Herzog Heirs Win Again in Fight to Recover Nazi-Looted Art
The heirs of a Jewish Hungarian art collector, whose paintings were seized during the Holocaust, can proceed with their fight to recover the collection. A federal appeals court has upheld the growing consensus that the Foreign Sovereign Immunities Act (FSIA) confers jurisdiction over foreign state actors in possession of art allegedly looted by the Nazis. Upholding last year’s District Court decision, the U.S. Court of Appeals for the D.C. Circuit affirmed the ruling in De Csepel v. Republic of Hungary that denied several Budapest museums’ motion to dismiss, while allowing the Republic of Hungary itself out of the case. This is the heirs’ second successful trip to the appellate court, after their claims were upheld in 2013.
Baron Mor Lipot Herzog died in 1934, and remarkable collection included works by El Greco, Velázquez, Lucas Cranach the Elder, van Dyck, Courbet and Corot. His heirs—David de Csepel, Angela Maria Herzog and Julia Alice Herzog—filed the case in 2010. Starting with the German occupation of 1944, the case alleged, the collection was taken away from the family after years of persecution, including the death of the Baron’s son, András, in a forced labor camp.
The so-called expropriation exception of the FSIA has become the focus of litigation against foreign defendants. The expropriation exception, simply stated, means that if the claims concern rights in property taken in violation of international law, and the defendants are engaged in commercial activity in the U.S., they may be sued notwithstanding the general concept of sovereign immunity. The battleground in these cases has tended to focus on whether a particular plaintiff’s claims concern “rights in property taken in violation of international law.”
The Court of Appeals decision adds to the consensus that the Nazi-supervised looting of art was a violation of international law, whether or not the act involved crossing the borders of a sovereign nation. Spain, Germany and Hungary have all urged courts at various points to excuse the conduct of German or Hungarian state actors of taking property within their own borders as a basis for jurisdiction. Building on another case against Hungary, involving its state railroads’ complicity in the deportation of Hungary’s Jews, this month’s decision confirms that one need not—and a defendant may not—parse the precise starting point of the murderous phase of genocide (as Germany shamefully tried to do in 2015). The deprivation of economic means to survive is just as central to the genocidal act as the later physical destruction. Germany, and Hungary, stripped its residents of property rights as part of their efforts to dehumanize and destroy them. That is enough.
The Hungarian defendants were unsuccessful in urging the court to dismiss the claims as preempted by a 1947 treaty that addressed property claims. Because the Herzog heirs were not U.S. citizens when the treaty was enacted, the plaintiffs persuaded the Court of Appeals to affirm the result that the treaty does not bar their claims.
The case was also interesting in its decision to allow Hungary itself out of the case. The commercial activity prong of the expropriation element has two clauses, one concerning foreign nations and one concerning their “agencies or instrumentalities.” The Court of Appeals applied a more stringent test to Hungary’s alleged commercial activity and held that it was insufficient to confer jurisdiction, while finding that Hungary’s museums—its instrumentalities—did meet the standard.
Some of the Herzog collection had been recovered by the Allies and returned to Hungary. Hungary entered into a treaty in 1947 that addressed in part Hungary’s role as custodian of heirless works. Hungary did return some of the collection to Herzog family members, but they later characterized that term as “on paper” or in the form of short term loans only (a description that Hungary contests). Under what they deemed harassment, the family allowed some of the works to return to the Museum of Fine Arts for display in 1948. The Herzogs engaged in a series of correspondence about the collection, from which, the current plaintiffs allege, a bailment resulted. Bailment is simply the act of entrusting an object to another; a coat or car check are the most common examples. Under a bailment, there is no ownership transfer, and the bailee (the person getting the property) is obliged to safeguard it and give it back upon demand.
Decades later, after the fall of Communism, the family restarted its efforts. The Baron’s daughter Erzsébet negotiated the return of six less significant works before her death in 1992. Martha Nierenberg, Erzsébet’s daughter, pursued legal action in Hungary. Initially, the Budapest Municipal Court recognized their claim and awarded ownership of 11 paintings, but in January 2008 an appellate court reversed the decision. The Herzog heirs have consistently characterized that reversal as politically motivated.
Nicholas O’Donnell is a litigation partner at Sullivan & Worcester LLP in Boston and New York. He is the author of the recently-published A Tragic Fate—Law and Ethics in the Battle Over Nazi-Looted Art (ABA 2017), the first comprehensive overview of disputes over art looted in the Nazi era.