Abrey v Reusch

• Court: U.S. District Court — Southern District of New York
• Date: 12 April 1957

United States, District Court, Southern District, New York.

Abrey

and

Reusch et Al.

War — Termination of — Invalidation of Looted Bonds — Board for the Validation of German Bonds in the United States — Decisions of — Review in Municipal Courts Pursuant to Treaty — Scope of Review — The Law of the Federal Republic of Germany and of the United States of America.

War — Occupation of Enemy Territory — Respect for Private Property — Looted Bonds — Invalidation of — Board for the Validation of German Bonds in the United States — Decisions of — Review in Municipal Courts Pursuant to Treaty — Scope of Review —The Law of the Federal Republic of Germany and of the United States of America.

Arbitration — The Award — Appeal and Revision — Board for the Validation of German Bonds in the United States — Decisions of — Review in Municipal Courts Pursuant to Treaty — Scope of Review — The Law of the Federal Republic of Germany and of the United States of America.

The Facts.—This was an action to secure judicial review of a decision of the Board for the Validation of German Bonds in the United States, denying validation of certain debentures of Vereinigte Stahlwerke Aktiengesellschaft (“Steel Works”) which the plaintiff alleged he had acquired in Poland in June 1940 before fleeing to the United States. The Board had been established pursuant to the Agreement between the Government of the United States of America and the Government of the Federal Republic of Germany regarding the Validation of Dollar Bonds of German Issue, signed at Bonn on February 27, 1953 (4 U.S.T. 797 and 5 U.S.T. 1; T.I.A.S. No. 2793; 223 U.N.T.S. 167), and the Agreement between the same parties regarding Certain Matters Arising from the Validation of German Dollar Bonds, signed at Bonn on April 1, 1953 (4 U.S.T. 885 and 5 U.S.T. 1; T.I.A.S. No. 2794; 224 U.N.T.S. 3), for the purpose of invalidating German public and private foreign currency bonds which had been acquired for cancellation and had thereafter, during the Second World War, been looted.

The plaintiff had submitted his debentures to the Validation Board in 1953. The German Examining Agency objected to the validation. Following a hearing held in May 1955, the Board concluded that the plaintiff's debentures had been “on January 1, 1945, located in the vaults of the Reichsbank in Berlin and had been reacquired by the issuer” and therefore were not subject to validation under the German Law of August 25, 1952, for the Validation of German Foreign Currency Bonds (Bundesgesetzblatt I, August 26, 1952, p. 553), which was implemented and confirmed by the Agreements referred to above. The plaintiff then brought this action in the United States District Court against the members of the Validation Board, the issuer of the debentures and its successors, and the trustee and paying agent. Resort to the courts of the United States was permitted by Article 33 of the German Law of August 25, 1952. The plaintiff maintained that he was entitled to have the validity of the bonds determined at a full judicial trial before a judge and a jury. The defendants contended, inter alia, that the Agreements of 1953 and related Laws provided for review of the Board's decision only in the traditional sense of “judicial review” as understood in the United States—a review of the administrative record in order to ascertain whether there was substantial evidence to sustain the Board's determination.

Held: that the motion of the defendant members of the Validation Board for summary judgment must be denied. The plaintiff was entitled to a full hearing on the question of the validity of his bonds, in which the Court would be required to make an independent evaluation of the evidence. The waiver by the United States of the immunity of the members of the Board from service of process in “proceedings brought to determine whether the requirements for validation of bonds under the Validation Law have been met” implied no limitation on the scope of review by the Court of the Board's decision. The co-ordinate remedies provided to aggrieved persons, namely, arbitration and appeal to the courts of Germany, called for a full examination of the merits of the case. Analogous judicial review in the United States should accordingly be given a like scope.

The Court said (March 27, 1957):

“I

“Where the Validation Board has refused to validate a registrant's bonds, one of the remedial proceedings to which the bondholder may then resort is a proceeding in the United States courts for a full-scale judicial determination of the issue whether the plaintiff has met the requirements for validation of its bonds.1 Such a proceeding is recognized by the terms of the Treaty and the Validation Law.

“Article 33 of the Validation Law, entitled ‘Application to a Court of the Country of Offering,’ provides:

“‘(1) If, pursuant to the applicable foreign [American] law, the registrant [plaintiff] may apply to a court of the Country of Offering [United States] for a decision of the issue whether the requirements under this Law for validation by the Foreign Representative [Validation Board] of a registered bond have...