De Csepel v. Republic of Hung.

• Docket Number: 1:10-cv-01261(ESH)
• Decision Date: 11 May 2020
• Citation: 613 F.Supp.3d 255
• Parties: David L. DE CSEPEL, et al., Plaintiffs, v. REPUBLIC OF HUNGARY, et al., Defendants.
• Court: U.S. District Court — District of Columbia

613 F.Supp.3d 255

David L. DE CSEPEL, et al., Plaintiffs,

v.REPUBLIC OF HUNGARY, et al., Defendants.

No. 1:10-cv-01261(ESH)

United States District Court, District of Columbia.

Signed May 11, 2020

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David Edward Mills, Michael DeWayne Hays, Cooley LLP, Washington, DC, Alycia Regan Benenati, Pro Hac Vice, Sheron Korpus, Pro Hac Vice, Kasowitz Benson Torres LLP, Dorit Ungar Black, Pro Hac Vice, Michael S. Shuster, Pro Hac Vice, Holwell Shuster & Goldberg LLP, New York, NY, for Plaintiffs.

Irene Tatevosyan, Pro Hac Vice, Sarah Erickson Andre, Pro Hac Vice, Thaddeus J. Stauber, Pro Hac Vice, Nixon Peabody LLP, Los Angeles, CA, for Defendants Republic of Hungary, Hungarian National Gallery, Museum of Fine Arts, Museum of Applied Arts, Budapest University of Technology And Economics.

Sarah Erickson Andre, Nixon Peabody LLP, Los Angeles, CA, for Defendant Magyar Nemzeti Vagyonkezel ZRT.

MEMORANDUM OPINION

ELLEN S. HUVELLE, United States District Judge

Plaintiffs David L. de Csepel, Angela Maria Herzog, and Julia Alice Herzog bring this action to recover artwork they allege is being wrongfully held by the Republic of Hungary, Hungarian National Gallery, Museum of Fine Arts, Museum of Applied Arts, Budapest University of Technology and Economics, and the Hungarian National Asset Management Inc., otherwise known as "MNV" (collectively, "defendants"). Before the Court is defendants’ motion to dismiss. (See Mot. to Dismiss, ECF No. 148.)

For the reasons stated herein, the Court will grant defendants’ motion in part and deny it in part.

BACKGROUND

I. FACTUAL BACKGROUND¹

"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" prior to his death in 1934. de Csepel v. Republic of Hungary , 169 F. Supp. 3d 143, 148 (D.D.C. 2016). Upon his wife's death several

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years later, the collection was divided amongst their three children, Erzsébet (Elizabeth), István and András.² (See Am. Compl. ¶ 38, ECF No. 141.)

"During the Holocaust, Hungarian Jews, including the Herzogs, were required to register their art treasuries." de Csepel , 169 F. Supp. 3d at 148. A 1944 decree required Hungarian Jews to register all valuables in excess of a certain threshold amount. (See Am. Compl. ¶ 54.) A subsequent decree "established a so-called Commission for the Recording and Safeguarding of Impounded Art Objects of Jews (the ‘Commission for Art Objects’), and required Hungarian Jews promptly to register all art objects in their possession." (Id. ¶ 55.) This Commission was led by Dénes Csánky, then-Director of the Museum of Fine Arts. (See id. )

In an attempt to avoid its confiscation, the Herzog family in 1943 hid much of their collection in the cellar of a family factory in Budafok. (See id. ¶ 57.) However, "[d]espite their efforts to prevent the looting of the art, the Hungarian government and their Nazi[ ] collaborators discovered the hiding place." (Id. ¶ 58.) A 1944 article quoted Csánky as saying 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. )

The Herzog family scattered, trying to avoid extermination by the Nazis and the Nazi-controlled Hungarian government. In May 1944, Elizabeth and her children fled Hungary, eventually settling in the United States in 1946. (See id. ¶ 62.) Elizabeth became a United States citizen on June 23, 1952. (See id. ) András was sent into forced labor in 1942 and died in 1943, but his wife and children escaped to Italy. (See id. ¶¶ 40, 63.) "Hungary attempted to send István Herzog to the infamous Auschwitz death camp[, but h]e 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. ¶ 41.) He remained in Hungary until his death in 1966. (See id. )

In May 1945, German rule in Hungary ended, and a 1947 Peace Treaty between Hungary and the Allies confirmed "that Hungary was to act solely as a custodian or trustee of looted or heirless property [and] under no circumstances could Hungary itself possess any right, title or interest in that property." (Id. ¶ 68.) Nevertheless, while some pieces of the Herzog collection were returned to the siblings or their representatives, many others were not. Moreover, the government sought "substantial fees to cover the cost of recovering the artwork from the countries to which it had been dispersed during the war," as well as large payments for export licenses to remove paintings from Hungary. (See id. ¶ 70.) For example, in lieu of a duty of 40,000 forints to repay the cost of repatriating several of András's pieces from outside the country, the Hungary's Minister of Finance accepted an artwork entitled "Still Life with Turkey" by Chardin. (See Declaration of Irene Scholl-Tatevosyan ("Scholl-Tatevosyan Decl.") Ex. 5, ECF No. 148-2.) The letter that memorialized that transaction also noted the Herzog siblings’ options should they want to export any of their returned artworks. First, the state had

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the option to purchase any piece for which its owners requested export permits. (See id. ) Second, if the state chose not to exercise its option, "40% of the estimated value [of the piece was] payable for the export permit" if Hungary's National Bank allowed the issuance of a permit at all. (See id. (noting some permit requests had been denied).)

Some pieces were returned to the siblings or to their representatives in Hungary but were taken back into governmental custody soon thereafter either as "deposits" with the museums or due to government actions, such as the smuggling prosecution of István's wife, or payments of tax bills purportedly owed by István or his siblings. (See Am. Compl. ¶ 71.) In 1948, the Hungarian police investigated Ilona Kiss, István's former wife, on the charge of smuggling several artworks out of the country for sale. (See Declaration of Jessica Walker ("Walker Decl.") Ex. G-2, ECF No. 148-15.) According to police reports, Kiss, along with her brother and a third individual, smuggled to Switzerland at least three paintings that had previously belonged to István. (See id. ) Kiss was indicted in 1949 (see Declaration of Irene Tatevosyan ("Tatevosyan Decl.") Ex. 19, ECF No. 106-3 ), and in October 1950 fourteen artworks were forfeited and taken into permanent custody by the Museum of Fine Arts as a result of the judgment in that case. (See Walker Decl. Ex. G-6.) These works included not only those attributable to István or Kiss, but also several that belonged to András and Elizabeth.

In 1949, Hungary became the Hungarian People's Republic, and little was known about the Herzog collection until the collapse of Communism in 1989. (See Am. Compl. ¶ 74.) However, "[w]ith the opening of Hungary to the West in 1989, the Herzog Heirs started making inquiries and learned that many pieces of the Herzog Collection were being openly exhibited, hanging on the walls of the Hungarian National Gallery and the Museum of Fine Arts." (Id. ¶ 76.) Elizabeth negotiated with the Hungarian government and received seven pieces (all from lesser-known artists) before her death in 1992. (See id. ¶ 77.)

Her daughter, Martha Nierenberg, continued to negotiate on Elizabeth's behalf but ultimately decided to pursue legal remedies against Hungary, filing suit in a Hungarian court in 1999, in what has been referred to as the "Nierenberg Litigation." (See id. ¶ 78.) Her complaint identified a number of pieces she alleged belonged to the Herzog siblings, including artworks that belonged to István, András, and her mother, Elizabeth. However, she petitioned the court only for return of ten artworks (later amended to twelve) attributed to Elizabeth. (See Scholl-Tatevosyan Decl. Ex. 20, ECF 148-3; see also Pls.’ Opp. at 13, ECF No. 153.) "To protect the interests of all three Herzog siblings, the heirs of András and István Herzog retained counsel and were brought into the lawsuit at the instruction of the Hungarian court" (see Mot. to Dismiss at 6); however, heirs of the other two siblings ultimately declined to participate. During the course of the litigation, Nierenberg received one of the paintings claimed in her petition, Mihály Munkácsy's "Half-Length Portrait of Christ" (also known as "Bust of Christ"), which was accepted by her attorney in Hungary in April 2000, as it could not be taken out of the country. (See Scholl-Tatevosyan Decl. Exs. 22-24, ECF No. 148-4.) "The Budapest Municipal Court initially recognized and acknowledged the Herzog Heirs’ ownership rights in the paintings at issue ...." (Am. Compl. ¶ 78.) However, in January 2008, "an appellate court reversed the lower court's decision ordering restitution and rejected the demand" for return of the artworks. (Id. )

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II. PROCEDURAL HISTORY

Plaintiffs filed this action in 2010 asserting claims based on bailment, conversion, constructive trust, accounting, unjust enrichment, replevin, and declaratory relief. (See Compl., ECF No. 1 ; see also Am. Compl.) They asked for either a return of the artworks or for monetary damages. (See Compl. at 35-36.)

A. First Motion to Dismiss

Defendants filed their initial motion to dismiss on February 15, 2011. (See First Mot. to Dismiss, ECF No. 15.) Defendants claimed plaintiffs’ case must be dismissed for several reasons: (1) various treaties and international agreements barred the suit; (2) the Court lacked jurisdiction under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq. ; (3) forum non conveniens ; (4) statute of limitations; (5) act of state; and (3) comity, res judicata , and collateral estoppel arising from the Nierenberg Litigation. (See First Mot. to Dismiss at ii.)

By memorandum opinion issued on September 1, 2011, this...