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In a divided 2-1 ruling, the 2nd U.S. Circuit Court of Appeals has dismissed the last remaining class action for Holocaust-era claims against the Austrian government, setting the stage for the release of $210 million in compensation negotiated in the waning days of the Clinton Administration. Relying on a statement of interest submitted by the U.S. government, the majority, in an opinion written by Judge Jose A. Cabranes, ordered the dismissal of claims against governmental entities brought by a group of Austrian Jews whose property had been seized by the Nazis during World War II. Dismissal is required under the political question doctrine, Cabranes wrote in Whiteman v. Dorotheum GmbH & Co KG, 02-9361, because the U.S. government had specifically negotiated a vehicle for resolving the claims that is superior to litigation and advances important United States foreign policy interests. Judge Amalya L. Kearse joined in the majority. In dissent, Judge Chester J. Straub wrote that by finding dismissal mandatory under the political question doctrine, based solely upon the government’s filing of a statement of interest, the majority had created the prospect of a legal doctrine that is “troubling as well as novel.” Meanwhile, separate developments are likely to moot the dispute which has been brewing since the U.S. government and Austria created a $210 million fund and compensation system to pay Austrian Jews and their heirs for property that was confiscated by the Nazis. The agreement was memorialized by an exchange of diplomatic notes on Jan. 17, 2001, a few days before President George W. Bush was inaugurated. While several groups of plaintiffs seeking class action status agreed to seek compensation from the fund, the Whiteman group, which is represented by Jay R. Fialkoff, of Moses & Singer, insisted on pursuing its case. That stance prevented funds from being paid out under the agreement because the two governments had agreed that no funds would be distributed until all pending lawsuits had been dismissed. In addition, the Austrian Jewish Community, which consists of about 150 Jewish communal organizations, had asserted hundreds of millions of dollars worth of claims for expropriated property with the Austrian government but never filed suit. But two weeks ago, Fialkoff advised Southern District of New York Judge Shirley Wohl Kram, who has been presiding over the Whiteman case, that the Austrian government had agreed to pay an additional $18 million to resolve the claims of the Austrian Jewish Community and to add an additional 1.8 million euros to the $210 million fund. The Austrian Jewish Community has withdrawn its claims from the settlement fund, freeing up that money to be paid to other claimants, and joined the Austrian government in asking for the dismissal of the Whiteman case, Fialkoff said. In light of those developments, Fialkoff said, most of the Whiteman plaintiffs have agreed to the voluntary dismissal of their case. One of the plaintiffs, however, has retained separate counsel and is resisting dismissal. In addition, the 2nd Circuit’s dismissal is directed only at Austrian government entities, and claims remain against several businesses. SWIFT CONCLUSION SOUGHT But the majority made plain its intent that the lawsuit be brought to a rapid conclusion. It ordered Kram to decide all remaining motions within 60 days after its ruling takes effect. Should she be unable to do so, the court directed that the case be transferred to another judge. The case had previously been before the 2nd Circuit, which had remanded back to Kram the question of whether the Foreign Sovereign Immunities Act of 1976 could be applied retroactively to confer jurisdiction over the case. Kram had declined to rule on the Austrian government’s motion to dismiss and ordered limited discovery. But in a related case involving the confiscation of paintings from an Austrian Jew decided in July 2004, the U.S. Supreme Court ruled that the Foreign Sovereign Immunities Act applies retroactively to claims that arose before its enactment in 1976. That law allows American courts to consider suits against foreign governments under certain circumstances. Cabranes noted that the Supreme Court, while deciding that the 1976 law was retroactive in Republic of Austria v. Altmann, 541 U.S. 677, specifically left open whether the case could be dismissed based upon the government’s submission of a statement of interest urging dismissal. U.S. GOVERMNENT INTERESTS Cabranes concluded that dismissal as a political question was required because to permit the action to proceed would be “impossible without expressing lack of the respect due” the Executive Branch. In so concluding, he pointed to several interests asserted in the government’s statement: � The agreement concluded with the Clinton Administration represented the culmination of a half-century of discussions dating back to shortly after the end of World War II and implicated the U.S. government’s interests in maintaining good relations with Israel and nations throughout Europe. � The agreement will provide benefits to more victims, and will do so faster and with less uncertainty, than litigation. � Because many victims are elderly and dying, it is important to bring some measure of justice to Holocaust survivors in their lifetimes. � Leaving litigation as the sole alternative will likely lead to disputes between survivors and Austria and its industries which will likely embroil the U.S. and set back its relations with the Austrian government. MAJORITY ‘CEDES JURISDICTION’ In his dissent, Straub criticized the majority for the “conflation” of the political question doctrine — which requires dismissal — and the doctrine of deference to the executive, under which dismissal is discretionary. The language of the 2001 agreement operates in favor of applying the discretionary doctrine, Straub contended. The agreement only asserted that the government would “recommend dismissal on any valid legal ground,” and put the Austrian government on notice that U.S. policy interests concerning the fund do not in “themselves provide an independent legal basis for dismissal.” By approving a mandatory dismissal under the political question doctrine, Straub wrote, “the majority effectively cedes jurisdiction to the Executive to determine, on an ad hoc basis, when cases can and cannot be brought against a foreign sovereign.” The Republic of Austria was represented by Gregory S. Coleman, Christian J. Ward, Konrad L. Cailteux, and Nina Nagler of Weil, Gotschal & Manges. William M. Barron of Alston & Bird represented Dorotheum GmbH & Co KG. Bernard W. Nussbaum of Wachtell, Lipton, Rosen & Katz represented Judge Kram. Douglas Hallward-Driemeier, William H. Taft IV, Jonathan B. Schwartz, Wynne M. Teel, Robert McCallum, Gregory G. Katsas, and Mark B. Stern, of the U.S. Department of Justice appeared for the U.S. Government as amicus curiae. Charles G. Moerdler, James A. Shifran, Joseph E. Strauss, and Jeremy S. Rosof, of Stroock & Stroock & Lavan, represented the Austrian Jewish Community, amicus curiae. And Stanley M. Chesley and Jean M. Geoppinger of Waite, Schneider, Bayless & Chesley, represented the American Council for Equal Compensation of Nazi Victims from Austria, amicus curiae. Phillippe Zimmerman and Jayson D. Glassman, also of Moses & Singer, worked with Fialkoff in representing the Whiteman plaintiffs.

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