Philipp v. Fed. Republic of Ger.

• Decision Date: 31 March 2017
• Docket Number: Civil Action No. 15-266 (CKK).
• Citation: 248 F.Supp.3d 59
• Parties: Alan PHILIPP, et al., Plaintiffs, v. FEDERAL REPUBLIC OF GERMANY, et al., Defendants.
• Court: U.S. District Court — District of Columbia

248 F.Supp.3d 59

Alan PHILIPP, et al., Plaintiffs,

v.FEDERAL REPUBLIC OF GERMANY, et al., Defendants.

Civil Action No. 15-266 (CKK).

United States District Court, District of Columbia.

Filed March 31, 2017

Nicholas M. O'Donnell, Sullivan & Worcester LLP, Boston, MA, for Plaintiffs.

Jonathan M. Freiman, Benjamin M. Daniels, David Roth, Tahlia Townsend, Wiggin & Dana LLP, New Haven, CT, David L. Hall, Wiggin and Dana LLP, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION

COLLEEN KOLLAR–KOTELLY, United States District Judge

This case centers around the June 14, 1935, sale of a collection of medieval relics known as the "Welfenschatz" by a consortium of three art dealer firms in Frankfurt ("Consortium") to the State of Prussia through the Dresdner Bank. Plaintiffs Alan Philipp, Gerald G. Stiebel, and Jed R. Leiber, legal successors of the estates of members of the Consortium, filed suit against Defendants the Federal Republic of Germany ("Germany") and Stiftung Preussischer Kulturbesitz ("SPK"), an instrumentality of Germany, alleging that the SPK is in wrongful possession of the Welfenschatz because the 1935 sale was coerced as part of the Nazi persecution of the Jewish sellers. Presently before the Court is Defendants' [18] Motion to Dismiss the First Amended Complaint and Incorporated Memorandum of Law, requesting that the Court dismiss all of Plaintiffs' claims on the grounds that: (1) Defendants are entitled to sovereign immunity; (2) the claims are preempted and non-justiciable because they conflict with U.S. foreign policy; and/or (3) the doctrine of forum non conveniens favors dismissal.¹

Upon consideration of the pleadings,² the relevant legal authorities, and the record as a whole, the Court GRANTS IN PART and DENIES IN PART Defendants' [18] Motion to Dismiss the First Amended Complaint for the reasons described herein. Specifically, the Court GRANTS as conceded Defendants' request that the Court dismiss the following five non-property based claims because Defendants are entitled to sovereign immunity on each claim: fraud in the inducement (Count V); breach of fiduciary duty (Count VI); breach of the covenant of good faith and fair dealing (Count VII); civil conspiracy (Count VIII); and tortious interference (Count X). The Court DENIES Defendants' request for dismissal on the remaining five claims: declaratory relief (Count I); replevin (Count II); conversion (Count III); unjust enrichment (Count IV); and bailment (Count IX).

I. BACKGROUND

In or around 1929, the Consortium was formed by three art dealer firms owned by German Jews in Frankfurt. The three firms, J. & S. Goldschmidt, I. Rosenbaum, and Z.M. Hackenbroch, were owned by Plaintiffs' ancestors and/or predecessors-in-interest.³ Compl. ¶ 34. The Consortium acquired the Welfenschatz on October 5, 1929, pursuant to a written agreement with the Duke of Brunswick–Lüneberg. Id. ¶ 35. The Welfenschatz is comprised of 82 medieval reliquary and devotional objects, dating primarily from the 11th to 15th century, that were originally housed in the Braunschweiger Dom (Brunswick Cathedral) in Germany. Id. ¶¶ 30, 41. The Consortium eventually brought the Welfenschatz to the United States to offer it for sale to museums and, by 1931, sold 40 of the 82 pieces to museums and individuals in Europe and the United States, including the Cleveland Museum of Art. Id. ¶ 41. Plaintiffs' claims center around the remaining 42 objects that were acquired by the State of Prussia pursuant to a contract with the Consortium on June 14, 1935, which was facilitated through the Dresdner Bank.⁴ Id. ¶ 151. Defendant SPK, an instrumentality of Germany, was created for the purpose of succeeding all of Prussia's rights in cultural property and currently is in possession of the Welfenschatz. Id. ¶ 184. The Welfenschatz currently is located at the SPK-administered Museum of Decorative Arts ("Kunstgewerbemuseum") in Berlin.⁵ Id. ¶ 26(iv).

Plaintiffs' position is that the 1935 sale between the Consortium and the State of Prussia, a political subdivision of the German Weimar Republic and later the Third Reich, was coerced as part of the Nazi persecution of the Jewish sellers of the Welfenschatz and, as such, the Court shall briefly summarize the allegations in the complaint that Plaintiffs rely on in support of this position. Id. ¶ 22. Specifically, Plaintiffs allege the 1935 transaction was spearheaded by Nazi-leaders Hermann Goering and Adolf Hitler, who were involved in explicit correspondence to "save the Welfenschatz" for the German Reich. Id. ¶¶ 2, 9. Further, the 1935 sale resulted in a payment of 4.25 million RM, which Plaintiffs assert demonstrates the lack of an arms'-length transaction because it was barely 35% of the market value of the Welfenschatz. Id. ¶¶ 4, 12. Further, the money exchanged was never fully accessible to the Consortium because it was split and partly paid into a blocked account, and was subject to "flight taxes" that Jews had to pay in order to escape. Id. ¶¶ 4, 12. Moreover, in November of 1935, Goering presented the Welfenschatz as a personal "surprise gift" to Hitler during a ceremony. Id. ¶¶ 13, 179.

Plaintiffs contend that during the time that the Consortium possessed the Welfenschatz, there were concerted efforts by Germany's Reichsregierung (Reich Government), the Prussian State Government and several other entities and museum officials to regain possession of the Welfenschatz starting in 1930. See generally id. ¶¶ 37–40. After the Nazi rise to power in Germany, see generally id. ¶¶ 44–65, Plaintiffs point to more statements regarding an interest in Germany regaining possession of the Welfenschatz. Specifically, Plaintiffs point to a letter written by the new Mayor of Frankfurt Friedrich Krebs to Hitler requesting that Hitler "create the legal and financial preconditions for the return of the [Welfenschatz]." Id. ¶ 69 (quoting Compl., Ex. 2). Plaintiffs also reference a letter from 1933 written by a Frankfurt museum director to the President of the German Association for the Preservation and Promotion of Research indicating that one member of the Consortium indicated the owners were "very willing ... to enter into negotiations with the Reich," id. ¶ 77, and minutes from a 1934 meeting among several museum directors and a board member of the Dresdner Bank when the purchase of the Welfenschatz was again discussed, id. ¶ 79.

Dresdner Bank, which was majority-owned by the German state at the time of the Nazi rise to power, served as the intermediary facilitating the 1935 transaction between the Consortium and Prussia. Id. ¶¶ 88–89. Plaintiffs cite to an investigative report from a German weekly news magazine noting that it "shows the [Dresdner] bank took part early on in Third Reich's policy of confiscating Jewish property and wealth." Id. ¶ 90; see also id. ¶ 132. Plaintiffs detail the history of the discussions between the Dresdner Bank and the Consortium regarding the sale price of the Welfenschatz, noting that in January 1934, the Consortium was unwilling to sell the objects for below 6.5 million RM or 6 million RM in "extreme circumstances," id. ¶ 92, while the Dresdner Bank indicated the sale price could not exceed 3.5 million RM, id. ¶ 93. Plaintiffs also point to a record from May 1934 indicating that the Consortium advised the Dresdner Bank that it had an offer of 7 million RM, probably from a Berlin private banker. Id. ¶ 94. Further, Plaintiffs point to a draft letter written to Hitler by the Secretary of the Prussian State Ministry and provided to the Deputy Minister of the Ministry of Science in July 1934 regarding acquisition of the Welfenschatz through Prussian treasury bonds in order to "bring the historically, artistically and national-politically valuable [Welfenschatz] to the Reich in addition to many other valuable cultural treasures," and specifically referencing the role of Prussian Prime Minister Goering. Id. ¶¶ 103, 111 (quoting Compl., Ex. 3). In February 1935, the Dresdner Bank Director noted that the Prussian Finance Minister asked him to handle the Welfenschatz matter. Id. ¶ 133.

In April 1935, an owner of a Berlin art dealership who served as the messenger between the Bank and the Consortium, notified the Bank's Director that he had been "intensely preoccupied with the matter" for a year and a half and reported that the problem with acquiring the Welfenschatz was that the members of the Consortium were confident in the asking price. Id. ¶¶ 83, 137. Later that month, the Dresdner Bank Director authorized a bid of 3.7 million on behalf of its client. Id. ¶ 140. At some point, the Consortium sent word that it was willing to sell the Welfenschatz for 5 million RM. Id. ¶ 139. Plaintiffs also point to a new museum that intended to acquire the Welfenschatz and allege that "[t]he ‘authoritative entities' were ... invited to review the plans at [the prospective buyer museum] to ensure that there was no ‘conflict," which resulted in the elimination of an independent interested purchaser. Id. ¶ 143.

On May 4, 1935, the Consortium offered the Welfenschatz for a sale price of 4.35 million RM to the Dresdner Bank, id. ¶ 146, and, after receiving a response from the Dresdner Bank, submitted its final offer on May 17, 1935, id. ¶ 148. The contract was executed on June 14, 1935, selling the Welfenschatz for the price of 4.25 million RM. Id. ¶ 151. On July 18, 1935, the Welfenschatz was packed for shipping from Amsterdam, where it was housed, for delivery to Berlin, and the Dresdner Bank made the requisite payment on the following day. Id. ¶¶ 157–58. The payments were split, with 778,125 RM paid into a blocked account with Dresdner Bank, and 3,371,875 RM, paid to three different bank accounts in Germany. Id. ¶¶ 159–60. Plaintiffs agreed to accept art objects in Berlin museums to satisfy some of the purchase price. Id. ¶ 159. However, the objects were not selected by art dealers, as the parties had agreed to, but rather by museum officials. Id. The...