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Bleiser v. BundersRepublik Deutschland

October 7, 2010

RICHARD BLEISER, ELFRIEDE KORBER, CHRISTOPHER MARK, PLAINTIFFS,
v.
BUNDERSREPUBLIK DEUTSCHLAND, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiffs Richard Bleier ("Bleier"), Christopher Mark ("Mark"), and Elfriede Korber ("Korber")filed their 241-page, twenty-four count, second amended complaint seeking payment and redemption of certain German gold-dollar bearer bonds. Defendants Commerzbank AG, Commerzbank "Chicago Branch", CommerzBank "New York Branch", CommerzBank "Los Angeles Branch", CommerzBank "Atlanta Branch", CommerzBank Capital Market Corp., a/k/a "CCMC" a division of CommerzBank AG, CommerzBank Securities, a division/subsidiary of CommerzBank AG, (collectively "Commerzbank"), Dresdner Bank AG, Deutsche Bank AG and Deutsche Bank/Bankers Trust Co., Citibank, N.A., JPMorgan Chase, N.A., Schroders PLC, UBS AG, Mizuho Corporate bank, and Credit Suisse Group AG (collectively "Defendants") have filed two joint motions to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Defendants have also filed individual motions to dismiss on various grounds. Because of the numerous arguments presented as to each joint motion, here, I only address Defendants' motion to dismiss for lack of subject matter jurisdiction. For the following reasons, Defendants' joint motion to dismiss for lack of subject matter jurisdiction is denied.

I. FACT STATEMENT

Following World War I ("WWI"), between 1924 and 1930, Germany issued hundreds of millions of United States dollar-denominated gold-backed bearer bonds (the "Bonds") to American citizens. The Bonds were underwritten in the United States and payable through corporate trustees or paying agents in the United States. When Hitler came to power in 1933, the payment on the Bonds ceased and the Bonds went into default.

Defendants contend that between WWI and World War II (WWII) a significant number of the bonds were reacquired by Germany for retirement, thus no longer representing valid obligations. However, because of WWII, Germany was unable to present the bonds to the American trustees for cancellation. As a result, redeemed, but un-cancelled bonds were held in German bank vaults. Upon Russia's occupation of Germany, these un-cancelled bonds were looted from the banks and redistributed.*fn1 Plaintiffs, however, contend that such looting never occurred, and they attribute such claims to Defendants' scheme to defraud bondholders.

In 1951, a series of meetings were held in London to determine how Germany would pay pre- and post-war debt. There, Germany agreed to take full responsibility for all of the pre-war debt, including the German Gold Bonds. The Law for the Validation of German Foreign Currency Bonds ("The Validation Law") was enacted by the German Government on August 25, 1952. It established the procedures and criteria for validation. The validation procedures were incorporated by reference into the Agreement Between the United States of America and the Federal Republic of Germany Regarding Certain Matters Arising from the Validation of German Dollar Bonds ("Certain Matters Treaty"), which states that "[n]o bond... shall be enforceable unless and until it shall be validated either by the Board for Validation of German Bonds in the United States established by the Agreement on Validation Procedures, or by the authorities competent for that purpose in the Federal Republic." 4 U.S.T. 885, Art II. The Agreement on German External Debt 1953 (commonly referred to as the "London Debt Accord") was entered into by Germany, the United States, and other nations to reduce Germany's debt and negotiated contemporaneously with the Certain Matters Treaty. The London Debt Accord was a government-sponsored settlement proposal relative to German external debt whereby creditors were offered settlement proposals.

The named Plaintiffs are the owners of German Gold Bearer Bonds and bring this suit individually and on behalf of class members similarly situated. Plaintiffs allege that Defendants are the redemption or paying agents for the bonds and are liable for payment on the bonds.*fn2

Plaintiff Korber alleges that she was denied proper redemption of her bond when she submitted her bonds to the Commerzbank "Examining Agency" in Germany. Mark and Bleier also allege that they have been denied validation. They allege that they have effectively been denied this right because no "Validation Board" exists in Germany or the United States. Furthermore, Plaintiffs allege that Plaintiffs' counsel requested redemption of bonds on behalf of Plaintiffs and have received no adequate response. Alternatively, Plaintiffs allege that Defendants have been negligent and/or incompetent in providing meaningful redemption and validation procedures.

Plaintiff filed a first amended complaint on February 4, 2009, which Defendants have jointly moved to dismiss. On May 11, 2009, Plaintiff filed a motion for class certification. The briefing on that motion has been stayed pending ruling on the joint motion to dismiss. Plaintiffs then asked for, and were granted, leave to file a second amended complaint. Defendants now move jointly to dismiss Plaintiffs' second amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(1).

II. STANDARD OF REVIEW

A motion to dismiss filed pursuant to Rule 12(b)(1) challenges the federal court's jurisdiction to hear the complaint. Fed. R. Civ. P. 12(b)(1). "It is well established that federal courts are courts of limited jurisdiction and may adjudicate a case only if there is both constitutional and statutory authority for federal jurisdiction." Lewis v. Eisenberg, No. 10-126, 2010 U.S. Dist. LEXIS 74092, at *2 (E.D.Wis. July 22, 2010) (citing Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988)). In ruling on such a motion, I accept as true all well-pleaded factual allegations in the complaint and draw all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir.2002).

III. DISCUSSION

Defendants have moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. Defendants argue that the Certain Matters Treaty denies this court jurisdiction because Plaintiffs have failed to follow the procedures set forth in the Treaty. Essentially, Defendants argue that Plaintiffs' failure to validate their bonds precludes any action in this court.

In determining whether the Certain Matters Treaty denies this court subject matter jurisdiction I must first examine the text of the treaty. United States v. Alvarez-Machain, 504 U.S. 655, 663 (1992) ("In construing a treaty, as in construing a statute, we first look to its terms to ...


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