David De Csepel v. Republic of Hungary , 859 F.3d 1094 ( 2017 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 6, 2017 Decided June 20, 2017
No. 16-7042
DAVID L. DE CSEPEL, ET AL.,
APPELLEES
v.
REPUBLIC OF HUNGARY, A FOREIGN STATE, ET AL.,
APPELLANTS
Appeal from the United States District Court
for the District of Columbia
(No. 1:10-cv-01261)
Thaddeus J. Stauber argued the cause for appellants. With
him on the briefs were Emily Crandall Harlan and Sarah
Erickson André.
Alycia Regan Benenati argued the cause for appellees.
With her on the brief were Sheron Korpus, Michael Shuster,
Michael D. Hays, and Alyssa T. Saunders.
Before: HENDERSON and TATEL, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
2
Opinion concurring in part and dissenting from part II.B.2
filed by Senior Circuit Judge RANDOLPH.
TATEL, Circuit Judge: For the second time, we consider a
family’s decades-long effort to recover a valuable art collection
that the World-War-II–era Hungarian government and its Nazi
collaborators seized during their wholesale plunder of Jewish
property during the Holocaust. On remand from our earlier
decision, the district court concluded that the family’s claims
against the Republic of Hungary, its museums, and a state
university satisfy the expropriation exception to the Foreign
Sovereign Immunities Act and that no other provision of the
Act bars their claims. For the reasons explained below, we
affirm in part, reverse in part, and along the way, resolve
several issues regarding the Act’s application to claims seeking
to recover art stolen during the Holocaust.
I.
We described the background of this case in our earlier
opinion, de Csepel v. Republic of Hungary, 714 F.3d 591, 594–
97 (D.C. Cir. 2013). For the reader’s convenience, we repeat it
virtually in full.
Baron Mór Lipót Herzog was a “passionate Jewish art
collector in pre-war Hungary” who assembled a collection of
more than two thousand paintings, sculptures, and other
artworks. Compl. ¶ 38. Known as the “Herzog Collection,” this
body of artwork was “one of Europe’s great private collections
of art, and the largest in Hungary,” and included works by
renowned artists such as El Greco, Diego Velázquez, Pierre–
Auguste Renoir, and Claude Monet. Id. Following Herzog’s
death in 1934 and his wife’s shortly thereafter, their daughter
Erzsébet and two sons István and András inherited the
Collection. Id. ¶ 39.
 3
Then came World War II, and Hungary joined the Axis
Powers. In March 1944, Adolf Hitler sent German troops into
Hungary, and SS Commander Adolf Eichmann entered the
country along with the occupying forces and established
headquarters at the Majestic Hotel in Budapest. Id. ¶¶ 51, 60.
During this time, Hungarian Jews were subjected to anti-
Semitic laws restricting their economic and cultural
participation in Hungarian society and deported to German
concentration camps. Id. ¶¶ 44, 47, 52. As an integral part of
its oppression of Hungarian Jews, “[t]he Hungarian
government, including the Hungarian state police, authorized,
fully supported and carried out a program of wholesale plunder
of Jewish property, stripping anyone ‘of Jewish origin’ of their
assets.” Id. ¶ 54. Jews “were required to register all of their
property and valuables” in excess of a certain value, and the
Hungarian government “inventoried the contents of safes and
confiscated cash, jewelry, and other valuables belonging to
Jews.” Id. ¶ 55. “[P]articularly concerned with the retention of
artistic treasures belonging to Jews,” the Hungarian
government established “a so-called Commission for the
Recording and Safeguarding of Impounded Art Objects of Jews
. . . and required Hungarian Jews promptly to register all art
objects in their possession.” Id. ¶ 56. “These art treasures were
sequestered and collected centrally by the Commission for Art
Objects,” headed by the director of the Hungarian Museum of
Fine Arts. Id.
In response to widespread looting of Jewish property, the
Herzogs “attempted to save their art works from damage and
confiscation by hiding the bulk of [them] in the cellar of one of
the family’s factories at Budafok.” Id. ¶ 58. Despite these
efforts, “the Hungarian government and their Nazi[ ]
collaborators discovered the hiding place” and confiscated the
artworks. Id. ¶ 59. They were “taken directly to Adolf
Eichmann's headquarters at the Majestic Hotel in Budapest for
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his inspection,” where he “selected many of the best pieces of
the Herzog Collection” for display near Gestapo headquarters
and for eventual transport to Germany. Id. ¶ 60. “The
remainder was handed over by the Hungarian government to
the Museum of Fine Arts for safekeeping.” Id. After seizure of
the Collection, a pro-Nazi newspaper ran an article in which
the director of the Hungarian Museum of Fine Arts boasted 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. ¶ 59.
“Fearing for their lives, and stripped of their property and
livelihoods, the Herzog family was forced to flee Hungary or
face extermination.” Id. ¶ 63. Erzsébet Herzog (Erzsébet Weiss
de Csepel following her marriage) fled Hungary with her
children, first reaching Portugal and eventually settling in the
United States, where she became a U.S. citizen in 1952. Id.
István Herzog was nearly sent to Auschwitz but “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. ¶ 42. Several members of his family escaped to
Switzerland while others remained in Hungary. Id. ¶ 64. István
Herzog died in 1966, leaving his estate to his two sons, Stephan
and Péter Herzog, and his second wife, Mária Bertalanffy. Id.
¶ 42. András Herzog was “sent . . . into forced labor in 1942
and he died on the Eastern Front in 1943.” Id. ¶ 41. His
daughters, Julia Alice Herzog and Angela Maria Herzog, fled
to Argentina and eventually settled in Italy. Id. ¶ 64.
In our prior opinion, we described the family’s seven-
decade effort to reclaim the Collection, including through
Hungarian courts. de Csepel, 714 F.3d at 595–96; see de Csepel
v. Republic of Hungary, 808 F. Supp. 2d 113, 134–35 (D.D.C.
5
2011). When those efforts proved unsuccessful, the Herzog
family filed suit in U.S. district court against the Republic of
Hungary, three art museums—the Budapest Museum of Fine
Arts, the Hungarian National Gallery, and the Museum of
Applied Arts—and the Budapest University of Technology and
Economics (collectively, “Hungary”). The family alleges that
Hungary’s taking of forty-four pieces of the Herzog Collection
“constituted an express or implied-in-fact bailment contract,”
and that its failure to return them upon demand breached the
bailment contract and constituted conversion and unjust
enrichment. Compl. ¶¶ 96–110. The family seeks imposition of
a constructive trust, an accounting, and a declaration of its
ownership of the Herzog collection, all aimed at either
recovering the artwork or obtaining over $100 million in
compensation. Id. ¶¶ 111–28 & pt. V.
Hungary moved to dismiss, arguing that the suit was
barred by the Foreign Sovereign Immunities Act (FSIA). That
Act authorizes federal jurisdiction over civil actions against
foreign states, as relevant here, only in certain cases involving
expropriated property or commercial activity, and only to the
extent such jurisdiction is not inconsistent with certain
international agreements. 28 U.S.C. §§ 1604–05. The district
court denied Hungary’s motion, concluding that the
expropriation exception applies to the Herzog family’s claims
and that jurisdiction is not inconsistent with agreements
between the United States and Hungary. de Csepel, 808 F.
Supp. 2d. at 128–35. Hungary appealed, and “without ruling on
the availability of the expropriation exception,” we concluded
that the family’s claims satisfied the Act’s commercial activity
exception. de Csepel, 714 F.3d at 597–603.
Back in the district court, and following the close of
discovery, Hungary renewed its motion to dismiss. The district
court agreed with Hungary that the freshly developed record
6
failed to show that the commercial activities, i.e., the bailment
agreements, had any “direct effect” in the United States, as
required by the commercial activity exception. de Csepel v.
Republic of Hungary, 169 F. Supp. 3d 143, 158–63 (D.D.C.
2016) (quoting 28 U.S.C. § 1605(a)(2)). It nonetheless again
concluded that the expropriation exception applies, and that no
treaty forecloses its application. Id. at 163–69. The court
therefore denied the motion to dismiss, except as to two
paintings—Lucian Cranach the Elder’s “The Annunciation to
Saint Joachim” and John Opie’s “Portrait of a Lady”—that
Hungary acquired from third parties after the war. Id. at 165–
67.
Hungary now appeals, seeking dismissal of the claims
regarding the remaining forty-two pieces. It argues that all
claims are barred by a 1947 treaty between Hungary and the
Allied Powers and, alternatively, that the expropriation
exception is inapplicable. For its part, the Herzog family
defends the district court’s decision, but asks that, should we
dismiss any of their claims, they be given leave to amend their
complaint in light of the Holocaust Expropriated Art Recovery
Act of 2016, Pub. L. 114–308, 130 Stat. 1524, which Congress
enacted during the pendency of this appeal to remove
“significant procedural obstacles” facing “[v]ictims of Nazi
persecution” seeking to “recover Nazi-confiscated art.” Id.
§ 2(6). We have jurisdiction under the collateral order doctrine,
see Kilburn v. Socialist People’s Libyan Arab Jamahiriya, 376
F.3d 1123, 1126 (D.C. Cir. 2004) (holding that “denial of a
motion to dismiss on the ground of sovereign immunity” is
subject to interlocutory review under the collateral order
doctrine), and our review is de novo, de Csepel, 714 F.3d at
597.
Before considering the parties’ arguments, we think it
helpful to explain that the issues before us relate to two distinct
7
groups of art. The first—some twenty-five pieces—was never
physically returned to the family. As the district court
explained, after being seized, they were “scattered across Nazi-
occupied Europe,” and then “shipped back” to Hungary after
the war. de Csepel, 169 F. Supp. 3d at 149. According to the
family, these paintings are “being held by Hungary in a
custodial role” under a bailment arrangement. Id. at 149–51,
160. The second category—some fifteen pieces—was returned
to the family after the war, but Hungary later regained custody
through various procedures not relevant to the issues before us.
See id. at 149–51.
II.
The Foreign Sovereign Immunities Act provides that “a
foreign state shall be immune from the jurisdiction of the courts
of the United States and of the States,” subject to certain
exceptions. 28 U.S.C. § 1604. When a “defendant foreign state
has asserted the jurisdictional defense of immunity, the
defendant state bears the burden of proving that the plaintiff’s
allegations do not bring its case within a statutory exception to
immunity.” Belize Social Development Ltd. v. Government of
Belize, 794 F.3d 99, 102 (D.C. Cir. 2015) (citation and internal
quotation marks omitted).
Two FSIA provisions are central to this appeal: the treaty
exception, which Hungary contends bars all of the family’s
claims; and the expropriation exception, which the family,
echoing the district court, argues vitiates Hungary’s sovereign
immunity. We consider each in turn.
A.
Under the FSIA, a foreign sovereign’s immunity is
“[s]ubject to existing international agreements to which the
United States [wa]s a party at the time of enactment of th[e]
8
Act.” 28 U.S.C. § 1604. Pursuant to that exception, “if there is
a conflict between the FSIA and such an agreement regarding
the availability of a judicial remedy against a contracting state,
the agreement prevails.” de Csepel, 714 F.3d at 601 (alteration,
citation, and internal quotation marks omitted). As our court
recently explained in Simon v. Republic of Hungary, 812 F.3d
127 (D.C. Cir. 2016), which also involved the Hungarian
government’s wartime seizure of Jewish property—in that
case, the personal property of Jews sent to death camps—where
“a pre-existing treaty is said to confer more immunity than
would the FSIA, the treaty exception would override any of the
FSIA’s exceptions to immunity under which the claims
otherwise could go forward.” Id. at 135–36.
Hungary argues that the 1947 Treaty of Peace, Feb. 10,
1947, 61 Stat. 2065, 41 U.N.T.S. 135, which settled questions
outstanding between the Allied Powers and Hungary, including
claims of Hungarian nationals for property seized during the
war, is just such a treaty. Under Article 27 of the treaty,
Hungary promised to restore the property of all “persons under
Hungarian jurisdiction” who were “the subject of measures of
sequestration, confiscation or control on account of the racial
origin or religion of such persons.” Id. art. 27. Article 40
established a mechanism for resolving “any dispute concerning
the . . . execution of the Treaty,” i.e., direct diplomatic
negotiations followed by referral to the “Heads of the
Diplomatic Missions in Budapest of the Soviet Union, the
United Kingdom and the United States of America, acting in
concert.” Id. arts. 39–40. According to Hungary, these
provisions created an exclusive mechanism for individuals
seeking restitution of property expropriated by Hungary during
World War II, thereby barring additional liability through an
FSIA exception.
9
As the district court correctly noted, however, Hungary’s
argument is completely foreclosed by Simon, which holds that
“while Article 27 secures one mechanism by which Hungarian
victims may seek recovery, it does not establish the exclusive
means of doing so.” 812 F.3d at 137; see de Csepel, 169 F.
Supp. 3d at 164–65. “The terms of Article 27,” Simon explains,
“do not speak in the language of exclusivity,” and although “[a]
sovereign generally has the authority to espouse and settle the
claims of its nationals against foreign countries[,] . . . it has no
authority to espouse and extinguish the claims of another
state’s nationals.” Simon, 812 F.3d at 137–38 (citation and
internal quotation marks omitted). In executing the 1947
Treaty, then, “the United States and the other Allied Powers . . .
lacked the power to eliminate (or waive) the claims of another
state’s—i.e., Hungary’s—nationals in the treaty’s terms.” Id. at
138.
Hungary argues that the Simon court failed to consider the
Treaty’s introduction, which states that the treaty “will settle
questions still outstanding as a result of” the war. 41 U.N.T.S.
135, intro. According to Hungary, the family’s claims are
barred because they were “affirmatively ‘settled’” by the
treaty. Appellants’ Br. at 35. But this ignores Simon’s holding
that the Allies had “no power to settle or waive the extra-treaty
claims of . . . [Hungary’s] nationals.” 812 F.3d at 138.
Hungary insists that some of the family’s claims are
factually distinct from those in Simon. According to Hungary,
Simon addresses only claims filed in lieu of attempts to recover
through the treaty. In this case, by contrast, at least some of the
claims concern art recovered through the treaty process and
later retaken by Hungary. As the Herzog family observes, this
is a “distinction without a difference.” Appellee’s Br. at 52.
Because the Herzog family believes that Hungary failed to give
them full relief through the treaty, Simon allows them to
10
proceed either through the treaty or through other means like
“an Allied nation’s courts.” Simon, 812 F.3d at 138. Hungary
points to nothing in the treaty, nor to any principle of
international law, suggesting that claimants who attempt to use
the treaty but find the relief inadequate are either barred or
estopped from bringing extra-treaty claims. Indeed, Hungary’s
view of the treaty makes little sense: as Simon explains, such a
reading would require Hungarian nationals to enforce the treaty
through Article 40, a state-to-state process, despite having “no
obvious nation to speak and negotiate on their behalf against
Hungary.” Id. at 139.
B.
The rather abstruse text of the FSIA’s expropriation
exception is as follows:
A foreign state shall not be immune from the
jurisdiction of the courts of the United States . . . in
any case . . . [1] in which rights in property taken in
violation of international law are in issue and [2][a]
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; or [b] 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.
28 U.S.C. § 1605(a)(3). In other words, the exception has two
requirements. A claim satisfies the exception if (1) “rights in
property taken in violation of international law are in issue,”
and (2) there is an adequate commercial nexus between the
United States and the defendants. See Agudas Chasidei Chabad
11
of U.S. v. Russian Federation, 528 F.3d 934, 940 (D.C. Cir.
2008). We start with the “rights in property” requirement.
1.
Hungary argues that this case involves a bailment
agreement, not “rights in property taken in violation of
international law.” Once again, however, Simon controls. That
decision holds that Hungary’s seizures of Jewish property
during the Holocaust constituted genocide and were therefore
takings in violation of international law. 812 F.3d at 142–46.
Equally important, Simon explains that a complaint need not
allege a straightforward claim for taking in violation of
international law. See id. at 140–42; cf. Helmerich & Payne
International Drilling Co. v. Bolivarian Republic of Venezuela,
971 F. Supp. 2d 49, 56 (D.D.C. 2013) (“The Complaint states
[a] count[ for] Taking in Violation of International Law.”).
Rather, “garden-variety common-law causes of action” can
suffice. Simon, 812 F.3d at 141; see Bolivarian Republic of
Venezuela v. Helmerich & Payne International Drilling Co.,
137 S. Ct. 1312, 1323–24 (2017) (recognizing expropriation
exception cases involving “simple common-law claim[s]”).
This case is just like Simon. Here, as there, Hungary seized
Jewish property during the Holocaust. Here, as there, plaintiffs
bring “garden-variety common-law” claims to recover for that
taking. In Simon, the plaintiffs’ conversion claim alleged that
they “had the right to possess personal property that was taken
from them by defendants,” and their unjust enrichment claim
alleged that they “were deprived of their personal property by
the defendants and that it would be inequitable and
unconscionable for the defendants to continue to enjoy the
benefits of possession and use of the plaintiffs’ personal
property.” Simon, 812 F.3d at 142 (alteration, citations, and
internal quotation marks omitted). So too here. The Herzog
family alleges that they “own and have a right to possession of
12
the Herzog Collection,” and that Hungary “reject[ed]” a
demand for its return. Compl. ¶¶ 103–05. To be sure, the Simon
plaintiffs did not bring a bailment claim, but like the conversion
claim they did bring bailment is a “garden-variety common-
law” claim concerning the right to possess property. See
George W. Paton, BAILMENT IN THE COMMON LAW 4 (1952)
(“This work is primarily concerned with the common law
conception of bailment.”).
Hungary points out that the complaint’s “causes of action
make no reference to a war-time taking.” Appellants’ Br. at 22.
Rather, it says, Hungary’s Holocaust expropriations are
“legally, factually, and temporally distinct from [plaintiffs’]
claims of post-war, non-sovereign, private party commercial
bailment breaches.” Appellants’ Reply Br. at 4.
We agree that there must be some connection between the
family’s claims and Hungary’s expropriation of the Herzog
collection. The Herzog family conceded as much at oral
argument. See Oral Arg. Tr. 20:1–:12 (acknowledging that
property once expropriated is not forever tainted by that
expropriation). But as the family also emphasizes, most of its
claims do in fact involve a tight legal, factual, and temporal
connection to Hungary’s expropriation of the collection. The
district court found, and Hungary concedes, that some twenty-
five pieces of art were never returned to the family. See de
Csepel, 169 F. Supp. 3d at 149; Appellants’ Br. at 45. Even
though the complaint seeks recovery through a bailment, the
fundamental fact remains: Hungary’s possession of the Herzog
collection stems directly from its expropriation of the
collection during the Holocaust. See Bernstein v. Noble, 487
A.2d 231, 234 (D.C. 1985) (explaining that one element of a
bailment relationship is that “possession and control over an
object pass from the bailor to the bailee” (citation and internal
quotation marks omitted)).
13
Hungary argues that the expropriation exception is
inapplicable because a bailment claim is, at its core,
commercial, and commercial claims may proceed only under
the commercial activity exception, not the expropriation
exception. Moreover, as Hungary points out, we explained in
our earlier decision that the Herzog family “seeks to recover
not for the original expropriation of the Collection, but rather
for the subsequent breaches of bailment agreements they say
they entered into with Hungary.” de Csepel, 714 F.3d at 598.
But we also expressly reserved decision on the availability of
the expropriation exception, and we have never held that in
order to proceed against a foreign government, a claim must
fall into just one FSIA exception—in this case, either the
expropriation exception or the commercial activity exception,
but not both. Whether an activity is commercial and whether
the claim is “based upon” such activity, as the commercial
activity exception requires, are altogether different questions
from whether the claim places “in issue” an expropriated
property right, as the expropriation exception requires. See 28
U.S.C. § 1605(a)(2) (depriving a foreign state of immunity
when “the action is based upon a commercial activity carried
on in the United States by the foreign state”); OBB
Personenverkehr AG v. Sachs, 136 S. Ct. 390, 396 (2015)
(“[A]n action is ‘based upon’ the ‘particular conduct’ that
constitutes the ‘gravamen’ of the suit.”). Indeed, Simon
explains that garden-variety common-law claims, including a
quasi-contractual claim for unjust enrichment, may satisfy the
expropriation exception. Simon, 812 F.3d at 142; see id. at 146
(“There is no reason to assume that, in every discrete context
in which [the FSIA] exceptions might be applied . . . , there
would be perfect coherence in outcome across all of the
exceptions.”). The same is true for the family’s bailment claim.
Hungary cites a series of cases in which courts have
rejected efforts to recast tort and takings claims as commercial
14
claims in order to satisfy the commercial activity exception.
See, e.g., Saudi Arabia v. Nelson, 507 U.S. 349, 361–63 (1993)
(concluding that plaintiffs could not sue for intentional torts
committed by the Saudi police through a commercial claim for
“failure to warn” of their “own tortious propensity”); Rong v.
Liaoning Province Government, 452 F.3d 883, 890 (D.C. Cir.
2006) (holding that the transfer of expropriated property to
another government-created entity constituted no commercial
activity, because the alternative conclusion would allow
jurisdiction over foreign sovereigns based on “almost any
subsequent disposition of expropriated property”). Those
cases, however, stand only for the proposition that the activity
at issue did not constitute “commercial activity” under the
FSIA. Cf. de Csepel, 714 F.3d at 599 (evaluating whether a
bailment agreement is a sovereign act or commercial activity).
The question here is very different: whether the claims satisfy
the expropriation exception.
We thus conclude 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. This, however, does not end our task.
As mentioned above, 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 “dispute[s] whether they were ever actually returned
to their physical custody”). de Csepel, 169 F. Supp. 3d at 149.
The district court, however, never determined whether the
temporary return of the art severed the connection between
Hungary’s current possession and its Holocaust-era seizure.
Instead, it concluded that the return of the art is irrelevant
because “the subsequent return of property confiscated by the
government does not extinguish the earlier taking; it simply
converts a permanent taking to a temporary one, altering the
15
appropriate measure of damages.” Id. at 166. But the family’s
bailment claims do not seek only damages for Hungary’s
temporary possession of this artwork from World War II until
its return. Instead, the family seeks to recover for Hungary’s
failure to return the art today in violation of bailment
agreements presumably formed when the country repossessed
the art. See Compl. ¶¶ 100 (“Defendants’ possession or re-
possession of any portion of the Herzog Collection following
WWII constituted an express or implied-in-fact bailment
contract for the benefit of the Plaintiffs.”); pt. V.A (“On their
First Claim of Relief: for an order directing Defendants to
return to Plaintiffs the pieces of the Herzog Collection that are
now . . . in Defendants’ possession . . . or for compensation
therefor . . . .”).
We shall therefore remand to the district court for it to
consider, in the first instance, the Herzog family’s claims to
those pieces returned by Hungary. See Simon, 812 F.3d at 142
(“We leave it to the district court on remand to determine
precisely which of the plaintiffs’ claims . . . satisfy[] the ‘rights
in property . . . in issue’ requirement of § 1605(a)(3).”). If their
return to the family and Hungary’s repossession are sufficiently
intertwined with the Holocaust-era taking, or if the pieces were
retaken in a new violation of international law, the claims may
place in issue “rights in property taken in violation of
international law.” But 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.
2.
Having concluded that the family’s claims for at least
some of the artworks satisfy the expropriation exception’s first
requirement, we turn to the commercial-activity nexus
requirement. It contains two clauses: where “rights in property
16
taken in violation of international law are in issue,” then the
foreign sovereign loses its immunity if (1) “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,” or (2) “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.” 28 U.S.C. § 1605(a)(3). The district court
concluded that the second clause is met here, see de Csepel,
169 F. Supp. 3d at 167, and neither the Republic of Hungary
nor its various agencies and instrumentalities, i.e., the three
museums and the university, dispute that conclusion.
The Republic of Hungary, however, argues that it should
nonetheless be dismissed as a defendant. As it points out,
unlike the first clause, which refers expressly to the “foreign
state,” the second clause—the one applicable here—refers to
only “an agency or instrumentality of the foreign state.”
According to the Republic, then, only its “agencies and
instrumentalities” are proper defendants, and it should be
dismissed. In support, it cites Simon, which explains that “[t]he
nexus requirement differs somewhat for claims against the
foreign state itself (e.g., Hungary) as compared with claims
against an agency or instrumentality of the foreign state . . . .”
812 F.3d at 146. “As to the claims against Hungary, the
question is whether” the first clause of the nexus requirement
is met. Id. “As to the claims against [the agency or
instrumentality], the question is whether” the second clause is
met. Id. “Applying that standard,” the Simon court found that
“the plaintiffs’ allegations suffice to withstand dismissal as to
the claims against the [agency or instrumentality] but not as to
the claims against Hungary,” and it dismissed the Republic of
Hungary from the case. Id. at 147–48.
 17
For its part, the Herzog family argues that the second
clause must be read in the context of the entire expropriation
exception, and read this way, the provision states that “a
foreign state shall not be immune . . . in 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.” 28
U.S.C. § 1605(a)(3). In other words, as the family sees it, the
foreign state (Hungary) remains a proper defendant as long as
its agencies or instrumentalities (the museums and the
university) engaged in the requisite commercial activity.
As to Simon, the family argues that we are bound not by
that decision, but rather by an earlier decision of our court,
Agudas Chasidei Chabad of U.S. v. Russian Federation, 528
F.3d 934 (D.C. Cir. 2008), a case which also dealt with the
exception’s second clause. Although the court in that case
found that two Russian agencies or instrumentalities “engaged
in sufficient commercial activity in the United States to satisfy”
that clause, it also “reverse[d]” the district court’s “finding of
Russia’s immunity.” Id. at 946, 955 (emphasis added).
According to the family, because Chabad retained the foreign
state (Russia) as a defendant, we too must retain the foreign
state (Hungary) as a defendant.
The question, then, is whether we are bound by Chabad or
Simon. See Helmerich & Payne International Drilling Co. v.
Bolivarian Republic of Venezuela, 185 F. Supp. 3d 233, 239–
42 (D.D.C. 2016) (recognizing their inconsistency). At first
glance, it appears that the family may be correct. Chabad
retained the foreign state, but Simon dismissed it, and in cases
of intracircuit conflict we are bound to follow the earlier
decision, here Chabad. Sierra Club v. Jackson, 648 F.3d 848,
18
854 (D.C. Cir. 2011) (“[W]hen a decision of one panel is
inconsistent with the decision of a prior panel, the norm is that
the later decision, being in violation of that fixed law, cannot
prevail.”).
The question, however, is not so simple because
“‘[b]inding circuit law comes only from the holdings of a prior
panel.’” Doe v. Federal Democratic Republic of Ethiopia, 851
F.3d 7, 10 (D.C. Cir. 2017) (emphasis added) (quoting
Gershman v. Group Health Association, 975 F.2d 886, 897
(D.C. Cir. 1992)). The precise question, then, is whether the
Chabad court held that a foreign state loses immunity if the
second nexus requirement is met. We think it did not.
The issue of the Russian state’s immunity was completely
unaddressed by the district court and neither raised nor briefed
on appeal—a deficiency that, as then-Judge Scalia reminded
us, deprives the court of the benefits of the adversarial system.
Carducci v. Regan, 714 F.2d 171, 177 (D.C. Cir. 1983) (Scalia,
J.) (“Failure to enforce” Federal Rule of Appellate Procedure
28, which requires that the parties brief the issues presented,
“deprive[s] us in substantial measure of that assistance of
counsel which the system assumes—a deficiency that we can
perhaps supply by other means, but not without altering the
character of our institution.”). The court, moreover, did not
explain why it kept the Russian Federation in the case. In fact,
we only know that it did because at the end of its opinion it
stated “we reverse [the district court’s] finding of Russia’s
immunity.” Chabad, 528 F.3d at 955. As our court recently
explained in United States v. Jones, 846 F.3d 366 (D.C. Cir.
2017), where “[o]ur prior decisions . . . merely stated without
analysis that [jurisdiction] existed, . . . those cursory and
unexamined statements of jurisdiction have no precedential
effect.” Id. at 369 (citations and internal quotation marks
omitted). In that case, the court considered whether it had
19
authority to review district court orders granting or denying
sentence reductions under 18 U.S.C. § 3582(c)(2). Though we
had previously reviewed such orders and stated that we “ha[d]
jurisdiction” under two specific statutes, see United States v.
Kennedy, 722 F.3d 439, 442 (D.C. Cir. 2013) (citing 28 U.S.C.
§ 1291); United States v. Cook, 594 F.3d 883, 885 (D.C. Cir.
2010) (citing 28 U.S.C. § 1291; 18 U.S.C. § 3742(a)(1)), these
bare statements, the court explained, were too conclusory to
constitute binding precedent. Accordingly, the Jones court
“grapple[d] with the issue more explicitly” and “f[ound] that
28 U.S.C. § 1291 permits such review.” Id. at 368–69.
So too here. While readers of the dissent might think that
the Chabad court discussed at length whether the Russian
Federation should remain in the case, the court reversed the
district court with no explanation at all. See Arch Trading Corp.
v. Republic of Ecuador, 839 F.3d 193, 206 (2d Cir. 2016)
(noting that Chabad asserted jurisdiction over Russia “without
separate discussion” of the foreign state). Such a “cursory and
unexamined” reversal is just the kind of “drive-by
jurisdictional ruling[]” that the Supreme Court has explained
“ha[s] no precedential effect.” Steel Co. v. Citizens for a Better
Environment, 523 U.S. 83, 91 (1998).
Indeed, Chabad’s analysis is in tension with its apparent
decision to extend jurisdiction from Russia’s agencies and
instrumentalities to the foreign state itself. Recall that the first
clause of the nexus requirement mandates that the property be
physically present in the United States, but the second does not.
In Chabad, the defendants argued that it “would be quite
anomalous” if the second clause could be satisfied by both a
relaxed physical presence requirement and a lower level of
commercial activity. Chabad, 528 F.3d at 947. The level of
commercial activity necessary to satisfy the second clause, the
argument went, must therefore be higher than that necessary to
20
satisfy the first clause. The Chabad court considered that
argument at some length before rejecting it. See id. at 947; see
also Agudas Chasidei Chabad of U.S. v. Russian Federation,
466 F. Supp. 2d 6, 24–25 (D.D.C. 2006). But it did so by
explaining that the first clause “applies to activities ‘carried on
by the foreign state,’ whereas the second clause involves the
commercial activities of the foreign state’s agencies and
instrumentalities.” Chabad, 528 F.3d at 947. The second
clause’s lower bar made sense in light of agencies’ and
instrumentalities’ “greater detachment from the state itself.” Id.
Given that the Chabad court recognized that the expropriation
exception provides greater protection to foreign states than to
agencies and instrumentalities, why would it have held that
foreign states lose their immunity whenever the lower bar is
satisfied? If there is an answer to that question, it appears
nowhere in the Chabad opinion. Although the Chabad court
did discuss the commercial-activity nexus requirements, as the
dissent notes, Dissenting Op. at 6–8, it never considered the
issue before us, namely, whether a foreign state loses its
immunity simply because its agency or instrumentality satisfies
the expropriation exception’s second clause.
By contrast to the Chabad court, the Simon court expressly
considered and decided the question of foreign state immunity
under the expropriation exception. It explained that the nexus
requirement for jurisdiction over foreign states “differs” from
that over agencies and instrumentalities: claims against foreign
states must satisfy the first nexus requirement, and claims
against agencies and instrumentalities must satisfy the second.
812 F.3d at 146. To be sure, the Simon court did not address
the Herzog family’s precise textual argument. But in a petition
for rehearing, the plaintiffs not only raised just that argument,
but also claimed that the Simon court was bound by Chabad to
retain the Republic of Hungary as a defendant. Petition for
Rehearing at 7, 12, Simon v. Republic of Hungary, No. 14-7082
21
(Feb. 29, 2016). Hardly “unaware” of the supposed intra-circuit
conflict, Dissenting Op. at 1, the Simon court denied the
petition. 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.
Although this is sufficient to resolve the question, even
were we not bound by Simon, we would hold that a foreign
state retains its immunity unless the first clause of the
commercial-activity nexus requirement is met. The FSIA
carefully distinguishes foreign states from their agencies and
instrumentalities. See, e.g., 28 U.S.C. §§ 1603(a)–(b) (defining
the terms); 1606 (making punitive damages available against
agencies and instrumentalities but not foreign states); 1610
(establishing different procedures for property execution).
Though the list of exceptions begins “[a] foreign state shall not
be immune,” id. § 1605, our court has explained that the foreign
state itself does not lose immunity merely because one of its
agencies and instrumentalities satisfies an FSIA exception;
rather, given the Act’s “presumption” that agencies and
instrumentalities have “independent status” from the foreign
state, “‘[w]hen a state instrumentality is not immune . . . , the
claim is ordinarily to be brought only against the
instrumentality.’” Foremost-McKesson, Inc. v. Islamic
Republic of Iran, 905 F.2d 438, 446 (D.C. Cir. 1990) (quoting
Restatement (Third) of the Foreign Relations Law of the
United States § 452 cmt. c (1987)). For that reason, a foreign
state loses its immunity under the commercial-activity
exception only if the claim against the state—as opposed to the
agency or instrumentality—satisfies that exception. See id. at
446–47 (“[A]bsent an agency relationship, the court lacks
subject matter jurisdiction over the foreign state for the acts of
its instrumentality.”).
22
The same is true for the 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; by contrast, an agency or instrumentality
loses its immunity if the claim against it satisfies the exception
by way of the second clause.
To conclude that the foreign state loses its immunity if
either clause is satisfied would produce an anomalous result:
the court would have no jurisdiction over the agencies and
instrumentalities that actually own or operate the expropriated
property. That is because, although the FSIA generally allows
for “an agency or instrumentality of a foreign state” to count as
a “foreign state,” id. § 1603, the agencies or instrumentalities
would fail to satisfy either of the expropriation exception’s two
clauses if considered to be the relevant “foreign state”
throughout the exception. Take this case. The family would be
unable to pursue its claims against the very entities that actually
possess the Herzog collection—the museums and the
university—because the collection is not “present in the United
States” (clause one) nor “owned or operated by an agency or
instrumentality” of the museums and the university (clause
two). Thus, the expropriation exception’s two clauses make
sense only if they establish alternative thresholds a plaintiff
must meet depending on whether the plaintiff seeks to sue a
foreign state or an agency or instrumentality of that state.
Collapsing the well-worn distinction between foreign
states and agencies and instrumentalities would likewise lead
to odd results. Because a foreign state would be amenable to
suit whenever its agency or instrumentality is not immune, a
plaintiff would be able to sue a foreign state with no
commercial activity in the United States so long as the agency
or instrumentality owning the property in issue is engaged in a
commercial activity in the United States. In other words—and
23
counterintuitively—a plaintiff (1) could more easily obtain
jurisdiction over a foreign state if the expropriated property is
possessed not by it, but by one of its agencies or
instrumentalities, and (2) could sue any and all agencies and
instrumentalities of a foreign state however unconnected to the
United States, so long as the foreign state itself possesses the
property in connection with a commercial activity carried on in
the United States. This expansive reading of the expropriation
exception makes little sense given that the provision targets
specific expropriated property. It is hardly surprising, then, that
such a reading was rejected by Simon and the only other circuit
to have addressed the question. See Garb v. Republic of
Poland, 440 F.3d 579, 589 (2d Cir. 2006) (explaining that the
first nexus requirement “sets a higher threshold of proof for
suing foreign states in connection with alleged takings”);
FEDERAL JUDICIAL CENTER, THE FOREIGN SOVEREIGN
IMMUNITIES ACT: A GUIDE FOR JUDGES 58–59 (2013) (“As is
often the case under the FSIA, standards established for the
foreign state differ from those established for its agencies and
instrumentalities.”).
III.
This leaves three issues.
First, the remaining defendants—the museums and the
university—argue that the claims of Erzsébet Weiss de Csepel,
the Herzog daughter who became a United States citizen in
1952, supra at 4, are barred by a 1973 agreement between the
United States and Hungary under which Hungary paid the
United States $18.9 million “in full and final settlement and in
discharge of all claims of the Government and nationals of the
United States against the Government and nationals of the
Hungarian People’s Republic.” Agreement between the
Government of the United States of America and the
Government of the Hungarian People’s Republic Regarding
24
the Settlement of Claims, Mar. 6, 1973, 24 U.S.T. 522 art. 1.
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, see de
Csepel, 808 F. Supp. 2d at 133–34, the remaining defendants
insist that Hungary did take some of the art from Erzsébet after
she became a citizen. This is true with respect to two
paintings—the Cranach and the Opie—but those two paintings
are no longer at issue in this case. See de Csepel, 169 F. Supp.
3d at 167 (dismissing the Cranach and Opie paintings).
Defendants point to record evidence suggesting that other
paintings may also have been taken from Erzsébet after she
became a citizen. See Appellants’ Reply Br. at 10 n.7
(identifying twelve paintings). The family disagrees, claiming
that only the Cranach and Opie paintings were seized after
1952. See Appellees’ Br. at 54–55 & n.15. Because we are
remanding the case for other reasons, we 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.
Defendants next argue, separate and apart from their FSIA
immunity defense, that the Herzog family should have to
exhaust its claims in Hungarian courts, as well as through a
recently created formal claims process. See de Csepel, 169 F.
Supp. 3d at 169. Compare Chabad, 528 F.3d at 948 (stating it
is “likely correct” that the plaintiff “was not required to exhaust
Russian remedies before litigating in the United States”), with
Fischer v. Magyar Allamvasutak Zrt., 777 F.3d 847, 859 (7th
Cir. 2015) (requiring “prudential exhaustion . . . based on
international comity concerns”). This argument ignores the
source of our appellate jurisdiction, i.e., the collateral order
doctrine.
25
As a general rule, appellate jurisdiction extends only to
“final decisions” of a district court, 28 U.S.C. § 1291, and
parties may not appeal where, as here, the district court has
simply denied a motion to dismiss. Kilburn, 376 F.3d at 1126.
It is nonetheless well settled that denial of a motion to dismiss
on the ground of sovereign immunity is “final” by application
of the collateral order doctrine and “therefore subject to
interlocutory review.” Id. This is why we have appellate
jurisdiction to consider Hungary’s FSIA arguments.
Hungary, however, has made no argument that the
collateral order doctrine applies to denial of a motion to dismiss
on freestanding exhaustion grounds. See Simon, 812 F.3d at
148 (observing that “the FSIA itself imposes no exhaustion
requirement”); see also Swint v. Chambers County
Commission, 514 U.S. 35, 49–51 (1995) (explaining that the
collateral-order exception applies to claims, rather than cases);
Stewart v. Oklahoma, 292 F.3d 1257, 1260 (10th Cir. 2002)
(addressing an Eleventh Amendment defense through the
collateral order doctrine but holding that a failure-to-exhaust
defense is not “independently subject to the collateral order
doctrine”). True, the Simon court considered several
exhaustion arguments, but that case came to us on appeal from
a final order dismissing the entire suit. Simon, 812 F.3d at 132,
146–49. Asked about our appellate jurisdiction at oral
argument, counsel for Hungary said “I’ll be honest, Your
Honor, you’ve got me there.” Oral Arg. Tr. 11:15–13:15.
Finally, the Herzog family asks that should we dismiss any
of their claims, they be allowed to amend their complaint in
light of the Holocaust Expropriated Art Recovery Act of 2016.
Pub. L. 114–308, 130 Stat. 1524. Passed during the pendency
of this appeal, that statute rests on Congress’s finding that
“[v]ictims of Nazi persecution and their heirs have taken legal
action in the United States to recover Nazi-confiscated art,” but
26
“[t]hese lawsuits face significant procedural obstacles partly
due to State statutes of limitations.” Id. § 2(6). The Act
therefore preempts existing state and federal statutes of
limitations for “a civil claim or cause of action . . . to recover
any artwork or other property that was lost . . . because of Nazi
persecution.” Id. § 5(a). Plaintiffs whose claims were barred by
a statute of limitations now have six years from the enactment
of the new statute to file their claims. Id. §5(c). Moreover, and
crucially for the Herzog family, the Act’s new statute of
limitations applies to claims “pending in any court on the date
of enactment of this Act, including any civil claim or cause of
action that is pending on appeal.” Id. § 5(d)(1).
Defendants urge us to deny the motion because, they say,
the family has offered “no explanation” for its failure to bring
a straightforward conversion claim from the start. Appellants’
Reply Br. at 25. Defendants cannot be serious about this, as in
their opening brief they themselves identify the “explanation,”
i.e., the “statute of limitations obstacle that has been applied in
courts around the country.” Appellants’ Br. at 29–30; see D.C.
Code § 12-301(2) (imposing a three-year statute of limitations
on actions “for the recovery of personal property”). Federal
Rule of Civil Procedure 15 directs courts to “freely give leave
[to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2).
Given that Congress enacted the Holocaust Expropriated Art
Recovery Act for the very purpose of permitting claims like
these to continue despite existing statutes of limitations,
“justice” quite obviously requires that the family be given leave
to amend their complaint.
IV.
We affirm the district court’s ruling that the Herzog
family’s claims to art never returned to them satisfy the FSIA’s
expropriation exception. With respect to art that was returned
to the Herzog family, we remand for the district court to
27
determine whether the claim to recover each piece may proceed
under the expropriation exception. We also instruct the district
court to dismiss the Republic of Hungary as a defendant and to
grant the Herzog family leave to amend their complaint in light
of the Holocaust Expropriated Art Recovery Act. Finally, we
dismiss for lack of appellate jurisdiction Hungary’s appeal
from the denial of its motion to dismiss on exhaustion grounds.
So ordered.
RANDOLPH, Senior Circuit Judge, concurring in part and
dissenting from part II.B.2:
The majority decides that the Republic of Hungary is
immune from the jurisdiction of the federal courts in this case.
I disagree.
Part II.B.2 of the majority’s opinion transforms the
governing jurisdictional statute to mean the opposite of what it
says. That distortion of the English language is not all. The
majority also dismisses a controlling panel decision thoroughly
inconsistent with the majority’s conclusion that there is no
jurisdiction over the Republic of Hungary. Instead of following
that decision, the majority credits a later, contradictory panel
decision, a decision bereft of any statutory analysis.
The two decisions dealing with the jurisdictional question
presented here are Agudas Chasidei Chabad of United States v.
Russian Federation, 528 F.3d 934 (D.C. Cir. 2008), and the later
decision in Simon v. Republic of Hungary, 812 F.3d 127 (D.C.
Cir. 2016). Chabad and Simon cannot be reconciled, at “first
glance” and every later glance. Maj. Op. 17. Both were
expropriation cases in which jurisdiction over the foreign state
rested on the commercial activities of the foreign state’s
agencies and instrumentalities in the United States. Chabad
upheld jurisdiction over the foreign state. Simon decided the
opposite, apparently unaware of the intra-circuit conflict it was
thereby creating. (After Simon came down the district court
noticed the obvious intra-circuit conflict Simon caused. See
Philipp v. Fed. Republic of Germany, No. 15-266 (CKK), 2017
WL 1207408, at *9 (D.D.C. March 31, 2017).)
As between Chabad and Simon, the earlier Chabad decision
controls for the reasons Judge Sentelle stated for our court in
Sierra Club v. Jackson, 648 F.3d 848, 854 (D.C. Cir. 2011).
Under Chabad, the district court in this case therefore had
jurisdiction over the Republic of Hungary. I will have more to
2
say about Chabad and Simon in a moment. But it will be useful
to examine first the majority’s efforts to fill in a rationale for the
result in Simon, a rationale missing from the Simon opinion
itself.
The expropriation or “takings” exception in the Foreign
Sovereign Immunities Act, 28 U.S.C. § 1605(a)(3), states as
follows, with my italics added:
[a] foreign state shall not be immune from the
jurisdiction of courts of the United States or of the States
in any case . . . (3) in which rights in property taken in
violation of international law are in issue and that
property . . . is owned or operated by an agency or
instrumentality of the foreign state . . . engaged in a
commercial activity in the United States.
See Bolivarian Republic of Venezuela v. Helmerich & Payne
Int’l Drilling Co., 137 S. Ct. 1312, 1316 (2017), quoting the
same portion of the statute in a case dealing with jurisdiction
over a foreign state.
Hungary’s immunity thus should have depended on three
easily-answered questions. Is the Republic of Hungary a
“foreign state”? Of course it is. See Maj. Op. 16. Are “rights
in property taken in violation of international law” “in issue”?
The answer is clearly yes. See Maj. Op. 14. And is “that
property” “owned or operated by an agency or instrumentality
of the foreign state . . . engaged in a commercial activity in the
United States”? Once again – yes. See Maj. Op. 16.
Yet the majority decides that Hungary is immune from suit.
The apparent basis for its conclusion is that the italicized portion
of § 1605(a)(3), quoted above, does not divest a “foreign state”
of immunity. Although § 1605(a)(3) provides that a foreign
3
state shall not be immune from suit, the majority crosses out the
“not” and holds that the foreign state shall be immune when its
agencies or instrumentalities owning or operating the
expropriated property engage in commercial activity in the
United States.
In trying to explain why § 1605(a)(3) should be treated as
if it means the opposite of what it actually provides, the majority
invokes § 1606 and § 1610 of the Act, sections that differentiate
foreign states from their agencies and instrumentalities. See
Maj. Op. 21 (citing 28 U.S.C. §§ 1606 & 1610). One of these
sections (§ 1606) exempts foreign states, “except for an agency
or instrumentality thereof,” from liability for punitive damages.
The other section (§ 1610) sets forth procedures for attaching the
property of a foreign state, procedures that differ from those for
attaching the property of a foreign state’s agency or
instrumentality. Both sections deal with remedies, not a foreign
state’s immunity from suit.
Neither section suggests that Hungary is not a foreign state.
The Act defines “foreign state” to include the foreign state’s
agencies and instrumentalities. 28 U.S.C. § 1603(a). The
sections the majority cites are arguably exceptions to that
definition. It is one thing to say that a “foreign state” under the
Act does not always include agencies and instrumentalities.
Those sections may stand for that proposition. But the majority
advances an entirely different proposition – namely, that the
term “foreign state” in § 1605(a)(3) somehow does not include
a “foreign state.”
To support this non sequitur, the majority enlists Foremost-
McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 446
(D.C. Cir. 1990). The case has no logical connection to the
issue at hand. On the page the majority cites, the Foremost-
McKesson court was not interpreting “foreign state,” or any
4
statutory text for that matter. Instead, the court was addressing
an antecedent issue to the immunity exceptions. Specifically,
the issue was whether “the government of Iran exercised the
necessary degree of control over the other [instrumentality]
defendants to create a principal/agent relationship and thus
permit this court to deem Iran responsible for their actions.” Id.
at 445 (citation omitted). No one argues here that Hungary is
being called to answer for the wrongs of its instrumentalities; all
agree that this case involves a “family’s decades-long effort to
recover a valuable art collection that the World-War-II–era
Hungarian government and its Nazi collaborators seized during
their wholesale plunder of Jewish property during the
Holocaust.” Maj. Op. 2. Foremost-McKesson thus offers no
support to the majority’s view of § 1605(a)(3). The distinction
between foreign states and their instrumentalities simply does
not matter on the question whether Hungary is a foreign state.1
1
Because the majority relies on this distinction, it is worth
making one additional point. The majority concludes that 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; by contrast, an agency or instrumentality loses its
immunity if the claim against it satisfies the exception by way of the
second clause.” Maj. Op. 22. This supposed neat distinction between
foreign states and their instrumentalities is belied not only by the Act
defining “foreign state” to include agencies and instrumentalities, 28
U.S.C. § 1603(a), but also by the House Report on the Act explicitly
adopting this definition for the expropriation exception. See H.R. Rep.
No. 94-1487, pp. 18, 19 (1976). This definition of “foreign state” also
dispels the majority’s notion that reading the statute for what it says
would result in the court having “no jurisdiction over the agencies and
instrumentalities that actually own or operate the expropriated
property.” Maj. Op. 22. That argument only works if “foreign state”
means either the foreign state or its instrumentalities – but the term
includes both.
5
The Supreme Court, in its latest opinion on the Foreign
Sovereign Immunities Act, cited the Restatement (Fourth) of
Foreign Relations Law: Sovereign Immunity § 455 (Tent. Draft
No. 2, March 21, 2016). See Helmerich & Payne Int’l Drilling,
137 S. Ct. at 1321. As one would expect, the Restatement
provides a clear articulation of the expropriation exception to a
foreign state’s immunity. Section 455 states:
Courts in the United States may exercise jurisdiction
over a foreign state in any case in which rights in
property taken in violation of international law are in
issue when
(a) that property (or any property exchanged for
such property) is present in the United States in
connection with a commercial activity carried on by
that foreign state in the United States; or
(b) that property (or any property exchanged for
such property) is owned or operated by an agency or
instrumentality of a foreign state and that agency or
instrumentality is engaged in commercial activity in
the United States.
Reporter Note 6 then addresses the issue in this case directly.
“Some courts,” the Note says, “have allowed actions under the
second ‘prong’ of this exception to be brought against the
foreign state in question rather than the agency or
instrumentality. See, e.g., Augudas Chasidei Chabad of U.S. v.
Russian Federation, 528 F.3d 934 (D.C. Cir. 2008); Siderman
de Blake v. Republic of Argentina, 965 F.2d 699 (9th Cir. 1992);
de Csepel v. Republic of Hungary, 808 F. Supp. 2d 113 (D.D.C.
2011), aff’d on other grounds, 714 F.3d 591 (D.C. Cir. 2013).”2
2
The Restatement and majority both note a contrary decision in
the Second Circuit. See Garb v. Poland, 440 F.3d 579, 589 (2d Cir.
6
Notice that the Reporter cites Chabad as a case in which the
court decided that the italicized language from § 1605(a)(3), set
forth above, conferred jurisdiction over the foreign state itself.
Yet the majority denies that Chabad so ruled and on that basis
concludes that the later-issued opinion in Simon, contrary to
Chabad, controls. The majority is mistaken. The briefs of the
parties discussed the italicized portion of § 1605(a)(3) at some
length for the quite apparent reason that the plaintiffs relied on
that portion of the statute to strip Russia of its immunity. See
Opening Brief for Chabad at 48, Chabad, 528 F.3d 934.
As I briefly discussed in the beginning of this dissent, the
majority’s failure to follow Chabad is clear error. Consider the
majority’s statement that in Chabad the “issue of the Russian
state’s immunity was completely unaddressed by the district
court and neither raised nor briefed on appeal . . ..” Maj. Op. 18.
There are two assertions here. The first deals with the district
court’s opinion, the second with what the parties argued on
appeal. Both are wrong.
As to the majority’s first assertion, District Judge
Lamberth’s comprehensive opinion in Chabad refutes it. On
page after page Judge Lamberth discusses and ultimately agrees
with Chabad’s claim that jurisdiction over Russia – that is,
Russia’s lack of immunity – required that “the entity that owns
or operates the property at issue ‘be engaged in a commercial
activity in the United States.’ § 1605(a)(3) (emphasis added).”
466 F. Supp. 2d 6, 24 (D.D.C. 2006). Judge Lamberth’s opinion
2006); Maj. Op. 23. Courts in the Second Circuit have concluded that
the relevant language in Garb was dicta. See Freund v. Republic of
France, 592 F. Supp. 2d 540, 561 n.10 (S.D.N.Y. 2008). See also
Arch Trading Corp. v. Republic of Ecuador, 839 F.3d 193, 205-06 (2d
Cir. 2016).
7
then begins an extended analysis of the clause in § 1605(a)(3) I
have italicized above. Id. at 24-25. The majority here also fails
to notice that there were two separate alleged expropriations in
Chabad, one dealing with what the parties called the “Archive,”
the other dealing with the “Library.” Maj. Op. 18, 19. Judge
Lamberth determined that Russia had no immunity regarding the
“Archive” expropriation, but had immunity regarding the
“Library” expropriation. 466 F. Supp. 2d at 31. Both sides
appealed. Chabad, 528 F.3d at 939.
On appeal, Russia argued in its brief that “commercial
activity” in the italicized clause in § 1605(a)(3) – which Chabad
had relied upon (466 F. Supp. 2d at 23-24) – should be
interpreted to require “substantial contact” with the United
States. See Opening Brief for Russia at 41-42, Chabad, 528
F.3d 934. Otherwise, Russia argued, there would be an
anomaly: plaintiffs could more easily establish jurisdiction over
a foreign state based on the commercial activity of its agencies
and instrumentalities than based on the activity of the foreign
state itself. Id. The Chabad plaintiffs countered that the “plain
language” of the § 1605(a)(3) clause italicized above conferred
jurisdiction over the foreign state without any substantiality
requirement and that if this should be altered, it was up to
Congress not the courts. Opening Brief for Chabad at 50-51,
Chabad, 528 F.3d 934. On appeal, our court acknowledged
Russia’s “anomaly” argument regarding the italicized clause in
§ 1605(a)(3), 528 F.3d at 947, and expressly rejected it. Id.
Yet the majority in this case now resurrects Russia’s
argument and claims that treating the italicized clause in
§ 1605(a)(3) as establishing jurisdiction over Hungary would
produce an “anomalous result.” Maj. Op. 22-23. The majority
seems quite unaware that the “anomaly” argument it puts
forward is the argument the Chabad court flatly rejected on
appeal. The briefs in Chabad make the majority’s error clear.
8
The short of the matter is that the appellate decision in
Chabad is controlling. The Supreme Court has instructed that
“it is not only the result but also those portions of the opinion
necessary to that result by which we are bound.” Seminole Tribe
of Florida v. Florida, 517 U.S. 44, 67 (1996), quoted in Citizens
for Responsibility & Ethics in Washington v. United States Dep’t
of Justice, 846 F.3d 1235, 1244 (D.C. Cir. 2017). The result in
Chabad was clear: the court affirmed the district court’s
judgment upholding jurisdiction over Russia with regard to the
“Archive” claim and reversed the district court’s judgment
granting Russia immunity on the “Library” claim. Chabad, 528
F.3d at 948, 955; see Agudas Chasidei Chabad of U.S. v.
Russian Fed’n, 729 F. Supp. 2d 141, 143, 148 (D.D.C. 2010)
(exercising jurisdiction over Russia on remand). Both
jurisdictional decisions rested on the italicized portion of
§ 1605(a)(3) that the plaintiffs in this case clearly satisfied. See
Maj. Op. 17. When, in the Supreme Court’s words in Seminole
Tribe, one looks to the “portions of the opinion necessary to that
result,” one finds ample reasoning in support over multiple
pages. See Chabad, 528 F.3d at 946-48. Chabad examined
whether Russia’s agencies and instrumentalities were “engaged
in a commercial activity in the United States” and found this
“alternative” clause in § 1605(a)(3) “plainly satisfied.” 28
U.S.C. § 1605(a)(3); Chabad, 528 F.3d at 948. On that basis, it
determined that Russia did not have immunity from the
jurisdiction of the federal courts. Chabad, 528 F.3d at 955.
The majority dismisses the reasoning of Chabad because it
believes that a “foreign state” in § 1605(a)(3) may sometimes
not be a “foreign state.” Having adopted this unfounded reading
of the statute, the majority then faults Chabad for not explicitly
addressing it. It bears repeating that Chabad upheld jurisdiction
over Russia. Why? Because the italicized portion of
§ 1605(a)(3) removed Russia’s immunity in light of the
commercial activities of Russia’s agencies and instrumentalities
9
in the United States. The Chabad decision is clearly
precedential, whether or not the opinion responded to every
conceivable misreading of the statute.
In the later decision in Simon, the panel recognized that the
relevant portion of Chabad had precedential effect. Without
explanation, it cited that precise portion in reaching its contrary
and counter-textual interpretation of the expropriation exception.
See Simon, 812 F.3d at 146 (citing Chabad, 528 F.3d at 947).
Chabad was the only case it cited for that result. Id. The Simon
panel’s one-sentence rehearing denial added nothing.
The only reasonable explanation for Simon’s treatment of
Chabad is that it made a mistake. The majority’s decision in
this case only compounds the error.