In re Holocaust Victim Assets Litigation

• Decision Date: 26 July 2000
• Docket Number: No. 97 Civ. 461.,No. 96 Civ. 4849 (ERK)(MDG).,No. 99 Civ. 5161.,96 Civ. 4849 (ERK)(MDG).,99 Civ. 5161.,97 Civ. 461.
• Citation: 105 F.Supp.2d 139
• Parties: In re HOLOCAUST VICTIM ASSETS LITIGATION. This Document Relates to All Cases.
• Court: U.S. District Court — Eastern District of New York

105 F.Supp.2d 139

In re HOLOCAUST VICTIM ASSETS LITIGATION This Document Relates to All Cases.

No. 96 Civ. 4849 (ERK)(MDG).

No. 99 Civ. 5161.

No. 97 Civ. 461.

United States District Court, E.D. New York.

July 26, 2000.

As Corrected August 2, 2000.

Burt Neuborne, New York University Law School, New York, NY, lead class counsel.

Michael D. Hausfeld, Paul T. Gallagher, Cohen, Milstein, Hausfeld & toll, P.L.L.c., Washington, DC, Robert L. Lieff, Elizabeth J. Cabraser, Morris A. Ratner, Lisa J. Leebove, Lieff, Cabraser, Heimann & Bernstein, LLP, New York, NY, Melvyn I. Weiss, Deborah Sturman, Milberg Weiss Bershad Hynes & Lerach, LLP, New York, NY, Robert A. Swift, Kohn, Swift & Graf, P.C., Philadelphia, PA, Irwin Levin, Richard Shevitz, Cohen & Malad, P.C., Indianapolis, IN, Ed Fagan, Fagan & D'Avino, New York, NY, Stephen Whinston, Berger & Montague, P.C., Philadelphia, PA, Mel Urbach, Fort Lee, NJ, Arnold Levin, Levin, Fishbein, Sedran & Berman, Philadelphia, PA, Martin Mendelsohn, Verner, Liipfert, Bernard, McPherson & Hand, Charter, Washington, DC, Barry Fisher, Fleishman, Fisher & Moest, Los Angeles, CA, Stanley M. Chesley, Jeannie Geoppinger, WEaite, Schneider, Bayless & Chesley, Co., L.P.A., Cincinnati, OH, class counsel.

Roger M. Witten, Wilmer, Cutler & Pickering, Washington, DC, for defendants.

MEMORANDUM & ORDER

KORMAN, Chief Judge.

I address here the legal issue of the fairness of the $1.25 billion settlement of the Holocaust Victim Assets Litigation against two leading Swiss banks. The words of Ernest Lobet, a survivor of the Holocaust, provide the best summary of the conclusion that I reach after the analysis to follow:

I have no quarrel with the settlement. I do not say it is fair, because fairness is a relative term. No amount of money can possibly be fair under those circumstances, but I'm quite sure it is the very best that could be done by the groups that negotiated for the settlement. The world is not perfect and the people that negotiated I'm sure tried their very best, and I think they deserve our cooperation and ... that they be supported and the settlement be approved.

Transcript of Fairness Hearing, November 29, 1999, at 146.

Background and Procedural History

I. Nature of the Lawsuit and Proposed Settlement

Beginning in late 1996 and early 1997, plaintiffs filed a series of class action lawsuits against defendants. The original class action complaints were amended and refiled in July 1997 as four separate actions, consolidated under Master Docket No. 96 Civ. 4849: Sonabend, et al. v. Union Bank of Switzerland, et al.; Trilling-Grotch, et al. v. Union Bank of Switzerland, et al.; Weisshaus, et al. v. Union Bank of Switzerland, et al.; and World Council of Orthodox Jewish Communities, Inc., et al. v. Union Bank of Switzerland, et al.

Plaintiffs alleged that, before and during World War II, they were subjected to persecution by the Nazi regime, including genocide, wholesale and systematic looting of personal and business property and slave labor. Plaintiffs alleged that, in knowingly retaining and concealing the assets of Holocaust victims, accepting and laundering illegally obtained Nazi loot and transacting in the profits of slave labor, Swiss institutions and entities, including the named defendants, collaborated with and aided the Nazi regime in furtherance of war crimes, crimes against humanity, crimes against peace, slave labor and genocide. Plaintiffs also alleged that defendants breached fiduciary and other duties; breached contracts; converted plaintiffs' property; enriched themselves unjustly; were negligent; violated customary international law, Swiss banking law and the Swiss commercial code of obligations; engaged in fraud and conspiracy; and concealed relevant facts from the named plaintiffs and the plaintiff class members in an effort to frustrate plaintiffs' ability to pursue their claims. Plaintiffs sought an accounting, disgorgement, compensatory and punitive damages, and declaratory and other appropriate relief.

In May 1997, defendants filed motions to dismiss the litigation, or, in the alternative, for a stay. The motions, supported by expert affidavits, argued that the actions should be dismissed because plaintiffs failed to state claims under Swiss and international law, failed to join indispensable parties, lacked personal and subject matter jurisdiction, and lacked standing. Defendants also argued that I should abstain from adjudicating plaintiffs' claims in favor of ongoing non-judicial initiatives to redress all of plaintiffs' claims, and argued that Switzerland, not the United States, was the proper forum for plaintiffs to pursue the relief to which they believed they were entitled. I heard lengthy argument on defendants' motions on July 31, 1997. At argument, I voiced concerns about the viability of certain causes of action and I identified several additional legal issues that the parties subsequently addressed in post-hearing memoranda of law. While the motions to dismiss were pending, the parties engaged in discussions resulting in a Settlement Agreement, which made it unnecessary for me to decide the motions.

The settlement discussions were facilitated, initially, by former United States Under Secretary of State, now Deputy Secretary of Treasury, Stuart Eizenstat. Subsequently, I became intimately involved in the settlement discussions that led to an agreement in principle in August 1998. The key terms of the proposed Settlement Agreement are as follows:

1. Settlement Fund: Defendants have agreed to pay $1.25 billion, in four installments, over the course of three years. Pursuant to the terms of the Settlement Agreement, defendants paid the first and second installments into an escrow fund on November 23, 1998 and 1999, respectively. As originally set forth in the Settlement Agreement, the two remaining payments were to be made on November 23, 2000 and 2001, respectively. However, the parties have agreed to amend the Settlement Agreement to provide for acceleration of certain payments and modification of the flow of funds between the escrow fund and the settlement fund in order to generate additional interest payments payable to the settlement fund. The additional interest payments are designed to partially defray the cost of the claims process for the Deposited Assets Class, which is defined below.

2. Defenses Waived: As part of the settlement, defendants have foregone potentially dispositive legal and factual defenses, including the following: (i) whether this dispute is justiciable, (ii) whether plaintiffs' claims are barred under applicable foreign law, (iii) whether plaintiffs have standing to assert various claims and (iv) whether the claims are time-barred under applicable statutes of limitation and repose, or by the doctrine of prescription.

3. Revival of Claims: The settlement protects class members whose claims may otherwise have been deemed expired under applicable statutes of limitation and repose.

4. Distribution: The settlement does not preordain a plan for distribution of the settlement fund. Instead, the settlement sets forth a fair and open mechanism for the development of criteria pursuant to which distribution and allocation determinations will be made.

5. Settled Claims: In exchange for the settlement amount paid by the settling defendants, settling plaintiffs and settlement class members have agreed irrevocably and unconditionally to release, acquit and forever discharge certain releasees from any and all claims relating to the Holocaust, World War II and its prelude and aftermath, victims or targets of Nazi persecution, transactions with or actions of or in connection with the Nazi regime, treatment by the Swiss Confederation or other releasees of refugees fleeing persecution, or any related cause or thing whatever. Certain limited exceptions are detailed in the Settlement Agreement. The settlement resolves not only the cases coordinated as part of the above-captioned proceeding, but also resolves additional related cases, including cases in California and Washington, D.C. captioned Markovicova, et al. v. Union Bank of Switzerland, et al., Case No. C98-2924 (N.D.Cal.), and Rosenberg, et al. v. Swiss National Bank, Case No. 1:98-CV-01647 (D.D.C.).

6. Class Beneficiaries: The parties agreed that the settlement should benefit generally persons recognized as targets of systematic Nazi oppression on the basis of race, religion or personal status. Declaration of Burt Neuborne, Esq. (Nov. 5, 1999) ("Neuborne Decl. I") ¶ 23. Accordingly, at the initiative of plaintiffs' Executive Committee, the settlement was explicitly designed to benefit Jews, homosexuals, Jehovah's Witnesses, the disabled and Romani — groups recognized by the United Nations as having been the targets of systematic Nazi persecution on the basis of race, religion or personal status. Id. Thus, four of the five settlement classes defined below benefit these targets of Nazi persecution.

Because the defendant banks sought to settle not only the causes of action alleged against them, but were seeking to resolve legal claims against Swiss governmental and business entities, the releases described in the fifth numbered paragraph above included entities that were not named as defendants in this case. See Settlement Agreement ¶ 1 (definition of "Releasees"). Also for this reason, at least one of the five settlement classes described below, the Refugee Class, includes victims of Nazi persecution who did not suffer any injury as a direct or indirect result of conduct of the defendant banks or of any Swiss banks.

II. The Settlement Evaluation Process

A. Preliminary Approval and Class Certification

In an order dated March 30, 1999, I preliminarily approved the proposed settlement and certified five settlement classes under Fed.R.Civ.P. 23(a) and 23(b)(3). The classes certified were the following:

1. Deposited Assets Class: The Deposited Assets Class consists of...