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Simon v. Republic of Hungary

United States Court of Appeals, District of Columbia Circuit

January 29, 2016

ROSALIE SIMON, ET AL., APPELLANTS
v.
REPUBLIC OF HUNGARY, ET AL., APPELLEES

Argued March 10, 2015.

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Appeal from the United States District Court for the District of Columbia. (No. 1:10-cv-01770).

Paul G. Gaston argued the cause for appellants. With him on the briefs were Charles S. Fax, Liesel Schopler, L. Marc Zell, and David H. Weinstein.

Konrad L. Cailteux argued the cause for appellees. With him on the briefs was Gregory Silbert.

Before: HENDERSON, SRINIVASAN and WILKINS, Circuit Judges. OPINION filed by Circuit Judge SRINIVASAN. Concurring opinion filed by Circuit Judge HENDERSON.

OPINION

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Srinivasan, Circuit Judge :

This case arises out of one of humanity's darkest hours. In the summer of 1944, upon the arrival of German troops in Nazi-allied Hungary, the Hungarian government implemented an accelerated campaign to deport Hungarian Jews to Nazi death camps for extermination before the War's end. At the outset of the War, the Jewish population in Hungary numbered more than 800,000. By the end of the War, more than two-thirds of that population had been murdered, with the lion's share of victims killed at Auschwitz in a mere three-month period in 1944. Winston Churchill described the brutal, mass deportation of Hungarian Jews for extermination at Nazi death camps as " probably the greatest and most horrible crime ever committed in the history of the world."

The wartime wrongs inflicted upon Hungarian Jews by the Hungarian government are unspeakable and undeniable. The issue raised by this appeal is whether those wrongs are actionable in United States courts. Plaintiffs, fourteen Jewish survivors of the Hungarian Holocaust, bring various causes of action against the Republic of Hungary and the Hungarian state-owned railway arising from the defendants' participation in--and perpetration of--the Holocaust. The district court dismissed the suit, holding that the Foreign Sovereign Immunities Act's treaty exception grants the Hungarian defendants immunity. The court concluded that the 1947 Peace Treaty between the Allied Powers and Hungary set forth an exclusive mechanism for Hungarian Holocaust victims to obtain recovery for their property losses, and that permitting the plaintiffs' lawsuit to proceed under the FSIA would conflict with the peace treaty's terms.

We hold that the peace treaty poses no bar to the plaintiffs' lawsuit. While the treaty secures an obligation by Hungary to provide compensation for property interests confiscated from Hungarian Jews during the War, that obligation is not exclusive of other, extra-treaty means of recovery like the causes of action asserted in this case. As a result, the FSIA's treaty exception does not preclude this action.

Plaintiffs, however, still must overcome the FSIA's default grant of immunity to foreign sovereigns. We hold that the FSIA's expropriation exception affords plaintiffs a pathway to pursue certain of their claims: those involving the taking of the plaintiffs' property in the commission of genocide against Hungarian Jews. Because those expropriations themselves amount to genocide, they qualify as takings of property " in violation of international law" within the meaning of the FSIA's expropriation exception. We further hold that the plaintiffs' claims do not constitute non-justiciable political questions falling outside of the Judiciary's cognizance. We leave for the district court to consider on remand whether, as a matter of international comity, the plaintiffs must

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first exhaust available remedies in Hungary before proceeding with their claims in United States courts.

I.

A.

The Hungarian government, a wartime ally of Nazi Germany, began a systematic campaign of discrimination against Hungarian Jews as early as 1941. Hungary stripped some Hungarian Jews of their Hungarian citizenship, forced others into internment camps or slave labor battalions, expelled others from public or professional employment, and pressed still others into exile. But as of 1944--" on the very eve of triumph over the barbarism which their persecution symbolize[d]" --Hungarian Jews, " while living under persecution[,] ha[d] at least found a haven" from widespread extermination in the Holocaust. Franklin D. Roosevelt, Statement on Opening Frontiers to War Victims and Justice for War Crimes, The American Presidency Project (Mar. 24, 1944). That reprieve from the Holocaust's very worst horrors would not persist.

In 1943, the Soviet Red Army dealt the Nazi Wehrmacht and its allies a decisive blow at the battle of Stalingrad (now Volgograd). The complete destruction of the German Sixth Army turned the tide of war on the Eastern Front. And on the Western Front, less than twenty-six months later--after the Normandy landing and ensuing battles--American and Soviet forces would meet at the Elbe River, in Torgau, Germany. Within three days of that meeting, Adolf Hitler would be dead by his own hand.

The Hungarian government sensed the sea change attending the crushing defeat of the Nazis at Stalingrad. Fearing the imminent Soviet advance, Hungary sought to negotiate a separate peace with the United States, Great Britain, and the other Western Allies. But Germany, desperate to stave off Hungarian capitulation, rushed Nazi troops into Hungary in March 1944. The Hungarian parliament then ousted the existing government and installed the fanatically anti-Semitic Dö me Sztójay as Prime Minister.

The new Sztójay government, in collaboration with German Nazis, embarked on a policy of total destruction of Hungary's Jewish population. " Nowhere was the Holocaust executed with such speed and ferocity as it was in Hungary." Compl. ¶ 1. Within a period of three months in 1944, nearly half a million Hungarian Jews were murdered.

First came persecution. Building on previous efforts to marginalize Jews in society, the new Hungarian government forbade Jews from traveling, wearing military or school uniforms, eating in public restaurants, or using public pools. Hungary banned books by Jewish authors from schools and libraries. As of April 5, 1944, all Jews had to wear the identifying yellow star.

Next came property confiscation and ghettoization. Pursuant to government decrees, Hungary forced all Jews into ghettos, where they were " stripped of protective clothing, exposed to the elements, [and] deprived of sanitary facilities." Id. ¶ 101. Hungarian officials went home to home, inventorying and confiscating Jewish property.

Finally came extermination in the death camps. With the Hungarian government rapidly implementing Hitler's Final Solution, incarceration in the ghettos lasted but a few weeks. Hungarian authorities marched Jews from the ghettos to railroad stations, where they were divested of what little property--typically suitcases, clothes, and hidden valuables--they had managed

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to retain to that point. Within a mere three months, the majority of Hungarian Jews had been transported via railroad from the ghettos to Auschwitz and other death camps. Ninety percent of those sent to Auschwitz and the other camps were murdered upon arrival.

By January 17, 1945, Soviet troops had arrived in Budapest. But by then, over 560,000 Hungarian Jews--out of a pre-War population of nearly 825,000--had perished. The overwhelming majority of those deaths came from the roughly 430,000 Hungarian Jews deported to Auschwitz and other camps during those three months in 1944.

B.

Because this case comes to us on a grant of dismissal in favor of the defendants on grounds of sovereign immunity, we assume the factual allegations in the complaint to be true. See Price v. Socialist People's Libyan Arab Jamahiriya, 294 F.3d 82, 93, 352 U.S.App.D.C. 284 (D.C. Cir. 2002). The named plaintiffs in this case are fourteen Jewish survivors of the Hungarian Holocaust. All fourteen were Hungarian nationals during World War II, but have since adopted other nationalities. Twelve of the plaintiffs were among the hundreds of thousands transported to Auschwitz, but they beat the overwhelming odds and survived.

The plaintiffs filed suit in the United States District Court for the District of Columbia against the Republic of Hungary (Hungary), the state-owned Hungarian railway, Magyar Allamvastuak Zrt. (MÁV, and, with Hungary, referred to as the Hungarian defendants), and Rail Cargo Hungaria Zrt. (RCH), an Austrian freight-rail company that is the successor-in-interest to MÁV's World War II-era freight division. The plaintiffs allege that the Republic of Hungary collaborated with the Nazis to exterminate Hungarian Jews and to expropriate their property. The defendant railways, the plaintiffs contend, voluntarily played an integral role in that effort--specifically by transporting Hungarian Jews to death camps, and, at the point of embarkation, confiscating the property of those about to be deported. The complaint asserts causes of action ranging from the common law torts of conversion and unjust enrichment for the plaintiffs' property loss, to false imprisonment, torture, and assault for their personal injuries, to international law violations. The complaint seeks certification of a class of plaintiffs and, as relief, seeks compensatory damages, punitive damages, and various forms of equitable relief.

The defendants moved for dismissal of the claims. The Hungarian defendants argued as alternate grounds for dismissal: that they were immune from suit under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § § 1603 et seq. ; that the case presented a non-justiciable political question; and that the case should be dismissed under the doctrine of forum non conveniens. The district court concluded that the FSIA granted the Hungarian defendants immunity from suit. See Simon v. Republic of Hungary, 37 F.Supp.3d 381, 408-24 (D.D.C. 2014). Accordingly, the court dismissed the claims against the Hungarian defendants for lack of subject-matter jurisdiction. Fed.R.Civ.P. 12(b)(1). (The court also dismissed the claims against RCH based on the lack of personal jurisdiction over the company, 37 F.Supp.3d at 425-44; see Fed.R.Civ.P. 12(b)(2), but the plaintiffs raise no challenge to the dismissal of RCH in this appeal.)

II.

The plaintiffs appeal the dismissal of their claims against the Hungarian defendants--the Republic of Hungary and

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MÁV. We review de novo the district court's dismissal of the claims for lack of subject-matter jurisdiction. El Paso Nat. Gas Co. v. United States, 750 F.3d 863, 874, 409 U.S.App.D.C. 367 (D.C. Cir. 2014). " When reviewing a plaintiff's unchallenged factual allegations to determine whether they are sufficient to deprive a . . . defendant of sovereign immunity, we assume those allegations to be true." Price, 294 F.3d at 93.

The parties agree that, for purposes of qualifying for sovereign immunity under the FSIA, the Republic of Hungary is a " foreign state," and MÁV, a corporation wholly-owned by the Republic of Hungary, is an " agency or instrumentality" of the Hungarian state. 28 U.S.C. § 1603(a)-(b). In the United States, the sole avenue for a court to obtain jurisdiction over claims against a foreign state or its agencies and instrumentalities is through the FSIA, 28 U.S.C. § § 1603 et seq. See Peterson v. Royal Kingdom of Saudi Arabia, 416 F.3d 83, 86, 367 U.S.App.D.C. 421 (D.C. Cir. 2005).

The FSIA establishes a default rule granting foreign sovereigns immunity from the jurisdiction of United States courts. See 28 U.S.C. § 1604; Mohammadi v. Islamic Republic of Iran, 782 F.3d 9, 13, 414 U.S.App.D.C. 327 (D.C. Cir. 2015). That baseline grant of immunity, however, is subject to a number of exceptions. See 28 U.S.C. § § 1605-07; see also id. § 1604. The plaintiffs argue that their claims fit within the FSIA's " expropriation exception," which provides jurisdiction over certain claims involving " rights in property taken in violation of international law." Id. § 1605(a)(3). The Hungarian defendants contend that the expropriation exception is inapplicable here. They further argue that the FSIA's " treaty exception," see id. § 1604, in any event divests the district court of any jurisdiction it might otherwise have under the expropriation exception.

We first address the treaty exception, the ground upon which the district court rested its decision to dismiss the plaintiffs' claims. Finding the treaty exception inapplicable, we next examine whether the plaintiffs' claims implicate the FSIA's expropriation exception, which, as noted, creates an exception to foreign sovereign immunity for claims involving property " taken in violation of international law." Id. § 1605(a)(3). We hold that in the particular circumstances of this case--involving confiscations of property that themselves constitute the commission of genocide--certain of plaintiffs' claims against the Hungarian defendants may proceed under the FSIA's expropriation exception.

A.

The FSIA's baseline grant of immunity to foreign sovereigns is " [s]ubject to existing international agreements to which the United States [was] a party at the time of enactment of th[e] Act." 28 U.S.C. § 1604. That proviso is known as the FSIA's treaty exception. Under the treaty exception, " if there is a conflict between the FSIA and such an agreement regarding the availability of a judicial remedy against a contracting state, the agreement prevails." de Csepel v. Republic of Hungary, 714 F.3d 591, 601, 404 U.S.App.D.C. 358 (D.C. Cir. 2013) (quoting Moore v. United Kingdom, 384 F.3d 1079, 1085 (9th Cir. 2004) (punctuation omitted)). " Any conflict between a [pre-existing] treaty and the FSIA immunity provisions, whether toward more or less immunity, is within the treaty exception." Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661, 669 (7th Cir. 2012); accord Moore, 384 F.3d at 1084-85. As a result, in a case like this one, in which a pre-existing treaty is said to confer more immunity than would the FSIA, the treaty exception would override any of the FSIA's exceptions to immunity under

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which the claims otherwise could go forward.

1.

In this case, the Hungarian defendants' claim of immunity under the treaty exception rests on the 1947 Peace Treaty between Hungary and the Allied Powers (including the United States). Treaty of Peace with Hungary (1947 Treaty), Feb. 10, 1947, 61 Stat. 2065, 41 U.N.T.S. 135. The 1947 Treaty is an " international agreement[] to which the United States [was] a party at the time of the enactment of" the FSIA (in 1976). 28 U.S.C. § 1604. The treaty settled myriad issues arising out of wartime hostilities, covering topics as varied as the location of Hungary's post-war frontiers and the regulation of Hungarian railway rates. See 1947 Treaty arts. 1, 34.

The 1947 Treaty also contained provisions addressing the payment of compensation for (or the restoration of) property rights and interests seized by the Hungarian government during the war. Article 26 pertained to property rights and interests formerly held by non-Hungarian nationals. Article 27 addressed " persons under Hungarian jurisdiction" --Hungarian nationals. Id. art. 27(1).

Article 27 is of particular salience here. In that article, Hungary agreed:

[T]hat in all cases where the property, legal rights or interests in Hungary of persons under Hungarian jurisdiction have, since September 1, 1939, been the subject of . . . confiscation . . . on account of the racial origin or religion of such persons, the said property, legal rights and interests shall be restored . . ...

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