Fred Westfield v. Fed. Republic of Germany

Decision Date02 February 2011
Docket NumberNo. 09–6010.,09–6010.
Citation633 F.3d 409
PartiesFred WESTFIELD, in his capacity as administrator de bonis non administratis of the Estate of an Alien, Walter Westfeld; Fred Westfield; Erich Westfield; Hannah Kahn; Linda Plaut; Jeanne Rees; and Rosie Segal, as executor of the Estate of Martin Segal, Plaintiffs–Appellants,v.FEDERAL REPUBLIC OF GERMANY, Defendant–Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

OPINION TEXT STARTS HERE

ARGUED: Overton Thompson III, Bass, Berry & Sims PLC, Nashville, Tennessee, for Appellants. William S. Walton, Miller & Martin PLLC, Nashville, Tennessee, for Appellee. ON BRIEF: Overton Thompson III, Kathryn Hannen Walker, Bass, Berry & Sims PLC, Nashville, Tennessee, Jeffrey Schoenblum, Vanderbilt Legal Clinic, Nashville, Tennessee, for Appellants. William S. Walton, James A. Beakes III, Miller & Martin PLLC, Nashville, Tennessee, Max Riederer von Paar, Rubin, Winston, Diercks, Harris & Cooke, LLP, Washington, D.C., for Appellee.Before: MARTIN and SILER, Circuit Judges; BELL, District Judge. *

OPINION

BOYCE F. MARTIN, JR., Circuit Judge.

The Heirs of Walter Westfeld, a prominent German art dealer during the 1930s, seek to recover the value of Westfeld's art collection from the Federal Republic of Germany. Westfeld had attempted to remove his art collection to Tennessee but, before he could do so, Nazi officials seized and sold off the collection. The district court granted Germany's motion to dismiss, holding that the Heirs' claims were barred by the Foreign Sovereign Immunities Act, and do not fall within the exception for acts in connection with commercial activity. On appeal, the Heirs make a compelling argument that while other plaintiffs raising similar claims have not fallen within the commercial activity exception, their claims do fall within a literal reading of the text of the exception and should be allowed to proceed. However, while the Heirs present a very persuasive explanation of why Germany's actions were in connection with commercial activity, they fail to establish that Germany's actions had a sufficiently direct effect in the United States to support applying this exception. Therefore, we AFFIRM the district court's decision granting Germany's motion to dismiss.

I.

Fred Westfield,1 in his capacity as the second administrator of the estate of Walter Westfeld, and the individual heirs of Walter Westfeld, brought this action to recover damages from the Federal Republic of Germany for the seizure and conversion of Westfeld's art and tapestry collection. The Heirs contend that, while under Nazi control, German officials seized and sold the collection, which Westfeld had attempted to protect and bring to the United States.

Westfeld was a renowned art dealer in Germany in the 1930s. Nazi officials began persecuting and torturing Westfeld in 1933 because he was Jewish. Westfeld attempted to flee Germany with his art collection but his passport had expired and he was unable to get a visa from the United States. In 1938, German officials arrested Westfeld for what the Heirs refer to as a “trumped up” currency charge. Westfeld was sentenced to prison for three and a half years and fined Reichmarks 300,000 for the alleged currency violation. Before the sentence and fine were finalized, the District Attorney's Office in Düsseldorf ordered that Westfeld's art and tapestry collection be sold to satisfy the fine. The Heirs explain this was a common practice in Nazi Germany that allowed the government to raise funds. Lempertz, the German auction house, auctioned off Westfeld's collection under orders from the German government on December 12 and 13, 1939. The Heirs eventually obtained a copy of the auction catalogue, which describes more than five hundred tapestries and pieces of artwork from Westfeld's collection that Lempertz sold.

In prison, officials interrogated Westfeld and discovered that he had more artwork. From 1943 to 1944, after Westfeld had been killed, Nazi officials seized and sold the rest of his collection. After the war, the Regional Court Düsseldorf declared Westfeld's sentence and fine to be null and void.

In 2004, Fred Westfield discovered that the Boston Museum of Fine Arts was seeking information about his uncle, Walter Westfeld, in relation to a painting in its collection of Dutch Masters. Through the Museum, Fred learned that Germany had seized his uncle's art collection and discovered that much of it had been sold at auction by Lempertz.

The Heirs seek to recover the value of this property, arguing that Germany improperly seized it from Westfeld. Important to establishing jurisdiction, the Heirs contend that Westfeld had intended to send these items to Nashville, Tennessee where his brother lived. The complaint alleges that Germany's actions had a direct effect in the United States because they prevented valuable assets from reaching the United States, deprived Westfeld's family members in the United States the benefit of the property intended for them, deprived Westfeld's family members of property that would have passed to them by intestacy, and deprived the United States art market of access to the collection.

Fred Westfield initiated an action in a Tennessee probate court, which appointed him administrator de bonis non administratis, the second administrator, of Walter Westfeld's estate. The probate court also designated the individual plaintiffs in this suit the sole heirs of Walter Westfeld after litigation with German citizens who also claimed to be heirs.2

The Heirs then filed this lawsuit in Tennessee state court. Germany removed to federal court and filed a motion to dismiss for lack of subject matter jurisdiction based on the Foreign Sovereign Immunities Act. The district court granted Germany's motion to dismiss and the Heirs appealed.

II.
A. Standard of Review.

This Court reviews decisions regarding subject matter jurisdiction under the Foreign Sovereign Immunities Act de novo. O'Bryan v. Holy See, 556 F.3d 361, 372 (6th Cir.2009). We may affirm the district court's judgment on any ground supported by the record, including on a basis not mentioned in the district court's opinion. Louisiana Sch. Employees' Ret. Sys. v. Ernst & Young, LLP, 622 F.3d 471, 477 (6th Cir.2010); In re Comshare Inc. Sec. Litig., 183 F.3d 542, 547–48 (6th Cir.1999). For purposes of this motion to dismiss, we must accept all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).

B. The Commercial Activity Exception to Sovereign Immunity.

The Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq. (2006), provides the sole basis for a court in this country to obtain jurisdiction over a foreign sovereign. Republic of Arg. v. Weltover, Inc., 504 U.S. 607, 611, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). The Act provides that a “foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter.” 28 U.S.C. § 1604. The plaintiff has the burden of proving that one of the statutorily defined exceptions applies and the court has jurisdiction. See Am. Telecom Co., L.L.C. v. Republic of Leb., 501 F.3d 534, 537 (6th Cir.2007); see also Verlinden B.V. v. Cent. Bank of Nig., 461 U.S. 480, 494 n. 20, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983) (requiring courts to determine that immunity is unavailable under the Act even if the foreign state does not enter an appearance).

At issue on this appeal is the “commercial activities” exception, 28 U.S.C. § 1605(a)(2), which provides that foreign sovereigns are not immune from suit in any case:

[1] in which the action is based upon a commercial activity carried on in the United States by the foreign state; [2] or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; [3] or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.

The Heirs rely on the exception contained in the third clause of this section and assert that Germany's act of seizing Westfeld's valuable art collection was “in connection with” the “commercial activity” of selling it on the private market. Although the district court rejected this argument, on appeal the Heirs quite persuasively navigate the morass of reported decisions and make a convincing argument that, based on Germany's sale of the collection at auction to raise capital, the seizure of Westfeld's artwork was sufficiently in connection with commercial activity to fall within this exception. However, we need not, and do not, decide whether the actions as alleged are sufficiently in connection with commercial activity to fall within this exception. Even if Germany's actions were sufficiently in connection with commercial activity, Germany is nonetheless entitled to immunity because the Heirs have not established that those actions caused a direct effect in the United States.

III.

The district court did not reach the issue of whether Germany's actions caused a direct effect in the United States in light of its holding that the seizure of Westfeld's art collection was insufficiently connected to commercial activity.3 “An effect is direct if it follows as an immediate consequence of the defendant's ... activity.” Weltover, 504 U.S. at 618, 112 S.Ct. 2160 (internal quotations omitted). The effect need not be foreseeable or substantial but “jurisdiction may not be predicated on purely trivial effects in the United States.” Id.; see also Virtual Countries, Inc. v. Republic of S. Afr., 300 F.3d 230, 236 (2d Cir.2002) (Congress did not intend to provide jurisdiction whenever the ripples caused by an overseas transaction manage eventually to reach the shores of the United States.” (internal quotations omitted)). Unlike some of our...

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