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Court Likely Will Reverse Art Case

By David F. Pike
Daily Journal Staff Writer WASHINGTON - The Supreme Court on Wednesday appeared unsympathetic to Maria V. Altmann's quest to use the U.S. courts to recover six Gustav Klimt paintings she says were stolen from her family by the Nazis in the 1930s and early 1940s and transferred to the Austrian government.
During an hourlong argument, most of the justices appeared ready to reverse a decision by the San Francisco-based 9th U.S. Circuit Court of Appeals that the 88-year-old Cheviot Hills woman could pursue her case against Austria in U.S. District Court in Los Angeles to recover the paintings, valued at $150 million.
The justices indicated they agree with Austria and the U.S. government that the Foreign Sovereign Immunities Act of 1976, which would allow a suit in U.S. courts, cannot be applied retroactively to a foreign country's conduct decades earlier. Republic of Austria v. Altmann, 03-13.
The court also generally is solicitous of executive branch decisions on foreign policy, and several justices expressed concern about the effect of such suits.
"The government says this suit would affect foreign relations; why should we look further?" Chief Justice William H. Rehnquist asked Altmann's lawyer. "Isn't that dispositive?"
And Justice Stephen G. Breyer said, "Think about all those Eastern Bloc countries, and others like Japan, Peru - places where property was expropriated. Suddenly our courts would become places to litigate cases from all over the world."
"It would be a nightmare if judges have to work this out, case by case, country by country - Norway, Hungary, wherever," Breyer said.
Austria is being supported by amicus briefs from Japan and Mexico, both of which have faced suits stemming from World War II actions.
The facts in the case go back to the early 1900s, when Altmann's uncle, Czech sugar magnate Ferdinand Bloch-Bauer, commissioned Klimt to paint several portraits of his wife, Adele Bloch-Bauer. When she died in 1925, she left a will requesting that her husband leave the paintings to the state-owned Austrian Gallery in Vienna.
But in 1938, when the Nazis invaded Austria, Ferdinand Bloch-Bauer, who was Jewish, fled to Switzerland, leaving his possessions behind. The Nazis seized the paintings.
Before he died in exile in Switzerland in November 1945, Bloch-Bauer wrote a new will leaving his entire estate to one nephew and two nieces - one of them Altmann.
When the Nazis invaded Austria, they moved Altmann to a guarded apartment and imprisoned her husband, Fritz, in the labor camp at Dachau. After they won release, the couple fled to Holland and then to Hollywood, where Altmann became a U.S. citizen in 1945.
The Klimt paintings ended up in the Austrian Gallery, and after her attempts to retrieve them failed, Altmann filed suit in 2000. She argued that the paintings were looted and that the Austrian government is keeping them illegally.
In May 2001, U.S. District Judge Florence-Marie Cooper of Los Angeles rejected Austria's argument that U.S. courts have no jurisdiction over a sovereign foreign state.
Cooper held that the Foreign Sovereign Immunities Act's exception for possession of stolen property allowed the suit to proceed.
The 9th Circuit affirmed, in an opinion by Judge Kim M. Wardlaw, who was joined by Circuit Judge William A. Fletcher and U.S. District Judge Ronald M. Whyte of San Jose, sitting by designation.
The decision sent Altmann's suit back to Cooper for trial, but Austria sought high-court review.
On Wednesday, Austria's lawyer, Scott P. Cooper of Proskauer Rose in Los Angeles, began his 20-minute argument by contending that the justices' decision in Landgraf v. USI Film Products, 511 U.S. 244 (1994), which set out a test for applying law retroactively, prevents Altmann's suit.
Allowing the suit would attach "new legal consequences" to Austria's actions before 1976 and therefore conflict with Landgraf, Cooper said.
"Prior to 1976," he said, "Austria had an expectation against being hauled into U.S. courts."
Justice Sandra Day O'Connor, first off the mark as usual, broke in quickly to ask about the effect of a 1952 State Department directive.
Cooper replied that the department's letter said that sovereign immunity should apply only to a nation's public acts, not to its commercial acts.
Justice Ruth Bader Ginsburg noted that Altmann could bring her suit in Austria. Ginsburg questioned whether Austria, after the German invasion in 1938, was a country with sovereign immunity and wondered why after the war it became known as the Second Republic of Austria.
"The United States says it was an occupied country," Cooper said, and the post-war Second Republic was merely "a reconstituted government" of existing country.
Asked by Justice Antonin Scalia whether Congress intended to make the immunities act retroactive, Cooper replied that there is no evidence that it did.
Justice Anthony M. Kennedy asked whether Austria and other Axis countries were put on notice in 1948 that they would face questions about expropriated property and had "an expectation" of lawsuits.
"The question is one of the expectations of one sovereign that it would be treated fairly by another," Cooper replied.
Scalia cut in, saying, "I don't know that we protect expectations of this sort."
As Cooper sat down, saving five minutes for rebuttal, Assistant U.S. Solicitor General Thomas G. Hungar took the podium for his 10-minute effort as an amicus for Austria.
Kennedy quickly interrupted Hungar to state that Austria and other countries "knew the law could change - I don't see how they had settled expectations."
"This hadn't happened in 150 years [that the United States existed]," Hungar said. "No suit was permitted prior to 1976 in the expropriation context."
Asked by Ginsburg whether reciprocity is an issue, Hungar replied, "Reciprocity is important. This could open up the United States to claims in foreign courts."
"Our concern is not just this case," Hungar added. "There are claims and potential claims against countless foreign countries. We have agreements with Japan, Mexico and others on how to resolve them, and allowing suits would unsettle those agreements."
Hungar was followed by Altmann's attorney, E. Randol Schoenberg of Los Angeles' Burris & Schoenberg.
Schoenberg barely got under way when Rehnquist and Breyer fired off hostile questions about the negative effect his case could have.
"We're sensitive to the government's 'can of worms' argument, but other cases are more of a problem," Schoenberg said.

But foreign governments have other defenses, such as the statute of limitations, interference with foreign affairs or "act-of-state" immunity to suit, he added.
Trying another tack, Schoenberg insisted that "the text of the [1976] act shows Congress' intent to apply it to all acts of foreign sovereigns, no matter when they occur."
"Not every statute that affects prior acts is barred by retroactivity," he added. "The FSIA merely codified the law of sovereign immunity; it didn't affect the rules."
"And there is no impermissible retroactive effect, because there was no expectation by Austria that its actions were legal," Schoenberg said. "Austria always could be sued for these actions after World War II. They don't assert sovereign immunity in their own courts."
Schoenberg has said that Altmann wants to pursue her case in this country because Austria has set a $2 million fee to file her claim.
As Schoenberg's time was running out, Scalia asked, "Is it true that we would be out of step with other countries if we allow this suit?"
"I don't know about all of them, but Austria allowed Germany to sue Czechoslovakia in its courts over expropriations during the communist regime," Schoenberg said.
In his rebuttal, Cooper said that "Austria's decision to entertain suits in its own courts or a claims process is not a waiver of its sovereign immunity."
"The United States did not allow expropriation suits before passage of the FSIA. The legislative history shows that," he added. "The State Department viewed this to be a fundamental change in the law," and so the immunities act may not be applied retroactively.
The justices are expected to decide the case before they begin their summer recess in late June.

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