IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

) DAVID L. de CSEPEL, et al., ) ) ) Plaintiffs, ) vs. ) ) No. 1:10-cv-01261(ESH) REPUBLIC OF HUNGARY, ) et al., ) ) ) Defendants. )

MEMORANDUM OPINION

Plaintiffs David L. de Csepel, Angela Maria Herzog, and Julia Alice Herzog bring this

action to recover artwork they allege is being wrongfully held by the Republic of Hungary,

Hungarian National Gallery, Museum of Fine Arts, Museum of Applied Arts, Budapest

University of Technology and Economics, and the Hungarian National Asset Management Inc.,

otherwise known as “MNV” (collectively, “defendants”). Before the Court is defendants’ motion

to dismiss. (See Mot. to Dismiss, ECF No. 148.)

For the reasons stated herein, the Court will grant defendants’ motion in part and deny it

in part.

1 BACKGROUND

I. FACTUAL BACKGROUND1

“Baron Mór Lipót Herzog was a Jewish Hungarian art collector who amassed a

collection of over 2,000 paintings, sculptures, and other pieces of artwork” prior to his death in

1934. de Csepel v. Republic of Hungary,

(D.D.C. 2016). Upon his

wife’s death several years later, the collection was divided amongst their three children,

Erzsébet (Elizabeth), István and András. 2 (See Am. Compl. ¶ 38, ECF No. 141.)

“During the Holocaust, Hungarian Jews, including the Herzogs, were required to

register their art treasuries.” de Csepel,

. A 1944 decree required

Hungarian Jews to register all valuables in excess of a certain threshold amount. (See Am.

Compl. ¶ 54.) A subsequent decree “established a so-called Commission for the Recording and

Safeguarding of Impounded Art Objects of Jews (the ‘Commission for Art Objects’), and

required Hungarian Jews promptly to register all art objects in their possession.” (Id. ¶ 55.)

This Commission was led by Dénes Csánky, then-Director of the Museum of Fine Arts. (See

id.)

In an attempt to avoid its confiscation, the Herzog family in 1943 hid much of their

collection in the cellar of a family factory in Budafok. (See id. ¶ 57.) However, “[d]espite their

1 The facts relating to this case have been set out in greater detail by this Court in its two prior opinions, see de Csepel v. Republic of Hungary,

(D.D.C. 2011), and

(D.D.C. 2016), as well as by the Court of Appeals in its two opinions, see

(D.C. Cir. 2013), and

(D.C. Cir. 2017). As a result, the Court’s recitation of the facts at this juncture will be brief; additional facts will be recounted as necessary to explain the Court’s decision. 2 Plaintiff David de Csepel has been assigned all rights to the works in this action attributable to his grandmother, Elizabeth, and her brother, István. (See Am. Compl. ¶¶ 39, 41.) Plaintiffs Angela and Julia Herzog, who now reside in Italy, have full rights to all the works in the action attributable to their father András. (See id. ¶ 40.) 2 efforts to prevent the looting of the art, the Hungarian government and their Nazi[]

collaborators discovered the hiding place.” (Id. ¶ 58.) A 1944 article quoted Csánky as saying

that “‘[t]he Mór Herzog collection contains treasures the artistic value of which exceeds that of

any similar collection in the country. . . . If the state now takes over these treasures, the

Museum of Fine Arts will become a collection ranking just behind Madrid.’” (Id.)

The Herzog family scattered, trying to avoid extermination by the Nazis and the Nazi-

controlled Hungarian government. In May 1944, Elizabeth and her children fled Hungary,

eventually settling in the United States in 1946. (See id. ¶ 62.) Elizabeth became a United

States citizen on June 23, 1952. (See id.) András was sent into forced labor in 1942 and died in

1943, but his wife and children escaped to Italy. (See id. ¶¶ 40, 63.) “Hungary attempted to

send István Herzog to the infamous Auschwitz death camp[, but h]e escaped after his former

sister-in-law’s husband . . . arranged for him to be put in a safe house under the protection of

the Spanish Embassy.” (Id. ¶ 41.) He remained in Hungary until his death in 1966. (See id.)

In May 1945, German rule in Hungary ended, and a 1947 Peace Treaty between

Hungary and the Allies confirmed “that Hungary was to act solely as a custodian or trustee of

looted or heirless property [and] under no circumstances could Hungary itself possess any right,

title or interest in that property.” (Id. ¶ 68.) Nevertheless, while some pieces of the Herzog

collection were returned to the siblings or their representatives, many others were not.

Moreover, the government sought “substantial fees to cover the cost of recovering the artwork

from the countries to which it had been dispersed during the war,” as well as large payments for

export licenses to remove paintings from Hungary. (See id. ¶ 70.) For example, in lieu of a

duty of 40,000 forints to repay the cost of repatriating several of András’s pieces from outside

the country, the Hungary’s Minister of Finance accepted an artwork entitled “Still Life with

3 Turkey” by Chardin. (See Declaration of Irene Scholl-Tatevosyan (“Scholl-Tatevosyan Decl.”)

Ex. 5, ECF No. 148-2.) The letter that memorialized that transaction also noted the Herzog

siblings’ options should they want to export any of their returned artworks. First, the state had

the option to purchase any piece for which its owners requested export permits. (See id.)

Second, if the state chose not to exercise its option, “40% of the estimated value [of the piece

was] payable for the export permit” if Hungary’s National Bank allowed the issuance of a

permit at all. (See id. (noting some permit requests had been denied).)

Some pieces were returned to the siblings or to their representatives in Hungary but

were taken back into governmental custody soon thereafter either as “deposits” with the

museums or due to government actions, such as the smuggling prosecution of István’s wife, or

payments of tax bills purportedly owed by István or his siblings. (See Am. Compl. ¶ 71.) In

1948, the Hungarian police investigated Ilona Kiss, István’s former wife, on the charge of

smuggling several artworks out of the country for sale. (See Declaration of Jessica Walker

(“Walker Decl.”) Ex. G-2, ECF No. 148-15.) According to police reports, Kiss, along with her

brother and a third individual, smuggled to Switzerland at least three paintings that had

previously belonged to István. (See id.) Kiss was indicted in 1949 (see Declaration of Irene

Tatevosyan (“Tatevosyan Decl.”) Ex. 19, ECF No. 106-3), and in October 1950 fourteen

artworks were forfeited and taken into permanent custody by the Museum of Fine Arts as a

result of the judgment in that case. (See Walker Decl. Ex. G-6.) These works included not only

those attributable to István or Kiss, but also several that belonged to András and Elizabeth.

In 1949, Hungary became the Hungarian People’s Republic, and little was known about

the Herzog collection until the collapse of Communism in 1989. (See Am. Compl. ¶ 74.)

However, “[w]ith the opening of Hungary to the West in 1989, the Herzog Heirs started making

4 inquiries and learned that many pieces of the Herzog Collection were being openly exhibited,

hanging on the walls of the Hungarian National Gallery and the Museum of Fine Arts.” (Id.

¶ 76.) Elizabeth negotiated with the Hungarian government and received seven pieces (all from

lesser-known artists) before her death in 1992. (See id. ¶ 77.)

Her daughter, Martha Nierenberg, continued to negotiate on Elizabeth’s behalf but

ultimately decided to pursue legal remedies against Hungary, filing suit in a Hungarian court in

1999, in what has been referred to as the “Nierenberg Litigation.” (See id. ¶ 78.) Her

complaint identified a number of pieces she alleged belonged to the Herzog siblings, including

artworks that belonged to István, András, and her mother, Elizabeth. However, she petitioned

the court only for return of ten artworks (later amended to twelve) attributed to Elizabeth. (See

Scholl-Tatevosyan Decl. Ex. 20, ECF 148-3; see also Pls.’ Opp. at 13, ECF No. 153.) “To

protect the interests of all three Herzog siblings, the heirs of András and István Herzog retained

counsel and were brought into the lawsuit at the instruction of the Hungarian court” (see Mot.

to Dismiss at 6); however, heirs of the other two siblings ultimately declined to participate.

During the course of the litigation, Nierenberg received one of the paintings claimed in her

petition, Mihály Munkácsy’s “Half-Length Portrait of Christ” (also known as “Bust of Christ”),

which was accepted by her attorney in Hungary in April 2000, as it could not be taken out of

the country. (See Scholl-Tatevosyan Decl. Exs. 22-24, ECF No. 148-4.) “The Budapest

Municipal Court initially recognized and acknowledged the Herzog Heirs’ ownership rights in

the paintings at issue . . . .” (Am. Compl. ¶ 78.) However, in January 2008, “an appellate court

reversed the lower court’s decision ordering restitution and rejected the demand” for return of

the artworks. (Id.)

5 II. PROCEDURAL HISTORY

Plaintiffs filed this action in 2010 asserting claims based on bailment, conversion,

constructive trust, accounting, unjust enrichment, replevin, and declaratory relief. (See Compl.,

ECF No. 1; see also Am. Compl.) They asked for either a return of the artworks or for

monetary damages. (See Compl. at 35-36.)

A. First Motion to Dismiss

Defendants filed their initial motion to dismiss on February 15, 2011. (See First Mot. to

Dismiss, ECF No. 15.) Defendants claimed plaintiffs’ case must be dismissed for several

reasons: (1) various treaties and international agreements barred the suit; (2) the Court lacked

jurisdiction under the Foreign Sovereign Immunities Act (“FSIA”),

et seq.;

(3) forum non conveniens; (4) statute of limitations; (5) act of state; and (3) comity, res

judicata, and collateral estoppel arising from the Nierenberg Litigation. (See First Mot. to

Dismiss at ii.)

By memorandum opinion issued on September 1, 2011, this Court granted in part and

denied in part defendant’s motion. See de Csepel v. Republic of Hungary,

(D.D.C. 2011). The Court concluded that it had jurisdiction under the FSIA’s expropriation

exception, see

at 132–33, and that the rest of defendants’ defenses were either premature or

without merit, with the exception of international comity. Because “the record is devoid of

evidence of either prejudice in the court, or in the system of laws under which it was sitting, or

fraud in procuring the judgment, or any other special reason why the comity of this nation

should not allow it full effect,” the Court granted defendants’ motion to dismiss with respect to

the eleven pieces of artwork at issue in the Nierenberg Litigation.

(internal quotation

marks omitted).

6 Because the Court denied sovereign immunity, that portion of its order was immediately

appealable. See de Csepel v. Republic of Hungary,

, at *1 n.2 (D.D.C. Nov.

30, 2011). The Court also granted certification on the remaining issues addressed in the

Memorandum Opinion, concluding that the statutory criteria for interlocutory appeal under

(b) were met.

. On April 19, 2013, the Court of Appeals affirmed this

Court’s opinion in part and reversed it in part. See de Csepel v. Republic of Hungary,

(D.C. Cir. 2013). The Court of Appeals concluded that plaintiffs’ complaint alleged

sufficient facts to bring it within the FSIA’s commercial activity exception, see

, and

that the FSIA’s treaty exception was not implicated. See

. The Court of Appeals, like

this Court, rejected defendants’ remaining defenses as either premature (statute of limitations)

or lacking in merit (political question, act of state, and forum non conveniens). The Court of

Appeals, however, reversed this Court’s decision to accord comity to the Nierenberg decision,

concluding that “[t]he complaint’s allegations of due process violations present just the kind of

fact-intensive issues inappropriate for resolution on a Rule 12(b)(6) motion.”

.

B. Renewed Motion to Dismiss

On remand, defendants filed an answer to plaintiffs’ complaint (see Answer, ECF No.

76), and the parties conducted discovery. On May 14, 2014, defendants filed their second

motion to dismiss. (See Second Mot. to Dismiss, ECF No. 86.) This motion focused solely on

defendants’ contention that the Court lacked jurisdiction under the FSIA but was denied

without prejudice while discovery continued. See

(D.D.C. 2014). On

May 18, 2015, defendants filed a renewed motion to dismiss again arguing that the Court

lacked subject matter jurisdiction under either the FSIA’s expropriation exception or its

commercial activity exception. (See Renewed Mot. to Dismiss, ECF No. 106.)

7 On March 14, 2016, the Court granted defendants’ motion in part and denied it in part.

See de Csepel v. Republic of Hungary,

(D.D.C. 2016). The Court

concluded that while the FSIA’s commercial activity exception did not apply, the expropriation

exception did. See

at 163–64. However, the Court dismissed plaintiffs’ claims as to two of

the artworks listed in the complaint, as “[t]here is no evidence in the record that the two

paintings were among the Collection items confiscated during World War II.” 3

. The

Court also rejected defendants’ remaining claims regarding subject matter jurisdiction, the

FSIA’s treaty exception, and exhaustion.

On June 20, 2017, the Court of Appeals again affirmed in part and reversed in part. See

de Csepel v. Republic of Hungary,

(D.C. Cir. 2017). It approved this Court’s

conclusion that the FSIA’s expropriation exception applied, as “‘rights in property taken in

violation of international law’ are ‘in issue’ as to those twenty-five or so artworks taken by

Hungary during the Holocaust and never returned.”

. However, it directed this

Court on remand to “consider, in the first instance, the Herzog family’s claims to those pieces

returned by Hungary,” which it estimated to be approximately fifteen.

. And,

following the standard announced in Simon v. Republic of Hungary,

(D.C. Cir.

2016), the Court of Appeals concluded that the Court lacked jurisdiction over Hungary, as the

first clause of the commercial-activity nexus requirement of the expropriation exception to the

FSIA had not been met in this case. See de Csepel,

(“Applying Simon to the

facts of this case, we have jurisdiction through only the second clause of the commercial-

activity nexus requirement, meaning that the Republic of Hungary retains its FSIA immunity.”).

3 The dismissed pieces were (1) Lucas Cranach the Elder, The Annunciation to Saint Joachim, 16(vi) in the complaint; and (2) John Opie, Portrait of a Lady, half-length, in a White Bonnet, 16(xiii). 8 Lastly, the Court of Appeals directed this Court on remand (1) to consider whether any

artworks, other than the two already dismissed by this Court, were taken by Hungary after

Elizabeth became a citizen in 1952, see

; and (2) to allow plaintiffs to amend their

complaint to account for the Holocaust Expropriated Art Recovery Act of 2016 (the “HEAR

Act”). See

. It declined to address defendants’ exhaustion claim as defendants

“made no argument that the collateral order doctrine applies to denial of a motion to dismiss on

freestanding exhaustion grounds.” See

.

C. The Instant Motion to Dismiss

This case is now on remand from the Court of Appeals for the second time. Plaintiffs

filed an amended complaint on December 18, 2017 (see Am. Compl., ECF No. 141), which not

only added reference to the HEAR Act, but also added a new defendant, the Hungarian

National Asset Management Inc. (“MNV”). (See id. ¶ 14.) Moreover, the amended complaint

alleges that the “Court has jurisdiction over Hungary pursuant to

(a)(3) because

MNV is so extensively controlled by Hungary that a relationship of principal and agent exists

between Hungary and MNV.” (Id. ¶ 36.)

On February 9, 2018, defendants filed the instant motion to dismiss. Defendants’

motion makes the following arguments: (1) MNV is not properly added, it is immune, and its

actions cannot be attributed to Hungary for purposes of abrogating the latter’s sovereign

immunity; (2) Hungary is a necessary party and thus the case must be dismissed pursuant to

Federal Rule of Civil Procedure Rule 19; (3) the Court lacks jurisdiction under the FSIA over

certain pieces of art that were returned to the Herzog siblings after the war, or were settled

under an agreement concluded between the United States and Hungary in 1973; and (4) as to

the pieces over which the Court has jurisdiction, various other defenses require dismissal under

9 Rule 12(b)(6).

After the motion was fully briefed, plaintiffs requested the case be stayed pending

resolution of their petition for a writ of certiorari, which defendants did not oppose. (See Mot.

to Stay, ECF No. 158.) Plaintiffs’ question to the Supreme Court was whether the Court of

Appeals correctly interpreted the FSIA’s expropriation exception when it concluded that

foreign states and agencies or instrumentalities had to meet different commercial-nexus

requirements. See Petition for Cert. at i, Docket No. 17-1165 (Feb. 16, 2018). The case was

stayed until January 2019, when plaintiffs’ petition was denied by the Supreme Court. (See

Joint Status Report at 1, ECF No. 163.) During the stay the Court of Appeals issued two

opinions related to issues in this case: Simon v. Republic of Hungary,

(D.C. Cir.

2018), and Philipp v. Federal Republic of Germany,

(D.C. Cir. 2018). The parties

submitted supplemental briefing regarding these cases. (See Joint Status Report at 2.)

Argument was held on defendants’ motion on January 13, 2020, and the parties filed additional

supplemental briefing on January 24, 2020. (See ECF Nos. 175, 176.)

ANALYSIS

I. AMENDMENT

In its most recent opinion, the Court of Appeals ordered Hungary dismissed from this

litigation after concluding that Hungary’s sovereign immunity was not abrogated under the

expropriation exception. On remand, plaintiffs filed an amended complaint that, inter alia, adds

MNV as a defendant. Plaintiffs argue that MNV is properly added as an agency or

instrumentality of Hungary under the second clause of FSIA’s expropriation exception. See note

4, infra. Furthermore, they contend that MNV “is so extensively controlled by Hungary that a

relationship of principal and agent exists between Hungary and MNV,” such that MNV’s actions

10 can be imputed to Hungary to abrogate Hungary’s sovereign immunity. (See Am. Compl. ¶ 36.)

As a result, plaintiffs argue not only that MNV belongs in the case, but also that Hungary should

remain as a defendant.

Defendants, on the other hand, argue that MNV is not properly added for two reasons: (1)

plaintiffs’ amended complaint goes beyond the Court of Appeals’ mandate, which only allowed

for amendment to add allegations relating to the HEAR Act (see Mot. to Dismiss at 10–14); and

(2) MNV is properly analyzed as part of the Hungarian state itself, rather than as its agency or

instrumentality, so it is immune from suit for the same reason that Hungary was found to be

immune. (See id. at 15 (“Because MNV’s ‘core functions’ are governmental, not commercial,

MNV is part of the ‘foreign state’ and . . . is, therefore, entitled to the same immunity as

Hungary.”).) Moreover, defendants contend that even if MNV is properly added as a defendant,

its actions cannot be imputed to Hungary, so Hungary remains immune. (See id. at 21–22.)

The Court concludes that MNV has been properly added as a defendant, since its addition

does not go beyond the Court of Appeals’ mandate and is proper under the FSIA, but that

MNV’s actions cannot be imputed to Hungary so as to abrogate its immunity. Thus, Hungary is

dismissed in accordance with the Court of Appeals’ opinion. See de Csepel,

(“We also instruct the district court to dismiss the Republic of Hungary as a defendant . . . .”).

A. The Addition of MNV as a Defendant

Defendants argue that “Plaintiffs’ amendments go beyond the scope of the appellate

court’s mandate as Plaintiffs did not seek, nor receive, leave to include a new defendant—a

defendant that Plaintiffs admit they learned of years ago.” (Mot. to Dismiss at 12.) “The

decision of a federal appellate court establishes the law binding further action in the litigation by

another body subject to its authority.” USPS v. Postal Regulatory Comm’n,

, 910

11 (D.C. Cir. 2014) (quoting City of Cleveland v. Fed. Power Comm’n,

(D.C.

Cir. 1977)). A district court must “scrupulously avoid implementing the mandate in a manner

that exceeds, or limits, the scope of the appellate decision.” Texas Oil & Gas Corp. v. Hodel,

(D.D.C. 1987). However, “the only issues the reconsideration of which

activate the doctrine [of law of the case] are those decided either explicitly or by necessary

implication by the higher court.” Simpson v. Socialist People’s Libyan Arab Jamahiriya,

(D.D.C. 2005) (internal quotation marks omitted).

The Court concludes that plaintiffs’ ability to add a new party is not foreclosed by the

Court of Appeals’ decision. In Simpson, Judge Urbina rejected the argument that the principle of

inclusio unius est exclusio alterius should apply to allow amendment on one issue but not

another when the other issue was not considered by the appeals court. See

At oral argument

before the Court of Appeals in this case there was an exchange between Circuit Judge Tatel and

plaintiffs’ attorney in which she repeatedly suggested that plaintiffs would like to amend the

complaint. While Judge Tatel suggested the amendment would be to amend plaintiffs’ complaint

to add the newly enacted HEAR Act (see Mot. to Dismiss at 13 n.3), his questions focused on

whether plaintiffs needed anything from the Court beyond leave to amend, rather than suggesting

that leave to amend had to be restricted to only one topic. Furthermore, until Hungary was

dismissed when the Court of Appeals issued its opinion, there was no need for plaintiffs to

consider adding a new party, even one they may have known about since the beginning of the

litigation. As the Court of Appeals noted, the Federal Rules of Civil Procedure direct courts to

“freely give leave [to amend] when justice so requires.” See de Csepel,

(quoting Fed. R. Civ. P. 15(a)(2)). The Court thus concludes that the Court of Appeals’ mandate

does not prevent MNV’s addition.

12 B. Whether MNV’s Core Functions are Commercial or Governmental

Defendants next argue that, even if plaintiffs are permitted to amend their complaint to

add MNV as a defendant, MNV is properly considered a part of Hungary and thus, like Hungary,

retains its immunity. (See Mot. to Dismiss at 15.) Under the FSIA’s expropriation exception,

“[a] foreign state loses its immunity if the claim against it satisfies the exception by way of the

first clause of the commercial-activity nexus requirement[, . . . while] an agency or

instrumentality loses its immunity if the claim against it satisfies the exception by way of the

second clause.” de Csepel,

.4 Defendants do not contest plaintiffs’ allegations

that MNV, as asset manager for the State of Hungary, “operates” the property at issue in

Hungary, and that it also “engage[s] in a commercial activity in the United States.” See

(a)(3); (see also Am. Compl. ¶ 35). As a result, the only question relevant to

determining MNV’s immunity under the FSIA is whether MNV is an “agency or

4 The expropriation exception,

(a)(3), provides that a foreign state shall be stripped of its immunity:

[I]n any case . . . in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state . . . .

An agency or instrumentality of a foreign state, on the other hand, is stripped of its immunity:

[I]n any case . . . in which rights in property taken in violation of international law are in issue and . . . that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.

For a more thorough explanation of the expropriation exception, see de Csepel,

(explaining the two requirements of the expropriation exception, the “rights in property” requirement and the two clauses of the commercial-nexus requirement).

13 instrumentality” of Hungary or its political subdivision.

“Because Section 1603(a) defines ‘foreign state’ as including ‘agencies and

instrumentalities,’ the distinction between the two is only relevant in [the] FSIA where explicitly

drawn.” Jacobsen v. Oliver,

(D.D.C. 2006); see also

(a) (defining a “foreign state” to “include[] a political subdivision of a foreign state or an

agency or instrumentality of a foreign state as defined in subsection (b)”) . An “agency or

instrumentality” is any entity:

(1) [W]hich is a separate legal person, corporate or otherwise, and

(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (e) of this title, nor created under the laws of any third country.

§ 1603(b).

When a court is “concerned with the meaning of the statutory terms ‘foreign state’ and

‘agency or instrumentality,’” TMR Energy Ltd. v. State Property Fund of Ukraine,

(D.C. Cir. 2005), the Court of Appeals has instructed courts to use the “core functions” test.

See Transaero, Inc. v. La Fuerza Aerea Boliviana,

(D.C. Cir. 1994). Transaero held

that a court must look to “whether the core functions of the foreign entity are predominantly

governmental or commercial” when determining whether it is a “separate legal person” from the

foreign state.

. Because “any nation may well find it convenient (as does ours) to

give powers of contract and litigation to entities that on any reasonable view must count as part

of the state itself,” this categorical approach “winnow[s] the applications” of the definition of

agency or instrumentality to just those Congress intended, i.e., primarily public commercial

enterprises. See

. While Transaero’s test was originally formulated to analyze

14 § 1608’s requirements for service of process, the Court of Appeals has extended it to

§ 1605(a)(3). See Crist v. Republic of Turkey,

,

(D.C. Cir.

1997) (“Notably, section 1603 does provide a different definition of ‘foreign state’ for use in

section 1608 as opposed to the rest of the FSIA, and that section 1603 does not similarly

establish different definitions of ‘agency or instrumentality’ is even more compelling evidence

that ‘agency or instrumentality’ should be read the same in sections 1608 and 1605.”); see also

Roeder v. Islamic Republic of Iran,

(D.C. Cir. 2003) (applying the Transaero

test to § 1605).

Applying this test, most courts have concluded that “intelligence and security activities,”

for example, will almost always be governmental rather than commercial. See Jacobsen,

(citing Regier v. Islamic Republic of Iran,

(D.D.C.

2003), abrogated on other grounds by Cicippio-Puleo v. Islamic Republic of Iran,

(D.C. Cir. 2004)); see also S.K. Innovation, Inc. v. Finpol,

(D.D.C. 2012) (collecting cases). On the other end of the spectrum, as described in Transaero,

are entities such as “a state trading corporation, a mining enterprise . . . or a steel company.”

(quoting H.R. Rep. No. 94-1487, at 15-16 (1976)). In the middle are cases involving

cultural and financial institutions.

For example, in Taylor v. Kingdom of Sweden,

(D.D.C. Aug. 2, 2019),

Judge Leon concluded that, under Transaero’s test, Sweden’s National Museums of World

Culture (“NMWC”), a government agency, “is ‘so closely bound up with the structure of the’

Swedish sovereign that it is properly ‘considered as the “foreign state” itself’ under §

1605(a)(3).” Id. at *3 (quoting Transaero,

). According to Taylor, the NMWC’s

functions “include the promotion of Sweden’s view of world culture to its own citizens and the

15 international community as well as the country’s ability to share that world view with people and

institutions domestically and around the world.”

And, in Garb v. Republic of Poland,

(2d Cir. 2006), the Second Circuit concluded that Poland’s Ministry of Treasury was

not an “agency or instrumentality” for purposes of the FSIA’s takings exception, but an “integral

part of Poland’s political structure.”

(internal quotation marks omitted).

Focusing on MNV’s structure, the Court finds these cases inapposite. The non-

governmental nature of MNV is apparent in light of Hungary’s choice several decades ago to

transform its asset manager from a governmental agency into a joint-stock company to take

advantage of the benefits of corporate law. (See Declaration of Dr. Bernadette Somody ¶ 17

(quoting the Explanatory Memorandum to the 1992 Act creating MNV’s predecessor

organization, which said that “[f]or the management of the permanently state-owned

entrepreneurial assets it is reasonable to establish a joint stock company instead of a

governmental agency” (emphasis added)), ECF No. 153-1 (“Somody Decl.”).) Hungary used to

manage its assets using a state agency controlled by Parliament. (See id.) However, in 1992, it

decided to transfer such functions to a joint-stock company, as such a structure would allow the

company to more easily obtain loans, issue bonds, and act on the private market. (See id.) And

Hungary’s Constitutional Court has held that, because of this new structure, MNV cannot

exempt itself from certain aspects of corporate law, as “the State’s roles as the holder of public

power and as an owner have to be consequently differentiated in the private sector.” (See id.

¶ 18 (internal quotation marks omitted).)

Unlike the NMWC in Taylor, which was “created by Act of Swedish Parliament as a

state agency within the Swedish Ministry of Culture, which is itself a department of the

Government of the Kingdom of Sweden,” Taylor,

, at *3 (internal quotation

16 marks omitted), MNV is a joint-stock company. In other words, it is outside of the hierarchy of

the Hungarian government and is instead considered a company, even though it is owned by the

government. (See Somody Decl. ¶ 16 (noting that MNV is registered on Hungary’s “Company

Register,” and that “company” is defined under Hungarian law as “a legal entity . . . engaging in

business operations”).) Similarly, in Garb, the Second Circuit observed that “all governmental

units beneath the central government—and the Ministry of the Treasury is indisputably one such

unit—constitute ‘political subdivisions,’ a category that is not congruent with ‘agencies and

instrumentalities.’”

. Indeed, the Second Circuit then went on to compare

foreign sovereign immunity to Eleventh Amendment immunity, saying “it is black letter

Eleventh Amendment law that the political agencies and departments of states are entitled to the

same sovereign immunity as the state.”

at 597 n.23 (citing Compagnie Noga D’Importation

et D’Exportation S.A. v. Russian Fed’n,

(2d Cir. 2004)). Like Taylor, the

result in Garb was driven by the entity’s placement in the structure of Poland’s government. But

MNV is different. MNV is not a “governmental unit[] beneath the central government” like the

Polish Ministry of the Treasury, id. at 596, Iran’s Ministry of Foreign Affairs, see Roeder,

, or the United States Department of State. See Transaero,

. Rather,

MNV is a joint-stock company.

To compensate for MNV’s placement outside the governmental hierarchy, defendants ask

the Court to blur the distinction between purpose and function. For example, they compare

MNV’s functions to that of Poland’s Ministry of Treasury, which also engages in asset

management on behalf of a sovereign state and represents the state against financial claims. See

Garb,

. However, while holding and administering assets for another “is an act

that sovereigns may accomplish, . . . it is not an act that only a sovereign power can do.” Smith

17 v. Overseas Korean Cultural Heritage Found.,

, 297 (D.D.C. 2018)

(emphasis added). And, “[a]lthough [MNV’s] interests and objectives may align with, or be

directed by, a foreign state, [the Court] must look to the ‘nature’ of the act, rather than its

‘purpose.’”

(quoting Republic of Argentina v. Weltover, Inc.,

(1992)). For

example, in Smith, Judge McFadden concluded that “building and operating a museum . . . is the

type of action by which a private party can engage in commerce,” so the defendant was an

agency or instrumentality rather than a foreign state. Id.; cf. Malewicz v. City of Amsterdam,

(D.D.C. 2005) (concluding that defendant engaged in commercial activities

when lending art pieces because private parties may also loan artwork internationally, and “it is

the type of activity—not its purpose—that must guide the analysis” (emphasis in original)).

In their recently-filed supplemental pleading, defendants cited a case from South

Carolina, in which a district court concluded that the core functions of the Ministry of Education,

Culture, and Science of the Netherlands, as well as the Cultural Heritage Agency of the

Netherlands, were governmental rather than commercial and thus they were both immune under

the FSIA. See Berg v. Kingdom of the Netherlands, Slip. Op. at 15, Docket No. 18-cv-3123

(BHH) (D.S.C. Mar. 6, 2020); (see also ECF No. 177-1). The district court in that case

concluded that “[w]hile the Ministry may engage in some commercial transactions, there is no

evidence that the commercial transactions occur for the purpose of individual profit, but rather

for a civic and political purpose.”

This analysis blends purpose and function. Cf. Weltover,

(“[T]he question is not whether the foreign government is acting with a profit

motive or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is

whether the particular actions that the foreign state performs (whatever the motive behind them)

are the type of actions by which a private party engages in trade and traffic or commerce.”

18 (internal quotation marks omitted)).

Furthermore, MNV’s situation is factually distinguishable from that of the entities in

Berg. For example, the Berg court observed that “the Minister reports to the Prime Minister, not

to a board of directors,” and “there is no evidence that the commercial transactions [it engages

in] occur for the purpose of individual profit.” See Berg, Slip Op. at 15. MNV, on the other

hand, has both a Board of Directors and a Board of Supervisors which oversee the organization’s

operations; while these Boards are accountable to the Hungarian government, which owns

MNV’s single share, they nonetheless are required to run the organization with certain levels of

knowledge and expertise. (See, e.g., Declaration of Zoltan Novak Ex. C, Act CVI of 2007 on

State Assets at Section 20(3) (“Only Hungarian citizens with a degree from an institute of higher

education who have exceptional theoretical or practical professional knowledge related to

budgetary, financial and asset-management matters may be appointed chairman or members of

the Board of Directors.”), ECF No. 148-29 (“Novak Decl.”).) And while MNV is required to

manage the state’s assets in an efficient and value-conserving manner, it also must “ensur[e]

the . . . value-enhancing use of state assets.” (See

at Section 2(1) (emphasis added); see also

at Section 22(7) (“MNV Zrt. shall . . . allocate the revenues from the utilisation and sale of the

state assets to preserving and increasing the value of the . . . assets entrusted to it . . . .”

(emphasis added)).)

The Hungarian Act CVI of 2007 on State Assets provides that “tasks conferred upon

MNV . . . shall be recognized as government functions.” (See

at Section 17(2).) However,

while managing the sovereign’s property is undoubtedly “essential to the daily functioning and

long-term survival of that government,” Garb,

n.19, such an argument focuses

on the purpose of the act, rather than its nature. See Smith, 279 F. Supp. 3d at 297. At their core,

19 MNV’s functions are those that a private entity could engage in as well. Moreover, MNV’s

placement outside of the Hungarian government, as a joint-stock company, further emphasizes

its commercial, rather than governmental, nature. The Court thus concludes MNV is an “agency

or instrumentality” of Hungary, not a political subdivision, and it loses its sovereign immunity

pursuant to the second clause of the FSIA’s expropriation exception. See de Csepel,

(“[A]n agency or instrumentality loses its immunity if the claim against it satisfies the

exception by way of the second clause [of the commercial-activity nexus requirement].”).

C. The Addition of Hungary as a Defendant

Finally, defendants argue that, even if the Court can exercise jurisdiction over MNV,

MNV’s actions cannot be attributed to Hungary to abrogate Hungary’s immunity. (See Defs.’

Reply at 9 (“[E]ven if MNV was relegated to agency or instrumentality status, the theory fails

because Hungary is not using MNV to shield itself from liability.” (internal quotation marks

omitted)), ECF No. 154.) The Court agrees.

“[A]bsent an agency relationship, the court lacks subject matter jurisdiction over the

foreign state for the acts of its instrumentality.” Foremost-McKesson, Inc. v. Islamic Republic of

Iran,

(D.C. Cir. 1990). However, “the activities of an agent may be attributed

to the principal for jurisdictional purposes.” Gilson v. Republic of Ireland,

, 1026

n.16 (D.C. Cir. 1982) (internal quotation marks omitted), abrogated on other grounds by In re

Papandreou,

, 254 n.4 (D.C. Cir. 1998); see also TMR Energy Ltd. v. State

Property Fund of Ukraine,

(D.C. Cir. 2005) (“[T]he presumption of

independent status detailed in Bancec also applies to the question of subject matter jurisdiction

under the FSIA; that is, a foreign state is amenable to suit based upon an exception in the FSIA

and the acts of its instrumentality only if the sovereign exerts sufficient control over the

instrumentality . . . to create a relationship of principal to agent.” (internal quotation marks and

20 brackets omitted)).

The Supreme Court allowed what amounts to a “piercing of the corporate veil” between

an instrumentality and a foreign sovereign in First Nat’l City Bank v. Banco Para El Comercio

Exterior de Cuba,

(1983) (“Bancec”). Although “government instrumentalities

established as juridical entities distinct and independent from their sovereign should normally be

treated as such,” id. at 626-27, this principle is not blindly adhered to when to do so would cause

injustice. Id. at 632. According to “internationally recognized equitable principles,” foreign

sovereigns cannot “avoid the requirements of international law simply by creating juridical

entities whenever the need arises.” Id. at 633. To determine when separateness should not be

respected, courts apply the so-called “Bancec factors”:

(1) the level of economic control by the government; (2) whether the entity’s profits go to the government; (3) the degree to which government officials manage the entity or otherwise have a hand in its daily affairs; (4) whether the government is the real beneficiary of the entity’s conduct; and (5) whether adherence to separate identities would entitle the foreign state to benefits in United States courts while avoiding its obligations.

Rubin v. Islamic Republic of Iran,

(2018) (internal quotation marks omitted).

Later courts have interpreted Bancec to allow them to disregard separate juridical status when

“the foreign entity is exclusively controlled by the foreign state or where recognizing the

separateness of that entity and the foreign state would work fraud or injustice.” Estate of Heiser

v. Islamic Republic of Iran,

(D.D.C. 2012) (internal quotation marks

omitted) (emphasis added); see also Transamerica Leasing, Inc. v. La Republica de Venezuela,

(D.C. Cir. 2000).

The Court concludes that MNV is properly characterized as a “typical government

instrumentality” rather than one so exclusively controlled by Hungary that it should be deemed

the same as the state. See Bancec,

. While Hungary undoubtedly has the power

21 to exert substantial control over MNV—which has one share, owned by the government and

exercised by the Minister—majority stock ownership or control of the Board of Directors is not,

without more, sufficient to satisfy the control prong. See Transamerica Leasing, Inc.,

. Furthermore, in other important ways MNV fits comfortably in Bancec’s “typical

government instrumentality” definition: it is created by statute that prescribes powers and duties;

it is managed by a board selected by the government “in a manner consistent with the enabling

law”5; and it has its own budget, although the money comes from Hungary. Bancec,

; see also DRC, Inc. v. Republic of Honduras,

(D.D.C. 2014).

As to Bancec’s “fraud or injustice” factor, there is no evidence that Hungary is abusing

the presumption of separateness with its relationship with MNV, a concern that motivated the

piercing of the veil that the Supreme Court allowed in Bancec. There, for example, treating the

instrumentality (a bank) as separate from its sovereign principal (Cuba) “would permit the real

beneficiary of such an action, the Government of the Republic of Cuba, to obtain relief in our

courts that it could not obtain in its own right without waiving its sovereign immunity and

answering for the seizure of [the U.S. bank’s] assets.” Bancec,

. Here, plaintiffs

do not suggest that Hungary is using MNV to shield it from liability—Hungary has not

transferred ownership of state assets to MNV to thwart litigation, and MNV is not the entity that

performed the acts of expropriation about which plaintiffs are suing. See Empresa Cubana

5 As described in the section on whether MNV is commercial or governmental, supra, although Hungary’s Minister of Culture has the power to appoint and recall members of MNV’s Board of Directors, he is constrained in who he can pick:

Only Hungarian citizens with a degree from an institute of higher education who have exceptional theoretical or practical professional knowledge related to budgetary, financial and asset-management matters may be appointed chairman or members of the Board of Directors.

(Novak Decl. Ex. C, Act CVI of 2007 on State Assets at Section 20(3). 22 Exportadora de Alimentos y Productos Varios v. U.S. Dep’t of Treasury,

(D.D.C. 2009) (concluding that presumption of separateness should be disregarded when the

sovereign is “attempting to use the federal courts as a sword while invoking the Constitution as a

shield”).

Moreover, the amended complaint does not seek to hold Hungary liable for the purported

unlawful acts of MNV. Rather, it seeks to hold Hungary liable for the purported unlawful acts of

Hungary. If plaintiffs were suing about actions that MNV had taken that harmed them, it might

be proper for this Court to consider whether “adherence to [Hungary and MNV’s] separate

identifies would entitle [Hungary] to benefits in United States courts while avoiding its

obligations.” Rubin,

(internal quotation marks omitted). Here, however, while

MNV manages the artwork at issue for Hungary, it had nothing to do with (and indeed it did not

exist) when Hungary undertook the challenged actions. Had plaintiffs alleged MNV undertook

actions in the United States that might satisfy the first commercial nexus clause, as well as facts

sufficient under Bancec to impute MNV’s actions in the United States to Hungary, a different

result might be required. See Kuo v. Gov’t of Taiwan,

, at *3 & n.2 (S.D.N.Y.

Jan. 7, 2019).

Allowing plaintiffs to go forward under this theory would also circumvent the Court of

Appeals’ decision that foreign states and their instrumentalities need to satisfy different clauses

of the FSIA’s expropriation requirement before their sovereign immunity is waived. See de

Csepel,

. The Court of Appeals found that Hungary was immune because the

property it took is not located in the United States. See

If this Court were now to conclude

that because Hungary controls MNV, which engages in commercial activity in the United States,

Hungary is not immune, this would destroy the distinction recognized by the Court of Appeals

23 between the expropriation exception’s commercial nexus requirement for states, as opposed to

their instrumentalities. Given the allegations in plaintiffs’ complaint, the Court concludes that

actions undertaken by MNV cannot be used to bring Hungary back into this litigation.

II. RULE 19

Defendants argue that, in light of Hungary’s dismissal by the Court of Appeals, the entire

action should be dismissed. (See Mot. to Dismiss at 22 (“Even if this Court found it could take

jurisdiction over MNV, the action cannot go forward because Hungary, the sole owner of the

artworks, is immune from this Court’s jurisdiction.”).) As explained below, the Court concludes

that Hungary is not an indispensable party.

A. Rule and Legal Standard

“Rule 19 of the Federal Rules of Civil Procedure establishes a two-step procedure for

determining whether an action must be dismissed because of the absence of a party needed for a

just adjudication.” Cherokee Nation of Oklahoma v. Babbitt,

, 1495–96 (D.C. Cir.

1997). First, a court must determine whether the absent party is “necessary.” A party is

necessary if:

(A) in that person’s absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may:

(i) as a practical matter impair or impede the person’s ability to protect the interest; or

(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Fed. R. Civ. P. 19(a)(1). “If the Court determines that [the absent party] is not required under

Rule 19(a), it need not proceed to the second step of the test . . . .” Cronin v. Adam A. Weschler

& Son, Inc.,

(D.D.C. 2012). However, if the absent party is necessary

24 and cannot be joined without depriving the court of subject-matter jurisdiction, the action must

be dismissed unless “in equity and good conscience, the action should proceed among the

existing parties.” Fed. R. Civ. P. 19(b). Factors to consider in deciding whether the action

should proceed are:

(1) the extent to which a judgment rendered in the person’s absence might prejudice that person or the existing parties;

(2) the extent to which any prejudice could be lessened or avoided by:

(A) protective provisions in the judgment;

(B) shaping the relief; or

(C) other measures;

(3) whether a judgment rendered in the person’s absence would be adequate; and

(4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

Id. 19(b)(1)-(4).

“Courts are generally reluctant to grant Rule 12(b)(7) motions, and dismissal is warranted

only when the defect is serious and cannot be cured.” Cronin,

(internal

quotation marks omitted). Moreover, defendants, as the moving parties, “bear[] the burden to

demonstrate that [the] absent party is required under Rule 19.”

B. Necessary Party

Defendants argue that Hungary is necessary to both plaintiffs’ tort and contract claims.

(See Mot. to Dismiss at 24 (“Hungary is a party to the purported bailments—Plaintiffs allege

their predecessors entered into bailments with Hungary’s legal representatives.”); see also

(“Only Hungary is alleged to have taken the artworks ‘in violation of international law’ and

converted them.”).) While “Rule 19 does not require the joinder of joint tortfeasors,” Cronin,

, “in actions involving contractual rights, courts have frequently found that

25 the parties to a contract are required parties within the meaning of Rule 19.” Eco Tour

Adventures, Inc. v. Zinke,

(D.D.C. 2017) (citing Ward v. Deavers,

(D.C. Cir. 1953)).

At the outset, with one exception discussed below, even if one were to assume arguendo

that in the absence of Hungary, the remaining parties cannot turn over the artworks, as they claim

only to display and manage them on behalf of Hungary, a court is not required to be able to

provide all forms of relief in order to provide sufficiently complete relief to the parties for

purposes of Rule 19. See Ward, 203 F.2d at 75–76 (concluding that, without the absent party,

contract rescission could not be ordered, but the case could still go forward against the remaining

defendants for damages). And, plaintiffs have sufficiently alleged that the remaining defendants

may be liable, at the very least, for monetary relief.

As a matter of law, defendants are incorrect that “neither MNV nor the museum

defendants are joint tortfeasors” because only Hungary purports to own the artworks. (See Mot.

to Dismiss at 24.) Under District of Columbia law, “[a] defendant will be liable for conversion if

the plaintiff shows that the defendant participated in (1) an unlawful exercise, (2) of ownership,

dominion, or control, (3) over the personal property of another, (4) in denial or repudiation of

that person’s rights thereto.” Gov’t of Rwanda v. Rwanda Working Grp.,

(D.D.C. 2002) (emphasis added); see also Mac’Avoy v. The Smithsonian Inst.,

(D.D.C. 1991) (“The acquisition of the property is immaterial to a claim in replevin or

conversion. The essence of the actions is the wrongful withholding of the property in question.”

(emphasis added)). Therefore, the remaining defendants may be determined to be converters

even though they only purport to display or manage the property on behalf of Hungary. See Dan

B. Dobbs et al., The Law of Torts § 61 (“[T]he defendant who exercises significant control over

26 the property is a converter even though he himself gains nothing from the property or his control

over it.”); see also Dodd v. Pearson,

(D.D.C. 1968) (“It is well settled, . . .

that a person who receives and uses the property of another that has been wrongfully obtained,

knowing that it was so obtained, is likewise guilty of conversion and liable for damages.”), rev’d

in part on other grounds,

(D.C. Cir. 1969).

Second, plaintiffs allege that many of the bailments were actually entered into with

representatives of the museums, so that Hungary may not be the only party, or even a party at all,

to some of the bailments.6 Plaintiffs point to the 2004 Sigray decision of a Hungarian court, in

which the Hungarian National Museum, as the sole defendant, was ordered to return a painting to

the plaintiffs. (See Supp. Declaration of Dr. Mark Peto Ex. A, ECF No. 175-1 (“Sigray

Decision”).) According to the Sigray court, if there was a bailment between the plaintiff and the

museum, the Hungarian State is not required to take any action prior to the museum releasing it,

as “when the [artwork] is returned, there is . . . no alienation of property, only the return of

possession.” (Id.) Looking to the Sigray decision, the Court can see no reason why any similar

claims by plaintiffs cannot go forward without Hungary’s presence, at least to the extent

plaintiffs prove that bailments exist between their predecessors and any of the remaining

6 For example, in May 1950, a lawyer representing Elizabeth, Dr. Emil Oppler, “offer[ed]” several paintings belonging to the family “for deposit with the Museum of Fine Arts.” (See Walker Decl. Ex. B-3, ECF No. 148-10.) Defendants claim in supplemental briefing that Elizabeth was in fact required to hand over such artwork under the Legislative Decree No. 13 of 1949, and that the National Center for Museums and Monuments, to which the letter was addressed, was a political subdivision of Hungary. (See Defs.’ Supp. Reply Br. at 1-2, ECF No. 176 (“Defs.’ 2020 Reply”).) However, the Decree only permitted the government to require artwork be handed over (see Supp. Declaration of Zoltan Novak Ex. 1 at Art. 10, ECF No. 176- 3), and defendants provide no proof that such a hand-over was ordered. At this stage the Court considers plaintiffs’ evidence sufficient to state a claim for bailment, and it need not resolve whether there was a breach of a bailment for which the remaining defendants may be liable.

27 defendants.7

The conclusion that the remaining defendants may be liable for damages or even in some

cases for the return of the artwork is not altered by the Hungarian case cited by defendants in

their motion to dismiss. (See Mot. to Dismiss at 26 (citing Novak Decl. Ex. F, ECF No. 148-

30).) In that case, a claimant sued a private company and MNV for rights it claimed it had to use

a government-owned property, alleging that the contracts for use between the private-company

defendant and MNV were invalid under Hungarian law and that the private-company defendant

had no right to terminate the claimant’s use of the property. (See Novak Decl. Ex. F at 3.) The

Metropolitan Court of Appeals concluded that “the court of first instance is required to call upon

the claimant to involve the Hungarian State in the lawsuit[,] . . . failing which the proceedings

should be stayed. (See id. at 9.) But from the outset, neither the claimant nor the defendants in

that case disputed that the property at issue was owned by Hungary, and the only claims in the

case were contract-based. (See id. at 1.) This differs from the instant case in two important

ways: here, many of the claims are conversion-based, and joint tortfeasors generally need not be

7 In Sigray, the court found a law requiring the permission of the minister to alienate state property inapplicable, as “[t]he court determined that a bailment agreement had been concluded between the plaintiffs’ predecessor and the defendant,” meaning that “in this instance no alienation of property takes place.” (See Sigray Decision (emphasis in original).) Defendants argue that the Sigray case is inapposite because new laws on state property have been passed since the decision was published (see Defs.’ 2020 Reply at 8–9); however, defendants do not explain how, if at all, these laws abrogate the principle at the heart of the decision, which is that “[u]nder [a] bailment agreement, no transfer of ownership or alienation of property takes place; the chattel remains in the ownership of the bailor, and only possession of the chattel is transferred to the bailee.” (See Sigray Decision (emphasis added).)

Moreover, the Sigray decision does not become irrelevant merely because in this case, unlike in Sigray, the defendant museums dispute the existence of a bailment. (See id.) The Sigray court “determined that a bailment agreement had been concluded between the plaintiffs’ predecessor and the defendant.” (Id.) If plaintiffs prove the existence of any bailments here, defendants will only have possession and not ownership and thus they can return the art.

28 joined. Moreover, plaintiffs may be able to prove that bailment agreements existed with the

defendants, therefore undercutting Hungary’s claim of ownership of the property.

Nevertheless, even if the remaining defendants can provide some relief—monetary or

otherwise—Hungary may still be a required party under the definition of one “claim[ing] an

interest relating to the subject of the action” whose interest may be impeded. Fed. R. Civ. P.

19(a)(1)(B)(i); see also Wach v. Byrne, Goldenberg & Hamilton, PLLC,

,

169 n.5 (D.D.C. 2012) (“Notwithstanding a determination of complete relief, a party may still be

necessary under subsection (a)(1)(B).” (internal alterations omitted) (quoting Angst v. Royal

Maccabees Life Ins. Co.,

(3d Cir. 1996))). Judge Kollar-Kotelly described

“legally protected interest” as “exclud[ing] only those claimed interests that are ‘patently

frivolous.’” See Wach,

(quoting Davis v. United States,

(10th Cir. 1999)). And as in Wach, plaintiffs and Hungary “lay opposing, irreconcilable

claims to the same [pieces of artwork].” Id. at 169.

In Wach, Judge Kollar-Kotelly went on to conclude under Rule 19(b) that because, inter

alia, the absent party’s interests were not protected by the remaining defendant, the absent party

was indispensable. Id. at 172. This contrasts with an earlier decision of this Court where, at the

Rule 19(a) stage, it decided that the absent parties’ interests were not even “impede[d]” because

they were adequately represented by the remaining defendant. See FDIC v. Bank of New York,

(D.D.C. 2007). Whether an interest is “practically impeded” and whether

interests are adequately protected undoubtedly overlap, and thus can be considered under either

Rule 19(a) or 19(b). See Capital Med. Ctr., LLC v. Amerigroup Maryland, Inc.,

, 194 n.9 (D.D.C. 2010) (“Evaluation of the first Rule 19(b) factor overlaps considerably with

the Rule 19(a) analysis.” (internal quotation marks omitted)).

29 For this reason, courts often simply assume that an absent party meets the standard under

Rule 19(a)(1)(B) and instead focus on the 19(b) factors. See, e.g., Provident Tradesmens Bank &

Trust Co. v. Patterson,

(1968) (disposing of first step inquiry with the

observation that there was “at least the possibility that a judgment might impede [the absent

party’s] ability to protect his interest”); see also Federal Practice & Procedure (Wright & Miller)

§ 1604 (“Rule 19(a) reflects an affirmative policy of bringing all interested persons before the

court, whereas the object of Rule 19(b) is to determine whether it is possible to go forward with

an action despite the nonjoinder of someone whose presence is desirable but not feasible.”).

While Hungary’s presence may be desirable in this case, the Rule 19(b) factors are more

illuminating, as they guide the Court’s conclusion that continuation of the litigation, even

without Hungary, is appropriate.

C. Indispensable Party

Because Hungary cannot be joined due to its sovereign immunity, the Court moves to the

Rule’s second step, whether “in equity and good conscience, the action should proceed.” Fed. R.

Civ. P. 19(b). The Court concludes that it should.

In arguing that Hungary is indispensable, defendants ask the Court to place dispositive

weight on Hungary’s sovereign immunity. (See Mot. to Dismiss at 28 (“Because Hungary, a

required party, is entitled to sovereign immunity, the action can be dismissed ‘without

consideration of any additional factors.’ (quoting Kickapoo Tribe of Indians of Kickapoo

Reservation in Kansas v. Babbitt,

(D.C. Cir. 1995))).) It is true that the Rule

19(b) inquiry in a case involving an absent sovereign may be somewhat “circumscribed,” for

“immunity may be viewed as one of those interests ‘compelling by themselves.’” Kickapoo,

, 1496 (quoting Wichita & Affiliated Tribes of Oklahoma v. Hodel,

,

30 777 n.13 (D.C. Cir. 1986)). And, the Supreme Court has held that “where sovereign immunity is

asserted, and the claims of the sovereign are not frivolous, dismissal of the action must be

ordered where there is a potential for injury to the interests of the absent sovereign.” Republic of

Philippines v. Pimentel,

(2008) (emphasis added).

However, in contrast to the sovereign in Pimentel, Hungary’s interests are adequately

protected in this case by the remaining defendants. “[P]rejudice to absent parties approaches the

vanishing point when the remaining parties are represented by the same counsel, and when the

absent and remaining parties’ interests are aligned in all respects.” See Marvel Characters, Inc.

v. Kirby,

(2d Cir. 2013). This is precisely the case here, particularly with the

addition of MNV as a defendant—as plaintiffs observe, “MNV is Hungary’s agent with respect

to the artworks at issue, and has represented Hungary in this action from day one.” (See Pls.’

Opp. at 35.) Defendants have cited no differences in interests between themselves and Hungary;

indeed, all defendants are represented by the same legal team as Hungary was prior to its

dismissal, a key point in the prejudice analysis. See Am. Trucking Ass’n, Inc. v. N.Y. State

Thruway Auth.,

(2d Cir. 2015) (noting that defendant and absent party would

be represented by same attorney, suggesting their interests must be “aligned in all respects”

(internal quotation marks omitted)). In many cases in which the absent sovereign was deemed

indispensable, by contrast, the sovereign’s interests were often only partially aligned with other

defendants. See, e.g., Two Shields v. Wilkinson,

(8th Cir. 2015) (noting that

remaining defendants “have strong incentives to characterize any breach as resulting solely from

the government’s independent action and judgment” in order to reduce their own liability); see

also Kickapoo,

; Detroit Int’l Bridge Co. v. Gov’t of Canada,

(D.D.C. 2016). In this case the remaining defendants and Hungary are not only aligned, they

31 “share a ‘precisely’ identical interest in the subject matter of the litigation,” i.e., that Hungary

and its agencies and instrumentalities continue their possession of the artwork and pay no

damages. See Wach,

.

The remaining factors also weigh in plaintiffs’ favor. As discussed above, the Court

concludes that limiting plaintiffs’ remedies to damages to the extent defendants claim Hungarian

law forbids them from alienating artwork without permission of the Hungarian government

further reduces any prejudice or risk of inconsistent obligations. Plaintiffs do not claim that an

action limited in such a way—to damages, rather than injunctive or declaratory relief—would be

inadequate. (See Pls.’ Opp. at 35–36 (“Even if Hungary were prejudiced [by an order to return

the paintings in its absence], this Court could limit Plaintiffs’ remedy to damages against the

remaining Defendants, which would result in no prejudice to Hungary.”).) And, this Court has

previously observed that requiring plaintiffs to litigate in Hungary, defendants’ proposed

alternative forum, would be futile. See de Csepel,

n.15 (“[T]he Court

finds that plaintiffs have adequately shown that further efforts to seek a remedy in Hungary

would have likely proved futile.”).8

In briefing submitted after oral argument, defendants raised a new argument why

Hungary is a necessary party—“[b]ecause a money judgment against the Museum Defendants

alone could not be enforced without violating Hungary’s recognized sovereign immunity (as any

enforcement would necessarily implicate Hungarian state funds) Hungary is an indispensable

8 Of course, in a case involving sovereign immunity this last factor is of limited probative value. See Wichita & Affiliated Tribes,

(“Although we are sensitive to the problem of dismissing an action where there is no alternative forum, we think the result is less troublesome in this case than in some others. . . . [T]he dismissal turns on the fact that society has consciously opted to shield Indian tribes from suit without congressional or tribal consent.”).

32 party and the action cannot go forward.” (See Defs.’ Supp. Reply Br. at 10, ECF No. 176

(“Defs.’ 2020 Reply”).) This is a novel argument, particularly within the context of FSIA

actions. However, even assuming that any and all damages ordered against the remaining

defendants would be paid out of Hungary’s treasury, 9 the Court concludes that this action may

nonetheless continue.

Prior cases in which dismissal was ordered because the federal government was immune

yet faced potential monetary liability are distinguishable. Defendants cite Mine Safety

Appliances Co. v. Forrestal,

(1945), in which the Supreme Court concluded that

the suit against the Under Secretary of the Navy was “essentially one designed to reach money

which the government owns,” meaning that the federal government was a necessary party.

. However, the plaintiff in Mine Safety was effectively suing the Secretary in his official

capacity, and as a result, was suing the sovereign. Having determined that MNV is not so

integral to Hungary’s political structure that it should be considered Hungary’s “political

subdivision,” a conclusion already reached for the other remaining defendants, see de Csepel,

(“[D]efendants have already admitted that the museums and university

holding all of the art are agencies or instrumentalities.”), the Court will not reverse course and

collapse the distinction here.

Other cases where the federal government has been deemed indispensable based on the

potential for outlay of its funds, such as Weeks v. Housing Auth. of Opp, Alabama,

(M.D. Ala. 2013), lack the identity of interest present in this case. In Weeks, the district

9 Although defendants claim that in the absence of Hungary, they cannot pay damages (see Declaration of David Kratchowill ¶ 7, ECF No. 154-1; see also Defs.’ 2020 Reply at 9-10), this proposition is contested by plaintiffs. (See Supp. Declaration of Dr. Mark Peto at 4-5, ECF No. 175-1.) 33 court concluded that the Department of Housing and Urban Development (“HUD”) was an

indispensable party because all the defendant’s “funds and operating expenditures are subject to

[its] oversight and approval,” and it informed the defendant “that it would not approve any

payments” to the plaintiff, who had been terminated from defendant’s employment.

.

However, the local Housing Authority in Weeks did not have the same identity of interest with

HUD as defendants have with Hungary, even if both receive all their funds from the absent

sovereign entity. Defendants here are represented by the same attorneys as Hungary and are

agencies and instrumentalities of the state itself. In contrast, the Housing Authority in Weeks had

a contributions contract with HUD by which HUD paid its expenses, but the two clearly had

different priorities. See

(noting that the defendant “tried to negotiate further with

HUD” prior to litigation to avoid terminating plaintiff in the first place). This case, by contrast,

is more like American Trucking, in which the Second Circuit concluded that New York was not

an essential party even though “as a practical matter, a defeat for the [remaining defendant, the

New York State Thruway Authority,] may have downstream effects that cost the State money.”

American Trucking,

. Although the effect on Hungary of a judgment adverse to

defendants would be more direct than any potential effects of an adverse judgment on New York,

which had no legal obligation to pay the defendant’s liabilities, see

, this is a difference

in degree, rather than in kind. As the Court there aptly observed, “having reserved and retained

the benefits of corporate separation for all other purposes, [remaining defendants and absent

parties] may not pierce their own arrangements to accommodate litigation strategy.”

.

Moreover, implicit in the structure of the FSIA is the proposition that a foreign state’s

agency or instrumentality may be sued even when the foreign state remains immune. For

example, as has been clarified by the Court of Appeals, the FSIA’s expropriation exception lays

34 out two different commercial-nexus standards—one that abrogates immunity for foreign states,

and one for agencies and instrumentalities. See de Csepel,

(“hold[ing] that a

foreign state retains its immunity unless the first clause of the commercial-activity nexus

requirement is met”). Agencies and instrumentalities are often fully- or partially-funded by their

foreign state. See Bancec,

(describing how a “typical government

instrumentality” may require “appropriations to provide capital or to cover losses”); (see also

Pls.’ Supp. Reply Br. at 3, ECF No. 175 (“Pls.’ 2020 Reply”)). And even partial funding would

“implicate” the sovereign’s funds in some way. But under the test proposed by defendants, this

fact would necessarily render the foreign state an indispensable party. (See Defs.’ 2020 Reply at

10.) If an agency or instrumentality with some budgetary ties to the sovereign could never be

sued unless the sovereign itself were also a party, it would be pointless for the FSIA to treat

immunity for agencies and instrumentalities differently than for foreign states. Defendants’ per

se rule is thus in tension with the FSIA’s mandate, as articulated by the Court of Appeals, that

agencies and instrumentalities can be sued even when foreign states—which may fund their

budgets, in whole or in part—cannot. This conclusion is further bolstered by the FSIA provision

§ 1606:

As to any claim for relief with respect to which a foreign state is not entitled to immunity under section 1605 or 1607 of this chapter, the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances. (See Pls.’ 2020 Reply at 3 (quoting

).) Again, this demonstrates that agencies

and instrumentalities and foreign sovereigns, 10 which may at times lose immunity when the other

does not, cannot use their budgetary connections to circumvent the different ways the FSIA may

10 As discussed above,

(a) defines a foreign state to include an agency or instrumentality.

35 treat them.11

For all the above-described reasons, the Court concludes that Hungary is not an

indispensable party under Rule 19(b). The case may proceed in its absence.

III. JURISDICTION

A. Legal Standard

“The jurisdiction of the district court . . . is governed by the FSIA itself: A foreign state is

immune from suit in both federal and state courts,

, unless the case comes

within an express exception in the FSIA,

§ 1605.” Price v. Socialist People’s Libyan Arab

Jamahiriya,

(D.C. Cir. 2004); see also Phoenix Consulting, Inc. v. Republic of

Angola,

(D.C. Cir. 2000) (“If no exception applies, a foreign sovereign’s

immunity under the FSIA is complete: The district court lacks subject matter jurisdiction over

the plaintiff’s case . . . .” (internal citations omitted)).

While generally the Court is to assume all facts as true at the motion to dismiss stage,

“[w]hen a foreign sovereign disputes the fact(s) upon which the district court’s subject matter

jurisdiction depend(s), the court ‘must go beyond the pleadings and resolve any disputed issues

11 The Court is also not persuaded by the district court decision in South Carolina, discussed above, see section II.B, supra, in which the district court observed that it “believes the Netherlands and the Ministry are necessary parties to this action involving contested ownership,” because without their presence in the litigation it “cannot render an effective ruling regarding the ownership of the Artworks.” See Berg, Slip Op. at 41. Before making this remark, the court had already concluded that the action must be dismissed due to a lack of personal jurisdiction over remaining defendants, see id. at 31, and because of improper venue. See id. at 38-39. As a result, the court’s standing analysis—which included its offhand observation regarding the Netherlands’ “necessary” status—was mere dicta. Moreover, the district court reached this conclusion while deciding whether plaintiffs had standing to press their claims. See id. at 41 (concluding that without Netherlands or the Ministry, plaintiffs had not established redressability). Rule 19 was not mentioned, let alone analyzed.

36 of fact the resolution of which is necessary to a ruling upon the motion to dismiss.’” Price,

(quoting Phoenix Consulting,

). For example, under the expropriation

exception, “federal courts can maintain jurisdiction to hear the merits of a case only if they find

that the property in which the party claims to hold rights was indeed ‘property taken in violation

of international law.’” Bolivarian Republic of Venezuela v. Helmerich & Payne Int’l Drilling

Co.,

(2017).

Plaintiffs must produce evidence to show the absence of immunity based on an FSIA

exception. See Daliberti v. Republic of Iraq,

(D.D.C. 2000). However,

“[i]n accordance with the restrictive view of sovereign immunity reflected in the FSIA, the

burden of proof in establishing the inapplicability of these exceptions is upon the party claiming

immunity.” Transamerican S.S. Corp. v. Somali Democratic Republic,

, 1002

(D.C. Cir. 1985). As a result, “defendant[s] bear[] the burden of proving that the plaintiff’s

allegations do not bring its case within a statutory exception to immunity.” Phoenix Consulting,

; see also Belize Soc. Dev. Ltd. v. Gov’t of Belize,

(D.C. Cir.

2015) (same).

B. The Court of Appeals’ Remand

In its most recent opinion, the Court of Appeals approved this Court’s use of the FSIA’s

expropriation exception as to the remaining defendants (excluding Hungary), which satisfied the

second clause of the exception, relating to an agency or instrumentality of a foreign state. See

(a)(3). It then directed this Court to address several specific issues on remand.

First, the Court of Appeals determined that “most of [plaintiffs’] claims do in fact involve

a tight legal, factual, and temporal connection to Hungary’s expropriation of the collection.” de

Csepel,

. Indeed, the Circuit noted defendants’ concession that “some twenty-

37 five pieces of art were never returned to the family” by Hungary. See

(emphasis added). It

thus “conclude[d] that ‘rights in property taken in violation of international law’ are ‘in issue’ as

to those twenty-five or so artworks taken by Hungary during the Holocaust and never returned.”

. Therefore, the Court has jurisdiction under the FSIA’s expropriation exception over

these undisputed wartime takings. The twenty-three pieces that defendants have conceded were

never returned and over which the Court has jurisdiction pursuant to the Court of Appeals’

decision are listed in Appendix A, attached hereto.12

However, the Court of Appeals also noted that “some fifteen pieces of the Herzog

collection were physically returned to family members, and others were legally released to the

family on paper (though the family disputes whether they were ever actually returned to their

physical custody).”

(internal quotation marks and brackets omitted). As to these pieces, the

Circuit instructed the Court to “determine[] whether the temporary return of the art severed the

connection between Hungary’s current possession and its Holocaust-era seizure.”

For, “if

Hungary returned the artworks free and clear to the family and then lawfully repossessed them, a

claim for their return would not satisfy the expropriation exception.”

. However, if

the subsequent re-taking was “sufficiently intertwined with the Holocaust-era taking, or if the

pieces were retaken in a new violation of international law,” the expropriation exception would

be satisfied despite the temporary return. See

Defendants argue that nineteen pieces, listed in

Appendix B, were returned to the Herzog siblings after World War II, and that sixteen of those

were subsequently repossessed. The Court analyzes below whether post-World War II actions

caused these nineteen artworks to enter defendants’ possession lawfully.

12 Upon further review of the record, it is apparent that jurisdiction has been established as to twenty-three (not twenty-five) pieces of artwork. (Compare Scholl-Tatevosyan Decl. Ex. 1, ECF No. 148-2 (listing all forty-two artworks in the amended complaint) with Ex. 2 (listing nineteen pieces allegedly returned to Herzog siblings).) 38 Second, the Court of Appeals instructed the Court to determine if the 1973 Agreement

between Hungary and the United States that settled certain claims of American citizens barred

claims to pieces attributable to Elizabeth because of the treaty exception to the FSIA. 13 See

Agreement Between the Government of the United States of America and the Government of the

Hungarian People’s Republic Regarding the Settlement of Claims, March 6, 1973, 24 U.S.T. 522

(the “1973 Agreement”). The Court will discuss the claims settlement process in greater detail

below, see Section III.D.1, infra, but for now, the claims process can be briefly summarized as

follows: American citizens whose property was taken by Hungary up to the day the 1973

Agreement was signed on March 6, 1973, were able to make claims under two claims settlement

processes, one in the 1950’s and one in the 1970’s. While the first process allowed claimants to

retain rights to the unpaid balance of their claims, the 1973 Agreement purported to settle all

covered claims by American citizens and discharge them completely. According to the Court of

Appeals, this Court must determine whether “Hungary did take some of the art from [Elizabeth]

after she became a [U.S.] citizen,” as “the 1973 agreement could not have extinguished claims in

any work of art taken from [her] before she became a citizen in 1952.” de Csepel,

(emphasis added). However, claims relating to pieces taken between June 23, 1952, when

she became a U.S. citizen, and 1973 would be barred by the 1973 Agreement in accordance with

the FSIA’s treaty exception.14 Again, this review is limited to those nineteen pieces defendants

13 The FSIA provides that the abrogation of sovereign immunity under its exceptions is “[s]ubject to existing international agreements to which the United States is a party at the time of enactment of this Act.” See

. Therefore, “if there is a conflict between the FSIA and . . . [a pre-existing international] agreement regarding the availability of a judicial remedy against a contracting state, the agreement prevails.” de Csepel,

(internal quotation marks omitted). 14 This Court had previously concluded that two of the forty-four pieces of artwork in the complaint— Lucas Cranach’s Joachim with the Angel and John Opie’s Portrait of an Old Lady—were not take in violation of international law. See de Csepel,

. 39 argue were returned. See

(ordering the Court to review if pieces were taken from Elizabeth

after she became a citizen “as part of its review of the artwork returned and retaken by

Hungary”).

The Court addresses each of these jurisdictional issues—allegedly returned and

repossessed artworks, see Section III.C, infra, and pieces possibly barred by the 1973 Agreement

between Hungary and the United States, see Section III.D, infra. As to the nineteen pieces,

Appendix B lists the artworks and designates the ones over which the Court has concluded that it

retains jurisdiction.

C. Returned and Repossessed Artworks

Defendants’ first jurisdictional argument is that nineteen pieces listed in the amended

complaint were not taken in violation of international law for purpose of the FSIA’s

expropriation exception. (See Mot. to Dismiss at 34.) According to defendants, “Hungary

returned the artworks free and clear to the family and then lawfully repossessed them, [so] a

claim for their return would not satisfy the expropriation exception.” de Csepel,

.

The nineteen pieces allegedly returned and repossessed can be split into four categories:

(1) ten pieces that were part of the forfeiture order in the smuggling case against Illona Kiss,

István’s former wife (the “Kiss Forfeiture”); (2) three that were not explicitly part of the Kiss

Forfeiture, but which defendants argue were taken “in connection with” it; (3) two that

defendants argue were returned to plaintiffs and never re-possessed by Hungary; and (4) four for

As found by this Court, the Opie was acquired from a third-party donor in 1963, and the Cranach was seized by Hungary’s communist government in 1952 from the home of a former attorney for the Herzog family in connection with the prosecution of an individual (Ferenc Kelemen) who allegedly violated Hungarian registration laws and hid the painting to keep it safe for Elizabeth. See id. at 165-66; see also

. 40 which plaintiffs contest the return itself. Beyond the four pieces in category (4) whose return

plaintiffs dispute, plaintiffs argue that, even if a piece had been returned, all subsequent re-

takings were “in violation of international law.”

While plaintiffs are correct that “[a] taking violates international law if: (1) it was not for

a public purpose; (2) it was discriminatory; or (3) no just compensation was provided for the

property taken” (see Pls.’ Opp. at 40 (quoting de Csepel,

)), they fail to

address an additional requirement—for a taking to constitute an expropriation in violation of

international law, it must also be of the property of a national of another state because otherwise

it would be blocked by what is referred to as the “domestic takings rule.” See Restatement

(Third) of the Foreign Relations Law of the United States § 712 (“A state is responsible under

international law for injury resulting from . . . a taking by the state of the property of a national

of another state . . . .” (emphasis added)). “The domestic takings rule means that, as a general

matter, a plaintiff bringing an expropriation claim involving an intrastate taking cannot establish

jurisdiction under the FSIA’s expropriation exception because the taking does not violate

international law.” See Simon,

. In cases arising out of takings from Jewish

people during World War II, the domestic takings rule has not been applied because the genocide

perpetrated by Germany and other Nazi-affiliated governments constitutes the predicate violation

of international law. See

(“The domestic takings rule has no application in the unique

circumstances of this case, in which, unlike in most cases involving expropriations in violation of

international law, genocide constitutes the pertinent international-law violation.”). For that

reason, the Court of Appeals instructed this Court to determine on remand whether the new,

post-World War II takings were “sufficiently intertwined with the Holocaust-era taking.” See de

Csepel,

. Whether the later re-possessions are “sufficiently intertwined” with

41 the Holocaust will therefore guide the Court’s analysis, as any “basic international-law

expropriation claim[s],” Simon,

, severed from the Holocaust, will largely be

barred by the domestic takings rule and will not constitute violations of international law. 15

1. Kiss Forfeiture

Ten of the returned and repossessed pieces were taken as part of a smuggling prosecution

against Ilona Kiss, István’s former wife and one-time guardian. István “gifted” much of his art

to her in 1944 in an attempt to avoid its confiscation, as she was not Jewish and thus not subject

to the registration laws. (See Pls.’ Opp at 6; see also Walker Decl. Ex. R-2, ECF No. 148-26.) A

police report written during the investigation described how in 1948 Ms. Kiss, along with several

others, smuggled three artworks out of Hungary for sale in Switzerland. (See Walker Decl. Ex.

R-2.) As a result of this investigation, the Hungarian government impounded a number of

artworks belonging to the Herzog family—some belonging to István, but also several belonging

to Elizabeth and András. Following Kiss’ conviction, fourteen pieces belonging to the Herzog

family were taken into state ownership by the Museum of Fine Arts on October 6, 1950, and

were inventoried on October 18, 1950. (See Declaration of Alycia Regan Benenati (“Benenati

Decl.”) Ex. 12, ECF No. 153-15; see also Walker Decl. Ex. K-7, ECF No. 148-19.) Ten

artworks on this list of fourteen are part of the nineteen pieces the Court of Appeals directed this

Court to assess for jurisdictional purposes. 16

15 Thus, in 1952, when Elizabeth became an American citizen, and, for pieces attributed to András, in 1959, when his first daughter became an Italian citizen (see Pls.’ Opp. at 5), the domestic takings rule would cease to apply, and a taking meeting plaintiffs’ criteria (for example, one made without compensation) would constitute a taking in violation of international law unless barred by the FSIA’s treaty exception. See note 13, supra. 16 The ten pieces included in the Kiss Forfeiture (that also belong to the group of nineteen returned pieces) are:

(1) Barthel Bruyn, Portrait of Petrus von Clapis, half-length, in a blue coat with 42 Plaintiffs argue that “[t]he underlying criminal proceedings against Ilona Kiss were

predicated on an invalid Holocaust-era agreement that Ilona Kiss and István Herzog entered into

to attempt to shield István Herzog’s property from Nazi confiscation,” and thus, any takings

associated with it must be viewed as intertwined with the earlier, Holocaust-era takings. (See

Pls.’ Opp. at 43.) However, given that the Kiss prosecution was for smuggling and was

undertaken by Hungary’s communist government after the fall in 1945 of the German-controlled,

Fascist regime and the repeal in March 1945 of the World War II-era discriminatory laws, the

Court cannot agree. The ten pieces were returned prior to their forfeiture, so their taking in 1950

due to a criminal proceeding “severed the connection between Hungary’s current possession and

its Holocaust-era seizure.” See de Csepel,

.

However, the October 1950 forfeiture order does not close the chapter on the Kiss

Forfeiture. On March 20, 1951, Dr. Oltványi, then-director of the Museum of Fine Arts, wrote a

letter memorializing his conversation with a representative of the Herzog family, Henrik Lorant,

in which he stated that Mr. Lorant had informed him that several pieces had been “included in

the criminal attachment [in the Kiss Forfeiture] by mistake.” 17 (See Tatevosyan Decl. Ex. 63,

fur collar, 17(i) in the amended complaint; (2) Gustave Courbet, The Spring (Artist and Model), 17(v); (3) Pseudo Pier Francesco Fiorentino, The Madonna and Child with the Infant Saint John, Saint Catherine and Angels, 17(ix); (4) Domenikos Theotokopoulos, El Greco, The Holy Family with Saint Anne, 17(x); (5) Augustin Theodule Ribot, Still Life with a Chicken, a Bottle of Wine, Asparagus, Artichoke, Tomatoes and other Vegetables, on a Table, 17(xv); (6) Sir Anthony Van Dyck, Portrait of Margaret of Lothringen, 17(xvii); (7) Alvise Vivarini or Giovanni Battista da Udine, Madonna and Child with Saints John the Baptist and a male Saint, 17(xviii); (8) Francisco de Zurbarán, Saint Andrew, 17(xix); (9) A Terracotta Group of the Virgin and Child, Italian, 15th Century, 17(xxi); and (10) József Borsos, Portrait of the Architect Mátyás Zitterbarth, 18(i). 17 Another letter written by a Herzog representative, Dr. Emil Oppler, on May 3, 1950, refers to 43 ECF No. 106-6.) Furthermore, he “request[ed] commencement of the procedure for terminating

the criminal attachment.” (Id.) The five pieces listed in this “mistake letter” comprise the pieces

attributed to Elizabeth and András that had previously been included in the Kiss Forfeiture. 18

Neither plaintiffs nor defendants have provided any further proof as to whether the criminal

attachment was in fact terminated; however, at this stage, and given the burden of proof, the

Court cannot conclude that these pieces were taken as a result of the Kiss Forfeiture and,

therefore, cannot conclude that they passed to the state in 1950.

However, all five of these artworks are still in defendants’ possession, so they must have

been taken again at some later time. And as noted, the pieces are attributable to András or

Elizabeth, who either themselves (Elizabeth) or their heirs (András) eventually became non-

Hungarian citizens. See note 15, supra. Therefore, these later takings of the five paintings will

need to be analyzed to see if they constitute separate violations of international law.

Defendants have presented some evidence regarding the one piece that is attributable to

András—József Borsos’s Portrait of the Architect Mátyás Zitterbarth. (See Walker Decl. Ex. D,

ECF No. 148-12.) Although there is no information regarding the painting’s whereabouts after

the Kiss Forfeiture, the next mention of this painting was in a letter dated December 11, 1973, in

these pieces, among others, as having been taken by the police “for the clarification of their legal status.” (See Walker Decl. Ex. B-3.)

18 The five pieces included in the Kiss Forfeiture and also in this “mistake letter” are:

(1) Barthel Bruyn the Elder, Portrait of Petrus von Clapis, half-length, in a blue coat with fur collar, 17(i) in the amended complaint; (2) Pseudo Pier Francesco Fiorentino, The Madonna and Child, with the Infant Saint John, Saint Catherine and Angels, 17(ix); (3) Domenikos Theotokopoulos, El Greco, The Holy Family with Saint Anne, 17(x); (4) Sir Anthony Van Dyck, Portrait of Margaret of Lothringen, 17(xvii); and (5) József Borsos, Portrait of the Architect Mátyás Zitterbarth, 18(i). 44 which the Hungarian Ministry of Culture asserted that it, along with the other pieces listed in the

Kiss Forfeiture, “insofar [as] they have not already passed into the ownership of the State,” have

become state property. (See Scholl-Tatevosyan Decl. Ex. 37, ECF No. 148-5.) By 1973,

András’s daughters were Italian citizens, and they received no compensation for the painting’s

taking; as a result, the taking of this artwork is an expropriation in violation of international law

over which the Court has jurisdiction. As to the four pieces attributable to Elizabeth that were

listed in the March 20, 1951 “mistake letter,” it appears likely that any taking would have

occurred after she became a U.S. citizen in June 1952 and would thereby implicate the 1973

Agreement, which is discussed below. See Section III.D, infra.

2. Kiss Forfeiture “In Connection With” Pieces

Defendants next argue that three pieces “were handed over to Hungary in 1950, all in

connection with the Kiss smuggling action” (Mot. to Dismiss at 37)—(1) Alonso Cano, Portrait

of Don Balthasar Carlos (1629-1646), Standing full-length, in a Landscape, 17(ii) in the

amended complaint; (2) Giovanni Pedrini, called Giampietro, Christ Carrying the Cross,

17(xiii); and (3) Mihály Munkácsy, In the Studio, 18(iv). While all three pieces were indeed

offered to the defendants in May 1950, pursuant to a letter written by Elizabeth’s representative,

Dr. Emil Oppler (see Walker Decl. Ex. B-3, ECF No. 148-10), there is no evidence to suggest

that these three pieces were taken “in connection with” the Kiss Forfeiture. The letter recognized

that several pieces were already in the custody of the Financial Police, but these three were not

included with those pieces that were in the possession of the police. (See id.) As to these three

pieces, as well as several others not at issue here, Dr. Oppler offered the paintings “for

deposit . . . while maintaining the ownership title to the deposit.” (Id.) Dr. Oppler’s offer was

made with reference to Legislative Decree No. 13/1949, which allowed the government to order

certain collections of national interest be transferred to governmental custody for safekeeping.

45 (See Defs.’ 2020 Reply at 2 (“This law, which explicitly applies to ‘private collections of

national interest,’ states that the ‘Minister of Religion and Public Education may order the

transfer of the private collection into a public collection’ to keep a collection secure or intact.”

(quoting Legislative Decree No. 13 of 1949 on Museums and Monuments at Art. 10)).)

However, given that the letter purports only to bail the collection temporarily, and there is no

other evidence that Dr. Oppler was ordered to surrender the works, the Court concludes that the

May 1950 letter does not itself indicate that Hungary “took” the pieces in connection with the

Kiss Forfeiture.

Defendants cite a document from June 1958 listing certain pieces from the deposit stock

of the Old Masters Gallery “to be inventoried,” i.e., added to the Museum of Fine Art’s core

inventory. (See Walker Decl. Ex. B-5.) Included on this list is Christ Carrying the Cross by an

Italian painter, with the same dimensions as were listed for the Giovanni Pedrini in the amended

complaint. (Compare id. and Am. Compl. ¶ 17(xiii).) Given that it was returned before 1950,

kept by a private individual, and then offered back to the government in 1950, any “taking” that

occurred by 1958 of the Christ Carrying the Cross was “severed . . . [from] its Holocaust-era

seizure.” See de Csepel,

. Defendants have thus met their burden that the

expropriation exception does not apply.

The remaining two pieces—Munkácsy’s In the Studio and Cano’s Portrait of Don

Balthasar Carlos—present a different analysis. While both came into defendants’ possession in

1950 pursuant to the Oppler letter, there is no proof that they were “taken” by the Hungarian

government into its possession until much later. Given that both pieces belong to Elizabeth, their

taking after 1952 could constitute a separate violation of international law unless the 1973

Agreement applies. As a result, the Court will analyze these pieces under the 1973 Agreement

46 before deciding whether has jurisdiction over them. See Section III.D, infra.

3. Pieces Defendants Claim Not to Possess

Defendants claim not to be in possession of several artworks listed in the amended

complaint, two of which must be analyzed here—(1) Four ancient Egyptian sculptures, statues,

and steles, 17(xxxi); and (2) Lajos Deák Ébner, Fair in Szolnok City, 18(v).19 Plaintiffs

conceded at oral argument that they have no evidence to rebut defendants’ evidence that Ébner’s

Fair in Szolnok City was returned to the Herzog siblings after the war and was never repossessed

by defendants. (See Jan. 13, 2020 Tr. at 115:13-17, ECF No. 174.) Claims relating to this piece

are therefore dismissed for lack of jurisdiction. However, as to the Four Ancient Egyptian

sculptures, statues, and steles, not only does defendants’ evidence of return relates to, at most,

two of the four pieces (see Walker Decl. Ex. T, ECF No. 148-28), but plaintiffs also contest

defendants’ assumption that the returned pieces are the same as those confiscated during World

War II. (See Benenati Decl. Ex. 23 at 3, ECF No. 153-26.) The Court agrees that a document

memorializing the receipt of “1 Egyptian stone tablet” and “1 Egyptian inscribed tablet” (see

Walker Decl. Ex. T-1), without more, is not sufficient to demonstrate a return of the pieces

described in 17(xxxi). As a result, defendants have not “severed the connection between

Hungary’s current possession and its Holocaust-era seizure.” See de Csepel,

.

The Court thus concludes that defendants have not met their burden to demonstrate that the

19 The Court need not address the other three pieces defendants claim not to be in possession of: (1) Terracotta Group of the Virgin and Child, Italian, 15th century, 17(xxi) in the amended complaint; (2) Four ancient silver coins, 17(xxxiii); and (3) Seventy-Eight Pieces: Ancient Cameos, Intaglios, Other Carved Stones and Semi-Precious Stones, 17(xxxiv), which defendants noted for the first time at oral argument might also not be in their possession. (See Jan. 13, 2020 Tr. at 119:10-14, ECF No. 174.) The Terracotta Group was part of the Kiss Forfeiture and, as noted above, its taking was not intertwined with the Holocaust-era takings. See Section III.C.1, supra. The other two pieces are undisputed wartime takings (see Appendix A), so the Court need not address them for purposes of jurisdiction.

47 expropriation exception does not apply to the artwork listed in 17(xxxi) of the amended

complaint.

4. Disputed-Return Artworks

Plaintiffs raise factual disputes as to four of defendants’ alleged returns: (1) Virgin of the

Annunciation, Austrian, circa 1400, 17(xxv) in the amended complaint; (2) Károly Ferenczy,

Landscape with a Fenced Enclosure (Houses in Fernezely with Sheepfold) 1912, 20(i); (3)

Giovanni Santi Christ with a Fly, also known as Christ the Dolorous, Christ with a Fly, 17(xvi);

and (4) A Painted Stucco Bust, after Jacopo della Quercia, 17(xx). As to the first and fourth, the

Court concludes that defendants have failed to demonstrate that the expropriation exception does

not apply, as they have not shown that the pieces were in fact returned “free and clear.” See de

Csepel,

. As to the second and third, the Court concludes that plaintiffs cannot

rely on the expropriation exception.

Plaintiffs argue that the Virgin of the Annunciation was not returned in 1947, and that a

statue closely resembling it in description is listed as part of the Museum of Fine Art’s deposit

inventory. (See Pls.’ Opp. at 40.) The amended complaint describes this piece as an Austrian

statue circa 1400, made of limestone, and approximately 90 centimeters tall. (See Am. Compl.

¶ 17(xxv).) Defendants cite a letter dated January 25, 1947, from Elizabeth’s representative,

saying he took possession of a “Female Saint” stone sculpture, as evidence that the piece in the

complaint was returned after the war. (See Walker Decl. Ex. C-1, ECF No. 148-11.) A list of

the pieces on deposit with the Museum of Fine Arts in 1958 includes a “Saint Woman,”

purportedly from a 15th-century German master, made of chalk (a variety of limestone) and 90

centimeters tall. (See

at Ex. C-4; see also Benenati Decl. Ex. 23.) It is listed as acquired from

the “Government Commissioner’s Office.” (See Walker Decl. Ex. C-4.) Plaintiffs seem to agree

that the piece listed on the deposit register is the one described in the complaint, but dispute that

48 the “Female Saint” returned in 1947 is the same piece. (See Benenati Decl. Ex. 23.) The Court

concludes that such a sparse description as “Female Saint” is not sufficient to show that the

statue was in fact returned, particularly when there is no further evidence of its possession by the

Herzog siblings or of its bailment back to defendants. And, the piece’s current placement in the

“deposit” catalog casts doubts on defendants’ representations of ownership. 20 The Court will

therefore retain jurisdiction over claims related to this artwork.

Plaintiffs claim that “[t]here is also a dispute of fact as to whether . . . [Ferenczy’s

Landscape] was returned in 1947 and sold.” (See Pls.’ Opp. at 41.) However, it is clear from a

letter from January 25, 1947, that a representative of the Herzog family took possession of the

painting (see Walker Decl. Ex. E-1, ECF No. 148-13), and a subsequent letter in June 1948

indicates that the same representative “sold . . . [the Ferenczy Landscape] through professor

Elemer Varju.” (See

at E-2.) Contrary to plaintiffs’ contention (see Pls.’ Opp. at 41), the

exhibit relied on by defendants specifies which paintings were sold. (See Walker Decl. Ex. E-2.)

Although in light of this sale it is odd that a 1958 Museum of Fine Arts document lists the piece

as deposited by the Herzogs (see Benenati Decl. Ex. 25, ECF No. 153-28), the piece is no longer

on deposit and the Court sees no reason to disregard the record evidence attesting to the release

of the painting to a Herzog representative and its subsequent sale. Any later repossession by the

20 As the name suggests, pieces that are on “deposit” with the museums, as opposed to in their “core” inventory, do not belong to the museums but are merely on loan, for example from a private collection. (See Benenati Decl. Ex. 13, Deposition of Samuel Balász, at 33:17-19 (“Q: So if an artwork is a deposit, it is not owned by the state? A: Yes.”), ECF No. 153-16.) This different status between core and deposit pieces is reflected in how the two are treated under Hungarian law. For example, core pieces “are subject to restricted marketability” and cannot be alienated without government permission (see Novak Decl. Ex. E, Act CXL of 1997 on Museological Institutions, Public Library Services and Public Culture at Section 38(1), ECF No. 148-30), because they are government property. This restriction does not apply to pieces that are on deposit. 49 Hungarian government of the painting was thus “severed . . . [from] its Holocaust-era seizure.”

See de Csepel,

.

Plaintiffs take issue with defendants’ contention that Giovanni Santi’s Christ with a Fly

“was actually returned in 1947.” (Pls.’ Opp. at 41.) A memorandum dated June 25, 1947,

described the Santi being released to Mrs. István Herzog as István’s guardian. (See Walker Decl.

Ex. R-1.) And, a November 1948 report of the Hungarian State Police’s Economy Policy

Department says that in the summer of 1947, Mrs. István Herzog transferred her guardianship to

Dr. Odon Berzsenyi, “at the same time handing over” several paintings belonging to István,

including the Santi. (See

at Ex. R-2.) The painting entered state possession by sometime in

1948, when it was listed among pieces that a Hungarian ministry had placed “at the disposal of

the Museum of Fine Arts, as a temporary deposit.” (See Benenati Decl. Ex. 26, ECF No. 153-

29.) Then, as of January 1949, the piece had been seized to secure tax debts. (See Walker Decl.

Ex. R-3.) Again, however, the evidence suggests that the painting was returned and, indeed,

transferred freely between István’s two guardians. Deeming this return “free and clear” is not

inconsistent with the painting’s repossession by the Hungarian government, on deposit or

otherwise, approximately one year later. And, there is no basis to infer that the repossession by

the communist Hungarian government in 1948 or 1949 was “intertwined” with the earlier,

Holocaust-era taking.

Lastly, plaintiffs argue that A Painted Stucco Bust, after Jacopo della Quercia, was not

“actually ‘legally returned and physically released’ in 1948 as Defendants claim.” (Pls.’ Opp. at

41.) The Court agrees that it is unclear whether the bust was returned “free and clear” to the

Herzog family. Although defendants contend that the bust was returned to the Herzog family on

April 15, 1948 (see Walker Decl. Ex. Q-2, ECF No. 148-25), an “acknowledgment of receipt”

50 from Dr. Jeszenszky, a Hungarian government official, states that the Hungarian government

received the piece “for safeguarding” the exact same day. (See

at Ex. Q-3.) Since there does

not appear to be any time between the piece’s purported return to the Herzogs and its immediate

repossession by the government, there is a lack of evidence that the return was “free and clear”

such that it “severed the connection between Hungary’s current possession and its Holocaust-era

seizure.” See de Csepel,

. The Court concludes defendants have not met

their burden as to A Painted Stucco Bust, and thus, the Court will retain jurisdiction over this

piece.

Because the defendants have demonstrated that two pieces were returned “free and

clear,” their repossessions were sufficiently separate from the Holocaust-era takings and thus not

“in violation of international law.” Claims related to these pieces will be dismissed. Claims as

to the Virgin of the Annunciation and A Painted Stucco Bust, however, are subject to the Court’s

jurisdiction pursuant to the FSIA’s expropriation exception.

6. Conclusion as to Returned Pieces

The Court of Appeals instructed this Court to “review . . . the artwork returned and

retaken by Hungary.” See de Csepel,

. Defendants alleged that nineteen pieces

were returned to the Herzog siblings or their representatives, and that sixteen of those were

subsequently retaken. After reviewing the evidence, the Court has concluded that the

expropriation exception applies to at least four of the group of nineteen. For the following three

pieces, the takings were “sufficiently intertwined with the Holocaust-era taking,” See de Csepel,

:

(1) A Painted Stucco Bust, after Jacopo della Quercia, 17(xx) in the amended complaint;

(2) The Virgin of the Annunciation, Austrian, circa 1400, 17(xxv); and

51 (3) Four Ancient Egyptian Sculptures, Statues, and Steles, 17(xxxi);

And as to one piece—József Borsos, Portrait of the Architect Mátyás Zitterbarth, 18(i)—

the Court concludes it was “retaken in a new violation of international law” and thus the

expropriation exception applies. See

As to nine other pieces, defendants have demonstrated that they were returned and re-

taken (if re-taken at all) in a way that “severed the connection between Hungary’s current

possession and its Holocaust-era seizure.”

. The Court therefore lacks jurisdiction

over these pieces:

(1) Gustave Courbet, The Spring (Artist and Model), 17(v);

(2) Giovanni Pedrini, called Giampietro, Christ Carrying the Cross, 17(xiii);

(3) Augustin Theodule Ribot, Still Life with a Chicken, a Bottle of Wine, Asparagus, Artichoke, Tomatoes and other Vegetables, on a Table, 17(xv);

(4) Giovanni Santi, The Dead Christ with Two Angels, also known as Christ the Dolorous, Christ with a Fly, 17(xvi);

(5) Alvise Vivarini or Giovanni Battista da Udine, Madonna and Child with Saints John the Baptist and a male Saint, 17(xviii);

(6) Francisco de Zurbarán, Saint Andrew, 17(xix);

(7) A Terracotta Group of the Virgin and Child, Italian, 15th century, 17(xxi);

(8) Lajos Deák Ébner, Fair in Szolnok City, 18(v); and

(9) Károly Ferenczy, Landscape with a Fenced Enclosure (Houses in Fernezely with Sheepfold), 20(i).

Lastly, as to the remaining six pieces—all of which belong to Elizabeth—the Court finds

that while defendants have adequately demonstrated their return, their later repossession must

still be analyzed to determine whether claims related to them are subsumed by the 1973

Agreement and are thereby covered by the FSIA’s treaty exception. See note 13, supra. Those

pieces are:

52 (1) Barthel Bruyn the Elder, Portrait of Petrus von Clapis, half-length, in a blue coat with fur collar, 17(i);

(2) Alonso Cano, Portrait of Don Balthasar Carlos (1629-1646), Standing full- length, in a Landscape, 17(ii);

(3) Pseudo Pier Francesco Fiorentino, The Madonna and Child, with the Infant Saint John, Saint Catherine and Angels, 17(ix);

(4) Domenikos Theotokopoulos, El Greco, The Holy Family with Saint Anne, 17(x);

(5) Sir Anthony Van Dyck, Portrait of Margaret of Lothringen, 17(xvii); and

(6) Mihály Munkácsy, In the Studio, 18(iv).

D. 1973 AGREEMENT

Defendants argue that “[t]he documentary evidence makes clear that [Elizabeth] sought

and received compensation for property that she affirmatively claimed was taken from her after

she became a U.S. citizen,” and as a result, the Court lacks jurisdiction over her claims that were

settled pursuant to the 1973 Agreement between the United States and Hungary. (See Mot. to

Dismiss at 31 (emphasis in original).) Plaintiffs respond that the 1973 Agreement does not

apply, for defendants fail to point to any evidence that defendants took any of the artworks at

issue after Elizabeth became a citizen in June 1952 and before March 6, 1973, when the 1973

Agreement was signed, and second, the United States cannot espouse claims that arose when an

individual was not yet an American citizen. (See Pls.’ Opp. at 37.)

Throughout these proceedings, this Court has consistently held that the 1973 Agreement

does not bar claims except for those takings from Elizabeth between 1952 and 1973. The Court

of Appeals agreed and directed this Court on remand to determine whether any of the returned

artworks were taken from Elizabeth after June 1952. See de Csepel,

(“Although, as the district court explained, the 1973 agreement could not have extinguished

claims in any work of art taken from Erzsébet before she became a citizen in 1952, the remaining

53 defendants insist that Hungary did take some of the art from Erzsébet after she became a

citizen.” (internal citation omitted)); see also

(“[W]e think it best to leave it to the district

court to address this issue in the first instance as part of its review of the artwork returned and

retaken by Hungary.”).

As noted in Section III.C, supra, there are six pieces attributable to Elizabeth that may

have been taken during the relevant time period covered by the 1973 Agreement. In accordance

with the Court of Appeals’ mandate, the Court will analyze only those six pieces, which were

returned by Hungary post-war. Elizabeth’s remaining pieces are undisputed wartime takings and

thus could not have been settled by the 1973 Agreement, as will be further explained below. 21

See Section III.D.1, infra (explaining the claims process).

1. The Claims Process

The International Claims Settlement Act of 1949 established a process by which

American citizens could receive compensation from the United States government for losses

caused by certain foreign governments during certain periods of time. See International Claims

Settlement Act of 1949,

et seq.; (see also Scholl-Tatevosyan Decl. Ex. 40 at 13

21 For example, defendants contend that the 1973 Agreement subsumed Elizabeth’s claims to two pieces—József Borsos, Girls with Flowers (The Three Graces), 17(xxxii) in the amended complaint, and Károly Brocky, Bacchanale, 18(ii)—although they were never raised to either the United States or Hungary. (See Mot. to Dismiss at 33 (citing art. 6(1) of the 1973 Agreement (settling all claims of U.S. nationals, whether they were brought to Hungary’s attention or not)).) As the Court of Appeals limited this Court’s jurisdictional review to those pieces returned to the Herzog siblings after the war (see Appendix B), this argument must fail, for both pieces are undisputedly wartime takings (see Appendix A), and thus, they could not be settled by the 1973 Agreement, which requires that claimants be U.S. nationals at the time they suffered their losses. See de Csepel,

(“Both Hungary and the United States expressly recognized the inherent limitations on espousal authority during negotiations of the 1973 Agreement.”); see also de Csepel,

(citing this Court’s opinion for the proposition that “the 1973 agreement could not have extinguished claims in any work of art taken from Erzsébet before she became a [U.S.] citizen in 1952”). 54 (“These programs have involved claims of U.S. nationals for losses in specific foreign countries

as a result of the nationalization or other taking of property during specific periods of time by the

governments of those countries.”).) The Foreign Claims Settlement Commission (“FCSC”),

which replaced the International Claims Commission by amendment of the Act in 1954, decides

whether evidence submitted in support of claims for compensation under the Act establishes the

requisite elements. (See Scholl-Tatevosyan Decl. Ex. 40 at 1; see also id. at 3 (describing those

elements as “United States nationality, ownership, value and the date and circumstances of the

asserted loss”).) The FCSC determination is “final and conclusive on all questions of law and

fact and not subject to review by any other official of the United States or by any court by

mandamus or otherwise.” 22 U.S.C. §1641m.

The First Hungarian Claims Program, which was completed on August 9, 1959, and

funded by “the vesting and liquidation of enemy assets which had been blocked by the United

States during World War II” (see Scholl-Tatevosyan Decl. Ex. 40 at 17), provided compensation

for American citizens for losses suffered before August 9, 1955. See 22 U.S.C. § 1641b(2).

The Second Hungarian Claims Program came into existence following the conclusion of

an executive agreement between the United States and Hungary on March 6, 1973. See

Agreement Between the Government of the United States of America and the Government of the

Hungarian People’s Republic Regarding the Settlement of Claims, March 6, 1973, 24 U.S.T. 522

(the “1973 Agreement”). The 1973 Agreement provided that, in exchange for the sum of

$18,900,000, the government of the United States “shall discharge the Government of the

Hungarian People’s Republic and Hungarian nationals from their obligations to the Government

of the United States and its nationals in respect of all claims referred to in Article 2 of [the]

Agreement.” See 1973 Agreement at Art. 6(1). Article 2 listed as discharged and settled any

55 claims that, inter alia, related to “property, rights and interests affected by Hungarian measures

of nationalization, compulsory liquidation, expropriation, or other taking on or before the date of

this Agreement.” See id. at Art 2(1). The Second Program was completed on May 16, 1977, and

authorized the FCSC to determine claims for losses after August 9, 1955, up through the date the

1973 Agreement was signed on March 6, 1973. (See Scholl-Tatevosyan Decl. Ex. 40 at 19.)

The FCSC “was also authorized to adjudicate certain claims which should have been filed in the

first Hungarian Claims Program, but were not, due to an administrative error.” (Id.) While

funds from the Second Program could be used to pay pre-1955 claims, it could only do so once

post-1955 claims and previously-unfiled claims were funded to the same level as claims had

been under the First Program. See 22 U.S.C. § 1641i(a)(7).

Under the 1973 Agreement once Hungary paid the $18,900,000 as provided for in Article

1, “the Government of the United States will consider as finally settled all claims for which

compensation is provided under Article 1, whether or not they have been brought to the attention

of the Government of the Hungarian People’s Republic.” See 1973 Agreement at Art. 6(1).

Moreover, the Agreement provided that “[t]he distribution of [the $18.9 million] . . . falls within

the exclusive competence of the Government of the United States in accordance with its

legislation, without any responsibility arising therefrom for the Government of the Hungarian

People’s Republic.” See id. at Art. 5. As a result, the 1973 Agreement settled all claims of U.S.

citizens against Hungary in their entirety and required U.S. citizens to deal with the United States

government (not Hungary) to the extent they required compensation. Both the United States and

Hungary understood that to be deemed a “national of the United States,” an individual had to

have been a U.S. citizen at the time the loss was suffered. (See Benenati Decl. Ex. 22,

Deposition of Dr. István Kiss, at 32:14-17 (“The prime principle applied in this agreement was

56 that the person whose claim was submitted should be or should have been an American citizen at

the time of suffering the damage . . . .”), ECF No. 110-7); see also de Csepel,

(“Both Hungary and the United States expressly recognized the inherent limitations on

espousal authority during negotiations of the 1973 Agreement.”).

2. Elizabeth’s Claims

The evidence is clear as to the artworks that were included in Elizabeth’s 1959 claim to

the FCSC, as well as the compensation she received. In 1959 she received $457,290.80 for real

and personal property she asserted was taken from her by the Hungarian government after she

became a U.S. citizen and before August 9, 1955. (See Scholl-Tatevosyan Decl. Ex. 34.) This

total included $210,000 for art in which she claimed a full or a one-third interest along with her

two siblings.22 (See Scholl-Tatevosyan Decl. Ex. 33.) She claimed that the art was taken on

22 Of the twelve pieces which she claimed were taken by Hungary in 1954, eleven are included in the amended complaint:

(1) Barthel Bruyn the Elder, Portrait of Petrus von Clapis, half-length, in a blue coat with fur collar, 17(i) in the amended complaint; (2) Alonso Cano, Portrait of Don Balthasar Carlos (1629-1646), Standing full- length, in a Landscape, 17(ii); (3) Gustave Courbet, Le Chateau de Blonay (neige), (The Chateau of Blonay (snow)), 17(iv); (4) Pseudo Pier Francesco Fiorentino, The Madonna and Child, with the Infant Saint John, Saint Catherine and Angels, 17(ix); (5) Domenikos Theotokopoulos, El Greco, The Holy Family with Saint Anne, 17(x); (6) Bernardino Licinio da Pordenone, Portrait of a Lady, half-length, in a Black Robe, Holding a Book, 17(xiv); (7) Augustin Theodule Ribot, Still Life with a Chicken, a Bottle of Wine, Asparagus, Artichoke, Tomatoes and other Vegetables, on a Table, 17(xv); (8) Sir Anthony Van Dyck, Portrait of Margaret of Lothringen, 17(xvii); (9) Alvise Vivarini or Giovanni Battista da Udine, Madonna and Child with Saints John the Baptist and a male Saint, 17(xviii); (10) Mihály Munkácsy, “La Visite” (The Afternoon Visit), 18(iii); and (11) Mihály Munkácsy, In the Studio, 18(iv).

57 May 12, 1954, the date of passage of Hungary’s 1954 Museum Decree (see id.), which allowed

the Hungarian government to nationalize art with no apparent owner or when the owner had fled

the country without permission. (See Declaration of Orsolya Banki Ex. C, Legislative Decree

No. 13 of 1954 at Sec. 9(1), ECF No. 13-2.) It appears now that Elizabeth’s claim that her art

was taken on May 12, 1954, pursuant to the Museum Decree, was made in error. 23 (See Pls.’

2020 Reply at 7 (“Elizabeth’s claim was predicated on the erroneous belief that her art had been

nationalized pursuant to the 1954 Museum Decree . . . .”); see also Defs.’ 2020 Reply at 6

(“Early in the course of the 1973 Agreement negotiations, the Hungarian delegation rejected the

claims advanced by the United States on behalf of Erzsébet on the grounds that, while the

artworks had been placed in a public collection and would not be returned, they may not have

been formally ‘nationalized.’”).) She was paid $210,000 based on the assessments of an art

dealer and an employee of the Smithsonian Institute that the amount represented her “total

interest” in the claimed works. (See Scholl-Tatevosyan Decl. Ex. 33.) Nevertheless, the FCSC’s

decision provided that “[p]ayment of any part of this award shall not be construed to have

divested the claimant herein, or the Government of the United States on her behalf, of any rights

against the Government of Hungary for the unpaid balance of the claim, if any.” (See Scholl-

23 It is unclear when Elizabeth or her heirs understood that the pieces that she claimed compensation for in 1959 had not in fact been taken or placed in the state’s ownership under the 1954 Museum Decree. From the record, it appears that as late as 2000, Hungary was still claiming that at least some of the artwork at issue in the Nierenberg litigation was acquired as either “abandoned goods” or “marked as having an unknown owner and thus were acquired through legal regulation.” (See Scholl-Tatevosyan Decl. Ex. 48 at 21, ECF No. 148-6.) In October 2000, the Metropolitan Court concluded that the state had not gained ownership of the art in this way (see id. at 35), and this conclusion carried through to the Metropolitan Court of Appeals’ final decision in 2008, which agreed with the lower court’s determination that the 1954 Museum Decree did not apply to Elizabeth’s paintings, except for one. (See Scholl-Tatevosyan Decl. Ex. 26 at 3 (court concluded that the state could not establish ownership pursuant to the 1954 Museum Decree “because the plaintiff’s legal predecessor emigrated with permission”), ECF No. 148-4; see also id. at 14 (concluding that as to the Opie, the conditions of the 1954 Museum Decree were met).) 58 Tatevosyan Decl. Ex. 34.)

After the conclusion of the 1973 Agreement, Elizabeth made another claim, which was

adjudicated in 1977. This claim contained none of the art listed in the 1959 decision. (See

Scholl-Tatevosyan Decl. Ex. 16 (1977 FCSC decision).) Rather, it covered only property taken

after 1955. (See Scholl-Tatevosyan Decl. Ex. 17 (citing Section 303(5) of the International

Claims Settlement Act of 1949, which provided for compensation for losses after August 9,

1955).) The claimed property consisted of several pieces of real estate, as well as the two

paintings, Lucas Cranach’s Joachim with the Angel and John Opie’s Portrait of an Old Lady,

which have already been dismissed from this case. See de Csepel,

; see

also note 14, supra. The decision provided for payment of $33,000 for the Cranach and the

Opie and $31,000 for real property, plus interest. (See Scholl-Tatevosyan Decl. Exs. 16, 17.)

While defendants claim that Elizabeth also received additional money for the pieces listed in her

1959 claim under the 1973 Agreement (see Defs.’ 2020 Reply at 3), there is no evidence to

support such a finding.24

3. Pieces Settled Under 1973 Agreement

The Court concludes that five of the nineteen returned pieces were taken by Hungary

after Elizabeth became a U.S. citizen in June 1952 and before 1973, and thus claims related to

them must be dismissed for lack of jurisdiction due to the FSIA’s treaty exception. See note 13,

supra. These pieces are:

24 Defendants point to Martha Nierenberg’s comment that although she found no evidence of further payment, “her mother, as all other claimants, must have received USD 1,000 and 37% of the amount determined by the Foreign Claims Settlement Commission.” (See Scholl-Tatevosyan Decl. Ex. 49 at 9, ECF No. 148-6.) However, as discussed below, see Section III.D.3, the pertinent question is not whether Elizabeth was paid more money for those pieces under the 1973 Agreement—it is whether the pieces described in the FCSC decision were actually taken by the Hungarian government, and if so, when. 59 (1) Barthel Bruyn the Elder, Portrait of Petrus Von Clapis, half-length, in a blue coat with fur collar, 17(i) in the amended complaint;

(2) Alonso Cano, Portrait of Don Balthasar Carlos (1629-1646), Standing full- length, in a Landscape, 17(ii);

(3) Pseudo Pier Francesco Fiorentino, The Madonna and Child, with the Infant Saint John, Saint Catherine and Angels, 17(ix);

(4) Domenikos Theotokopoulos, El Greco, The Holy Family with Saint Anne, 17(x); and

(5) Sir Anthony Van Dyck, Portrait of Margaret of Lothringen, 17(xvii).

On May 10, 1966, Hungary’s Financial Institutions Authority wrote a letter to the

Museum of Fine Arts asking the museum to assess “whether [certain artworks] in fact came into

the possession of one of our public collections and, if they did, whether they are still there,

otherwise what ha[s] happened to them.” (See Scholl-Tatevosyan Decl. Ex. 38.) This letter

listed—as part of a longer list containing all pieces claimed by Elizabeth in her 1959 FCSC

claim—the five above-named pieces. In September 1966, a letter was written by the Director of

the Museum of Fine Arts to the Ministry of Cultural Affairs stating that “of the artworks listed

by the Financial Institutions Authority, 10 pictures that once comprised the property of the

Herzog family are now the property of the Museum of Fine Arts.” (See Walker Decl. Ex. L-6,

ECF No. 148-20.) Included in that list of ten were the five paintings. This letter explained that

the pieces had entered the property of the state as a result of the Kiss Forfeiture order. (See id.)

While a number of the pieces in that list had never been mentioned in connection with the Kiss

Forfeiture, and at least four on them were included in Dr. Oltványi’s 1951 “mistake letter,” the

question is not whether Hungary accurately described how it obtained possession. Rather, the

question is when the pieces were taken, and what that means for plaintiffs’ claims in the lawsuit

given the September 1966 letter’s affirmation that the Hungarian government considered these

pieces to be “the property of the Museum of Fine Arts.” (See id.)

60 Hungarian documents from the time period directly following the enactment of the 1973

Agreement also corroborate the state’s ownership of the five pieces. A letter dated March 14,

1973 (eight days after the signing of the Agreement), referenced the May 1966 letter and said

that “[t]he scope of the claims settlement agreement includes . . . paintings that formerly

belonged to the Weiss de Csepel family as listed in our letter of May 10, 1966.” (See Scholl-

Tatevosyan Decl. Ex. 39.) This underscores the conclusion that, regardless of exactly when the

pieces were taken, the Hungarian government considered them to be state property at least by the

time the 1973 Agreement was signed, if not before. The Hungarian government reiterated this

position in a December 11, 1973 letter to the Minister of Culture, wherein these five paintings, as

well as others, were listed as belonging to the state based on the 1973 Agreement. (See Scholl-

Tatevosyan Decl. Ex 37.) This is consistent with the ledger presented to the Hungarian

government by the United States in conjunction with the negotiation of the 1973 Agreement.

(See Scholl-Tatevosyan Decl. Ex. 36.) This ledger contained a list of Americans with claims and

made a specific reference to the $457,290.80 that was paid to Elizabeth in 1959 (which included

$210,000 for the twelve paintings). See Section III.D.2, supra.

Whether the Hungarian government agreed with Elizabeth’s representation in 1959 that

her pieces were taken pursuant to the 1954 Museum Decree, or whether her representation was

incorrect, is simply not relevant to the outcome of plaintiffs’ claims. For example, the

September 1966 letter—which post-dated the 1973 Agreement negotiations cited by plaintiffs in

which the Hungarian negotiators appeared to reject Elizabeth’s claims (see Benenati Decl. Ex. E

at 239, ECF No. 22-7)—stated that Elizabeth’s pieces were taken as a result of the Kiss

Forfeiture. (See Walker Decl. Ex. L-6.) If the pieces had in fact become state property as a

result of the Kiss Forfeiture, they would not be covered by the 1973 Agreement, as that pre-dated

61 her U.S. citizenship. The Court would still need to dismiss claims related to these pieces,

however, because the Kiss Forfeiture was not sufficiently “intertwined” with the Holocaust-era

taking to constitute a taking in violation of international law. See Section III.C.1, supra. And, if

the 1966 letter itself constituted a taking by declaring the pieces “state property,” they would be

covered by the 1973 Agreement. Because Elizabeth’s claims to these pieces must fail either

way, the Court need not determine exactly when the pieces were taken.

Moreover, plaintiffs may be correct that Elizabeth received no additional compensation

for the settlement of these claims pursuant to the 1973 Agreement (or the nationalization of her

pieces sometime in the late 1950’s or 1960’s). But this is immaterial under the text of the 1973

Agreement, which provides that once Hungary pays the $18,900,000, it is discharged from all

claims, whether or not they were presented to Hungary. See 1973 Agreement at Art. 6(1).

Under the Agreement, the United States government was solely responsible for distributing

money to potential claimants. See id. at Art. 5. Therefore, if Elizabeth did not receive any

additional money after the signing of the 1973 Agreement, she would have to take that up with

the United States government, not Hungary. Furthermore, even though the Court does not doubt

that Elizabeth made her 1959 claim in good faith, she likely received funds for pieces that were

in fact taken before 1952. Whether Elizabeth received from the FCSC more or less than she was

entitled to is beyond the Court’s purview, since by statute, it cannot review the FCSC’s

decisions. See 22 U.S.C. §1641m. And, since the Hungarian and U.S. negotiations included

these same pieces under the umbrella of the 1973 Agreement, the Court has no jurisdiction over

these pieces due the FSIA’s treaty exception. See

; see also note 13, supra.

However, for one piece not discussed in the September 1966 letter—Munkácsy’s In the

Studio—the Court will retain jurisdiction. The painting was deposited with the Museum of Fine

62 Arts in the 1950’s. (See Walker Decl. Ex. P-5, ECF No. 148-24.) While it was listed in the May

10, 1966 letter asking whether certain pieces belonged to the state, the September 1966 letter

failed to include it in the list of the Herzog pieces that “are now the property of the Museum of

Fine Arts.” (Compare Scholl-Tatevosyan Decl. Ex. 38 with Walker Decl. Ex. L-6.) Defendants

provided no further information about the painting’s whereabouts after the 1950’s deposit until

March 14, 1973, when a Hungarian government official wrote that “[t]he works of art in question

[including the Munkácsy]—should they have not yet passed into Hungarian state ownership—

have become property of the Hungarian State by virtue of the claims settlement agreement.”

(See Scholl-Tatevosyan Decl. Ex. 39; see also Scholl-Tatevosyan Decl. Ex. 37 (listing the 12

pieces claimed by Elizabeth “including two paintings by Munkácsy” as among those now in state

ownership).) However, In the Studio is still listed by defendants as “on deposit.” (See Scholl-

Tatevosyan Decl. Ex. 1); see also note 20, supra. This suggests that the piece may not actually

have been taken in 1973, as indicated by the March and December 1973 letters. And, any taking

after 1973 would be a taking in violation of international law not settled by the 1973 Agreement.

As a result, the Court will retain jurisdiction over claims related to this piece, as defendants have

not met their burden to demonstrate that the expropriation exception does not apply.

VI. MOTION TO DISMISS

A. Legal Standard

“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the

claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of

what the . . . claim is and the grounds upon which it rests.’” Bell Atlantic Corp. v. Twombly,

(2007) (quoting Conley v. Gibson,

(1957)). However, “[w]hile a

complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual

63 allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires

more than labels and conclusions, and a formulaic recitation of the elements of a cause of action

will not do.”

(internal quotation marks, brackets, and citations omitted). A plaintiff’s

allegations must be facially plausible, which requires that “the plaintiff plead[] factual content

that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Ashcroft v. Iqbal,

(2009).

“When there are well-pleaded factual allegations, a court should assume their veracity

and then determine whether they plausibly give rise to an entitlement to relief.”

. If the

facts alleged in the complaint taken as true fail to state a claim upon which relief could be

granted, under Rule 12(b)(6) a court must dismiss the case. See Am. Chemistry Council, Inc. v.

U.S. Dep’t of Health & Human Servs.,

(D.D.C. 2013).

In addition to their jurisdictional challenge as to the 19 pieces of allegedly returned

artwork (see Appendix B), defendants renew their arguments as to four issues raised in their

previous motions to dismiss—act of state, international comity, exhaustion, and statute of

limitations. These arguments were all rejected by this Court or the Court of Appeals. See, e.g.,

de Csepel,

(declining to address statute of limitations at motion to

dismiss stage, rejecting act of state); see also de Csepel,

(same); see also

(concluding that international comity should not be decided on a motion to dismiss); de

Csepel,

(rejecting exhaustion). Defendants now argue that since fact

discovery is over, the Court should revisit its rulings in view of the facts that have come to light

through discovery. But, as explained below, the Court is still unwilling to decide many of these

fact-intensive issues within the context of a motion to dismiss.

64 B. Act of State Doctrine

Defendants argue that “[t]he 1950 Confiscation Order [from the Kiss Forfeiture] is an

‘act of state’ that memorializes a legitimate confiscation allowed by the pre-war, non-biased Act

No XI of 1929,” and thus should not be reviewed by the Court. (See Mot. to Dismiss at 40.)

“The act of state doctrine ‘precludes the courts of this country from inquiring into the validity of

the public acts a recognized foreign sovereign power committed within its own territory.’”

World Wide Minerals, Ltd. v. Republic of Kazakhstan,

(D.C. Cir. 2002)

(quoting Banco Nacional de Cuba v. Sabbatino,

(1964)).

Defendants’ act of state argument requires little attention in light of the conclusion of

Section III.C.6, supra, that the Court lacks jurisdiction over nine of the eleven pieces from the

amended complaint that were also included in the Kiss Forfeiture. As a result, defendants’

argument is moot as to those nine pieces. Moreover, as the Court found that Dr. Oltványi’s 1951

“mistake letter” meant that József Borsos, Portrait of the Architect Mátyás Zitterbarth, 18(i) in

the amended complaint, was not in fact taken by the Kiss Forfeiture, the only remaining piece the

1950 Order could apply to is El Greco’s The Espolio, 17(viii). However, defendants have

conceded that this piece was a wartime taking by Hungary in its alliance with Nazi Germany and

never returned to the Herzog siblings. The piece’s subsequent inclusion in the Kiss Forfeiture is

therefore irrelevant, as it did not change the painting’s status as art initially expropriated and

taken into ownership by the World War II-era Hungarian government in cooperation with the

Nazis. Therefore, the act of state doctrine does not apply to El Greco’s The Espolio.

C. International Comity

Defendants argue that “the principles of international comity warrant recognition of the

2008 Hungarian Judgment [in the Nierenberg litigation], and this Court should reject Plaintiffs’

65 demand to re-litigate ownership of . . . artworks adjudicated in that action.” (See Mot. to Dismiss

at 46.) In its first opinion, the Court dismissed claims relating to any artworks litigated in the

Nierenberg action, concluding that “the record is devoid of evidence of ‘either prejudice in the

court, or in the system of laws under which it was sitting, or fraud in procuring the judgment, or

any other special reason why the comity of this nation should not allow it full effect.’” de

Csepel,

(quoting Hilton v. Guyot,

(1895)). However,

the Court of Appeals reversed, “[b]ecause nothing in the complaint contradicts the family’s

claims of due process violations, [so] dismissal at this stage [is] inappropriate.” de Csepel,

. Defendants contend that the Court can now decide to accord comity to the judgment

despite plaintiffs’ allegations because, “as is clear from all of the materials filed in the

Nierenberg proceedings, Ms. Nierenberg was afforded significant due process rights in

Hungary.” (See Mot. to Dismiss at 44.)

1. Nierenberg Litigation

Martha Nierenberg filed her suit in Hungary in 1999 and listed in her complaint a number

of works owned by her mother, Elizabeth, and her uncles István and András. (See Scholl-

Tatevosyan Decl. Ex. 20.) She petitioned for the return of twelve pieces belonging to Elizabeth.

Nine of those twelve are in the amended complaint. 25 Another two listed in the petition, Lucas

25 Those nine pieces are:

(1) Barthel Bruyn the Elder, Portrait of Petrus von Clapis, half-length, in a blue coat with fur collar, 17(i) in the amended complaint; (2) Alonso Cano, Portrait of Don Balthasar Carlos (1629-1646), Standing full- length, in a Landscape, 17(ii); (3) Gustave Courbet, Le Chateau de Blonay (neige), (The Chateau of Blonay (snow)), 17(iv); (4) Pseudo Pier Francesco Fiorentino, The Madonna and Child, with the Infant Saint John, Saint Catherine and Angels, 17(ix); (5) Domenikos Theotokopoulos, El Greco, The Holy Family with Saint Anne, 66 Cranach’s Joachim with the Angel and John Opie’s Portrait of an Old Lady, have already been

dismissed from this case. See de Csepel,

. The last of the twelve,

Munkácsy’s Bust of Christ, was returned to Nierenberg while the case was ongoing. (See Scholl-

Tatevosyan Decl. Exs. 22-24.)

The pieces listed in Nierenberg’s complaint as attributable to András and István include

at least eighteen pieces included in the amended complaint. (See Scholl-Tatevosyan Decl. Ex.

20.) However, as András and István’s heirs declined to participate in the Nierenberg Litigation

(see Scholl-Tatevosyan Decl. Ex. 27 (letter from Julia Alice and Maria Angela declining to

participate)), the Hungarian court did not render any decision with regard to those pieces, and

thus, defendants do not argue they should be dismissed from the case on the ground of comity.

(See Mot. to Dismiss at 46 (“[T]he principles of international comity warrant recognition of the

2008 Hungarian Judgment, and this Court should reject Plaintiffs’ demand to re-litigate

ownership of . . .artworks adjudicated in that action.” (emphasis added)).)

“On October 20, 2000 the Budapest Metropolitan Court ordered that all paintings except

one be returned to Martha.” (See Pls.’ Opp. at 14; see also Scholl-Tatevosyan Decl. Ex. 47 at 35

(describing judgment requiring return of all pieces except John Opie’s Portrait of an Old Lady,

which it found was acquired by the state).) In November 2002, Hungary’s Supreme Court

17(x); (6) Sir Anthony Van Dyck, Portrait of Margaret of Lothringen, 17(xvii); (7) Károly Brocky, Bacchanale, 18(ii); (8) Mihály Munkácsy, “La Visite” (The Afternoon Visit), 18(iii); and (9) Mihály Munkácsy, In the Studio, 18(iv).

The Court notes that numbers (1), (2), (4), (5), and (6) in this list have already been dismissed for lack of jurisdiction. As a result, whether comity is accorded to the Nierenberg decision only affects claims as to four pieces (numbers (3), (7), (8), and (9)).

67 vacated the Metropolitan Court’s judgment primarily on the basis that Nierenberg had not proven

that she, as opposed to the heirs of the other siblings, owned all the claimed paintings. (See id. at

36-38 (describing 2002 judgment).)

In 2005, the Metropolitan Court concluded that Nierenberg was entitled to only one

painting, El Greco’s Holy Family. (See id. at 63.) This judgment was once again appealed, and

on January 10, 2008, Nierenberg’s claim was rejected in its entirety by the Metropolitan Court of

Appeals. (See id. at 67 (describing 2008 decision); see also Scholl-Tatevosyan Decl. Ex. 26

(2008 decision).) The Hungarian court concluded that the defendants had acquired ownership to

all the claimed paintings by, inter alia, uscupation (i.e., adverse possession), a criminal decision

(i.e., the Kiss Forfeiture), and international claims settlement (i.e., Elizabeth’s 1959 claim and

the 1973 Agreement). (See Scholl-Tatevosyan Decl. Ex. 48 at 68-69.)

2. Analysis

“‘Comity’ summarizes in a brief word a complex and elusive concept—the degree of

deference that a domestic forum must pay to the act of a foreign government not otherwise

binding on the forum.” Laker Airways, Ltd. v. Sabena, Belgian World Airlines,

(D.C. Cir. 1984). However, “the obligation of comity expires when the strong public

policies of the forum are vitiated by the foreign act.”

The application of comity “varies

according to the factual circumstances surrounding each claim for its recognition,” id.; the

presence of such “fact-intensive issues” often makes the defense “inappropriate for resolution on

a Rule 12(b)(6) motion.” de Csepel,

.

Defendants contend that since fact discovery is closed and “the factual record [is] now

well developed,” but “the FAC makes no new allegations regarding the Hungarian proceedings,”

it is appropriate to dismiss claims related to artworks adjudicated in the Nierenberg Litigation.

68 (See Mot. to Dismiss at 44.) It is true that plaintiffs’ allegations regarding the Nierenberg

proceedings have not been fleshed out since the end of fact discovery. (See Am. Compl. ¶ 78

(alleging only that the Hungarian proceedings “were not conducted in accordance with

internationally recognized standards of due process or in accordance with international law”).)

And, defendants, referring to a voluminous record relating to the Nierenberg Litigation, describe

myriad due process rights they claim Martha Nierenberg was afforded during the litigation in

Hungary. (See Mot. to Dismiss at 44–46.) But, defendants base their argument that the

Nierenberg proceedings “were . . . conducted in accordance with internationally recognized

standards of due process [and] in accordance with international law” (see Mot. to Dismiss at 44

(internal quotation marks omitted)), on a summary docket they created to describe the

proceedings. (See Scholl-Tatevosyan Decl. Exs. 47-49.) This docket includes citations to

“thousands of pages of motions, briefs, expert opinions, petitions, orders [and] judgments.” (See

Mot. to Dismiss at 44.) This is certainly not the type of evidence the Court is expected to wade

through at the motion to dismiss stage, when plaintiffs’ complaint is presumed to be true.

Moreover, plaintiffs argue that “while fact discovery has concluded, expert discovery has

not even commenced,” and that the issue of comity should not be decided at this stage. (See Pls.’

Opp. at 48.) Contrary to defendants’ position (see Defs.’ Reply at 22), expert testimony

comparing the Hungarian court system to the U.S. common law judicial system could well be

relevant. Moreover, the Court has already stated that resolution of non-jurisdictional factual

issues would need to wait for summary judgment. (See Oct. 26, 2017 Tr. at 11:11-12, ECF No.

140.) And, the Court of Appeals observed that allegations of due process violations present “just

the kind of fact-intensive issues that are inappropriate for resolution on a Rule 12(b)(6) motion,”

and therefore, “are properly addressed at summary judgment or trial.” See de Csepel,

607, 608. The Court therefore declines to revisit the issue of comity at this stage.

D. Exhaustion

Defendants also revive their argument that claims for which plaintiffs did not exhaust

their remedies in Hungary should be dismissed. They expanded upon this argument in their

supplemental briefing, which argued that despite the Court of Appeals’ subsequent opinions in

Simon and Philipp, this Court could grant the motion to dismiss on prudential exhaustion

grounds, as those actions “are factually and procedural[ly] distinct from this action.” (See Defs.’

Supp. Br. at 1, ECF No. 166.) The Court cannot agree.

Binding Circuit precedent forecloses defendants’ argument that prudential exhaustion

bars plaintiffs’ claims. In Philipp, the Court of Appeals observed that “although courts once

decided on a case-by-case basis whether to grant foreign states immunity as matter of

international comity, Congress abated the bedlam in 1976, replacing the old executive-driven,

factor-intensive, loosely common-law-based immunity regime with the FSIA’s comprehensive

set of legal standards governing claims of immunity in every civil action against a foreign state.”

Philipp,

(internal quotation marks and brackets omitted). As again explained by

the Circuit several months later in Simon, this means that under the FSIA, there is no requirement

of prudential exhaustion in cases against foreign states. See Simon,

(“When

Congress wanted to require the pursuit of foreign remedies as a predicate to FSIA jurisdiction, it

said so explicitly.”). Although defendants suggest that these cases are procedurally different and

thus need not be applied here, there is no suggestion in Philipp or Simon that their conclusions

were so limited; on the contrary, they observed that “controlling circuit and Supreme Court

precedent give no quarter to [the defendants’] theory of judicial immunity wrapped in exhaustion

clothing.” See

(emphasis added). Given this binding precedent, plaintiffs do not need to

70 exhaust their remedies in Hungary prior to bringing suit here.

E. Statute of Limitations

Defendants also argue that plaintiffs’ claims are not timely. In particular, they argue that

“[b]ecause Plaintiffs could have brought timely claims within six years of learning of the

artworks’ location but failed to do so, the HEAR Act does not apply to retroactively extend the

statute of limitations for claims to non-exhausted artworks,” and without the HEAR Act, all other

claims are barred by the District’s three-year statute of limitations. (See Mot. to Dismiss at 54

(internal quotation marks omitted).)

The Holocaust Expropriated Art Recovery Act of 2016, commonly referred to as the

“HEAR Act,” was passed in recognition of “[t]he unique and horrific circumstances of World

War II and the Holocaust[, which makes] statutes of limitations especially burdensome to the

victims and their heirs.” See P.L. 114-308,

, Sec. 2(6). As “[t]hose seeking

recovery of Nazi-confiscated art must painstakingly piece together their cases from a

fragmentary historical record ravaged by persecution, war, and genocide,” they are often unable

to complete the process within the time constraints of existing statutes of limitations. See

To

provide some relief to those undergoing this process, Congress provided that “[n]otwithstanding

any other provision of Federal or State law or any defense at law relating to the passage of

time, . . . a civil claim or cause of action against a defendant to recover any artwork or other

property that was lost during the covered period because of Nazi persecution may be

commenced,” at the latest, six years after “actual discovery” by the claimant of his possessory

interest in a work and of the work’s location. See

at Sec. 5(a).

This default six-year statute of limitations may be modified in two other potential

circumstances—for “preexisting” or “stale” claims. A “preexisting” claim is one that the

71 claimant already knew about, but which was barred even before the passage of the Act or which

is not yet barred. See

at Section 5(c). Under the Act, unless the preexisting claim also fits

within the ambit of Section 5(e), it “shall be deemed to have been actually discovered on the date

of enactment of this Act.” See

This revival of preexisting claims is meant to combat, for

example, the unfair situation where “claims expired before World War II even ended.” See

at

Sec. 2(6). However, some preexisting claims may also be considered “stale,” defined as where:

(1) the claimant or a predecessor-in-interest of the claimant had knowledge of the elements set forth in subsection (a) on or after January 1, 1999; and

(2) not less than 6 years have passed from the date such claimant or predecessor- in-interest acquired such knowledge and during which time the civil claim or cause of action was not barred by a Federal or State statute of limitations.

See id.at Sec. 5(e). Stale claims are not revived by the HEAR Act.

Plaintiffs’ claims are based in two theories: conversion and bailment. Under DC law,

conversion claims accrue as soon as the defendant acquires the property unlawfully and must be

brought within three years. See Sea Search Armada v. Republic of Colombia,

(D.D.C. 2011); see also Malewicz v. City of Amsterdam,

(D.D.C. 2007) (“[W]hen the defendant did not acquire the property lawfully in the first instance,

the claim accrues immediately . . . .”). Plaintiffs’ conversion claims qualify as preexisting claims

that will be revived by the HEAR Act, as claims arising from paintings taken during World War

II would have expired long before the Herzog siblings or their successors had the ability to bring

them.

The same three-year statute of limitations also applies to plaintiffs’ bailment claims. See

de Csepel,

. However, a bailment claim only accrues “when the plaintiff

demands the return of the property and the defendant refuses, or when the defendant takes some

action that a reasonable person would understand to be either an act of conversion or inconsistent

72 with a bailment.” Malewicz,

. While defendants argue (as they did in

previous motions to dismiss) that plaintiffs’ claims accrued as early as 1999 (see Mot. to Dismiss

at 54), the Court of Appeals concluded in its first opinion that “nothing in the complaint indicates

that the family’s claims did in fact accrue in 1999 when Martha Nierenberg filed suit in the

Hungarian court.” See de Csepel,

. This is because “although litigation is often

filed in response to refusal of a demand, it can also serve as a vehicle for increasing pressure to

settle during ongoing negotiations.”

. For that reason, the Court of Appeals concluded

that “at the motion to dismiss stage, we look only at the complaint, in which we see nothing that

conflicts with the family’s allegation that their bailment claims accrued in January 2008.”

If

such facts are ultimately proven, plaintiffs’ bailment claims would be timely even without the

HEAR Act, as the complaint was filed in 2010.

As this Court stated in its earlier opinion, “[m]otions to dismiss ‘based on a limitations

defense are disfavored because resolution generally requires the development of a record and the

adjudication of factual issues.’” See de Csepel,

(quoting Malewicz,

). For instance, “[a]lthough what constitutes the accrual of a cause of action is

a question of law, determining when accrual occurs in a specific case is a question of fact.” Lee

v. Wolfson,

(D.D.C. 2003) (internal quotation marks and brackets

omitted). So even if plaintiffs must rely on the HEAR Act with respect to their bailment claims,

there are a host of factual issues that must be resolved regarding when plaintiffs (or their

predecessors) may have learned about their claims or might have been able to bring them. 26

26 Moreover, the Court has not even begun to “wade into . . . equitable-tolling waters,” see de Csepel,

, as it has previously suggested may be appropriate given plaintiffs’ allegations that “for years, Hungary actively misled the Herzog Heirs into believing that it accepted their ownership rights to the Herzog Collection, was giving their claims serious consideration, and repeatedly advised them that it would reach a favorable decision, at which 73 As a result, the Court will not revisit its earlier ruling. It will decline to resolve

defendants’ statute of limitations defense as to plaintiffs’ bailment claims. The Court, however,

concludes that plaintiffs’ conversion claims are revived by the HEAR Act as “preexisting

claims.”

CONCLUSION

For the foregoing reasons, the Court will grant defendants’ motion to dismiss in part and

deny it in part. A separate Order accompanies this Memorandum Opinion.

_______________________ ELLEN S. HUVELLE United States District Judge

Date: May 11, 2020

time they could decide if any further action would be required.” See de Csepel,

(quoting Compl. ¶ 94.) As the Supreme Court has stated, “where the complainant has been induced or tricked by his adversary’s misconduct into allowing the filing deadline to pass,” Young v. United States,

(2002) (internal quotation marks omitted), the application of equitable tolling may be warranted. Moreover, in previous motions as in the current motion to dismiss, “defendants allege[d] that plaintiffs were required to exhaust their remedies in Hungary prior to filing suit here, a fact that, if anything, supports plaintiffs’ plea for equitable tolling.” See de Csepel,

(emphasis in original) (internal citation omitted). 74 APPENDIX A Undisputed wartime takings for which the Court of Appeals approved jurisdiction

Art Piece FAC ¶ Owner (1) Camille Corot, Portrait of a Woman 17(iii) András (Lady with a Marguerite (Daisy))

(2) Gustave Courbet, Le Chateau de 17(iv) Erzsébet Blonay (neige), (The Chateau of Blonay (snow))

(3) Domenikos Theotokopoulos, El 17(vi) András Greco, Saint Andrew

(4) Domenikos Theotokopoulos, El 17(vii) István Greco, The Espolio, also known as El Expolio, The Disrobing of Christ

(5) Domenikos Theotokopoulos, El 17(viii) András Greco, The Agony in the Garden, also known as Christ on the Mount of Olives

(6) Polidoro Da Lanciano, Christ and the 17(xi) András Woman Taken in Adultery

(7) Eugenio Lucas Padilla (Eugenio 17(xii) András Velázquez), The Revolution (8 May 1808)

(8) Bernardino Licinio da Pordenone, 17(xiv) András Portrait of a Lady, half-length, in a Black Robe, Holding a Book

(9) Figure of Saint Agnes, Schwarzwald 17(xxii) András Sculptor, German, circa 1430

(10) Figure of Saint Catherine of 17(xxiii) András Alexandria, German, early 16th century

(11) Figure of Saint Barbara, German, 17(xxiv) András early 16th century

(12) A Carved Bust of a Prophet, South 17(xxvi) András German, probably workshop of Erasmus Grasser, circa 1500

75 Art Piece FAC ¶ Owner

(13) The Virgin and Child, Florentine, 17(xxvii) András circa 1540

(14) The Nativity, Anonymous, 14th 17(xxviii) András century

(15) A Greek Marble Hero Relief, 17(xxix) András showing the Deceased at a Funerary Banquet, Greek, 4th century BC

(16) One Hundred and Seventy-Seven 17(xxx) András Items of Ancient Gold Jewels and Coins

(17) József Borsos, Girls with Garlands 17(xxxii) Erzsébet of Flowers (The Three Graces)

(18) Four ancient silver coins 17(xxxiii) András

(19) Seventy-Eight Pieces: Ancient 17(xxxiv) András Cameos, Intaglios, Other Carved Stones and Semi-Precious Stones

(20) Károly Brocky, Bacchanale 18(ii) Erzsébet

(21) Mihály Munkácsy, “La Visite” (The 18(iii) Erzsébet Afternoon Visit)

(22) “Meuron a Paris” Musical Clock, 19(i) András 18th century

(23) Sebastianus Hann, Jewelry Bowl 19(ii) András

76 APPENDIX B Artworks for which the Court was directed to address jurisdiction

Artwork FAC ¶ Owner Jurisdiction

(1) Barthel Bruyn the Elder, 17(i) Erzsébet No Portrait of Petrus von Clapis, half- length, in a blue coat with fur collar

(2) Alonso Cano, Portrait of Don 17(ii) Erzsébet No Balthasar Carlos (1629-1646), Standing full-length, in a Landscape

(3) Gustave Courbet, The Spring 17(v) István No (Artist and Model)

(4) Pseudo Pier Francesco 17(ix) Erzsébet No Fiorentino, The Madonna and Child, with the Infant Saint John, Saint Catherine and Angels

(5) Domenikos Theotokopoulos, 17(x) Erzsébet No El Greco, The Holy Family with Saint Anne

(6) Giovanni Pedrini, called 17(xiii) András No Giampietro, Christ Carrying the Cross

(7) Augustin Theodule Ribot, Still 17(xv) István No Life with a Chicken, a Bottle of Wine, Asparagus, Artichoke, Tomatoes and other Vegetables, on a Table

(8) Giovanni Santi, The Dead 17(xvi) István No Christ with Two Angels, also known as Christ the Dolorous, Christ with a Fly

(9) Sir Anthony Van Dyck, 17(xvii) Erzsébet No Portrait of Margaret of Lothringen

77 Artwork FAC ¶ Owner Jurisdiction

(10) Alvise Vivarini or Giovanni 17(xviii) István No Battista da Udine, Madonna and Child with Saint John the Baptist and a male Saint

(11) Francisco de Zurbarán, Saint 17(xix) István No Andrew

(12) A Painted Stucco Bust 17(xx) István Yes Representing Prudence, After Jacopo della Quercia

(13) A Terracotta Group of the 17(xxi) István No Virgin and Child, Italian, 15th Century

(14) The Virgin of the 17(xxv) András Yes Annunciation, Austrian, circa 1400

(15) Four Ancient Egyptian 17(xxxi) András Yes Sculptures, Statues, and Steles

(16) József Borsos, Portrait of the 18(i) András Yes Architect Mátyás Zitterbarth

(17) Mihály Munkácsy, In the 18(iv) Erzsébet Yes Studio

(18) Lajos Deák Ébner, Fair in 18(v) András No Szolnok City

(19) Károly Ferenczy, Landscape 20(i) András No with a Fenced Enclosure (Houses in Fernezely with Sheepfold) 1912

78