It has been nearly 80 years since World War II officially ended in Europe. On Tuesday, the Supreme Court will hear oral arguments in the latest chapter in efforts by the victims of the war’s atrocities to recover confiscated property. At issue is whether a lawsuit by survivors of the Hungarian Holocaust, seeking to recover property that was seized, can go forward, or whether – as the Hungarian government alleges – it is barred by the federal law governing lawsuits against foreign countries in U.S. courts.
More than 560,000 Jews in Hungary, over two-thirds of the country’s pre-war Jewish population, lost their lives at the hands of the Nazis and the Hungarian government during the Holocaust. Most of those deaths occurred in a three-month period in 1944. In November 1944, the Hungarian government declared that all valuables owned by Jews were part of the national wealth. The government then confiscated virtually all of the property – including cash, jewelry, art, and gold – owned by Jews in Hungary.
In 2010, a group of survivors of the Hungarian Holocaust, along with their heirs, filed a lawsuit in federal court in Washington, D.C., against the Hungarian government and Hungary’s national railway, MÁV. They contended that the Hungarian government worked with the Nazis to kill Hungarian Jews and take their property; MÁV, they argued, transported Hungarian Jews to death camps and took their property before they boarded the trains.
As a general rule, foreign countries cannot be sued in U.S. courts. A federal law, the Foreign Sovereign Immunities Act, carves out several exceptions. One of those exceptions, known as the “expropriation” exception, allows cases to go forward when they involve property taken in violation of international law. Such cases must also have a commercial connection to the United States: The property or “any property exchanged for such property” must either be located in the United States in connection with a commercial activity or it must be “owned or operated by an agency or instrumentality” of the foreign country that engages in commercial activity in the United States.
The survivors’ case has, as the federal government has observed, “accumulated a lengthy and complex procedural history,” including an earlier trip to the Supreme Court. But as it comes to the Supreme Court this time, the case hinges primarily on the meaning of the phrase “any property exchanged for such property” in the expropriation exception.
The survivors do not contend that any of the property seized during World War II is itself currently present in the United States or owned by the railway company. Instead, the U.S. Court of Appeals for the District of Columbia Circuit ruled last year that it was enough that the Hungarian government and MÁV liquidated the property that they took from Hungarian Jews in the 1940s and “commingled” it with their other funds, which qualify as “property exchanged for” the property that was taken from the Hungarian Jews. Those commingled funds are now in the United States, the survivors argue, because both Hungary and MÁV do business with and in the U.S.
Hungary and MÁV came to the Supreme Court, and they now urge the justices to reverse the D.C. Circuit’s ruling. They contend that the D.C. Circuit’s “commingling” theory is inconsistent with the text of the expropriation exception. Even if the proceeds of property from property seized from Hungarian Jews more than a half-century ago were blended with the Hungarian government’s general revenues, they argue, that doesn’t mean that those proceeds were “exchanged for” the Hungarian government’s current assets.
Indeed, Hungary and MÁV maintain, in this case the chances that “any particular asset currently held by Hungary or MÁV can be traced to items seized from fourteen individuals in 1944 is infinitesimal given the intervening decades.”
More broadly, Hungary and MÁV tell the justices, the D.C. Circuit’s “commingling” theory would allow plaintiffs to circumvent the general bar on lawsuits against foreign governments, “transforming the expropriation exception into an all-purpose jurisdictional hook for adjudicating human rights violations.” It would be “difficult,” they suggest, “to imagine an international conflict that would not be subject to review by domestic courts under the D.C. Circuit’s commingling theory.”
The federal government, which filed a “friend of the court” brief supporting Hungary, writes that it “deplores the atrocities committed by the Nazi regime and its allies and supports efforts to provide their victims with remedies for the egregious wrongs they have suffered.” But because the United States is often sued in courts overseas, it explains, “protecting foreign states from civil suits in U.S. courts can help to avoid embroiling the United States in expensive and difficult litigation abroad.”
The federal government tells the justices that the rationale for the D.C. Circuit’s reliance on the commingling theory was that without it, a foreign country could elude liability under the expropriation exception by selling the property that it seized and then depositing the proceeds from the sale in its general treasury. However, the government contends, that reasoning does not take into account “that virtually every claim alleging liquidation would satisfy the expropriation exception, contrary to the FSIA’s purposes and the limited and unique nature of the expropriation exception.”
The federal government acknowledges that such a rule may in some cases make it more difficult for plaintiffs to trace their seized property back to the foreign country’s current assets, but it maintains that tracing is “not necessarily impossible.” “And even if the tracing requirement means that some claims cannot go forward,” the federal government concludes, “that is what Congress required in the FSIA.”
The survivors counter that the D.C. Circuit’s commingling theory is consistent with the “simple, ordinary meaning of ‘exchanged.’ When fungible property like money is commingled, it is exchanged.” They offer an example that they say demonstrates this point: If someone puts money in the bank on Monday and then takes the same amount of money out on Tuesday, she has “exchanged” Monday’s deposit for Tuesday’s withdrawal. This is true, they insist, regardless of how much time passes between the deposit and the withdrawal or how many exchanges happen in between.
The survivors note that the text of the expropriation exception also refers to “any property” exchanged for the expropriated property, signaling that that exception was intended to apply broadly to property swapped for the stolen property.
Any other rule, the survivors argue, “would disregard the acknowledged reality that money is fungible,” and would allow foreign countries to circumvent the expropriation exception by selling the property and, for example, putting money in the bank or investing it.
Indeed, they suggest, countries could even expropriate property by requiring the victims to deposit money directly into the government’s bank accounts – which, on Hungary’s theory, would make the property “untraceable the moment the expropriation occurs.” In fact, they observe, this is precisely what Hungary did during the Hungarian Holocaust, when it required the country’s Jewish population to deposit most of their assets into government institutions or banks.
The survivors contend that they have made the showing required for their case to go forward. They provided evidence, they emphasize, that the Hungarian government and MÁV seized their property, sold it, and then commingled the proceeds in government accounts. Those commingled funds are “present in the United States,” they say, because Hungary used them to sell commercial bonds, to pay interest, and to buy military equipment in this country; for its part, MÁV sold tickets and made reservations in the United States.
Hungary and MÁV contend that the D.C. Circuit made two additional mistakes beyond relying on the commingling theory. First, they say, the court of appeals was wrong to rule that they must show that the seized property cannot be traced to their current assets. Instead, they contend, the D.C. Circuit should have required the survivors to show that the current assets can be traced to the seized property. The lower court’s approach, they say, “imposes an onerous, if not insurmountable, burden on sovereign defendants to produce negative evidence based on the bald allegation of historical commingling. And it permits a court to exercise jurisdiction based on an absence of evidence, rather than a finding that the commercial nexus prong is satisfied.”
The D.C. Circuit was also wrong, Hungary and MÁV contend, when it concluded that they were not entitled to sovereign immunity unless, based on the facts that the survivors have outlined, “no plausible inference could be drawn in favor of an exception.” The text of the FSIA requires a court to determine whether a foreign country is “entitled” to sovereign immunity, Hungary and MÁV contend. And in Bolivarian Republic of Venezuela v. Helmerich & Payne International Drilling Co., they say, the Supreme Court indicated that “a nonfrivolous argument” that a court has jurisdiction is not enough.
The federal government echoes this argument. In Helmerich, it writes, the court “made clear that when a foreign state defendant challenges the factual basis for a claimed exception to sovereign immunity, the court should resolve the factual dispute ‘as near to the outset of the case as is reasonably possible’ rather than simply accept the plaintiff’s well-pleaded allegations.”
The survivors counter that these secondary questions are irrelevant. Helmerich, they say, simply requires them to advance a “valid legal theory” – which they have done with the commingling theory. And if Helmerich applies to facts, they continue, they have provided “unrefuted proof” that the expropriation exception applies to this case.
This post is also published on SCOTUSblog.
