357 U.S. 197 (1958), 348, Societe Internationale Pour Participations Industrielles

Docket NºNo. 348
Citation357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255
Party NameSociete Internationale Pour Participations Industrielles
Case DateJune 16, 1958
CourtUnited States Supreme Court

Page 197

357 U.S. 197 (1958)

78 S.Ct. 1087, 2 L.Ed.2d 1255

Societe Internationale Pour Participations Industrielles

No. 348

United States Supreme Court

June 16, 1958

et Commerciales, S.A. v. Rogers

Argued May 1, 1958

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Syllabus

In a suit under § 9(a) of the Trading with the Enemy Act brought by petitioner, a Swiss holding company, for the return of property seized by the Alien Property Custodian under § 5(b), the District Court ordered petitioner to produce certain records of petitioner's Swiss bank. The Court found the records to be relevant and to be within petitioner's "control," within the meaning of Rule 34 of the Federal Rules of Civil Procedure. The records were not produced, on the grounds that their production would violate Swiss penal laws and that an order prohibiting their production had been made by the Swiss Federal Attorney. The District Court ruled that, unless full production were made, the complaint would be dismissed. During further lengthy proceedings, petitioner produced over 190,000 documents, but was unable fully to satisfy the Court's order. The District Court found that petitioner had shown good faith in its efforts to comply with the production order, but it concluded that, apart from Swiss law, petitioner had control over its bank's records, that such records might prove to be crucial in the outcome of the litigation, and that Swiss law did not furnish an adequate excuse for failure to produce them. Accordingly, it dismissed the complaint with prejudice. The Court of Appeals affirmed.

Held: on the record, dismissal of the complaint with prejudice was not justified; the judgment is reversed; and the cause is remanded for further proceedings. Pp. 198-213.

(1) In this instance, accommodation of Rule 34 of the Federal Rules of Civil Procedure to the policies underlying the Trading with the Enemy Act justified the action of the District Court in issuing the production order, notwithstanding petitioner's claim that Swiss law, backed by criminal sanctions, prevented petitioner from having "control" of the records within the meaning of Rule 34. Pp. 204-206.

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(2) Whether a federal district court has power to dismiss a complaint because of failure of the plaintiff to comply with a production order depend exclusively upon Rule 37(b), which addresses itself with particularity to the consequences of a failure to make discovery by listing a variety of remedies which a court may employ. The Rule makes no real distinction between "failure" to comply and "refusal" to obey. Pp. 206-208.

(3) On the record in this case, dismissal of the complaint with prejudice was not justified in view of the findings below as to petitioner's good faith and efforts to comply with the production order, and in view of constitutional considerations which bear on this question. Pp. 208-213.

100 U.S.App.D.C. 148, 243 F.2d 254, reversed, and cause remanded.

HARLAN, J., lead opinion

MR. JUSTICE HARLAN delivered the opinion of the Court.

The question before us is whether, in the circumstances of this case, the District Court erred in dismissing, with prejudice, a complaint in a civil action as to a plaintiff that had failed to comply fully with a pretrial production order.

This issue comes to us in the context of an intricate litigation. Section 5(b) of the Trading with the Enemy Act, 40 Stat. 415, as amended, 50 U.S.C.Appendix, § 5(b), sets forth the conditions under which the United States, during a period of war or national emergency, may seize" . . . any property or interest of any foreign country or national. . . ." Acting under this section, the Alien Property Custodian, during World War II, assumed control

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of assets which were found by the Custodian to be "owned by or held for the benefit of" I.G. Farbenindustrie, a German firm and a then enemy national. These assets, valued at more than $100,000,000, consisted of cash in American banks and approximately 90% of the capital stock of General Aniline & Film Corporation, a Delaware corporation. In 1948, petitioner, a Swiss holding company also known as I. G. Chemie or Interhandel, brought suit under § 9(a) of the Trading with the Enemy Act, 40 Stat. 419, as amended, 50 U.S.C.Appendix, § 9(a), against the Attorney General, as successor to the Alien Property Custodian, and the Treasurer of the United States, to recover these assets. This section authorizes recovery of seized assets by "[a]ny person not an enemy or ally of enemy" to the extent of such person's interest in the assets. Petitioner claimed that it had owned the General Aniline stock and cash at the time of vesting, and hence, as the national of a neutral power, was entitled under § 9(a) to recovery.

The Government both challenged petitioner's claim of ownership and asserted that, in any event, petitioner was an "enemy" within the meaning of the Act, since it was intimately connected with I. G. Farben, and hence was affected with "enemy taint" despite its "neutral" incorporation. See Uebersee Finanz-Korp., A.G. v. McGrath, 343 U.S. 205. More particularly, the Government alleged that, from the time of its incorporation in 1928, petitioner had conspired with I. G. Farben, H. Sturzenegger & Cie, a Swiss banking firm, and others

[t]o conceal, camouflage, and cloak the ownership, control and domination by I. G. Farben of properties and interests located in countries, including the United States, other than Germany, in order to avoid seizure and confiscation in the event of war between such countries and Germany.

At an early stage of the litigation, the Government moved under Rule 34 of the Federal Rules of Civil Procedure

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for an order requiring petitioner to make available for inspection and copying a large number of the banking records of Sturzenegger & Cie. Rule 34, in conjunction with Rule 26(b), provides that, upon a motion "showing good cause therefor," a court may order a party to produce for inspection nonprivileged documents relevant to the subject matter [78 S.Ct. 1090] of pending litigation " . . . which are in his possession, custody, or control. . . ." In support of its motion, the Government alleged that the records sought were relevant to showing the true ownership of the General Aniline stock, and that they were within petitioner's control because petitioner and Sturzenegger were substantially identical. Petitioner did not dispute the general relevancy of the Sturzenegger documents, but denied that it controlled them. The District Court granted the Government's motion, holding, among other things, that petitioner's "control" over the records had been prima facie established.

Thereafter followed a number of motions by petitioner to be relieved of production on the ground that disclosure of the required bank records would violate Swiss penal laws, and consequently might lead to imposition of criminal sanctions, including fine and imprisonment, on those responsible for disclosure. The Government, in turn, moved under Rule 37(b)(2) of the Federal Rules of Civil Procedure to dismiss the complaint because of petitioner's noncompliance with the production order. During this period, the Swiss Federal Attorney, deeming that disclosure of these records in accordance with the production order would constitute a violation of Article 273 of the Swiss Penal Code, prohibiting economic espionage, and Article 47 of the Swiss Bank Law, relating to secrecy of banking records, "confiscated" the Sturzenegger records. This "confisaction" left possession of the records in Sturzenegger and amounted to an interdiction on

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Sturzenegger's transmission of the records to third persons. The upshot of all this was that the District Court, before finally ruling on petitioner's motion for relief from the production order and on the Government's motion to dismiss the complaint, referred the matter to a Special Master for findings as to the nature of the Swiss laws claimed by petitioner to block production and as to petitioner's good faith in seeking to achieve compliance with the court's order.

The Report of the Master bears importantly on our disposition of this case. It concluded that the Swiss Government had acted in accordance with its own established doctrines in exercising preventive police power by constructive seizure of the Sturzenegger records, and found that there was " . . . no proof, or any evidence at all of collusion between plaintiff and the Swiss Government in the seizure of the papers herein." Noting that the burden was on petitioner to show good faith in its efforts to comply with the production order, and taking as the test of good faith whether petitioner had attempted all which a reasonable man would have undertaken in the circumstances to comply with the order, the Master found that

. . . the plaintiff has sustained the burden of proof placed upon it, and has shown good faith in its efforts [to comply with the production order] in accordance with the foregoing test.

These findings of the Master were confirmed by the District Court. Nevertheless the court, in February, 1953, granted the Government's motion to dismiss the complaint and filed an opinion wherein it concluded that: (1) apart from considerations of Swiss law, petitioner had control over the Sturzenegger records; (2) such records might prove to be crucial in the outcome of this litigation; (3) Swiss law did not furnish an adequate excuse for petitioner's failure to comply with the production order,

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since petitioner could not invoke foreign laws to justify disobedience to orders entered under the laws of the forum; and (4) that the court in these circumstances had power under Rule 37(b)(2), as well as inherent power, to dismiss the complaint. 111 F.Supp. 435. However, in view of statements by the Swiss Government, following petitioner's intercession, that...

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