Opinion ID: 2772783
Heading Depth: 2
Heading Rank: 2

Heading: The Prior Appeals

Text: In 2012 we considered several appeals and mandamus petitions seeking review of the district court’s denial of defendants’ motions to dismiss on multiple grounds. In Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661 (7th Cir. 2012), we considered whether and under what circumstances the district court could exercise subject matter jurisdiction over the two instrumentalities of Hungary—the national bank and national railway. We held that the district court could exercise jurisdiction under the expropriation exception to the FSIA, but only if plaintiffs could demonstrate on remand that they either exhausted available Hungarian remedies or could show a legally compelling reason for not doing so. Id. at 684. 6 Nos. 13-3073 & 14-1319 Because exhaustion is also at the center of these appeals, we repeat our earlier conclusions. The national bank and national railway of Hungary are instrumentalities of a foreign sovereign under the FSIA. See 28 U.S.C. § 1603(b). Accordingly, the FSIA is the exclusive basis for exercising jurisdiction over those entities in United States courts. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434–36 (1989). Under the FSIA, foreign sovereigns and their instrumentalities are immune from suit in United States courts unless a specific statutory exception applies. 28 U.S.C. § 1604. Plaintiffs argued that two FSIA exceptions might allow jurisdiction over the national bank: the waiver exception in § 1605(a)(1) and the expropriation exception in § 1605(a)(3). We rejected the waiver exception. While the Hungarian constitution recognized international law norms, it did not go so far as to waive sovereign immunity for those claims. Abelesz, 692 F.3d at 670–71. The expropriation exception presented a closer and more complex question. We explained that the expropriation exception defeats sovereign immunity only where “(1) rights in property are in issue; (2) the property was taken; (3) the taking was in violation of international law; and (4) at least one of the two nexus requirements is satisfied.” Id. at 671, citing Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 251 (2d Cir. 2000). We held that “plaintiffs have sufficiently alleged that rights in property are at issue, that their property was taken, and that the national bank meets the nexus requirement.” Id. at 695. It was less clear that the national railway met either of the nexus requirements; accordNos. 13-3073 & 14-1319 7 ingly, we remanded for jurisdictional discovery on whether the railway meets the nexus requirements. Id. That left the most important and complex problem: whether plaintiffs alleged expropriations that could have violated international law. Abelesz, 692 F.3d at 673. We rejected defendants’ federal preemption argument, id. at 677–78, and made clear that because plaintiffs based their claims upon violations of customary international law, they had actionable rights, id. at 685–86. At the same time, because “a sovereign could expropriate the property of its own nationals within its own territory without violating international law,” id. at 674, the national bank and railway argued that the alleged expropriations taking place during the Holocaust did not violate international law and would not be justiciable under the FSIA. We recognized that courts should tread carefully in this field of property expropriation: “Actions that might appear to one regime or nation as unfair expropriations might seem to another to be a just remedy for decades or more of exploitation of the poor and downtrodden.” Id. at 675. Nevertheless, we held that the domestic takings rule did not apply where the expropriations funded the transport and murder of a country’s nationals in a campaign of genocide, which also sought to leave any survivors of that genocide impoverished. Id. The national bank and railway defendants also argued that either the FSIA itself or international law norms required exhaustion of domestic remedies before plaintiffs could assert a violation in a United States court. Id. at 678. We rejected the statutory exhaustion argument, finding that nothing in the language of the FSIA expropriation exception suggests that plaintiffs must exhaust domestic remedies be- 8 Nos. 13-3073 & 14-1319 fore resorting to United States courts. Id., citing § 1605(a)(3). In so doing, we joined the Ninth and D.C. Circuits. See id., citing Cassirer v. Kingdom of Spain, 616 F.3d 1019, 1034–37 (9th Cir. 2010), and Agudas Chasidei Chabad of U.S. v. Russian Fed’n, 528 F.3d 934, 948–49 (D.C. Cir. 2008). Even though § 1605(a)(3) itself does not require exhaustion, we went on to conclude that the provision’s reliance on international law norms made clear that plaintiffs would need to exhaust domestic remedies before they could assert a violation of customary international law in a United States court. This exhaustion principle, based on comity, is a wellestablished rule of customary international law. The Supreme Court has suggested that customary international law may require exhaustion. See Abelesz, 692 F.3d at 679, citing Sosa v. Alvarez-Machain, 542 U.S. 692, 733 n.21 (2004). This rule has also been invoked in other foreign and domestic situations, including by the United States government itself when defending against takings claims. Id. at 679–80 (collecting cases). At bottom, international law favors giving a state accused of taking property in violation of international law an opportunity to “redress it by its own means, within the framework of its own legal system” before the same alleged taking may be aired in foreign courts. Id. at 680. For these reasons, we required plaintiffs “either to pursue and exhaust domestic remedies in Hungary or to show convincingly that such remedies are clearly a sham or inadequate or that their application is unreasonably prolonged.” Id. at 681, citing Restatement (Third) of the Foreign Relations Law of the United States § 713 cmt. f. Keeping in mind that hearing these claims in a United States court “without even giving Hungarian courts an opportunity to address them” Nos. 13-3073 & 14-1319 9 would be an “extraordinary step,” we addressed and found unpersuasive some reasons offered by plaintiffs that the domestic exhaustion rule should not bar their claims. Id. at 684. And although we held that “plaintiffs [had] not presented a legally compelling reason for why the domestic exhaustion rule does not apply to their claims,” we found it prudent to remand the cases and to direct the district court to do “a more detailed examination of this pivotal exhaustion issue.” Id. In particular, we directed the defendants to specify the Hungarian remedies that might be available to individuals in plaintiffs’ position. Id. We said that plaintiffs would then have three options on remand: (1) They can voluntarily dismiss their claims against the national bank and national railway without prejudice and pursue their claims in Hungary using the remedies identified by defendants, with a possibility that they might refile their case in a U.S. court if and when they exhaust their remedies in Hungary. (2) They can ask the district court to stay their cases against the national bank and national railway while they pursue the Hungarian remedies identified by defendants. (3) They can ask the district court for an opportunity to develop further their arguments regarding the actual adequacy and availability of those remedies and the applicability of the domestic exhaustion rule. Id. In the separate but related appeals by the private banks, we issued a writ of mandamus directing the district court to 10 Nos. 13-3073 & 14-1319 dismiss the claims against two banks for lack of personal jurisdiction. Abelesz v. OTP Bank, 692 F.3d 638. At the same time, we concluded that Erste Bank—a private Austrian bank over which personal jurisdiction was not disputed— could not immediately appeal the district court’s denial of its motion to dismiss on other grounds and was not entitled to a writ of mandamus because it had not “demonstrated a clear and indisputable right to relief on par” with those of the other two banks. Abelesz v. Erste Group, 695 F.3d at 658. Thus, Erste Bank remained in the bank case.