425 U.S. 682 (1976), 73-1288, Alfred Dunhill of London, Inc. v. Republic of Cuba

Docket Nº:No. 73-1288
Citation:425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301
Party Name:Alfred Dunhill of London, Inc. v. Republic of Cuba
Case Date:May 24, 1976
Court:United States Supreme Court
 
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Page 682

425 U.S. 682 (1976)

96 S.Ct. 1854, 48 L.Ed.2d 301

Alfred Dunhill of London, Inc.

v.

Republic of Cuba

No. 73-1288

United States Supreme Court

May 24, 1976

Argued December 10, 1974

Reargued January 19, 1976

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

After the "intervention" (nationalization) by Cuba in 1960 of the business and assets of five leading cigar manufacturers, the former owners (most of whom had fled to the United States) brought actions against petitioner and two other importers for, inter alia, the purchase price of cigars that had been shipped to the importers from the seized Cuban plants. Following conclusion of related litigation, the Cuban "interventors" (those named to possess and occupy the seized businesses, one of whom, and Cuba, are the respondents herein) were allowed to join in those actions, which were consolidated for trial. Both the former owners and the interventors asserted their right to sums due from the three importers for post-intervention shipments. As of the date of intervention, the importers owed various amounts for pre-intervention shipments, which they later paid to the interventors, who the importers mistakenly believed were entitled to collect accounts receivable. The former owners also claimed title to and demanded payment of these accounts. The District Court, acknowledging that, under the "act of state" doctrine reaffirmed in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, it had to give effect to the 1960 confiscation insofar as it purported to take the property of Cubans in Cuba, held that the interventors could collect all due and unpaid amounts for post-intervention shipments, but further held that the former owners were entitled to the pre-intervention accounts receivable, the situs of which was with the importer-debtors; and the former owners, rather than the interventors, were held entitled to collect those accounts from the importers, even though the latter had already mistakenly paid them to the interventors. The importers then claimed that they were entitled to recover the payments from the interventors by way of setoff or counterclaim. The interventors countered with the contention that any repayment obligation was a quasi-contractual debt whose situs was in Cuba, and that their refusal to pay was an act of state not subject to question in American courts. The District

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Court rejected the interventors' claim on the grounds that the repayment obligation was deemed situated in the United States, and that nothing had occurred qualifying for recognition as an act of state. The importers accordingly were allowed to set off their mistaken payments for pre-intervention shipments against the amounts they owed for post-intervention purchases. Since petitioner's claim against the interventors exceeded [96 S.Ct. 1856] their claim against it, petitioner was awarded judgment against the interventors for the full amount of its claim, from which the smaller judgment against it would be deducted. The Court of Appeals, while agreeing with the District Court in other respects, held that the interventors' obligation to repay the importers was situated in Cuba, and that the interventors' counsel's repudiation of the obligation constituted an act of state. Nevertheless, relying on First Nat City Bank v. Banco Nacional de Cuba, 406 U.S. 759, the court held that enforcement of the importers' counterclaims was not barred up to the limits of the respective claims asserted against them by the interventors, but that the affirmative judgment awarded petitioner was barred by the act of state doctrine to the extent that petitioner's claim exceeded its debt. In this respect, the District Court's judgment was reversed, giving rise to the petition for certiorari in this case.

Held: There is nothing in the record of this case revealing an act of state with respect to the interventors' obligation to return the sums mistakenly paid to them. Pp. 690-695.

(a) If the interventors, whose contentions, including the claimed act of state, with respect to the pre-intervention accounts, represented by the 1960 confiscation had been properly rejected by the courts below, were to escape repayment upon the basis of a second and later act of state involving the funds mistakenly paid to them, they had the burden of proving that act. P. 691.

(b) The interventors' refusal to repay the mistakenly paid funds does not constitute an act of state or indicate that the interventors had governmental, as opposed to merely commercial, authority for the refusal. The "Gul Djemal," 264 U.S. 90. Pp. 691-694.

(c) The interventors' counsel's statement during trial that the Cuban Government and the interventors denied liability and had refused to make repayment is no proof of an act of state, and no statute, decree, order, or resolution of the Cuban Government was offered in evidence indicating Cuban repudiation of its obligations in general or of the obligations herein involved. Pp. 694-695.

485 F.2d 1355, reversed.

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WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and POWELL, REHNQUIST, and STEVENS (except for Part III), JJ., joined. POWELL, J., filed a concurring opinion, post, p. 715. STEVENS, J., filed a concurring statement, post, p. 715. MARSHALL, J., filed a dissenting opinion in which BRENNAN, STEWART, and BLACKMUN, JJ., joined, post, p. 715.

WHITE, J., lead opinion

MR. JUSTICE WHITE delivered the opinion of the Court. *

The issue in this case is whether the failure of respondents to return to petitioner Alfred Dunhill of London, Inc. (Dunhill), funds mistakenly paid by Dunhill for cigars that had been sold to Dunhill by certain expropriated Cuban cigar businesses was an "act of state" by Cuba precluding an affirmative judgment against respondents.

I

The rather involved factual and legal context in which this litigation arises is fully set out in the District Court's

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opinion in this case, Menendez v. Faber, Coe & Greg, Inc., 345 F.Supp. 527 (SDNY 1972), and in closely related litigation, F. Palicio y Compania, S.A. v. Brush, 256 F.Supp. 481 (SDNY 1966), aff'd, 375 F.2d 1011 (CA2), cert. denied, 389 U.S. 830 (1967). For present purposes, the following recitation will suffice. In 1960, the Cuban Government confiscated the business and assets of the five leading manufacturers of Havana cigars. These companies, three corporations and two partnerships, were organized under Cuban law. Virtually all of their owners were Cuban nationals. None was American. These companies sold large quantities of cigars to customers in other countries, including the United States, where the three principal importers were Dunhill, Saks & Co. (Saks), and Faber, Coe & Gregg, Inc. (Faber). The Cuban Government named "interventors" to take possession of and operate the business of the seized Cuban concerns. Interventors continued to ship cigars to foreign purchasers, including the United States importers.

This litigation began when the former owners of the Cuban companies, most of whom had fled to the United States, brought various actions against the three American importers for trademark infringement and for the purchase price of any cigars that had been shipped to importers from the seized Cuban plants and that bore United States trademarks claimed by the former owners to be their property. Following the conclusion of the related litigation in F. Palicio y Compania, S.A. v. Brush, supra,1 the Cuban interventors2 and the Republic

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of Cuba were allowed to intervene in these actions, which were consolidated for trial. Both the former owners and the interventors had asserted their right to some $700,000 due from the three importers for post-intervention shipments: Faber, $582,588.86; Dunhill, $92,949.70; and Saks, $24,250. It also developed that as of the date of intervention, the three importers owed sums totaling $477,200 for cigars shipped prior to intervention: Faber, $322,000; Dunhill, $148,600; and Saks, $6,600. These latter sums the importers had paid to interventors subsequent to intervention on the assumption that interventors were entitled to collect the accounts receivable of the intervened businesses. The former owners claimed title to and demanded payment of these accounts.

Based on the "act of state" doctrine which had been reaffirmed in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), the District Court held in F. Palicio y Compania, S.A. v. Brush, supra, and here, that it was required to give full legal effect to the 1960 confiscation of the five cigar companies insofar as it purported to take the property of Cuban nationals located within Cuba. Interventors were accordingly entitled to collect from the importers all amounts due and unpaid with respect to shipments made after the date of intervention. The contrary conclusion was reached as to the accounts owing at the time of intervention: because the United States

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courts will not give effect to foreign government confiscations without compensation of property located in the United States and because, under Republic of Iraq v. First Nat. City Bank, 353 F.2d 47 (CA2 1965), cert. denied, 382 U.S. 1027 (1966), the situs of the accounts receivable was with the importer-debtors, the 1960 seizures did not reach the pre-intervention accounts, and the former owners, rather than the interventors, were entitled to collect them from the importers [96 S.Ct. 1858] even though the latter had already paid them to interventors in the mistaken belief that they were fully discharging trade debts in the ordinary course of their business.

This conclusion brought to the fore the importers' claim that their payment of the pre-intervention accounts had been made in...

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