SOCIETE INTERNATIONALE, ETC. v. Brownell

• Decision Date: 30 June 1955
• Docket Number: No. 12140.,12140.
• Citation: 225 F.2d 532
• Parties: SOCIETE INTERNATIONALE POUR PARTICIPATIONS INDUSTRIELLES ET COMMERCIALES S.A., etc., Appellant, v. Herbert BROWNELL, Jr., Attorney General of the United States, as Successor to the Alien Property Custodian, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

225 F.2d 532 (1955)

SOCIETE INTERNATIONALE POUR PARTICIPATIONS INDUSTRIELLES ET COMMERCIALES S.A., etc., Appellant, v. Herbert BROWNELL, Jr., Attorney General of the United States, as Successor to the Alien Property Custodian, et al., Appellees.

No. 12140.

United States Court of Appeals District of Columbia Circuit.

Argued November 29, 1954.

Decided June 30, 1955.

Petition for Rehearing Denied September 1, 1955.

Mr. John J. Wilson, Washington, D. C., with whom Mr. Roger J. Whiteford, Washington, D. C., was on the brief, for appellant.

Asst. Atty. Gen. Dallas S. Townsend, of the bar of the Court of Appeals of New York, pro hac vice, by special leave of Court, and Mr. David Schwartz, Atty. Dept. of Justice, with whom Messrs. George B. Searls, Sidney B. Jacoby, Paul E. McGraw and Ernest S. Carsten, Attys., Dept. of Justice, were on the brief, for appellees.

Before WILBUR K. MILLER, FAHY and DANAHER, Circuit Judges.

Petition for Rehearing In Banc Denied September 1, 1955.

FAHY, Circuit Judge.

The District Court dismissed a complaint filed therein by I. G. Chemie¹ against the Attorney General of the United States, as successor to the Alien Property Custodian, and the Treasurer of the United States.² The complaint was filed October 21, 1948, under the provisions of Section 9(a) of the Trading with the Enemy Act, 40 Stat. 411, 419, as amended, 50 U.S.C.A.Appendix, § 9(a), to recover properties allegedly valued at more than $100,000,000 which the Custodian had vested, under Section 5(b) of the Act and regulations thereunder, as the property of foreign nationals or of German interests.³ The property vested is over 90% of the stock of General Aniline & Film Corporation, of Delaware, and some $1,800,000 in various bank accounts and securities. I. G. Chemie itself is a Swiss holding corporation having its domicile at Basle, Switzerland. It claims ownership of the vested stock of General Aniline & Film Corporation and of the cash. It asserts that it is not an enemy within the meaning of the Act and, accordingly, availed itself first of the statutory procedure for seeking return of the property by filing an administrative claim with the Custodian. See § 9(a) of the Act. Upon denial of its administrative claim Chemie, as also authorized by § 9(a), sued in the District Court for recovery of the property. The Custodian in his answer denied the property was owned by Chemie and also denied Chemie's allegations that it was not an enemy within the meaning of the Act. The pleadings came to issue on these conflicting claims of ownership and enemy character.

On July 5, 1949, with the pleadings in the situation outlined, the District Court, Chief Judge Laws sitting, on cross-motions, ordered both Chemie and the Custodian to produce for inspection certain documents.⁴ Among those ordered to be produced by Chemie were records of H. Sturzenegger & Cie., a Swiss banking concern domiciled, like Chemie, in Basle. Before their production, however, constructive possession of these documents was taken by the Swiss Federal Attorney on June 21, 1950, by his order of June 15, 1950, or, as is sometimes referred to in the proceedings, he seized or confiscated them. His order recited that their production would constitute the fact of prohibited economic espionage under Article 273 of the Swiss Penal Code and would also violate bank secrecy under Article 47 of the Swiss Bank Law "which offense the Federal Authorities have to prevent in order to maintain the public security and order on the basis of their preventive police power". Chemie thereupon, June 22, 1950, moved in the District Court to be relieved of that portion of the order of July 5, 1949, which required it to produce the Sturzenegger records for inspection by the Custodian, stating, as counsel were informed by cable of June 21, 1950, that Sturzenegger & Cie. had been prohibited by order of the Swiss Federal Attorney from delivering its records for such inspection.

On October 31, 1950, the Custodian moved to dismiss the complaint under Rule 37(b) (2), Fed.R.Civ.P., 28 U.S. C.A., for failure of Chemie to produce the Sturzenegger papers. The Custodian also filed a motion for such relief as should be deemed just and appropriate, including a ruling that all matters which defendants could possibly show by the papers be taken as proven. This motion stated that because of the seizure the court's order of July 5, 1949, would not be complied with by Chemie in Switzerland, and intimated the seizure was procured, and could be undone, by Chemie.

With the matter unresolved the court by order of March 1, 1951,⁵ ordered William J. Hughes, Jr., Esq., as Special Master to hold proceedings and take evidence as to the good faith of Chemie in its efforts to comply with the production order of July 5, 1949, and directed him to report his findings and conclusions to the court for consideration in connection with Chemie's motion, filed November 28, 1950, for reconsideration of its motion of June 22, 1950, to be relieved of producing the papers. On December 4, 1951, the Special Master filed his opinion, and on July 9, 1952, filed his findings of fact and conclusions, which on Chemie's motion were adopted by the court March 31, 1953. The Special Master found no evidence of collusion between Chemie and the Swiss Government in the matter of the seizure. He made a detailed report favorable to Chemie's conduct in the matter, including its good faith. The District Court said of this report:

"* * * The report is well-considered and there is substantial evidence to support the findings. While it may be true plaintiff did not exercise the utmost diligence and persistence in seeking to rescind the seizure order of the Swiss Federal Attorney in respect of the Sturzenegger papers, the court finds plaintiff\'s efforts were those of a reasonable and prudent person in face of the obstacles confronting it. The court will overrule the Government\'s exceptions and adopt the Master\'s findings that the order of the Swiss Federal Attorney, dated June 15, 1950, confiscating the records, books, and files of the firm of H. Sturzenegger & Cie. is legally supportable under Swiss law, and that plaintiff demonstrated good faith in its efforts to secure production of the papers of H. Sturzenegger & Cie., as ordered by this court on July 5, 1949."

Societe Internationale, etc., v. McGranery, D.C.D.C., 111 F.Supp. 435, 440.

The Court also said, however, that the Special Master's report did not resolve the issue either of Chemie's motion to be relieved of production or of the Custodian's motion to dismiss Chemie's complaint.

Some additional facts should be adverted to before coming more closely to grips with the court's ultimate dismissal of the complaint. After the court ordered the Sturzenegger records to be produced Chemie made unsuccessful efforts to obtain their release by the Swiss authorities. Chemie and the Sturzenegger Bank also sent letters to some of the latter's customers seeking waivers of their secrecy rights in the records. The court by various orders extended the time for compliance into the month of October, 1953. During the intervening period waivers were obtained from a substantial number of persons and over 9,000 documents⁶ were cleared by the Swiss Federal Attorney. The process of obtaining waivers continued until some 63,000 documents were cleared and released for inspection and were tendered⁷ to the Custodian for that purpose on October 15, 1953. In an affidavit filed a few days later Chemie's counsel stated that of the 124 waivers and consents he had solicited, 91 consents had been received, though 17 of them did not appear primarily to involve Sturzenegger papers. A few persons had refused to waive, a few others were dead or did not respond, or were liquidated corporations whose successors could not be located. As to 3 there was evidence that there were no papers pertaining to them. No account books of H. Sturzenegger & Cie. were then tendered although Chemie advised the Custodian of a plan to be submitted to the Swiss government for photostating parts of books the entire contents of which were not cleared, with the matter declared secret blacked out.

By October 20, 1953, Chemie was unable to assure the court that full compliance would be made even if more time were granted. The court thereupon, in a memorandum dated November 16, 1953, stated its opinion that it was unlikely Chemie could make full production, as had been required by the Swiss government itself in its own earlier investigations of Chemie's ownership. By order of December 21, 1953, the court (a) granted Chemie's motion of the previous July 14th to extend to September 15, 1953, the time for production, (b) denied Chemie's motion of October 15, 1953, to vacate in part the order of March 31, 1953, and to extend further the time for production, and (c) dismissed the complaint, with prejudice. This last action is the ultimate subject of our review on this appeal.

Chemie's appeal from the dismissal of its complaint leaves unaffected certain counterclaims filed by the Custodian and certain claims of intervening minority stockholders of Chemie to interests in the vested property. See Rule 54(b), Kaufman v. Societe Internationale, 343 U.S. 156, 72 S.Ct. 611, 96 L.Ed. 853, and Societe Internationale Pour Participations Industrielles Et Commerciales, S. A. v. McGrath (McGranery), 17 Fed. Rules Serv. § 24a.2, Case 3 (D.C.D.C.).⁸

The District Court based its dismissal of the complaint on two separate but related grounds, of which Rule 37(b) (2)⁹ is more elaborately analyzed by the parties in this court.¹⁰ The court read this Rule in conjunction with Rule 34,¹¹ which provides that the court on motion may order any party to produce and permit inspection and copying or photographing of any designated documents, papers, books, accounts, etc., not privileged, "which constitute or contain evidence relating to any of the matters within the scope of the...