Banco Nacional De Cuba v. Sabbatino

Argument of Victor Rabinowitz Chief Justice Earl Warren Number 16, Banco Nacional De Cuba versus Peter L. F. Sabbatino. Mr. Rabinowitz. Mr. Victor Rabinowitz May it please the Court. I notice that, although the Court does supply quill pens to counsel, it does not supply inkwells as well. This case is here on a writ of certiorari -- Justice William J. Brennan Does that bear on this issue? Mr. Victor Rabinowitz No sir. It's just a reference to the last case. This case is here on a writ of certiorari to the Court of Appeals for the Second Circuit to review that court's affirmance of a judgment of the District Court for the Southern District of New York. The District Court had entered an order dismissing the complaint on a motion by plaintiff for summary judgment. We think both of the courts below were in error and that summary judgment should have been entered in favor of plaintiff against the defendant, Farr Whitlock. The facts are somewhat complex, but I shall take the liberty of sketching them in rather quickly and only in broad outline because the details are really not necessary for a full understanding of the critical issue that confronts the Court on this record. Some time prior to 19-- to July of 1960 and about April or May, a sugar brokerage firm in New York by the name of Farr Whitlock entered into two contracts with a wholly owned subsidiary of a Cuban corporation, Compania Azucarera Vertientes-Ca Aguey, which is referred to in this proceeding by the initials C.A.V. Although Farr Whitlock was a sugar broker, it was buying this sugar on its own account. Under the terms of the contract, the sugar was to be shipped to Morocco, but payment was to be made in New York upon presentation of the bill of ladings and other shipping documents accompanied by a sight draft for the purchase price of the sugar in accordance with normal commercial practice. The price of the sugar was approximately $175,000. The record shows that C.A.V. was incorporated in Cuba and that about 90% or in excess of 90% of its stockholders are said to be residents of the United States. There is nothing into the -- in the record as to the nationality of those stockholders. On July 6, the Republic of Cuba adopted a decree authorizing the nationalization of property owned by nationals of the United States or properties in which the United States nationals had an interest. Under the terms of the decree, compensation was to be paid by the issuance of 20-year-bonds and the funds behind the bonds were to come from the proceeds of sales of sugar to the United States. On that very same day, the President of the United States signed the Sugar Act of 1960, which sharply curtailed the purchases of sugar by the United States from Cuba, although the Act, of course, had been passed by Congress a few days previously. One month later, on August 6, by a resolution made pursuant to the decree that I have mentioned, the property of C.A.V. and 25 other corporations were nationalized. This was one of a long series of decrees, which are -- some of which are referred to in a footnote at page 39 of petitioner's brief, which began in May of 1959 and which, in the end, transformed Cuba from a capitalist to a socialist economy. On the day of the decree, the sugar was being loaded on a freighter which was anchored in territorial waters of Cuba. Actually, the loading was not completed until August 9. The ship remained in territorial waters until August 11 and, on that day, new contracts were signed by Farr Whitlock with a Cuban governmental bank. These contracts were identical in terms, even as to the date, with the original contract signed between Farr Whitlock and C.A.V. and we contend that this contract recognized the ownership of the Cuban government in this sugar. A day or two later, the sugar went off to Morocco. The bills of lading were assigned to the petitioner which is the National Bank of Cuba and they were sent to Societe General, a French bank which acted as the New York agent of the petitioner, together with a sight draft in the sum of $175,000. While the bills of lading were in transit and, on August 16, 1960, in a proceeding commenced in the New York State Supreme Court, a receiver was appointed over the New York assets of C.A.V. pursuant to Section 977 (b) of the Civil Practice Act. As a result of subsequent proceedings, that receivership was set aside and vacated. That happened after the Court of Appeals decision on this case, the court-- Supreme Court in Kings County New York holding that the receivership was improper in the first place. On August 26, Farr Whitlock and C.A.V. entered into a contract. By the terms of which, Farr Whitlock agreed that if it could get possession of the sugar or of the proceeds, it would hold those proceeds for C.A.V., instead of turning them over to Societe General. In return, C.A.V. agreed to hold Farr Whitlock harmless for any loss it might suffer as a result of this transaction and also agreed to pay it 10% of the proceeds so that, although Farr Whitlock has been referred to in this proceeding on a number of occasions as only as stakeholder, actually, it stands to gain some of the sum of $17,500 if it should prevail in this lawsuit. On August 29, by means of a trick which we think equaled fraud, it certainly resembles fraud, Farr Whitlock managed to get possession of the bills of lading without actually honoring the sight draft. Using the bills of lading, it negotiated them, sold the sugar, and received $175,000 for it. It refused to pay that $175,000 over to Societe General and this lawsuit, which alleges a conversion of the bills of lading and the sugar that they represented, was commenced. A day or two later, the money was turned over to the receiver and, upon determination of the receivership, the money which, together with interest in course, now amounts to something over $200,000 was turned up to a-- over to an escrow agent who now holds those funds awaiting the decision of this Court. Justice Potter Stewart Societe General, if I got it right, is the instrument of the Government of Cuba? Mr. Victor Rabinowitz No, it's a French bank. It's a private bank which is owned by French Interest. It has an agency in New York and it engages in normal commercial business and it was acting as an agent here, not an agency of, but a commercial agent for the Government of Cuba in the transaction of these businesses. Justice Potter Stewart Then, how did Banco Nacional De Cuba come into the picture? Mr. Victor Rabinowitz Well, Banco Nacional was the assignee-- Justice Potter Stewart Of Societe? Mr. Victor Rabinowitz Of the Cuban Government or the Cuban bank which entered into the contract in the first place. Societe Generale was merely an agent of the petitioner and the petitioner sued here. Societe Generale was perhaps liable to Banco Nacional for negligence in handing over the bills of lading without getting the draft, but Banco Nacional chose not to sue Societe Generale, its agent, but rather sue directly for its-- Justice John M. Harlan Is Banco an instrumentality of the Cuban Government? Mr. Victor Rabinowitz Yes. Justice Potter Stewart It is? Mr. Victor Rabinowitz Yes. There's no question about that. Justice Byron R. White Is there a (Inaudible) obligation (Inaudible)? Mr. Victor Rabinowitz No, there was no negotiation-- Justice Byron R. White A collection agent -- Mr. Victor Rabinowitz It was purely a collection agent. There seem to be no question of fact in this case and, accordingly, petitioner moved for summary judgment. Farr Whitlock defended on two grounds. First, it claimed that the federal court did not have jurisdiction because of the pendency of the New York State receivership and, second, it raised the series of issues of fact. Neither of those grounds is raised in this Court and we assume that they have been abandoned. The district court first considered the question of jurisdiction and decided in favor of the petitioner. It then considered the factual questions and decided those in favor of petitioner, holding that there were no triable issues of fact. We would have thought that, under these circumstances, summary judgment would have resulted in favor of the petitioner that the Court then went on to decide the case on a ground that had not been urged before it, that had not been argued before it, that had not been briefed before it, and that I don't think that any counsel had even thought about it because, to us at least, the law seemed so clear that there was no point in arguing the matter. Despite a long line of cases of this Court and the federal courts known generally as the act of state cases, and I shall of course refer to them again later in my argument, it held that there was an exception to the act of state case, namely that they did not apply where the decree of a foreign government violated international law. It then examined the decree of the Cuban Government in this case and it found that violation of international law had indeed existed in three respects. First, that the Cuban decree was discriminatory against citizens of the United States; second, that it was retaliatory and third, that it confiscated a property without adequate compensation. The Court of Appeals affirmed on somewhat different ground. It held that the Act of State Doctrine was subject to another exception. This was the exception which it, the same court, had found, in about 1947 I think, in the second Bernstein case, and that's reported in 210 F.2d 375. I shall refer to that again later, although I think that the major burden of the argument, at least the major burden of the brief on this subject, will probably be carried by the Solicitor General. In any event, the court found that the Bernstein exception was present here, relying on fragments of correspondents which were submitted to it, not by us of course and not by Farr Whitlock, but by an amicus which had sought and received leave to file an amicus brief. And, these fragments of correspondents were handed up to the court and the court relied on these to hold that the Bernstein exception applied in this case. It then went on to decide that the Cuban decree had violated international law and, while it didn't find the same three violations of international law that the district court had find, it sort of grouped all of them together and, to use its language, it held that there was a violation of international law for a company to fail to pay adequate compensation for the property it seizes from a particular class of aliens when the purpose for the seizure of the property is to retaliate against the homeland of those aliens and when the result of such seizure is to discriminate against them only. In another words, it took the three grounds that the Court of Appeals said had found and locked them all together to make one single ground. In our opinion, the basic question before the Court here is the Act of State Doctrine. Both our brief and, to an even greater extent, the brief of the Solicitor General enters into a rather extensive consideration of the history of the Act of State Doctrine. Both of us say that this doctrine really dates from 1674 in an English case. But, in modern times, it may be said to date from Underhill against Hernandez, although there's some language in the Schooner Exchange which does seem to foreshadow this same doctrine. Now, there are many, many formulations of the Act of State Doctrine in the decision for this Court. In Oetjen against Central Leather Company, for example, this Court said the conduct of one independent government cannot be successfully questioned in the course of another. Mr. Justice Holmes earlier, in the American Banana Company case, had said “the general and almost universal rule is that the character of an act as lawful or unlawful must be determined wholly by the law of the country in which the act is done. ”There is similar language in Shapleigh against Mier, in the Belmont case, in the Pink case, all of them in this Court and, most recently, in the case of Pons against the Republic of Cuba which was decided by the Court of Appeals for the District of Columbia and certiorari was denied by this Court, I believe, in 1961 and it presents a Cuba situation. The others, of course, represented either Latin American nationalizations or Russian nationalizations. The New York courts hold to the same effect, and this is of some significance because there are some suggestion both in the Court of Appeals and in the decisions of the -- in the briefs of -- the many briefs that have been submitted in opposition to the petitioner, that perhaps, under the Erie against Tompkins case, the New York law applies, but it really doesn't matter because the New York cases are in complete agreement. Salimoff against Standard Oil, in 1933, is perhaps typical. It says “the courts of one independent government will not sit in judgment upon the validity of the acts of another done within its own territory, even when such government seizes and sells the property of an American citizen within its boundaries and, to the same effect, the Dougherty case and Holzer against Deutsche Reichsbahn, the last one being a case involving actions by the Nazi Government of Germany. Justice Arthur J. Goldberg There's a bit of (Inaudible) it appears the law of (Inaudible). At some point, the objection is (Inaudible) and they appear to have reached to define, regardless of how this case goes, (Inaudible) of our Act as it appear here. This is on the (Inaudible) giving him advice when you're treating it as an act of state. Mr. Victor Rabinowitz I'll be glad to come to that, Your Honor. I hope I remember it, and if I don't-- Justice Arthur J. Goldberg I hope (Inaudible) Mr. Victor Rabinowitz Mr. Boudin will remind me if I forget. I certainly shall. We, and the Solicitor General, say that this doctrine, the Act of States Doctrine is generally accepted throughout the world by the courts of most other countries. There's no doubt that it's accepted it in England in Luther against Sagor. C.A.V. disagrees and so do some of the other amicus briefs. And, frankly, I see no particular point in spending the time of this Court in discussing decisions in Bremen, Turin, Singapore, Nuremberg, Venice, Aden, and many other cases throu-- many other similar points throughout the world. All of them are discussed in the brief and to be honest, I really don't see why they make very much difference because the law in the United States and England is identical and I have just stated it, and I don't know why it should make very much difference what the Court of Venice thinks about this question. Justice Potter Stewart Now, in the ultimate effect, it doesn't really make much difference what the courts of England think about it. This is a-- Mr. Victor Rabinowitz Exactly. Justice Potter Stewart Question of what -- Mr. Victor Rabinowitz Exactly. Justice Potter Stewart The law is -- Mr. Victor Rabinowitz Except -- Justice Potter Stewart In the United States. Mr. Victor Rabinowitz Except that we are in what is sometimes referred to as Anglo-American -- Justice Potter Stewart Well, I understand that. Mr. Victor Rabinowitz System of law and I just want to get the Anglo in. Justice Potter Stewart It's the United States court -- Mr. Victor Rabinowitz I think -- Justice Potter Stewart The United States court -- Mr. Victor Rabinowitz That's so, Your Honor. The -- Justice Potter Stewart Now -- well, I've -- since I've interrupted you, may I ask you whether the -- or not this doctrine applies in case the foreign government has not been recognized diplomatically by our nation? Mr. Victor Rabinowitz Well, there is some suggestion that the doctrine does apply even where the foreign government has not been recognized but that, of course, is not before us because the foreign government has been recognized in this case. There are no diplomatic relations, but the foreign government has been recognized and there is material, I think it's in this record, but certainly in Ricoeur and many other cases in the United States in which the Secretary of State has written letters to various courts throughout the country saying “the Cuba -- the Cuban Government has been recognized by the United States.” Justice Potter Stewart Throughout the -- Mr. Victor Rabinowitz And still is. Justice Potter Stewart Series of transactions involved. Mr. Victor Rabinowitz Yes, throughout the period of transactions -- Justice Potter Stewart And now. Mr. Victor Rabinowitz And including today. The C.A.V. brief says that the Court of Appeals' decision is supported by commentators and decisions of courts in other countries and that may be true, but I don't consider it to be decisive. Not only is there no legal authority to support the respondent here, but I submit that there are no policy considerations either. Now, I'm not going to argue that extensively because I think that the brief of the Solicitor General handles this matter rather fully and is -- I'm sure, plans to consider these policy considerations. I would like just to mention two points, however, which are relevant. C.A.V. and many of the amicus briefs make quite a point of an argument which we don't make. They make quite a point in answering an argument that we don't make and that, I believe, the Solicitor General makes either and they say that this Court has the power to decide cases even though they affect foreign relations and it quotes cases like the Familiar Ground against Canal and other similar cases. Now, I certainly would not argue that this Court doesn't have any power to decide cases which involve foreign relations. The Court has done so many times, and I would not argue for any such broad proposition. For example, there is a citation -- there is a reference to Mr. Justice Brennan's decision in Baker against Carr in which the opinion makes some reference to the language in the Ricoeur case, I believe, and says that this language is too broad that the court frequently does handle problems involving foreign relations. Now, I'm not arguing that question. I don't think it has anything to do with this case. All we are saying, so far as this case in concerned, that our court should recognize the validity of the Acts of other states disposing of title to property within their territorial jurisdiction. That's all I have to say in this case and that's all that I am asking the Court to rule on. If we have other problems in other cases, we will consider them in due course. To hold otherwise is to challenge or to question the sovereignty of other nations, as Mr. Justice Holmes said “what is sovereignty, but the right to make decisions as to property within your own territory.” Justice Arthur J. Goldberg Do you decide to argue that as it leaves international law if the Court holds that? Mr. Victor Rabinowitz I think it's a rule of international law, Mr. Justice Goldberg, but whether it is or not. I think it's a rule of this Court and I'm willing to rely on this Court. I think that most courts hold that way. You see, the difficulty with the whole feel of international law, and we'll come to this a little later, is that there is a general tendency on the part of our courts, and it's natural enough, under the circumstances, to regard international law as being something that the courts of the United States and Western Europe hold. Now, the fact is that most of the people in the world don't live in United States or Western Europe. They live in Africa and they live in Asia and they live in Latin America and we do not have from those courts a body of opinion of judicial decisions which enable us to tell at this time what Indonesia or Pakistan or India or China think about these issues. Most of the people in the world live in those countries, not in the United States and Great Britain and Germany and so the whole question of international law on issues like this is really a matter which is of very, very great value. So, I can't say “the court say international law is the practice of most civilized nations. ”I don't know and I don't believe that anybody knows what international law is in this rapidly expanding world of today with so many new nations being created almost everyday. So, it's a pretty hard thing to tell. Justice Arthur J. Goldberg (Inaudible) I hope it's in the record that you're taking (Inaudible) and the Court ask you not to stay and (Inaudible) Mr. Victor Rabinowitz I have never considered this to be a rule of abstention, Your Honor. I have always considered this to be a rule of positive law. Justice Arthur J. Goldberg And, therefore, a rule of positive law and call it the National Law of Parliament. Mr. Victor Rabinowitz It's our law. Justice Arthur J. Goldberg Would you, therefore, argue the law using your rule? Do you have to take the rule? In our point, (Inaudible) is the nationalization of property (Inaudible) consider your example (Inaudible) Mr. Victor Rabinowitz I would say that with one qualification. I am now talking about nationalization of property within the territorial limits of the nationalizing country. Now, there are other cases where property in New York is nationalized, and there are other Cuban cases raising tat issue, but we haven't reached those yet. We may someday, but I am not -- I am not extending myself to that question at the moment because this property was in Cuba. Justice William J. Brennan Well, may I ask Mr. Rabinowitz. You're not arguing either, are you that this is the kind of subject matter which the Constitution commits to the Executive and, in that sense, is nonjusticiable? In other words, you're not arguing that this is a matter of lack of power in the judiciary. Mr. Victor Rabinowitz I should think not, Your Honor. I don't know what the Solicitor General says about that, but I don't think I am arguing that this is not justiciable in that sense. I think it's not justiciable for other reasons, but not in that sense. Justice Byron R. White Then you must -- you would probably also argue the Executive then has no business questioning the act of a foreign sovereignty. Mr. Victor Rabinowitz Whether the Executive may do it is a diplomatic matter. The Executive frequently questions the validity of acts of foreign countries. This is the -- Justice Byron R. White We may need to break international law. Mr. Victor Rabinowitz This is -- well, I don't know whether it's a question of breaking international law. The Executive frequently -- Justice Byron R. White Well, they recognized them. Mr. Victor Rabinowitz Signs a note saying that this is a violation of international law. This is all on the give and take of diplomacy and speeches are made and arguments are made and, in diplomatic negotiations. I think the Executive is entitled to a freehand in this and I certainly would not limit the or -- seek to limit the Executive, even if I could, in any question as to what kind of position the Executive is going to take in the give and take of the politics of the modern world. I think this is for the Executive to determine and I think that the Executive has a freehand, but I don't believe that it has any role in determining what this Court will decide. The second point I would like to make in connection with this problem of the policy behind the Act of State Doctrine is an illustration that I would like to present to Your Honors which is not a hypothetical illustration, but is an actual one and which I think is an excellent illustration of why the Court ought to stay out of this area and why the Act of State Doctrine is a sound one and it arose under these circumstances. On July 24, 1961, an Eastern Airline plane was hijacked by an armed passenger who took the plane from Miami to Havana together with all of the passengers. The passengers came back the next day but, on August 16th, the plane was returned by the Cuban Government after a great deal of diplomatic negotiation between the Swiss and Czech as these things are handled now. On the very next day, August 17th, a Cuban freighter was hijacked and was brought into Norfolk harbor. This presented a political situation of, I think, considerable importance and it was made even more critical by the fact that, on board that freighter, there was a cargo of sugar and it was owned by United Fruit Company or at least United Fruit Company claimed to own it. It was a cargo of sugar that had been nationalized by the very same decree that we are here considering, and United Fruit came in and said “we don't care about the freighter, but the sugar belongs to us. ” Now, the case of United Fruit was just as strong and just as weak as the case of C.A.V. in this re -- in this circumstance. Every single word of the C.A. brief -- C.A.V. brief, between page 12 and page 58, could have been written by United Fruit merely with a substitution of the name United Fruit for C.A.V. Chief Justice Earl Warren We'll recess now. Mr. Victor Rabinowitz Thank you.