German Heirs Allowed to Sue in U.S. for Nazi Art Seizures

• Author: Onika K. Williams
• Pages: 22-22

Published in Litigation News Volume 45, Number 3, Winte r 2020. © 2020 by the Ame rican Bar Associati on. Reproduced with p ermission. All rights r eserved. This in formation or any por tion thereof may no t be copied or disseminate d in any

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22 | SECTION OF LITIGATIO N

NEWS & ANALYSIS THE LATEST DEVELOPMENTS IN LITIGATION

German Heirs

Allowed to Sue in

U.S. for Nazi Art

Seizures

By Onika K. Wil liams, Litigation Ne ws

Assoc iate Editor

A party nee d not exhaust all availab le

foreign remedi es before suing a for-

eign entity in the U nited States under

the Foreign Sovereig n Immunities

Act’s (FSIA’s) expropriation excep-

tion. In Philip p v. Federal Republic of

Germany, the U. S. Court of Appeals

for the District of C olumbia Circuit

rejected Germany’s argument that

the heirs of Jewish a rt dealers must

assert claim s related to Nazi seizures

in German cou rts.

ABA Section of Liti gation lead-

ers agree this de cision will likely im-

pact many other li tigants filing suit

under the FSIA’s expropria tion ex-

ception, which c reates jurisdiction for

claims agains t foreign governments

that might other wise enjoy immunity

from suit.

The conflict in P hilipp began

in 2014, when th e heirs of several

Jewish art dea lers sought to recov-

er the Welfenschat z, a collection of

rare medieval ar t their German ances-

tors were forced to sell to the N azis in

the 190s . The heirs first submitted a

claim against the Stiftung Preussischer

Kulturbesitz (SP K), a German agen-

cy that oversees the m useum display-

ing the Welfenschat z, through the

German Advisory Commission. The

advisory com mission, which acts as a

mediator betwee n current possessors

and former owne rs of property seized

through Nazi persecution, conclud-

ed that the sale of th e Welfenschat z

was not a compulso ry sale due to

persecution.

Instead of seek ing further re-

lief through Ge rman courts, the heirs

filed suit again st the Federal Republic

of Germany and th e SPK in the U.S.

District Cour t for the District of

Columbia. Th e heirs sought return of

the Welfenschatz a nd/or $250 milli on.

Germany moved to dism iss, arguing,

among other thi ngs, that it enjoyed

immunity fro m suit under the FSIA

and that international comity required

the court to decli ne jurisdiction until

the heirs had exha usted their reme-

dies in Germa n courts.

When the distric t court denied

Germany’s motio n to dismiss, Germany

immediately appealed the FSIA immu-

nity portion of t he decision. The

D.C. Circuit lar gely armed the dis-

trict court .

Under the FSIA , 28 U.S.C. § 160 4,

foreign sovereigns a nd their agencies

enjoy immunit y from suit in the United

States unless an exception applies.

The heirs asse rted jurisdiction under

the FSIA’s expropriation exception, 28

U.S.C . § 1605(a)(), which has two re-

quirements: ( 1) rights in property ta ken

in violation of intern ational law are

at issue; and (2) there i s an adequate

commercial nexus between the United

States and the defe ndant. The party

challenging j urisdiction—in this case

Germany—bea rs the burden of proving

that the exception doe s not apply.

In Philipp, the D.C. C ircuit ultimately

concluded that the expropriation ex-

ception applie d to create jurisdi ction

over the heirs’ clai ms. Consequently,

the heirs were not re quired to exhaust

available remed ies in German courts

before suing in the U nited States.

The court dec lined to allow the

heirs’ claims to m ove forward aga inst

Germany, however. Relying on two

prior decisio ns involving the Republic

of Hungary, the cou rt dismissed

Germany as a par ty because the prop-

erty at issue , the Welfenschatz, is lo-

cated in Berlin a nd not the United

States. In contras t, the court found

that the SPK could r emain a defendant

because the co mmercial nexus re-

quirement can be satisfied.

Section of Litigati on leaders agree

the case raises seve ral interesting

questions, creating circuit splits as

to multiple issues . For one, the case

“splits from the S eventh Circuit with

regard to what extent pl aintis must

exhaust domes tic remedies before

pursuing a clai m under the FSIA in

U.S. courts against an instrumentali-

ty of a foreign govern ment,” explains

Brian A. Be rkley, Philadelphia, PA, co-

chair of the Sec tion’s Business Torts &

Unfair Competition Committee.

The D.C. Circuit a llowed the case

to proceed agains t the SPK, a German

agency, becau se of its commercial ac-

tivity in the United St ates. However,

“the opinio n does not say what com-

mercial activit y the SPK conducts in

the U.S.,” o bserves Chad S.C. Stover,

Wilmington, D E, who also serves as co-

chair of the Sec tion’s Business Torts &

Unfair Competition Committee.

Adjusting to

Expanding

Exemptions in

the FLSA

By Mark A. Flo res, Litigation News

Contributing Editor

At least one appe llate court seems

to be following the U. S. Supreme

Court’s lea d in the increasingly ex-

pansive interpreta tion of the Fair

Labor Stand ards Act’s (FLSA’s) over-

time pay exemptions, a ccording to

ABA Section of Liti gation leaders .

This emerging tr end is not neces-

sarily favorable for employees, lead-

ers say, given recent outcom es in

Munoz-Gonzalez v. D.L.C. Limousine

Service, Inc. and Flood v. Just Energy

Marketing Corporation.

Congress established the FLSA ap-

proximately 80 years a go to regulate

wage, hour, and overtime standards

and to create employer exem ptions

for overtime pay. The exemptio ns vary

covering salespe rsons to certain ex-

ecutives to taxicab d rivers. In Encino

Motorcars, L LC v. Narvarro, the C ourt

advised lower cour ts not to interpret

overtime exemptions n arrowly. The

U.S. Cou rt of Appeals for the Second

Circuit has followed th e Court’s lead in

two recent cases .

The FLSA express ly exempts “any

driver employed by an em ployer en-

gaged in the bus iness of operat-

ing taxicabs” f rom overtime pay re-

quirements. In Munoz-Gonzalez, the

U.S. Distr ict Court for the Southern

District of New York interp reted this

language after chaueur Alejandro

Munoz-Gonzal ez filed suit against his

former employer D. L.C. for failure to

pay overtime. D.L .C. argued Munoz-

Gonzalez fit und er the “taxicab ex-

emption” and was n ot entitled to over-

time. The distri ct court agreed and

held that, base d on definitions from