De Csepel v. Republic of Hungary

Citation75 F.Supp.3d 380
Decision Date12 December 2014
Docket NumberCivil Action No. 10–1261 ESH
CourtUnited States District Courts. United States District Court (Columbia)
PartiesDavid L. de Csepel, et al., Plaintiffs, v. Republic of Hungary, et al., Defendants.

Michael Dewayne Hays, Alyssa Tami Saunders, Cooley, LLP, Washington, DC, Alycia Regan Benenati, Megan Kathleen Zwiebel, Sheron Korpus, Kasowitz, Benson, Torres & Friedman LLP, Dorit Ungar Black, Michael S. Shuster, Holwell Shuster & Goldberg LLP, New York, NY, for Plaintiffs.

Emily C. Harlan, Grayson Yeargin, Nixon Peabody, L.L.P., Washington, DC, Michael Omar Azat, Sarah Erickson Andre, Thaddeus J. Stauber, Nixon Peabody LLP, Los Angeles, CA, for Defendants.

MEMORANDUM OPINION

ELLEN SEGAL HUVELLE, United States District Judge

Defendants the Republic of Hungary, the Hungarian National Gallery, the Museum of Fine Arts, the Museum of Applied Arts, and the Budapest University of Technology and Economics have moved, pursuant to Federal Rule of Civil Procedure 12(b)(1), to dismiss this case for want of subject matter jurisdiction. (Mot. to Dismiss by the Republic of Hungary, the Hungarian National Gallery, the Museum of Fine Arts, the Museum of Applied Arts, and the Budapest University of Technology and Economics [ECF No. 86] (“Defs.' Mot.”).)

Plaintiffs David L. de Csepel, Angela Maria Herzog, and Julia Alice Herzog are descendants of Baron Mór Lipót Herzog, a Jewish Hungarian art collector who assembled a substantial art collection (the “Herzog Collection”) prior to his death in 1934. Plaintiffs allege that Hungary and Nazi Germany seized the Herzog Collection during World War II, and that at least 40 of the pieces are still in defendants' possession. Plaintiffs brought this suit alleging that defendants breached bailment agreements entered into after World War II when they refused to return pieces from the Herzog Collection in 2008.

On February 15, 2011, defendants filed a motion to dismiss, which this Court granted in part and denied in part, holding that it had subject matter jurisdiction under the expropriation exception to the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1605(a)(3). See de Csepel v. Republic of Hungary, 808 F.Supp.2d 113, 132–33 (D.D.C.2011). The D.C. Circuit affirmed in part and reversed in part.

de Csepel v. Republic of Hungary, 714 F.3d 591 (D.C.Cir.2013). Without addressing the expropriation exception, the Circuit held that plaintiffs' complaint alleged sufficient facts to confer subject matter jurisdiction pursuant to the commercial activity exception to the FSIA, 28 U.S.C. § 1605(a)(2). See id. at 601. On remand, this Court ordered discovery to proceed. de Csepel v. Republic of Hungary, No. 10–cv–1261 (D.D.C. Dec. 9, 2013). Discovery is ongoing and scheduled to end on July 28, 2015.

Defendants now assert that, in light of the documentary evidence produced to date, plaintiffs cannot carry their burden of proving that this Court has subject matter jurisdiction. In particular, defendants claim that the commercial activity exception to the FSIA does not apply. Plaintiffs respond that there exists sufficient evidence to satisfy the commercial activity exception and that, in any event, it would be premature for this Court to rule on the matter prior to the close of discovery. Alternatively, plaintiffs maintain that this Court has subject matter jurisdiction pursuant to the expropriation exception.

For the reasons stated below, this Court will deny defendants' motion without prejudice pending the close of fact discovery on February 27, 2015.

BACKGROUND

The background of this case has already been described by this Court and the Court of Appeals. de Csepel, 714 F.3d at 594–97 ; de Csepel, 808 F.Supp.2d at 120–26. The Court will therefore only recount the procedural history and facts relevant to this motion.

Baron Mór Lipót Herzog was a Jewish Hungarian art collector who amassed a collection of over 2,000 paintings, sculptures, and other pieces of artwork. (Compl. [ECF No. 1] (“Compl.”) ¶ 38.) After his death in 1934 and his wife's death in 1940, the Herzog Collection passed to his three children, Erzsébet (Elizabeth) Weiss de Csepel, István (Stephen) Herzog, and András (Andrew) Herzog. (Id. ¶ 39.)

During the Holocaust, Hungarian Jews, including the Herzogs, were required to register their art treasuries. (Id. ¶ 56.) The Herzog family attempted to hide their Collection, but the Hungarian government and their Nazi collaborators discovered its location and seized it. (Id. ¶¶ 58–61.)

Several of the Herzog heirs and their families escaped from Hungary during the war: Elizabeth fled to Portugal and settled in the United States in 1946, becoming a U.S. citizen on June 23, 1952. (Id. ¶ 63.) Angela and Julia Herzog, Andrew's daughters, escaped to Argentina and eventually settled in Italy. (Id. ¶ 64.) Stephen remained in Hungary. (Id. ¶¶ 42, 64.)

Following Germany's defeat, several pieces of the Herzog Collection were returned to the family. (Id. ¶ 72.) However, plaintiffs allege that much of the Collection has remained in defendants' possession. (Id. ¶¶ 70, 73.) Plaintiffs have submitted documentary evidence that arguably suggests that Hungarian officials understood that these pieces of art were the property of the Herzog family and that defendants were merely acting as custodians. For example, in a memorandum dated November 10, 1947, Dr. Gyula Ortutay, the Minister of Religion and Public Education, wrote that several pieces of the Herzog Collection had recently been returned to Hungary from Germany. (See Decl. of Alycia Regan Benenati (“Benenati Decl.”), Ex. D [ECF No. 89–6] at HUNG010996.) The memorandum lists several pieces that were the “property of the minor heirs of the late András Herczog and several other pieces that were “the property of István Herczog.” (Id. ) It then notes that “the artworks could only be released [to the owners] in return for the repatriation duty” and that all but two of the pieces “remain in the care of the office of the ministerial commission to this day.” (Id. ) In a memorandum dated November 20, 1948, Ministerial Commissioner Sandor Jeszensky wrote that his office had “found a solution under which it is able to place works from the Herzog collection at the disposal of the Museum of Fine Arts, as a temporary deposit, for the purpose of exhibiting them.” (Benenati Decl., Ex. F [ECF No. 89–8] at HUNG011376–77.) The memorandum goes on to list eleven pieces, many of which are subjects of this litigation. (Id. at HUNG011377; see also Pls.' Mem. of P. & A. in Opp. to Defs.' Mot. to Dismiss [ECF No. 89] (“Pls.' Opp.”) at 10–11.) Finally, in a letter dated May 3, 1950, Dr. Emil Oppler, the Herzog family attorney, offered several paintings “for deposit with the Museum of Fine Art,” noting that [t]he owner of the paintings and other works of art is Mrs. Alfonz Weiss, née Erzsébet Herzog.” (Benenati Decl., Ex. H [ECF No. 89–10] at HUNG012663.) The letter lists the paintings and states that Dr. Oppler is “authorized to entrust the Museum of Fine Art with the safekeeping and handling of these works of art, while maintaining the ownership title to the deposit.” (Id. ) Again, many of the listed pieces are the ones plaintiffs now seek. (See Pls.' Opp. at 11–12.)

“Following the end of World War II, the Herzog family began a seven-decade struggle to reclaim the Collection.” de Csepel, 714 F.3d at 595. Their efforts are described in de Csepel, 808 F.Supp.2d at 123–26. Among these efforts, Martha Nierenberg, Elizabeth Weiss de Csepel's daughter, filed suit in Hungary in October 1999 to recover twelve paintings that belonged to her mother. Id. at 125. In 2008, the Hungarian Metropolitan Appellate Court dismissed Nierenberg's claim in its entirety. Id. at 126. Thereafter, plaintiffs commenced this lawsuit, and on September 1, 2011, this Court granted in part and denied in part defendants' motion to dismiss. Id. at 145. The Court sustained jurisdiction under the expropriation exception to the FSIA, 28 U.S.C. § 1605(a)(3). It noted that defendants do not dispute that ‘rights in property’ ... are ‘in issue.’ Id. at 128. It further found that “the Herzog Collection was taken in violation of international law” when “the Hungarian government, in collaboration with the Nazis, discovered the hiding place [of the Collection] and confiscated its contents.” Id. at 129, 131. Finally, it held that there was a “commercial activity nexus between the foreign state ... that owns or operates the property at issue and the United States.” Id. at 131–32. The Court did not reach the question of whether it had jurisdiction under the commercial activity exception to the FSIA, 28 U.S.C. § 1605(a)(2). Id. at 133 n. 4.

The D.C. Circuit affirmed this Court's jurisdictional holding on alternative grounds. It held that “the family's claims fall comfortably within the FSIA's commercial activity exception.” de Csepel, 714 F.3d at 598. In so doing, it first found that “Hungary's repudiation of bailment agreements with respect to the Collection constitutes an act taken in connection with a commercial activity.” Id. at 599 ; see also id. at 600 (“The complaint ... alleges that, by entering into bailment agreements to retain possession of the expropriated artwork and later breaching those agreements by refusing to return the artwork, Hungary took affirmative acts beyond the initial expropriation to deprive the family of their property rights in the Collection.”). It next found that the complaint alleged that Hungary's repudiation of the bailment agreement “caused a ‘direct effect’ in the United States.” Id. at 599 ; see also id. at 601 (“Although the complaint never expressly alleges that the return of the artwork was to occur in the United States, we think this is fairly inferred from the complaint's allegations that the bailment contract required specific performance—i.e., return of the property itself—and that this return was to be directed to members of the Herzog family Hungary knew to be residing in the United...

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    ...to allow discovery if it 'could produce [facts] that would affect [its] jurisdictional analysis.'" de Csepel v. Republic of Hungary, 75 F. Supp. 3d 380, 385 (D.D.C. 2014) (quoting Al Maqaleh v. Hagel, 738 F.3d 312, 325 (D.C. Cir. 2013)). There is no need to address the procedural question o......

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