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Malewicz v. City of Amsterdam

June 27, 2007

LEONARD MALEWICZ, ET AL., PLAINTIFFS,
v.
CITY OF AMSTERDAM, DEFENDANT.



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

Plaintiffs are surviving heirs of Kazimir Malewicz, a Russian artist who was a pioneer in geometric abstractionism during the first half of the 20th Century. Due to the political situation in the Soviet Union during the latter years of his life, Malewicz entrusted a large number of his paintings to friends in Germany, where he had gone to show them, for safe keeping. In 1956, after Malewicz's death and the end of the Second World War, the City of Amsterdam's Stedelijk Museum ("the City" or "the Stedelijk") acquired some of those paintings from one of the persons to whom Malewicz had entrusted them. In 2003, the City loaned the paintings to the Guggenheim Museum in New York and the Menil Collection in Houston, Texas ("the American Museums"). While the paintings were being exhibited in the United States, Plaintiffs filed this suit against the City alleging that the Stedelijk's acquisition of the paintings in 1956 was unlawful. In March 2005, this Court denied the City's motion to dismiss for lack of jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602, et seq. ("FSIA"), because there was insufficient information in the record to determine whether the FSIA's expropriation exception applied. The City has now submitted additional evidence to support its position that it is immune from suit under the FSIA and renewed its motion to dismiss. For the following reasons, the Court will deny the City's renewed motion.

I. FACTUAL BACKGROUND

The Court assumes general familiarity with the factual history of the present dispute from its previous decision. See Malewicz v. City of Amsterdam, 362 F. Supp. 2d 298, 301-04 (D.D.C. 2005). For purposes of the present motion, the following facts are critical. The Stedelijk Museum was established and is operated by the City of Amsterdam, which is itself a political subdivision of the Kingdom of the Netherlands. See id. at 306. In 1956, representatives of the Stedelijk persuaded Hugo Haring, one of the persons to whom Malewicz had entrusted his artwork, to loan the Malewicz paintings in his possession to the museum. Id. at 302-03. In 1958, the City exercised an option in the loan agreement and purchased the Malewicz artwork for DM120,000. Id. In 2003 the Stedelijk loaned 14 artworks from its Malewicz Collection to the American Museums as part of a temporary art exhibition. Id.at 303. Two days before the end of the temporary exhibition, Plaintiffs filed this lawsuit against the City seeking damages and injunctive relief. Id.

In its March 2005 opinion on the City's motion to dismiss, the Court reserved ruling on whether the FSIA's so-called "expropriation" exception - which allows a foreign state to be sued if it took rights in property in violation of international law and the property is present in the United States in connection with commercial activity carried out in the United States by the foreign state - applies in this case. See id. at 315. In that opinion, the Court found that three of the four elements necessary to establish the expropriation exception were present in the record but stopped short of finding that the fourth element was satisfied because there was insufficient evidence to determine whether the City's contact with the United States was "substantial." See id.

The City now renews its motion to dismiss and submits documents that allegedly show that its contact with the United States in connection with the loan of the Malewicz artwork was insufficient to provide a basis for jurisdiction under the FSIA. The City also asks the Court to reconsider one of its holdings in the March 2005 decision - namely, that Plaintiffs would not be required to exhaust their remedies in the Netherlands before bringing suit under the FSIA if their claims in that country were time barred. In addition, the City asks the Court to dismiss the complaint based on the statute of limitations, the "act of state" doctrine, and forum non conveniens.

II. LEGALSTANDARDS

A. Rule 12(b)(1)

The City moves for dismissal under Federal Rule of Civil Procedure 12(b)(1) for lack of jurisdiction. "FSIA establishes a specific framework for determining whether a sovereign is immune from suit and consequently whether the district court has jurisdiction." Phoenix Consulting Inc. v. Republic of Angola, 216 F.3d 36, 39 (D.C. Cir. 2000). "Generally, in entertaining a motion to dismiss, the district court must accept the allegations of the complaint as true, and construe all inferences in the plaintiff's favor. However, '[w]here the motion to dismiss is based on a claim of foreign sovereign immunity, which provides protection from suit and not merely a defense to liability, . . . the court must engage in sufficient pretrial factual and legal determinations to satisfy itself of its authority to hear the case before trial.'" Burnett v. Al Baraka Inv. & Dev. Corp., 292 F. Supp. 2d 9, 14 (D.D.C. 2003) (internal citations omitted). Accordingly, the court must look beyond the parties' pleadings to resolve any factual disputes that are essential to its decision to retain jurisdiction or dismiss the action. See id. (citing Phoenix Consulting, 216 F.3d at 40); see also Price v. Socialist People's Libyan Arab Jamahiriya, 274 F. Supp. 2d 20, 24 (D.D.C. 2003). "'In accordance with the restrictive view of sovereign immunity reflected in the FSIA,' the defendant bears the burden of proving that the plaintiff's allegations do not bring its case within a statutory exception to immunity." Phoenix Consulting, 216 F.3d at 40 (quoting Transamerican S.S. Corp. v. Somali Democratic Republic, 767 F.2d 998, 1002 (D.C. Cir. 1985)). The foreign state must produce evidence establishing that the plaintiff's claim relates to a public act of the foreign state - that is, that the FSIA's exceptions do not apply. Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 451 n.5 (6th Cir. 1988). "Once the foreign state has produced such prima facie evidence of immunity, the burden of going forward would shift to the plaintiff to produce evidence establishing that the foreign state is not entitled to immunity." Id. (quoting H.R. Rep. No. 1487, 94th Cong., 2d Sess. 1, 17, reprinted in 1976 U.S.C.C.A.N. 6604, 6616).

B. Rule 12(b)(6)

The City also moves for dismissal under Rule 12(b)(6). A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the adequacy of a complaint on its face, testing whether a plaintiff has properly stated a claim. Although a complaint "does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment]to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) (internal citations omitted). The court must treat the complaint's factual allegations - including mixed questions of law and fact - as true, drawing all reasonable inferences in the plaintiff's favor, Macharia v. United States, 334 F.3d 61, 64, 67 (D.C. Cir. 2003); Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003), and the facts alleged "must be enough to raise a right to relief above the speculative level," Twombly, 127 S.Ct. at 1965. But the court need not accept as true inferences unsupported by facts set out in the complaint or legal conclusions cast as factual allegations. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002).In deciding a 12(b)(6) motion, the Court may consider only "the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about which the Court may take judicial notice." Gustave-Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002) (citation omitted).However, the Court may, in its discretion, consider matters outside the pleadings and thereby convert a Rule 12(b)(6) motion into a motion for summary judgment under Rule 56. See Fed. R. Civ. P. 12(b); Yates v. District of Columbia, 324 F.3d 724, 725 (D.C. Cir. 2003).

C. Rule 54(b)

Finally, the City asks the Court to reconsider its earlier ruling that Plaintiffs were not required to exhaust their remedies in the Netherlands because their claims would be time barred. The City argues that the Court has inherent authority to reconsider its prior ruling under Langevine v. District of Columbia, 106 F.3d 1018, 1023 (D.C. Cir. 1997) ("Interlocutory orders are not subject to the law of the case doctrine and may always be reconsidered prior to final judgment"). The City does not cite to or rely on Rule 54(b), which allows district courts to revise their own interlocutory decisions "at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties." Under Rule 54(b), relief from interlocutory orders is available "as justice requires." Childers v. Slater, 197 F.R.D. 185, 190 (D.D.C. 2000). Moreover, while the law of the case doctrine does not necessarily apply to interlocutory orders, district courts generally consider the doctrine's underlying rationale when deciding whether to reconsider an earlier decision. See 18B Wright & Miller, Federal Practice & Procedure § 4478.1 (2006).

III. ANALYSIS

A. Jurisdiction Under The FSIA - The Expropriation Exception

The FSIA provides the "sole basis for obtaining jurisdiction over a foreign state in [American] courts." Republic of Austria v. Altmann, 541 U.S. 677, 699 (2004) (citation omitted); see also Millen Indus., Inc. v. Coordination Council, 855 F.2d 879, 883-84 (D.C. Cir. 1988) ("FSIA is the exclusive means of exercising jurisdiction over the foreign sovereigns . . . ."). As a political subdivision of the Kingdom of the Netherlands, the City is "immune from the jurisdiction of the courts of the United States," 28 U.S.C. § 1604, unless one of the FSIA's statutory exceptions applies. The FSIA's "exceptions are central to the Act's functioning: 'At the threshold of every action in a district court against a foreign state, . . . the court must satisfy itself that one of the exceptions applies,' as 'subject-matter jurisdiction in any such action depends' on that application." Altmann, 541 U.S. at 691 (quoting Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 493-94 (1983)).

Here, Plaintiffs argue that the Court has jurisdiction over this suit against the City under the expropriation exception. See 28 U.S.C. § 1605(a)(3). Four elements must be present in order for the FSIA's expropriation exception to apply: (1) "rights in property" are at issue; (2) the property was "taken in violation of international law"; (3) the "property is present in the United States"; and (4) the property is present in the United States "in connection with a commercial activity carried on in the United States by the foreign state." Id.

1. Commercial Activity in the United States - Substantial Contact

As mentioned above, it is the fourth element of the expropriation exception that is at issue in the instant motion. With respect to that element, the phrase "commercial activity carried on in the United States by a foreign state" means "commercial activity carried on by such state and having substantial contact with the United States." See 28 U.S.C. § 1603(e). The legislative history of the FSIA provides some examples of what is meant by "substantial contact": commercial transactions performed in whole or in part in the United States, import-export transactions involving sales to, or purchases from, concerns in the United States, business torts occurring in the United States . . . and an indebtedness incurred by a foreign state which negotiates or executes a loan agreement in the United States, or which receives financing from a private or public lending institution located in the United States . . . . This definition, however, is intended to reflect a degree of contact beyond that occasioned simply by U.S. citizenship or U.S. residence of the plaintiff.

H.R. Rep. No. 1487, 94th Cong., 2d Sess., reprinted in 1976 U.S.C.C.A.N. 6604, 6615-16. Based on this legislative history, the D.C. Circuit has held that "a contractual arrangement, one part of which is to be performed in the United States, constitutes a substantial contact with the United States." Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1513 (D.C. Cir. 1988). Although the D.C. Circuit looks to the traditional due-process minimum contacts analysis for guidance, the "substantial contact requirement is stricter than that ...


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