David De Csepel v. Republic of Hungary

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 6, 2017 Decided June 20, 2017

No. 16-7042

DAVID L. DE CSEPEL, ET AL.,

APPELLEES

v.

REPUBLIC OF HUNGARY, A FOREIGN STATE, ET AL.,

APPELLANTS

Appeal from the United States District Court

for the District of Columbia

(No. 1:10-cv-01261)

Thaddeus J. Stauber argued the cause for appellants. With

him on the briefs were Emily Crandall Harlan and Sarah

Erickson André.

Alycia Regan Benenati argued the cause for appellees.

With her on the brief were Sheron Korpus, Michael Shuster,

Michael D. Hays, and Alyssa T. Saunders.

Before: HENDERSON and TATEL, Circuit Judges, and

RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

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Opinion concurring in part and dissenting from part II.B.2

filed by Senior Circuit Judge RANDOLPH.

TATEL, Circuit Judge: For the second time, we consider a

family’s decades-long effort to recover a valuable art collection

that the World-War-II–era Hungarian government and its Nazi

collaborators seized during their wholesale plunder of Jewish

property during the Holocaust. On remand from our earlier

decision, the district court concluded that the family’s claims

against the Republic of Hungary, its museums, and a state

university satisfy the expropriation exception to the Foreign

Sovereign Immunities Act and that no other provision of the

Act bars their claims. For the reasons explained below, we

affirm in part, reverse in part, and along the way, resolve

several issues regarding the Act’s application to claims seeking

to recover art stolen during the Holocaust.

I.

We described the background of this case in our earlier

opinion, de Csepel v. Republic of Hungary, 714 F.3d 591, 594–

97 (D.C. Cir. 2013). For the reader’s convenience, we repeat it

virtually in full.

Baron Mór Lipót Herzog was a “passionate Jewish art

collector in pre-war Hungary” who assembled a collection of

more than two thousand paintings, sculptures, and other

artworks. Compl. ¶ 38. Known as the “Herzog Collection,” this

body of artwork was “one of Europe’s great private collections

of art, and the largest in Hungary,” and included works by

renowned artists such as El Greco, Diego Velázquez, Pierre–

Auguste Renoir, and Claude Monet. Id. Following Herzog’s

death in 1934 and his wife’s shortly thereafter, their daughter

Erzsébet and two sons István and András inherited the

Collection. Id. ¶ 39.

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Then came World War II, and Hungary joined the Axis

Powers. In March 1944, Adolf Hitler sent German troops into

Hungary, and SS Commander Adolf Eichmann entered the

country along with the occupying forces and established

headquarters at the Majestic Hotel in Budapest. Id. ¶¶ 51, 60.

During this time, Hungarian Jews were subjected to anti-

Semitic laws restricting their economic and cultural

participation in Hungarian society and deported to German

concentration camps. Id. ¶¶ 44, 47, 52. As an integral part of

its oppression of Hungarian Jews, “[t]he Hungarian

government, including the Hungarian state police, authorized,

fully supported and carried out a program of wholesale plunder

of Jewish property, stripping anyone ‘of Jewish origin’ of their

assets.” Id. ¶ 54. Jews “were required to register all of their

property and valuables” in excess of a certain value, and the

Hungarian government “inventoried the contents of safes and

confiscated cash, jewelry, and other valuables belonging to

Jews.” Id. ¶ 55. “[P]articularly concerned with the retention of

artistic treasures belonging to Jews,” the Hungarian

government established “a so-called Commission for the

Recording and Safeguarding of Impounded Art Objects of Jews

. . . and required Hungarian Jews promptly to register all art

objects in their possession.” Id. ¶ 56. “These art treasures were

sequestered and collected centrally by the Commission for Art

Objects,” headed by the director of the Hungarian Museum of

Fine Arts. Id.

In response to widespread looting of Jewish property, the

Herzogs “attempted to save their art works from damage and

confiscation by hiding the bulk of [them] in the cellar of one of

the family’s factories at Budafok.” Id. ¶ 58. Despite these

efforts, “the Hungarian government and their Nazi[ ]

collaborators discovered the hiding place” and confiscated the

artworks. Id. ¶ 59. They were “taken directly to Adolf

Eichmann's headquarters at the Majestic Hotel in Budapest for

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his inspection,” where he “selected many of the best pieces of

the Herzog Collection” for display near Gestapo headquarters

and for eventual transport to Germany. Id. ¶ 60. “The

remainder was handed over by the Hungarian government to

the Museum of Fine Arts for safekeeping.” Id. After seizure of

the Collection, a pro-Nazi newspaper ran an article in which

the director of the Hungarian Museum of Fine Arts boasted that

“[t]he Mór Herzog collection contains treasures the artistic

value of which exceeds that of any similar collection in the

country. . . . If the state now takes over these treasures, the

Museum of Fine Arts will become a collection ranking just

behind Madrid.” Id. ¶ 59.

“Fearing for their lives, and stripped of their property and

livelihoods, the Herzog family was forced to flee Hungary or

face extermination.” Id. ¶ 63. Erzsébet Herzog (Erzsébet Weiss

de Csepel following her marriage) fled Hungary with her

children, first reaching Portugal and eventually settling in the

United States, where she became a U.S. citizen in 1952. Id.

István Herzog was nearly sent to Auschwitz but “escaped after

his former sister-in-law’s husband . . . arranged for him to be

put in a safe house under the protection of the Spanish

Embassy.” Id. ¶ 42. Several members of his family escaped to

Switzerland while others remained in Hungary. Id. ¶ 64. István

Herzog died in 1966, leaving his estate to his two sons, Stephan

and Péter Herzog, and his second wife, Mária Bertalanffy. Id.

¶ 42. András Herzog was “sent . . . into forced labor in 1942

and he died on the Eastern Front in 1943.” Id. ¶ 41. His

daughters, Julia Alice Herzog and Angela Maria Herzog, fled

to Argentina and eventually settled in Italy. Id. ¶ 64.

In our prior opinion, we described the family’s seven-

decade effort to reclaim the Collection, including through

Hungarian courts. de Csepel, 714 F.3d at 595–96; see de Csepel

v. Republic of Hungary, 808 F. Supp. 2d 113, 134–35 (D.D.C.

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2011). When those efforts proved unsuccessful, the Herzog

family filed suit in U.S. district court against the Republic of

Hungary, three art museums—the Budapest Museum of Fine

Arts, the Hungarian National Gallery, and the Museum of

Applied Arts—and the Budapest University of Technology and

Economics (collectively, “Hungary”). The family alleges that

Hungary’s taking of forty-four pieces of the Herzog Collection

“constituted an express or implied-in-fact bailment contract,”

and that its failure to return them upon demand breached the

bailment contract and constituted conversion and unjust

enrichment. Compl. ¶¶ 96–110. The family seeks imposition of

a constructive trust, an accounting, and a declaration of its

ownership of the Herzog collection, all aimed at either

recovering the artwork or obtaining over $100 million in

compensation. Id. ¶¶ 111–28 & pt. V.

Hungary moved to dismiss, arguing that the suit was

barred by the Foreign Sovereign Immunities Act (FSIA). That

Act authorizes federal jurisdiction over civil actions against

foreign states, as relevant here, only in certain cases involving

expropriated property or commercial activity, and only to the

extent such jurisdiction is not inconsistent with certain

international agreements. 28 U.S.C. §§ 1604–05. The district

court denied Hungary’s motion, concluding that the

expropriation exception applies to the Herzog family’s claims

and that jurisdiction is not inconsistent with agreements

between the United States and Hungary. de Csepel, 808 F.

Supp. 2d. at 128–35. Hungary appealed, and “without ruling on

the availability of the expropriation exception,” we concluded

that the family’s claims satisfied the Act’s commercial activity

exception. de Csepel, 714 F.3d at 597–603.

Back in the district court, and following the close of

discovery, Hungary renewed its motion to dismiss. The district

court agreed with Hungary that the freshly developed record

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failed to show that the commercial activities, i.e., the bailment

agreements, had any “direct effect” in the United States, as

required by the commercial activity exception. de Csepel v.

Republic of Hungary, 169 F. Supp. 3d 143, 158–63 (D.D.C.

2016) (quoting 28 U.S.C. § 1605(a)(2)). It nonetheless again

concluded that the expropriation exception applies, and that no

treaty forecloses its application. Id. at 163–69. The court

therefore denied the motion to dismiss, except as to two

paintings—Lucian Cranach the Elder’s “The Annunciation to

Saint Joachim” and John Opie’s “Portrait of a Lady”—that

Hungary acquired from third parties after the war. Id. at 165–

67.

Hungary now appeals, seeking dismissal of the claims

regarding the remaining forty-two pieces. It argues that all

claims are barred by a 1947 treaty between Hungary and the

Allied Powers and, alternatively, that the expropriation

exception is inapplicable. For its part, the Herzog family

defends the district court’s decision, but asks that, should we

dismiss any of their claims, they be given leave to amend their

complaint in light of the Holocaust Expropriated Art Recovery

Act of 2016, Pub. L. 114–308, 130 Stat. 1524, which Congress

enacted during the pendency of this appeal to remove

“significant procedural obstacles” facing “[v]ictims of Nazi

persecution” seeking to “recover Nazi-confiscated art.” Id.

§ 2(6). We have jurisdiction under the collateral order doctrine,

see Kilburn v. Socialist People’s Libyan Arab Jamahiriya, 376

F.3d 1123, 1126 (D.C. Cir. 2004) (holding that “denial of a

motion to dismiss on the ground of sovereign immunity” is

subject to interlocutory review under the collateral order

doctrine), and our review is de novo, de Csepel, 714 F.3d at

597.

Before considering the parties’ arguments, we think it

helpful to explain that the issues before us relate to two distinct

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groups of art. The first—some twenty-five pieces—was never

physically returned to the family. As the district court

explained, after being seized, they were “scattered across Nazi-

occupied Europe,” and then “shipped back” to Hungary after

the war. de Csepel, 169 F. Supp. 3d at 149. According to the

family, these paintings are “being held by Hungary in a

custodial role” under a bailment arrangement. Id. at 149–51,

160. The second category—some fifteen pieces—was returned

to the family after the war, but Hungary later regained custody

through various procedures not relevant to the issues before us.

See id. at 149–51.

II.

The Foreign Sovereign Immunities Act provides that “a

foreign state shall be immune from the jurisdiction of the courts

of the United States and of the States,” subject to certain

exceptions. 28 U.S.C. § 1604. When a “defendant foreign state

has asserted the jurisdictional defense of immunity, the

defendant state bears the burden of proving that the plaintiff’s

allegations do not bring its case within a statutory exception to

immunity.” Belize Social Development Ltd. v. Government of

Belize, 794 F.3d 99, 102 (D.C. Cir. 2015) (citation and internal

quotation marks omitted).

Two FSIA provisions are central to this appeal: the treaty

exception, which Hungary contends bars all of the family’s

claims; and the expropriation exception, which the family,

echoing the district court, argues vitiates Hungary’s sovereign

immunity. We consider each in turn.

A.

Under the FSIA, a foreign sovereign’s immunity is

“[s]ubject to existing international agreements to which the

United States [wa]s a party at the time of enactment of th[e]

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Act.” 28 U.S.C. § 1604. Pursuant to that exception, “if there is

a conflict between the FSIA and such an agreement regarding

the availability of a judicial remedy against a contracting state,

the agreement prevails.” de Csepel, 714 F.3d at 601 (alteration,

citation, and internal quotation marks omitted). As our court

recently explained in Simon v. Republic of Hungary, 812 F.3d

127 (D.C. Cir. 2016), which also involved the Hungarian

government’s wartime seizure of Jewish property—in that

case, the personal property of Jews sent to death camps—where

“a pre-existing treaty is said to confer more immunity than

would the FSIA, the treaty exception would override any of the

FSIA’s exceptions to immunity under which the claims

otherwise could go forward.” Id. at 135–36.

Hungary argues that the 1947 Treaty of Peace, Feb. 10,

1947, 61 Stat. 2065, 41 U.N.T.S. 135, which settled questions

outstanding between the Allied Powers and Hungary, including

claims of Hungarian nationals for property seized during the

war, is just such a treaty. Under Article 27 of the treaty,

Hungary promised to restore the property of all “persons under

Hungarian jurisdiction” who were “the subject of measures of

sequestration, confiscation or control on account of the racial

origin or religion of such persons.” Id. art. 27. Article 40

established a mechanism for resolving “any dispute concerning

the . . . execution of the Treaty,” i.e., direct diplomatic

negotiations followed by referral to the “Heads of the

Diplomatic Missions in Budapest of the Soviet Union, the

United Kingdom and the United States of America, acting in

concert.” Id. arts. 39–40. According to Hungary, these

provisions created an exclusive mechanism for individuals

seeking restitution of property expropriated by Hungary during

World War II, thereby barring additional liability through an

FSIA exception.

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As the district court correctly noted, however, Hungary’s

argument is completely foreclosed by Simon, which holds that

“while Article 27 secures one mechanism by which Hungarian

victims may seek recovery, it does not establish the exclusive

means of doing so.” 812 F.3d at 137; see de Csepel, 169 F.

Supp. 3d at 164–65. “The terms of Article 27,” Simon explains,

“do not speak in the language of exclusivity,” and although “[a]

sovereign generally has the authority to espouse and settle the

claims of its nationals against foreign countries[,] . . . it has no

authority to espouse and extinguish the claims of another

state’s nationals.” Simon, 812 F.3d at 137–38 (citation and

internal quotation marks omitted). In executing the 1947

Treaty, then, “the United States and the other Allied Powers . . .

lacked the power to eliminate (or waive) the claims of another

state’s—i.e., Hungary’s—nationals in the treaty’s terms.” Id. at

138.

Hungary argues that the Simon court failed to consider the

Treaty’s introduction, which states that the treaty “will settle

questions still outstanding as a result of” the war. 41 U.N.T.S.

135, intro. According to Hungary, the family’s claims are

barred because they were “affirmatively ‘settled’” by the

treaty. Appellants’ Br. at 35. But this ignores Simon’s holding

that the Allies had “no power to settle or waive the extra-treaty

claims of . . . [Hungary’s] nationals.” 812 F.3d at 138.

Hungary insists that some of the family’s claims are

factually distinct from those in Simon. According to Hungary,

Simon addresses only claims filed in lieu of attempts to recover

through the treaty. In this case, by contrast, at least some of the

claims concern art recovered through the treaty process and

later retaken by Hungary. As the Herzog family observes, this

is a “distinction without a difference.” Appellee’s Br. at 52.

Because the Herzog family believes that Hungary failed to give

them full relief through the treaty, Simon allows them to

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proceed either through the treaty or through other means like

“an Allied nation’s courts.” Simon, 812 F.3d at 138. Hungary

points to nothing in the treaty, nor to any principle of

international law, suggesting that claimants who attempt to use

the treaty but find the relief inadequate are either barred or

estopped from bringing extra-treaty claims. Indeed, Hungary’s

view of the treaty makes little sense: as Simon explains, such a

reading would require Hungarian nationals to enforce the treaty

through Article 40, a state-to-state process, despite having “no

obvious nation to speak and negotiate on their behalf against

Hungary.” Id. at 139.

B.

The rather abstruse text of the FSIA’s expropriation

exception is as follows:

A foreign state shall not be immune from the

jurisdiction of the courts of the United States . . . in

any case . . . [1] in which rights in property taken in

violation of international law are in issue and [2][a]

that property or any property exchanged for such

property is present in the United States in connection

with a commercial activity carried on in the United

States by the foreign state; or [b] that property or any

property exchanged for such property is owned or

operated by an agency or instrumentality of the

foreign state and that agency or instrumentality is

engaged in a commercial activity in the United States.

28 U.S.C. § 1605(a)(3). In other words, the exception has two

requirements. A claim satisfies the exception if (1) “rights in

property taken in violation of international law are in issue,”

and (2) there is an adequate commercial nexus between the

United States and the defendants. See Agudas Chasidei Chabad

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of U.S. v. Russian Federation, 528 F.3d 934, 940 (D.C. Cir.

2008). We start with the “rights in property” requirement.

1.

Hungary argues that this case involves a bailment

agreement, not “rights in property taken in violation of

international law.” Once again, however, Simon controls. That

decision holds that Hungary’s seizures of Jewish property

during the Holocaust constituted genocide and were therefore

takings in violation of international law. 812 F.3d at 142–46.

Equally important, Simon explains that a complaint need not

allege a straightforward claim for taking in violation of

international law. See id. at 140–42; cf. Helmerich & Payne

International Drilling Co. v. Bolivarian Republic of Venezuela,

971 F. Supp. 2d 49, 56 (D.D.C. 2013) (“The Complaint states

[a] count[ for] Taking in Violation of International Law.”).

Rather, “garden-variety common-law causes of action” can

suffice. Simon, 812 F.3d at 141; see Bolivarian Republic of

Venezuela v. Helmerich & Payne International Drilling Co.,

137 S. Ct. 1312, 1323–24 (2017) (recognizing expropriation

exception cases involving “simple common-law claim[s]”).

This case is just like Simon. Here, as there, Hungary seized

Jewish property during the Holocaust. Here, as there, plaintiffs

bring “garden-variety common-law” claims to recover for that

taking. In Simon, the plaintiffs’ conversion claim alleged that

they “had the right to possess personal property that was taken

from them by defendants,” and their unjust enrichment claim

alleged that they “were deprived of their personal property by

the defendants and that it would be inequitable and

unconscionable for the defendants to continue to enjoy the

benefits of possession and use of the plaintiffs’ personal

property.” Simon, 812 F.3d at 142 (alteration, citations, and

internal quotation marks omitted). So too here. The Herzog

family alleges that they “own and have a right to possession of

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the Herzog Collection,” and that Hungary “reject[ed]” a

demand for its return. Compl. ¶¶ 103–05. To be sure, the Simon

plaintiffs did not bring a bailment claim, but like the conversion

claim they did bring bailment is a “garden-variety common-

law” claim concerning the right to possess property. See

George W. Paton, BAILMENT IN THE COMMON LAW 4 (1952)

(“This work is primarily concerned with the common law

conception of bailment.”).

Hungary points out that the complaint’s “causes of action

make no reference to a war-time taking.” Appellants’ Br. at 22.

Rather, it says, Hungary’s Holocaust expropriations are

“legally, factually, and temporally distinct from [plaintiffs’]

claims of post-war, non-sovereign, private party commercial

bailment breaches.” Appellants’ Reply Br. at 4.

We agree that there must be some connection between the

family’s claims and Hungary’s expropriation of the Herzog

collection. The Herzog family conceded as much at oral

argument. See Oral Arg. Tr. 20:1–:12 (acknowledging that

property once expropriated is not forever tainted by that

expropriation). But as the family also emphasizes, most of its

claims do in fact involve a tight legal, factual, and temporal

connection to Hungary’s expropriation of the collection. The

district court found, and Hungary concedes, that some twenty-

five pieces of art were never returned to the family. See de

Csepel, 169 F. Supp. 3d at 149; Appellants’ Br. at 45. Even

though the complaint seeks recovery through a bailment, the

fundamental fact remains: Hungary’s possession of the Herzog

collection stems directly from its expropriation of the

collection during the Holocaust. See Bernstein v. Noble, 487

A.2d 231, 234 (D.C. 1985) (explaining that one element of a

bailment relationship is that “possession and control over an

object pass from the bailor to the bailee” (citation and internal

quotation marks omitted)).

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Hungary argues that the expropriation exception is

inapplicable because a bailment claim is, at its core,

commercial, and commercial claims may proceed only under

the commercial activity exception, not the expropriation

exception. Moreover, as Hungary points out, we explained in

our earlier decision that the Herzog family “seeks to recover

not for the original expropriation of the Collection, but rather

for the subsequent breaches of bailment agreements they say

they entered into with Hungary.” de Csepel, 714 F.3d at 598.

But we also expressly reserved decision on the availability of

the expropriation exception, and we have never held that in

order to proceed against a foreign government, a claim must

fall into just one FSIA exception—in this case, either the

expropriation exception or the commercial activity exception,

but not both. Whether an activity is commercial and whether

the claim is “based upon” such activity, as the commercial

activity exception requires, are altogether different questions

from whether the claim places “in issue” an expropriated

property right, as the expropriation exception requires. See 28

U.S.C. § 1605(a)(2) (depriving a foreign state of immunity

when “the action is based upon a commercial activity carried

on in the United States by the foreign state”); OBB

Personenverkehr AG v. Sachs, 136 S. Ct. 390, 396 (2015)

(“[A]n action is ‘based upon’ the ‘particular conduct’ that

constitutes the ‘gravamen’ of the suit.”). Indeed, Simon

explains that garden-variety common-law claims, including a

quasi-contractual claim for unjust enrichment, may satisfy the

expropriation exception. Simon, 812 F.3d at 142; see id. at 146

(“There is no reason to assume that, in every discrete context

in which [the FSIA] exceptions might be applied . . . , there

would be perfect coherence in outcome across all of the

exceptions.”). The same is true for the family’s bailment claim.

Hungary cites a series of cases in which courts have

rejected efforts to recast tort and takings claims as commercial

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claims in order to satisfy the commercial activity exception.

See, e.g., Saudi Arabia v. Nelson, 507 U.S. 349, 361–63 (1993)

(concluding that plaintiffs could not sue for intentional torts

committed by the Saudi police through a commercial claim for

“failure to warn” of their “own tortious propensity”); Rong v.

Liaoning Province Government, 452 F.3d 883, 890 (D.C. Cir.

2006) (holding that the transfer of expropriated property to

another government-created entity constituted no commercial

activity, because the alternative conclusion would allow

jurisdiction over foreign sovereigns based on “almost any

subsequent disposition of expropriated property”). Those

cases, however, stand only for the proposition that the activity

at issue did not constitute “commercial activity” under the

FSIA. Cf. de Csepel, 714 F.3d at 599 (evaluating whether a

bailment agreement is a sovereign act or commercial activity).

The question here is very different: whether the claims satisfy

the expropriation exception.

We thus conclude that “rights in property taken in

violation of international law” are “in issue” as to those twenty-

five or so artworks taken by Hungary during the Holocaust and

never returned. This, however, does not end our task.

As mentioned above, some fifteen pieces of the Herzog

collection were physically returned to family members, and

others were “legally released to the family on paper” (though

the family “dispute[s] whether they were ever actually returned

to their physical custody”). de Csepel, 169 F. Supp. 3d at 149.

The district court, however, never determined whether the

temporary return of the art severed the connection between

Hungary’s current possession and its Holocaust-era seizure.

Instead, it concluded that the return of the art is irrelevant

because “the subsequent return of property confiscated by the

government does not extinguish the earlier taking; it simply

converts a permanent taking to a temporary one, altering the

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appropriate measure of damages.” Id. at 166. But the family’s

bailment claims do not seek only damages for Hungary’s

temporary possession of this artwork from World War II until

its return. Instead, the family seeks to recover for Hungary’s

failure to return the art today in violation of bailment

agreements presumably formed when the country repossessed

the art. See Compl. ¶¶ 100 (“Defendants’ possession or re-

possession of any portion of the Herzog Collection following

WWII constituted an express or implied-in-fact bailment

contract for the benefit of the Plaintiffs.”); pt. V.A (“On their

First Claim of Relief: for an order directing Defendants to

return to Plaintiffs the pieces of the Herzog Collection that are

now . . . in Defendants’ possession . . . or for compensation

therefor . . . .”).

We shall therefore remand to the district court for it to

consider, in the first instance, the Herzog family’s claims to

those pieces returned by Hungary. See Simon, 812 F.3d at 142

(“We leave it to the district court on remand to determine

precisely which of the plaintiffs’ claims . . . satisfy[] the ‘rights

in property . . . in issue’ requirement of § 1605(a)(3).”). If their

return to the family and Hungary’s repossession are sufficiently

intertwined with the Holocaust-era taking, or if the pieces were

retaken in a new violation of international law, the claims may

place in issue “rights in property taken in violation of

international law.” But if Hungary returned the artworks free

and clear to the family and then lawfully repossessed them, a

claim for their return would not satisfy the expropriation

exception.

2.

Having concluded that the family’s claims for at least

some of the artworks satisfy the expropriation exception’s first

requirement, we turn to the commercial-activity nexus

requirement. It contains two clauses: where “rights in property

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taken in violation of international law are in issue,” then the

foreign sovereign loses its immunity if (1) “that property or any

property exchanged for such property is present in the United

States in connection with a commercial activity carried on in

the United States by the foreign state,” or (2) “that property or

any property exchanged for such property is owned or operated

by an agency or instrumentality of the foreign state and that

agency or instrumentality is engaged in a commercial activity

in the United States.” 28 U.S.C. § 1605(a)(3). The district court

concluded that the second clause is met here, see de Csepel,

169 F. Supp. 3d at 167, and neither the Republic of Hungary

nor its various agencies and instrumentalities, i.e., the three

museums and the university, dispute that conclusion.

The Republic of Hungary, however, argues that it should

nonetheless be dismissed as a defendant. As it points out,

unlike the first clause, which refers expressly to the “foreign

state,” the second clause—the one applicable here—refers to

only “an agency or instrumentality of the foreign state.”

According to the Republic, then, only its “agencies and

instrumentalities” are proper defendants, and it should be

dismissed. In support, it cites Simon, which explains that “[t]he

nexus requirement differs somewhat for claims against the

foreign state itself (e.g., Hungary) as compared with claims

against an agency or instrumentality of the foreign state . . . .”

812 F.3d at 146. “As to the claims against Hungary, the

question is whether” the first clause of the nexus requirement

is met. Id. “As to the claims against [the agency or

instrumentality], the question is whether” the second clause is

met. Id. “Applying that standard,” the Simon court found that

“the plaintiffs’ allegations suffice to withstand dismissal as to

the claims against the [agency or instrumentality] but not as to

the claims against Hungary,” and it dismissed the Republic of

Hungary from the case. Id. at 147–48.

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For its part, the Herzog family argues that the second

clause must be read in the context of the entire expropriation

exception, and read this way, the provision states that “a

foreign state shall not be immune . . . in any case . . . in which

rights in property taken in violation of international law are in

issue” and “that property or any property exchanged for such

property is owned or operated by an agency or instrumentality

of the foreign state and that agency or instrumentality is

engaged in a commercial activity in the United States.” 28

U.S.C. § 1605(a)(3). In other words, as the family sees it, the

foreign state (Hungary) remains a proper defendant as long as

its agencies or instrumentalities (the museums and the

university) engaged in the requisite commercial activity.

As to Simon, the family argues that we are bound not by

that decision, but rather by an earlier decision of our court,

Agudas Chasidei Chabad of U.S. v. Russian Federation, 528

F.3d 934 (D.C. Cir. 2008), a case which also dealt with the

exception’s second clause. Although the court in that case

found that two Russian agencies or instrumentalities “engaged

in sufficient commercial activity in the United States to satisfy”

that clause, it also “reverse[d]” the district court’s “finding of

Russia’s immunity.” Id. at 946, 955 (emphasis added).

According to the family, because Chabad retained the foreign

state (Russia) as a defendant, we too must retain the foreign

state (Hungary) as a defendant.

The question, then, is whether we are bound by Chabad or

Simon. See Helmerich & Payne International Drilling Co. v.

Bolivarian Republic of Venezuela, 185 F. Supp. 3d 233, 239–

42 (D.D.C. 2016) (recognizing their inconsistency). At first

glance, it appears that the family may be correct. Chabad

retained the foreign state, but Simon dismissed it, and in cases

of intracircuit conflict we are bound to follow the earlier

decision, here Chabad. Sierra Club v. Jackson, 648 F.3d 848,

18

854 (D.C. Cir. 2011) (“[W]hen a decision of one panel is

inconsistent with the decision of a prior panel, the norm is that

the later decision, being in violation of that fixed law, cannot

prevail.”).

The question, however, is not so simple because

“‘[b]inding circuit law comes only from the holdings of a prior

panel.’” Doe v. Federal Democratic Republic of Ethiopia, 851

F.3d 7, 10 (D.C. Cir. 2017) (emphasis added) (quoting

Gershman v. Group Health Association, 975 F.2d 886, 897

(D.C. Cir. 1992)). The precise question, then, is whether the

Chabad court held that a foreign state loses immunity if the

second nexus requirement is met. We think it did not.

The issue of the Russian state’s immunity was completely

unaddressed by the district court and neither raised nor briefed

on appeal—a deficiency that, as then-Judge Scalia reminded

us, deprives the court of the benefits of the adversarial system.

Carducci v. Regan, 714 F.2d 171, 177 (D.C. Cir. 1983) (Scalia,

J.) (“Failure to enforce” Federal Rule of Appellate Procedure

28, which requires that the parties brief the issues presented,

“deprive[s] us in substantial measure of that assistance of

counsel which the system assumes—a deficiency that we can

perhaps supply by other means, but not without altering the

character of our institution.”). The court, moreover, did not

explain why it kept the Russian Federation in the case. In fact,

we only know that it did because at the end of its opinion it

stated “we reverse [the district court’s] finding of Russia’s

immunity.” Chabad, 528 F.3d at 955. As our court recently

explained in United States v. Jones, 846 F.3d 366 (D.C. Cir.

2017), where “[o]ur prior decisions . . . merely stated without

analysis that [jurisdiction] existed, . . . those cursory and

unexamined statements of jurisdiction have no precedential

effect.” Id. at 369 (citations and internal quotation marks

omitted). In that case, the court considered whether it had

19

authority to review district court orders granting or denying

sentence reductions under 18 U.S.C. § 3582(c)(2). Though we

had previously reviewed such orders and stated that we “ha[d]

jurisdiction” under two specific statutes, see United States v.

Kennedy, 722 F.3d 439, 442 (D.C. Cir. 2013) (citing 28 U.S.C.

§ 1291); United States v. Cook, 594 F.3d 883, 885 (D.C. Cir.

2010) (citing 28 U.S.C. § 1291; 18 U.S.C. § 3742(a)(1)), these

bare statements, the court explained, were too conclusory to

constitute binding precedent. Accordingly, the Jones court

“grapple[d] with the issue more explicitly” and “f[ound] that

28 U.S.C. § 1291 permits such review.” Id. at 368–69.

So too here. While readers of the dissent might think that

the Chabad court discussed at length whether the Russian

Federation should remain in the case, the court reversed the

district court with no explanation at all. See Arch Trading Corp.

v. Republic of Ecuador, 839 F.3d 193, 206 (2d Cir. 2016)

(noting that Chabad asserted jurisdiction over Russia “without

separate discussion” of the foreign state). Such a “cursory and

unexamined” reversal is just the kind of “drive-by

jurisdictional ruling[]” that the Supreme Court has explained

“ha[s] no precedential effect.” Steel Co. v. Citizens for a Better

Environment, 523 U.S. 83, 91 (1998).

Indeed, Chabad’s analysis is in tension with its apparent

decision to extend jurisdiction from Russia’s agencies and

instrumentalities to the foreign state itself. Recall that the first

clause of the nexus requirement mandates that the property be

physically present in the United States, but the second does not.

In Chabad, the defendants argued that it “would be quite

anomalous” if the second clause could be satisfied by both a

relaxed physical presence requirement and a lower level of

commercial activity. Chabad, 528 F.3d at 947. The level of

commercial activity necessary to satisfy the second clause, the

argument went, must therefore be higher than that necessary to

20

satisfy the first clause. The Chabad court considered that

argument at some length before rejecting it. See id. at 947; see

also Agudas Chasidei Chabad of U.S. v. Russian Federation,

466 F. Supp. 2d 6, 24–25 (D.D.C. 2006). But it did so by

explaining that the first clause “applies to activities ‘carried on

by the foreign state,’ whereas the second clause involves the

commercial activities of the foreign state’s agencies and

instrumentalities.” Chabad, 528 F.3d at 947. The second

clause’s lower bar made sense in light of agencies’ and

instrumentalities’ “greater detachment from the state itself.” Id.

Given that the Chabad court recognized that the expropriation

exception provides greater protection to foreign states than to

agencies and instrumentalities, why would it have held that

foreign states lose their immunity whenever the lower bar is

satisfied? If there is an answer to that question, it appears

nowhere in the Chabad opinion. Although the Chabad court

did discuss the commercial-activity nexus requirements, as the

dissent notes, Dissenting Op. at 6–8, it never considered the

issue before us, namely, whether a foreign state loses its

immunity simply because its agency or instrumentality satisfies

the expropriation exception’s second clause.

By contrast to the Chabad court, the Simon court expressly

considered and decided the question of foreign state immunity

under the expropriation exception. It explained that the nexus

requirement for jurisdiction over foreign states “differs” from

that over agencies and instrumentalities: claims against foreign

states must satisfy the first nexus requirement, and claims

against agencies and instrumentalities must satisfy the second.

812 F.3d at 146. To be sure, the Simon court did not address

the Herzog family’s precise textual argument. But in a petition

for rehearing, the plaintiffs not only raised just that argument,

but also claimed that the Simon court was bound by Chabad to

retain the Republic of Hungary as a defendant. Petition for

Rehearing at 7, 12, Simon v. Republic of Hungary, No. 14-7082

21

(Feb. 29, 2016). Hardly “unaware” of the supposed intra-circuit

conflict, Dissenting Op. at 1, the Simon court denied the

petition. Applying Simon to the facts of this case, we have

jurisdiction through only the second clause of the commercial-

activity nexus requirement, meaning that the Republic of

Hungary retains its FSIA immunity.

Although this is sufficient to resolve the question, even

were we not bound by Simon, we would hold that a foreign

state retains its immunity unless the first clause of the

commercial-activity nexus requirement is met. The FSIA

carefully distinguishes foreign states from their agencies and

instrumentalities. See, e.g., 28 U.S.C. §§ 1603(a)–(b) (defining

the terms); 1606 (making punitive damages available against

agencies and instrumentalities but not foreign states); 1610

(establishing different procedures for property execution).

Though the list of exceptions begins “[a] foreign state shall not

be immune,” id. § 1605, our court has explained that the foreign

state itself does not lose immunity merely because one of its

agencies and instrumentalities satisfies an FSIA exception;

rather, given the Act’s “presumption” that agencies and

instrumentalities have “independent status” from the foreign

state, “‘[w]hen a state instrumentality is not immune . . . , the

claim is ordinarily to be brought only against the

instrumentality.’” Foremost-McKesson, Inc. v. Islamic

Republic of Iran, 905 F.2d 438, 446 (D.C. Cir. 1990) (quoting

Restatement (Third) of the Foreign Relations Law of the

United States § 452 cmt. c (1987)). For that reason, a foreign

state loses its immunity under the commercial-activity

exception only if the claim against the state—as opposed to the

agency or instrumentality—satisfies that exception. See id. at

446–47 (“[A]bsent an agency relationship, the court lacks

subject matter jurisdiction over the foreign state for the acts of

its instrumentality.”).

22

The same is true for the expropriation exception. A foreign

state loses its immunity if the claim against it satisfies the

exception by way of the first clause of the commercial-activity

nexus requirement; by contrast, an agency or instrumentality

loses its immunity if the claim against it satisfies the exception

by way of the second clause.

To conclude that the foreign state loses its immunity if

either clause is satisfied would produce an anomalous result:

the court would have no jurisdiction over the agencies and

instrumentalities that actually own or operate the expropriated

property. That is because, although the FSIA generally allows

for “an agency or instrumentality of a foreign state” to count as

a “foreign state,” id. § 1603, the agencies or instrumentalities

would fail to satisfy either of the expropriation exception’s two

clauses if considered to be the relevant “foreign state”

throughout the exception. Take this case. The family would be

unable to pursue its claims against the very entities that actually

possess the Herzog collection—the museums and the

university—because the collection is not “present in the United

States” (clause one) nor “owned or operated by an agency or

instrumentality” of the museums and the university (clause

two). Thus, the expropriation exception’s two clauses make

sense only if they establish alternative thresholds a plaintiff

must meet depending on whether the plaintiff seeks to sue a

foreign state or an agency or instrumentality of that state.

Collapsing the well-worn distinction between foreign

states and agencies and instrumentalities would likewise lead

to odd results. Because a foreign state would be amenable to

suit whenever its agency or instrumentality is not immune, a

plaintiff would be able to sue a foreign state with no

commercial activity in the United States so long as the agency

or instrumentality owning the property in issue is engaged in a

commercial activity in the United States. In other words—and

23

counterintuitively—a plaintiff (1) could more easily obtain

jurisdiction over a foreign state if the expropriated property is

possessed not by it, but by one of its agencies or

instrumentalities, and (2) could sue any and all agencies and

instrumentalities of a foreign state however unconnected to the

United States, so long as the foreign state itself possesses the

property in connection with a commercial activity carried on in

the United States. This expansive reading of the expropriation

exception makes little sense given that the provision targets

specific expropriated property. It is hardly surprising, then, that

such a reading was rejected by Simon and the only other circuit

to have addressed the question. See Garb v. Republic of

Poland, 440 F.3d 579, 589 (2d Cir. 2006) (explaining that the

first nexus requirement “sets a higher threshold of proof for

suing foreign states in connection with alleged takings”);

FEDERAL JUDICIAL CENTER, THE FOREIGN SOVEREIGN

IMMUNITIES ACT: A GUIDE FOR JUDGES 58–59 (2013) (“As is

often the case under the FSIA, standards established for the

foreign state differ from those established for its agencies and

instrumentalities.”).

III.

This leaves three issues.

First, the remaining defendants—the museums and the

university—argue that the claims of Erzsébet Weiss de Csepel,

the Herzog daughter who became a United States citizen in

1952, supra at 4, are barred by a 1973 agreement between the

United States and Hungary under which Hungary paid the

United States $18.9 million “in full and final settlement and in

discharge of all claims of the Government and nationals of the

United States against the Government and nationals of the

Hungarian People’s Republic.” Agreement between the

Government of the United States of America and the

Government of the Hungarian People’s Republic Regarding

24

the Settlement of Claims, Mar. 6, 1973, 24 U.S.T. 522 art. 1.

Although, as the district court explained, the 1973 agreement

could not have extinguished claims in any work of art taken

from Erzsébet before she became a citizen in 1952, see de

Csepel, 808 F. Supp. 2d at 133–34, the remaining defendants

insist that Hungary did take some of the art from Erzsébet after

she became a citizen. This is true with respect to two

paintings—the Cranach and the Opie—but those two paintings

are no longer at issue in this case. See de Csepel, 169 F. Supp.

3d at 167 (dismissing the Cranach and Opie paintings).

Defendants point to record evidence suggesting that other

paintings may also have been taken from Erzsébet after she

became a citizen. See Appellants’ Reply Br. at 10 n.7

(identifying twelve paintings). The family disagrees, claiming

that only the Cranach and Opie paintings were seized after

1952. See Appellees’ Br. at 54–55 & n.15. Because we are

remanding the case for other reasons, we think it best to leave

it to the district court to address this issue in the first instance

as part of its review of the artwork returned and retaken by

Hungary.

Defendants next argue, separate and apart from their FSIA

immunity defense, that the Herzog family should have to

exhaust its claims in Hungarian courts, as well as through a

recently created formal claims process. See de Csepel, 169 F.

Supp. 3d at 169. Compare Chabad, 528 F.3d at 948 (stating it

is “likely correct” that the plaintiff “was not required to exhaust

Russian remedies before litigating in the United States”), with

Fischer v. Magyar Allamvasutak Zrt., 777 F.3d 847, 859 (7th

Cir. 2015) (requiring “prudential exhaustion . . . based on

international comity concerns”). This argument ignores the

source of our appellate jurisdiction, i.e., the collateral order

doctrine.

25

As a general rule, appellate jurisdiction extends only to

“final decisions” of a district court, 28 U.S.C. § 1291, and

parties may not appeal where, as here, the district court has

simply denied a motion to dismiss. Kilburn, 376 F.3d at 1126.

It is nonetheless well settled that denial of a motion to dismiss

on the ground of sovereign immunity is “final” by application

of the collateral order doctrine and “therefore subject to

interlocutory review.” Id. This is why we have appellate

jurisdiction to consider Hungary’s FSIA arguments.

Hungary, however, has made no argument that the

collateral order doctrine applies to denial of a motion to dismiss

on freestanding exhaustion grounds. See Simon, 812 F.3d at

148 (observing that “the FSIA itself imposes no exhaustion

requirement”); see also Swint v. Chambers County

Commission, 514 U.S. 35, 49–51 (1995) (explaining that the

collateral-order exception applies to claims, rather than cases);

Stewart v. Oklahoma, 292 F.3d 1257, 1260 (10th Cir. 2002)

(addressing an Eleventh Amendment defense through the

collateral order doctrine but holding that a failure-to-exhaust

defense is not “independently subject to the collateral order

doctrine”). True, the Simon court considered several

exhaustion arguments, but that case came to us on appeal from

a final order dismissing the entire suit. Simon, 812 F.3d at 132,

146–49. Asked about our appellate jurisdiction at oral

argument, counsel for Hungary said “I’ll be honest, Your

Honor, you’ve got me there.” Oral Arg. Tr. 11:15–13:15.

Finally, the Herzog family asks that should we dismiss any

of their claims, they be allowed to amend their complaint in

light of the Holocaust Expropriated Art Recovery Act of 2016.

Pub. L. 114–308, 130 Stat. 1524. Passed during the pendency

of this appeal, that statute rests on Congress’s finding that

“[v]ictims of Nazi persecution and their heirs have taken legal

action in the United States to recover Nazi-confiscated art,” but

26

“[t]hese lawsuits face significant procedural obstacles partly

due to State statutes of limitations.” Id. § 2(6). The Act

therefore preempts existing state and federal statutes of

limitations for “a civil claim or cause of action . . . to recover

any artwork or other property that was lost . . . because of Nazi

persecution.” Id. § 5(a). Plaintiffs whose claims were barred by

a statute of limitations now have six years from the enactment

of the new statute to file their claims. Id. §5(c). Moreover, and

crucially for the Herzog family, the Act’s new statute of

limitations applies to claims “pending in any court on the date

of enactment of this Act, including any civil claim or cause of

action that is pending on appeal.” Id. § 5(d)(1).

Defendants urge us to deny the motion because, they say,

the family has offered “no explanation” for its failure to bring

a straightforward conversion claim from the start. Appellants’

Reply Br. at 25. Defendants cannot be serious about this, as in

their opening brief they themselves identify the “explanation,”

i.e., the “statute of limitations obstacle that has been applied in

courts around the country.” Appellants’ Br. at 29–30; see D.C.

Code § 12-301(2) (imposing a three-year statute of limitations

on actions “for the recovery of personal property”). Federal

Rule of Civil Procedure 15 directs courts to “freely give leave

[to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2).

Given that Congress enacted the Holocaust Expropriated Art

Recovery Act for the very purpose of permitting claims like

these to continue despite existing statutes of limitations,

“justice” quite obviously requires that the family be given leave

to amend their complaint.

IV.

We affirm the district court’s ruling that the Herzog

family’s claims to art never returned to them satisfy the FSIA’s

expropriation exception. With respect to art that was returned

to the Herzog family, we remand for the district court to

27

determine whether the claim to recover each piece may proceed

under the expropriation exception. We also instruct the district

court to dismiss the Republic of Hungary as a defendant and to

grant the Herzog family leave to amend their complaint in light

of the Holocaust Expropriated Art Recovery Act. Finally, we

dismiss for lack of appellate jurisdiction Hungary’s appeal

from the denial of its motion to dismiss on exhaustion grounds.

So ordered.

RANDOLPH, Senior Circuit Judge, concurring in part and

dissenting from part II.B.2:

The majority decides that the Republic of Hungary is

immune from the jurisdiction of the federal courts in this case.

I disagree.

Part II.B.2 of the majority’s opinion transforms the

governing jurisdictional statute to mean the opposite of what it

says. That distortion of the English language is not all. The

majority also dismisses a controlling panel decision thoroughly

inconsistent with the majority’s conclusion that there is no

jurisdiction over the Republic of Hungary. Instead of following

that decision, the majority credits a later, contradictory panel

decision, a decision bereft of any statutory analysis.

The two decisions dealing with the jurisdictional question

presented here are Agudas Chasidei Chabad of United States v.

Russian Federation, 528 F.3d 934 (D.C. Cir. 2008), and the later

decision in Simon v. Republic of Hungary, 812 F.3d 127 (D.C.

Cir. 2016). Chabad and Simon cannot be reconciled, at “first

glance” and every later glance. Maj. Op. 17. Both were

expropriation cases in which jurisdiction over the foreign state

rested on the commercial activities of the foreign state’s

agencies and instrumentalities in the United States. Chabad

upheld jurisdiction over the foreign state. Simon decided the

opposite, apparently unaware of the intra-circuit conflict it was

thereby creating. (After Simon came down the district court

noticed the obvious intra-circuit conflict Simon caused. See

Philipp v. Fed. Republic of Germany, No. 15-266 (CKK), 2017

WL 1207408, at *9 (D.D.C. March 31, 2017).)

As between Chabad and Simon, the earlier Chabad decision

controls for the reasons Judge Sentelle stated for our court in

Sierra Club v. Jackson, 648 F.3d 848, 854 (D.C. Cir. 2011).

Under Chabad, the district court in this case therefore had

jurisdiction over the Republic of Hungary. I will have more to

2

say about Chabad and Simon in a moment. But it will be useful

to examine first the majority’s efforts to fill in a rationale for the

result in Simon, a rationale missing from the Simon opinion

itself.

The expropriation or “takings” exception in the Foreign

Sovereign Immunities Act, 28 U.S.C. § 1605(a)(3), states as

follows, with my italics added:

[a] foreign state shall not be immune from the

jurisdiction of courts of the United States or of the States

in any case . . . (3) in which rights in property taken in

violation of international law are in issue and that

property . . . is owned or operated by an agency or

instrumentality of the foreign state . . . engaged in a

commercial activity in the United States.

See Bolivarian Republic of Venezuela v. Helmerich & Payne

Int’l Drilling Co., 137 S. Ct. 1312, 1316 (2017), quoting the

same portion of the statute in a case dealing with jurisdiction

over a foreign state.

Hungary’s immunity thus should have depended on three

easily-answered questions. Is the Republic of Hungary a

“foreign state”? Of course it is. See Maj. Op. 16. Are “rights

in property taken in violation of international law” “in issue”?

The answer is clearly yes. See Maj. Op. 14. And is “that

property” “owned or operated by an agency or instrumentality

of the foreign state . . . engaged in a commercial activity in the

United States”? Once again – yes. See Maj. Op. 16.

Yet the majority decides that Hungary is immune from suit.

The apparent basis for its conclusion is that the italicized portion

of § 1605(a)(3), quoted above, does not divest a “foreign state”

of immunity. Although § 1605(a)(3) provides that a foreign

3

state shall not be immune from suit, the majority crosses out the

“not” and holds that the foreign state shall be immune when its

agencies or instrumentalities owning or operating the

expropriated property engage in commercial activity in the

United States.

In trying to explain why § 1605(a)(3) should be treated as

if it means the opposite of what it actually provides, the majority

invokes § 1606 and § 1610 of the Act, sections that differentiate

foreign states from their agencies and instrumentalities. See

Maj. Op. 21 (citing 28 U.S.C. §§ 1606 & 1610). One of these

sections (§ 1606) exempts foreign states, “except for an agency

or instrumentality thereof,” from liability for punitive damages.

The other section (§ 1610) sets forth procedures for attaching the

property of a foreign state, procedures that differ from those for

attaching the property of a foreign state’s agency or

instrumentality. Both sections deal with remedies, not a foreign

state’s immunity from suit.

Neither section suggests that Hungary is not a foreign state.

The Act defines “foreign state” to include the foreign state’s

agencies and instrumentalities. 28 U.S.C. § 1603(a). The

sections the majority cites are arguably exceptions to that

definition. It is one thing to say that a “foreign state” under the

Act does not always include agencies and instrumentalities.

Those sections may stand for that proposition. But the majority

advances an entirely different proposition – namely, that the

term “foreign state” in § 1605(a)(3) somehow does not include

a “foreign state.”

To support this non sequitur, the majority enlists Foremost-

McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 446

(D.C. Cir. 1990). The case has no logical connection to the

issue at hand. On the page the majority cites, the Foremost-

McKesson court was not interpreting “foreign state,” or any

4

statutory text for that matter. Instead, the court was addressing

an antecedent issue to the immunity exceptions. Specifically,

the issue was whether “the government of Iran exercised the

necessary degree of control over the other [instrumentality]

defendants to create a principal/agent relationship and thus

permit this court to deem Iran responsible for their actions.” Id.

at 445 (citation omitted). No one argues here that Hungary is

being called to answer for the wrongs of its instrumentalities; all

agree that this case involves a “family’s decades-long effort to

recover a valuable art collection that the World-War-II–era

Hungarian government and its Nazi collaborators seized during

their wholesale plunder of Jewish property during the

Holocaust.” Maj. Op. 2. Foremost-McKesson thus offers no

support to the majority’s view of § 1605(a)(3). The distinction

between foreign states and their instrumentalities simply does

not matter on the question whether Hungary is a foreign state.1

1

Because the majority relies on this distinction, it is worth

making one additional point. The majority concludes that a “foreign

state loses its immunity if the claim against it satisfies the exception

by way of the first clause of the commercial-activity nexus

requirement; by contrast, an agency or instrumentality loses its

immunity if the claim against it satisfies the exception by way of the

second clause.” Maj. Op. 22. This supposed neat distinction between

foreign states and their instrumentalities is belied not only by the Act

defining “foreign state” to include agencies and instrumentalities, 28

U.S.C. § 1603(a), but also by the House Report on the Act explicitly

adopting this definition for the expropriation exception. See H.R. Rep.

No. 94-1487, pp. 18, 19 (1976). This definition of “foreign state” also

dispels the majority’s notion that reading the statute for what it says

would result in the court having “no jurisdiction over the agencies and

instrumentalities that actually own or operate the expropriated

property.” Maj. Op. 22. That argument only works if “foreign state”

means either the foreign state or its instrumentalities – but the term

includes both.

5

The Supreme Court, in its latest opinion on the Foreign

Sovereign Immunities Act, cited the Restatement (Fourth) of

Foreign Relations Law: Sovereign Immunity § 455 (Tent. Draft

No. 2, March 21, 2016). See Helmerich & Payne Int’l Drilling,

137 S. Ct. at 1321. As one would expect, the Restatement

provides a clear articulation of the expropriation exception to a

foreign state’s immunity. Section 455 states:

Courts in the United States may exercise jurisdiction

over a foreign state in any case in which rights in

property taken in violation of international law are in

issue when

(a) that property (or any property exchanged for

such property) is present in the United States in

connection with a commercial activity carried on by

that foreign state in the United States; or

(b) that property (or any property exchanged for

such property) is owned or operated by an agency or

instrumentality of a foreign state and that agency or

instrumentality is engaged in commercial activity in

the United States.

Reporter Note 6 then addresses the issue in this case directly.

“Some courts,” the Note says, “have allowed actions under the

second ‘prong’ of this exception to be brought against the

foreign state in question rather than the agency or

instrumentality. See, e.g., Augudas Chasidei Chabad of U.S. v.

Russian Federation, 528 F.3d 934 (D.C. Cir. 2008); Siderman

de Blake v. Republic of Argentina, 965 F.2d 699 (9th Cir. 1992);

de Csepel v. Republic of Hungary, 808 F. Supp. 2d 113 (D.D.C.

2011), aff’d on other grounds, 714 F.3d 591 (D.C. Cir. 2013).”2

2

The Restatement and majority both note a contrary decision in

the Second Circuit. See Garb v. Poland, 440 F.3d 579, 589 (2d Cir.

6

Notice that the Reporter cites Chabad as a case in which the

court decided that the italicized language from § 1605(a)(3), set

forth above, conferred jurisdiction over the foreign state itself.

Yet the majority denies that Chabad so ruled and on that basis

concludes that the later-issued opinion in Simon, contrary to

Chabad, controls. The majority is mistaken. The briefs of the

parties discussed the italicized portion of § 1605(a)(3) at some

length for the quite apparent reason that the plaintiffs relied on

that portion of the statute to strip Russia of its immunity. See

Opening Brief for Chabad at 48, Chabad, 528 F.3d 934.

As I briefly discussed in the beginning of this dissent, the

majority’s failure to follow Chabad is clear error. Consider the

majority’s statement that in Chabad the “issue of the Russian

state’s immunity was completely unaddressed by the district

court and neither raised nor briefed on appeal . . ..” Maj. Op. 18.

There are two assertions here. The first deals with the district

court’s opinion, the second with what the parties argued on

appeal. Both are wrong.

As to the majority’s first assertion, District Judge

Lamberth’s comprehensive opinion in Chabad refutes it. On

page after page Judge Lamberth discusses and ultimately agrees

with Chabad’s claim that jurisdiction over Russia – that is,

Russia’s lack of immunity – required that “the entity that owns

or operates the property at issue ‘be engaged in a commercial

activity in the United States.’ § 1605(a)(3) (emphasis added).”

466 F. Supp. 2d 6, 24 (D.D.C. 2006). Judge Lamberth’s opinion

2006); Maj. Op. 23. Courts in the Second Circuit have concluded that

the relevant language in Garb was dicta. See Freund v. Republic of

France, 592 F. Supp. 2d 540, 561 n.10 (S.D.N.Y. 2008). See also

Arch Trading Corp. v. Republic of Ecuador, 839 F.3d 193, 205-06 (2d

Cir. 2016).

7

then begins an extended analysis of the clause in § 1605(a)(3) I

have italicized above. Id. at 24-25. The majority here also fails

to notice that there were two separate alleged expropriations in

Chabad, one dealing with what the parties called the “Archive,”

the other dealing with the “Library.” Maj. Op. 18, 19. Judge

Lamberth determined that Russia had no immunity regarding the

“Archive” expropriation, but had immunity regarding the

“Library” expropriation. 466 F. Supp. 2d at 31. Both sides

appealed. Chabad, 528 F.3d at 939.

On appeal, Russia argued in its brief that “commercial

activity” in the italicized clause in § 1605(a)(3) – which Chabad

had relied upon (466 F. Supp. 2d at 23-24) – should be

interpreted to require “substantial contact” with the United

States. See Opening Brief for Russia at 41-42, Chabad, 528

F.3d 934. Otherwise, Russia argued, there would be an

anomaly: plaintiffs could more easily establish jurisdiction over

a foreign state based on the commercial activity of its agencies

and instrumentalities than based on the activity of the foreign

state itself. Id. The Chabad plaintiffs countered that the “plain

language” of the § 1605(a)(3) clause italicized above conferred

jurisdiction over the foreign state without any substantiality

requirement and that if this should be altered, it was up to

Congress not the courts. Opening Brief for Chabad at 50-51,

Chabad, 528 F.3d 934. On appeal, our court acknowledged

Russia’s “anomaly” argument regarding the italicized clause in

§ 1605(a)(3), 528 F.3d at 947, and expressly rejected it. Id.

Yet the majority in this case now resurrects Russia’s

argument and claims that treating the italicized clause in

§ 1605(a)(3) as establishing jurisdiction over Hungary would

produce an “anomalous result.” Maj. Op. 22-23. The majority

seems quite unaware that the “anomaly” argument it puts

forward is the argument the Chabad court flatly rejected on

appeal. The briefs in Chabad make the majority’s error clear.

8

The short of the matter is that the appellate decision in

Chabad is controlling. The Supreme Court has instructed that

“it is not only the result but also those portions of the opinion

necessary to that result by which we are bound.” Seminole Tribe

of Florida v. Florida, 517 U.S. 44, 67 (1996), quoted in Citizens

for Responsibility & Ethics in Washington v. United States Dep’t

of Justice, 846 F.3d 1235, 1244 (D.C. Cir. 2017). The result in

Chabad was clear: the court affirmed the district court’s

judgment upholding jurisdiction over Russia with regard to the

“Archive” claim and reversed the district court’s judgment

granting Russia immunity on the “Library” claim. Chabad, 528

F.3d at 948, 955; see Agudas Chasidei Chabad of U.S. v.

Russian Fed’n, 729 F. Supp. 2d 141, 143, 148 (D.D.C. 2010)

(exercising jurisdiction over Russia on remand). Both

jurisdictional decisions rested on the italicized portion of

§ 1605(a)(3) that the plaintiffs in this case clearly satisfied. See

Maj. Op. 17. When, in the Supreme Court’s words in Seminole

Tribe, one looks to the “portions of the opinion necessary to that

result,” one finds ample reasoning in support over multiple

pages. See Chabad, 528 F.3d at 946-48. Chabad examined

whether Russia’s agencies and instrumentalities were “engaged

in a commercial activity in the United States” and found this

“alternative” clause in § 1605(a)(3) “plainly satisfied.” 28

U.S.C. § 1605(a)(3); Chabad, 528 F.3d at 948. On that basis, it

determined that Russia did not have immunity from the

jurisdiction of the federal courts. Chabad, 528 F.3d at 955.

The majority dismisses the reasoning of Chabad because it

believes that a “foreign state” in § 1605(a)(3) may sometimes

not be a “foreign state.” Having adopted this unfounded reading

of the statute, the majority then faults Chabad for not explicitly

addressing it. It bears repeating that Chabad upheld jurisdiction

over Russia. Why? Because the italicized portion of

§ 1605(a)(3) removed Russia’s immunity in light of the

commercial activities of Russia’s agencies and instrumentalities

9

in the United States. The Chabad decision is clearly

precedential, whether or not the opinion responded to every

conceivable misreading of the statute.

In the later decision in Simon, the panel recognized that the

relevant portion of Chabad had precedential effect. Without

explanation, it cited that precise portion in reaching its contrary

and counter-textual interpretation of the expropriation exception.

See Simon, 812 F.3d at 146 (citing Chabad, 528 F.3d at 947).

Chabad was the only case it cited for that result. Id. The Simon

panel’s one-sentence rehearing denial added nothing.

The only reasonable explanation for Simon’s treatment of

Chabad is that it made a mistake. The majority’s decision in

this case only compounds the error.