas Chasidei Chabad of United States v. Russian Federation,
As between Chabad and Simon, the earlier Chabad decision controls for the reasons Judge Sentelle stated for our court in Sierra Club v. Jackson,
The expropriation or “takings” exception in the Foreign Sovereign Immunities Act,
[a] foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case ... (3) in which rights in property taken in violation of international law are in issue and that property ... is owned or operated by an agency or instrumentality of the foreign state ... engaged in a commercial activity in the United States.
See Bolivarian Republic of Venezuela v. Helmerich & Payne Int’l Drilling Co., — U.S. —,
Hungary’s immunity thus should have depended on three easily-answered questions. Is the Republic of Hungary a “foreign state”? Of course it is. See Maj. Op. 1104. Are “rights in property taken in violation of international law” “in issue”? The answer is clearly yes. See Maj. Op. 1103. And is “that property” “owned or operated by an agency or instrumentality of the foreign state ... engaged in a commercial activity in the United States”? Once again — yes. See Maj. Op. 1104.
Yet the majority decides that Hungary is immune from suit. The apparent basis for its conclusion is that the italicized portion of § 1605(a)(3), quoted above, does not divest a “foreign state” of immunity. Although § 1605(a)(3) provides that a foreign state shall not be immune from suit, the majority crosses out the “not” and holds that the foreign state shall be immune when its agencies or instrumentalities owning or operating the expropriated property engage in commercial activity in the United States.
In trying to explain why § 1605(a)(3) should be treated as if it means the opposite of what it actually provides, the majority invokes § 1606 and § 1610 of the Act, sections that differentiate foreign states from their agencies and instrumentalities. See Maj. Op. 1107 (citing 28 U.S.C. §§ 1606 & 1610). One of these sections (§ 1606) exempts foreign states, “except for an agency or instrumentality thereof,” from liability for punitive damages. The other section (§ 1610) sets forth procedures for attaching the property of a foreign state, procedures that differ from those for attaching the property of a foreign state’s agency or instrumentality. Both sections deal with remedies, not a foreign state’s immunity from suit.
Neither section suggests that Hungary is not a foreign state. The Act defines “foreign state” to include the foreign state’s agencies and instrumentalities. 28 U.S.C. § 1603(a). The sections the majority cites are arguably exceptions to that definition. It is one thing to say that a “foreign state” under the Act does not always include agencies and instrumentalities. Those sections may stand for that proposition. But the majority advances an entirely different proposition — namely, that the term “foreign state” in § 1605(a)(3) somehow does nоt include a “foreign state.”
To support this non sequitur, the majority enlists Foremost-McKesson, Inc. v. Islamic Republic of Iran,
The Supreme Court, in its latest opinion on the Foreign Sovereign Immunities Act, cited the Restatement (Fourth) of Foreign Relations Law: Sovereign Immunity § 455 (Tent. Draft No. 2, March 21, 2016). See Helmerich & Payne Int’l Drilling,
Courts in the United States may exercise jurisdiction over a foreign state in any case in which rights in property taken in violation of international law are in issue when
(a) that property (or any property exchanged for such property) is present in the United States in connection with a commercial activity carried on by that foreign state in the United States; or
(b) that property (or any property exchanged for such property) is owned or operated by an agency or instrumentality of a foreign state and that agency or instrumentality is engaged in commercial activity in the United States.
Reporter Note 6 then addresses the issue in this case directly. “Some courts,” the Note says, “have allowed actions under the second ‘prong’ of this exception to be brought against the foreign state in question rather than the agency or instrumentality. See, e.g., Agudas Chasidei Chabad of U.S. v. Russian Federation,
Notice that the Reporter cites Chabad as a case in which the court decided that the italicized language from § 1605(a)(3),
As I briefly discussed in the beginning of this dissent, the majority’s failure to follow Chabad is clear error. Consider the majority’s statement that in Chabad the “issue of the Russian state’s immunity was completely unaddressed by the district court and neither raised nor briefed on appeal....” Maj. Op. 1105. There are two assertions here. The first deals with the district court’s opinion, the second with what the parties argued on appeal. Both are wrong.
As to the majority’s first assertion, District Judge Lamberth’s comprehensive opinion in Chabad refutes it. On page after page Judge Lamberth discusses and ultimately agrees with Chabad’s сlaim that jurisdiction over Russia — that is, Russia’s lack of immunity — required that “the entity that owns or operates the property at issue ‘be engaged in a commercial activity in the United States.’ § 1605(a)(3) (emphasis added).”
On appeal, Russia argued in its brief that “commercial activity” in the italicized clause in § 1605(a)(3) — which Chabad had relied upon (
Yet the majority in this case now resurrects Russia’s argument and claims that treating the italicized clause in § 1605(a)(3) as establishing jurisdiction over Hungary would produce an “anomalous result.” Maj. Op. 1107-08. The majority seems quite unaware that the “anomaly” argument it puts forward is the argument the Chabad court flatly rejected on appeal. The briefs in Chabad make the majority’s error clear.
The short of the matter is that the appellate decision in Chabad is controlling. The Supreme Court has instructed that “it is not only the result but also those portions of the opinion necessary to that result by which we are bound.” Seminole Tribe of Florida v. Florida,
The majority dismisses the reasoning of Chabad because it believes that a “foreign state” in § 1605(a)(3) may sometimes not be a “foreign state.” Having adopted this unfounded reading of the statute, the majority then faults Chabad for not explicitly addressing it. It bears repeating that Cha-bad upheld jurisdiction over Russia. Why? Because the italicized portion of § 1605(a)(3) removed Russia’s immunity in light of the commercial activities of Russia’s agencies and instrumentalities in the United States. The Chabad decision is clearly precedential, whether or not the opinion responded to every conceivable misreading of the statute.
In the later decision in Simon, the panel recognized that the relevant portion of Chabad had precedential effect. Without explanation, it cited that precise portion in reaching its contrary and counter-textual interpretation of the expropriation exception. See Simon,
The only reasonable explanation for Simon’s treatment of Chabad is that it made a mistake. The majority’s decision in this case only compounds the error.
Notes
. Because the majority relies on this distinction, it is worth making one additional point. The majority concludes that a "foreign state loses its immunity if the claim against it satisfies the exception by way of the first clause of the commercial-activity nexus requirement; by contrast, an agency or instrumentality loses its immunity if the claim against it satisfies the exception by way of the second clause.” Maj. Op. 1107. This supposed neat distinction between foreign states and their instrumental-ities is belied not only by the Act defining “foreign state” to include agencies and instru-mentalities, 28 U.S.C. § 1603(a), but also by the House Report on the Act explicitly adopting this definition for the expropriation exception. See H.R. Rep. No. 94-1487, pp. 18, 19 (1976). This definition of "foreign state” also dispels the majority’s notion that reading the statute for what it says would result in the court having “no jurisdiction over the agencies and instrumentalities that actually own or operate the expropriated property.” Maj. Op. 1107. That argument only works if "foreign state” means either the foreign state or its instrumentalities — but the term includes both.
. The Restatement and majority both note a contrary decision in the Second Circuit. See Garb v. Poland,