Fifth Circuit Applies Act of State Doctrine in Holocaust Art Case


WikiArt (Public Domain)

Does the act of state doctrine apply to mistakes? On May 29, 2024, the Fifth Circuit held in Emden v. Museum of Fine Arts, Houston that the doctrine bars a claim for return of a painting that the Dutch government gave to the wrong person after World War II. There were several copies of this painting. A Dutch agency determined that a copy made by an unknown artist properly belonged to Hugo Moser, who owned this copy before the war, and the agency gave him the painting in its possession. But the painting was in fact a copy made by the artist himself, which was owned before the war by Max Emden.

Emden’s heirs sued the Museum of Fine Arts in Houston, which now owns the painting, to recover it, but the district court held that their claims were barred by the act of state doctrine. On appeal, the heirs raised several arguments why the doctrine should not apply, each of which the Fifth Circuit rejected. I have previously argued that the act of state doctrine should be abolished. This decision does not prove that argument. But it does show that sometimes applying the act of state doctrine is silly.

The Facts

In 1753, the Italian artist Bernardo Bellotto painted “The Marketplace at Pirna.” During the next few years, copies were made, some by Bellotto himself (“By Bellotto Pirnas”) and some by other, unknown artists (“After Bellotto Prinas”). By the 1930s, Max Emden owned one of the By Bellotto Pirnas. Persecuted by the Nazis as a Jew, Emden was forced to sell this painting and two other Bellottos at below-market prices to an art dealer who promptly sold them to the German government for the Führermuseum in Austria.

Hugo Moser owned another copy of the painting, an After Bellotto Pirna, by an unknown artist. Moser fled Germany for the Netherlands in 1933, with the painting, and subsequently fled the Netherlands, leaving the painting behind. Moser’s copy came into the possession of a Dutch art gallery and was purchased by a German dealer for the Führermuseum.

After World War II, both copies were recovered by the Monuments Men and sent to the Munich Central Collection Point (MCCP) for analysis. The Dutch Art Property Foundation (SNK) asked the MCCP to return the painting on behalf of the Dutch gallery. The MCCP mistakenly sent Emden’s By Bellotto Pirna to the SNK rather than Moser’s After Bellotto Pirna. At this point, Moser himself filed a claim for the painting with the SNK, which decided that the painting properly belonged to him rather than the gallery. By the time the mistake was discovered in 1949, the painting was no longer in the SNK’s possession. Moser sold it to the American collector Samuel Kress in 1952. Kress loaned it to the museum in 1953 and then donated it in 1961.

More recently, Emden’s heirs sought to recover the three Bellottos that he had owned. In 2019, the German Advisory Commission ruled that Nazi persecution had forced Emden to sell the paintings at below-market prices and that the MCCP had mistakenly sent the wrong copy of one of the paintings to the Netherlands. The heirs sued the museum to recover the By Bellotto Pirna that their grandfather owned, but the district court held that the act of state doctrine barred their claim.

The Fifth Circuit’s Decision

The act of state doctrine provides that courts in the United States will not question the validity of an official act of a foreign government fully performed within its own territory. Plaintiffs made several arguments why the doctrine should not apply in this case.

Whether the Claim Questions the Validity of a Foreign Act

Plaintiffs first argued that their claim did not require the district court to question the validity of any decision by the SNK because the SNK had adjudicated ownership of the After Bellotto Pirna owned by Moser rather than the By Bellotto Pirna owned by Emden.

Plaintiffs relied on the Fifth Circuit’s decision in Geophysical Service, Inc. v. TGS-NOPEC Geophysical Co.(2017), which drew a distinction between validity and effects, holding that the act of state doctrine did not prevent U.S. courts from adjudicating the effects of foreign government acts. Plaintiffs also relied on United States v. Portrait of Wally (2009), a district court decision from the Southern District of New York in which the U.S. government successfully sought forfeiture of a painting that was mistakenly restituted by an Austrian government agency after the war. The district court in Portrait of Wally reasoned that it was “not being asked to invalidate any action by an Austrian governmental authority, but only to determine the effect of such action, if any, on Wally ‘s ownership.” The Fifth Circuit acknowledged that, if Portrait of Wally were binding here, the act of state doctrine would not bar the plaintiffs’ claim. But the court of appeals concluded that Geophysical Services had not adopted Portrait of Wally’s reasoning despite relying on the decision.

“The act of restitution legally established the owner and possessor of the By Bellotto Pirna,” the Fifth Circuit reasoned. “The SNK could not have sent the painting without concurrently determining its rightful owner. Thus, any evaluation of the effect of the SNK’s act intrinsically implicates its validity.”

Although I concede that it can sometime be difficult to distinguish effects from validity, the Fifth Circuit’s reasoning here seems to miss the point. Plaintiffs’ central argument is that the SNK made no determination at all about the ownership of the By Bellotto Pirna, because it thought that the painting in its possession was the After Bellotto Pirna. The court of appeals says that “[t]he SNK could not have sent the painting without concurrently determining its rightful owner,” yet that seems to be precisely what happened. The SNK decided who owned the After Bellotto Pirna, and then it sent the By Bellotto Pirna without making any determination of its ownership.

Whether the SNK’s Decision Was an Act of State

Second, plaintiffs argued that the SNK’s decision was not an act of the Dutch government to which the act of state doctrine applies. Relying on the Ninth Circuit’s decision in Von Saher v. Norton Simon Museum of Art at Pasadena (2018), the Fifth Circuit disagreed. The court explained that after the war, the Dutch government expropriated property stolen by the Nazis and then restored the property to its rightful owners.

This seems correct to me. But still, it begs the question discussed above. The SNK’s decision may well have been an act of state, but it was a decision about a different painting. The SNK made no decision concerning the By Bellotto Pirna, and therefore no foreign act of state is implicated in this case.

Impact on Foreign Relations

Third, plaintiffs argued that the policies underlying the act of state doctrine do not justify its application in this case. When the Supreme Court narrowed the doctrine in W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., International (1990) to apply only to questions of validity, the Court suggested that even in such cases, sometimes, “the policies underlying the act of state doctrine may not justify its application.” The Fifth Circuit identified three factors, articulated by the Supreme Court in Banco Nacional de Cuba v. Sabbatino(1964) and applied by the Ninth Circuit in Von Saher: (1) the degree of consensus regarding legal principles; (2) the importance of the issue for U.S. foreign relations; and (3) whether the foreign government is still in existence.

The Fifth Circuit focused mainly on the first factor. Plaintiffs argued that the U.S. and Dutch governments had both endorsed the Washington Principles on Nazi-Confiscated Art, so that reviewing a foreign act of state for consistency with those principles would not harm U.S. foreign relations. The court replied that “consensus regarding the Washington Principles does not equate to consensus casting doubt on the Dutch post-war restitution process.” This is true but irrelevant. In terms of harm to U.S. foreign relations, it is the attitude of the Dutch government today that matters, not its attitude 75 years ago.

With respect to the second factor, the Fifth Circuit conceded that this question is of little importance for Netherlands-U.S. relations. In contrast to the Cassirer case, the painting is not even owned by a Dutch museum (which is also why the Foreign Sovereign Immunities Act (FSIA) is not implicated). But the court went on to say that “the third factor tilts towards our applying the act of state doctrine” because the Dutch government still exists. This misreads Sabbatino. The point of the third factor is to make the act of state doctrine inapplicable to the acts of regimes that no longer exist (like Nazi Germany). The third factor is not meant to weigh in favor of the doctrine when the issue is of little importance to an existing government under the second factor.

In the end, the Fifth Circuit concluded “that adjudicating the Emdens’ claim could create a negative impact on foreign relations, even if a limited one.” This seems like a stretch. I cannot see how deciding that a Dutch agency made a mistake 75 years ago in adjudicating a claim against a museum in the United States poses any threat to relations with the Netherlands.

Whether the Act was Extraterritorial

Finally, plaintiffs argued that the act of state doctrine does not apply because “the Dutch government did not act solely within the Netherlands.” Recall from above that the act of state doctrine only applies to foreign acts of state fully performed within a nation’s own territory. The Fifth Circuit rejected this argument, properly in my view. The SNK’s actions in determining ownership and delivering the painting to Moser in the Netherlands. That the painting subsequently came to the United States does not alter this fact.

The problem with applying the act of state doctrine in this case is not that that SNK’s act was extraterritorial but rather that it was directed to a different painting and would, therefore, not be called into question by any decision in this case.

The Silliness of the Act of State Doctrine

This case is a good illustration of just how silly applying the act of state doctrine can be. More than 75 years ago, the SNK gave a painting to the wrong party. It concluded that Moser, rather than a Dutch art gallery, properly owned the After Bellotto Pirna. But the painting in its possession was the By Bellotto Pirna, which no one doubts properly belonged to Emden. The Dutch government was not effectuating state policy or resolving a difficult question of fact when it delivered the painting to Moser. It simply made a mistake. But, under the act of state doctrine, the fact that this mistake was made by an agency established by a foreign government effectively insulates it from further review. This serves no purpose I can think of.

I have previously argued that the act of state doctrine should be abolished. As reformulated in Kirkpatrick, the doctrine serves as a special, federal choice-of-law rule, directing courts in the United States to apply foreign acts of state as rules of decision even if they violate the public policy of the forum. As a general matter, federal courts are required to apply state choice-of-law rules. Two years ago, in the Cassirer case, the Supreme Court reaffirmed that this is true even in cases against foreign states under the FSIA. If a federal choice-of-law rule is not necessary when the defendant is a foreign state, why is such a rule needed when the validity of a foreign act of state is at issue?

As a general matter, federal courts are also required to apply state rules on the recognition and enforcement of foreign judgments. In this case, if the decision about the painting’s ownership had been made by a foreign court, the act of state doctrine would not apply and Texas law would govern (Texas has adopted the 2005 Uniform Foreign-Country Money Judgments Recognition Act).

Often state choice-of-law rules will give effect to foreign law and will recognize foreign judgments. But I strongly suspect that Texas law would not afford the Dutch agency’s mistake the sort of preclusive effect that the Fifth Circuit has given it under the act of state doctrine. Yes, the SNK made a decision that is entitled to respect, but it was a decision about a different painting. The notion that failing to protect the SNK’s mistake from further review in a suit against a museum in the United States concerning a painting that has been here for more than 70 years is—well—silly.