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FEDERAL REPUBLIC OF GERMANY v. ELICOFON

June 25, 1970

FEDERAL REPUBLIC OF GERMANY, Plaintiff,
v.
Edward I. ELICOFON, Defendant, Elisabeth Mathilde Isidore Erbgrossherzogin von Sachsen-Weimar-Eisenach (Grand Duchess of Saxony-Weimar), Plaintiff-Intervenor. KUNSTSAMMLUNGEN zu WEIMAR, Plaintiff, v. Edward I. ELICOFON, Defendant


Mishler, Chief Judge.


The opinion of the court was delivered by: MISHLER

MEMORANDUM OF DECISION AND ORDER (June 25, 1970)

Mishler, Chief Judge.

 On January 27, 1969, the Federal Republic of Germany began action number 69-C-93 against Edward I. Elicofon for the return of two paintings believed to be in defendant's possession. The paintings, portraits of Hans and Felicitas Teicher, were allegedly painted by the celebrated German artist Albrecht Duerer in or about 1499. The complaint asserts that the paintings became part of an art collection in Weimar in 1824 and were placed in a museum which since 1921 has been called "Staatliche Kunstsammlungen"; that during the occupation of Weimar (currently in East Germany) by the United States armed forces and prior to July 1, 1945, the paintings were stolen from the Castle Schwartzburg, where they had been placed for safekeeping; and that defendant, directly or indirectly, acquired the paintings from the thief.

 Plaintiff claims the right to custody and possession of the paintings by reason of the Joint Declaration of Three Allied Powers of September 18, 1950, which, with the United States as a participant, declared that the Federal Republic is the only government which may represent the German people. *fn1"

 Defendant denies the allegations of the complaint, including the theft, and affirmatively claims title to the paintings through purchase in good faith for value in accordance with the laws of Germany. *fn2"

 By order dated March 25, 1969, Elisabeth Mathilde Isidore Erbgrossherzogin Von Sachsen-Weimar-Eisenach (hereinafter the Grand Duchess) was granted leave to intervene. She alleged that the paintings have been part of the Grand Ducal collection since 1824 and asserts title to the paintings through assignment from the Grand Duke of Saxony-Weimar on August 8, 1968.

 On April 14, 1969, the Kunstsammlungen Zu Weimar (hereinafter Weimar Art Collection), an entity existing under the laws of the German Democratic Republic (hereinafter G.D.R.) and having custody over the art collection from which the paintings in suit were allegedly stolen, both moved to intervene in 69-C-93, Fed. Rules Civ. Proc. 24(a)(2), and brought a separate action, 69-C-370, against Edward I. Elicofon for return of the paintings. The Weimar Art Collection alleges that it owned the paintings at the time of the theft.

 The Federal Republic, the Grand Duchess, and Elicofon all oppose the Weimar Art Collection's application to intervene. Elicofon has, in addition, moved to dismiss the Weimar Art Collection's complaint in 69-C-370. Should his motion to dismiss be denied, however, Elicofon asks that 69-C-93 and 69-C-370 be consolidated.

 The motions by the Weimar Art Collection to intervene in 69-C-93 and by Elicofon to dismiss the complaint in 69-C-370 or if that is unsuccessful to consolidate 69-C-93 and 69-C-370 are currently before the court.

 The Federal Republic takes the position, shared by the Grand Duchess and Elicofon, that the Weimar Art Collection is an instrumentality of the G.D.R., a government not recognized by the government of the United States, and as such lacks standing to sue in United States courts. The Federal Republic makes the additional argument that it adequately represents the interests of the Weimar Art Collection in 69-C-93. In further support of his motion to dismiss the complaint in 69-C-370, Elicofon asserts that as a citizen of a country whose government is not recognized by the United States, the Weimar Art Collection is not a citizen or subject of a foreign state within the meaning of 28 U.S.C. § 1332(a)(2) and, therefore, that the court lacks jurisdiction over the subject matter of the action.

 The Weimar Art Collection differs with the assertions of the other parties concerning its status. It alleges that by virtue of a decree of the Minister of Culture of the G.D.R. dated April 14, 1969 and made retroactive to January 1, 1969 it is a juristic entity independent of the government and possesses the capacity "to enter into contracts, to acquire and dispose of property and to sue in its own name." Affidavit of Manfred Hofmann, at par. 10. The Weimar Art Collection argues, therefore, that it has standing to bring suit in this court regardless of the position which this court may take on the question of whether the G.D.R. itself could sue.

 The parties have filed numerous and voluminous affidavits and memoranda in support of their various positions. In addition, the United States Department of Justice, acting on behalf of the Department of State, filed the following "Suggestion of Interest of the United States":

 
1. The United States Government does not recognize the East German regime.
 
2. The United States Government recognizes the Federal Republic of Germany as the only German Government entitled to speak for Germany as the representative of the German people in international affairs.
 
3. The United States Government recognizes the Federal Republic of Germany as entitled in this litigation to represent the Weimar Museum as trustee of its interests.

 It is apparent that notwithstanding the position of the Weimar Art Collection, the question of whether a government not recognized by the United States would have standing to bring an action like the one at bar is of central importance to the resolution of the motions before the court. It is conceded by the parties that a determination favorable to the unrecognized government would establish the standing of the Weimar Art Collection in this litigation without regard to its claim of independence of the government of the G.D.R.

 Survey of the Case Law

 Virtually all of the courts which have had occasion to comment on the standing of unrecognized governments to sue in American courts have stated quite flatly that such governments lack standing to sue. See S. Lubman, The Unrecognized Government in American Courts: Upright v. Mercury Business Machines, 62 Colum. L. Rev. 275 (1962). Two grounds have been offered in support of this conclusion. At least one court has reasoned that the right of foreign governments to sue in American Courts is a function of the comity which exists between friendly nations and that this comity is absent between the United States and a government nor recognized by it. Russian Socialist Federated Soviet Republic v. Cibrario, 235 N.Y. 255, 139 N.E. 259 (1923). The great majority of the courts which have taken a position on the issue have based their opposition to suits by unrecognized governments on the theory that to allow an unrecognized government to sue in American courts would overrule the act of the President in withholding recognition from the plaintiff government, a power which is exclusively his under the Constitution. See e.g. The Penza, 277 F. 91 (E.D.N.Y. 1921); The Rogdai, 278 F. 294 (N.D. Cal. 1920).

 Absent from most of these cases is a thorough analysis of the considerations which have motivated this rather consistent expression of judicial opinion. The correctness of the rule denying litigant status to non-recognized governments seems to have been taken for granted in many cases, and little attempt has been made to examine the nature of the presidential act of refusing to recognize a government. Some courts, moreover, have repeated the rule while reaching results which seem to question its validity. In Wulfsohn v. Russian Socialist Federated Soviet Republic, 234 N.Y. 372, 138 N.E. 24 (1923), appeal dismissed, 266 U.S. 580, 45 S. Ct. 89, 69 L. Ed. 451 (1924), the same court which some months later decided the now famous Cibrario case upheld the claim of Soviet Russia, at that time not recognized by the United States, to sovereign immunity from suit. The court stated that the existence of a government is a fact not dependent upon recognition and that a foreign sovereign cannot be made subject to our laws without its consent. *fn3" Cf. Bank of China v. Wells Fargo Bank & Union Trust Co., 92 F. Supp. 920 (N.D. Cal. 1950), appeal dismissed, 190 F.2d 1010 (9th Cir. 1951), judgment entered, 104 F. Supp. 59, 66 (N.D. Cal. 1952), modified, 209 F.2d 467 (9th Cir. 1953); Banque de France v. Equitable Trust Co., 33 F.2d 202 (S.D.N.Y. 1929), aff'd, 60 F.2d 703 (2d Cir. 1932); Russian Reinsurance Co. v. Stoddard, 240 N.Y. 149, 147 N.E. 703 (1925). And in United States v. Home Insurance Co., 89 U.S. (22 Wall.) 99, 22 L. Ed. 816 (1875) and Amtorg Trading Corp. v. United States, 21 C.C.P.A. 532, 71 F.2d 524 (C.C.P.A. 1934), federal courts permitted suit by corporations associated with unrecognized governments. See also Upright v. Mercury Business Machines Co., 13 A.D. 2d 36, 213 N.Y.S. 2d 417 (1st Dep't 1961) (dictum). In Home Insurance, supra, the Supreme Court sustained the standing to sue of two corporations created by the Georgia legislature at a time when Georgia was in armed rebellion against the Union. The court reasoned that the Georgia legislature had a de facto if not a de jure existence and that enactments of the legislature which were neither hostile to the Union nor in conflict with the Constitution of the United States had the same validity as if they had been enactments of legitimate legislatures. In Amtorg, supra, the Court of Customs and Patent Appeals allowed a New York corporation which was wholly owned by Soviet Russia to challenge an import duty. The court based its decision on the New York citizenship of the plaintiff corporation and indicated that since its equity jurisdiction was not invoked and no matter of public policy was involved the court would not pierce the corporate veil.

 The Sabbatino Case

 It is against this background that this court interprets a recent Supreme Court decision as having invited a reexamination of the rule denying unrecognized governments access to our courts. In Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964), the Supreme Court was faced with the question of whether the government of Cuba, a government recognized by but having no formal diplomatic relations with the United States, could sue in United States courts. In upholding the status of the Cuban government as a litigant, the Court commented:

 
The doctrine that nonrecognition precludes suit by the foreign government in every circumstance has been the subject of discussion and criticism . . . In this litigation we need intimate no view on the possibility of access by an unrecognized government to United States courts, except to point out that even the most inhospitable attitude on the matter does not dictate denial of standing here. 376 U.S. at 411, n. 12, 84 S. Ct. at 931, n. 12.

 The Court, moreover, illuminated a path for the reexamination of the rule to follow. The Court said at pp. 410-411, 84 S. Ct. at 931:

 
It is perhaps true that nonrecognition of a government in certain circumstances may reflect no greater unfriendliness than the severance of diplomatic relations with a recognized government, but the refusal to recognize has a unique legal aspect. It signifies this country's unwillingness to acknowledge that the government in question speaks as the sovereign authority for the territory it purports to control. . . . Political recognition is exclusively a function of the Executive. The possible incongruity of judicial "recognition," by permitting suit, of a government not recognized by the Executive is completely absent when merely diplomatic relations are broken.

 Analysis in Light of the Sabbatino Case

 The Supreme Court's elucidation of the presidential act of nonrecognition as manifesting the unwillingness of the United States to acknowledge that a government speaks as the sovereign authority for the territory it purports to control is productive of a rule which would deny to the G.D.R. the right to bring suit in our courts in an action like the one at bar. Nonrecognition of a government, under the Supreme Court's analysis, is indicative of the refusal of the United States to regard that government as the legitimate spokesman in international affairs for the people it purports to govern. Nonrecognition, therefore, negatives the very posture which the G.D.R. would necessarily have to assume had it brought suit for return of the paintings. A claim of title to the paintings by the G.D.R. would, by definition, be a claim on behalf of the people it purports to govern.

 Any attempt, moreover, to characterize such a suit as involving purely private rights and therefore outside the realm of international affairs unduly limits the scope of international affairs. It is a mistake to restrict the label of international affairs to negotiations between governments concerning subjects in the nature of national defense and foreign cultural exchanges. A government is in every sense of the word acting in international affairs when it seeks the aid of a foreign government in an attempt to vindicate the private rights of specific citizens or of its citizenry as a whole. See Agreement with Yugoslavia on Claims of United States Nationals, [1965] 1 U.S.T. 1; Banco Nacional de Cuba v. Sabbatino, supra, at 431-432, 84 S. Ct. at 942. A decision by this court permitting the G.D.R. to bring such a suit would be the equivalent of an assertion by the court that it acknowledges the right of that government to represent the people of East Germany in international affairs. A determination of that kind would be inconsistent with the presidential denial of recognition to the G.D.R. and thus be an unconstitutional encroachment upon the power of the President. *fn4"

 It is clear, at this point, that the question of whether the Weimar Art Collection has standing to maintain suit in this court for return of the Duerer paintings cannot be answered without a prior determination of the relationship of the Collection to the G.D.R. The Weimar Art Collection has consistently maintained that it is a juristic entity independent of the government and has supported its contentions with voluminous affidavits. The other parties to the action have just as consistently and with similar supporting papers taken a contrary position. The court is reluctant, however, to decide the complex issues of law and fact involved in this critically important question on the uncross-examined assertions of even the distinguished experts marshalled by the various parties. A hearing on these issues is required if the court is to avoid a determination based upon politically informed notions concerning property rights in the G.D.R.

 If, after a hearing, it is found that the Weimar Art Collection is an arm or instrumentality of the G.D.R., the court will have no choice but to hold that it too is barred from bringing suit. On the other hand, facts may be developed at the hearing which indicate that the Weimar Art Collection is sufficiently independent of the G.D.R. to be entitled to be free of the latter's disability.

 The parties are therefore directed to appear by their attorneys on July 2, 1970 at 11:30 A.M. to set a date for a hearing and to specify the issues of law and fact to be heard.

 The Court also reserves decision on Elicofon's claim that the court lacks subject matter jurisdiction in 69-C-370 and on the Federal Republic's contention that it adequately represents the interests of the Weimar Art Collection in 69-C-93.

 It is so ordered.

 SUPPLEMENTAL OPINION (September 25, 1972)

 The memorandum of decision of this court dated June 25, 1970 directed an evidentiary hearing to determine whether the Weimar Art Collection is an arm or instrumentality of the GDR. The resolution of the issue is determinative of the motion of the Weimar Art Collection to intervene in 69-C-93 and of the defendant Elicofon's motion to dismiss the complaint in 69-C-370. The Weimar Art Collection submitted the affidavits of Manfred Hofmann and Heinz Puschel in support of its motion to intervene and in opposition to the motion to dismiss its complaint. The affidavits of Andreas F. Lowenfeld were submitted for Elicofon and Federal Republic of Germany. Subsequent to the filing of the memorandum of decision the Weimar Art Collection deposed Dr. Walther Scheidig, the former director of the Weimar Art Collection, Dr. Gerhard Pommeranz-Liedtke, the present director, Dr. Bernard Graefrath and Dr. Heinz Puschel.1a The other parties were afforded full right of cross-examination. The testimony of Dr. Sigfried Mampel was offered at an evidentiary hearing before the court by the Federal Republic of Germany. The Federal Republic of Germany commenced this action (69-C-93) on January 27, 1969.

 On April 14, 1969, the Minister for Culture and Education of the GDR issued an order granting the Weimar Art Collection "the status of a juristic person" and declaring "it shall be represented in legal matters through the Director of the Weimar Art Collections." It further directed:

 
"The Statut (articles or by-laws) of the Weimar Art Collections is to be prepared by the Director and requires confirmation by the competent local governmental authorities."

 The order was made retroactive by its terms to January 1, 1969. The statut was signed by the Director on April 16, 1969 and confirmed by the Lord Mayor of the City of Weimar on April 17, 1969. A copy of the statut is appended to this memorandum of decision.

 Prior to World War I, Weimar Castle, which included the Weimar Art Collection, was the property of the Grand Duke Wilhelm Ernst of Saxony. On April 30, 1920, Federal German law created various states. One of the states, Land Thuringen, comprised seven political subdivisions, including the territory of Weimar, in which the museum was located. Land Thuringen succeeded to the rights formerly held by the territory of Weimar which included the museum and the castle in which the museum was located. During the reign of the Third Reich the German Reichstag enacted a law providing for the transfer of the sovereign rights of the various states to the ...


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