Holocaust Survivors Settlement Hits Snag

A massive agreement between the U.S. government and Germany designed to provide more than $5 billion in compensation to survivors of Nazi enslavement and forced labor has hit a major snag.

Citing the failure of German companies to fully fund the settlement, a federal judge in New York this week refused to dismiss a Holocaust-related class-action lawsuit.

The State Department, some Jewish organizations, plaintiffs’ lawyers and German companies all asked the judge to dismiss the case against German banks as part of an effort to hasten the launch of a German foundation that would provide compensation to the former slave laborers and other Nazi victims.

The German companies have demanded a guarantee of “legal peace” from the U.S. government--meaning dismissal of all World War II-related suits and a promise that the State Department will ask for dismissal of any filed in the future--as a condition before releasing the funds for survivors. The State Department has agreed to submit “statements of interest” in all such cases.

So far, Judge Shirley W. Kram is the only jurist who has refused to grant a dismissal motion. Two other federal judges have dismissed similar cases against German industrial firms and German insurers to help get the $5-billion settlement flowing. It was completed last July, after long negotiations.

As a result of Kram’s action, legal and political observers said Friday the situation has become the equivalent of a “schoolyard standoff,” with the judge demanding full funding before dismissing the case, and the companies demanding dismissal of all cases before they put up the money.

“We have hit a stone wall. If something doesn’t change the foundation will disintegrate,” said New York University law professor Burt Neuborne, one of the lead lawyers for the plaintiffs in several Holocaust-related cases.

“I am heartsick, just heartsick,” Neuborne said. “The only people getting hurt are the victims. A thousand survivors die each month.”

Irvine resident Henry Kress, a survivor of Auschwitz who stands to receive compensation, agreed. “They’ll have to send the money to the cemetery,” said Kress, 75, who is an active member of the Shoah Survivors of Orange County and Long Beach.

Neuborne and several other plaintiffs’ attorneys, including Barry A. Fisher of Century City, said they were considering an appeal or other legal action that could be filed as early as next week.

Representatives of the German consortium, some Jewish organizations and the State Department all expressed dismay at the decision.

“German industry is very discouraged by the decision of Judge Kram, as it certainly will have an impact on how quickly survivors and their heirs will get paid,” said Wolfgang Gibowski, a spokesman for the foundation that is named Remembrance, Responsibility and the Future.

“The decision is contrary to the recommendations of all parties having an interest in the case and will delay justice and payments to Holocaust victims, a significant number of whom are dying each month,” said State Department spokesman Richard Boucher.

“Holocaust survivors should not be held hostage to the whims of the court,” said Elan Steinberg, executive director of the World Jewish Congress. However, Steinberg quickly added, “The Germans should put the money up immediately, and let the legal technicalities work themselves out.”

Still, some survivors, who thought the settlement was inadequate, said they were pleased at the ruling.

Si Frumkin of Studio City, who was forced to work for a German firm building an aircraft factory near Dachau, has refused to give up his slave labor lawsuit in a New Jersey federal court.

“I worked there for a year, seven days a week,” recalled Frumkin, a native of Lithuania. “Even taking into account the minimum wage in Germany at the time, plus interest, that company owes me around $80,000. I can’t even begin to think what else they owe for my father, who died working there.”

Frumkin said he is disgusted at “the idea that I am supposed to be satisfied with $5,000,” the amount he said he would get under the settlement.

Sources close to the German foundation said the German government had intensified its efforts to obtain full funding for the deal.

So far, German industry has pledged about 70% of its half of the settlement, while the German government already has put its $2.5-billion share into an escrow account.

This week’s development comes amid long delays in resolving other Holocaust-related claims. Prime among them is a $1.25-billion settlement in which two Swiss banks agreed to pay compensation for unreturned World War II-era claims.

Although the deal was announced in August 1998, not a dime has been paid out yet because of numerous difficulties in getting the agreement finalized and the compensation program started.

The process of resolving thousands of disputed Holocaust-era insurance claims against European insurers also is plodding along.

So far, an international commission created to deal with the issue has offered $3 million to about 300 claimants, according to Neil Sher, the commission’s executive director.

Lisa Freeman, a paralegal at Bet Tzedek Legal Services in Los Angeles, who helps survivors fill out claim forms, said the process is getting increasingly painful, with many survivors wondering if they ever will receive any compensation.

“Time is in the forefront of everyone’s mind,” Freeman said. “I think this decision would have made a lot more sense 60 years ago when there was time to fight.”

Judge Kram said that if she dismissed the case now the sole remedy for many plaintiffs who “have waited decades to receive compensation” would be claims filed with the German foundation. She said that at this time “it would be unjust to divert . . . claims to a forum whose funding remains in doubt.”

In contrast, another federal judge, in dismissing a separate Holocaust-related class action case, said that if the German foundation were not fully funded, the plaintiffs could petition him to reopen the case under applicable federal law.

Kram criticized the State Department for agreeing to file a statement saying it was in the foreign policy interest of the United States for any Holocaust-related lawsuit to be dismissed.

She said such a move clearly would prejudice potential claimants who wanted to pursue a remedy in court rather than through the German foundation.

To buttress her point, Kram cited a recent law review article by Whittier Law School professor Michael J. Bazyler, who said judges throughout the United States were likely to give substantial deference to such an argument by the State Department.

But Bazyler said Kram’s ruling “shows we have an independent judiciary in the United States. Judges don’t have to follow the State Department’s request.”

In essence, said Bazyler, Kram is invoking the mantra frequently cited by actor Cuba Gooding in the movie “Jerry Maguire”: “Show me the money!”

“The German companies need to come up with the full amount,” Bazyler said. At that point, Bazyler predicted, it is likely that the judge would dismiss the case and the settlement would go forward.