## Facts

- Marcel M. Holzer, a German national of Jewish origin, entered a written employment contract in connection with the 1931–1932 corporate reorganization of a German transportation enterprise controlled through Deutsche Reichsbahn-Gesellschaft (DRG) and related German corporations.
- The contract contemplated three years of services beginning January 1, 1932, to be performed in Germany and other locations outside New York.
- The contract included a clause requiring defendants to pay Holzer (or his heirs) 120,000 marks if he died or became unable, without fault on his part, to serve during the contract term.
- After the Nazi regime’s enactment of “non-Aryan” measures, defendants discharged Holzer effective October 31, 1933, allegedly solely because he was Jewish.
- Holzer also alleged that the German government imprisoned him for about six months beginning in April 1933, rendering him unable, without fault, to continue performing services.
- Holzer sued in New York and obtained an attachment against defendants’ property located in the state.
- DRG pleaded, as a separate defense, that the contract was made, performed, and terminated in Germany; German law governed; and German decrees required retirement of persons of non-Aryan descent.
- The trial court struck the defense as legally insufficient and refused to vacate the attachment; the Appellate Division affirmed and certified questions to the Court of Appeals on (1) the defense’s legal sufficiency and (2) whether the complaint stated a cause of action.

## Issues

1. Whether, for an employment contract governed by German law, a pleaded defense that German law required the employee’s retirement as non-Aryan is sufficient in law to defeat a breach claim based on discharge.
2. Whether the complaint states a cause of action for (a) wrongful discharge and/or (b) contractual payment triggered by the employee’s inability to serve without fault.

## Decision

- The Court of Appeals modified in part and affirmed in part.
- It held DRG’s German-law defense was sufficient in law as pleaded, because the contract was governed by German law and the alleged termination was legally compelled under that law.
- It held the complaint did not state a cause of action for breach based on the discharge, given the pleaded mandatory German legal requirement.
- It held the complaint did state a cause of action on the separate contractual clause requiring payment if Holzer became unable, without fault, to serve, because the meaning and application of that clause could not be resolved on the pleadings.
- It answered the certified question on the defense in the affirmative and answered the certified question on the complaint in the affirmative only as to the second cause of action.

## Legal Principles

- A forum court may entertain jurisdiction over disputes between foreign parties on a contract made and to be performed abroad.
- Under traditional conflicts rules, the law of the place of contracting and performance governs the contract and its defenses.
- When governing law makes the contracted-for performance illegal or mandates the challenged conduct, nonperformance or termination compelled by that law can defeat a breach-of-contract claim.
- Distinct contract provisions may support separate claims even if a discharge-based breach theory fails; a contractual payment clause tied to “inability to serve without fault” may require factual development and contract interpretation under the governing foreign law.

## Conclusion

The court treated German law as governing an employment contract formed and performed in Germany and held that a pleaded allegation of legally mandated retirement defeated a discharge-based breach claim, while allowing a separate claim to proceed for contractual payment based on inability to serve without fault, because that clause required further interpretation and proof.


Holzer v. Deutsche Reichsbahn-Gesellschaft, 277 N.Y. 474, 14 N.E.2d 798 (N.Y. 1938)