Supreme Court Blocks Lawsuit Against Hungary for Seizing Assets During the Holocaust

Associate Justice Sonia Sotomayor poses during a group photo of the justices at the Supreme Court in Washington, on April 23, 2021. Erin Schaff/Pool via Reuters

The U.S. Supreme Court unanimously sided with Hungary on Feb. 21, ruling that a group of foreigners may not sue that country in U.S. courts over Holocaust-era asset seizures.

Justice Sonia Sotomayor wrote the court’s 9–0 opinion in Republic of Hungary v. Simon.

The justices held that because the survivors and their families could not prove that cash raised from the sale of their seized property was connected to business activity in the United States, they could not sue in this country’s court system.

The respondents in the case, most of whom are foreign nationals, filed a proposed class action lawsuit in 2010, seeking compensation for property confiscated from their families during the Holocaust.

According to court papers, they claimed that Hungary and its railway system took the property in 1944 when families were forcibly removed from that country under Nazi policies. The proceeds from the property “were transferred to the Hungarian government treasury and commingled with other Hungarian government revenues.”

Because Hungary later issued bonds in the United States from its general fund, lower courts have found that the connection of the confiscated assets to the United States was sufficient to give U.S. courts jurisdiction, or authority, over the case.

A federal district court previously dismissed the lawsuit, finding that suing in U.S. courts was precluded by the dispute resolution process specified in the peace treaty the United States signed with Hungary.

In 2016, the U.S. Court of Appeals for the District of Columbia Circuit reversed, finding that the process laid out in the treaty was not the final word on this kind of litigation.

The appeals court determined that because the proceeds from the sale of the assets had been commingled with other funds, this allowed the court to infer “that the defendants retain the property or proceeds thereof, absent a sufficiently convincing indication to the contrary.”

When the district court reconsidered the case, it dismissed it again on the grounds that the litigants should have pursued the matter outside the United States.

The D.C. Circuit again reversed, holding in 2020 that the district court erred in dismissing the case because the grounds it identified were not allowed by the Foreign Sovereign Immunities Act (FSIA), a federal statute enacted in 1977 that transferred the determination of foreign governments’ immunity to lawsuits from the U.S. State Department to the courts.

The case made it to the Supreme Court in 2021 and was returned to a lower court for reconsideration.

Then, the case made it back to the D.C. Circuit, which ruled in August 2023 that the families could proceed against Hungary in the U.S. judicial system.

Hungary asked the Supreme Court to review the decision, and in June 2024, it agreed to do so. Oral argument was held in December 2024.

In the new ruling, the Supreme Court rejected the respondents’ claim that because their seized funds were commingled with general government funds in Hungary that had a connection to the United States through the bond transaction, this enabled them to sue in the United States under the so-called expropriation exception of FSIA.

The respondents argued the expropriation exception permits suits against foreign governments when property is seized in violation of international law.

Sotomayor acknowledged in the opinion that the expropriation exception allows lawsuits to move forward if the property concerned has “a commercial nexus,” or business-related connection, to the United States.

The justice noted that the respondents argued that the commercial nexus requirement was met because Hungarian government officials liquidated their assets, mixed the funds with government treasury funds, and then years later used that account “in connection with commercial activity in the United States.”

“The issue presented in this case is whether alleging commingling of funds alone can satisfy the commercial nexus requirement of the expropriation exception of the FSIA. The Court holds that it cannot,” she wrote.

The exception treats all “‘property’ alike, whether that property is tangible (like a piece of art) or fungible (like cash),” the justice wrote. Fungible means capable of being replaced by an identical item. Cash is fungible because it becomes indistinguishable from other cash when deposited into a bank account.

The respondents here did not dispute that the law “requires plaintiffs to identify and trace their specific expropriated property, or the particular property exchanged for their expropriated property, to the United States (or to the possession of a foreign instrumentality that does commercial activity here) when the property in question is nonfungible,” the justice wrote.

They argued the statutory language does not mandate the tracing of the assets when the seized property has been converted to cash.

“That argument is unpersuasive,” Justice Sotomayor wrote.

The Supreme Court left open the possibility that the respondents could seek legal redress for their losses in a different way.

“Today’s decision concerns only what plaintiffs must plead to bring suit against foreign sovereigns for their actions abroad in the courts of the United States. That a particular claim cannot satisfy the expropriation exception means only that it cannot be brought here, not that it cannot be brought in any forum.”

The Supreme Court vacated the ruling of the D.C. Circuit and sent the case back to that court “for further proceedings consistent with this opinion.”