Model Code of Professional Ethics Canon 7. See also, e.g.,
Stephen Gillers & Roy D. Simons, Regulation of Lawyers: Statutes and
Standards (2000) (texts of relevant ethical codes); Monroe H. Freedman,
Understanding Lawyers' Ethics 65 (1990); L. Ray Patterson, Legal Ethics
and the Lawyer's Duty of Loyalty, 29 Emory L.J. 909, 918, 947 (1980)
("the prevailing notion among lawyers seems to be that the lawyers' duty
of loyalty to the client is the first, the foremost, and on occasion, the
only duty of the lawyer"); Richard A. Matasar, The Pain of Moral
Lawyering 75 Iowa L. Rev. 975 (1990) (a lawyer/advocate must resolve
doubts about law in favor of the client's interests). In a case as
important as the present one, it is the duty of the lawyer to exercise
discretion and to "urge any permissible construction of the law favorable
to [the] client . . . if the position . . . is supported by a good faith
argument for an extension, modification, or reversal of the law," so long
as the position is not frivolous. ABA Model Code of Professional
Responsibility, Ethical Consideration 3.1 (meritorious claims
distinguished from frivolous contentions); Rule 11(b), Fed. R. Civ. P.
(Claims "are warranted by . . . a nonfrivolous argument for the . . .
modification or reversal of existing law or the establishment of new
law."). Here the stakes for the clients are enormous, the law and its
application to the facts is unprecendented, and the decision in the
Holocaust case has not been reviewed by the Supreme Court or adopted by
another Circuit. Commencement of this law suit can not be characterized
as "frivolous" or "outside the bounds of the law" or of ethics.
III. Complaint of Plaintiffs.
The complaint, buttressed by extensive exhibits, provides details
supporting the following Foundation improprieties, among others:
1) The German banks which were obligated to contribute to the
Foundation's finds are administering much of the finances of the
Foundation, in violation of basic conflict of interest principles, to
their own excessive enrichment and to the reduction of payments to
2) Interest which should have accrued to the benefit of the Foundation
and its beneficiaries is being diverted and improperly retained by the
3) Voluntary contributions to the finds of the Foundation are being
improperly credited to offset the obligations of German entities.
4) Instead of being transparent as required, the activities of the
Foundation are conducted in secret and inquiries from properly interested
persons are ignored.
5) Required contributions are being delayed without justification.
6) The claims process has been improperly delayed and inadequately
funded by the Foundation so that many rightful claimants will not be in a
position to make timely claims.
7) Such inappropriate conduct has already cost victims entitled to
compensation hundreds of millions of dollars in potential relief.
It is plaintiffs' contention that these and other improper actions and
failures to act constitute a violation of the terms of the Agreement
between the Government of the Federal Republic of Germany and the
Government of the United States of America Concerning the Foundation
"Remembrance, Responsibility, and Future"; that the Agreement was in
effect a guarantee by the United States and others inducing plaintiffs
and potential beneficiaries to settle the Holocaust and related cases;
that failure of the United States to object to breaches by the German
entities and the Foundation, and the continuation by the United States of
its practice of issuing statements of interest to block actions by
plaintiffs and potential beneficiaries in United States Courts, constitute
a violation of fiduciary obligations assumed by the United States in
connection with the Agreement; and that the continuing breach of the
guarantees of and by the United States requires prompt injunctive
IV. Authority of Members of the Board.
The German Federal Republic law on the Creation of a Foundation,
"`Remembrance, Responsibility and Future'" (the "Act") entered into force
on August 12, 2000, BGBL. 2000 I 1263, and was amended on August 4,
2001, BGBL. 2001 I 2036. In its preamble it states, after reviewing the
history of forced and slave laborers of German enterprises under the
The German Bundestag presumes that this Law, the
German-U.S. intergovernmental agreement, the
accompanying statements of the U.S. Government as well
as the Joint Declaration by all parties to the
negotiations provide adequate legal security for
German enterprises and the Federal Republic of
Germany, especially in the United States of America.
One person is to be named by the government of the United States to the
27 member Board of Trustees. Id. at § 5(1)(9). A Board of Directors
is provided to control "the day-to-day business of the Foundation." Id.
at § 6(3). The Foundation is first "subject to legal oversight by the
[German] Federal Ministry of Finance" and subsequently by the "[German]
Federal Ministry for Foreign Affairs." Id. at § 8(1). It is also
subject to being audited by the "[German] Federal Court of Audit" and the
"[German] Federal Office for the Settlement of Open Property." Id. at
§ 8(3). Details on potential beneficiaries by class are specified.
Id. at § 9 (Use of Foundation Resources); § 11 (Eligible
Persons). An "appeals process" is to be created by "partner
organizations" "subject to no outside instruction." Id. at § 19. No
appeals or oversight process mentioned in the Act is being utilized or
relied upon in the present suit.
There is no point in reviewing the rest of the Act, except to say that
it does not provide for legal review of the Foundation's actions by any
United States court. Even if review by some sort of appeal in Germany is
possible, the Act does not authorize litigation in the United States.
None of the supporting documents leading up to creation of the
Foundation, or since, envisage suits in the United States. See, e.g.,
Joint Statement [of governments and private organizations] on Occasion of
the Final Plenary Meeting Concluding International Talks on the
Preparation of the Foundation "Remembrance, Responsibility, and Future"
at 4 ("Recognizing the Foundation to be the exclusive remedy and forum
for the resolution of all claims"); id. at 5 ("tag-along" future cases
are to be dismissed "with prejudice"); Agreement between the Government
of the Federal Republic of Germany and the Government of the United
States of America Concerning the Foundation "Remembrance,
Responsibility, and Future" (July 17, 2000) ("both parties desire
all-embracing and enduring legal peace to advance their foreign policy
interests"); id. art. 1, § 3 ("The Federal Republic of Germany
assures that the Foundation will be subject to legal supervision by a
German governmental authority; any person may request that the German
governmental authority take measures to ensure compliance with the legal
requirements of the Foundation."); id. art. 2, § 1 ("it would be in
the foreign policy interests of the United States for the Foundation to
be the exclusive remedy and forum for resolving [claims]").
The request for an order to show cause is denied. The parties may move
for an injunction, to dismiss, to reassign the case within this court, to
transfer venue, or for other appropriate relief.
Any representative of the Foundation or member of its Board is free to
respond to the plaintiffs' complaints, without conceding that this court
has any personal jurisdiction or competence to affect the Foundation,
members of the Board or its agents.
The plaintiffs on or before October 23, 2001, shall send to each group
of attorneys listed in Austrian and German Holocaust Litigation v. United
States District Court for the Southern District of New York, 250 F.3d 156
(2d Cir. 2001), the United States Attorney for the Eastern District of
New York, and the member of the Board designated by the United States, by
fax or express mail: 1) a copy of the papers filed in this proceeding and
2) this preliminary memorandum and preliminary order. Such delivery or
its acceptance shall not constitute service for purposes of obtaining
jurisdiction over any person to whom notice is given or over a client of
Any papers filed in relation to this matter shall be served on
plaintiffs' attorneys, the United States Attorney, persons to whom papers
were sent by plaintiffs in accordance with the immediately preceding
paragraph, and to the court, by November 5, 2001. Any person may respond
to filed papers by November 12, 2001. Any motions or oral statements will
be beard on November 19 at 10:00 AM. in courtroom 10 of this courthouse.
Filing or delivery of any papers does not constitute a waiver of any
rights, nor is it an appearance for any purpose, nor does it grant the
court personal jurisdiction or competence.
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