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Simon v. Republic of Hungary

United States District Court, District of Columbia

September 30, 2017

ROSALIE SIMON, et al., Individually, for themselves and for all others similarly situated Plaintiffs,
v.
REPUBLIC OF HUNGARY, et al., Defendants.

          MEMORANDUM OPINION

          BERYL A. HOWELL CHIEF JUDGE.

         The named plaintiffs in this proposed class action, Rosalie Simon, Helen Herman, Charlotte Weiss, Helena Weksberg, Rose Miller, Tzvi Zelikovitch, Magda Kopolovich Bar-Or, Zehava (Olga) Friedman, Yitzhak Pressburger, Alexander Speiser, Ze-ev Tibi Ram, Vera Deutsch Danos, Ella Feuerstein Schlanger, and Moshe Perel (collectively, “the plaintiffs”), are fourteen of the approximately 825, 000 Hungarian Jews who were subjected to the atrocities and horrors of the Holocaust at the hands of the Hungarian government between 1941 and 1945. Second Am. Compl. (“SAC”) ¶¶ 5-9, 14, 22, 28, 39, 41, 49, 65, 73, 81, 131, ECF No. 118. The plaintiffs instituted this suit against the Republic of Hungary (“Hungary”) and the Hungarian national railway, Magyar Államvasutak Zrt. (“MÁV”), (collectively, “the Defendants”) seeking restitution for the property seized from them as part of Hungary's broader effort to eradicate the Jewish people. SAC ¶¶ 173-215.[1]

         In 2014, this Court dismissed the plaintiffs' case, holding that in light of a treaty between the United States and Hungary, the defendants were entitled to sovereign immunity under the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. §§ 1605-07. Simon v. Republic of Hungary (“Simon I”), 37 F.Supp.3d 381, 424 (D.D.C. 2014). The case now returns on remand from the D.C. Circuit, which rejected the application of the treaty exception under the FSIA, and held that the FSIA “expropriation exception” may provide a waiver of the defendants' sovereign immunity. Simon v. Republic of Hungary (“Simon II”), 812 F.3d 127, 149 (D.C. Cir. 2016). The D.C. Circuit further held “that the plaintiffs' claims do not constitute non-justiciable political questions falling outside of the Judiciary's cognizance, ” id. at 132; id. at 151, but left unresolved the applicability of other prudential doctrines. Instead, “whether, as a matter of international comity, the plaintiffs must first exhaust available remedies in Hungary before proceeding with their claims in United States courts, ” id. at 132-33, as well as “any other arguments” previously raised by the defendants “that [the Court] has yet to reach . . . such as the defendants' forum non conveniens arguments, ” id. at 151, were expressly left to this Court to consider on remand.

         The defendants now seek to dismiss the plaintiffs' Second Amended Complaint, which was filed after remand. Defs.' Mot. Dismiss SAC (“Defs.' Mot.”), ECF No. 120. For the reasons explained below, the plaintiffs are required to exhaust their Hungarian remedies before bringing suit in the United States under the prudential exhaustion doctrine and, since they have not done so, the defendants' motion to dismiss is granted, without prejudice, on that ground as well as under the forum non conveniens doctrine.[2]

         I. BACKGROUND

         The factual background of this case has been extensively reviewed in prior decisions of this Court and the D.C. Circuit, see generally Simon I, 37 F.Supp.3d at 385-95; see also Simon II, 812 F.3d at 132-34, and, consequently, that background, as set out in the Second Amended Complaint, will only be briefly summarized below, followed by review of the relevant procedural history.

         A. Factual Background

         In 1944, “the Nazis and Hungary, knowing they had lost [the war], raced to complete their eradication of the Jews before the Axis surrendered.” SAC ¶ 3. As part of their greater plan to eradicate the Jewish people, the defendants stripped Hungarian Jews of their possessions, including cash, jewelry, heirlooms, art, valuable collectibles, and gold and silver, loaded them onto trains, and transported them in squalid conditions to concentration camps where they were either murdered or forced to work as slave laborers. Id. ¶¶ 17, 20, 23-26, 32-34, 44-48, 52, 57, 69-71, 76, 81. “In less than two months . . . over 430, 000 Hungarian Jews were deported, mostly to Auschwitz, in 147 trains, ” id. ¶ 120; id., Exhibit B (list of deportation trains in 1944, along with “DATES, ORIGIN OF TRANSPORTS AND NUMBER OF DEPORTEES”), and the “vast majority” of the Hungarian Jews sent “to the killing fields and death camps of Nazi Germany-occupied Poland and the Ukraine” died, id. ¶ 3. “The overall loss of Hungarian Jewry during the Second World War, excluding those who fled abroad, was 564, 507.” Id. ¶ 131.

         After the armistice agreement ended the hostilities of World War II, id. ¶ 137, Hungary signed the “Paris Peace Treaty of February 10, 1947” (“1947 Treaty”) that incorporated “a number of provisions relating to the restoration of confiscated property, ” with promises to undertake the restoration of, and fair compensation for, property, legal rights or interests confiscated from persons “ʻon account of the racial origin or religion of such persons, '” id. ¶ 138 (quoting 1947 Treaty, 61 Stat. 2065, 41 U.N.T.S. 135, art. 27, para. 1). Article 27 and related provisions “were not self-executing (they needed appropriate municipal legislation and enforcement to prevail); and they did not provide for sanction in case of non-compliance, other than the implied possible litigation before an international tribunal.” Id. (quoting 2 Randolph L. Braham, The Politics of Genocide: The Holocaust in Hungary, 1308-09 (rev. ed. 1994)). The plaintiffs acknowledge that the Hungarian government “implement[ed] an array of legislative enactments and remedial statutes, ” but Hungarian Jews “saw no tangible results with respect to restitution and indemnification” for their seized property. Id. Moreover, “[w]ith the communist party in power in Hungary” after World War II, “‘the issue of compensation or restitution was squashed, '” and to the extent the Hungarian government had set aside funds for victims of the Holocaust, “the funds were rarely used for their intended purpose and they were frequently raided by the Communists for financing their own political projects.” Id. ¶¶ 141-42 (quoting 2 Braham at 1309). In 1992, two years after “the downfall of the Communist regime” in Hungary, the Hungarian government adopted at least two laws to provide remedies to Hungarian Jews victimized in the Holocaust: one of these laws “provid[ed] compensation for material losses incurred between May 1, 1939 and June 8, 1949, ” and the other “provid[ed] compensation for those who, for political reasons, were illegally deprived of their lives or liberty between March 11, 1939 and October 23, 1989, ” but plaintiffs claim that the remedies provided under those programs are “paltry and wholly inadequate.” Id. ¶ 143.

         In sum, the plaintiffs have never been properly compensated for the personal property seized from them by the defendants as the plaintiffs were about to be deported. Id. ¶¶ 83-84. The plaintiffs believe that the defendants “liquidated [this] stolen property, mixed the resulting funds with their general revenues, and devoted the proceeds to funding various governmental and commercial operations.” Id. ¶ 97. Thus, the plaintiffs claim that the “stolen property or property exchanged for such stolen property is owned and operated by Hungary and MÁV, ” some of which property “is present in the United States in connection with commercial activity carried on in the United States by Hungary, ” id. ¶ 98, including, for example, “fees and payments, offices, furniture, furnishings, bank accounts, artwork, stock and bond certificates, securities held in ‘street name' and airplanes, ” id. ¶ 101.

         Sixty-five years after the end of World War II and twenty years after the fall of the Hungarian communist regime, the plaintiffs filed the instant action against Hungary and MÁV, seeking, inter alia, restitution for the possessions seized from them and their families during the Holocaust, and to certify a class “consist[ing] of [1] all surviving Jewish victims of the Holocaust” who were residents of Hungary between September 1, 1939 and May 8, 1945, and “[2] the heirs (whether American citizens or aliens) and open estates . . . of the deceased Jewish victims of the Holocaust, whether presently American citizens or aliens, ” who were residents of Hungary between September 1, 1939 and May 8, 1945. Id. ¶ 153. According to the plaintiffs, this class would consist of at least “5, 000 survivors” and “countless heirs and estates” of the “approximately 825, 000 Jews in Hungary” who were victims of the atrocities committed by the defendants. Id. ¶¶ 131, 154.

         The plaintiffs' Second Amended Complaint asserts, in ten counts, claims for conversion (Count I), unjust enrichment (Count II), breach of fiduciary and special duties imposed on common carriers (Count III), recklessness and negligence (Counts IV, V), civil conspiracy with Nazi Germany to commit tortious acts (Count VI), aiding and abetting (Count VII), restitution (Count VIII), accounting (Count IX), a demand for a declaratory judgment that plaintiffs and class members are entitled to inspect and copy certain documents, and for injunctive relief enjoining the defendants from tampering or destroying such documents (Count X; Prayer For Relief, ¶¶ 5, 6). See SAC. The plaintiffs also assert that subject matter jurisdiction may properly be exercised over their claims, and that the defendants are not immune from suit, pursuant to the FSIA's expropriation exception, 28 U.S.C. § 1605(a)(3), SAC ¶¶ 86-92, which exception permits suit against a foreign sovereign or its agencies or instrumentalities in the courts of the United States to vindicate “rights in property taken in violation of international law” when an adequate commercial nexus is present between the United States and the defendant, 28 U.S.C. § 1605(a)(3).

         B. Procedural History

         As noted, the defendants' first motion to dismiss on the grounds of sovereign immunity was granted because the exceptions to such immunity set out in the FSIA, 28 U.S.C. §§ 1605-07, only apply “if allowing a suit against a sovereign to proceed, pursuant to one of those exceptions, does not conflict with ‘existing international agreements to which the United States [was] a party at the time of the enactment of' the FSIA.” Simon I, 37 F.Supp.3d at 406. Finding “that the 1947 Treaty is an ‘existing international agreement[] to which the United States [was] a party at the time of the enactment' of the FSIA, 28 U.S.C. § 1604, ” the Court held that the 1947 Treaty “trigger[ed] the FSIA's treaty exception to deprive this Court of subject matter jurisdiction over the plaintiffs' claims.” Id. at 407. In particular, the 1947 Treaty addressed Hungary's disposition of “all property” taken from Holocaust victims, directed how Hungary was to distribute all expropriated property at the end of the war, and provided that “any dispute concerning the interpretation or execution of the treaty” was subject to resolution exclusively through the mechanisms described in the Treaty. Id. at 415-16 (quoting 1947 Treaty, art. 40(1)). Based on those treaty provisions, which this Court viewed as defining the contours of Hungary's waiver of its sovereign immunity for claims for property seized during the Holocaust and delineating the exclusive legal regime set up to resolve the plaintiffs' property claims against Hungary, the Court held that the Treaty precluded review of those claims under a FSIA exception and declined to reach the parties' other arguments concerning the application of the FSIA's “expropriation exception” or prudential reasons to dismiss the case, such as forum non conveniens. Id. at 397, 418 n.28.

         On appeal, the D.C. Circuit affirmed in part and reversed in part. In particular, the Circuit rejected application of the treaty exception, Simon II, 812 F.3d at 135, finding that the 1947 Treaty set out only a non-exclusive mechanism for the plaintiffs to obtain compensation, id. at 137, and, thus, did not conflict with the FSIA such that “the FSIA's treaty exception does not foreclose jurisdiction over the plaintiffs' claims, ” id. at 140 (“we hold that Article 27 secures one means by which Hungarian victims can seek recovery against Hungary for their wartime property losses, but not to the exclusion of other available remedies.”). The Circuit then considered whether the expropriation exception provides a basis for waiver of the defendants' sovereign immunity. Id.

         The Circuit affirmed the dismissal of the “plaintiffs' non-property claims because they do not come within the FSIA's expropriation exception, ” and no other FSIA exception provided jurisdiction over the claims. Id. at 151. By contrast, the plaintiffs' claims that “directly implicate[d]” their property rights were “claims ‘in which rights in property taken in violation of international law'” remained at issue. Id. at 140 (quoting 28 U.S.C. § 1605(a)(3)).[3] The Circuit acknowledged that a sovereign's expropriation of its own nationals' property was not a violation of international law under the “so-called ‘domestic takings rule, '” but construed the plaintiffs' claims as not asserting a “basic expropriation claim” subject to the domestic takings rule. Id. at 140-41, 144. Reasoning that “[e]xpropriations undertaken for the purpose of bringing about a protected group's physical destruction qualify as genocide, ” id. at 143, the Circuit saw “the expropriations as themselves genocide” committed “‘in violation of international law, '” id. at 142-43 (emphasis in original), in reliance on “[t]he legal definition of genocide” set out in the Convention on the Prevention and Punishment of the Crime of Genocide (Genocide Convention), art. 2, Dec. 9, 1948, 78 U.N.T.S. 277, and other international treaties. See also id. at 144 (“[T]he complaint describes takings of property that are themselves genocide within the legal definition of the term.”).[4]

         The Circuit then turned to the “commercial-activity nexus requirement” of the expropriation exception, which, on a “general level . . . require[s]: (i) that the defendants possess the expropriated property or proceeds thereof; and (ii) that the defendants participate in some kind of commercial activity in the United States.” Id. at 146. The plaintiffs' allegations “that the Hungarian defendants liquidated the stolen property, mixed the resulting funds with their general revenues, and devoted the proceeds to funding various governmental and commercial operations” were found to “raise a ‘plausible inference' that the defendants retain the [plaintiffs'] property or proceeds thereof, ” and, thus, the defendants' argument that such allegations were insufficient as a matter of law was rejected. Id. at 147. Nevertheless, the Circuit cautioned that the plaintiffs ultimately “may or may not be able to prove the point, ” and emphasized the limitation of its holding to whether the plaintiffs' allegations were sufficient as a matter of law. Id. The Circuit further noted that “[u]pon any factual challenge by the [] defendants-e.g., concerning whether the defendants in fact still possess the property or proceeds thereof-the plaintiffs will bear the burden of production, and the defendants will bear the burden of persuasion to establish the absence of the factual basis by a preponderance of the evidence.” Id. (internal quotation omitted). Based on the then-record regarding the commercial activity nexus requirement, the Circuit held that “[b]ecause defendants make no attempt to argue that the rail company fails to ‘engage[] in a commercial activity in the United States, ' the nexus requirement is satisfied as to MÁV, ” id. at 147-48, but that “the complaint's allegations about Hungary's commercial activity fail to demonstrate satisfaction of §1605(a)(3)'s nexus requirement” because the plaintiffs “put forward only [] bare, conclusory assertion[s]” to support their claim, consequently affirming the dismissal of the claims against Hungary, id. at 148.

         The Circuit concluded by leaving to this Court to consider on remand any remaining issues raised by defendants' invocation of sovereign immunity “should the defendants assert” them, such as “whether, as a matter of international comity, the court should decline to exercise jurisdiction unless and until the plaintiffs exhaust available Hungarian remedies, ” id. at 149, and “any other arguments that [this Court] has yet to reach and that are unaddressed [by the Circuit], such as the defendants' forum non conveniens arguments, ” id. at 151.[5]

         C. Second Amended Complaint

         On remand, the plaintiffs were permitted to file the operative Second Amended Complaint, see Scheduling Order, dated April 13, 2016; J. Stip. Regarding Sched. Order, ECF No. 117, which supplements the allegations regarding the defendants' commercial nexus to the U.S., and alleges for the first time, consistent with the D.C. Circuit's holding, that the takings at issue were “themselves genocide, ” SAC ¶¶ 92-94. The defendants then filed their second Motion to Dismiss, arguing that the Second Amended Complaint should be dismissed, inter alia, for plaintiffs' failure to exhaust Hungarian remedies, Defs.' Mem. Supp. Second Mot. Dismiss (“Defs.' Mem.”) at 21-24, ECF No. 120-1, and under forum non conveniens, id. at 24-35.[6] The defendants' second motion to dismiss is now ripe for review. For the reasons explained below, the defendants' motion is granted on prudential exhaustion and forum non conveniens grounds.

         II. LEGAL STANDARD

         Both forum non conveniens and exhaustion are prudential doctrines that fall outside the “standard procedural devices trial courts around the country use every day in service of [Federal Rule of Civil Procedure] Rule 1's paramount command: the just, speedy, and inexpensive resolution of disputes.” Dietz v. Bouldin, 136 S.Ct. 1885, 1891 (2016). Nevertheless, in considering dismissal of a case on prudential grounds, the norm in reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b) is followed and the Court “must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Warth v. Seldin, 422 U.S. 490, 501 (1975); see also Am. Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (noting that in evaluating dismissal under Rule 12(b)(1), court should “assume the truth of all material factual allegations in the complaint and ‘construe the complaint liberally, granting [the] plaintiff the benefit of all inferences that can be derived from the facts alleged'” (quoting Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005))). At the same time, inferences drawn by the plaintiff that are unsupported by facts alleged in the complaint or amount merely to legal conclusions need not be accepted. See Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). Similarly to evaluating the jurisdictional sufficiency of a complaint, the Court may also consider “materials outside the pleadings.” Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005); Belhas v. Ya'Alon, 515 F.3d 1279, 1281 (D.C. Cir. 2008) (examining materials outside the pleadings in ruling on a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction); Coal. for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (noting that courts may consider materials outside the pleadings in ruling on a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction).

         III. DISCUSSION

         The defendants have moved to dismiss the SAC on three independent grounds, which are, unsurprisingly, the grounds highlighted by the D.C. Circuit as left unresolved on appeal: first, the defendants dispute the factual bases on which application of the FSIA's expropriation exception to the plaintiffs' claims depends, Defs.' Mem. at 8-20; second, the defendants argue that, as a matter of international comity, the Court should as, a prudential matter, decline to hear the case until the plaintiffs have exhausted their claims before a court in Hungary, id.at 21-24; and third, the defendants reassert, as they did in their first motion to dismiss, that regardless of whether jurisdiction may properly be exercised over the plaintiffs' claims, the Court should decline to hear the case under the doctrine of forum non conveniens, id. at 24-34. The plaintiffs counter that the facts support the exercise of subject matter jurisdiction under the FSIA's expropriation exception, Pls.' Mem. Opp'n Defs.' Mot. Dismiss (“Pls.' Opp'n”) at 2-22, ECF No. 122; that they are not required to exhaust their claims in Hungary, stressing that such efforts would be futile, id. at 22-27; and that forum non conveniens is unavailable because Hungary is not an adequate alternative forum and other relevant factors do not overcome the plaintiffs' choice of forum, id. at 27-44.

         As explained below, plaintiffs have not shown that pursuing their claims in Hungary would be futile or that Hungary is an inadequate alternative forum. Thus, the prudential exhaustion and forum non conveniens doctrines both provide a compelling basis for “declin[ing] to exercise jurisdiction, ” Simon II, 812 F.3d at 149, and dismissing the plaintiffs' claims.

         A. Prudential Exhaustion

         1. Applicable Legal Principles

         The prudential exhaustion doctrine for FSIA expropriation claims was articulated by the Seventh Circuit first in Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661 (7th Cir. 2012), and later refined by Fischer v. Magyar Államvasutak Zrt, 777 F.3d 847 (7th Cir. 2015). As summarized in Fischer, the exhaustion inquiry must answer two questions: (1) whether plaintiffs have alleged a taking in violation of international law where “international law favors giving a state accused of taking property in violation of international law an opportunity to ‘redress it by its own means, within the framework of its own legal system' before the same alleged taking may be aired in foreign courts, ” Fischer, 777 F.3d at 855 (quoting Abelesz, 672 F.3d at 680); and (2) whether the plaintiffs have exhausted domestic remedies in the country where the taking occurred or, if not, whether plaintiffs can “show convincingly that such remedies are clearly a sham or inadequate or that their application is unreasonably prolonged, ” Abelesz, 672 F.3d at 681, such that “it could not be worthwhile to bring suit” there, Fischer, 777 F.3d at 857. In such cases, “principles of international comity make clear that these plaintiffs must attempt to exhaust domestic remedies, ” id. at 852, except where those remedies are “futile or imaginary, ” id. at 858. Those two factors - comity and futility - are now considered in turn.

         a. Comity

         In Abelesz, the Seventh Circuit reversed the denial of motions to dismiss claims from two related cases brought by “Holocaust survivors and heirs of other Holocaust victims” against the Hungarian national bank and against MÁV, also a defendant in the instant case, for allegedly “participat[ing] in expropriating property from Hungarian Jews who were victims of the Holocaust.” 692 F.3d at 665.[7] The Abelesz court affirmed the district court's rejection of the FSIA treaty exception, id. at 695, and found that the expropriation exception may provide a waiver of sovereign immunity, despite the general principle that plaintiffs may not bring an FSIA suit for uncompensated takings without exhausting domestic remedies, id. at 677, because the relevant “violation of international law” was not an uncompensated taking, but expropriation of property “to deprive Hungarian Jews of their wealth and to fund genocide, a long-recognized violation of international law.” Id. at 677. Nevertheless, the ...


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