De Csepel v. Republic of Hungary

Baron Mór Lipót Herzog was a Jewish Hungarian whose art collection was inherited by his children and seized during the Holocaust. Some artworks were returned after World War II. In 1950, Herzog’s daughter, who had moved to the United States, deposited paintings with a Hungarian museum pursuant to a written bailment agreement. After learning that another Herzog family member had tried to smuggle restituted artworks out of the country, Hungary re-seized pieces and stopped returning the collection. In 1998, heirs of one of Herzog’s sons became US citizens. Three Herzog descendants (the Herzogs) (plaintiffs) sued the Republic of Hungary, three museums, and a university (collectively, Hungary) (defendants) after demands for the collection’s return were refused, alleging that the refusals breached implied and express bailments. Hungary’s motion to dismiss for lack of subject-matter jurisdiction was denied. On appeal, the District of Columbia Circuit found the complaint sufficient to confer subject-matter jurisdiction under the commercial-activity exception to the Foreign Sovereign Immunities Act (FSIA), which provided jurisdiction over actions based upon (1) commercial activity a foreign state carried on in the US, (2) acts performed in the US in connection with a foreign state’s commercial activity elsewhere, or (3) acts outside the US in connection with a foreign state’s commercial activity elsewhere that caused a direct effect in the US. The court held that it could be inferred from the complaint that the bailments required the property to be returned to family members in the US and therefore Hungary’s repudiations of the bailments were commercial acts that caused a direct effect in the US. On remand and after discovery, Hungary renewed its dismissal motion. The Herzogs asserted that their claim was based upon Hungary’s solicitation of US tourists and other US activities and bailment agreements that required delivery of property in the US.