Grossman LLP | <strong >Supreme Court Rules Against Jewish Art Dealers’ Heirs In Suit To Recover the “Guelph Treasure,” Allegedly the Subject of a Nazi-Era Forced Sale </strong >
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  • Supreme Court Rules Against Jewish Art Dealers’ Heirs In Suit To Recover the “Guelph Treasure,” Allegedly the Subject of a Nazi-Era Forced Sale 
    Just a few weeks ago, we wrote (here) about some of the Supreme Court’s most significant art-related cases from 2020, and noted that we were awaiting the Court’s decision in a long-running dispute over the so-called Guelph Treasure.  In early February, the Court issued its ruling, dealing the plaintiffs, who are the heirs of a consortium of Jewish art dealers, a major blow in their attempt to seek redress for their ancestors’ loss.  
    The Guelph Treasure is a collection of important medieval artifacts, initially assembled by a family of Prussian aristocrats.  (See here and here for further historical background.)  In 1929, a group of Jewish art dealers jointly purchased the Treasure from a German duke.   But in 1935, after the Nazi party took over Germany, the consortium sold most of the collection to the Prussian state for about half what they had paid.  The works have been in a German museum since the 1960s. 
    The plaintiffs, heirs of those dealers, allege that the 1935 sale was effectively a forced sale, spearheaded by Hermann Goering—Hitler’s deputy and the Prime Minister of Prussia—who became interested in the remainder of the Welfenschatz, and persecuted and threatened the consortium to coerce them to relinquish it for a fraction of its value.
    Around 2008, the heirs began seeking the return of the Treasure.  But the SPK (the German instrumentality that maintains the collection) investigated and determined that the 1935 transaction was fair.  In 2014, the parties agreed to submit the claim to the so-called Limbach Commission (its full name is the “German Advisory Commission for the Return of Cultural Property Seized as a Result of Nazi Persecution, Especially Jewish Property”), which since 2003 has been tasked with mediating disputes over art and cultural assets confiscated during the Third Reich which are now held by museums, libraries, archives or other public institutions in Germany.  The Commission agreed with the SPK, opining that the sale had been consummated at a fair price and not under duress.  
    The frustrated heirs then turned to the U.S. courts, filing a lawsuit in 2015 in the U.S.  District Court for the District of Columbia, asserting common law property claims against Germany and SPK and seeking $250 million in compensation.  The defendants moved to dismiss the case, arguing that they were immune from suit under the Foreign Sovereign Immunites Act, a federal statute which generally makes foreign sovereigns immune from suit by U.S. citizens, subject to certain narrow exceptions.  The plaintiffs argued that their claims fall under one of the FSIA exceptions, sometimes called the “expropriation exception,” which permits U.S. courts to exercise jurisdiction over suits against foreign sovereigns concerning “property taken in violation of international law.”   See 28 U. S. C. §1605(a)(3).  The defendants’ primary argument against application of the expropriation exception was that the purchase of the Welfenschatz could not have violated international law because a sovereign’s taking of its own nationals’ property is not unlawful under the international law of expropriation.  The heirs, for their part, argued that the purchase of the Welfenschatz was one of Germany’s acts of genocide, and therefore violated international law regarding genocide.  The District Court sided with the plaintiffs (248 F.Supp.3d 59, 70–74 (D.D.C. 2017), and a panel of the D.C. Circuit affirmed, 894 F. 3d 406 (D.C. Cir. 2018), opining that genocide, even when perpetrated by a state against its own nationals, is a violation of international law.  The D.C. Circuit declined to hear the case en banc, and in 2020, the Supreme Court agreed to hear Germany’s appeal.  Oral arguments were held in December 2020.  The primary issues were whether the expropriation exception should apply, and whether, even if Plaintiffs’ claims were permissible under the FSIA, U.S. courts should still abstain from the case out of respect for “international comity.”   
    The Supreme Court’s Decision
    The Supreme Court’s decision (available here), penned by Chief Justice Roberts, was unanimous.  The Court analyzed longstanding historical and legal precedents in the international law context and concluded that this situation implicates the “domestic takings rule,” which generally treats a foreign sovereign’s taking of its own nationals’ property as a domestic affair; in other words, in the Court’s view, what a country does to property belonging to its own citizens within its own borders is not the subject of international law.  Thus, the Court concluded, the FSIA’s expropriation exception’s reference to “violation of international law” does not cover expropriations of property belonging to a country’s own nationals.
    The Court acknowledged the Plaintiffs’ argument that “rights in property taken in violation of international law” should be read more broadly, to encompass broad international norms including human rights laws against genocide (which the United Nation defines as “deliberately inflicting on [a] group conditions of life calculated to bring about its physical destruction in whole or in part”).  But the Court declined to rule on whether the sale of the consortium’s property was an act of genocide, “because the expropriation exception is best read as referencing the international law of expropriation rather than of human rights.  We do not look to the law of genocide to determine if we have jurisdiction over the heirs’ common law property claims.  We look to the law of property.”  And at the time of the FSIA’s passage in 1976, a “taking of property” was “wrongful under international law” only where a state deprived an alien of property; international law did not concern itself with a government’s taking of property from its own people.  The Court expressed an unwillingness to allow the expropriation exception to apply anytime a human-rights violation is accompanied by a taking of property, thereby “transforming the expropriation exception into an all-purpose jurisdictional hook for adjudicating human rights violations.”  The Court also noted that Congress has already tried to carefully account for how the FSIA should apply with respect to human rights violations such as torture or terrorism, and warned that those other sections of the FSIA “would be of little consequence if human rights abuses could be packaged as violations of property rights and thereby brought within the expropriation exception.”  The Court also evinced a general concern for the foreign relations implications of abrogating sovereign immunity.  
    Implications and What’s Next
    Interestingly, at the end of the decision, the Court noted that it was not considering an alternative argument raised by the heirs: that the sale of the Welfenschatz is not subject to the domestic takings rule because the consortium members were not German nationals at the time of the transaction.  The Court remanded that issue to the district court to consider the argument and whether it had been adequately raised in the lower courts.  In other words, the Plaintiffs may still be able to argue that this was not a situation involving a sovereign’s taking of its own citizens’ property, because by 1935, as Jews, the dealers were no longer really German citizens at all.    
    Thus, it seems that the heirs may have at least one possible argument remaining as they attempt to keep their federal case alive.  In the larger picture, however, this case is an important one in the growing body of case law regarding Nazi-looted art and art restitution.  Specifically, the Plaintiffs’ plight highlights that it is not uncommon for stolen or looted art to end up in the hands of a foreign government, as opposed to a private collector or museum.  And this decision emphasizes the particularly steep legal hurdles faced by claimants who wish to use the U.S. court system to sue this kind of foreign government entity.  The Supreme Court’s ruling will likely remind lower courts throughout the country that the FSIA should not be construed broadly, and will certainly remind potential claimants to carefully evaluate how the FSIA may apply to their particular situation before attempting to chart a course of legal action with respect to seeking the return of a lost artwork.  We will continue to watch this and other restitution cases as they unfold.