Survivors Ask Court To Alter Swiss Bank Settlement

By Nathaniel Popper

Published April 14, 2006, issue of April 14, 2006.
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A group of American Holocaust survivors is petitioning the U.S. Supreme Court to alter the terms of a mammoth Holocaust restitution agreement that is sending tens of millions of dollars to survivors in the former Soviet Union rather than to survivors in America.

The petition, filed last week by the Holocaust Survivors Foundation USA, a network of survivors’ groups, challenges the way funds are being distributed in the so-called Swiss bank settlement. The $1.25 billion settlement ended a series of class action lawsuits filed in 1996 against Swiss banks that were accused of hiding Holocaust-era bank accounts from Jewish owners who sought to reclaim them after the war.

The survivors’ foundation objects to a decision by the federal judge overseeing the case, Edward Korman, that allocates the bulk of unclaimed funds in the settlement to needy survivors in the former Soviet Union.

In the petition to the Supreme Court, the lead lawyer for the survivors foundation, Samuel Dubbin, wrote that Korman’s decisions “leave large blocks of plaintiffs with nothing other than a sense that the American courts failed them.”

A similar request to a federal appeals court was rejected in January. The current petition asks the Supreme Court to accept jurisdiction over the case. If it does so, the case would likely be heard next fall.

The writ to the high court is the latest twist in an unending stream of controversy that plagues the case, seven years after the initial lawsuits were settled with the Swiss banks. In addition to feuds over the funds’ distribution, the Swiss have been accused of dragging their feet in providing information to help would-be claimants find their families’ accounts.

More recently, the attorney tapped by Korman to administer the settlement funds, New York University law professor Burt Neuborne, generated headlines. Neuborne was the lead counsel representing the plaintiffs in the suit against the banks. He has drawn fire for requesting a $4.1 million fee last December for his work in administering the settlement funds.

Several lawyers in the case have argued that the fee request violated Neuborne’s pledge to represent the survivors pro bono, or without fee. Additionally, survivor groups have said that Neuborne has not adequately challenged the judge’s distribution plan. Neuborne has said that the fee is intended to compensate him for not his legal work representing the plaintiffs in the case, but for his administrative work overseeing the funds’ distribution once the case is settled.

Last week, the judge announced that he would remove himself from any decisions about Neuborne’s fees because of the close relationship the two men have developed.

The initial suits against the Swiss banks were settled in late 1998, a few years after survivors began coming forward with stories of dormant bank accounts that their parents had opened before the war. The case never went to trial, but political pressure led the banks to offer $1.25 billion in settlement negotiations with Jewish organizations.

In the complex settlement, the banks agreed not only to return dormant accounts but also to compensate other Holocaust victims whose suffering had benefited the Swiss. These included those forced to work as slaves for companies that then deposited the profits in Swiss banks, as well as refugees turned back at the Swiss border. Another group consisted of those whose personal property was looted by the Nazis and then deposited in Swiss banks.

Most controversy has centered on the last category, known as the looted-assets class. The judge ruled in 2000 that the group — individuals whose property was stolen by the Nazis — was potentially almost limitless and that identifying those whose assets ended up in Swiss banks would be nearly impossible. Instead, he approved a so-called “next best” solution: using the looted-assets portion of the settlement — originally totaling $100 million — to create a humanitarian fund for the neediest Holocaust survivors.

After a demographic study and lengthy hearings, Korman decided that fully 75% of the humanitarian fund would go to survivors in the former Soviet Union, and only 4% to survivors in the United States. He cited the current level of destitution in former communist countries. He also noted that survivors living under communism had been barred by their governments for years from claiming their share of the $40 billion reparations paid to survivors over the years by the German government.

The decision has drawn a steady stream of angry responses from survivors in America who say they were shortchanged in the Swiss case. Protests also have come from Israel. The dispute has intensified as the humanitarian fund has grown, fattened by interest on the $1.25 billion awaiting claimants.

The most visible opponent of the plan has been the survivor foundation’s lawyer, Dubbin. His early opposition to Korman drew an unusually personal response from the judge, who called Dubbin’s petition “frivolous” and said the foundation’s positions were “absurd.” The federal appeals court has twice rejected Dubbin’s petitions.

Dubbin’s new petition argues that Korman’s decisions disregarded past American court rulings, which require that settlements of class action lawsuits treat all class members equally. American survivors have long argued that the humanitarian allocations should follow the geographical distribution of survivors. According to a Brandeis University study, some 14% to 19% of survivors live in the United States and 19% to 27% in the former Soviet Union.

Michael Bazyler, a Whittier College legal scholar who has followed Holocaust-related lawsuits, said the “chances are next to nil” that the Supreme Court will take up Dubbin’s petition, given the small number of cases the court reviews. In the past, the high court has taken up two Holocaust-era suits, including a dispute over stolen paintings and a case involving wartime insurance policies. But Bazyler said that judges administering settlements, like Korman, are typically granted a wide range of discretion, and the survivors will have to prove the judge abused that discretion.

Complicating matters, the lawyer responsible for answering the petition is Neuborne, who is supposed to both help the judge and represent the plaintiffs as the lead settlement counsel. Neuborne scratched a long-simmering itch when he made his request last December for $4.1 million in fees. The request drew heat because many onlookers assumed Neuborne was still working pro bono, as he had done before the case was settled. Neuborne has argued that his administrative duties since the settlement involved work that no lawyer would have done for free.

American survivors have objected to Neuborne’s request because of his work in supporting Korman’s decision — a point made in a footnote in the Supreme Court petition. Neuborne’s request has also elicited three new fee requests from other lawyers involved in the case, as well as impassioned letters for and against Neuborne.

The case has become intensely personal. Korman, in a conference call with some opponents of Neuborne’s request, defended Neuborne by saying he had played an “extraordinary role” in the case.

According to a transcript of the meeting, Korman recalled visiting Neuborne at home when he was recovering from open heart surgery, “just to call to see how he was” — and to bring him a new report on Switzerland’s wartime record.

Neuborne said he is happy that Korman recused himself last week from the fee dispute, because the dispute had forced the two men to cancel regular meetings and discussions of the case during the past four months.

“This case is like a big machine that ticks all the time,” Neuborne told the Forward. “Recently it’s been like operating in the dark. I wouldn’t talk to him, and he wouldn’t talk to me.”

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