Opinion ID: 106959
Heading Depth: 1
Heading Rank: 3

Heading: the overall balance of equities and considerations affecting jurisdiction. [20]

Text: Certainly the Court's remark that it must act in light of the public interest cannot mean that because the Government is a party here, the Court may ignore its duty to consider the balance of equities. It is, therefore, well to consider just what overall benefits will accrue in the public interest as a result of today's decision. Except in the context of the comparatively rare case in which the Government has the element of surprise on its side, it must be recognized that the utility of the extra-territorial freeze order as a tax-collecting weapon is minimal. Under the tax regulation adopted during this action the Government declares that it would use the freeze-order power to reach only funds which were transferred out of this country in order to hinder or delay the collection of taxes and which were in banks having an American office. [21] In other words, the regulation would snare only those taxpayers smart and unscrupulous enough to withdraw their funds from the United States, but stupid and uninformed enough, even after this decision, to put the transferred funds in a bank having a United States office. In order to provide the Government with this toy pistol, the Court flexes its muscles in a manner never before imagined. If the overall benefits of this exercise of power are minimal, the detriments are substantial. (a) It would expose Citibank, an innocent stakeholder, to exactly the kind of administrative hazards which New York's separate entity theory is designed to obviate. (b) It would subject Citibank to the possibility of double liability if Uruguay did not recognize the United States' judgment, and multiple liability if Uruguay permitted actions for slander of credit. The District Court's offer to modify the freeze order if Citibank shows that it conflicts with Uruguayan law is some hedge against the first of these dangers, but operating at its best it places the heavy burden on Citibank, blameless in this situation, of discovering Uruguayan law. In practical operation the Uruguayan law may well be unclear to the point that Citibank can only be sure of its obligation to Omar if it is sued for payment and the matter is litigated. If Omar is loath to sue for one reason or another (it may fear that its demand for the money and the bank's refusal to pay it will cause the obligation to become payable in New York), it may be impossible for Citibank to establish Uruguayan law before it is too late. If the Government manages to levy on the account, and only afterwards is it established that the bank was liable to Omar, Citibank would be left to sue the United States for recoupment, an eventuality for which no provision has been made and which the Government stated at the oral argument of this case that it would oppose. (c) Citibank alleges that its foreign banking business will be hurt because foreign depositors will be discouraged from using United States banks for fear that their funds can be reached by United States courts. There is no sure way to gauge the seriousness of this possibility, but since Citibank is an innocent stakeholder here, doubt should be resolved in its favor. (d) The Uruguay Code of Civil Procedure provides, in rough translation: Art. 511. Judgments rendered in foreign states shall have in the Republic [Uruguay] the effect prescribed by applicable treaties. Art. 512. If there are not treaties with the nation in which they are rendered, they shall have the same effect which by the laws of that nation, it would give to the decrees rendered in the Republic. Art. 513. If the judgment proceeds from a nation in which by its jurisprudence, it would not give effect to the decrees of the Tribunals of the Republic, they [ sic ] shall have no force here. [22] When Omar sues Citibank in Montevideo for its account, Citibank will plead the United States decree as a defense, and the Court speculates that Uruguay will give it effect ( ante, pp. 384-385). In light of Uruguay's reciprocity principle the Court's decision implicitly signifies that our courts would recognize a similar order by a Uruguayan court. [23] Operating under a tax regulation similar to that adopted by the Government, a Uruguayan court with jurisdiction over the Montevideo branch of Citibank could freeze accounts in New York. [24] I am extremely reluctant to uphold such a power. The freeze orders of the type in question here issue prior to any court judgment, indeed before any significant proceedings at all. A nation asked to recognize such a freeze order will have virtually nothing to go on but the bare request. The propriety of the decree does not even rest on the reliability of the foreign court, as is the usual case in judgment recognition problems, [25] but on the reliability of the foreign taxing authorities, something a domestic court has no way of judging. The Court should not lose sight of the fact that our modern notions of substituted service and personal jurisdiction were developed within a framework of States whose various processes are governed by the Due Process Clause and whose judgments must be given full faith and credit by the other States within the federal structure. Great care and reserve should be exercised when extending our notions of personal jurisdiction into the international field, both as a basis for asserting federal judicial power with respect to property in foreign countries and for permitting property in this country to be tied up by foreign courts.