Holocaust Victims of Bank Theft v. Magyar Nemzeti Bank et. al.

Filing 176

MEMORANDUM Opinion Signed by the Honorable Samuel Der-Yeghiayan on 5/18/2011:Mailed notice (mw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
HOLOCAUST VICTIMS
OF BANK THEFT,

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Plaintiffs,
v.

MAGYAR NEMZETI BANK, et. al.,
Defendants.

No. 10 C 1884

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendants’ motions to dismiss. For the
reasons stated below, the motions are denied in their entirety.

BACKGROUND
Plaintiffs brought the instant action against Defendants, which are
international banking institutions that allegedly played a role in a wealth
expropriation scheme involving the theft and withholding of assets and funds from
Hungarian Jews who were victims of the Holocaust and their next of kin. Plaintiffs
include in their amended complaint claims based on genocide, aiding and abetting
genocide, bailment, conversion, and claims seeking a constructive trust and
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accounting. Defendants now move to dismiss the instant action.

DISCUSSION
I. Subject Matter Jurisdiction
Defendants argue that this court lacks subject matter jurisdiction in the instant
action. Pursuant to 28 U.S.C. § 1331 (Section 1331), “[t]he district courts shall have
original jurisdiction of all civil actions arising under the Constitution, laws, or
treaties of the United States.” Id. The Seventh Circuit in Jogi v. Voges, 480 F.3d
822 (7th Cir. 2007), made clear that “the assertion of a claim arising under any one of
those sources of federal law [listed in Section 1331] is enough to support subject
matter jurisdiction unless the claim is so plainly insubstantial that it does not engage
the court’s power.” Id. at 825. Plaintiffs contend that Defendants have violated
certain non-U.S. treaties (Non-U.S. Treaties), U.S. treaties (U.S. Treaties), and
customary international law.
Defendants argue that this court lacks subject matter jurisdiction over the NonU.S. Treaties, arguing that Section 1331 references only “treaties of the United
States.” 28 U.S.C. § 1331; see also Abagninin v. AMVAC Chemical Corp., 545 F.3d
733, 737 (9th Cir. 2008)(stating that a ‘treaty of the United States’ is a formal
agreement between the United States and one or more other sovereigns, entered into
by the President and approved by two-thirds of the Senate”). Defendants also argue
that this court lacks subject matter jurisdiction over any of the Non-U.S. Treaties or
U.S. Treaties because they are not deemed to be self-executing treaties. Regardless
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of whether the Non-U.S. Treaties or U.S. Treaties are self-executing, Plaintiffs have
based their claims upon a violation of the historical norms established by the treaties,
customary international law, and the limited area of law governing areas such as
genocide. See, e.g., Sosa v. Alvarez-Machain, 542 U.S. 692, 725, 762 (2004); Kadic
v. Karadzic, 70 F.3d 232, 238-41 (2nd Cir. 1995)(indicating that genocide is a
violation of a universal norm of international law). In addition, contrary to
Defendants’ reading of footnote 19 in Sosa, the Supreme Court did not expressly
foreclose bringing an action based on customary international law under the
circumstances of the instant action.
In regard to the Alien Plaintiffs in the instant action, the Alien Tort Claims Act
(ATS) provides that “[t]he district courts shall have original jurisdiction of any civil
action by an alien for a tort only, committed in violation of the law of nations or a
treaty of the United States.” 28 U.S.C. § 1350. Although the ATS did not authorize
the creation of new causes of action, an action can be based on a violation of the
norms of treaties, such as the Non-U.S. Treaties and U.S. Treaties. See, e.g., Sosa,
542 U.S. at 724-25. As Defendants concede, the United States Supreme Court in
Sosa indicated a claim can be “based on the present-day law of nations” as long as it
“rest[s] on a norm of international character accepted by the civilized world and
defined with a specificity comparable to the features of the 18th-century paradigms
[the Court has] recognized.” Id. at 725; see also Abagninin, 545 F.3d at 738 (stating
that “[t]he law of nations is synonymous with ‘customary international law,’ . . . and
violations of international law must contravene a norm that is specific, universal, and
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obligatory”).
Defendants contend that in the instant action Plaintiffs are presenting claims
that are novel and not supported by law. However, Defendants have not shown that
novel claims cannot be made, nor have Defendants pointed to any precedent
explicitly foreclosing the instant action. See Bowoto v. Chevron Corp., 557 F.
Supp.2d 1080, 1090 (N.D. Cal. 2008)(explaining that “Sosa reaffirmed Filartiga,
630 F.2d at 881-82, which relied on non-self-executing treaties as evidence of
customary international law” and the court “reiterated the pre-Sosa holding in Flores
v. Southern Peru Copper Corp., 414 F.3d 233 (2d Cir. 2003) that non-self executing
treaties can be used as evidence of customary international law”). Defendants
contend that “genocide by looting and aiding and abetting genocide by looting are
not, per Sosa, universally accepted and specifically defined [contemporary
international law] violations.” (OTP Mem. Dis. 14). Defendants cite no controlling
precedent that has expressly agreed with Defendants’ position. (OTP Mem. Dis. 1415).
Genocide by looting and aiding and abetting genocide by looting falls within
the limited scope of jurisdiction recognized in Sosa. Genocide has been recognized
as a violation of the norms of international character accepted by the civilized world
and of contemporary international law. See Sosa, 542 U.S. at 762 (Breyer, J.,
concurring in part and concurring in judgment)(indicating that there is a “subset” of
“universally condemned behavior” that “includes torture, genocide, crimes against
humanity, and war crimes”); see also Kadic, 70 F.3d at 238-39 (stating that the court
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“find[s] the norms of contemporary international law by consulting the works of
jurists, writing professedly on public law; or by the general usage and practice of
nations; or by judicial decisions recognizing and enforcing that law” and “[i]f this
inquiry discloses that the defendant’s alleged conduct violates well-established,
universally recognized norms of international law, . . . as opposed to idiosyncratic
legal rules, . . . then federal jurisdiction exists under the Alien Tort Act”)(internal
quotations omitted). In addition, Plaintiffs have pointed to support indicating that
genocide was considered an established violation of international law long before
World War II.
Defendants contend that the ATS was not intended to have an extraterritorial
effect. However, the Seventh Circuit has indicated that “[g]enerally speaking,
Congress has the authority to apply its laws, . . . beyond the territorial boundaries of
the United States, to the extent that extraterritorial application is consistent with the
principles of international law.” United States v. Dawn, 129 F.3d 878, 882 (7th Cir.
1997).
Defendants also contend that the ATS cannot subject a corporation to liability.
Defendants cite Sosa in support of their position. (OTP Mem. Dis. 13). Although the
court in Sosa referenced the issue of whether a corporation could be held liable under
international law, the Court did not decide the issue. Sosa, 542 U.S. at 733 n.20.
Defendants argue that the only decision that properly addressed this issue and
applied Sosa is the Second Circuit in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d
111 (2nd Cir. 2010). (OTP Reply 10). However, Kiobel is non-controlling
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precedent, and there is persuasive precedent indicating that corporations can be held
liable under the ATS. See, e.g., Romero v. Drummond Co., Inc., 552 F.3d 1303,
1315 (11th Cir. 2008)(stating that “the law of th[at] Circuit is that [the ATS] grants
jurisdiction from complaints of torture against corporate defendants”). The express
language of the ATS does not include any express exemption for corporations or
language from which such a conclusion can be inferred. See id. (stating that the ATS
“provides no express exception for corporations”). This court agrees with the
concurring opinion in Kiobel that there is a sufficient legal basis to hold corporations
liable under the ATS for genocide. As the concurring opinion in Kiobel pointed out,
if a corporation cannot be held liable under the ATS, then a corporation that
“committed a genocide to increase its profits” would be able to obtain a dismissal of
any action brought against it simply “on the ground that the defendant is a
corporation.” Kiobel, 621 F.3d at 157 (Leval, J., concurring). The concurring
opinion in Kiobel also aptly noted that “[r]ecognition of the humanitarian objectives
of the law of nations makes it unlikely that this body of law intends to exempt
corporations from its prohibitions or to provide a substantial financial incentive to
violate the most fundamental of human rights.” Id. at 159. Therefore, based on the
record before the court at his juncture, this court has subject matter jurisdiction. In
addition, Defendants request that the court decline to exercise supplemental
jurisdiction over the state law claims. After consideration of the pertinent factors at
this juncture, this court denies Defendants’ request to decline to exercise
supplemental jurisdiction over the state law claims. See, e.g., Williams Electronics
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Games, Inc. v. Garrity, 479 F.3d 904, 906-07 (7th Cir. 2007)(explaining
considerations for declining to exercise supplemental jurisdiction);
Groce v. Eli Lilly & Co., 193 F.3d 496, 501 (7th Cir. 1999)(same); Timm v. Mead
Corp., 32 F.3d 273, 277 (7th Cir. 1994)(same).

II. Personal Jurisdiction
Defendant OTP Bank (OTP) and Defendant MKB Bank Zrt. (MKB) argue
that they are not subject to personal jurisdiction in this forum. A federal district
court has “personal jurisdiction over the defendant if either federal law or the law of
the state in which the court sits authorizes service of process to that defendant.”
Mobile Anesthesiologists Chicago, LLC v. Anesthesia Associates of Houston
Metroplex, P.A., 623 F.3d 440, 443-44 (7th Cir. 2010). A defendant is deemed to be
subject to “personal jurisdiction in a particular state only if the defendant had certain
minimum contacts with it such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice.” Id. (internal quotations
omitted)(quoting International Shoe Co. v. Washington, 326 U.S. 310, 316
(1945))(stating that “[i]t is unconstitutional to force a defendant to appear in a distant
court unless it has done something that should make it ‘reasonably anticipate being
haled into court there’”)(quoting World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286 (1980)). Another aspect of the constitutional inquiry includes “whether the
defendant ‘purposefully avails itself’ of the benefits and protections of conducting
activities in the forum state.” Id. Thus, a defendant is deemed to be “subject to
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general jurisdiction when it has ‘continuous and systematic general business
contacts’ with the forum state.” uBID, Inc. v. GoDaddy Group, Inc., 623 F.3d 421,
425-26 (7th Cir. 2010)(quoting Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 415-16 (1984)). Plaintiffs have shown that OTP and MKB have
extensive continuous and systematic general business contacts that would subject
them to general personal jurisdiction.

III. Forum Non Conveniens
Defendants argue that this action should be dismissed based on the doctrine of
forum non conveniens, arguing that the Hungarian courts provide an available and
adequate alternative forum. Under the principle of forum non conveniens, “a trial
court may dismiss a suit over which it would normally have jurisdiction if it best
serves the convenience of the parties and the ends of justice.” Kamel v. Hill-Rom
Co., Inc., 108 F.3d 799, 802 (7th Cir. 1997); see also Abad v. Bayer Corp., 563 F.3d
663, 665 (7th Cir. 2009); Stroitelstvo Bulgaria Ltd. v. Bulgarian-American
Enterprise Fund, 589 F.3d 417, 421 (7th Cir. 2009). A determination of whether to
dismiss an action based on forum non conveniens “is consigned to the trial court’s
sound discretion.” Kamel, 108 F.3d at 802.
Even if the Hungarian courts provided an available and adequate alternative
forum, Defendants have not shown that the convenience of the parties, or the
interests of justice would be best served by a dismissal of the instant action. The
potential inconvenience to the corporate Defendants in litigating here would be
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minimal compared to the potential inconvenience to Plaintiffs, if required to
prosecute this action in the Hungarian courts. In addition, the record indicates that
the pertinent evidence is dispersed, that many eyewitnesses are deceased, and that
those who are living are dispersed. Further, a plaintiff’s choice of forum is accorded
deference. In general, “a plaintiff’s choice of forum should rarely be disturbed”
because “[w]hen the home forum has been chosen, it is reasonable to assume that this
choice is convenient.” Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 (1981); ISI
Intern., Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 553 (7th Cir.
2001)(quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947), for the proposition
that “[u]nless the balance is strongly in favor of the defendant, the plaintiff’s choice
of forum should rarely be disturbed”)(internal quotations omitted); Kamel v. HillRom Co., Inc., 108 F.3d 799, 803 (7th Cir. 1997)(stating that “[o]rdinarily, the trial
court should not supplant the plaintiff’s choice of forum”). The Seventh Circuit has
indicated that “a foreign plaintiff’s choice of forum deserves less deference,” Kamel,
108 F.3d at 803, but in the instant action, a substantial number of Plaintiffs are in the
United States, and those American Plaintiffs’ choice of forum should be accorded
deference. There is also a local interest factor in regard to protecting the rights of
such Plaintiffs in the United States and a strong American interest in vindicating
international human rights violations such as genocide. Defendants have not shown
that the instant forum is inappropriate or that the interests of justice and the
convenience of the parties will not be served by a resolution of this case in this
forum. Therefore, a dismissal under the doctrine of forum non conveniens is not
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warranted and Defendants’ motion to dismiss on the basis of forum non conveniens is
denied.

IV. Statute of Limitations
Defendants argue that the instant action is barred by the applicable statute of
limitations periods. However, the Seventh Circuit has held that ”a complaint need
not anticipate and overcome affirmative defenses, such as the statute of limitations”
and a dismissal is only “appropriate when the plaintiff pleads himself out of court by
alleging facts sufficient to establish the complaint’s tardiness.” Cancer Foundation,
Inc. v. Cerberus Capital Management, LP, 559 F.3d 671, 674-75 (7th Cir. 2009). In
the instant action, Plaintiffs have not pled facts that establish that their claims are
untimely. In addition, there are factual issues regarding potential tolling under the
equitable tolling doctrines that cannot be assessed at the pleadings stage. Defendants
also move for a dismissal based on defenses such as the doctrine of laches, but
Plaintiffs were not required to plead in anticipation of defeating such defenses.
Therefore, it is premature at this juncture to resolve the statute of limitations and
laches issues.

V. Political Question
Defendants argue that Plaintiffs’ claims should be dismissed based on the
political question doctrine. The court should dismiss an action under the political
question doctrine
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when any one of the following circumstances is present: a textually
demonstrable constitutional commitment of the issue to a coordinate political
department; or a lack of judicially discoverable and manageable standards for
resolving it; or the impossibility of deciding without an initial policy
determination of a kind clearly for nonjudicial discretion; or the impossibility
of a court’s undertaking independent resolution without expressing lack of the
respect due coordinate branches of government; or an unusual need for
unquestioning adherence to a political decision already made; or the
potentiality of embarrassment from multifarious pronouncements by various
departments on one question.
I.N.S. v. Chadha, 462 U.S. 919, 941 (1983)(citing Baker v. Carr, 369 U.S. 186, 217,
(1962))(internal quotations omitted).
Defendants contend that Plaintiffs’ claims have been committed to the
Executive Branch as a matter of foreign policy and that there are already Executive
Agreements or Treaties in place settling Plaintiffs’ claims, such as a Treaty between
the United States and Hungary resolving some of the claims of victims of the
Holocaust. However, it is premature to address at this juncture whether the
Executive Agreements and Treaties cited by Defendants may limit certain Plaintiffs’
claims, since their applicability raises factual issues not properly adjudicated at the
motion to dismiss stage of the proceedings. At the summary judgment stage of the
proceedings, if warranted, Defendants may re-raise the issue relating to the
applicability of existing Executive Agreements or Treaties to Plaintiffs’ claims.
Defendants also contend that there are no judicially discoverable or
manageable standards for adjudication of Plaintiffs’ claims and that Plaintiffs’ claims
require non-judicial resolution, arguing that the alleged events took place more than
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65 years ago, that the identity of the alleged perpetrators is too indefinite,
and that many “factors unrelated to the law or the conduct of the parties” affect
issues of evidence, causation, liability, and/or fair compensation. (Mag. Mem. Dis.
37). However, Defendants have pointed to no controlling authority requiring the
court to abstain from adjudicating Plaintiffs’ claims for such alleged reasons, and the
court does not find Defendant’s argument to be persuasive. Therefore, based on the
above, the court declines to dismiss the instant action based on the political question
doctrine at this juncture.

VI. Immunity Pursuant to FSIA
Defendant Magyar Nemzeti Bank (Magyar), which is the central bank of
Hungary, argues that Plaintiffs’ claims against it are barred by the Foreign Sovereign
Immunities Act (FSIA), which generally makes a foreign state (or an agency or
instrumentality of a foreign state) “immune from the jurisdiction of the courts of the
United States.” 28 U.S.C. § 1604. Plaintiffs have alleged sufficient facts to show, at
this juncture, that the takings exception to the FSIA, found at 28 U.S.C. § 1605(a)(3),
is applicable to the Plaintiffs’ claims against Magyar. Plaintiffs allege that Magyar
took money and other property held in bank accounts or kept in safe deposit boxes at
Magyar. See, e.g., Nemariam v. Federal Democratic Republic of Ethiopia, 491 F.3d
470, 479-80 (D.C. Cir. 2007)(holding that 28 U.S.C. § 1605(a)(3) applies to both
tangible and intangible property, such as money in bank accounts). In addition, as
discussed above, such taking was in violation of international law. See, e.g., Kadic
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v. Karadzic, 70 F.3d 232, 242 (2d Cir. 1995)(indicating that “from its incorporation
into international law, the proscription of genocide has applied equally to state and
non-state actors”). Magyar has not presented any controlling precedent to the
contrary. Further, 18 U.S.C. § 1091 does not expressly disavow the instant action, as
Magyar contends. Finally, Plaintiffs have sufficiently alleged that Magyar owns or
operates the property taken and that Magyar is engaged in commercial activity in the
United States within the meaning of the FSIA. It is premature at this juncture to
adjudicate Magyar’s denial of the facts alleged. At the summary judgment stage of
the proceedings, if warranted, Magyar may re-raise the arguments that it does not
own or operate the property at issue or that it does not engage in commercial activity
within the meaning of the FSIA.
In addition, Plaintiffs have raised the argument that even if the takings
exception to sovereign immunity is not applicable to Plaintiffs’ claims, Magyar has
implicitly waived immunity. Plaintiffs contend that Hungary has waived immunity
through its agreement in its constitution to submit to international law, and that the
Hungarian Constitutional Court has found that Hungary has failed to make fair
compensation to the victims of genocide as required under the Hungarian
Constitution. Since there remain factual issues concerning whether Magyar is even
entitled to immunity under FSIA, it is premature to adjudicate the waiver issue at this
juncture. At the summary judgment stage of the proceedings, if warranted, Plaintiffs
may re-raise the issue regarding any waiver of sovereign immunity.

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VII. Acts of State Doctrine
Magyar argues that Plaintiffs’ claims against it are barred by the acts of state
doctrine, “which requires American courts to presume the validity of an official act
of a foreign sovereign performed within its own territory.” Republic of Austria v.
Altmann, 541 U.S. 677, 713-14 (2004)(internal quotations omitted)(citations
omitted); see also Agudas Chasidei Chabad of U.S. v. Russian Federation, 528 F.3d
934, 951 (D.C. Cir. 2008)(citing Banco Nacional de Cuba v. Sabbatino, 376 U.S.
398, 428 (1964)). In considering the applicability of the acts of state doctrine, the
court looks at several factors, including the “degree of codification or consensus
concerning a particular area of international law” and whether “the government
which perpetrated the challenged act of state” is still in existence. Banco Nacional
de Cuba, 376 U.S. at 427-28; see also Restatement (Third) of Foreign Relations Law
of the United States, Sect. 443 Comment (d) (1987)(stating that the acts of state
doctrine would not likely bar claims by victims of genocide, “since the accepted
international law of human rights is well established and contemplates external
scrutiny of such acts”). Magyar has the burden to show that the acts of state doctrine
should be applied in this case. Chabad, 528 F.3d at 951. Magyar has not met its
burden at this juncture. Determining whether the acts of state doctrine applies in this
case raises factual issues that cannot be resolved at the pleading stage. At the
summary judgment stage of the proceedings, if warranted, Magyar may re-raise the
argument that the acts of state doctrine bars the Plaintiffs’ claims against Magyar.

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VIII. Failure to State a Claim
Defendant Erste Group Bank (Erste) and OTP argue that Plaintiffs’ claims
against them must be dismissed for failure to state a claim pursuant to Federal Rule
of Civil Procedure 12(b)(6) (Rule 12(b)(6)), contending that Plaintiffs failed to allege
sufficient facts regarding successor liability. OTP also argues that Plaintiffs have
failed to allege sufficient facts showing that Plaintiffs have standing to bring claims
against OTP or that Plaintiffs were injured by OTP’s conduct. In ruling on a motion
to dismiss brought pursuant to Rule 12(b)(6), a court must “accept as true all of the
allegations contained in a complaint” and make reasonable inferences in favor of the
plaintiff. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(stating that the tenet is
“inapplicable to legal conclusions”); Thompson v. Ill. Dep’t of Prof’l Regulation, 300
F.3d 750, 753 (7th Cir. 2002). To defeat a Rule 12(b)(6) motion to dismiss, “a
complaint must contain sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.” Iqbal, 129 S.Ct. at 1949 (internal quotations
omitted)(quoting in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Plaintiffs have alleged sufficient facts to plausibly suggest successor liability by
Erste and OTP. Plaintiffs have also alleged sufficient facts to plausibly suggest that
Plaintiffs have standing and were injured by the acts of Defendants. At the summary
judgment stage of the proceedings, if warranted, Defendants may re-raise arguments
related to successor liability and standing.
Based on all of the above, Defendants’ motions to dismiss are denied in their
entirety.
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CONCLUSION
Based on the foregoing analysis, Defendants’ motions to dismiss are denied in
their entirety.

___________________________________
Samuel Der-Yeghiayan
United States District Court Judge
Dated: May 18, 2011

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