Warren E. Burger: We'll hear arguments next in 73-1288, Dunhill against Republic of Cuba. Mr. Friedman?
Victor S. Friedman: Mr. Chief Justice, may it please the Court. This case is here on a writ of certiorari to the Court of Appeals for the Second Circuit which applied the act of state doctrine to hold the petitioner, Alfred Dunhill of London, could not obtain an affirmative judgment against the Republic of Cuba, awarded by the District Court. Certiorari was granted by this Court with respect to two issues. First issue is whether statement of counsel made at the trial can constitute an act of state. As to that issue, we contend that there is nothing in the record that in any way evidences, a sovereign act by the Republic of Cuba. All that the record shows in this respect are statements by counsel for the Republic of Cuba indicating a litigating position in the case. The second issue in which certiorari was granted sua sponte by this Court was whether assuming the act of state doctrine applies in this case, whether the affirmative judgment nevertheless should be reinstated under the counter claim exception set forth in First National City Bank against Banco Nacional de Cuba. As to that issue, we contend that under the totality of the circumstances in this case where Cuba has put into issue in a single proceeding far more than the amount of the counter claims awarded against us -- against it, and where all of the claims and counter claims arise out of serious of related transactions, put into issue by Cuba in our courts that that counter claim exception should apply. Because of the position taken by respondent's counsel in their brief in this Court, the position being that the record does not justified the phrasing of the questions as granted in the petition for certiorari. I think it'd important that the background of this litigation be set forth at some length so that we can understand precisely what is in the record and the significance of the questions as framed by the questions as framed by this Court. Litigation arose out of the action in September 1960 of the Republic of Cuba in nationalizing certain cigar factories in Cuba. That action was turned an intervention, a euphemist. And for that reason, the Cuban Government and its representatives in this case are often referred to as interventors. The persons whose factories were seized are very often referred to as the owners. For a long time prior to the intervention, Dunhill, as well as other importers had purchased cigars from the owners. Indeed, for a short period after the intervention, the importers, against including Dunhill continued to purchase cigars from Cuba. And during the immediate post-intervention period continue to make payments for shipments of cigars that had been shipped prior to the intervention. The owners of course immediately after the intervention fled Cuba; some of them coming here to the United States. In early 1961, the owner instituted nine actions in the Southern District of New York. Four of them were against Dunhill. By these actions, the owners in essence sought to obtain payments for cigar shipped both before and after the intervention. Shortly thereafter, the interventors brought their own action, not against the importers but against the owner's counsel in an action entitled Policio against Russian Block. By that action, the interventors in essence sought to claim the right to sue for the same matters on which the owners had already institute it suit. Since the importers were essentially in the position of stake holder in these actions, the District Court stay the actions against them and proceeded to resolve the threshold and significant disputes between the owners and the interventors regarding who is entitled to payment of what cigars. Insofar as relevant here, the District Court for Judge O'Brien in 1966 and under the decision that was later affirmed per curium by the Second Circuit held that the interventors were entitled to sue for the post-intervention shipments. In essence, the court held that at least with respect to Cuban assets under the ruling of this Court in Sabbatino and the act of state doctrine set forth there, the nationalization decree of 1960 was effective as to the seized Cuban assets. At this point in time however, the significant, and we're talking now about 1967, the interventors stipulated before the District Court that the owners were entitled to recover for free intervention shipments. The assumption by both the owners and the interventors some seven years after the event being that these amounts were to insignificant to concern themselves with. After the rulings in Policio against Russian Block, the interventors were allowed to intervene this time in the procedural sense in the nine actions in New York. The actions were in fact consolidated for trial, tried together and appeal together to the Second Circuit. During the course of trial preparation however and the course of the trial itself, it developed that as of the day of the intervention, there had been almost $500,000.00 in unpaid amounts for cigar shipped prior to the intervention. Hardly and insignificance on this had been thought by both the owners and interventors when they entered into their stipulation in 1967. It further developed during the course of these proceedings that the importers shortly after the intervention had in fact paid all of the sums in accordance with their long standing practice of paying on 30, 60 or 90 days terms. At that point, Cuba of course changed its position and sought to back off from its stipulation that had entered -- it had intervened to in Policio against Russian Block. They contended now that they should be entitled to the pre-intervention shipments as well. And not only that, they contended that they never received those payments if in fact they had been made. The District Court however found that not only had the payments been made by the importers, but that Cuba in fact had received them. In the case of Dunhill, those payments amounted to some $55,000.00 more than the District Court found Dunhill still owed for the post-intervention shipments. In the case of the importers as a group however, the situation was reversed because far more was still ode to the interventors by the importers as a group for the post-intervention shipments than the District Court found had been paid to Cuba for the pre-intervention shipments. Judge O'Brien ruled that the owners were entitled to payment for the pre-intervention shipments. He also ruled that the interventors had received those payments and reliable under an unjust-enrichment theory to return them to the importers. In his initial decision, he allowed the importers to set off against what they owed for the post-intervention shipments the amounts that they had paid for the pre-intervention shipments. He specifically ruled the act of state doctrine inapplicable to the payments received by Cuba, stating in part, and I'm quoting this portion of an opinion now. “Here, all that occurred was a statement by counsel for the interventors during trial that the Cuban Government and the interventors denied liability and had refused to make repayment.” This statement was made after the interventors had invoked the jurisdiction of this Court in order to pursue their claims against the importers for post-intervention shipments. It is hard to conceive how if such a statement can be elevated to the status of an act of state any refusal by any state to honor any obligation at any time could be considered anything else, should note panthetically at this point that it was apparent that the set off procedure described by Judge O'Brien in his initial opinion obviously did not take account of Dunhill's situation. Accordingly after the decision was rendered, we move for an affirmative judgment against the interventors. Despite the claim and trial of an act of state, the interventors expressed no opposition to this and there being no opposition, that motion was granted. The Second Circuit of course affirmed Judge O'Brien's decision in all respects except one. It reversed the affirmative judgment in favor of Dunhill on the ground of the act of state doctrine. It found the act of state in Cuba's failure to honor the importer's demand for return of the payments, and I'm quoting now, “confirmed by the Cuban Government's counsel at trial.” In short, regardless of what the Court of Appeals language was, there is no question that on the record, the only conceivable evidence of any act of state by the Cuban Government was simply the statements by counsel for the Cuban Government that its client would not honor a claim for return of the funds. The effect of the Court of Appeals ruling of course is to force Dunhill to pay twice for the same cigars, having already paid the interventors. Under the court's ruling, they must now pay the owners with interest. We submit therefore that despite the statements in respondent's brief to the contrary, the first issue is properly before this Court that is whether statements of counsel can constitute an act of state. And we submit as well that for the reason's set forth in our brief that they cannot.
Potter Stewart: The Court of Appeals opinion reproduced any of the papers we have?
Victor S. Friedman: Yes, that's in the joint appendix Mr. Justice Stewart.
Potter Stewart: I don't have an appendix --
Victor S. Friedman: And there's a joint appendix as well.
Potter Stewart: Oh, I don't have that. Thank you.
Victor Rabinowitz: The page on which the quote from the Court of Appeals that I read is on 25 (a) of the joint appendix.
Lewis F. Powell, Jr.: Mr. Friedman, is there really any doubt as to the fact that Cuba as repudiated these debts?
Victor S. Friedman: Yes Your Honor, I would say there is.
Lewis F. Powell, Jr.: Had they paid any of them to anybody in this country since Castro took power?
Victor S. Friedman: Well Your Honor, this is a rather special circumstance. I think we must recognize that in all other instances were Cuba has been before this or any other court, they have appeared armed with a decree which states certain consequences, usually confiscation of property. We have a situation in this case however were up until that last year, not only has Cuba certainly not issued any decree with respect to these funds, but is been actively contending in our courts that they never receive them. Now, it seems to me that it is a far crime from stating that we have funds and we hereby seize them to say in the other instance that we are coming into your courts to try to collect those funds, and then when the proof come out that they already had them to deny received of the funds. That is not a seizure and I would respectfully suggest that the situation is far different and that there is a real debt, yes sir.
Lewis F. Powell, Jr.: The Second Circuit as I read the opinion found an act of state in view of all of the circumstances and said that a form of declaration was not necessary, and you differ from that?
Victor S. Friedman: No, I do not. Clearly, there are circumstances where some act, some public sovereign act of the state maybe proved by other than a formal decree. There are a number of cases, most of them occur in time of civil strife or rebellion where a military officer for example goes in and seizes property. That is not a formal act. But every case which has decided the act of state doctrine has insisted that there be some public affirmative act, something that one can look at and say “this is the affirmative act of the sovereign”, something with a sovereigness acting so that if this Court or any court in this country where to take a contrary position, it could be considered in a front to the sovereignty of that nation.
Warren E. Burger: Well then, is it not also an act which takes place within the jurisdiction of that sovereign and then in turned his asserted in our courts?
Victor S. Friedman: That is correct Mr. Chief Justice. Not only that in every case which has dealt with the doctrine, our courts have required a proof in our courts of the fact of that act in the foreign jurisdiction, that is correct.
Warren E. Burger: Was that true in Pons against Cuba, do you recall --
Victor S. Friedman: Pon?
Warren E. Burger: P-O-N-S against Cuba, was there an official act claimed --
Victor S. Friedman: I'm sorry. I'm not familiar with that case, I'm sorry sir.
Warren E. Burger: Well, not important. I can track that down.
Victor S. Friedman: Respondents appear to concede in their brief and I'm not sure it's a concession, but they do appear to concede that statements of counsel in fact cannot constitute an act of state. I refer the Court to page 12 of respondent's brief in that respect. They seek to avoid the issue by in affect asserting that counsel was simply the agency by which Cuba made known its legal position. We suggest that this simply does not square with the cases. As I have said, every case which has does far considered the application of this doctrine has insisted that there be some affirmative act of the foreign sovereign as the Chief Justice says pointed out within it's own territory, and then as a second requirement that there be confident proof of the existence of that act within our courts. Here, for all that counsel has said, we still do not know what the act was. We do not know when it took place or how it took place or who is responsible for it. In this connection, we've cited the case of the Navemar which all be the case dealing with sovereign immunity. I think his instructive in terms of the standards of at least minimal proof required when a sovereign comes into our courts and asserts a claim that it should be treated differently from private litigates. In the Navemar, there was a verified statement by the Ambassador of Spain that his Government had in fact seized possession and ownership of a libel vessel. There being some question about those facts. The court refused to foreclose these issues, but instead, invited the ambassador to intervene in the action and prosecute his claims as a litigant in the suit. Suggest moreover that in addition to the fact that the act of state application here was far broader than in any of the decided cases, that there are no policy reasons underlying the act of state doctrine which would require any less proof than we are contending for. The doctrine itself as the respondents concede of necessity works in unfairness. As to any litigant against whom the doctrine is applied, it denies him his judicial remedies. True, if the courts are attempting to deal with a public act or pronouncement of a foreign Government, certainly, they're maybe a realistic danger that the courts either maybe involved in political controversy in international affairs were may be usurping executive prerogatives in those affairs. But surely, we're -- there is no public act of a foreign sovereign. We submit that those dangers are unrealistic. And that to apply the doctrine, to create the unfairness, unless there is a realistic basis in fact on which the courts can operate, simply does not make sense. And we submit that that requires nothing less than competent evidence at the trial that an affirmative act of a foreign sovereign has in fact occurred. And here as we know nothing of a sort has occurred. I reviewed the history of the case at some length because I wanted to show that for some 10 years, Cuba apparently was either unaware or at the very least disputed the receipt of the varying monies, counsel for Cuba and assets, it has seized at sometime that we don't know and in some manner which we also don't know. There is a suggestion to respondent's brief that I feel should be discussed briefly. At page 17, respondents appeared to argue that the nationalization decree of 1960 might be the act of state which justifies the retention of petitioner's payments. The argument appears to be that since that decree nationalized, the accounts receivable of the owners that payments on those accounts, at least in so far as they reach Cuba may also have been taken under the authority of that decree. Both courts below and of course held under the Republic of Iraq case that the decree was in effective to reach those accounts receivable because they were assets located outside of the jurisdiction of Cuba being payable in New York. We believe that ruling was correct, but we do want to point out that if this is respondent's position now and if that word to be adopted, we must note that to the extent that the court rule in that fashion. The rulings of the courts below with respect to parties not now before it would also be affected because if the court were to rule that the decree somehow operated with respect to the accounts receivable insofar as payments on those accounts reach Cuba, then we would submit that the -- that such a ruling would then effect extinguished the accounts receivable themselves, and the owner's judgments against Dunhill to that effect would also be extinguished. I turn now to the second argument, one of the second branch of the argument which assumes that the court finds -- that the act of state doctrine is effective here. And the question is assuming that effect is this case within the counter claim exception created by City Bank in view of the fact that petitioners counter claim here does not exceed the net balance owed to Cuba by all of the other importers who are consolidated for trial in this case. We submit that in view of the totality of circumstances of this case that the counter claim exception should in fact be applied. In fact, we believe that the circumstances here are far stronger for justifying the application of that doctrine than they were in City Bank. In City Bank, of course, they were many differences of views among the different justices. But we think that two-threads run through the various opinions. I've have already alluded to them in my argument on the first point, they are that the act of state doctrine really serves two fundamental purposes. One is involved with not having this Court enter into areas which are more properly reserved for the executive, the other is that this Court should not be involve in deciding issues with may affect our foreign relations. I do not and I'm thankful, I do not for purposes of this case have to get into the question as to which of those is the more important because I think under either view, it is quite clear that allowing the counter claim here to the extent of all of the judgments in favor of Cuba would not violate either of those principles. We must recall that this case like any other that we have found involves Cuba's coming into our courts and affirmatively seeking relief on the questions of who was entitled to the payment of all of the cigars. Initially, they came in and asked for payments of all. They then retreated when they found that they were significant amounts due on the post-intervention ship -- for the pre-intervention shipments. They went back and again, sued for all of it. The only thing that happened after that was that having as the courts, as the evidence manted and as it became clear that they might loose on some of those issues. They retreated into an act of state defense to the assertion of a judgment. Cuba has never in this case said that anything they have done with respect to those accounts receivable and the amounts payable on the cigars should not be treated by this Courts as a judicial issue. In fact, Cuba has submitted these very issues to the courts. The only reason the act of state doctrine has been asserted here is because on some of those issues, Cuba seemed to being coming out a loser. That is --
Warren E. Burger: Has -- there was -- what has our State Department had to say about this case in --
Victor S. Friedman: So far as I know, nothing Mr. Chief Justice.
Warren E. Burger: Is it not usual that our State Department does take a position or at least advices the courts that they have no position?
Victor S. Friedman: My understanding sir is that they will do that if any party or the court requested. We did not feel it was appropriate to request it in this instance because we did not believe there was any proof whatsoever that an act of state had occurred. We believe --
Warren E. Burger: Well, wherever it is been thought, at least in my observation in cases of this kind over 18, 20 years, wherever the State Department has thought any relations between the two countries would be adversely affected. They didn't wait for anybody to ask. They affirmatively told the Attorney General what was the position of the State Department.
Victor S. Friedman: Well, I'm perfectly prepared to accept that Mr. Chief Justice. In addition, I might point out that I believe that the Stevenson letter which goes beyond the City Bank case would also talks about like cases, would I believe be applicable here. If anything this case presents certainly far less rational for and abstention by the judiciary, then First National City Bank did. After all in First National City Bank, the effect of this Court's ruling was to have the District Court or the Court of Appeals actually rule on the legality of the seizure by the Castro Government of First National City's Cuban Bank. Here, we have nothing of the sort. All of the legal issues have already been decided. The factual issues have already been decided. The only that issue here is the entry of a judgment. We do not have a situation where this Court is being asked as against an act of state contention to rule on matters which may involve some kind of sensitive foreign relations possibilities. I might also point out that it appears that the -- Mr. Rabinowitz has been in contact with the State Department, although the appendix to his brief with regard to the Office of Foreign Assets Treasury Department. So, the executive branch is obviously where the case. I would conclude simply by saying that we have cited in our brief a number of instances where both the executive and legislative trends, it seems to us or distinctly going toward looking at this favor with any expansion of view the act of state doctrine where the doctrine of sovereign immunity. We think that this case to the extent that the Court of Appeals held that there was an act of state doctrine applicable. Clearly is such an expansion and we see no reason why the courts in the face of the decided legislative and executive trend to the contrary should get involved in expanding the act of state doctrine.
Byron R. White: Can I ask you just one question. I suppose there were no act of state doctrine involved in the case and they came out as it did with owing money, debts due on either side. How about Dunhill being able to collect the excess of what the Cuba owes it from the other judgments, from the other assets available in the case?
Victor S. Friedman: Well, --
Byron R. White: You say, they were consolidated for trial?
Victor S. Friedman: That's correct, that's correct.
Byron R. White: Now, under New York procedure, would it be technically a --
Victor S. Friedman: A set off?
Byron R. White: Let's assume Dunhill have judgment against Cuba for this -- what is it, 80,000 or whatever it is that had that judgment, and it wanted to satisfy. Would it be technically a set off in that case?
Victor S. Friedman: No, I believe it would not be.
Byron R. White: So, you would have to utilize other procedures available --
Victor S. Friedman: That's correct. We would have to attach the judgment.
Byron R. White: You have to attach the judgment?
Victor S. Friedman: Yes.
Byron R. White: Less the -- your assets are there before the court?
Victor S. Friedman: That is correct, that is correct. But let me point out --
Byron R. White: But would it be really any -- for purposes of -- for our purposes, is it really any different than if you found the bank -- that you have this judgment and you found the bank accounts somewhere?
Victor S. Friedman: I believe it is, I believe it is.
Byron R. White: Now, that's what I want to know. Why is it like that?
Victor S. Friedman: Right. Not on a technical or procedural ground. My point simply is that Cuba has put into issue in a single litigating mode all these claims and counter claims. And what I'm suggesting is that the rational for allowing a complete set off or counter claim within this framework, regardless of the precise form that it took is far stronger than was present in City Bank. There are no -- to my way of thinking, there are no justifications with underly the application of the act of state doctrine which in any way, should preclude that result, whereas in City Bank, they're very definitely were different policy considerations which could have let the court to the other result. So, I am not relying on the technicality of whether or not these were consolidated for trial or consolidated action. I do not think that New York procedural niceties should control the ruling of this Court in that respect.
Byron R. White: Would it be your position or the -- I'm not sure that you need to go so far. But is it your position that whenever foreign sovereign comes into our courts, they must come in on our terms and have that case decided by traditional principles of law applicable to two American litigants?
Victor S. Friedman: Well, I'm afraid if I answer that question, yes Mr. Chief Justice, I luminate to the act of state doctrine and --
Byron R. White: You don't think you need to illuminate it entirely in order to prevail on this case.
Victor S. Friedman: No. I don't really at all Mr. Chief Justice. In fact, I think, I can live within the decided precedence on the subject.
William H. Rehnquist: Mr. Friedman, your response to Justice White's question that you're not relying on New York procedural niceties has certain overtones of making a virtue out of necessity because I take it if you are to bottom the argument on procedural niceties that this is really nothing like a set off in the traditional synth that lawyers use the word.
Victor S. Friedman: We -- to the extent that we would be reaching a judgment by a co-defendant. I would agree with that Mr. Justice Rehnquist.
Warren E. Burger: Very well Mr. Friedman.
Victor Rabinowitz: Mr. Chief --
Warren E. Burger: Mr. Rabinowitz?
Victor Rabinowitz: -- Justice and may it please the Court. I would like to start off if I may with this discussion that Mr. Justice White and Mr. Justice Rehnquist had been having because I suggested in filing my brief here that this petition for certiorari was improvidently granted and should be dismissed. Then one of the reasons that I urge was that no judgment can be collected here, collected that can perhaps be obtain if the petition to wins, but no judgment can be collected here under any foreseeable circumstances, and therefore this case, well I'm not moot in the constitutional sense, that is a risk of a case of controversy under Article III. Nevertheless, it is for all practical purposes pointless. And it is pointless because all Cuban assets are frozen, and the Treasury Department which has the task of licensing the expenditure of funds out of frozen funds has indicated already as we knew all along it would that it will not license. The execution of any Dunhill excess judgment against assets which are of a wise frozen whether it be a bank account as Mr. Justice White suggest or one of the other judgments that has been obtained as against Faver, Coe as Mr. Friedman suggests. Therefore, we have a situation which is akin shall we say to an action in which plaintiff is suing a person who is concededly and obviously insolvent. The total number of claims filed against Cuban assets in the United States amounts to $1,799,000,000.00. Now, I don't know the amount of frozen funds are, but if they amount to a few million dollars, it's a lot. If this $53,000.00 judgment is collected from those funds and I don't believe it can be, but if it is collected from those funds, we have pennies depending on the outcome of this litigation. And I don't believe it can be because the procedure that is followed in all of these cases and that has been followed in the Cuba case is to require a debted to file a claim with the Foreign Claims Settlement Commission, and not to bring the lawsuit. Dunhill chose to bring a lawsuit instead of filing a claim. Now, I suppose it has the right to do that. But if passed precedent in handling these cases is any guide to what the future may bring, and of course, I have no crystal ball, but I can read what has happened, there is no possibility of even this $53,000.00 sharing in that $1 billion, excuse me, $1,000,800,000.00 claim. So, this whole discussion, although it involved very interesting questions of law, so far as return to Dunhill is concern is going to end in zero when I cannot understand any justification for Dunhill spending all his time and I of course why the court granted the petition for cert is not my business, but at least I suggest that perhaps that question might be reviewed.
Byron R. White: What about -- what about the set off, face to face set off?
Victor Rabinowitz: Well, so far as the face to face set off is concerned, it is my understanding that that will be recognized by foreign assets control. So to that extent, the face to face set off which of course is not subject on, would not the subject of this petition for cert. It is the subject of another petition for certiorari which Cuba's filed.
Byron R. White: I understand that. I understand that but you don't claim that this present argument, you make with no rob off on any face to face set off --
Victor Rabinowitz: No, no.
Byron R. White: Or anything that would like it as a matter of fact.
Victor Rabinowitz: As far as I know now, it would not. I don't know that what the attitude of foreign assets control would be on that subject, but I'm been trying to think that a face to face set off would be recognized by the Treasury Department. Now on the question of is there an act of state here? I don't know whether I or to be flattered or the contrary that being suggested that is have the power to commit an act of state. I have no such power, and then no statement that I ever made in court is to be considered to be an act of state. Cuba here received funds and claims that it was entitle to those funds. Hence, it refuses to return the money and it is retained to counsel to plead its right to those funds and that's what counsel has been doing to the best of its ability. Now, that claim is not a frivolous or capricious or an arbitrary claim. It is based as Mr. Friedman was kind enough to state on a nationalization decree, a decree which was adopted on September 17, 1960 and which purported to nationalize all of the assets of Cuban, not American but Cuban concerns about manufactured tobaccos, cigars in Havana, and to nationalize not only the physical property in Cuba, but also the accounts receivable. The question as to whether this nationalization decree extended to the accounts receivable was litigated. We lost in the District Court. We lost in the Court of Appeals and pursuant to instructions specific I might saying, instructions by my client, I have filed a petition for certiorari, which is one of those issues that's pending in the other case. And the issue there involves or revolves around this rather metaphysical question, what is the situs of the debt? If the situs of the debt was in Havana, then, it was nationalized. If the situs of the debt was in New York, then, it was not nationalized. That's an issue which is not before us. I mentioned that only to show that the claim of act of state here was not disconnected or irrelevant to the nationalization decree because if the nationalization decree did in fact and I'm advised that under Cuban law, it would have. If that nationalization decree did in fact attached or nationalized the accounts receivable, then, we are entitled, Cuba is entitled to the funds for pre-intervention cigars.
Byron R. White: And could you get them out?
Victor Rabinowitz: Well, the set off would be cancelled. We got the money. We have the money.
Byron R. White: How did you get it?
Victor Rabinowitz: We got it because Mr. Dunhill over here paid it to us.
Byron R. White: Well, could the --
Victor Rabinowitz: The whole problem now was whether we have to pay it back.
Byron R. White: Yeah, I understand that. But for post-intervention shipments --
Victor Rabinowitz: Oh, yes.
Byron R. White: You can be paid for those?
Victor Rabinowitz: Oh, yes.
Byron R. White: And you get the money out?
Victor Rabinowitz: Can Cuba get the money out? Oh no, no. It goes into that frozen --
Byron R. White: Just what I thought --
Victor Rabinowitz: Well, no question about that. That's true of all of this Cuba litigation.
Byron R. White: So you're litigating -- what you're litigating here is on funds to add to the claimed accounts --
Victor S. Friedman: Right. We're trying as hard as we can in all of these cases to build that fund up as high as it can. The same question was raised I think by Mr. Justice Blackmun in the City Bank case. Our goal in this case and in the Chase case which is behind us hasn't come up there yet, is just to increase that fund because that's what my client thinks is in its best interest. And that which I --
Warren E. Burger: Now when you spoke of Dunhill kindly paying that account, that was before the seizure or --
Victor Rabinowitz: It was after the seizure.
Warren E. Burger: After the seizure?
Victor Rabinowitz: It was after the seizure.
Warren E. Burger: Any of it bracket the seizure, some before and some after?
Victor Rabinowitz: Oh, yes. All during the months of August, September, October, November, December, it continued to send money down to Cuba. Now, why it did it? I'm not all together sure. Various reasons have been given and hadn't been proven as events later shown with the advantages of hindsight. It would have stopped when the nationalization occurred, it would have said had it had sufficient foresight. We don't know whose entitled to this money and therefore, we're not going to pay it to anybody. But it didn't do that. It continued to send the money down to Cuba. It sets and I will assume for purposes of this argument that that's exactly what happened because --
Byron R. White: Now this is all pre-intervention.
Victor Rabinowitz: All pre-intervention and a little bit of post-intervention. I think perhaps --
Byron R. White: (UInaudible) well, --
Victor Rabinowitz: But there is no issue about that.
Byron R. White: Well, out there, entitled any of it back -- if you have to pay anything, it comes up only this frozen fund?
Victor Rabinowitz: The court held that the former owners are entitle to a set off, are entitle to a judgment against Cuba which is a set off, they're very complicated. The court held that the former owners were entitled to that money. They are entitled to that money from Dunhill which was the debtor. And therefore, Dunhill is ordered to pay that money to the former owners. Dunhill however paid the money to Cuba said the court by mistake. Therefore, it is entitled to get that precise sum back from us. So whatever it has to pay the former owners, it collects from us, except for this $53,000.00 because we contend there is no way in which it can collect an affirmative judgment of $53,000.00 from Cuba. I'm feeling a little bad, I keep saying us in here because it may give the court some idea that I am the state, but I am not. I am just speaking as counsel.
Warren E. Burger: When you -- well, I think you've answered the question I was about to ask.
Victor Rabinowitz: Now, counsel has made much in his brief, and again in his oral argument to the contention, to the argument which said that Cuba never admitted receiving the funds. Now of course, that's not so, what happened was that the claim was made at large sums of money had been paid. This claim did not come to like until 1967 which was some seven years after nationalization. By that time, the -- all of the relevant records had been lost, destroyed, at least they were not available. And so, the Republic of Cuba said in response to a set of interrogatories, we do not know as to $93,000.00 of the total, yes. We received it, as -- because they were records. They were endorsed checks. As to the balance, we do not know whether we received it or not. The District Court held that the evidence was sufficient that we had received it. The Court of Appeals held the evidence was sufficient that we had received it. We're not applying for cert on that issue and therefore, I will assume that of for so far as this record is concerned, we have received it. Now of course, if we didn't receive it, then Dunhill has no claim at all. Dunhill's whole claim here is based on the fact that it paid money to us by mistake. If it -- if we didn't pay it, then the whole of Dunhill's claim for and therefore, we really think the petitioner is faced with the fact that whatever maybe ultimate truth, so far as to the record is concerned, Cuba got the money. And also it is clear that so far as the record is concerned, Cuba, basing its argument on a nationalization decree says it does not have to repay the money, and we submit that that is an act of state because as has been conceded, no particular formality is required.
Byron R. White: Wxcuse me Mr. Rabinowitz, Cuba got the money. The fund, they got the money or Cuba got the money, which?
Victor Rabinowitz: Cuba got the money in September of 1960, September --
Byron R. White: Before the nationalization?
Victor Rabinowitz: Bridging the nationalization; some of it before the nationalization, some of it after the nationalization.
Byron R. White: But in any event, it didn't go to the fund?
Victor Rabinowitz: It went to Cuba. Oh, by that time, money was being -- at that time, money was being shipped to Cuba. The freeze didn't come ‘till 1963. Up to that point, the money went down to Cuba. Now, it's perfectly clear from all of the cases that the court -- that a course of conduct is sufficient to constitute an act of state. We have a great deal of state action here, much more than Henrico, Cochin, Bernstein and the other traditional act of state cases. And as I've indicated this continuing interest and continuing determination by Cuba to assert this claim is an indication on the part of Cuba that it believes that under its own nationalization decree in its own view of the law, it is entitled to this money.
Warren E. Burger: Mr. Rabinowitz, when you say that why this case is not technically moot in the traditional sense that it is at for all practical purposes, there's nothing left of it. Is that because the claims against the $1,800,000,000.00 will so far exceed the fund that they really get nothing or pennies issue --
Victor Rabinowitz: Right.
Warren E. Burger: Is that --
Victor Rabinowitz: Right, right. Well of two reasons. That's one. The other is that at least so far as the President of the Soviet Union, Bulgaria, Romania, Yugoslavia, and two or three other similarly situated countries, people who didn't file claims with the Foreign Claims Settlement Commission don't even get those pennies.
Potter Stewart: Was there a cut off date?
Victor Rabinowitz: Oh, yes, cut-off date was two or three years ago.
Potter Stewart: So, the claim couldn't be based on --
Victor Rabinowitz: No.
Potter Stewart: A judgment now.
Victor Rabinowitz: No. No, the claim could not be based on judgment why they didn't file before the Foreign Claims Settlement Commission, I don't know. But there certainly is not the slightest precedent, nor for there be the slightest justification for saying that a litigant who ignored the statutory procedure set up by Congress should find himself placed in a better position, so far as ultimately collecting this judgment against --
Byron R. White: Oh, it seems to have been -- is that mean if -- are you suggesting if Dunhill prevails and we reverse and Dunhill judgment is reinstated, it's useless?
Victor Rabinowitz: Yeah, that's exactly what I'm saying.
Byron R. White: Because they didn't file -- in the amount of the judgment of the claim, whatever it was, will be the commission within --
Victor Rabinowitz: They didn't -- it's useless for two reasons Your Honor. The first place, they didn't file. Second place, even if they had filed, the amount -- if they had filed, they wouldn't need a judgment. But even if they had filed, the amount involved would have been infinitesimal compared to the amount -- but even -- I don't know what disposition is going to be made to that. All I can say it that the precedent follow in all of the other cases was to say specifically the judgments will not be permitted, and that claims before the filed with the Foreign Claims Settlement Commission are the only source of getting money. And remember, so far as the settlements in the past have been concern, the issue becomes is really a dual one, one is between the United States and the foreign country, and that settles some which money as to be paid. The second step is that the United States distributes this money to its citizens. And in the treaties that have been entered into which Romania and the other countries that I've mentioned, the United States has specifically waived on behalf of its citizens all judgments which the citizen may have obtained or may in the future obtain against the foreign government for those pre-settlement claims shall we say, so that when was I say I can't even venture to predict what's going to happened here if the Polish and Romanian and other settlements are reached here, the judgment is really of absolutely no value in this situation. And what we're discussing here very interesting act --and to me rather vital questions of law, and I'm always delighted to discuss them. But in terms of the practical effect of what we're getting here, it's going to turn out to be nothing at all. Now, I would like to --
Warren E. Burger: Are you suggesting that your friend is overly optimistic about Cuba's voluntarily paying any judgments which maybe entered against it?
Lewis F. Powell, Jr.: Well, I wouldn't. I would prefer not to have to characterize that as even with the word optimism. I think even that's too hopeful a word. No, I don't know why or why counsel is doing it. I suppose counsel is here because his client is instructed him to be here and he's got whatever motivation he has go ahead with this case, and maybe he thinks she can in some way or other collect it. And if he does, he's doing very well for his client. But --
William J. Brennan, Jr.: Mr. Rabinowitz, if there's no practical result to all of these, why is Cuba defending?
Victor Rabinowitz: Well, Cuba is defending it right now because this Court issued a petition for certiorari and told me to come here and since I always enjoy arguing before this Court, here I am. But Cuba is proceeding with all of the other litigation because as I said before, my clients apparently and nobody has told me this, but I can grow a reasonable inference. My client feels that it will be good to have this money in that frozen account as against someday when there is going to be a settlement. And the more money there is in that frozen account, the better it's going to be for my client. Now maybe, it will be better for everybody, I don't know but it's going to be better for my client. To put in other way, if I may, I don't suppose this is a breach of professional confidence as one of my client said to me, is it better to have a million dollars in that fund or not to have a million dollars in the fund, and my answer was would it be better to have a million dollars in the fund. I don't know exactly why it's better. I just think it's better to have that much money in the fund than not to have that much money in the fund.
William J. Brennan, Jr.: You pleaded why the case is not moot.
Victor Rabinowitz: Pardon me?
William J. Brennan, Jr.: You just stated why the case is not moot then?
Victor Rabinowitz: The case is moot in the sense that the amount of money that will go --
William J. Brennan, Jr.: This is a new kind of conception of mootness.
Victor Rabinowitz: Well, alright, I -- no. I don't think it's moot in any --
Warren E. Burger: This is a doctrine --
Victor Rabinowitz: -- in a constitutional sense, it certainly a case of controversy.
Warren E. Burger: -- (Voice Overlap) is it?
Victor Rabinowitz: That's right. It's -- as I think in my brief, I said is a practical matter its moot, and maybe I shouldn't have used the word moot.
John Paul Stevens: If you are in control of the freezing mechanism, I suppose that's right, but you're not.
Victor Rabinowitz: No, we have no connection with the freezing mechanism at all, quite the contrary. We've tried to break it on the few occasions without any success.
William H. Rehnquist: But what if petitioners were to take their judgment to France to England and try to locate Cuban assets there and they ask for full faith and credit whatever the French or English are equivalent to that is.
Victor Rabinowitz: I hadn't thought of that. I don't know, maybe I -- I don't know how the French courts or the German courts or the English courts would treat the matter like this and what, I'm sure that they have their own problem so far as foreign relations and the enforcement of the judgment obtained under these circumstances. I don't know.
Warren E. Burger: I suppose Cuba must have some accounts receivable due somewhere for sugar these days.
Victor Rabinowitz: I have read newspapers stories that indicate that that maybe the case. I just don't know. I -- anyhow, to conclude this part of is there an act of state, I submit that we have here as much evidence, as much of an act. I don't know what counsel means when he keeps talking about a public act. I don't know what exactly a public act is. In the French against Banco Nacional in the New York Court of Appeals, the act involved a piece of paper called an instruction which was posted on the bulletin board of the national bank or the currency stabilization for a board in Cuba and that was regarded as an act of state.
Warren E. Burger: But sometimes, it's a document --
Victor Rabinowitz: Oh, something --
Warren E. Burger: -- of the foreign office of the sovereign filed in the litigation, is it not?
Victor Rabinowitz: No question at all, but sometimes it is. But sometimes, it is the expropriation of a load of hides as in Ochin or of load of silver as in record. The seizure of these commodities by an army in the field and the -- this has been held to be an act of state by as I say the classic cases.
Warren E. Burger: Are you free when I put that limitation on it, are you free to offer a hypothesis as to why the Government of Cuba as not made any formal claim of act of state, but has simply depended upon a litigation position asserted by you?
Victor Rabinowitz: You mean why it has not made a decree written in a piece of paper?
Warren E. Burger: Just written letters the Secretary of State of the United States often the --
Victor Rabinowitz: I think, I think that the opinion of the Cuban Government is that the nationalization decree is quite sufficient, and that there is no particular point in repeating over and over again that it claims that it nationalized these account receivable. And therefore, it is entitled to that money.
Potter Stewart: That is the decree of September 15, 1960?
Victor Rabinowitz: 1960, yes sir.
Potter Stewart: They nationalized everything, didn't --?
Victor Rabinowitz: That's right, nationalized everything. And I suppose that there is no -- the Government does not feel any compulsion to keep repeating this because the Governments are not always -- to issue documents.
Warren E. Burger: Is not part of the debate, whether that decree of nationalization reached the assets outside of Cuba?
Victor Rabinowitz: Yes. That is part of the debate and there is no question --
Warren E. Burger: No one is challenging this litigation that Cuba by its decree of nationalization could seize and exert sovereign power over assets in Cuba.
Victor Rabinowitz: Oh no, no. That's not an issue --
Warren E. Burger: Was assets somewhere else is in on another issue, is it not?
Victor Rabinowitz: Exactly, that is an issue. But whether that seizure is valid under United States law, the seizure of accounts receivable I mean, is valid under the United States law is not valid under United States law has nothing to do with whether it's an act of state. The fact is it's an act of state. Now, maybe they attempted to do something that they couldn't do. If it is true that a debt has its situs and as I said before, it's a rather metaphysical problem that a debt has it situs in the -- at the home of the debtor, then this was an ineffective nationalization decree because it sought to nationalize property outside the territory. But in the Cuban view, this is not so, and I have as I say so argued in this petition for certiorari which is before the Court pending at this moment. I would like to proceed to the second question which is the so called counter claim rule. As Your Honors will recall in Sabbatino, this Court held with only one judge dissenting, that the court of the United States would not examine it to the legality of the conduct of a sovereign done within its own territory. When the City Bank came before three years ago, the court had before it a claim by City Bank first that there was or should be a counter claim exception to the act of state doctrine. And second, the court had before it a letter from the State Department, and that State Department said that the act of --
Warren E. Burger: We'll resume there after lunch Mr. Rabinowitz
Victor Rabinowitz: How much time do I have --
Warren E. Burger: You may proceed whenever you're ready Mr. Rabinowitz?
Victor Rabinowitz: Thank you sir. I would like to spend my remaining time on the problem the counter claim rule, but just for a moment before I get to that, I would like to make one thing clear if it's not already clear. While I said that the nationalization decree of September 1960, nationalized not only the physical property, but also the account receivable, and therefore the problem arose as to where these accounts receivable were located. Of course, it is true that shortly after in the two or three months after the nationalization decree, the money represented by these accounts receivable did in fact to get to Cuba. So that it was no longer a question of nationalizing intangibles which will located in a foreign country, but was then became a question of the effect of the nationalization decree on that money which was then in Cuba, so that from the position of the respondent --
Byron R. White: Oh, is that all of it Mr. Rabinowitz?
Victor Rabinowitz: Pardon me?
Byron R. White: Is that all of it that was involved in the --
Victor Rabinowitz: All of it that was involved, yes.
Byron R. White: In the Dunhill claim?
Victor Rabinowitz: All of it, yes. All of it came to Cuba and that's why Cuba is under an obligation to pay it back. And of course, the nationalization decree --
Potter Stewart: That's a pre-intervention payments.
Victor Rabinowitz: Pre-intervention payments.
Potter Stewart: I mean payments for pre-intervention to that was stolen --
Victor Rabinowitz: Yes. Payment for pre-int -- that's right. So that as that money came back, it was the -- put down there, it was the position of the Cuban Government that as it entered Cuba, the nationalization --
Byron R. White: I think you said earlier, there was no freeze order until long after --
Victor Rabinowitz: Long after three years later.
Warren E. Burger: Three years -- three years --
Victor Rabinowitz: Three years later. Now on the question of the counter claim rule, as I said in the City Bank case, this Court had before it a letter from the State Department which said that the act of state doctrine in its opinion was not to be applied in the counter claim situation and I quote “the amount of the relief to be granted is limited to the amount of the foreign states claim, and the foreign policy interest with the United States do not require application of the doctrine.” The letter then went on to say that the foreign policy interest of the United States do not require the application of the act of state doctrine to barge adjudication of a defendant's claim or set-off against the Government of Cuba in these circumstances. And hence the act of state doctrine should not be applied in this or like cases. Now, there is no State Department letter here of course, and I must with due respect Your Honor say that at least so far as the case is I am familiar with, the State Department has never sua sponte written a letter. In the Sabbatino case, the State Department participated not only as amicus but in argument, but that was on the motion of the court, not on its own notion or not by its own request.
Thurgood Marshall: As a matter -- in fact in Sabbatino case, they refused to come in to the Court of Appeals.
Victor Rabinowitz: Yes, they did sir. Yes, they did. And in -- it's quite right. And in the City Bank case, it's my understanding that they came in at the request of City Bank or at least at the suggestion of City Bank. And since then in other cases which are pending in the District Court, in one case, they did submit a letter. In other cases, they have refused to submit letters sir. What motivates them one way or the other, I don't know. The most recent was a refusal to submit three letters in cases involving three banks. Now, the petitioner's argument here is based on three assumptions, none of which I respectfully submit as valid. First, that there was a ruling by this Court in the City Bank case that there was the counter claim exception to the Sabbatino rule. Second, that the Stevenson letter submitted in City Bank is applicable to this case. And third, that there is an exception to what I contend is a non-existed counter claim rule which would permit the petitioner to get an affirmative judgment in this case. Now as Your Honors, I'm sure will recall the City Bank case, there was only one opinion out of Mr. Justice Douglas which opted for a straight out and out counter claim exception to the Sabbatino case. Three judges thought that there should be a counter claim exception when there was a State Department letter as there was in that case. Five judges as I read the opinion felt that there should not be a counter claim exception to the Sabbatino rule. So, it's rather difficult to say and talk about a counter claim rule in the National City Bank case because as I read those opinions, the vote was would have been on that issue four to five. Thank you.
William O. Douglas: I just hope that the court doesn't follow my lead.
Victor Rabinowitz: Your Honor, I hope it doesn't because with all due respect, I think your lead was a wrong one.
William O. Douglas: Oh, you're protected by the First Amendment.
Victor Rabinowitz: I understand that. I understand that and I'm going to take advantage of it by saying that I think --
William O. Douglas: As an exception to Sabbatino.
Victor Rabinowitz: As an exception to Sabbatino. And I'm going to take advantage of it --
Warren E. Burger: Go ahead. Finish the sentence.
Victor Rabinowitz: -- by suggesting that the counter claim rule is improper for two reasons. First, because as Mr. Justice Brennan pointed out in the dissent in City Bank, all the reasons for the Sabbatino case are equally valid with respect to a counter claim. And the second, that more often than not, the question of whether a case comes up as a counter claim or as an affirmative claim depends on who gets to the court house first because in all of these cases, it could have operated in exactly the other way if the other party had come in first.
Byron R. White: So you're in the subject manner of that petitioner of yours not yet acted on that there shouldn't be any set off in this case?
Victor Rabinowitz: Oh yes, yes sir. And just, may I say in final conclusion on that, I would suggest that this Court dispose of this matter here in one of two ways, either it grant those other two petitions that are pending, and that we really go at this rather tangled situation and decide all of the issues, or else that the petition be dismiss as in advertently granted because --
Byron R. White: Will the other be denied?
Victor Rabinowitz: Pardon me?
Byron R. White: If this is dismissed, is it proper that we granted this, do you suggest we deny the other two?
Victor Rabinowitz: If this is dismissed, I would think that the others ought to be denied, yes. If this is entertained, I think the others ought to be entertained --
Byron R. White: What would you prefer --
Victor Rabinowitz: -- but unless Your Honors just want to make --
Byron R. White: What would you prefer? Which would you prefer, dismissal is improbably granted or in affirmance?
William O. Douglas: Is that -- dismiss the -- inadvertently granted?
Victor Rabinowitz: In providently. Inadvert -- no, it wasn't in advertent Your Honor.
William O. Douglas: Oh, it wasn't, it's not like I can assure you.
Victor Rabinowitz: No, I'm certain, it was not inadvertent. I misspoke. I think, inadvertently granted, which would I prefer? Well, I do love to argue the cases --
Byron R. White: That's really difficult, isn't it?
Victor Rabinowitz: Yes, it is difficult. I love to argue cases before this Court and the prospect of another go around that this very attractive to me.
Byron R. White: Still.
Victor Rabinowitz: But still, I think it might best if every -- is like, we like the Court --
Byron R. White: You know, I wouldn't guess you wouldn't wanted it affirmed.
Victor Rabinowitz: I think I would just like you to be of either affirmed, I've no objection to an affirmance.
Byron R. White: You -- well, you -- would you prefer that to a dismissal?
Victor Rabinowitz: I don't know that it matter --
Byron R. White: Alright, no.
Victor Rabinowitz: A great deal. I think I would prefer dismissal to an affirmance.
Warren E. Burger: Didn't -- just very often we give the counsel their choice.
Victor Rabinowitz: I am under no illusion that you're giving me a choice.
Warren E. Burger: Mr. Friedman, we'll extend your time to five minutes from your previous three.
Victor S. Friedman: Thank you Mr. Chief Justice. I would just like to respond to a few remarks made by counsel for respondents. I turn first to the question again of what is the act of state in this case, and Mr. Rabinowitz is indicated that it may proceed from one of two standpoints, and I'm still confused is to where we really look to it. I simply want to point out again however that if it is the decree, I do not believe that this Court can rule with respect to that issue on this petition. That is something that has not been raised by the respondent's previous to this time, and I respectfully suggest that that would affect rights of other parties to this action that where are not now before this Court. If on the other hand, we are still dealing with the question of the possible seizure or retention of assets independently of the decree. I would suggest again that the remarks in our brief are fully applicable, and that is there has been no proof whatsoever that any sovereign act on the part of Cuba in any form that is acceptable as evidence in our courts. I'd like to turn now to the questions that our counsel has raised with respect to the enforceability of this judgment. I do not pretend for a minute that I will soon be a simple matter of simply going into court and enforcing this judgment the way one would and the other civil judgment. I do not agree with counsel for respondents that this is a worthless piece of paper. There are a number of possible ways the judgment might be enforced. I do not believe that this Court need consider how likely those possibilities are or just exactly what our chances will be to obtain a recovery under the judgment. The fact of the matter is that there are possibilities and we should be entitled to pursue them.
Byron R. White: Well, your set off as money and the pocket, isn't it?
Victor S. Friedman: The set off is not money in the pocket Your Honor, no sir.
Byron R. White: Well, what its -- its money you don't have to pay?
Victor S. Friedman: Its money we -- for -- the money that we owe for the post-intervention shipments, that has already been paid to Cuba --
Byron R. White: Yes.
Victor S. Friedman: -- for the pre-intervention shipments.
Byron R. White: Yes.
Victor S. Friedman: To the extent that those are payments for the pre-intervention shipments, we still must pay the owners. So, there is no money in the pocket there. In fact --
Byron R. White: But --
Victor S. Friedman: If we were to recover on this judgment in full, there's still would not be a single penny coming to Dunhill; that would stay with Dunhill. Dunhill would simply have to turn that money over to the owners. The only question is whether we're going to have to pay the owners and not recover back from the -- from Cuba. There's no way that Dunhill can recover a single penny here that goes into Dunhill's pockets. That really raises another issue that was alluded to by counsel for respondents, and that is the question of why didn't Dunhill file a claim? The simple answer is here, that Dunhill was never seeking anything from anybody. The only reason that Dunhill is in the position that is in now is because of the conflicting claims that were asserted against it by both the owners and the interventors. Dunhill, as well as the other importers always considering themselves in the position of stakeholder, and along that same lines, I would suggest that the cut-off date, which was allude to for filing of claims, we do not think as it all applicable here for at least two reasons. First, that refers to expropriations of property. And as I've indicated, we do not believe there ever was any expropriation here. Secondly, whatever the claim is that we might file to our knowledge was not in existence as of that cut-off date sometime in 1967. If Your Honors will recall at --
Byron R. White: Is this to get the litigation approval?
Victor S. Friedman: Well, I would hope not Mr. Justice. The problem is that as of that point in time, Cuba was still contesting that they'd ever received any money. So, it was hardly lay in our must to make a claim against them for money which a court might later judge. Cuba owed us, but we couldn't collect of them.
William J. Brennan, Jr.: When did the owners start to press Dunhill? When did the owners start to press Dunhill for payment?
Victor S. Friedman: The owners brought suit in the February or March of 1961.
William J. Brennan, Jr.: Oh, was that the first knowledge Dunhill had out of the owner's claim?
Victor S. Friedman: So far as the record shows, yes.
Warren E. Burger: It was desserted as a defense in those cases that the money was owed to and payable to Cuba as the new owner?
Victor S. Friedman: Mr. Chief Justice, so far as I know, as soon as those cases were filed, the interventors then started their action against the owner's counsel, and all proceedings, vis-à-vis, the importers were stayed. So far as I know, I don't believe that the importers had any connection with these cases, except to be named as defendants by the owners until 1967 -- or 1966 I guess. I would just make one other point with respect to the question of a license. Counsel has stated that the office of foreign assets control has said in no one certain terms that a license will not be issued. I think if the Court will look at the appendix to respondent's brief which contains the exchange of correspondents between the respondents and that office it will find that that is not the position of that office. They had set forth a general policy, but that does not say that that is their final position or if it is, then, it would not be subject to review in the courts, or that it might not be influenced by a ruling by this Court in this proceeding. Thank you.
Warren E. Burger: Thank you gentlemen. The case is submitted.