Abelesz v. Magyar Nemzeti Bank

692 F.3d 661

Erno Kalman ABELESZ et al.,^* Plaintiffs–Appellees,

v.MAGYAR NEMZETI BANK, Defendant–Appellant.

Paul Chaim Shlomo Fischer et al., Plaintiffs–Appellees,

v.Magyar Államvasutak Zrt., Defendant–Appellant.

Nos. 11–2387, 11–2791.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 11, 2012.

Decided Aug. 22, 2012.

Anthony Alfred D'Amato, Attorney, Northwestern University School of Law, Jeffrey A. Leon (argued), Attorney, Complex Litigation Group LLC, Robert James Pavich (argued), Attorney, Pavich Law Group, Chicago, IL, Richard H. Weisberg, Attorney, Cardozo Law School, New York, NY, for Plaintiffs–Appellees.

Anthony L. Paccione (argued), Attorney, Katten Muchin Rosenman LLP, Chicago, IL, for Defendant–Appellant.

Konrad L. Cailteux, Attorney, Weil, Gotshal & Manges LLP, New York, NY, Dean A Dickie, Attorney, Miller Canfield P.L.C., Chicago, IL, for Defendant–Appellant.

Before KANNE, WILLIAMS, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge.

Holocaust survivors and heirs of other Holocaust victims have sued several Hungarian banks and the Hungarian national railway in a U.S. district court alleging that the banks and the national railway participated in expropriating property from Hungarian Jews who were victims of the Holocaust. These two district court cases have produced nine separate pending appeals and mandamus petitions in this court. In this opinion, we address the claims against the Hungarian national bank, defendant Magyar Nemzeti Bank (the “national bank”), and the claims against the Hungarian national railway, Magyar Államvasutak Zrt. (the “national railway”). In separate opinions released today, we address the claims against three other private banks.¹

Plaintiffs' complaints describe a part of the tragic, historic crimes that were the Holocaust, and in particular the arrest, detention, transport, and murder of Hungarian Jews, starting in large numbers relatively late, in 1944, as Soviet armies were advancing west toward the Third Reich and the countries it dominated, including Hungary. The plaintiffs allege that both the national bank and the national railway played critical roles in the expropriation of Jewish property that was essential to finance the genocide of the Holocaust in Hungary. The plaintiffs suing the railway claim subject-matter jurisdiction under the expropriation exception to the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1605(a)(3), and assert eight causes of action: takings in violation of international law, aiding and abetting genocide, complicity in genocide, violations of customary international law, unlawful conversion, unjust enrichment, fraudulent misrepresentation, and accounting. The plaintiffs suing the banks claim subject matter jurisdiction over the national bank under both the expropriation exception, 28 U.S.C. § 1605(a)(3), and the waiver exception, 28 U.S.C. § 1605(a)(1) to the FSIA, and assert six causes of action: genocide, aiding and abetting genocide, bailment, conversion, constructive trust, and accounting. Both sets of plaintiffs seek to have their respective cases certified as class actions—the railway plaintiffs seek to have the national railway be held responsible for damages of approximately $1.25 billion, and the bank plaintiffs seek to have the national bank held jointly and severally responsible with the private bank defendants for damages of approximately $75 billion. The district court denied both the national bank's and the national railway's respective motions to dismiss.

We conclude that we have appellate jurisdiction over both of these appeals under the collateral order doctrine. We remand the cases to the district court with instructions that both sets of plaintiffs either exhaust any available Hungarian remedies identified by the national bank and national railway or present to the district court a legally compelling reason for their failure to do so. We further direct the district court to allow jurisdictional discovery with respect to whether the national railway is engaged in “commercial activity” in the United States, as required by the expropriation exception to the FSIA.

I. Appellate Jurisdiction

We turn first to our jurisdiction over these appeals. The appellate jurisdiction story in all of the interlocutory appeals arising from the bank case begins with the national bank, which moved to dismiss for lack of subject-matter jurisdiction based on a defense of sovereign immunity under the FSIA, 28 U.S.C. § 1604. The district court denied the national bank's motion. Along the same lines, in the railway case, the national railway also moved to dismiss for lack of subject-matter jurisdiction based on a defense of sovereign immunity under the FSIA, 28 U.S.C. § 1604, which was likewise denied by the district court. The national bank and the national railway have appealed the district court's denials of their respective motions to dismiss.

The district court's denials of the national bank's and national railway's motions to dismiss on sovereign immunity grounds are immediately appealable collateral orders so that we have jurisdiction under 28 U.S.C. § 1291. Both the national bank and national railway argue, and we agree, that we also have appellate jurisdiction over their treaty-based defenses becausethose are part of their immunity defenses under the FSIA. We decline, however, to exercise pendent appellate jurisdiction over the national bank's statute of limitations defense, which is not inextricably intertwined with the sovereign immunity argument.

A. Collateral Order Doctrine

As a general rule, the district court must issue a final judgment before an appellate court has jurisdiction to entertain an appeal under 28 U.S.C. § 1291. It is well established, however, that certain types of interlocutory orders denying immunity defenses in civil cases may be appealed immediately under the collateral order doctrine, regardless of whether the denied motion was a motion to dismiss or a motion for summary judgment. Behrens v. Pelletier, 516 U.S. 299, 307, 116 S.Ct. 834, 133 L.Ed.2d 773 (1996) (“[A]n order rejecting the defense of qualified immunity at either the dismissal stage or the summary judgment stage is a ‘final’ judgment subject to immediate appeal.”); see also Mitchell v. Forsyth, 472 U.S. 511, 525–30, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985) (denial of qualified immunity based on question of law was immediately appealable); Nixon v. Fitzgerald, 457 U.S. 731, 742–43, 102 S.Ct. 2690, 73 L.Ed.2d 349 (1982) (denial of former president's claim of absolute immunity was immediately appealable).

Like qualified or absolute immunity in civil rights lawsuits, sovereign immunity is an immunity from trial and the attendant burdens of litigation. Sovereign immunity reflects the comity or mutual respect that is essential in dealings between sovereign nations. See Republic of Philippines v. Pimentel, 553 U.S. 851, 865, 128 S.Ct. 2180, 171 L.Ed.2d 131 (2008); Dole Food Co. v. Patrickson, 538 U.S. 468, 479, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003); Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983). Based on the reasoning permitting appeals of those other immunity defenses, we and other circuits treat denials of sovereign immunity defenses as appealable collateral orders. Rubin v. Islamic Republic of Iran, 637 F.3d 783, 789–90, 795 (7th Cir.2011) (appeal of discovery order that rejected FSIA immunity defense); World Holdings, LLC v. Federal Republic of Germany, 613 F.3d 1310, 1314 & n. 6 (11th Cir.2010) (appeal of denial of FSIA immunity in suit to enforce pre-World War II German bonds); O'Bryan v. Holy See, 556 F.3d 361, 372 (6th Cir.2009) (appeal of denial of FSIA immunity in case alleging sexual abuse of children by clergy); Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 532 (5th Cir.1992) (appeal of denial of FSIA immunity in breach of contract case); Foremost–McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 443 (D.C.Cir.1990) (appeal of denial of FSIA immunity defense in expropriation case; collecting cases from several circuits); Rush–Presbyterian–St. Luke's Med. Center v. Hellenic Republic, 877 F.2d 574, 576 n. 2 (7th Cir.1989) (appeal of denial of FSIA immunity based on commercial activities in United States); Segni v. Commercial Office of Spain, 816 F.2d 344, 347 (7th Cir.1987) (appeal of denial of FSIA immunity defense asserted in breach of contract suit).

The plaintiffs in both appeals attempt to avoid this well-established doctrine and practice by arguing that the district court's orders denying the defendants' respective motions to dismiss did not “conclusively determine” that the defendants are not entitled to sovereign immunity. The district court found that both groups of plaintiffs had alleged sufficient facts to show at the motion to dismiss stage that the expropriation exception to the FSIA applied to their claims against these defendants. See 28 U.S.C. § 1605(a)(3). The court then wrote in the bank case: “It is premature at this juncture to adjudicate [the national bank's] denial of the facts alleged.” Holocaust Victims of Bank Theft v. Magyar Nemzeti Bank, 807 F.Supp.2d 689, 697 (N.D.Ill.2011). The district court noted that the national bank may, if warranted, raise its arguments regarding the expropriation exception's nexus requirements again in a motion for summary judgment. Id. In denying the national bank's request for certification of an interlocutory appeal pursuant to 28 U.S.C. § 1292(b), the district court wrote:

this Court did not adjudicate [the national bank's] defense of sovereign immunity under FSIA on the merits. This court denied the motion to dismiss and indicated that the issue was not ripe for adjudication at the motion to dismiss stage because Plaintiffs in opposition to the motion to dismiss argued that the [expropriation] exception under FSIA applies in this case and presented sufficient allegations at the pleadings stage...