Judge: Herzog heirs can sue Hungary to recover Nazi-looted art

Thomson Reuters 7 September 2011
By Alison Frankel

It's been decades since Baron Mor Lipot Herzog's children hid his renowned art collection in the basement of one of the family's factories in the Hungarian countryside, hoping to protect their dead father's beloved paintings and sculptures from the Nazi regime. No such luck. The cache was discovered and appropriated, with choice pieces from the Herzog Collection going to Adolph Eichmann himself. Eichmann's leavings, according to a ruling last week by Washington, D.C., federal judge Ellen Huvelle, ended up in, among other places, the Budapest Museum of Fine Arts, the Hungarian National Gallery, and the Budapest University of Technology and Economics.

The Baron's heirs, scattered around the world, tried over the years, with very limited success, to recover the Baron's art. Early on they were stymied by the Communist regime. In later years, when an American descendant sued in Hungary to recover 11 paintings supposedly left directly to her, her claim was rejected because of a 1973 agreement between the U.S. and Hungary that granted her mother compensation for the misappropriated work.

In 2010, three Baron Herzog heirs (who are not related to the Baron Herzog kosher wine family) filed suit in federal court in the District of Columbia seeking to recover the pieces from Hungary and the state-run institutions that own pieces of the erstwhile collection. The case was billed as the last of the big Nazi art cases, and like its predecessors, claimed Hungary is not protected by the doctrine of foreign sovereign immunity. Counsel for the Baron's heirs, Michael Shuster of Kasowitz Benson Torres & Friedman, argued that the Baron's heirs had essentially been exiled from Hungarian citizenship at the time the art was seized; that the seizure was in violation of their human rights; and that the Hungarian owners had improperly capitalized on the art for commercial purposes in the U.S. through ticket and merchandise sales.

Judge Huvelle agreed, in a 46-page opinion. The judge rejected the foreign sovereign immunity defense, finding that the Baron's heirs had "clearly [alleged] substantial and non-frivolous claims that the Herzog Collection was taken without just compensation and for discriminatory purposes." (Even if Hungary's actions didn't violate international law, the judge said, the alleged Nazi involvement in the disposition of the collection was enough to constitute a sufficient assertion of such a violation.)

Significantly, Judge Huvelle also found that the U.S. was an appropriate forum for the case, despite Hungary's arguments that the claims should be tried in Hungary. And she concluded that the Baron's heirs had not waited too long to bring their suit. Hungary had stalled for years after one of the heirs brought a claim there, she noted. She left open a final ruling on the statute of limitations issues, but said the complaint claimed facts that "if true, could support a finding that this action is timely."

"It's a really favorable decision," said Shuster of Kasowitz, counsel to the Baron's heirs. "The judge found we pled a substantial and non-frivolous basis for asserting the exceptions we invoked.There's good language on the statute. It's a good and thorough opinion."

Hungary's lead counsel, Thaddeus Stauber of Nixon Peabody, noted, however, that Judge Huvelle refused to revisit Hungary's ruling that 11 of the disputed paintings are now the property of the state because the Baron's American heir received compensation under the 1973 pact between the U.S. and Hungary. (Among those 11 paintings are some of the true masterpieces of the collection, including paintings by El Greco, Cranach, and Courbet.) "The court recognized the fairness and legitimacy of the Hungarian court proceeding," Stauber said. Given that finding, he said, Hungary plans to appeal Judge Huvelle's conclusion on the forum issue, arguing that the judge erred in her conclusion that the case should be tried in the U.S.'ANV'
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