In re Nazi Era Cases against German Defendants

• Citation: 320 F.Supp.2d 204
• Decision Date: 20 May 2004
• Docket Number: Civil No. 02-3890(WGB).
• Parties: In re NAZI ERA CASES AGAINST GERMAN DEFENDANTS LITIGATION Martin G. Wortham and Barbara Principe, Plaintiffs, v. Karstadtquelle AG, and Warenhaus Wertheim GmbH, Defendants.
• Court: U.S. District Court — District of New Jersey

320 F.Supp.2d 204

In re NAZI ERA CASES AGAINST GERMAN DEFENDANTS LITIGATION Martin G. Wortham and Barbara Principe, Plaintiffs, v. Karstadtquelle AG, and Warenhaus Wertheim GmbH, Defendants.

Civil No. 02-3890(WGB).

United States District Court, D. New Jersey.

May 20, 2004.

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Wechsler Harwood by Andrew D. Friedman, Esq., New York, NY, Osen & Associates, L.L.C. by Gary Osen, Esq., Oradell, NJ, for the Plaintiffs.

Wilmer, Cutler & Pickering by Roger M. Witten, Esq., New York, NY, Gibbons, Del Deo, Dolan, Griffinger & Vecchione P.C. by John J. Gibbons, Esq., Newark, NJ, for the Defendants.

OPINION

BASSLER, District Judge.

This action is before the Court as part of Multi-District Litigation Docket No. 1337, In re Holocaust Era German Industry, Bank, and Insurance Litigation. Plaintiffs Martin G. Wortham and Barbara Principe instituted the action in the Southern District of New York, Civil Action No. 01-2741(LAP), the district in which the alleged predecessors of the current defendant companies allegedly committed the tort of fraud in 1951 against Gunther Wortham (f/k/a Gunther Wertheim), the father of plaintiff Principe and grandfather of plaintiff Wortham. On the motion of defendants KarstadtQuelle AG ("Karstadt") and Warenhaus Wertheim GmbH ("Warenhaus Wertheim"), the Judicial Panel on Multi-District Litigation ("J.P.M.L.Panel") transferred the action to this Court for consolidated or coordinated pretrial proceedings because it appeared that the claims against these defendants, like those against German companies in the other actions that have been part of these J.P.M.L.-1337 proceedings to date, were (1) "connected to events arising out of Nazi rule in Germany", and (2) "linked to an important international agreement [that presents] significant common pretrial issues pertaining to the settlement or dismissal of the actions." See, In re Holocaust Era German Industry, Bank & Insurance Litigation, 2000 U.S. Dist. LEXIS 11650, Docket No. 1337 (J.P.M.L. Aug. 4, 2000); Id., Transfer Order (Aug. 8, 2002).

The defendants now move to dismiss the plaintiffs' Second Amended Complaint ("SAC") on several grounds, including lack of personal jurisdiction and various defenses under New York law. Defendants also interpose three defenses bearing directly on the issues within the scope of this J.P.M.L. docket: The political question doctrine, international comity, and the act of state doctrine. The plaintiffs cross-moved the Court for a suggestion of remand, but the Court denied plaintiffs' motion at a hearing on April 10, 2003 because whether remand is appropriate requires that the Court first assess whether the Court has jurisdiction over the defendants. For the following reasons, the defendants' motion to dismiss for lack of personal jurisdiction is granted. Because the Court does not have jurisdiction, it does not address defendants' additional defenses: the political question doctrine, international comity and act of state doctrine.

I. Factual & Procedural Background

The seventy-five page Second Amended Complaint ("SAC") filed in this action contains numerous factual allegations important to the ultimate success of plaintiffs' many claims. The Court reviews only those facts critical to its disposition of the issue of personal jurisdiction.¹

Most other actions consolidated in this docket involved claims arising out of the actions of German industry during the Nazi Era. See, In re Nazi Era Cases Against German Defendants Litigation, 198 F.R.D. 429 (D.N.J.2000)(approving voluntary dismissal with prejudice of claims against German industry for injuries not redressed by prior German restitution and compensation programs); In re Nazi Era Cases Against German Defendants Litigation, 129 F.Supp.2d 370 (D.N.J.2001)(dismissing slave labor claims against German company as presenting political questions and as barred by principles of international comity). The Court recommended that the J.P.M.D.L. Panel remand to the transferor district actions that involved claims that did not arise from the conduct of German industry during the Nazi Era. See, In re Nazi Era Cases Against German Defendants Litigation, 2002 WL 31454184 (D.N.J. June 5, 2002)(suggesting remand after voluntary dismissal of German defendants and only claims against Austrian defendants remained). Here, the plaintiffs allege that, unlike these other actions, their claims, although against German companies, arise not from the defendants' actions during the Nazi Era but from fraudulent and tortious conduct by the defendants' alleged predecessor companies or their agents and co-conspirators in 1951 and thereafter.

A. The Forced Sale of the Wertheim Family Holdings

Plaintiffs Barbara Principe and Martin G. Wortham are, respectively, a daughter and a grandson of the late Gunther Wortham. Gunther Wortham was the son of Franz and Kathe Wertheim, who, with his brothers Wilhem and Georg and other family members, owned and controlled more than twenty companies in Germany between 1875 and 1935. The family's principal company, Wertheim AG fur Handelsbeteiligungen was a holding company that operated department stores in Berlin. The Wertheim family also owned and controlled a real estate holding company, Wertheim Grundstucks-Gesellschaft GmbH. Wertheim AG fur Handelsbeteiligungen owned ninety-seven percent of the real estate holding company. Franz Wertheim owned one percent of the real estate holding company and approximately thirty-two percent of the Wertheim AG fur Handelsbeteiligungen capital stock prior to 1933. Upon Franz Wertheim's death in 1933, his wife Kathe inherited his real estate and stock holdings. (SAC ¶¶ 3, 47-52.)

In 1935, in accordance with the policies and laws of the Nazi Government of Germany, Kathe Wertheim was forced to sell approximately twenty percent of her shares in Wertheim AG fur Handelsbeteiligungen, subsequently known as AWAG Allgemeine Warenhandels-Gesellshaft AG ("AWAG") in 1938. Gunther Wertheim and his brother Fritz inherited the approximately twelve percent of the shares that remained upon their mother's death, but the brothers, too, were forced to sell those remaining shares in 1938 to a consortium of non-Jewish directors of AWAG led by Dr. Arthur Lindgens. Lindgens was at the time a non-Jewish family friend who eventually married Ursula Wertheim, the former wife of Georg Wertheim and mother of Georg's daughter Ursula. The other Wertheim family holdings in AWAG also were forcibly sold between 1934 and 1939. Gunther and Fritz Wertheim escaped Germany in 1939 and settled in the United States in 1942.

Post-war control of AWAG assets turned upon the location of those assets. The U.S. military authority, which controlled West Berlin following the war, concluded that AWAG was owned, in part, by Ursula Wertheim Froeb — a New York resident, United States citizen, and daughter of Georg Wertheim — and released control of AWAG assets in West Berlin on that basis. (Freidman Decl. Ex. 6, Property Control Record.) The Soviet Military Administration, however, refused to release AWAG assets in East Berlin. According to plaintiffs, AWAG property located in Soviet-controlled Berlin was expropriated and nationalized without compensation on the ground that Nazi collaborators controlled the company. (SAC ¶ 75.)

In 1950, Gunther Wortham,² then a naturalized U.S. citizen living in New Jersey, together with his brother Fritz, filed a restitution claim with the Restitution Authority in West Berlin³ seeking the return of the AWAG shares they had been forced to sell to the Lindgens-led consortium in 1938. According to plaintiffs, Lindgens had been actively involved in the control of AWAG since the 1938 forced sale. In 1951, because AWAG was suffering from a lack of liquidity, Lindgens approached AWAG competitor Hertie Waren-und Kaufhaus GmbH ("Hertie")⁴ about purchasing a controlling share of the company. Thereafter, the alleged conspiracy to defraud the brothers of their restitution claims was entered into and carried out to preclude the Wertheim brothers and others with stock in or restitution claims against AWAG from discovering Hertie's interest in acquiring control of AWAG and thus its true market value.

B. The Alleged 1951 Fraud

Plaintiffs specifically allege that the fraud was perpetrated as follows: Hertie transferred money to a bank account to which AWAG had access, and AWAG, through Lindgens, used that money to acquire title to enough outstanding shares of the company that control could be, and was, sold to Hertie. (Friedman Decl. Exs. 18, 19.) AWAG acquired some of the shares necessary to effectuate this sale of control from Elsa Ziehm, the non-Jewish adopted daughter of Wilhelm Wertheim who had retained her stock in AWAG during the Nazi period. Lindgens convinced Ziehm, without informing her of the pending Hertie transaction, to sell to AWAG her 25% stake in the company for one-tenth the amount that Hertie subsequently paid AWAG to purchase those same shares. (SAC ¶ 88.) Lindgens then allegedly undertook two additional actions in furtherance of his conspiracy with Hertie in New York.

First, on August 12, 1951, Lindgens secretly negotiated a sales agreement in New York with Ursula Wertheim-Froeb and her husband whereby the Froebs, together with Lindgens, his wife, and Albrecht Wertheim, agreed to sell a 50.7% stake in AWAG to Hertie, its subsidiaries, and another individual associated with Hertie, Georg Karg ("the Secret Sales Agreement"). This so-called Secret Sales Agreement, which was handwritten, provided, inter alia, that Lindgens, his wife, and the Froebs would retain a 49% interest in AWAG; and the agreement purported to sell to Hertie shares from unspecified sellers including, according to plaintiffs, the shares against which the Wertheim brothers had filed restitution claims. (SAC ¶¶ 96-97.)

Second, on August 16, 1951, Lindgens met with the Wertheim brothers'...