Episode 119
Opinion Summary: Hungary v. Simon | Date Decided: 2/21/25 | Case No. 23-867
The questions presented in this case are: (1) Whether historical commingling of assets suffices to establish that proceeds of seized property have a commercial nexus with the United States under the expropriation exception to the Foreign Sovereign Immunities Act. (2) Whether a plaintiff must make out a valid claim that an exception to the Foreign Sovereign Immunities Act applies at the pleading stage, rather than merely raising a plausible inference. (3) Whether a sovereign defendant bears the burden of producing evidence to affirmatively disprove that the proceeds of property taken in violation of international law have a commercial nexus with the United States under the expropriation exception to the Foreign Sovereign Immunities Act.
The Supreme Court held: Alleging commingling of funds alone cannot satisfy the commercial nexus requirement of the FSIA’s expropriation exception.
Transcript
The questions presented in this case are 1.
Speaker A:Whether historical commingling of assets suffices to establish that proceeds of seized property have a commercial nexus with the United States under the expropriation exception to the Foreign Sovereign Immunities Act 2.
Speaker A:Whether a plaintiff must make out a valid claim that an exception to the Foreign Sovereign Immunities act applies at the pleading stage rather than merely raising a plausible inference.
Speaker A:3.
Speaker A:Whether a sovereign defendant bears the burden of producing evidence to affirmatively disprove that the proceeds of property taken in violation of international law have a commercial nexus with the United States under the expropriation exception to the Foreign Sovereign Immunities Act.
Speaker A:Justice Sotomayor delivered the opinion for a unanimous court.
Speaker A:Please note that this summary is read by an automated voice.
Speaker B: n Sovereign immunities Act of: Speaker B:28 U.S.C.
Speaker B: section: Speaker B:To sue a foreign sovereign in United States courts, plaintiffs must satisfy one of the exceptions to immunity set forth in the FSIA.
Speaker B:The FSIA's expropriation exception permits claims when rights and property taken in violation of international law are in issue and either the property itself or any property exchanged for the expropriated property has a commercial nexus to the United States.
Speaker B: United States Code §: Speaker B:In federal court seeking damages for property allegedly seized during World War II.
Speaker B:Respondents complaint alleged that Hungary and IMAV liquidated the expropriated property, commingled the proceeds with other government funds, and later used funds from those commingled accounts in connection with commercial activities in the United States.
Speaker B: ling theory satisfied Section: Speaker B:The D.C.
Speaker B:circuit affirmed, reasoning that requiring plaintiffs to trace the particular funds from the sale of their specific expropriated property to the United States would make the exception a nullity in cases involving liquidated property held alleging commingling of funds alone cannot satisfy the commercial nexus requirement of the FSIA's expropriation exception.
Speaker B:Pages 9 to 22 the expropriation exception requires plaintiffs to trace either the specific expropriated property itself or any property exchanged for such property to the United States or to the possession of a foreign state instrumentality engaged in United States commercial activity.
Speaker B:The provision's plain text treats tangible and fungible property alike.
Speaker B:For both kinds of property, plaintiffs must plead some facts that enable the reasonable tracing of the property to the United States.
Speaker B:Thus, when property is expropriated and exchanged for cash that is then commingled with other funds, plaintiffs must still plausibly allege that the specific proceeds from their property have the required commercial connection to the United States.
Speaker B:Plaintiffs might satisfy this requirement in various scenarios, for example, by identifying a United States account holding proceeds from expropriated property, as in Banco Nacional de Cuba vs Sabatino 376, 398 or by showing that a foreign sovereign spent all funds from a commingled account in the United States shortly after the commingling occurred.
Speaker B:But an allegation that a foreign sovereign liquidated property decades ago, commingled the proceeds with general funds, and later used some portion of of those funds for commercial activities in the United States cannot establish a plausible nexus.
Speaker B:This is especially true when commingled funds have been used for various activities worldwide or when the commingled funds are within a foreign sovereign's treasury.
Speaker B:The Court does not today address all circumstances where commingling allegations might contribute to establishing the required nexus.
Speaker B:Nor does the Court determine the applicability of common law tracing principles.
Speaker B: alone cannot satisfy section: Speaker B:Pages 9 to 15b.
Speaker B:This interpretation aligns with the FSIA's structure, history, and purpose.
Speaker B:The act generally codifies the restrictive theory of sovereign immunity, which shields foreign states from suits based on public rather than commercial acts.
Speaker B:Although the FSIA allows claims based on the public act of expropriation, this Court has previously rejected the suggestion that Congress intended the exception to be a radical departure from restrictive immunity principles.
Speaker B:Federal Republic of Germany v.
Speaker B:592 U.S.
Speaker B:169, 183 the exceptions text mirrors the second Hickenlooper Amendment, which Congress enacted to permit adjudication of claims after Sabatino.
Speaker B:In that case, the expropriated properties proceeds were traceable to a segregated New York account.
Speaker B:The FSIA's text requiring identification of specific property combined with the facts of Sabatino counsels against respondents expansive commingling theory.
Speaker B:Additionally, the Court interprets the FSIA to avoid producing friction in international relations or inviting reciprocal actions against the United States in foreign courts.
Speaker B:Congress included the commercial nexus requirement and the in violation of international law limitation to help ensure the exception would conform fairly closely with international law.
Speaker B: Section: Speaker B:Helmrich and Payne International Drilling Co.
Speaker B:581 U.S.
Speaker B:170, 181 Accepting respondents theory would expand greatly the circumstances in which foreign sovereigns could be sued in United States courts for public acts potentially inviting retaliatory measures against the United States.
Speaker B:Pages 15 to 17 respondents counterarguments are unpersuasive.
Speaker B: st, they contend that section: Speaker B:But the statute's text draws no such distinction.
Speaker B:The ordinary meaning of exchanged for requires identifying the specific property received in the exchange.
Speaker B:Here the proceeds from selling the expropriated property.
Speaker B:Commingling those proceeds with other funds does not transform the entire commingled account into property exchanged for the expropriated property.
Speaker B:Indeed, the statute's requirement that property be present in the United States reinforces the need to trace specific property, as Congress imposed this geographic constraint for any property, including money.
Speaker B:Second, respondents argue that the concerns about tracing raised in Sabatino support their position.
Speaker B: But the text of section: Speaker B: United States Code section: Speaker B:Finally, respondents contend that rejecting their commingling theory would render the expropriation exception a nullity for liquidated property claims.
Speaker B:But the court does not categorically reject all commingling based claims.
Speaker B:It holds only that a commingling theory alone cannot satisfy the commercial nexus requirement.
Speaker B:This holding accords with the statute's text and purpose of providing only a limited departure from the restrictive theory of sovereign immunity.
Speaker B: Pages: Speaker A:The Court's rejection of the commingling theory may make it substantially more difficult for Holocaust survivors and their descendants to pursue claims in US Courts against foreign governments that liquidated and commingled expropriated assets decades ago.
Speaker A:Foreign governments facing expropriation claims might be incentivized to quickly convert seized assets into cash and commingle them with general funds, potentially creating an effective Shield against future US jurisdiction under the FSIA's expropriation exception.
Speaker A:The ruling could have broader implications beyond Holocaust related cases potentially affecting various types of historical expropriation claims where plaintiffs cannot specifically trace liquidated assets to current commercial activities.
Speaker A:In the United States.
Speaker A:While the Court explicitly leaves open some possibilities for establishing jurisdiction through more direct tracing of commingled funds, the practical challenges of such tracing after significant time has passed may lead more plaintiffs to pursue diplomatic solutions or seek remedies in non US Forums.
