Nazi-Looting and Forced Sales Support Jurisdiction—Guelph Treasure Ruling Analysis

by Sullivan & Worcester
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The decision on Friday to allow our clients’ claims to proceed against German and the Stiftung Preussischer Kulturbesitz for the restitution of the Guelph Treasure (or Welfenschatz) is ground-breaking in important respects, and a welcome part of a consistent progression in the law of sovereign immunity over claims for Nazi-looted art.  As we noted in our initial reaction, it is the first decision in which a U.S. court has held that it has jurisdiction over Germany or an agency or instrumentality of it under the Foreign Sovereign Immunities Act (FSIA) for a claim to Nazi-looted or purchased art—though others have certainly tried—in this case finding the so-called expropriation exception applies.  Critically, it recognizes that claims about forced sales in the early days of Nazi persecution indeed create jurisdiction.  Moreover, the court agreed with our clients that Germany’s various excuses to avoid litigating the substance of a forced sale involving Hermann Goering based on pleas for deference or respect to the flawed Advisory Commission are no reason to dismiss the case.  

As we have explored many times before, the FSIA provides that a foreign sovereign may be sued in a U.S. court where the claims concern rights in property taken in violation of international law, and the sovereign defendant is engaged in commercial activity in the United States.  The Defendants challenged the argument that the allegations about the 1935 sale to the Prussian government was such a taking in violation of international law, or that even if it qualified the case ought not be heard as somehow in conflict with U.S. policy or out of respect for the Advisory Commission that issued a badly-flawed recommendation in 2014.  The court rejected every one of these arguments. 

First, the court ruled that claims involving the targeting of Jews in the early Nazi era (the Defendants’ initial briefing argued that 1935 was “several years” before the Holocaust) implicate international law.  In keeping with other recent decisions, the court ruled that “Plaintiffs sufficiently pled the taking of the Welfenschatz was part of the genocide of the Jewish people during the Holocaust and, accordingly, violated international law,” and further that:

the taking of the Welfenschatz as alleged in the complaint bears a sufficient connection to genocide such that the alleged coerced sale may amount to a taking in violation of international law. Plaintiffs sufficiently pled that they were targeted because they were Jewish sellers in possession of property that was of particular interest to the Nazi regime. The complaint further includes sufficient allegations that the taking of this property was in furtherance of the genocide of the Jewish people during the Holocaust.

Notably, the court rejected Germany’s argument that the fact that the property taken was eventually intended for resale should change this result.  The art dealer consortium’s property was the consortium’s property, and the key point is the agency of their decision to sell, which the claims clearly allege was impossible because of Nazi persecution.  Laudably, “the Court finds that expropriating property that Plaintiffs planned to sell for a profit falls within the definition of genocide that includes deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part.”  It also did so despite applying the more demanding standard for which the Defendants advocated that our claims must actually demonstrate at this stage that they were in violation of international law, as opposed to a mere non-frivolous allegation that the property had been taken.

The court went on to reject the idea that the so-called “domestic takings” rule, that the takings by a sovereign from its own citizens are unreviewable, should bar the claims.  Instead, the court noted the D.C. Circuit’s case law that “the relevant international law violation for jurisdictional purposes under the expropriation exception is genocide, including genocide perpetuated by a foreign state against its own nationals.”

Lastly, the court dismissed the Defendants’ arguments that the Advisory Commission proceedings mean that the claims were either preempted by, or conflict with U.S. law.  Defendants like Germany have often argued that individual litigation claims conflict with U.S. foreign policy.  They have always been wrong, but the recent passage of the HEAR Act put that argument to rest.  As the court noted here:

It is clear from the text of the HEAR Act that Congress specifically recognized and did not foreclose the use of litigation as a means to resolve claims to recover Nazi-confiscated art. As such, the Court agrees with Plaintiffs that the HEAR Act supports their argument that U.S. policy does not conflict with Plaintiffs’ ability to pursue their claims in this Court.

Nor can the Advisory Commission recommendation be used as a basis for dismissal.  The proceedings were not a property adjudication or judgment, so the principle of comity has no real application. 

There are many other aspects of this thorough 42-page decision, including the helpful conclusion that the doctrine of forum non conveniens (inconvenient forum) or exhaustion of administrative remedies abroad is no basis to dismiss the case. 

One final note: There was some confused reporting in the German press that this was only a “partial victory” for our clients, which is incorrect.  The property-based claims for the return of the collection were all upheld.  As in any case, we pleaded a variety of legal theories in the alternative to make our clients’ case.  The core of the Complaint is and has always been the property claims of replevin and conversion, as well as the request for declaratory relief.  Other tort-based theories were dismissed after we elected not to pursue them in the briefing.  But the critical claims to restitute my clients’ ancestors’ property are all very much in play.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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