Expropriation Exception Saves Case, But District Court Holds Commercial Activity Exception Does Not Apply, Claims to Two of the Paintings at Issue are Dismissed as Well
The ongoing litigation between the heirs of Baron Mor Lipot Herzog and several state owned Hungarian museums has produced a new decision interpreting the scope of the Foreign Sovereign Immunities Act (FSIA), a frequent tool used to seek jurisdiction over Nazi-looted art claims brought in U.S. federal court. Relying on Supreme Court and D.C. Circuit cases in the last few months, the U.S. District Court held that claims for all but two of the paintings at issue can proceed under the FSIA’s “expropriation exception” codified in 28 U.S.C. § 1605(a)(3), but that the FSIA’s “commercial activity exception”—which the D.C. Circuit had held applicable in 2013 to the same case—could not be invoked based on the facts in the record developed in discovery. De Csepel v. Republic of Hungary, 2016 U.S. Dist. LEXIS 32111 (March 14, 2016).
The decision is most notable given its kinship to the recent Simon v. Republic of Hungary, because both reject the idea that the persecution of a group of people by its own government, often known as the “domestic takings” rule, or some other corollary of the Act of State Doctrine, should always be immune from U.S. court review. That doctrine still exists, but these decisions together confirm the consensus view that it does not apply to Holocaust claims. In other words, the takings of the Holocaust are genocidal per se, and genocide violates international law regardless of the citizenship of the aggressor and the victim. The ramifications of these two decisions could be far-reaching.
David de Csepel, Angela Maria Herzog, and Julia Alice Herzog filed the case in 2010. They are the heirs of Baron Mor Lipot Herzog, a Jewish Hungarian collector who died in 1934. His remarkable collection included works by El Greco, Velázquez, Lucas Cranach the Elder, van Dyck, Courbet, and Corot. The case alleged that collection was first taken away from the family starting with the German occupation of 1944 (after years of increasing persecution, including the death in a forced labor camp of the Baron’s son András).
Some of the Herzog collection had been recovered by the Allies and returned to Hungary. Hungary entered into a treaty in 1947 that addressed in part Hungary’s role as custodian of heirless works. Hungary did return some of the collection to Herzog family members, but they later characterized that term as “on paper” or in the form of short term loans only (a description that Hungary contests). Under what they deemed harassment, the family allowed some of the works to return to the Museum of Fine Arts for display in 1948. The Herzogs engaged in a series of correspondence about the collection, from which, the current plaintiffs allege, a bailment resulted. Bailment is simply the act of entrusting an object to another; a coat or car check are the most common examples. Under a bailment, there is no ownership transfer, and the bailee (the person getting the property) is obliged to safeguard it and give it back upon demand.
Decades later after the fall of Communism, the family restarted its efforts. The Baron’s daughter Erzsébet...
