Philipp v. Fed. Republic of Ger., 17-7064

• Decision Date: 10 July 2018
• Docket Number: C/w 17-7117,No. 17-7064,17-7064
• Parties: Alan PHILIPP, et al., Appellees, v. FEDERAL REPUBLIC OF GERMANY and Stiftung Preussischer Kulturbesitz, Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

894 F.3d 406

Alan PHILIPP, et al., Appellees,

v.FEDERAL REPUBLIC OF GERMANY and Stiftung Preussischer Kulturbesitz, Appellants.

No. 17-7064

C/w 17-7117

United States Court of Appeals, District of Columbia Circuit.

Argued May 2, 2018

Decided July 10, 2018

Jonathan M. Freiman argued the cause for appellants. With him on the briefs were Benjamin M. Daniels, David R. Roth, and David L. Hall.

Nicholas M. O'Donnell argued the cause and filed the brief for appellees.

Gary A. Orseck, Ariel N. Lavinbuk, Daniel N. Lerman, and D. Hunter Smith were on the brief for amicus curiae David Toren in support of appellees.

Before: Tatel, Griffith, and Wilkins, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

In this case, the heirs of several Jewish art dealers doing business in Frankfurt, Germany in the 1930s seek to recover a valuable art collection allegedly taken by the Nazis. Defendants, the Federal Republic of Germany and the agency that administers the museum where the art is now exhibited, moved to dismiss, claiming immunity from suit under the Foreign Sovereign Immunities Act. They also argued that the heirs failed to exhaust their remedies in German courts and that their state-law causes of action are preempted by United States foreign policy. The district court rejected all three arguments and denied the motion to dismiss. For the reasons set forth below, we largely affirm.

I.

Because this appeal comes to us from the district court’s ruling on a motion to dismiss, "we must accept as true all material allegations of the complaint, drawing all reasonable inferences from those allegations in plaintiffs’ favor." de Csepel v. Republic of Hungary , 714 F.3d 591, 597 (D.C. Cir. 2013) (internal quotation marks omitted). Viewed through that lens, the complaint relates the following events:

In 1929, three Frankfurt-based firms owned by Jewish art dealers joined together into a "Consortium" and purchased "a unique collection of medieval relics and devotional art" called the Welfenschatz. First Amended Compl. (FAC) ¶ 1, Philipp v. Federal Republic of Germany , 248 F.Supp.3d 59 (D.D.C. 2017) (No. 1:15-cv-00266); see id. ¶¶ 34–35. The treasure—or "schatz"—acquired its name due to its association with the House of Welf, an ancient European dynasty. See id. ¶ 30. Dating primarily from the eleventh to fifteenth centuries, the several dozen pieces that make up the Welfenschatz were housed for generations in Germany’s Brunswick Cathedral. See id. After displaying the Welfenschatz throughout Europe and the United States and selling a few dozen pieces, the Consortium placed the remainder of the collection, which at that time retained about eighty percent of the full collection’s value, into storage in Amsterdam. Id. ¶¶ 41, 78.

The heirs allege that "[a]fter the [1933] Nazi-takeover of power in Germany, ... the members of the Consortium faced catastrophic economic hardship," id. ¶ 10, and in 1935, following "two years of direct persecution" and "physical peril to themselves and their family members," id. ¶ 145, the Consortium sold the Welfenschatz to the Nazi-controlled State of Prussia for 4.25 million Reichsmarks (the German currency at the time), id. ¶¶ 145–160, "barely 35% of its actual value," id. ¶ 12. "Standing behind all of this was [Hermann] Goering," id. ¶ 73, "Prime Minister of Prussia at that time," id. , a "notorious racist and anti-Semite," id. ¶ 74, and "legendary" art plunderer, id. ¶ 75. Goering "seldom if ever" seized outright the art he desired, preferring "the bizarre pretense of ‘negotiations’ with and ‘purchase’ from counterparties with little or no ability to push back without risking their property or their lives." Id. The Welfenschatz was then shipped from Amsterdam to Berlin, see id. ¶ 157, where Goering presented it to Adolf Hitler as a "surprise gift," id. ¶ 179 (quoting Hitler Will Receive $2,500,000 Treasure , Balt. Sun, Oct. 31, 1935, at 2). All but one of the Consortium members then fled the country. See id. ¶¶ 163, 170–171. The remaining member died shortly after, officially of "cardiac insufficiency

," id. ¶ 163, but "rumors" circulated that he was "dragged to his death through the streets of Frankfurt by a Nazi mob," id. ¶ 166.

"After the war, [the Welfenschatz] was seized by U.S. troops," id. ¶ 181, and eventually turned over to appellant Stiftung Preussischer Kulturbesitz (SPK), a German agency formed "for the purpose ... of succeeding to all of Prussia’s rights in cultural property," id. ¶ 184; see id. ¶¶ 181–84. The Welfenschatz is now exhibited in an SPK-administered museum in Berlin. Id. ¶ 26(iv).

In 2014, appellees, Alan Philipp, Gerald Stiebel, and Jed Leiber, heirs of Consortium members, sought to recover the Welfenschatz, and they and the SPK agreed to submit the claim to a commission that had been created pursuant to the Washington Conference Principles on Nazi–Confiscated Art, id. ¶ 220, an international declaration that "encouraged" nations "to develop ... alternative dispute resolution mechanisms" for Nazi-era art claims, id. ¶ 197 (quoting U.S. Dep’t of State, Washington Conference Principles on Nazi-Confiscated Art ¶ 11 (1998) [hereinafter Washington Principles] ). Known as the German Advisory Commission for the Return of Cultural Property Seized as a Result of Nazi Persecution, Especially Jewish Property, id. ¶ 205, the Advisory Commission concluded "that the sale of the Welfenschatz was not a compulsory sale due to persecution" and it therefore could "not recommend the return of the Welfenschatz to the heirs," Advisory Commission, Recommendation Concerning the Welfenschatz (Guelph Treasure) (Mar. 20, 2014), Appellants’ Supp. Sources 7; see also FAC ¶ 221.

Seeking no further relief in Germany, the heirs filed suit in the United States District Court for the District of Columbia against the Federal Republic of Germany and the SPK (collectively, "Germany"), asserting several common-law causes of action, including replevin, conversion, unjust enrichment, and bailment. See FAC ¶¶ 250–304. They sought the return of the Welfenschatz "and/or" 250 million dollars, id. Prayer for Relief, a "conservative estimate[ ]" of its value, id. ¶ 33. Germany moved to dismiss, arguing that it enjoyed immunity from suit under the Foreign Sovereign Immunities Act (FSIA), that international comity required the court to decline jurisdiction until the heirs exhaust their remedies in German courts, and that United States foreign policy preempted the heirs’ state-law causes of action. The district court rejected all three arguments and, aside from a few uncontested issues, denied the motion to dismiss. Philipp , 248 F.Supp.3d at 87.

Germany appealed the district court’s FSIA determination as of right. See Owens v. Republic of Sudan , 531 F.3d 884, 887 (D.C. Cir. 2008) ("[W]hen ... a denial [of a motion to dismiss] subjects a foreign sovereign to jurisdiction, the order is ‘subject to interlocutory appeal.’ " (quoting El–Hadad v. United Arab Emirates , 216 F.3d 29, 31 (D.C. Cir. 2000) ) ). On Germany’s motion, the district court certified the other two issues for interlocutory appeal, Philipp v. Federal Republic of Germany , 253 F.Supp.3d 84 (D.D.C. 2017), and this court granted Germany’s petition to present them now, Per Curiam Order, In re Federal Republic of Germany , No. 17-8002 (D.C. Cir. Aug. 1, 2017). Reviewing de novo , we address Germany’s immunity, comity, and preemption arguments in turn.

II.

Under the FSIA, foreign sovereigns and their agencies enjoy immunity from suit in United States courts unless an expressly specified exception applies. 28 U.S.C. § 1604. The heirs assert jurisdiction under the statute’s "expropriation exception," see id. § 1605(a)(3), which "has two requirements": that " ‘rights in property taken in violation of international law are in issue,’ " and that "there is an adequate commercial nexus between the United States and the defendant[ ]," de Csepel v. Republic of Hungary , 859 F.3d 1094, 1101 (D.C. Cir. 2017) (quoting 28 U.S.C. § 1605(a)(3) ). Germany "bears the burden of proving that [the heirs’] allegations do not bring [the] case within" the exception. Phoenix Consulting Inc. v. Republic of Angola , 216 F.3d 36, 40 (D.C. Cir. 2000).

A.

As to the expropriation exception’s first requirement, we explained in Simon v. Republic of Hungary , 812 F.3d 127 (D.C. Cir. 2016), that although an "intrastate taking"—a foreign sovereign’s taking of its own citizens’ property—does not violate the international law of takings, id. at 144, an intrastate taking can nonetheless subject a foreign sovereign and its instrumentalities to jurisdiction in the United States where the taking "amounted to the commission of genocide," id. at 142. This, we explained, is because "[g]enocide perpetrated by a state," even "against its own nationals[,] ... is a violation of international law." Id. at 145. In so holding, we adopted the definition of genocide set forth in the Convention on the Prevention of the Crime of Genocide. Id. at 143. "[A]dopted by the United Nations in the immediate aftermath of World War II," id. , the Convention defines genocide, in relevant part, as "[d]eliberately inflicting" on "a national, ethnical, racial or religious group ... conditions of life calculated to bring about its physical destruction in whole or in part," Convention on the Prevention and Punishment of the Crime of Genocide (Genocide Convention), art. 2, Dec. 9, 1948, 78 U.N.T.S. 277.

In Simon , "survivors of the Hungarian Holocaust," 812 F.3d at 134, alleged that in 1944–45 Hungary "forced all Jews into ghettos, ... confiscating Jewish property" in the process, id. at 133, and then "transport[ed] Hungarian Jews to death camps, and, at the point of embarkation, confiscate[d] [their remaining] property," id. at 134. Assuming the truth of these allegations—like here, the case came to us from a ruling on a motion to dismiss—we held that because the allegations of "systematic, wholesale plunder of Jewish property ... aimed...