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Freund v. Republic of France

December 19, 2008


The opinion of the court was delivered by: Richard J. Sullivan, District Judge


This action arises out of the expropriation of property from thousands of Jews and other "undesirables" during World War II as they were transported by rail to French holding camps, detained at those facilities, and ultimately deported to Nazi-run concentration camps. Plaintiffs are Holocaust survivors, as well as the heirs and beneficiaries of some Holocaust victims. They allege that, between August 1941 and July 1943, their money and property was confiscated while they were aboard trains operated by Defendant Société Nationale des Chemins de Fer Français ("SNCF") and held at camps run by civil servants of the Republic of France ("France"). They further allege that proceeds from those confiscations were deposited at Defendant Caisse des Dép"ts et Consignations ("CDC").

Before the Court are Defendants' respective motions to dismiss. After careful consideration, the Court concludes that the bounds of its jurisdiction are not coterminous with the moral force of Plaintiffs' claims. For the reasons that follow, the Court finds that it lacks subject matter jurisdiction to adjudicate Plaintiffs' claims under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq. (the "FSIA" or the "Act"), and that, even if jurisdiction were proper, the case presents serious justiciability issues that make abstention appropriate. Accordingly, Defendants' motions to dismiss are granted.


A. Facts*fn1

During World War II, 75,000 Jews and thousands of other "undesirables" were taken captive and detained at holding camps in France. (Compl. ¶¶ 6-7.) SNCF transported the detainees by train between various French holding camps, and to Nazi-run concentration camps. (Id. ¶ 8.) When the detainees boarded the trains, SNCF employees demanded their money, suitcases, and valuables. (Id.) Upon arrival at the French holding camps, the detainees were forced to turn over any remaining money and property.*fn2 (Id. ¶ 7.) Much of the confiscated property was ultimately deposited at CDC. (Id.) Some of the victims were searched again before the SNCF trains transported them to concentration camps. (Id.) In total, property was confiscated from approximately 56,400 people. (U.S. Dep't of Justice, Statement of Interest of the United States of America, June 29, 2006 ("Statement of Interest") at 3; Rakower Decl. Ex. B at 25.)

1. The Parties

Plaintiffs bring this action individually and on behalf of other Holocaust survivors and victims, their heirs, and beneficiaries. (Compl. ¶ 1.) The putative class includes all individuals detained in French holding camps, as well as those transported by SNCF trains either to those holding camps or to Nazi-run concentration camps. (Id. ¶ 51.) Plaintiffs are citizens of the United States, France, and other foreign nations. (See id. ¶¶ 10-11.)

Plaintiffs have named the Republic of France as a defendant in this action in its sovereign capacity as a "foreign state" under the FSIA, 28 U.S.C. § 1603(a). (Id. ¶ 24.)

Defendant CDC was created by an 1816 French statute in order to "restore faith in public finances following the Napoleonic Wars." (Rosenfeld Decl. ¶ 4.) It has been designated the "public depository of France" and is subject to the "oversight and guarantee of the French Legislature." (Id. ¶¶ 5-6.) During World War II, CDC accepted deposits of property taken from the detainees in the holding camps. (See id. ¶ 7 & Ex. D.) Today, the President of France appoints the CDC's Chairman and Chief Executive. (Id. ¶ 6.) The CDC also has a twelve-member Supervisory Board, including four members from the French Senate and French Chamber of Deputies. (Id.)

Defendant SNCF was created in 1938, when the French government consolidated five regional train networks. (Compl. ¶ 25.) It is the national railway of France and is wholly owned by the French government. (Id.) SNCF is also one of the 500 largest companies in the world, and it derives substantial revenue from international business, including business conducted with United States citizens. (Id. ¶¶ 25, 61.)

2. The Drancy Holding Camp

Plaintiffs' claims center on property expropriations at French provincial holding camps such as Pithiviers, Beaune-la-Rolande, Compiegne, and Drancy. (See id. ¶ 10.) The Complaint focuses on the events in and around the camp at Drancy as Plaintiffs' starkest example of the atrocities that serve as the basis for their claims.

Over a six-day period starting on August 20, 1941, acting on orders from Nazi authorities, the Paris Police captured approximately four thousand Jews and brought them to a camp outside the city at Drancy. (See Rodd Decl. Ex. 6 at 14.) By March 1942, Drancy was being used as a "transit station" for deportation to Nazi concentration camps, mainly Auschwitz. (Compl. ¶ 10; Rodd Decl. Ex. 6 at 4, 14.) Between July and November 1942, approximately 29,000 victims were deported to Auschwitz, and an additional 8,000 people were sent between February 9 and March 25, 1943. (Rodd Decl. Ex. 6 at 4.) The Nazis took control of Drancy in July 1943 and used it as a concentration camp. (Id.)

Approximately 80,000 people "passed through" Drancy, including 40,000 Jews from outside of France. (Compl. ¶ 11.) About 67,000 of those victims were deported to Nazi-run concentration camps elsewhere in Europe. (Compl. ¶ 11; Rodd Decl. Ex. 6 at 14.) Less than 3% of these victims survived. (Compl. ¶ 6.)

Before the Nazis seized control of Drancy, it was run by French civil servants who kept records of the property that was seized from detainees. (Rodd Decl. Ex. 6 at 14.) The records from Drancy reflect that approximately 12,039,892 French francs were seized. (Compl. ¶ 15.)*fn3 Overall, an estimated 200,000,000 francs were expropriated from detainees at the French provincial camps. (Id. ¶ 14.)

The proceeds from the Drancy expropriations were initially deposited with the City of Paris Municipal Savings Bank, but, starting in February 1942, the money was brought directly to CDC. (Rodd Decl. Ex. 6 at 14.) At the end of World War II, 1,081,158.75 expropriated francs from Drancy had been returned. (Id. at 15.) However, as of December 1999, 9,733,308 expropriated francs remained deposited at CDC. (See Compl. ¶ 21.)

Limited amounts of the expropriated funds were reimbursed to 138 claimants in 1945 and 1946, but only twenty-five reimbursements were made after October 1947. (Rodd Decl. Ex. 6 at 15.) Physical property that was seized was returned on an even more limited basis. A series of auctions was held in the early 1950s, and the proceeds from the sales were deposited at CDC. (Id.) Although CDC forfeited some of the spoliated funds to the French Treasury between 1978 and 1986, it also retained significant amounts of those funds. (Id.; Statement of Interest Ex. 1, Declaration of Stuart E. Eizenstat, Jan. 19, 2001 ("Eizenstat Decl.") ¶ 6)

3. The Mattéoli Mission And United States Diplomatic Efforts

In 1995, French President Jacques Chirac publicly declared that France would seek to remedy the harms done by the Vichy Regime and Nazi occupation. (Eizenstat Decl. ¶ 6.) Two years later, the French government initiated the Study Mission on the Spoliation of Jews in France (the "Mattéoli Mission"). (Statement of Interest at 3.) The Mattéoli Mission issued a 3,000 page report in April 2000, which described various types of spoliations suffered by Jews in France between 1940 and 1944 (the "Mattéoli Report"). (Eizenstat Decl. ¶ 6.)

The Mattéoli Report quantified, to some extent, past restitution for the French expropriations, but found that "significant portions of the spoliated bank assets remain[] unknown." (Id.) It recommended, inter alia, creating a commission to hear claims relating to lost property, and establishing a foundation that would provide support to Holocaust victims and their families, as well as education regarding the Holocaust. (Id. ¶ 7.)

While the Mattéoli Mission was conducting its inquiry, individual Holocaust victims began filing claims in United States courts relating to the expropriations in France. (Id. ¶ 8.) In August 2000, just months after the Mattéoli Report had been released, "a United States District Court denied a motion to dismiss two of the cases, indicating that they would be allowed to proceed." (Id.)

As the Mattéoli Mission was working in France and the American lawsuits against French banks proceeded, the United States government sought to facilitate an alternative resolution of the Holocaust survivors' claims. Between the fall of 1998 and the summer of 2000, Stuart E. Eizenstat, serving as the Secretary of State's Special Envoy on Property Restitution in Central and Eastern Europe, led a team of United States officials seeking to "facilitate[] negotiations leading to a resolution of class action lawsuits filed in [United States] courts against German companies arising from slave and forced labor and other wrongs by those companies during the Nazi era." (Statement of Interest at 4; see also Eizenstat Decl. ¶ 1.)

Eizenstat was experienced with the task at hand. He had led a team with a similar mission in Austria, which resulted in the October 2000 creation of an Austrian foundation and a general settlement fund to compensate those who were victimized within the Austrian territory during World War II. (Eizenstat Decl. ¶ 10.) Eizenstat was also involved in the creation of a German Foundation known as "Remembrance, Responsibility, and the Future," which makes payments to victims who were forced to work for German companies during the Nazi era. (See Statement of Interest at 4-5; Eizenstat Decl. ¶ 10.)

Meanwhile, as a result of the Mattéoli Report, France established the Commission for the Compensation of the Victims of Acts of Despoilment Committed Pursuant to Anti- Semitic Laws in Force During the Occupation (the "CIVS" or the "Commission") in September 1999. (Eizenstat Decl. ¶ 7.) In December 2000, the Foundation for Memory of the Shoah ("Foundation" or the "Shoah Foundation") was established. (Id.) In light of Eizenstat's progress with the Austrian and German settlements, parties to similar discussions in France requested his assistance in resolving litigation against French banks. (Id. ¶ 11.)

4. The Joint Statement And The Executive Agreement

Beginning in November 2000, Eizenstat represented the United States at negotiations between the French government, French banks, and attorneys representing Holocaust victims with claims against the banks. (Id. ¶ 12.) The claimants' representatives were concerned that the CIVS and the Shoah Foundation would not provide enough compensation to the victims. (Id. ¶ 14.) They were also concerned that some victims would not be compensated because they could not substantiate their losses. (Id.)

A major breakthrough in the negotiations occurred in January 2001, when the participating banks agreed to establish a fund that would make payments to victims who lacked documentation for their claims before the CIVS (the "Fund"). (Id. ¶ 15.) The participating banks agreed to contribute $22.5 million to the Fund in exchange for the dismissal with prejudice of all cases pending against the banks as of January 18, 2001. (Statement of Interest Ex. 1A at 1-2; see also Eizenstat Decl. ¶ 15.) The banks' contributions to the Fund were deposited at CDC. (See Statement of Interest Ex. 1A Annex A at 2.) The parties agreed that the CIVS would refer cases to the Fund for compensation when the CIVS process was unable to verify the victims' losses through its own procedures. (Id. Annex A at 2-3.)

The parties to the negotiations memorialized this agreement in a January 18, 2001 Joint Statement, which was signed in Washington, D.C. (See Statement of Interest Ex. 1A ("Joint Statement").) The signatories included representatives of France and the United States, a French banking association known as Association Francaise des Éstablissements de Crédit et des Entreprises d'Investissement ("AFECEI"), and several attorneys representing victims' interests, including Plaintiffs' counsel, Harriet Tamen. (See id. at 3-4.)

Because the parties to the Joint Statement agreed to dismiss pending expropriation claims against French "banks," the term "bank" took on central significance during the negotiations. The Joint Statement defined the term to include (1) "[t]he defendants in the actions Benisti, et al. v. Banque Paribas, et al., No. 98 Civ. 7851 (E.D.N.Y.); Bodner, et al. v. Banque Paribas, et al., No. 97 Civ. 7433 (E.D.N.Y.); and Mayer v. Banque Paribas, et al., Civ. Action No. 302226 (Cal. Superior Court)"; (2) members of the AFECEI; and (3) "other financial institutions that receive deposits." (Id. Annex B.) The definition excluded insurance companies, and it prohibited challenges to settlements regarding these claims with Barclays Bank and JP Morgan that predated the agreement between the parties to the Joint Statement. (Id.) Finally, the Joint Statement noted, "[w]ith respect to banks of French nationality, this definition applies to all World War II activities of such banks." (Id.)

The Joint Statement referenced an Executive Agreement between the United States and France, which was executed on the same day as the Joint Statement. (See Statement of Interest Ex. 1B ("Executive Agreement").)*fn4 Through the Agreement, the two nations stated that "it is in the interests of both the [United States and France] to have a resolution of these issues that is nonadversarial and non-confrontational, and outside of litigation," and that "both parties desire all-embracing and enduring legal peace with respect to all claims asserted against the Banks arising out of World War II . . . ." (Id. at 3.) To further those goals, France undertook to enforce the banks' promised contributions to the Fund, and to provide legal oversight of the CIVS and the Foundation in connection with the parties' agreement. (Id. at 4.) The United States promised:

in all pending and future cases [to] . . . inform its courts through a Statement of Interest . . . that it would be in the foreign policy interests of the United States for the Commission, the Foundation, and the Fund to be the exclusive remedies and fora for resolving . . . claims asserted against the Banks and that dismissal of such cases would be in its foreign policy interest.

(Id. at 5.) As characterized by Eizenstat,

[t]he Executive Agreement negotiated is not a government-to-government claims settlement agreement, and the United States has not extinguished the claims of its nationals or anyone else. Instead, the intent of our participation was . . . to bring expeditious justice to the widest possible population of survivors, and to help facilitate legal peace. Among these parties, the United States facilitated the essential arrangement by which the French side would establish the Fund, and make certain enhancements to the [CIVS] and [Shoah] Foundation . . ., and the class action representatives in pending United States litigation agreed to give up their claims. The [United States] further contributed its own commitment to advise United States courts of its foreign policy interests . . . in current and future litigation being dismissed.

(Eizenstat Decl. ¶ 17.)

5. The French Alternative Fora: The CIVS, The Fund, And The Shoah Foundation

The CIVS initially focused on publicizing the availability of its compensation mechanism. (See id. ¶ 19.) It did so by contacting Holocaust victims organizations, as well as by establishing outreach offices in the United States and other countries to obviate the need for victims and their heirs to travel to France to file claims. (Statement of Interest at 8; Eizenstat Decl. ¶¶ 18-24.) Claimants may appear in the CIVS through representatives and do not have to attend the proceedings. (Eizenstat Decl. ¶ 20.) CIVS also employs a "relaxed standard of proof" relative to United States courts. (Id.) As part of its process, individual CIVS panels aim to award an "amount designed to compensate fully the claimants for any material damages" suffered from their assets being expropriated. (Id.)

There is no cap on compensation awards, and the participating banks committed to paying the full amount recommended by the Commission to each successful claimant. (Id. ¶ 21.) The CIVS issues periodic reports of its activity as well as the criteria on which its decisions are based. (Id. ¶ 23; Rakower Decl. ¶ 5.) There is also an appeals process through which claimants may appeal panel decisions to the full Commission. Decisions of the full Commission are also subject to reconsideration based on new facts or previous errors. (Eizenstat Decl. ¶ 22.)

Individuals "whose claims cannot be substantiated by the" CIVS are referred to the Fund. (Id. ¶ 24.) The Fund is administered by a five-person board comprised of two members appointed by France, two members appointed by the United States, and one member appointed by the attorneys who represented the victims in the negotiation of the Joint Statement. (See Joint Statement Annex B at 3.) Each referred claimant receives a $1,500 lump sum payment from the Fund, and, in February 2005, the Fund agreed to make a second round of supplemental payments to some of those who had already received compensation from it. (See Larrivet Decl. ¶ 34.)

The third component of the French efforts to redress these expropriations is the Shoah Foundation, which was established by decree of the French Government in December 2000. (Eizenstat Decl. ¶ 7.) It was designed "as the primary mechanism to achieve full disgorgement by French banks and other French institutions of any remaining assets that were not subject to restitution." (Id. ¶ 25.) The Foundation's objectives include research and education regarding the Holocaust and Holocaust victims, as well as studying other acts of genocide and crimes against humanity. (Id. ¶ 26.) It also provides funding for "moral, technical, and financial support" to victims and their families. (Id. ¶ 26.) The Foundation was initially endowed with approximately $375 million, approximately $100 million of which was contributed by French banks. (Id. ¶ 25.)

B. Procedural History

1. Plaintiffs' Lawsuit

Plaintiffs commenced this action on March 2, 2006 by filing a complaint on behalf of themselves and all others similarly situated against France, SNCF, and CDC. They bring claims for conversion and unjust enrichment, they seek an accounting of the allegedly expropriated property, and they also contend that they are entitled to compensatory and punitive damages based on Defendants' alleged violations of international law.

Defendants have not answered, and instead filed the instant motions to dismiss on December 1, 2006. The case was reassigned to the undersigned on October 14, 2007. The Court held oral argument on June 3, 2008.

2. The United States Statement of Interest

On July 12, 2006, the Department of Justice submitted to the Court a document titled "Statement Of Interest Of The United States Of America" (the "Statement of Interest"). The background information contained in the Statement of Interest is drawn from the Eizenstat Declaration, the Joint Statement, and the related Executive Agreement, all of which are attached to the Statement of Interest as exhibits. (See Statement of Interest Exs. 1, 1A, 1B.)

The Statement of Interest is expressly limited to Plaintiffs' claims against CDC. (See Statement of Interest at 2 n.2.) It states that "[t]he United States has determined that the CDC is a `bank' as that term is used in the Executive Agreement, and that plaintiffs' claims against the CDC are thus covered by the Agreement." (Id. at 11.) After outlining the interests of the United States in providing compensation to Holocaust survivors, furthering close diplomatic cooperation with France, and avoiding conflicts between Holocaust victims organizations and banks, the Statement of Interest asserts that:

The United States does not suggest that these policy interests described above in themselves provide an independent legal basis for dismissal. . . . Because of the United States' strong interests in the success of the CIVS, the Foundation, and the Fund, however, the United States recommends dismissal on any valid legal ground.

(Id. at 14.)


Although Defendants filed separate motions, their principal arguments are similar. Each Defendant argues, albeit for different reasons, that: (1) it is immune from Plaintiffs' claims under the FSIA; (2) the act of state doctrine and forum non conveniens require dismissal; (3) the statute of limitations bars Plaintiffs' claims; (4) abstention is appropriate based on the political question doctrine and principles of international comity; and (5) Plaintiffs did not effectuate valid service of process.

In considering Defendants' motions, the Court is mindful that it must "address questions pertaining to its . . . jurisdiction before proceeding to the merits." Tenet v. Doe, 544 U.S. 1, 6 n.4 (2005) (citing Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 94- 95 (1998)); see also Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1868) ("Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause."); Alliance for Envtl. Review, Inc. v. Pyramid Crossgates Co., 436 F.3d 82, 85-88 (2d Cir. 2006). Thus, because the act of state doctrine is substantive rather than jurisdictional, see W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp., Int'l, 493 U.S. 400, 408-10 (1990), courts may not consider its application prior to establishing that subject matter jurisdiction exists, see In re Papandreou, 139 F.3d 247, 256 (D.C. Cir. 1998). Similarly, the Court may not - and in light of its holding, does not - reach Defendants' statute of limitations arguments before resolving the questions regarding jurisdiction and justiciability. See Bowles v. Russell, 127 S.Ct. 2360, 2369 (2007) ("[A] statute of limitations . . . provides an affirmative defense . . . and is not jurisdictional . . . .") (internal citations omitted).

These principles, however, do not prescribe a "sequencing" for Defendants' remaining arguments. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584 (1999). Courts have discretion to decide motions on forum non conveniens grounds before deciding whether subject matter jurisdiction exists. See Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 127 S.Ct. 1184, 1192 (2007). Courts may also, under some circumstances, resolve justiciability issues before deciding whether jurisdiction is proper. See Whiteman v. Dorotheum GmbH & Co. KG, 431 F.3d 57, 73 n.18 (2d Cir. 2005); Can v. United States, 14 F.3d 160, 162 n.1 (2d Cir. 1994) ("[J]usticiability is also a `threshold' question.").

Based on these principles, the Court first addresses whether its has subject matter jurisdiction to decide Plaintiffs' claims. For the reasons set forth in Part III of this Opinion and Order, the Complaint is dismissed because Defendants are entitled to sovereign immunity under the FSIA. Additionally, for the reasons stated in Part IV, even if the Court had subject matter jurisdiction, the Court would abstain, based on the political question doctrine and principles of international comity, from deciding the claims of those Plaintiffs who are eligible to seek compensation from the CIVS and the Fund. Finally, in light of these holdings, the Court does not reach Defendants' remaining arguments based on forum non coveniens, the act of state doctrine, and the statute of limitations.


France, CDC, and SNCF argue that the FSIA grants them sovereign immunity and that, therefore, they are not subject to liability for Plaintiffs' claims in United States courts. Plaintiffs argue that the Court has subject matter jurisdiction because each Defendant fits within the "takings exception" to the FSIA based on the alleged property expropriations in violation of international law. For the reasons that follow, Plaintiffs' claims against each Defendant are dismissed for lack of subject matter jurisdiction.*fn5

A. Law

"[T]he FSIA was enacted to address `the potential sensitivity of actions against foreign states.' . . . [I]t aimed `to facilitate and depoliticize litigation against foreign states and to minimize irritations in foreign relations arising out of such litigation.'" Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993) (quoting H.R. Rep. No. 1487, at 45 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6631, 6634). The FSIA, therefore, "provides the sole basis for obtaining jurisdiction over a foreign state in federal court," Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989), and it applies to the instant case despite the fact that the alleged conduct occurred prior to its enactment, see Republic of Austria v. Altmann, 541 U.S. 677, 700 (2004).

Under the Act, "foreign state[s]" are presumptively immune from suit in United States courts unless one of the statute's exceptions apply. See Garb v. Republic of Poland, 440 F.3d 579, 582 (2d Cir. 2006) (citing Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993)). The only exception at issue here is the FSIA's "takings" exception, 28 U.S.C. § 1605(a)(3), which denies "foreign states" sovereign immunity for certain types of claims relating to expropriations of property in violation of international law.

1. Motion to Dismiss Standard

In a motion to dismiss on FSIA grounds, the movant must first make a prima facie showing that it is a "foreign state" under the Act. See Cabiri v. Republic of China, 165 F.3d 193, 196 (2d Cir. 1999). "This proof establishes a presumption that immunity applies." Baglab Ltd. v. Johnson Matthey Bankers Ltd., 665 F. Supp. 289, 293-94 (S.D.N.Y. 1987). Once the movant makes that showing, the opposing party "has the burden of going forward with evidence showing that, under exceptions to the FSIA, immunity should not be granted." Cabiri, 165 F.3d at 196 (quoting Cargill, 991 F.2d at 1016). However, "the ultimate burden of persuasion remains with the alleged foreign sovereign." Agudas Chasidei Chabad v. Russian Fed'n, 528 F.3d 934, 940 (D.C. Cir. 2008) (internal citation omitted).

In considering such a motion, the "district court `retains considerable latitude in devising the procedures it will follow to ferret out the facts pertinent to jurisdiction.'" APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003) (quoting Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000)). This discretion includes the ability to "`resolve disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits.'" Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998) (quoting Antares Aircraft, L.P. v. Fed. Republic of Nigeria, 948 F.2d 90, 96 (2d Cir. 1991)); see also Zappia Middle E. Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000) ("On a . . . motion challenging ...

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