Simon v. Republic of Hungary—Summary in Brief

Last week, the D.C. Circuit removed a hurdle for a pending suit against the Republic of Hungary and the Republic’s state-owned railway company. Judge Sri Srinivasan, writing for a three judge panel in Simon v. Republic of Hungary, reversed a district court’s holding that the 1947 Peace Treaty between Hungary and the Allies provided the exclusive means to settle Holocaust claims, and remanded the case for further proceedings concerning the Foreign Sovereign Immunity Act (FSIA).

Fourteen Jewish Holocaust survivors in this case contend that Hungary “collaborated with the Nazis to exterminate Hungarian Jews and expropriate their property,” and the state-owned railway aided the state by transporting Jews to death camps. The district court dismissed on the grounds that the suit is precluded by the FSIA’s treaty exception.

Under the FSIA treaty exception, preexisting treaties provisions addressing sovereign immunity trump the FSIA. Article 27 of the 1947 Treaty guaranteed compensation for unlawful confiscation “on account of [] racial origin or religion.” The district court granted a 12(b)(1) motion to dismiss for lack of subject matter jurisdiction on the grounds that Article 27 triggered the treaty exception by creating an exclusive means to resolve disputes.

Judge Srinivasan disagreed, instead holding that Article 27 merely creates a floor on compensation for two reasons. First, the text of the 1947 Treaty, unlike other treaties concluding World War II hostilities, does not bar extra-treaty claims. Second, Article 27 concerned settlement of Hungarian citizens’ claims against their own government, and the Allies “lacked the power to eliminate (or waive) the claims of” Hungary’s own citizens. The 1947 Treaty therefore did not trigger the FSIA’s treaty exception.

The FSIA, as its name suggests, guarantees foreign sovereign immunity broadly, while allowing for a few exceptions. The panel held that the case could plausibly proceed under the § 1605(a)(3) exception for cases “in which rights in property [are] taken in violation of international law.” § 1605(a)(3) also requires that the state (or its agency or instrumentality named in the suit) “possess the expropriated property or proceeds thereof” and “participate in some kind of commercial activity in the United States.” Ultimately, the district court had to engage in more analysis on remand to determine if § 1605(a)(3) applied.

First, the court dismissed many claims raised in the complaint that did not apply to “rights in property” (including allegations of torture and wrongful death) but sent the case back to the district court to determine exactly which claims fell under this rubric.

Ordinarily, a state’s taking of its own citizens’ property does not violate international law. But the relevant appropriation amounted to genocide, so the second prong—violation of international law—was also satisfied. The Genocide Convention defines genocide in part as, “[d]eliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part.” The purpose of Nazi expropriation was “to deprive Hungarian Jews of the resources needed to survive as a people.” The Convention’s drafting committee included this catch-all in fact to cover expropriation.

The court also believed the plaintiffs’ allegations were sufficiently plausible to meet the final prong for at least the claims raised against the state railway. It is sufficiently plausible in the pleadings stage that, having presumably usen the proceeds of the stolen property to fund government operations, the Hungarian government possesses “the proceeds thereof.” The railway company’s maintenance of an agency to manage reservations and sell tickets in the United States sufficed for establishing commercial nexus for that company. However, the complaint set forth only conclusory allegations about Hungary’s commercial acts in the United States, so the claim against the Hungarian state did not fall within the exception. The court deferred on whether Simon et al. could amend their complaint to allege such a connection with greater specificity.

Judge Srinivasan also partially dismissed the notion that plaintiffs had any obligation to exhaust local remedies before bringing the suit in the United States, as “the FSIA itself imposes no exhaustion requirement” and failure to exhaust local remedies has no bearing on whether an expropriation constituted genocide. Nonetheless, the panel remanded the case to the district court to determine whether exhaustion should be required as a matter of international comity.

Finally, the court rejected the argument that the case involved any political question, quickly dispensing with the idea that the Constitution textually commits war claims settlements to the Executive branch, or that deciding the case could undermine the Executive branch. Judge Srinivasan pointed again to his argument that previous international agreements only pertained to U.S. citizens’ rights against Hungary, not Hungarians’ rights against their own government, and also noted that the United States declined to express an interest in these particular claims’ disposition.

Judge Henderson wrote a very brief concurrence simply to “emphasize the baselessness of Hungary’s invocation of the [FSIA’s] Treaty Exception.”

The case survives then on remand, where the district court will adjudicate the international comity issue, any forum non conveniens arguments defendants raise, and which claims really concern “rights in property.”