Holocaust-related claims and limitations: familiar issues in a new context.

• Author: Krechmer, Leonid
• Position: New York

New York's statute of limitations will play a central role in cases seeking recovery of dormant bank accounts and life insurance proceeds

HOW will the New York statute of limitations apply to lawsuits by brought by Holocaust survivors and their children against European business entities that had dealings with European Jews before the World War II? The importance of this question and issue is obvious. Time limitations are central to claims based on wrongs that occurred at the time of the Holocaust, now half a century ago. And much of the litigation will be brought in New York courts or in courts that will apply New York law.

While there has been an explosion of litigation in this area recently, none of the litigation has reached the stage yet where a court could consider application of the statute of limitations in this context.

Six million persons dead, destroyed families, concentration camps, ghettos, confiscation of property--all these characteristics of the Holocaust have become well known. On the other hand, the role of Swiss and other European banks and of insurance companies in relation to property of Holocaust victims has not been explored as well. Until recently, knowledge about confidential accounts Jews opened in Swiss banks before the war and life insurance policies they bought "just in case" at the dawn of the war belonged mainly to the memories of individual Jewish families. It was not in the public domain.

After World War II, Holocaust survivors or members of their families began to make attempts to access family bank accounts in Switzerland, but the absence of death certificates of the account holders, or the inability to produce lost code numbers, resulted in the refusal of bank officials to provide access to accounts or to investigate bank records. Practically nothing could help. Explanations that "the code was lost when we were searched and stripped down on our first day in Auschwitz," or that "our house was destroyed with all the financial papers" did not work. Retaining Swiss attorneys was ineffectual. Appeals to the Swiss government brought nothing but polite and maddeningly useless replies.

This continued for years, until 1996 when publicity hell broke down on the heads of the Swiss bankers.

There are many explanations in today's academic legal press as to why the issue of aftermath of the Holocaust became so heated again. Among the factors named as contributing to the eruption of political and legal activity are the reopening of important archive sources in the former Soviet Union and countries of Eastern Europe, the declassification of thousands of documents at the National Archives and the Treasury and State departments in the United States, and the re-emerged interest in the World War II leading to a re-examination of Switzerland's role in pre- and post-war times.(1)

It is not the purpose of this article to evaluate these events. It is enough to say that the re-examination of history and the attempts to correct old wrongs has resulted in traditional litigation activity, and this, in turn, inevitably raises questions of the application and propriety of statutes of limitations.

ACCOUNTS IN SWISS BANKS

Nobody knows how many accounts opened by victims of the Holocaust still lie dormant in Swiss banks. Nobody disputes that Swiss bank secrecy law and the banks' high reputation for confidentiality and stability attracted many Jews in the unstable political situation of pre-war Europe.(2) Another factor that made those banks attractive for hiding assets was that in Switzerland, unlike in many countries, inactive accounts were not required to be turned over to the government at some point. Then, as now, such accounts remained property of the client and were continued to be held by the banks.(3)

Hence, it is entirely possible that the dormant accounts still exist and may be located and turned over to the people to whom they rightfully belong. This simple fact was reluctantly and gradually acknowledged by the Swiss banking industry in the middle 1990s, and the last chapter in the story of "assets without heirs" finally began.(4)

One of the first practical attempts to resolve the dormant accounts situation was creation of the Volcker Commission, led by Paul Volcker, the former chairman of the U.S. Federal Reserve Board. On May 2, 1996, members of the Swiss Bankers Association and leading members of the representative Jewish organizations signed a two-page memorandum of agreement setting forth the framework for an Independent Committee of Eminent Persons (the Volcker Commission) designed to oversee an audit of dormant bank accounts and other assets and financial instruments deposited before, during and immediately after World War II. The commission includes three Swiss representatives appointed by the Swiss Bankers Association and three Jewish representatives appointed by the World Jewish Restitution Organization.

The Volcker Commission's goal is to facilitate the return of money in dormant accounts to relatives and heirs of victims of the Holocaust. Its priorities are to define the term "dormant accounts," to determine how to decide which accounts are "Jewish" and to match claims to assets. By the terms of the agreement, the commission is required to assure that the Swiss government addresses the issue of unreported looted assets.

Subsequent attempts to resolve the situation, however, took a more adversarial form. Three major lawsuits were filed in New York against Swiss banks regarding the dormant accounts.

First was Weisshaus v. Union Bank of Switzerland, filed on October 3, 1996, in the U.S. District Court for the Eastern District of New York, initially No. CV-964849. The representative plaintiff, Gisella Weisshaus, brought this class action against the Union Bank of Switzerland, the Swiss Bank Corporation, Credit Suisse, the Swiss Bankers Association and the Bank of International Settlement as joint defendants. The complaint alleged that the banks failed to return valuables that Jewish owners deposited. The suit also charged that the Nazis deposited much of the vast wealth confiscated from Jews in Swiss banks. To support these charges, the complaint stated six causes of action, including breach of contract, breach of fiduciary duty, conversion, conspiracy, and unjust enrichment. The plaintiffs demanded judgment against the defendants jointly, severally and/or in the alternative; they requested an accounting, compensatory damages, exemplary or punitive damages, and trial costs.

The second lawsuit, Friedman v. Union Bank of Switzerland, was filed on October 21, 1996, in the same court, initially No. CV-96-6161. The children of Holocaust victims, as representative plaintiffs, filed this class action against the Union Bank of Switzerland, the Swiss Bank Corporation, and Credit Suisse as joint defendants. Additionally the complaint named the Swiss Bank Association as a non-defendant coconspirator. The complaint alleged 12 causes of action, including conspiracy to violate and/or complicity in violations of international law; breach of fiduciary duty; breach of special duty; breach of contract; conversion; unjust enrichment; negligence; conspiracy; fraud; fraudulent concealment; and causes of action based on violations of Swiss laws.

The third lawsuit, World Council of Orthodox Jewish Communities Inc. v. Union Bank of Switzerland, was filed as a class action on January 29, 1997, initially No. CV-97-0461, against the same defendants. The causes of action were analogous to those in other two lawsuits, and there were references to looted assets and slave labor in the complaint.

All three actions were assigned to District Judge Edward Korman and later were consolidated in master docket No. CV-96-4849.

The plaintiffs in both Weisshaus and Friedman argued that because the defendant banks acted to conceal the existence of deposited, looted and cloaked assets, they should be estopped from seeking the protections of the applicable statute of limitations. In their response motions, the defendants did not directly discuss the issue of the expired statute of limitations. They referred to it in general terms, however, and argued that the issue of limitations would be a future point of contention.

On August 12, 1998, the plaintiffs and the Swiss banks reached a global settlement under which the defendants agreed to pay US$1.25 billion for dismissal of these and similar future claims against them and the Swiss government, the Swiss National Bank, and all other members of Swiss industry (three Swiss insurance companies were specifically excluded).(5) The court held a fairness hearing in New York on November 29, 1999, regarding final approval of the settlement agreement, and a further hearing was held in Jerusalem on December 14. A special master has been appointed to propose to the court, assuming approval of the settlement, a plan of allocation and distribution of the settlement fund.

Thus, there has been no opportunity for the court to rule on the statute of limitations issues yet, and the question whether the statute, which is Article II of the New York Civil Practice Law and Rules, would ultimately prevent recovery in these kinds of lawsuits remains open.

However, the question probably will be considered and answered in the near future. It is possible that German, Austrian and other European banks soon will be targeted for large settlements because of similar wrongs committed against Jews. It is also possible, and even likely, that some respectable international corporations will be accused of the use of forced labor during the war and sued by Holocaust survivors and their ancestors for compensation.

If this occurs, the future parties and courts will have to deal with the New York and possibly other statutes of limitations simply because it is impossible to avoid this issue unless both parties agree to do so. Given the very broad release of the Swiss business entities in the August 1998...