Banco Nacional de Cuba v. Farr

• Decision Date: 30 July 1965
• Citation: 243 F. Supp. 957
• Parties: BANCO NACIONAL de CUBA, Plaintiff, v. F. Shelton FARR, William F. Prescott, Emmet Whitlock, Lawrence H. Dixon, H. Bartow Farr, Elizabeth C. Prescott, Fabio Freyre and Helen G. Downs, co-partners doing business as Farr, Whitlock & Co., Defendants and Third-Party Plaintiffs, v. COMPANIA AZUCARERA VERTIENTES-CAMAGUEY de CUBA and Lehman Brothers, Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

243 F. Supp. 957

BANCO NACIONAL de CUBA, Plaintiff, v. F. Shelton FARR, William F. Prescott, Emmet Whitlock, Lawrence H. Dixon, H. Bartow Farr, Elizabeth C. Prescott, Fabio Freyre and Helen G. Downs, co-partners doing business as Farr, Whitlock & Co., Defendants and Third-Party Plaintiffs, v. COMPANIA AZUCARERA VERTIENTES-CAMAGUEY de CUBA and Lehman Brothers, Third-Party Defendants.

United States District Court S. D. New York.

July 30, 1965.

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Rabinowitz & Boudin, New York City, for plaintiff, Victor Rabinowitz, New York City, of counsel.

Baker, Nelson, Williams & Mitchell, New York City, for defendants and third-party plaintiffs, C. Dickerman Williams, New York City, of counsel.

Simpson, Thacher & Bartlett, New York City, for third-party defendants, Whitney North Seymour, Sr., Eastman Birkett, John A. Guzzetta, Gerald M. Levin, Joel S. Hoffman, New York City, of counsel.

Robert M. Morgenthau, U. S. Atty., for United States, amicus curiae, J. William Doolittle, First Asst., Civil Division, Dept. of Justice, Eugene R. Anderson, Asst. U. S. Atty., Southern Dist. of New York, Bruno A. Ristau, Carl F. Goodman, Attys., Dept. of Justice, Washington, D. C., of counsel.

Brush & Bloch, New York City, for Cuban cigar manufacturers, amici curiae, Monroe Percy Bloch, Jac M. Wolff, New York City, of counsel.

Milbank, Tweed, Hadley & McCloy, New York City, for The Chase Manhattan Bank, amicus curiae, A. Donald MacKinnon, Roy C. Haberkern, Jr., Andrew J. Connick, New York City, of counsel.

John G. Laylin, Washington, D. C., for North American Sugar Industries, Inc., Cuban American Sugar Mills Co., and Cuban-American Mercantile Corp., amici curiae, William H. Allen, William A. Dobrovir, Covington & Burling, Washington, D. C., of counsel.

Katz & Sommerich, New York City, for Cultural, S.A. and Robert I. Williams, amici curiae, Otto C. Sommerich, Benjamin Busch, New York City, of counsel.

Shearman & Sterling, New York City, for First National City Bank, amicus curiae, Henry Harfield, William Harvey Reeves, New York City, of counsel.

FREDERICK van PELT BRYAN, District Judge:

This case is before me on remand from the Supreme Court of the United States (Banco Nacional de Cuba v. Sabbatino et al., 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed. 2d 804 (1964)), which reversed summary judgment in favor of defendants granted by the District Court (193 F.Supp. 375 (1961)) and affirmed by the Court of Appeals (2 Cir., 307 F.2d 845 (1962)). The facts are fully stated in the opinions of the Supreme Court, 376 U.S. at 401-408, 84 S.Ct. 923, and of the courts below. It is unnecessary to repeat them in detail here except to the extent necessary to an understanding of the issues now presented.

The case involves the proceeds of the sale of a cargo of sugar which was expropriated by the Castro government while in Cuban territorial waters from Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.), a corporation organized under Cuban law whose capital stock was owned principally by United States citizens.

The sugar was sold to Farr, Whitlock & Co. (Farr), New York sugar brokers, and the proceeds of the sale came to the United States.

The claim of plaintiff Banco Nacional de Cuba (Banco), an instrumentality of the Cuban government, to the proceeds of the expropriated sugar is founded on the Cuban expropriation. Defendant Farr and defendant Sabbatino,¹ a State Court Receiver for C.A.V. who held the proceeds, took the position that the Cuban government was not entitled thereto but that the proceeds were the property of C.A.V. from whom the sugar was expropriated.

Judgment for the defendants below was granted on the ground that the expropriation of the sugar violated international law, was therefore invalid and unenforceable in our courts, and was ineffective to deprive C.A.V. of its rights in the sugar and its proceeds.

The Supreme Court held that the "act of state doctrine" proscribed a challenge to the validity of the Cuban expropriation law in this case even if it violated international law. It reversed and remanded the case to the District Court for further proceedings.

On October 7, 1964, subsequent to the decision of the Supreme Court and before judgment was entered on remand, the President signed the Foreign Assistance Act of 1964 containing an amendment sponsored by Senators Hickenlooper and Sparkman, which precipitated the present phase of this litigation. (Section 301(d) (4) of Public Law 88-633, 78 Stat. 1009, 1013, hereafter referred to as the Hickenlooper Amendment.) The Amendment provided:

"Notwithstanding any other provision of law, no court in the United States shall decline on the ground of the federal act of state doctrine to make a determination on the merits giving effect to the principles of international law in a case in which a claim of title or other right is asserted by any party including a foreign state (or a party claiming through such state) based upon (or traced through) a confiscation or other taking after January 1, 1959, by an act of that state in violation of the principles of international law, including the principles of compensation and the other standards set out in this subsection: Provided, That this subparagraph shall not be applicable (1) in any case in which an act of a foreign state is not contrary to international law or with respect to a claim of title or other right acquired pursuant to an irrevocable letter of credit of not more than 180 days duration issued in good faith prior to the time of the confiscation or other taking, or (2) in any case with respect to which the President determines that application of the act of state doctrine is required in that particular case by the foreign policy interests of the United States and a suggestion to this effect is filed on his behalf in that case with the court, or (3) in any case in which the proceedings are commenced after January 1, 1966."

When the Amendment became law proceedings with respect to the entry of judgment on remand were still pending.

Plaintiff had moved for entry and execution of judgment in its favor. Complications not relevant here arose from the Cuban Assets Control Regulations effective July 8, 1963 (31 C.F.R. §§ 515.101-.808), which, it was claimed, required that entry of judgment and execution must be licensed by the Treasury Department. There were further complications arising from the fact that the funds which were the subject of the action had been placed in the hands of Lehman Bros. pending the outcome of this litigation under an escrow agreement executed by Sabbatino, the C.A.V. receiver, Farr, C.A.V. and the plaintiff. Efforts to resolve these complications to the satisfaction of the various parties in interest were unsuccessful.

Plaintiff then made a superseding motion for entry and execution of judgment challenging the application and validity of the Cuban Assets Control Regulations insofar as they are claimed to relate to this case. Before that motion came on for hearing defendant Farr moved for leave to serve a third party complaint against C.A.V. and Lehman Bros. alleging their liability to Farr under the escrow agreement for the plaintiff's claim against Farr. At this stage of the proceedings the Hickenlooper Amendment became law. Farr's motion to bring in C.A.V. and Lehman as third party defendants was then granted and the third party defendants served answers to the third party complaint.

Farr then moved pursuant to Rule 56, F.R.Civ.P., for summary judgment dismissing the complaint on the basis of the Hickenlooper Amendment. The third party defendants made similar motions to dismiss the complaint and the third party complaint pursuant to Rules 14 and 56.

The defendants and third party defendants contend (1) that the Hickenlooper Amendment removed the bar interposed by the act of state doctrine to a determination of the validity of the Cuban expropriation under international law; (2) that under the Amendment this court is now required to adjudicate that issue; and (3) that in making such an adjudication this court is bound by the determination of the Court of Appeals in this case and defendants were therefore entitled to judgment dismissing the complaint.

Plaintiff, on the other hand, maintains (1) that the Hickenlooper Amendment is not applicable to this case, and (2) that if it is it is unconstitutional in its application to this case.

Some thirty-five cases involving a wide spectrum of questions arising out of Cuban expropriations are before me which had been delayed pending the final determination of the case at bar. These cases were likely to be affected if not determined by the decision on the present motions. Opportunity was therefore given to all counsel in these cases to participate in the argument of the motions and submit briefs. A number did so.

The United States, through the Department of Justice, also appeared as amicus curiae at the suggestion of the court. The United States took the position that the Amendment did not apply to any pending cases but that if it did it was valid and constitutional.

The questions posed here then are:

1. Does the Hickenlooper Amendment apply to pending cases generally?

2. Does it apply to the case at Bar?

3. Is it unconstitutional in any respect?

4. What is the effect of the Amendment on this case?

The legislative background of the Amendment.

In the spring of 1964 Congress had under consideration various amendments to the Foreign Assistance Act to be embodied in the Foreign Assistance Act of 1964. The section of the Act into which the Hickenlooper Amendment was later inserted already contained a number of prohibitions against aid to Communist countries and provided specifically that no assistance was to be given to Cuba, authorized the President to place an embargo on all trade with Cuba and suspended aid to countries which had expropriated property of the United States citizens without adequate...