# Petition for Writ of Certiorari — Baker v. Gotz > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1796%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1974 - **Citation:** 417 U.S. 955 ## Text Supreme Court of the Unite .90°9 FILE copy} “FTP APR 25 1974 IN THE October Term, 1974. No.73-1609 GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, Trustees of the Property of the PENN CENTRAL TRANSPORTATION COMPANY, Petitioners, « FIDEL G6TZ, VOLKER G6TZ, FINANZ AKTIENGESELL- SCHAFT, VILEDA ANSTALT, G6TZ AKTIENGESELL- SCHAFT OF ST. GALLEN (Also Known as GOTZ AG OF ST. GALLEN, or GO6TZ ANSTALT OF ST. GALLEN, or GOTZ ETABLISSEMENT OF ST. GALLEN, or GOTZ ESTABLISH- MENT OF ST. GALLEN), INTER-INDUSTRY AKTIENGE- SELLSCHAFT OF ST. GALLEN (Also Known as INTER- INDUSTRY AG OF ST. GALLEN, or INTER-INDUSTRY ANSTALT OF ST. GALLEN, or INTER-INDUSTRY ETAB- LISSEMENT OF ST. GALLEN, or INTER-INDUSTRY ESTAB- LISHMENT OF ST. GALLEN), INTER-MARKETING CORP. ANSTALT (Also Known as INTER-MARKETING CORP. ETABLISSEMENT, or INTER-MARKETING CORP. ESTAB- LISHMENT), MINOLTA ANSTALT, and FINANZ AG ST. GALLEN. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT. Epwin P. Rome, Marvin Comisky, Morris L. WEISBERG, 4 Penn Center Plaza, Philadelphia, Pennsylvania. 19103 Wituiam E. Taytor, Jr., 500 Continental American Building, On Rodney Square, Wilmington, Delaware. 19801 ‘ Attorneys for Petitioners - International Printing Co., 711 So. 50th St., Phila., Pa. 19143 — Tel. (215) 727-8711 WICRAEL RODAK JR_GLE ie: a ee ee eS me INDEX. SY Cp ecnsun cuascncicindaceedenecssenesesnes JURISDICTION... 22. cee ccc cece ccc cc cscs cceecccces CIN PUD «ons occ ncccnccaccccccccccersssess CONSTITUTIONAL AND STATUTORY PROVISIONS AND PROCE- en I NII 0 Fe aw euine Aare naaememmeennmneeie? ni SUNN a ok tah atc tintin wail wen DS IE iccicnicdcancwenenenhudenans oe PRED oidscucccteeieawekwewseny REASONS FOR GRANTING THE WRIT ............2eceeecees I. The Court of Appeals In Banc Was Equally Divided on the Important Federal Constitutional Questions Dt ctinisoueeauesubanndbolimcubagmesnae II. This Court Should Finally Settle the Issue Whether the Delaware Sequestration Procedure Violates the Due Process Provisions of the Fifth and Fourteenth Amendments Because It Authorizes the Seizure of Property Without Notice or Opportunity for Hear- De csatdavedwnseivessnestkeeabeesbeseuseeusbs III. This Court Should Finally Settle the Issue Whether the Delaware Sequestration Procedure Violates the Due Process Provisions of the Fifth and Fourteenth Amendments When the State Lacks Minimum Con- tacts With Either the Subject Matter or the Parties IV. This Court Should Settle the Question Whether the Sequestrations Constituted an Unconstitutional SE SD viwenianreveneseedeunenns (TESS TTD RRA I ie RS ER oe ie ON IDE GRO LE ONE EEN TP 12 15 15 21 MR eA te OTS By he by 2 Nr asics yc ty eet rd BDisrieriisstivtesirsions s ctptiaitn sends TABLE OF CASES CITED. Page Boyd v. United States, 116 U. S. 616 (1886) ........... 13, 25, 26 Camara v. Municipal Court, 387 U. S. 523 (1967) ......... 25 Chicago R. I. & P. R. Co. v. Sturm, 174 U. S. 710 (1899) ... 22 English v. Cunningham, 80 S. Ct. 18 (1959) ............... 16 Forsyth v. Hammond, 166 U. S. 506 (1896) ............... 2 Fuentes v. Shevin, 407 U. S. 67 (1972) ..... 12, 17, 18, 19, 20, 21, 23 Hanson v. Denckla, 357 U. S. 235 (1958) ............... 23 Biesvis wv. at, THB UL. & BES CUBS) ons cccccwcvcccccwcs 22 International Shoe v. Washington, 326 U. S. 310 (1945) . .22, 23,24 Landau v. Best, 187 A. 2d 75, 41 Del. Ch. 1 (Del. Supr. 1962) 24 Lebowitz v. Forbes Leasing and Finance Corp., 456 F. 2d 979 SE SEED cpa dadnnadnvnsiaecdavisasenaeacessaus 19, 21 Magnum Import Co. v. De Spoturno Coty, 262 U. S. 159 SE Sc .ccrdekudkase ponddeke ceaeetesebaecancenhes 16 McDonald v. Mabee, 243 U. S. 90 (1917) ................ 23 Meredith v. Fair, 306 F. 2d 374 (Sth Cir. 1962) ............ 16 Ownbey v. Morgan, 256 U. S. 94 (1920) ......... 12, 19, 20, 23, 24 Pennoyer v. Neff, 95 U. S. 714 (1877) ..........cceeeeee 22 Sniadach v. Family Finance Corp., 395 U. S. 337 (1969) .... 19 Weinress v. Bland, 71 A. 2d 59, 31 Del. Ch. 269 (Del. Ch. ST cccuan tithe edu seated saenosseaneneeacane’ 24 MISCELLANEOUS. Page Cary, Federalism and Corporate Law: Reflections Upon Dela- wore, SP Tele ©. 3. Ge CIPS) none ccckvcccccdescscc 17 Delaware Court of Chancery, Rules, Rule 4(db) ....2,5, 10, 11,13 ee Soy ED PEED gccnciescccestanecsnecaseen 24 ieee ele Ou C es aie irae gal lok 23 A a ed wed aod 2, 4, 8, 10 Federal Rules of Civil Procedure, Rule 4(e) ......... 2, 3, 4, 8, 10 Federal Rules of Appellate Procedure, Rule 35(a) .......... 15 Staff Report of the Committee on Banking and Currency of the House of Representatives “The Penn Central Failure and the Role of Financial Institutions” (1971), Part IV ... 9 is EE ID. 5 oc cae cncankeaGacn aude nck 24 United States Constitution : i sk a a anes icin SS oucmarc@ eae 25 I: 13, 21 Fourteenth Amendment .......... eR PrES eR men Tea? 13, 21 an Mn. dc nil nd dagen cause htekamauewas 2 Pn te ie IE als cb aeons ini dose beuas 10 ls ee ED Gixtcknbengacecavenabacbadenseecac 10 Wright & Miller, Federal Practice and Procedure: Civil (1969) PE at ek dnketadnenennnbansseueess oracles 3 PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT. Petitioners (Trustees) are the Trustees of the Property of Penn Central Transportation Company (Penn Central), Debtor in proceedings for the reorgan- ization of a railroad pursuant to Section 77 of the Bankruptcy Act, No. 70-347 pending in the United States District Court for the Eastern District of Penn- sylvania. The Trustees pray that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the Third Circuit entered in this case on February 21, 1974. OPINIONS BELOW. The per curiam opinion of the Court of Appeals in bane dated February 21, 1974 is not reported, and is printed in the Appendix (6a-7a).’ The majority and dissenting opinions of the panel of the Court of Ap- peals dated August 31, 1973 are not reported, and are printed in the Appendix (12a-66a). The opinion of the District Court dated December 20, 1971 is reported at 336 F. Supp. 197 (D. Del. 1971), and is printed in the Appendix (73a-85a). 1. References are to the pages of the Appendix to this petition, separately presented. Rule 23(1) of the Rules of this Court. a eee ee ee ee See SE teh we ned SS it OE al acta im I EI ye eas Bitte tates tatandowrniin spaces Ned to Petition for Writ of Certiorart JURISDICTION. The Court of Appeals in bane entered judgment (4a-5a) on February 21, 1974. A timely petition for rehearing containing a suggestion for rehearing in bane was filed by the Trustees on March 6, 1974, and was denied by order (2a-3a) of the Court of Appeals in bane dated March 15, 1974. The Trustees filed a motion for stay pending application to this Court for a writ of certiorari, which the Court of Appeals granted by order (la) dated April 1, 1974, thereby staying its mandate until April 25, 1974. The jurisdiction of this Court is invoked under 28 U.S. C. § 1254(1). This Court’s power to issue a writ of certiorari is in no way affected by the fact that the Court of Appeals in bane was equally divided. Forsyth v. Hammond, 166 U. S. 506, 513 (1896). QUESTIONS PRESENTED. Under Rule 4(e) of the Federal Rules of Civil Pro- cedure, whenever a statute or rule of court of the state in which a district court is held provides for notice toa party not an inhabitant of or found within the state to appear and respond or defend in an action by reason of the seizure of his property located within the state. service of the summons may be made under the eireum- stances and in the manner prescribed in the statute or rule. Delaware’s sequestration procedure—embodied in 10 Del. C. § 366 and in Delaware Court of Chancery Rule 4(db)—provides for such notice to a party not an Petition for Writ of Certiorari 3 inhabitant of or found within the state to appear by reason of the sequestration of his property located within the state. The Delaware District Court issued an order pursuant to Rule 4(e) providing for service of the summons, in accordance with the Delaware se- questration procedure, upon defendants, all aliens located in Europe. The questions presented are: 1. Does such sequestration violate the due process provisions of the Fifth and Fourteenth Amendments? because it provides for the seizure of a non-resident’s property located within the state without prior notice and an opportunity to be heard? 2. Does such sequestration violate the due process provision of the Fifth and Fourteenth Amendments when there are no minimum contacts between the state and either the subject matter or the defendants, but the defendants are all aliens not otherwise suable in the United States? 3. Did the sequestrations herein constitute unrea- sonable searches and seizures in violation of the Fourth Amendment ? 2. When service of process is made pursuant to state law, the federal court applies both federal and state law—federal law to deter- mine the constitutional validity of the service and state law to see if the procedures set out in the applicable state statute or rule have been followed. Wright & Miller, Federal Practice and Procedure: Civil (1969) § 1075, p. 316. Bens. Yanai A acne 0 4 Petition for Writ of Certiorari CONSTITUTIONAL AND STATUTORY PROVISIONS AND PROCEDURAL RULES INVOLVED. Rule 4(e) of the Federal Rules of Civil Procedure provides in part: Whenever a statute or rule of court of the state in which the district court is held provides (1) for service of a summons, or of a notice, or of an order in lieu of summons upon a party not an inhabitant of or found within the state, or (2) for service upon or notice to him to appear and respond or defend in an action by reason of the attachment or garnish- ment of similar seizure of his property located within the state, service may in either case be made under the circumstances and in the manner pre- scribed in the statute or rule. 10 Del. C. § 366 provides in part: § 366. Compelling appearance of non-resident defendant (a) If it appears in any complaint filed in the Court of Chancery that the defendant or any one or more of the defendants is a non-resident of the State of Delaware, the Court may make an order directing such non-resident defendant or defend- ants to appear by a day certain to be designated. Such order shall be served on such non-resident defendant or defendants by mail or otherwise, if practicable, and shall be published in such manner as the Court directs, not less than once a week for three consecutive weeks. The Court may compel the appearance of the defendant by the seizure of all or any part of his property, which property may be sold under the order of the Court to pay the Petition for Writ of Certiorari 5 demand of the plaintiff, if the defendant does not appear, or otherwise defaults. Any defendant whose property shall have been so seized and who shall have entered a general appearance in the cause may, upon notice to the plaintiff, petition the Court for an order releasing such property or any part thereof from the seizure. The Court shall release such property unless the plaintiff shall satisfy the Court that because of other circum- stances there is a reasonable possibility that such release may render it substantially less likely that plaintiff will obtain satisfaction of any judgment secured. If such petition shall not be granted, or if no such petition shall be filed, such property shall remain subject to seizure and may be sold to satisfy any judgment entered in the cause. The Court may at any time release such property or any part thereof upon the giving of sufficient security. Rule 4(db) of the Delaware Court of Chancery Rules provides: (db) Service by Publication and Seizure. (1) no order shall be entered under 10 Del. C. § 366 un- less it appears in the complaint that the defendant or any one or more of the defendants is a non-resi- dent of the State of Delaware and the application therefor is accompanied by the affidavit of a plain- tiff or other credible person stating: (a) As to each non-resident defendant whose appearance is sought to be compelled, his last known address or a statement that such address is unknown and cannot with due dili- gene be ascertained. Petition for Writ of Certiorari (b) The following information as to the property of each such defendant sought to be seized : (1) A reasonable description thereof. (2) The estimated amount and value thereof. (3) The nature of the defendant’s title or interest therein; and if such title or interest be equitable in nature, the name of the holder of the legal title. (4) The source of affiant’s informa- tion as to any of the items as to which the affidavit is made on information and . belief. (5) The reason for the omission of any of the required statements. (2) Within three business days after the filing of such bond or bonds as may be required or within such other times as the court may fix, the Register shall, in addition to making the required publica- tion, send by registered or certified mail to each defendant whose appearance is sought to be com- pelled a certified copy of the order and a copy of the pleading asserting the claim. (3) After the filing of such bond or bonds as may be required by the order, but not later than 10 days after the date of the order of seizure, the sequestrator shall serve a certified copy of the order upon the person, persons or corporation hav- ing possession or custody of the property or control of its transfer, and shall seize the property. The sequestrator shall seize property which is, or ap- Ty Petition for Writ of Certiorari 7 pears, not to be susceptible of physical seizure within the state by serving a direction in writing that the person, persons or corporation having pos- session or custody of the property or control of its transfer, shall: (a) retain the property and recognize no transfer thereof until further notice from the sequestrator or order of the Court; (b) forthwith make a notation upon any records pertaining to the property that such property is held pursuant to the order of the Court ; and (ec) within ten days after the date of such service, deliver a certificate under oath to the sequestrator, specifying (i) such defendant’s property, if any, of which it has possession, custody or control or control of its transfer ; (ii) whether the title or interest of each such defendant is legal or beneficial; and (iii) if legal, the name and address of the holder of any equitable title or interest therein, if known, and, if beneficial, the name and address of the holder of the legal title thereto, if known. (4) Within twenty days after seizure, unless otherwise specially ordered, the sequestrator shall make his return to the court, therein setting out all proceedings hereunder to the date of said re- turn, including the date and hour of service and seizure pursuant to subdivision (3) hereof. (5) The court may in its discretion and sub- ject to statutory requirements dispense with or ¥ divs Sd = raters rinse sett rie ne caret sient. at ia Lani rE 8 Petition for Writ of Certiorari modify compliance with the requirements of any part of this rule in any cause upon application to it stating the reasons therefor. The full texts of Rule 4(e) of the Federal Rules of Civil Procedure and of 10 Del. C. § 366 are set out in the Appendix, as well as other applicable statutory and constitutional provisions involved. ee Petition for Writ of Certiorari 9 STATEMENT OF THE CASE. 1. In the District Court. This case, which squarely presents the opportunity for this Court to answer a challenge to the continuing validity of established precedents, has its roots in a bizarre factual setting. In 1969, prior to its reorganization, Penn Central obtained a $10 million loan from a syndicate of German banks, $6 million of which was soon used in connection with a railroad equipment program. The remaining $4 million was placed in a trust account in Liechtenstein. After Penn Central instituted reorganization pro- ceedings in 1970 and the appointment of the Trustees, it was discovered that the $4 million * of the loan pro- ceeds was no longer held in the trust and was in the pos- session of defendant Vileda Anstalt, a Liechtenstein entity owned and controlled by Fidel Gotz (Gotz) a German citizen.* On March 10, 1971, the Trustees instituted suit to recover the misappropriated funds belonging to the Debtor. This suit was brought against Gotz, his son 3. Specifically, the sum of DM 16,800,000 which in 1969 had a value of in excess of $4.6 million, and which now has a value in excess of $6 million. 4. Gotz has been described in a Congressional Staff Report on the subject as “a German national operating his far-flung business ventures out of the tiny European state of Liechtenstein” (103a). The conversion of the $4 million by Gotz through entities controlled by him, has been described in the same Report “as a tale of financial chicanery rarely matched in the annals of the business world” (102a), and as having “all the elements of a film script of international finan- cial intrigue” (109a). See Staff Report of the Committee on Bank- ing and Currency of the House of Representatives entitled “The Penn Central Failure and the Role of Financial Institutions~ (1971). Part IV of that study is entitled “Penn Central Loses Four Million Dollars: A Story of International Intrigue,” and is set out in the Appendix (100a-134a). wise aa | PR eR Pas a Oe ie ne ak ee 10 Petition for Writ of Certiorari and seven ° entities, alleged to be controlled by Gotz, all aliens located in Europe, and was filed in the United States District Court for the District of Delaware, basing the jurisdiction of the District Court upon 28 U.S. C. § 1332(a) (2) pertaining to aliens and diversity of citizenship. Among other things, the complaint al- leged that Gotz, acting through—and in conspiracy with—the other alien defendants, fraudulently con- verted and embezzled $4 million of Penn Central’s moneys from the trust located in Liechtenstein. Utilizing the provisions of Rule 4(e) of the Fed- eral Rules of Civil Procedure, the Trustees applied to the District Court for a sequestration order under 10 Del. C. § 366 (87a) and under Delaware Court of Chancery Rule 4(db) (89a). The Trustees’ complaint alleged that the defendants were all aliens located in Europe. The Trustees filed the affidavit prescribed by Delaware Court of Chancery Rule 4(db), containing certain information concerning the property of the non-resident defendants to be seized. The District Court’s sequestration order directed the service of copies of the summons, complaint and order by certified mail upon defendants in Europe, and also directed publication of the order in a local newspaper. The clerk of the District Court sent such copies to the defendants at their European addresses, which copies were received. The District Court’s sequestration order also provided for the appointment of a seques- 5. Four corporations and three Anstalt defendants. An -instalt (translated as Establishment or Foundation) is an entity peculiar to Liechtenstein, and in many ways is like a trust. There are no shares, and it may be organized by one person. Rights in an Anstalt are freely transferable by written assignment. 6. As to venue, 28 U. S. C. § i391(d) provides that “[d] An alien may be sued in any district.” - die Petition for Writ of Certiorart 11 trator, who served sequestration notices’ upon the Delaware corporations, shares of stock or obligations of which were alleged in the affidavit to belong to de- fendants. Asa result of the District Court’s sequestra- tion order, shares of stock and obligations * of three Delaware corporations belonging to the three Anstalt defendants was seized. Refusing to enter an appear- ance in the District Court, all defendants moved to quash the sequestrations and to dismiss the complaint. On December 20, 1971 the District Court issued an order (7la-72a) vacating the sequestrations, upon the sole ground (84a) that the affidavit filed by the Trustees failed, in its view, to properly specify the property of each defendant sought to be seized, and that the omission of the information was not excused by giving the reasons for such omissions—a procedure author- ized by Delaware Court of Chancery Rule 4(db).° The Trustees appealed (69a-70a) from the District Court’s order of December 20, 1971. They moved for 7. Sub-paragraph 3 of Delaware Court of Chancery Rule 4(db) (90a) provides, in part, for seizure of intangible property by service of a notice upon the person, persons, or corporation “having posses- sion or custody of the property or control of its transfer”. 8. Defendants contend that the value of this property at the time of sequestration was in excess of $7 million. 9. Delaware Court of Chancery Rule 4(db), sub-paragraph (1)(b), provides that certain information “as to the property of each such defendant sought to be seized” shall be included in the affidavit, including “(3) The nature of the defendant’s title or in- terest therein * * *.” However, sub-paragraph (b)(1)(5) (89a) also provides that the affidavit shall include “The reason for the omission of any of the required statements” (89a), thus permitting omission of the information. Further, subparagraph (5) provides that “The Court may in its discretion and subject to statutory require- ments dispense with or modify compliance with the requirements of any part of this rule in any cause upon application to it stating the reasons therefor.” (91a). F ated bib eQiles Sikes pettaibas 12 Petition for Writ of Certiorart a stay *° in the Court of Appeals, which was granted on December 23, 1971 (67a-68a). 2. In the Court of Appeals. A panel of the Court of Appeals on August 31, 1973 reversed the judgment of the District Court in a scholarly opinion written by Judge Adams for the majority (13a-42a); Judge Gibbons dissented (42a- 66a). The majority did not agree with the sole ground of the District Court’s ruling—the asserted insuffi- ciency of the affidavit filed on behalf of the Trustees— and held the affidavit sufficient under Delaware law (18a-22a). Meeting the first of defendants’ constitutional attacks on the Delaware sequestration statute under the Fifth and Fourteenth Amendments, the majority held that the Delaware sequestration procedure repre- sented an ‘‘extraordinary situation’’ within the mean- ing of Fuentes v. Shevin, 407 U. S. 67 (1972). The majority noted (27a-28a) that in Ownbey v. Morgan, 256 U.S. 94 (1920), this Court had upheld the consti- tutionality of the Delaware foreign attachment statute —a statute closely related to the sequestration statute— and that Ownbey was referred to by this Court in Fuentes as an example of such an ‘‘extraordinary situation.”’ With regard to defendants’ attack on the seques- trations under the Fourth Amendment, the majority held that the Delaware sequestration procedure was not encompassed by the Fourth Amendment, relying 10. Without such a stay, defendants would have been free im- mediately to transfer the sequestered property, thereby defeating the jurisdiction of the District Court. The stay pending appeal was con- ditioned by the Court of Appeals upon the posting by the Trustees of a bond in the amount of $25,000. Petition for Writ of Certiorart 13 upon Boyd v. United States, 116 U. S. 616 (1886) and Wyman v. James, 400 U. 8. 309 (1971) (40a-41a). Judge Gibbons dissented, asserting, in part, that the sequestrations were violative of the due process provisions of the Fifth and Fourteenth Amendments because Delaware lacks minimum contacts with either the subject matter or the parties (55a-66a). The defendants filed a petition for rehearing in bane, urging review by the full court of what de- fendants described as ‘‘several major and novel issues as to constitutional matters on the frontiers of current constitutional litigation’’..*. On October 10, 1973 the Court of Appeals granted (8a-9a) the defendants’ petition for rehearing in bane. After reargument, the Court of Appeals in banc ” filed a per curiam opinion (6a-7a) stating simply that “the Court is evenly divided’’, and that the order of the District Court appealed from would be affirmed. The earlier reversal (10a-lla) of the order of the District Court, which resulted from the panel’s de- cision was transformed—because of the equal division of the Court in bane on the constitutional issues which prompted the reargument—into an affirmance of the order of the District Court of December 20, 1971, vacating the sequestrations. Thus, because of the equal division of the eight Judges of the Court of Appeals on the constitutional issues involved, the order of the District Court, based upon alleged non- conformance of the Trustees’ affidavit to the require- ments of Delaware Court of Chancery Rule 4(db)— 11. Petition of Appellees for Rehearing and Suggestion of Re- hearing In Banc, p. 1. 12. The Court of Appeals in banc consisted of the nine active Judges with the exception of Judge Hunter who disqualified himself. sient S ALR BAIN UIA EE ER BRE BB Di RRA AI OS cai j 14 Petition for Writ of Certiorart which ruling of the District Court the panel had held to be erroneous under Delaware law—was affirmed. The Trustees then petitioned for a rehearing in bane, which the Court of Appeals in bane denied (2a- 3a) on March 15, 1974. The Trustees also moved for stay pending application to this Court for a writ of certiorari. Defendants opposed the stay, and de- manded that any stay be conditioned upon the posting by the Trustees of a bond in the amount of $1 million. On April 1, 1974 the Court of Appeals issued an order (1a) granting the Trustees’ motion for a stay pending the filing of this petition, and continuing in effect the $25,000 bond originally posted by the Trustees for the stay pending appeal, thus rejecting the defendants’ demand for a $1 million bond. Petition for Writ of Certiorari 15 REASONS FOR GRANTING THE WRIT. I. The Court of Appeals In Banc Was Equally Divided on the Important Federal Constitutional Questions Involved. 1. The federal constitutional issues raised by de- fendants were briefed for—and argued—to the courts below. These issues were strenuously urged in de- fendants’ petition for rehearing in bane. While the District Court’s opinion rested upon the narrow ground of alleged noncompliance with the Delaware Court of Chancery Rule, the majority of the panel held the District Court’s decision to be erroneous, and went on to decide the constitutional issues, in an opinion by Judge Adams, from which Judge Gibbons dissented. It is indisputable that the Court of Appeals granted defendants’ petition for rehearing in bane in order to review the exceptionally important constitu- tional questions '* involved, and which were again 13. Section M of the Internal Operating Procedures of the United States Court of Appeals for the Third Circuit (1974), re- cently published, describes what has been the Court’s practice with regard to rehearing in banc: M. Rehearing, Criteria and Practice for Voting for 1. General Criteria and Court Practice for Voting for Re- hearing : a. Granting of rehearing in banc is totally within the discretion of the cricuit judges of this Court in regular active service. b. F. R. A. P. 35(a), hearing in banc or rehearing in banc, is not favored and ordinarily will not be ordered except (1) where consideration by the full court is neces- sary to secure or maintain uniformity of its decisions, or (2) where the proceeding involves a question of exceptional importance. c. This Court does not, ordinarily, grant rehearing in banc where the panel's statement of the law is correct and RN Ne — RABY Ov Austin tas, call taal My | ant age Me cE AGES OTE eT 16 Petition for Writ of Certiorari raised by defendants in their petition for rehearing in bane. Were there any doubt, the fact that the Court of Appeals stayed the issuance of its mandate pending an application by the Trustees for a writ of certiorari, is further indication of its view that this case raises issues of exceptional importance, and ‘‘* * * is one likely, under [our] practice, to be taken up by us on certiorari * * *’’: Magnum Import Co. v. De Spoturno Coty, 262 U. 8. 159, 163 (1922) ; English v. Cunningham, 80S. Ct. 18 (1959) (Mr. Justice Frank- furter as Acting Cireuit Judge) ; Meredith v. Fair, 306 F, 2d 374 (5th Cir. 1962). And while the Court of Appeals in bane filed a per curiam opinion stating only that the eight Judges were equally divided—the earlier opinions of Judges Adams and Gibbons illuminate, in part, the reasons why four of the Judges were on one side, and four Judges were on the other side, of the federal constitu- tional issues involved. 13. (Cont’d.) the controverted issue is solely the application of the law to the circumstances of the case. Third Circuit Rule 22, provides that after May 1, 1974 counsel for a petitioner for rehearing in banc shall make the following statement: “TI express a belief, based on a reasoned and studied profes- sional judgment, that the panel decision is contrary to decisions of the United States Court of Appeals for the Third Circuit or the Supreme Court of the United States, and that consideration by the full court is necessary to secure and maintain uniformity of decisions in this Court, to-wit, the panel's decision is contrary to the decision of the court or the Supreme Court in [citing specifically the case or cases] or, that this appeal involves a question of exceptional importance, to-wit [set forth in one sen- tence].” The Court of Appeals would clearly not have granted defendants’ petition for rehearing in banc merely to decide the non-constitutional questions in this case, since decision of such issues by the Court in bane would not have been necessary to secure uniformity of its deci- sions, nor did such issues involve questions of exceptional importance. Petition for Writ of Certiorari 17 2. The constitutional validity of the Delaware sequestration procedure, additionally, is a matter of practical importance, not merely because of the pend- ing sequestrations in the Delaware federal and state courts, but Delaware is the state of incorporation of a great number™ of corporations and the potential use of the sequestration procedure is also great. 3. This Court should exercise its supervisory powers to decide the important federal constitutional questions which equally divided the eight Judges of the Court-of Appeals in bane. Unless it does so, the District Court’s order vacating the sequestrations will stand affirmed, thus defeating the jurisdiction of the District Court, permitting the defendants immediately to transfer their sequestered property, and leaving de- fendant Gotz enriched at the expense of the Trustees’ Debtor.”* II. This Court Should Finally Settle the Issue Whether the Delaware Sequestration Procedure Violates the Due Process Provisions of the Fifth and Fourteenth Amend- ments Because It Authorizes the Seizure of Property Without Notice or Opportunity for Hearing. 1. Defendants contend that the Delaware seques- tration statute violates their due process rights because their intangible property located in Delaware was seized without prior notice or an opportunity to be heard. Defendants rely upon Fuentes, 407 U. S. 67, 14. Probably 9,000 new corporations will be incorporated in Delaware during 1974; see Cary, Federalism and Corporate Law: Reflections Upon Delaware, 83 Yale L. J. 663, 668 (1974). It has been unofficially estimated that 75,000 corporations are incorporated in Delaware. 15. Gotz is reputed to be the owner of an international con- glomerate valued at $500 million. New York Times, April 9, 1972, p. 40, col. 4. PANN Tee oe 0h dl SAE, aati 18 Petition for Writ of Certiorart in which this Court struck down Pennsylvania and Florida replevin statutes authorizing seizure of per- sonal property without notice or an opportunity to be heard. This Court however also said in Fuentes: There are ‘extraordinary situations’’ that justify postponing notice and opportunity for a hearing. Boddie v. Connecticut, 401 U. 8., at 379. These situations, however, must be truly unusual. Only in a few limited situations has this Court allowed outright seizure without opportunity for a prior hearing. First, in each case, the seizure has has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular in- stance. * * * [407 U. S. at 90-91 (footnotes omitted ) ] In connection with these observations, this Court cited Ownbey v. Morgan, 256 U. S. 94, with approval, describing it as a case which involved ‘‘attachment necessary to secure jurisdiction in [a] state court— clearly a most basic and important public interest’’. Fuentes, 407 U. S. at 91, note 23. In Ownbey this Court had rejected a constitutional attack made upon the exercise of quasi in rem jurisdiction under Dela- ware’s foreign attachment statute, and under that statute there was no pre-seizure notice or hearing. 2. The majority of the panel noted that Ownbey involved the Delaware foreign attachment statute, a Petition for Writ of Certiorari 19 statute closely related to the Delaware sequestration statute, and that both in Sniadach and Fuentes this Court referred to Ownbey as an example of an ‘‘ex- traordinary situation’? (27a). The majority said: * * * the continuing vitality of Ownbey is attested tu by its presence in both Fuentes and Sniadach. Unless and until the Supreme Court reverses Ownbey this Court is duty bound to accord the ease its full respect. (28a, n. 35) The majority of the panel also pointed out (27a- 28a) that references by this Court to Ownbey in Sniadach v. Family Finance Corp., 395 U.S. 337 (1969) and Fuentes had caused the Court of Appeals in Lebo- witz v. Forbes Leasing and Finance Corp., 456 F. 2d 979, 982 (3d. Cir.), cert. denied, 409 U. S. 843 (1972), to uphold the constitutionality of Pennsylvania’s for- eign attachment statute procedure against strong attack. 3. The Delaware sequestration statute provides that after a general appearance the seized property may be released, and in Lebowitz it was contended that after a general appearance there could no longer exist any justification for the attachment. The Court of Appeals for the Third Circuit, however, said in Lebowitz that it was bound by the decisions of this Court: But we are not free to adopt our own view as to post-appearance attachment. We say this because we think the reasoning of the Supreme Court’s decisions in Ownbey v. Morgan, 256 U. S. 94, 41 S. Ct. 433, 65 L. Ed. 837 (1921) and McKay v. McInnes, 279 U. S. 820, 49 S. Ct. 344, 73 L. Ed. 975 (1929) precludes such action. Any reexamination of the continuing vitality of these cases must come from the Supreme Court. [456 F. 2d at 982] dubbed A'S a OP al SOR. acs at la lita pases 4 Tee a ee) s Petition for Writ of Certiorari 4. The Delaware sequestration statute comports with the tripartite test of due process established in Fuentes. First, this Court’s footnote characterization of the attachment in Ownbey supplies the answer to the inquiry of whether the seizure was “‘directly necessary to secure an important governmental or general publie interest.’’ This is not a case like Fuentes where the statutes allowed private parties—serving their own private advantage—unilaterally to invoke state power to replevy goods from another. Fuentes, 407 U. S. at 93. A state has a legitimate interest in the exercise of judicial jurisdiction with respect to property within its borders. Seizure for the purpose of securing such jurisdiction accordingly serves a most basic and im- portant public interest. Second, there was a need for prompt action. Notice would afford the defendants an opportunity to defeat the state’s interest in securing jurisdiction, by the simple expedient of transferring the property. This distinguishes this case from Fuentes, for here the State of Delaware’s power to adjudicate was in jeopardy. Third, Delaware has kept a “‘strict control over its monopoly” of foree. This Court said in Fuentes: The statutes, moreover, abdicate effective state control over state power. Private parties, serving their own private advantage, may unilaterally in- voke state power to replevy goods from another. No state official participates in the decision to seek a writ; no state official reviews the basis for the claim to repossession; and no state official evaluates the need for immediate seizure. There is not even a requirement that the plaintiff provide any information to the court on these matters. The State acts largely in the dark. [407 U. S. at 93 (footnote omitted) ] — Here, unlike Fuentes, the order effecting the seizure was issued by a District Court judge. That judge had been supplied with a complaint and with an affidavit. The information provided a basis for the determination by the District Court that the seizure would be in fur- therance of the “‘important public interest’’ underlying the Delaware sequestration statute, and that prompt action would be required in order that the state’s juris- diction not be defeated. This case does not present a situation where the State of Delaware has abdicated ‘‘effective state control over state power * * * [to] private parties, serving their own private advantage * * *’’. Fuentes, 407 U. S. at 93. The sequestration procedure here attacked also serves a public purpose as part of the ordered system of conflict resolution which includes the exercise of judi- cial power over property located within (te state. Lebowitz, 456 F. 2d at 981. 5. The issue whether, under Fuentes, the Delaware sequestration procedure violates the due process pro- visions of the Fifth and Fourteenth Amendments be- eause it involves a seizure without prior notice or op- portunity for hearing—an issue on which the eight Judges of the Court of Appeals in bane split—should be finally settled by this Court. III. This Court Should Finally Settle the Issue Whether the Delaware Sequestration Procedure Violates the Due Process Provisions of the Fifth and Fourteenth Amend- ments When the State Lacks Minimum Contacts With either the Subject Matter or the Parties. 1. Defendants assert that the sequestration of the property of a non-resident where Delaware lacks mini- mum contacts either witn the subject matter or the Petition for Writ of Certiorari 21 vse! i nl PRR ~] Dae inlays O50, 002 await Sat Juels MNOS ra A ade ats Sinencraibd atthe eee ee Bo wenrinic 22 Petition for Writ of Certiorart parties violates due process, an argument based upon International Shoe v. Washington, 326 U. S. 310 (1945). Defendants assert that a court cannot assert, even quasi in rem jurisdiction, unless either the parties or the subject matter of the action have minimum con- tacts with the forum. Judge Gibbons, in his dissent from the panel’s opinion, accepted the defendants’ contention that the minimum contacts analysis set out in International Shoe and developed in connection with in personam jurisdiction, constitutionally must also be applied to cases of quasi in rem jurisdiction. Thus, rejecting landmark decisions * of this Court—holding a state’s power over persons or property within its boundaries is enough to establish quasi in rem juris- diction—Judge Gibbons asserted: It is time that Ownbey v. Morgan, 265 [sic] U. S. 94 (1921), be considered in light of International Shoe Co. v. Washington, supra, and its progeny. There is no reason for considering the jurisdiction recognized in Ownbey v. Morgan, supra, as exempt from the stricture of the fifth and fourteenth amendment due process clauses. Ownbey v. Morgan, supra, and International Shoe Co. v. Washington, supra, cannot be reconciled if the former is not applied subject to a minimum con- tacts analysis * * * (65a) 2. Judge Adams—speaking for the majority of the panel—pointed out that the Trustees did have substan- tial contacts with Delaware, and that the valid state interests in protecting residents and affording a forum to litigate grievances could not be satisfied in case of 16. Harris v. Balk, 198 U. S. 215 (1905) ; Chicago R. 1. & P. R. Co. v. Sturm, 174 U. S. 710 (1899) ; Pennoyer v. Neff, 95 U. S. 714 (1877). aa Petition for Writ of Certiorari 23 defendants who could not be served in the United States in any less restrictive manner, and that, therefore, the procedure used was necessary to secure jurisdiction and was under the circumstances appropriate as a response to an “‘extraordinary situation” within the exception described in Fuentes (31a). After discussing the doc- trines of International Shoe, Hanson v. Denckla, 357 U. S. 235 (1958), and Ownbey, Judge Adams observed: If consent to personal jurisdiction is the necessary implication of the entry of a general appearance, then application here of the ‘‘minimum contacts”’ tests seems misguided, and the in terrorem effect of the sequestration procedure might well pass con- stitutional muster. Ultimate resolution of this issue would depend, then, on which course of anal- ysis a court were to pursue—the ‘‘voluntary con- tact’’ test of International Shoe and Hanson or the ‘*implied consent’’ view of Ownbey. (36a) (foot- notes omitted) 3. The minimum contacts doctrine is not applicable where, as here, the plaintiff invokes the quasi in rem jurisdiction of the court. Almost 60 years ago Justice Holmes declared that the ‘‘foundation of jurisdiction is physical power’’ over persons and property within a state’s territorial borders. McDonald v. Mabee, 243 U.S. 90, 91 (1917). 4. Delaware’s jurisdiction over intangibles—such as shares of stock of, or the obligations or debts of, a Delaware corporation—is based upon two Delaware statutes, the effect of which is to prevent such intangible property from ever being embodied in a document, which document might be physically located outside of the State of Delaware. Under 8 Del. C. § 169 (92a) the situs of shares of stock of a Delaware corporation is " 7 rt is bios! Sia ESO A Li D Eh RE AB a a0 se Mah Mates tater eahad 9 Pcs con? PON Re | ee ee er ot eed detras*ibs Jabs Was lable Laine, 22020 24 Petition for Writ of Certiorart regarded as Delaware, no matter where the share cer- tificates may be located. Furthermore, the debts or obligations of a Delaware corporation also have their situs—as intangibles—within the State of Delaware.” Even when such intangibles may be regarded as ‘‘in- vestment securities’? within the meaning of the Uni- form Commercial Code (UCC) (and, therefore. by definition ‘‘negotiable’’), they, nevertheless, still have their situs in Delaware. Delaware—uniquely out of the 49 states which have adopted the UCC—is the only state which has rejected Section 8-317(1) in the form recom- mended by the UCC draftsmen (95a-96a), and in lieu thereof has enacted Section 8-317(1) of 5A Del. C. (93a-94a), which establishes the unique Delaware rule that such intangibles can never be embodied in a docu- ment. Thus, the intangible property of Delaware cor- porations—corporate stock and obligations—always has its situs in Delaware, no matter where the docu- ments evidencing such intangibles may happen to be physically located. 5. The issue whether Ownbey must be read in light of International Shoe, that is, whether the doctrine of minimum contacts, which is applicable to in personam jurisdiction, also applies to quasi in rem jurisdiction— an issue on which the Court of Appeals in bane split— should be finally settled by this Court. IV. This Court Should Settle the Question Whether the Sequestrations Constituted an Unconstitutional Search and Seizure. 1. Defendants argued in the courts below that the sequestration order ‘‘constituted a general warrant in 17. Weinress v. Bland, 71 A. 2d 59, 31 Del. Ch. 269 (Del. Ch. 1950) ; Landau v. Best, 187 A. 2d 75, 41 Del. Ch. 1 (Del. Supr. 1962). Petition for Writ of Certiorari 25 its most obnoxious form, indeed precisely as that noxious instrument stood when it became the specific abuse against which the Fourth Amendment was directed. 99 18 The majority of the panel held, however, that an examination of the early cases of this Court shows clearly that the protection of the Fourth Amendment does not extend to seizures of a civil nature. Boyd v. United States, 116 U.S. 616 (1886). Noting that while the concept of what constitutes a search or seizure impermissible under the Fourth Amendment has evolved significantly since the late nineteenth century, the majority said that ‘‘the path of that evolution has been neither so straight nor so exorable that it encom- passes sequestration proceedings, at least at the present time.’’ Compare Camara v. Municipal Court, 387 U.S. 523 (1967) with Wyman v. James, 400 U.S. 309 (1971). The majority also pointed out that the Court of Appeals in Lebowitz had summarily dismissed the same Fourth Amendment contention. 456 F. 2d at 980 (40a-41a). 2. In their petition for rehearing in bane de- fendants strenuously urged that the sequestrations in this case violated their Fourth Amendment rights, and that it is ‘‘well established’’ that the Fourth Amendment applies to civil actions: Yontrary to the majority holding, it is well es- tablished that the Fourth Amendment applies tu civil actions. Camara v. Municipal Court, 387 U. 8. 523 (1967) ; See v. City of Seattle, 387 U.S. 541 (1967) * * *.” 18. Brief for Fidel Gotz, et al., Defendants-Appellees 40-41. 19. Petition of Appellees for Rehearing and Suggestion of Re- hearing In Banc, p. 13. q Bitsiainais 26 Petition for Writ of Certiorari Defendants urged with respect to Boyd that: Furthermore, the statement relied upon by the majority from the Boyd case, decided in 1886, was not only mere dictum but is no longer the law, as the above decisions show. The Supreme Court plainly took the Fourth Amendment argu- ment seriously in Fuentes (see fn, 2.) * * **° And defendants further urged with respect to Wyman: But Wyman dealt with the propriety of a re- quirement that a welfare caseworker make periodic visits to a recipient’s home. The Court specifically reaffirmed that Fourth Amendment protections are not restricted to the criminal law field (400 U. S., at 317). It held that there was no ‘‘search’’ involved, and even if there were it was not unreasonable.” 3. The issue whether the sequestrations effected herein under the Delaware statute constituted an un- reasonable search and seizure—an issue on which the Court of Appeals in bane split—should be finally settled by this Court. 20. Ibid. 21.Jd. at 14. Petition for Writ of Certiorart 27 CONCLUSION. For the foregoing reasons this Court should grant the Trustees’ petition for a writ of certiorari, settle the important constitutional issues on which the eight Judges of the Court of Appeals in bane were equally divided, and remand the case for further proceedings in the Court of Appeals. Respectfully submitted, Epwin P. RoMgE, MarvIN CoMISKY, Morris L. WEISBERG, 4 Penn Center Plaza, Philadelphia, Pennsylvania. 19103 WituiaMm E. Taytor, JR., 300 Continental American Building, On Rodney Square, Wilmington, Delaware. 19801 Attorneys for Petitioners. -99 FILE COPY - wee aw | IN THE ae a hee Supreme Court of the United States ~ October Term, 1974. No. @3~ESOO GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, Trustees of the Property of the PENN CENTRAL TRANSPORTATION COMPANY, Petitioners, vu. FIDEL GO6TZ, VOLKER G6TZ, FINANZ AKTIENGESELL- SCHAFT, VILEDA ANSTALT, GOTZ AKTIENGESELL- SCHAFT OF ST. GALLEN (Also Known as GOTZ AG OF ST. GALLEN, or G6TZ ANSTALT OF ST. GALLEN, or GOTZ ETABLISSEMENT OF ST. GALLEN, or GOTZ ESTABLISH- MENT OF ST. GALLEN), INTER-INDUSTRY AKTIENGE- SELLSCHAFT OF ST. GALLEN (Also Known as INTER- INDUSTRY AG OF ST. GALLEN, or INTER-INDUSTRY ANSTALT OF ST. GALLEN, or INTER-INDUSTRY ETAB- LISSEMENT OF ST. GALLEN, or INTER-INDUSTRY ESTAB- LISHMENT OF ST. GALLEN), INTER-MARKETING CORP. ANSTALT (Also Known as INTER-MARKETING CORP. ETABLISSEMENT, or INTER-MARKETING CORP. ESTAB- LISHMENT), MINOLTA ANSTALT, and FINANZ AG ST. GALLEN. APPENDIX TO PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT. Epwin P. Rome, Marvin Comisky, Morris L. WEISBERG, 4 Penn Center Plaza, Philadelphia, Pennsylvania. 19103 WituiaM E. Taytor, Jr., 500 Continental American Building, On Rodney Square, Wilmington, Delaware. 19801 Attorneys for Petitioners International Printing Co., 711 So. 50th St., Phila., Pa. 19143 — Tel. (215) 727-8711 LER 25 TABLE OF CONTENTS OF SEPARATE APPENDIX. Page Order of the Court of Appeals Granting the Trustees’ Motion for Stay Pending Application for a Writ of Certiorari ... la Order of the Court of Appeals in Banc Denying the Trustees’ Petition for Rehearing in Banc ............ccccccccees 2a Judgment of the Court of Appeals in Banc ................- 4a Opinion of the Court of Appeals in Banc ............+.5+6. 6a Order of the Court of Appeals in Banc Granting Defendants’ Petition for Rehearing te Dame .......sccccvcccccccecs 8a Judgment of the Panel of the Court of Appeals ............ 10a Opinions of the Panel of the Court of Appeals .............. 12a Order of the Court of Appeals Granting the Trustees’ Motion Gee: Date, Te FD ov vcceinsenisesveviccanses 67a Trustees’ Notice of Appeal to the Court of Appeals ........ 69a Goder of the District Camit 2... ccccccccvcccccscceccecses 7la Gotniom of Che Tletvicd Camst ....cccsveccencccesesccccess 73a Federal Rule of Civil Procedure 4(e), 28 U. S. C. (1960, Cum. Sk SE cdvdves dennacdesaedeeemeieasea 86a Delaware Sequestration Statute, 10 Del. C. § 366 (1953, Cum. RED vcabuevcusscsecsdevenescseeurereewesens 87a Delaware Chancery Rule 4(db), 13 Del. Code (1970) ...... 89a Pe ET nhiducdcnsesauwacwias abageredasodusanewsker 92a Se Be Sa EE hbk dee nein Sonn cesaccensecasaeaneeens 93a Section 8-317 of the Uniform Commercial Code Recommended et Sie EY, BUND sv aciccccvasenkcveanascwcsoes 95a Fourth Amendment to the Constitution of the United States .. 97a Fifth Amendment to the Constitution of the United States ... 98a Foureenth Amendment (Section 1) to the Constitution of the i a ee ea 99a Staff Report of the Committee on Banking and Currency .... 100a ORDER OF THE COURT OF APPEALS GRANTING THE TRUSTEES’ MOTION FOR STAY PENDING APPLICATION FOR A WRIT OF CERTIORARI. UNITED STATES COURT OF APPEALS For THE THIRD CIRcuIT No. 71-2150. GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, TRUSTEES OF THE PROPERTY OF THE PENN CEN- TRAL TRANSPORTATION COMPANY, Appellants v. FIDEL GOTZ, et aL. Pursuant to Rule 41(b) of the Federal Rules of Appellate Procedure, it is ORDERED that issuance of the certified judgment in lieu of formal mandate in the above cause be, and it is hereby stayed until April 25, 1974, and it is FURTHER ORDERED that no final judgment in man- date form having issued, the $25,000 security heretofore filed in connection with the stay shall continue to con- stitute security in connection with the petition for certiorari. /s/ Cotiins J. Seitz, Chief Judge. Dated : April 1, 1974 (la) | 4 ! : 5 i ; | | 2 2a Court of Appeals Order (3/15/74) ORDER OF THE COURT OF APPEALS IN BANC DENYING THE TRUSTEES’ PETITION FOR REHEARING IN BANC. UNITED STATES COURT OF APPEALS For THE Txuirp Circuit No. 71-2150. GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, TRUSTEES OF THE PROPERTY OF THE PENN CEN- TRAL TRANSPORTATION COMPANY, Appellants v. FIDEL GOTZ, er At. SUR PETITION FOR REHEARING. Present: Serrz, Chief Judge, Van Dusen, ALDISERT, Apams, Grssons, Rosenn, Weis and GarrTH, Circuit Judges. The second petition for rehearing filed by Appel- lants in the above entitled case having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, Court of Appeals Order (3/15/74) 3a and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in bane, the petition for rehearing is denied. By THE COURT, CoLuins J. SEITz, Judge. Dated : March 15, 1974 T — } 4a Court of Appeals Judgment (2/21/74) JUDGMENT OF THE COURT OF APPEALS IN BANC. UNITED STATES COURT OF APPEALS For THE TuHrirp Circuit No. 71-2150. GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, : TRUSTEES OF THE PROPERTY OF THE PENN CEN- TRAL TRANSPORTATION COMPANY, Appellants : | v. FIDEL GOTY, er at. (D. C. Civil Action No. 4072) 3 ; On AppEAL FROM THE UNrTeEp States District Court j FOR THE District OF DELAWARE. Present: Seitz, Chief Judge and VAN DusEN, ALDISERT, Apams, Gisppons, RosENN, WEIS and GARTH, Circuit Judges. JUDGMENT ON REHEARING. This cause came on to be heard on the record from the United States District Court for the District of Delaware and was reargued by counsel. Court of Appeals Judgment (2/21/74) da On consideration whereof, it is now here ordered and adjudged by this Court that the judgment of the said District Court, filed December 20, 1971, be, and the same is hereby affirmed and the stay previously granted by this Court is hereby vacated. Costs taxed against appellants. ATTEST : THomas F.. QUINN, Clerk. February 21, 1974 | * 6a Court of Appeals Opinion (2/21/74) OPINION OF THE COURT OF APPEALS IN BANC. UNITED STATES COURT OF APPEALS For THE THtrD CIRcuIT No. 71-2150. GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, TRUSTEES OF THE PROPERTY OF THE PENN CEN- TRAL TRANSPORTATION COMPANY, Appellants Ne ee Ne ee * s Vv. FIDEL GOTZ, Et At. , On AppeAL From THE UnitTep States District Court FOR THE District oF DELAWARE. (C. A. No. 4072) Argued April 9, 1973 ’ Before Van Dusen, ADAMS and GIBBONS, Circuit Judges. Reargued In Banc November 16, 1973. Reargued before Seitz, Chief Judge, Vax Dvusen, ALDISERT, ADAMS, GIBBONS, ROSENN, WEIS and GarTH, Circuit Judges. Edwin P. Rome Arthur G. Connolly Marvin Comisky Attorney for Appellees Morris L. Weisberg William E. Taylor, Jr. Attorneys for Appellants Court of Appeals Opinion (2/21/74) Ta OPINION OF THE COURT. (Filed February 21, 1974) PER CURIAM: On this appeal from the order dated December 20, 1971, the Court is evenly divided. The order will be affirmed and the stay heretofore entered will be vacated. desde eile: Ua in Ae ate pica RAR ii Sc FRI BIE Ca ae iow Sis BALA Ee tea cece: Br wa deh bs cit RIA eR at bet 8a Court of Appeals Order (10/10/73) ORDER OF THE COURT OF APPEALS IN BANC GRANTING DEFENDANTS’ PETITION FOR REHEARING IN BANC. UNITED STATES COURT OF APPEALS For THE THIRD CIRCUIT No. 71-2150. GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, TRUSTEES OF THE PROPERTY OF THE PENN CEN- TRAL TRANSPORTATION COMPANY, Appellants, v. FIDEL GOTZ, Er At. A ppellees. Present: Seitz, Chief Judge and VAN DUSEN, ALDISERT, Apams, GIBBoNs, RosENN, WEIS and GARTH, Circuit Judges. ORDER. The Petition for Rehearing filed by. defendant- appellees in the above captioned matter having been submitted to the judges who participated in the deci- sion of this court and to all the other available circuit judges of the Circuit in regular active service, and a majority of such active circuit judges having voted for rehearing in bance, it is Court of Appeals Order (10/10/73) 9a ORDERED that the Petition for Rehearing in banc is granted, and the judgment of this court entered on August 31, 1973, is vacated, and it is FuRTHER ORDERED that the Clerk of this Court shall list this appeal for rehearing or reconsideration before the court in bance at the convenience of the court. By THE COURT, CoLuins J. SEITz, Chief Judge. DatepD: October 10, 1973. 7 ™ 10a ss Court of Appeals Judgment (8/31/73) j JUDGMENT OF THE PANEL OF THE COURT OF APPEALS. UNITED STATES COURT OF APPEALS For THE THIRD CIRCUIT No. 71-2150. bias nirvana abies tea er cay Ae GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, TRUSTEES OF THE PROPERTY OF THE PENN CEN- TRAL TRANSPORTATION COMPANY, Appellants : v. FIDEL GOTZ, Et At. (D. C. Civil Action No. 4072) 3 ————— On APPEAL FrRoM THE UNITED States District Court FOR THE DISTRICT OF DELAWARE. Present: VAN Dusen, ADAMS and GIBBONS, Circuit Judges. JUDGMENT. This cause came on to be heard on the record from the United States District Court for the District of Delaware and was argued by counsel. Court of Appeals Judgment (8/31/73) lla On consideration whereof, it is now here ordered and adjudged by this Court that the order of the said District Court, filed December 20, 1971, be, and the same is hereby reversed and the cause is remanded for action consistent with the opinion of this Court. Costs taxed against appellees. ATTEST: /s/ M. EizaBETH FERGUSON, Chief Deputy Clerk. August 31, 1973 12a Court of Appeals Opinions (8/31/73) OPINIONS OF THE PANEL OF THE COURT OF APPEALS. UNITED STATES COURT OF APPEALS For THE THIRD CIRCUIT No. 71-2150. GEORGE P. BAKER, RICHARD C. BOND, JERVIS LANGDON, JR., WILLARD WIRTZ, TRUSTEES OF THE PROPERTY OF THE PENN CEN- TRAL TRANSPORTATION COMPANY, Appellants v. FIDEL GOTZ, Et AL. On APPEAL FROM THE UNITED StaTEs District Court FOR THE DISTRICT OF DELAWARE. (C. A. No. 4072) Argued Monday, April 9, 1973. Before: VAN Dusen, ADAMS and GIBBONS, Circuit Judges. Edwin P. Rome Marvin Comisky Morris L. Weisberg William E. Taylor, Jr. Attorneys for Appellants Arthur G. Connolly Attorney for Appellees Court of Appeals Opinions (8/31/73) 13a Opinion of the Court. (Filed August 31, 1973) Apams, Circuit Judge: The Trustees of the Penn Central Transportation Company (Trustees) appeal to this Court from an order of the district court vacating a sequestration at- tempted by the Trustees against the property of de- fendant-appellees Fidel Gotz, his son Volker Gotz, and a number of corporations alleged to be controlled by Gotz. All of the defendants ‘‘are citizens of foreign states and reside in Continental Europe.’’ In granting the defendants’ motion to vacate, the district court did so on the basis that the Trustees had failed to conform fully to the required procedures. The underlying dispute, from which this case arose, involves an alleged conspiracy between Gotz and several of the defendant corporations. Through the conspiracy Gotz allegedly caused $4,000,000., belonging to the Penn Central, deposited in a Lichtenstein bank, to be converted to the use of Gotz and the corporations in which he had an interest. The activity involved occurred before the entry of the Penn Central into re- 1. Sequestration is a procedure for compelling the appearance of a defendant. In its operation, it is similar to the more common procedure of foreign attachment. In each, the plaintiff commences the suit by requesting that a judicial officer seize the property of an out-of-state defendant. The defendant is given notice of the seizure and is advised that unless he appears to defend the action, the prop- erty seized will be awarded to the plaintiff by default. Delaware has both sequestration and foreign attachment, the primary difference being that foreign attachment is an action at law while sequestration is effected in Chancery. See generally, E. Folk, The Delaware General Corporation Law, Appendix I at 569-71 1972). Because of the similarity of the two actions, they will be referred to at times interchangeably in the third section of this opinion. ~~ f l4a Court of Appeals Opinions (8/31/73) _ organization. The Trustees, not surprisingly, sought * to recover this amount. I. To commence the recovery litigation, the Trustees filed a complaint in the federal district court, with jurisdiction based on diversity of citizenship. Rule 4(e) of the Federal Rules of Civil Procedure provides that: **Whenever a statute or rule of court of the state in which the district court is held provides (1) for service of a summons, or of a notice, or of an order in lieu of summons upon a party not an inhabitant of or found within the state, or (2) for service upon or notice to him to appear and respond or defend in an action by reason of the attachment or gar- nishment or similar seizure of his property located within the state, service may in either case be made under the circumstances and in the manner pre- scribed in the statute or rule.”’ Because Rule 4(e) adopts for the district courts the rules of the state in which the district court in ques- tion is located, the Trustees sought to effect service on the defendants through the Delaware sequestration provisions.* In broad outline, the Delaware sequestration pro- cedure is as follows: The sequestration statute, 10 Del. C. § 366, provides that if in a complaint filed in the 2. Rule 4(e) was incorporated into the Federal Rules of Civil Procedure in 1963. wie Phage nab pam a non yh ely ae could not be commenced in the federal courts, though actions begun in that manner in state courts could be removed to federal court. The 1963 amendment enacting rule 4(e) cured this anomalous situation. 4 Wright & Miller, Federal Practice and Procedure § 1119 (1969). — Court of Appeals Opinions (8/31/73) 15a Court of Chancery, it appears that the defendant is a non-resident of Delaware, the Court may order such defendant to appear. Such appearance may be com- pelled by the seizure of all or any part of the defend- ant’s property. Such seizure is carried out by an officer of the court. The defendant whose property is seized is given notice of the commencement of the proceedings by mail, if feasible, and also by publication. If he does appear, the seizure may be dissolved, but the defendant has then submitted to in personam jurisdiction. Delaware Chancery Rule 4(db), promulgated pur- suant to section (b) of the statute limits the use of the sequestration proceeding. To utilize sequestration, the plaintiff must supply an affidavit which is to include, inter alia, a description of the property to be seized, specifying the amount, the nature of defendant’s title, and the source of the affiant’s information. If any information is omitted, the affidavit must contain the reason therefor. Sequestration in Delaware may be made of prop- erty not susceptible of physical seizure. And this pro- vision has been interpreted to permit seizure of certain equitable interests, so long as the interests are capable of being sold.* Employing this Delaware procedure, the Trustees, on March 10, 1971, filed in the district court a complaint requesting sequestration of the property of the non- resident defendants. That same day, the district court entered a sequestration order and gave notice to the defendants that they were to appear to defend by April 3. 8 Del. C. § 169 (Cum. Supp. 1968). See Green v. Johnston, 99 A. 2d 627 (1953). The statute and regulation have been inter- preted to mean that shares of a Delaware corporation, held by a non-resident, with the certificates evidencing the interest out-of-state, are nonetheless seizable. Such seizure is accomplished by notifying the transfer agent. ~ l6a Court of Appeals Opinions (8/31/73) 22, 1971. Pursuant to the order, debentures, warrants and notes held by the defendants in Delaware corpora- tions were seized. On March 22, 1971, the Trustees filed an amended complaint, again seeking sequestration. Pursuant to the amended complaint, notice was sent to the defend- ants requiring that they appear on May 4, 1971. The defendants did not do so by April 22, 1971, the deadline established by the original complaint. They did, how- ever, file a motion to quash the sequestration before May 4, 1971, the deadline created by the second, or amended, complaint. Between April 22nd and May 4th the Trustees obtained, from a deputy clerk, a default against the defendants who had failed to appear by April 22nd. The defendants moved to vacate that de- fault, and such motion was granted by order of the district court dated December 3, 1971. In view of the confusion created by the two complaints served on de- fendants, and since the defendants did appear by May 4th, and bearing in mind this Court’s ‘‘reluctance to permit the final disposition of substantial controversies by default’’* and the high standard necessary to re- verse an order in a default situation,’ we affirm the vacation of the default. Responding to the order to appear, the defendants on May 4, 1971, filed a motion to quash the sequestration or to dismiss the action for lack of jurisdiction. On December 20, 1971, the district court granted the motion to quash but denied the motion to dismiss. The Trus- tees appealed from the granting of the motion to quash. It is to that issue that we must address our attention. 4. Hutton v. Fisher, 359 F. 2d 913, 916 (3d Cir. 1966). 5. To reverse a district court's action in a matter of this sort, this Court must find that there was an abuse of discretion. Tozer v. Charles A. Krause Milling Co. 189 F.2d 242, 246 (3d Cir. 1951). Court of Appeals Opinions (8/31/73) 17a IL. The able and experienced district judge, granting the motion to quash the sequestration, focused on a narrow question of Delaware law,*® and found that the affidavit filed in support of the sequestration request was inadequate. As stated earlier, the procedure to be employed in effectuating service under the sequestration statute, 10 Del. C. § 366, is set forth in Chancery Rule 4(db). In pertinent part, that Rule states: ““(db) Service by Publication and Seizure. (1) No order shall be entered under 10 Del. C. § 366 unless it appears in the complaint that the defendant or any one or more of the defendants is a non-resident of the State of Delaware and the application therefor is accompanied by the affi- davit of a plaintiff or other credible person stating: **(a) As to each non-resident defendant whose appearance is sought to be compelled, his last known address or a statement that such address is unknown and cannot with due diligence be ascer- tained. “*(b) The following information as to the property of each such defendant sought to be seized : **(1) A reasonable description thereof. (2) The estimated amount and value thereof. is controlling on questions concerning the state procedure ed by ix Dede exnte eaamenst to €28. Ge. © Rule 4(e). = ia < Piedmont Aviation, Inc., 295 F. Pm 228 (S. D. N. ¥. 1968) aff'd 411 F. 2d 812 (2d Cir.), cert. 396 U. S. 840 (1969). re ewe Vee. ee 18a Court of Appeals Opinions (8/31/73) (3) The nature of the defendant’s title or interest therein; and if such title or in- terest be equitable in nature, the name of the holder of the legal title. (4) The source of affiant’s information as to any of the items as to which the affidavit is made on information and belief. (5) The reason for the omission of any of the required statements. * * * * * * * (5) The court may in its discretion and sub- ject to statutory requirements dispense with or modify compliance with the requirements of any part of this rule in any cause upon application to it stating the reasons therefor.”’ The two sections of the Rule most germane to this appeal are subsection (1)(b)(5) and section (5). Pursuant to the Rule’s directive, the Trustees sub- mitted an affidavit. It set forth that defendant Fidel Gotz, his son, or one or more of his alter ego corpora- tions held notes or shares in thirteen Delaware cor- porations. Regarding several but less than a majority of these corporations, the affidavit stated the estimated amount and value of the defendants’ holdings. The exact nature of the defendants’ title was not specified, and the identity of which specific defendant was the holder of the interest in any of the corporations was not stated. Affiant sought to overcome these deficiencies by furnishing, as provided for in section (1)(b)(5), a statement of the reasons for the omissions. Aware of the shortcomings of his affidavit, the affiant ascribed a Court of Appeals Opinions (8/31/73) 19a the omissions to the complete control over the informa- tion retained by Fidel Gotz.’ The property located and seized by the seques- trator was possessed by Inter-Marketing Corp., Minolta Corp. and Vileda Corp., three of the defendant cor- porations. The district court, noting that the affidavit did not specify that any of the three named corporate defend- ants did possess the specific property seized, ruled that the affidavit was insufficient to support the seques- tration. Holding that section (1) (b) (5) permitted only the omission of statements required by subsections (1) (b) (1)-(4), the district court concluded that denominating the specific possessor defendant was a requirement not of those subsections but a general requirement of sec- tion (1) (b) and therefore not curable under (1) (b) (5). That subsection being unavailable to the plaintiffs, the district court then turned to section (5) of the Rule which gives the court discretion, upon application by the plaintiff, to dispense with other requirements. The district court refused to consider whether it was proper to dispense with other requirements because it found that application had not been made for the dispensation. This finding was made by the district court despite the fact that a different judge of the dis- trict court had granted the original sequestration re- quest. Underlying the action of the second district judge in quashing the sequestration was a desire to 7. For example, the affidavit stated: “A ffiant is unable to state the value of any of the property owned by any of said defendants . . . because that information is peculiarly within the knowledge of said defendants and the cor- poration whose shares, notes, debentures, debts and contract ob- ligations are involved.” 20a Court of Appeals Opinions (8/31/73) prevent the use of the sequestration statute for ‘‘fishing expeditions,’’ attempts by individuals to commence harassing litigation by making sweeping claims and alleging that the defendant owns property in one or more of a large number of companies. Such abuse had been common prior to the adoption of Rule 4(db),* and the district court expressed a fear that if this affidavit were held adequate because of either section (1) (b) (5) or section (5), there would be a return to dragnet-type seizures. This Court holds that, under the circumstances of this ease, the affidavit submitted was sufficient to sup- port the sequestration.’ The danger of a “‘fishing ex- pedition”’ is not present when, as in this case, the affiant endeavors to attain the maximum possible degree of specificity, and additional precision is beyond the affiant’s facilities, because of the complex inter-cor- porate activities of multiple interrelated defendants. Along much the same line, the affiant has asserted that the corporations holding the legal title of the shares are but alter egos of the principal defendant. Thus, for the purpose of protecting against dragnet seizures, there may be considered to be one defendant with many facets. On these bases, the fears of the district court would not appear to be well-founded in this case. Further, a reversal of the order quashing the sequestration appears supported in part by our reading of Delaware case law, specifically Rebstock v. Lutz, 158 A. 2d 487 (1960). In that case, the plaintiffs, minority 8. See Cantor v. Sachs, 162 A. 73 (Del. Ch. 1932). 9. There were actually two affidavits submitted, one in connec- tion with the complaint filed March 10 and one with the amended or second complaint filed March 22. Since the district court did not deal explicitly with one or the other, we have treated the affidavits as one, as did the district court. oh a Court of Appeals Opinions (8/31/73) 2la shareholders, commenced a suit against directors of a corporation by seeking to sequester shares held by the directors in three Delaware corporations. The com- plaint named nineteen individual defendants, but the accompanying affidavit specified neither who among defendants held shares in the three corporations nor the amount of the holdings of any of the defendants. The affidavit alleged, pursuant to subsection (1) (b) (5): ‘*Deponent cannot state or estimate the number of shares owned by each of the individual defendants and the defendants named as co-partners in Model, Roland & Stone because the information is avail- able only to the respective defendants or to the cor- poration whose shares are involved.’’ *° The subsequent seizure revealed that five of the individ- ual directors held shares in the three designated cor- porations. Under these facts, the defendants moved to vacate the seizures. Their motion was denied by the Chancel- lor,” and the denial was affirmed by the Supreme Court of Delaware. The Supreme Court held that (1) (b) (5) was designed to allow omissions if explained, and in Rebstock, as in this case, one of the omissions was the failure to specify which among numerous defendants possessed shares of any of three corporations. The Delaware court further held that section (5) was not the sole remedy for this type of omission. It is with some hesitancy that this Court reverse a ruling on Delaware law made by an experienced Dela- ware district court judge. Nonetheless, given the re- 10. Rebstock v. Lutz, 158 A. 2d 487, 490 (1960). 11. Lutz v. Boas, 156 A. 2d 96 (1959). 4 ie ee eA moh cic alas A ales ee ee ee ee ee eT! a 22a Court of Appeals Opinions (8/31/73) semblance between Rebstock and the present case, this Court holds that the affidavit filed here is sufficient under Delaware law.” The defendants have asserted several other grounds on which the vacation of the sequestration order can be sustained.** One of these grounds, that the Delaware sequestration statute is unconstitutional, raises difficult questions dealt with in section III. One other ground appears not insubstantial, and we shall now consider it briefly. The return of the sequestrator showed that the following securities had been seized: (a) 30,000 SSI Computer Corp. common stock purchase warrants. (b) $1,000,000 principal amount 7% subordinated note, SSI Computer Corp. (now Itel Com- puter Leasing Corporation). 12. The dissent asserts that this holding constitutes a “specious refutation” of the district court and that reliance on Rebstock is not warranted. The procedure apparently employed in Rebstock consisted of the filing of affidavits asserting that each of nineteen defendants owned an unknown number of shares in one or more of several corporations. The return of the sequestrator revealed that five of the nineteen de- fendants held shares in the named corporations. Thus, as to many if not all of the remaining fourteen defendants, any affidavit asserting that the defendant owned an unknown number of shares would appear to be a misstatement. In the present case, there was no allegation that a particular defendant, among the inter-related corporate de- fendants, was the owner of a particular number of shares. Between the procedure here, and that employed in Rebstock, it is difficult to determine which produced more of the “beating of the bushes,” so criticized by the dissent. Here, at least, the affidavits submitted would appear to be free of misstatement. 13. On appeal, the appellate court must affirm the decision of the lower court, if correct, although the lower court relied on a dif- ferent and incorrect ground. Helvering v. Gowran, 302 U. S. 238, 245 (1937). - Court of Appeals Opinions (8/31/73) 23a (c) 50 shares of SSI Computer Corp. common stock (now Itel Computer Leasing Corp.). (d) 25,360,500 (Swiss franes) principal amount 8% notes of Textron Atlantic, Inc. (e) $500,000 principal amount of SSI Computer Corp. debentures (now Itel Computer Leasing Corporation). (f) 10,000 Itel warrants.“ Various types of securities are present in this list- ing. The sequestration statute does not, by its terms, define what is property seizable under the statute. Shares of common stock of Delaware corporations are seizable property ; * securities representing a debt owed to a non-resident by a Delaware corporation vary as to whether they are seizable. ‘*A debt owed to a nonresident of Delaware is sometimes subject to sequestration in order to compel his appearance in the Delaware courts. The key consideration is whether the debt is repre- sented by a negotiable instrument. If it is nego- tiable, then it does not have a Delaware situs and may not be seized. In other words, unlike stock of a Delaware corporation, the situs of a negotiable bond issued by a Delaware entity is not Delaware but follows the certificate. On the other hand, if the indebtedness is represented by a non-negotiable instrument, then it is like any other debt and re- tains a Delaware situs and may thus be seized under sequestration process.” 14. Baker v. Gotz, 335 F. Supp. 197, 199 (D. Del. 1971). 15. 8 Del. C. § 169. 16. E. Folk, supra note 1 at 592. (Footnote omitted) Pee aR oes 24a Court of Appeals Opinions (8/31/73) The Trustees argue that this distinction between negotiable and non-negotiable securities has not sur- vived Delaware’s modification of the Uniform Com- mercial Code.” They contend that this alteration in- dicates that all securities are seizable. The defendants, however, assert that the alteration merely preserves the existing Delaware judicial rules determining seizabil- ity. Professor Folk agrees with the interpretation suggested by the defendants.” The district court did not determine which, if any, of the securities seized are negotiable. Such resolution, since it may involve a question of fact, is, in the first instance, properly made by the district court.” If the 17. Section 8-317(1) of the Uniform Commercial Code as gen- erally adopted provides: “(1) No attachment or levy upon a security or any share or other interest evidenced thereby which is outstanding shall be valid until the security is actually seized by the officer making the attachment or levy but a security which has been surrendered to the issuer may be attached or levied upon at the source.” Delaware, however, has enacted a different provision. 5A Del. C. §8-317(1) states: “(1) Nothing contained in this title shall repeal, amend or in any way effect (sic) the provisions of sections 169 and 324, title 8, or sections 365 and 366, and chapter 35, title 10; and to the extent that any provision of this title is inconsistent with such sections, sections 169 and 324, title 8, and 365 and 366 and chapter 35, title 10, shall be controlling.” The Trustees argue that this section indicates that sequestration may be had of any type of property, regardless of whether that prop- erty is embodied in a negotiable instrument. The defendants, on the other hand, contend that this section merely carries forward estab- lished Delaware law on what items are seizable. 18. E. Folk, supra note 1 at 592, n.160. The distinction based on the negotiability rule was enunciated in Landau v. Best, 187 A. 2d 75 (1962). There does not appear to be a post-UCC case dealing with this question. 19. The dissent suggests that there should not be a remand on this issue, because only “phantom facts” remain to be found by the district court. However, this Court, as an appellate tribunal, does Court of Appeals Opinions (8/31/73) 25a district court determines that these securities are not negotiable, that will conclude this aspect of the inquiry, since non-negotiable securities would be sequesterable under the statutory construction advanced by either party. Only if the securities are found to be negotiable will statutory interpretation be required. Thus, it would not appear that the question is ripe for adjudica- tion, and, therefore, it will be deferred pending the dis- trict court’s factual determination, and if necessary, its construction of the Delaware statute.” The defendants, however, concede that the 50 shares of SSI Computer Corp. (now Itel Computer Leasing Corp.) (item (c)), are seizable under the Dela- ware sequestration statute.” This seizure appears un- assailable insofar as Delaware law is concerned. Thus, there remains property which has been properly seized according to the Delaware sequestration statute. For that reason, this Court must perforce proceed to meet the challenges raised to the constitutionality of the statute itself.” 19. (Cont’d.) not have before it the instruments embodying the interests seized, nor an exact description of those interests. While the determination of the negotiability of these instruments requires an application of law, the law must be applied to facts, And these facts have not yet been developed. Indeed, were we to make a decision now, we might be more validly charged with deciding on the basis of phantom facts. 20. On remand, the district court should consider Gotz’s argu- ment that the $500,000 principal amount, SSI Computer Corp. deben- tures (item (e)) are not seizable because they were sold prior to the sequestration. This question need not be reached if the debentures are found to be negotiable and held to be not seizable under Delaware law. 21. Brief of Appellee at 29. 22. The defendants also urge that the Trustees’ action is basically at law, not in equity, and consequently could not be brought in the Delaware Court of Chancery. They further contend that because sequestration is available only in Chancery, that procedure should not dict a ey a ee Ee TREN TOE Oe 26a Court of Appeals Opinions (8/31/73) Il. Having found that the sequestration order was proper under Delaware law, the Court must now pro- ceed to the contention of the defendants that the seizing of their property by sequestration, prior to a hearing, violated due process.” In considering the constitutionality of the state procedure, it is important to bear in mind that this Court’s task is not to assess the wisdom of a procedure characterized by some as a ‘“‘bludgeon.’’ Rather, our assignment is limited to measuring the state statute and rules against the decisions of the Supreme Court de- lineating the elements of due process. The recent cases of Sniadach v. Family Finance Corp.* and Fuentes v. Shevin® provide the benchmark against which prehearing seizures must be gauged.” 22. (Cont’d.) be available to a plaintiff in a federal court whose action sounds at law. This contention of the defendants must be weighed against the Trus- tees’ assertions that their action is in equity since it seeks an account- ing and imposition of a constructive trust and involves complex ac- counting and allegations of fraud. The Trustees also suggest that there is no longer a sharp cleavage in the federal courts between law and equity and that Rule 4(e) permits utilization of state procedures in any federal action, since all are denominated civil actions. Rule 2 F. R. Civ. P. This dispute has not been resolved by the district court and, in view of this Court’s disposition of the case, our resolution of the question at this time would appear to be premature. 23. Because of the incorporation of the state procedure provision on F. R. Civ. P. 4(e), Gotz’s claim must be primarily that his Fifth Amendment right to due process is being abridged, and secondarily that the underlying state statute deprives him of rights secured under the Fourteenth Amendment. 24. 395 U. S. 337 (1969). 25. 407 U. S. 67 (1972). 26. See E. Folk & P. Moyer, Sequestration in Delaware: A Constitutional Analysis, 73 Colum. L. Rev. 749 (1973) (hereinafter Folk & Moyer). Court of Appeals Opinions (8/31/73) 27a Although both Sniadach and Fuentes dealt with sei- zures from persons at the lower end of the economic spectrum,” Fuentes makes clear that the principle enunciated is wide-ranging in its application.* The basic holding of these two eases is that unless, as the Supreme Court stated, ‘‘extraordinary situations’’ ob- tain, absent notice and a prior hearing, pre-judgment seizures of property violate fundamental tenets of due process.” Since the Delaware procedure utilized here is essentially a pre-judgment seizure, the question he- comes whether, nonetheless, it is permissible because of the presence in this case of an extraordinary situation. Both Sniadach and Fuentes set forth examples of the type of situations the Supreme Court considers extraordinary.” In both cases, Ownbey v. Morgan ®™ was referred to as an exemplar of such a circumstance.” Ownbey involved the Delaware foreign attachment stat- ute, a statute closely related to the sequestration statute challenged here. The Supreme Court’s citation to 27. In Sniadach the seizure challenged was the garnishment of wages for non-payment of debt. In Fuentes the ancient practice of replevin was attacked. Both of these procedures are commonly ap- plied against the poor who are unable to meet installments due on credit purchases. 28. Prior to Fuentes two lines of cases had developed, one line holding that Sniadach was a bar to virtually all prehearing seizures, the other line limiting Sniadach to situations akin to wage garnish- ments. Compare e.g. Black Watch Farms vy. Dick, 323 F. Supp. 100 (D. Conn. 1971) with e.g. Swarb v. Lennox, 314 F. Supp. 1091 (E. D. Pa. 1970), aff'd 405 U. S. 191 (1972). 29. 395 U. S. at 339, 342; 407 U. S. at 90. 30. The Court in Fuentes indicates that extraordinary situations permitting prehearing seizures, include collection of the internal reve- nue, assistance to the war effort, and protection against an imminent bank failure, contaminated food and misbranded drugs. 407 U. S at 91-2. 31. 256 U. S. 94 (1921). 32. 395 U. S. at 339; 407 U. S. at 91, n. 23. Wee ee ne eee Ss ae a ee dus 28a Court of Appeals Opinions (8/31/73) Ownbey led this Court, in Lebowitz v. Forbes Leasing and Finance Corp.,* to uphold the constitutionality of Pennsylvania’s foreign attachment procedure,” in the face of a strong challenge.™ Although it might be contended that the Court, now, could hold that Lebowitz is binding in this case,” and on that basis sustain the Delaware statute, an ex- plication of the considerations that must be balanced in this due process challenge lead to the same conclu- sion, sustaining the Delaware procedure as applied in this case. The question that must be posed is, assuming an encroachment upon one’ right, what is the legitimate state interest justifying such a burden. In a typical ease of foreign attachment or sequestration, the state’s interest may not be of such magnitude to override the right to a pre-seizure hearing.” That question need 33. 456 F. 2d 979 (3d Cir.), cert. denied, 409 U. S. 843 (1972). 34. P. R. Civ. P. 1251-79, 1285-92. 35. The difficulty this Court had in reconciling the Ownbey citation with the philosophy of Sniadach can be seen in both the majority opinion, by Chief J Seitz, and the concurring opinion, po Gibbons. 456 F. 2d at 982-3. However, the continuing vitality of Ownbey is attested to by its presence in both Fuentes and Sniadach. Unless and until the Supreme Court reverses Ownbey this Court is duty bound to accord the case its full respect. 36. This Court’s prior reliance on Ownbey has been criticized in two thoughtful recent notes. See Comment, Foreign Attachment After Sniadach and Fuentes, 73 Colum. L. Rev. 342 (1973) ; Com- ment, Quasi in Rem Jurisdiction and Due Process Requirements, 82 Yale L. J. 1023 (1973). 37. The Supreme Court’s language indicates that extraordinary circumstances must be present to permit a prehearing seizure. In determining whether there is an extraordinary circumstance, the icons is Ghee’ t Oe eeet f te aoe Ss ema ¢ summary proceeding. Therefore, whether ysis is denominat a search for extraordinary circumstances or a balancing under due process, the final inquiry remains the extent and importance of the state’s interest. ‘—_ Court of Appeals Opinions (8/31/73) 29a not be decided at this point, for this is not the typical foreign attachment or sequestration case. It is crucial to recall that the defendants cannot be located within the United States and are not liable to im personam service under the applicable Delaware statutes.“ Thus, the constitutional challenge becomes more circumscribed, for if the procedure is constitu- tional as applied to the defendants, further examination of it would be impermissible. **[OJne to whom application of a statute is con- stitutional will not be heard to attack the statute on the ground that impliedly it might also be taken as applying to other persons or other situations in which its application might be unconstitutional.” Several interests of the state are frequently as- serted as the bases for justifying foreign attachments, or, as in this case, sequestration. These interests in- elude: protecting state residents by affording them a forum ; “ insuring that a fund be available from which a judgment may be satisfied ; “ reducing or eliminating extended litigation arising from attempted long-arm service ;“* and the more metaphysical interest of the 38. Delaware has a rather limited “long-arm” statute for secur- ing jurisdiction. 10 Del. C. § 3104, 8 Del. C. § 343. 39. United States v. Raines, 362 U. S. 17, 21 (1960). Raines involved a Federal statute, but the rule clearly applies to state statutes, see e.g. Yazoo v. Mississippi Valley R. Co. v. Jackson Vinegar Co., 226 U. S. 217 (1912). The presence of both Federal and state rules or statutes in this case, see note 20, supra, does not affect the per- tinence of this mandate. 40. See Lebowitz v. Forbes Leasing and Finance Corp., 326 F. Supp. 1335, 1348-9 (E. D. Pa. 1971) aff'd 456 F. 2d (3d Cir.), cert. denied, 409 U. S. 843 (1972). 41. See id. at 1349. See also, Comment, 73 Colum. L. Rev. at 7-8. 42. See Lebowitz v. Forbes ing and Finance Corp., 456 F. 2d 979, 982 (3d Cir.), cert. denied, U. S. 843 (1972). a ee ee ae a. ee Arte amoethé; 30a Court of Appeals Opinions (8/31/73) state in exercising its power as sovereign over property within its jurisdiction.” Were the defendants here amenable to service pur- suant to a Delaware statute or, even if the defendants were not liable to suit in Delaware but were liable in another state of the Union, we would be presented with not inconsideraable difficulty in holding that these as- serted state interests outweigh the right of the property owners to notice and a hearing prior to being deprived, even temporarily, of their property.“ Gotz, his son, and the alter ego corporate defend- ants named in the complaint are all ‘‘citizens of foreign states and reside in continental Europe.’’* As such, they are not liable to effective service by or in the United States, either under a Delaware statute or by proceedings brought in a sister state. The plaintiffs are trustees of a corporation that is incorporated in Delaware, has extensive power in Delaware, and conducts a significant amount of busi- 43. U. S. Industries v. Gregg, 348 F. Supp. 1004, 1019-21 (D. Del. 1972). 44. In the usual situation, many of the state’s objectives can be achieved without causing the deprivation of rights associated with prehearing seizures. If the potential defendant is amenable to service im personam, that proceeding might be sufficient to provide resident plaintiffs with a local forum. Similarly, if the case were between two ae es re ae Oe ee ay pee seizing a fund prior to judgment. endants were out-of-state, proceedings under the Gatton Enforcement of Judgments Act, ¢.g. 12 P. S. $§ 921-928 (Pennsylvania), or pursuant to the full faith and credit clause, U. S. Const. Art. IV $1, would provide the plaintiff with the means to satisfy any judgment obtained. From these illustrations, it becomes clear that the presence of less restrictive, alternative means to legitimate state ends might present ne eee aes Oe ee Se a oe Oe dures in the normal situation. Compare Folk & Moyer, 73 Colum. L. Rev. at 759-68. 45. Baker v. Gotz, 336 F. Supp. at 200. Court of Appeals Opinions (8/31/73) 3la ness in Delaware.“ In view of the fact that the plain- tiffs here do have substantial contacts “* with Delaware, and that the valid state interests in protecting residents and affording a forum to litigate grievances cannot be satisfied in the case of defendants who cannot be served in the United States in any less restrictive manner, the procedure used here is necessary to secure jurisdiction and under the circumstances appropriate as a response to an extraordinary situation within the exception de- seribed in Sniadach and Fuentes.“* Therefore, we hold that, as applied in this case, the absence of a pre-seizure hearing in the Delaware sequestration procedure does not violate due process.” The foregoing conclusion is, of course, bottomed on the premise that Delaware may, consistent with due process, provide a forum for the adjudication of the Trustees’ claim.” The defendants contest this premise, 46. The main line of the debtor-corporation’s Eastern corridor passenger and freight service runs through Delaware. 47. Whether the state has a legitimate interest in providing out- of-state plaintiffs a forum to sue out-of-state defendants is a question which we do not reach. Here, the plaintiffs have sufficient ties in Delaware to be considered not out-of-state. See generally Interna- tional Shoe Co. v. Washington, 326 U. S. 310 (1945). 48. The use of Ownbey in the Fuentes case as an example of an extraordinary situation has drawn some skeptical comment. See Comment, 73 Colum. L. Rev. at 344-7. Comment, 82 Yale L. J. at 1025-6. However, as applied to the facts of a case similar to this, the import of the citation is clear. Here, the prehearing seizure is jus- tifiable because it provides the only means for the state to gain juris- diction over a suit appropriately brought in its court. 49. Accord, Gordon v. Michel, 297 A. 2d 420 (Del. Ch. 1972). 50. In this point, the discussion has addressed the question whether due process requires a pre-seizure hearing. Analysis has been focused on the presence or absence of “extraordinary situa- tions.” The conclusion has been reached that the non-availability of the defendants in the United States presents an extraordinary situation. This same non-availability of the defendants raises questions con- cerning the propriety of adjudicating this claim in Delaware. The a 32a Court of Appeals Opinions (8/31/73) ; asserting that any attempted exertion of jurisdiction over them by Delaware would be, in reality, nothing short of an exercise of in personam jurisdiction. Since the exercise of in personam jurisdiction raises the specter of a judgment not limited by the value of their property, defendants contend that the procedure is unconstitutional. The highest court of Delaware has, in fact, in- dicated that the sequestration procedure, once properly instituted, leaves a defendant only the choice between defaulting, and thus forfeiting the property seized, or entering a general appearance to defend on the merits.” A general appearance subjects a defendant to the in personam jurisdiction of the court; thus, defendants argue, the Delaware procedure seeks, by its in terrorem effect, to secure personal jurisdiction where none could be obtained otherwise. Defendants consequently main- tain that when tested by the standards of due process enunciated in International Shoe Co. v. Washington,” the Delaware procedure must be struck down, at least insofar as it permits the rendition of judgments exceed- ing the amount of any property lawfully seized.™ i pit Bisel 50. (Cont’d) discussion now turns to that distinct question. The dissent, however, would appear to blur the distinction between the questions by suggest- ing that language employed to answer the first question is actually involved in the answer to the second. 51. See Sands v. Lefcourt Realty Corp., 117 A. 2d 365 (Del. 1955) : cf. Schwartz v. Miner, 36 Del. Ch. 481, 133 A. 2d 599 (1957). i 52. 326 U. S. 310 (1945). 3 53. The federal district court in Delaware has recently addressed ; itself to this contention. Basing its conclusion on the fundamental ; proposition that the “foundation of jurisdiction is physical power,” Judge Stapleton held that the presence of the property in the state gave the state power over the property and this provided sufficient contact. U. S. Industries v. Gregg, 348 F. Supp. 1004, 1019-21 (D. Del. 1972). Court of Appeals Opinions (8/31/73) 33a On the record before us, it would appear that the only contact between the defendants and Delaware is the property seized by the sequestrator. Since that is their sole contact, it may be argued that the defendants’ exposure to liability should be limited to the degree of their property in Delaware, i.e., limited to the degree of their contact with Delaware. As discussed earlier,” however, questions remain as to which of the de- fendants’ properties seized are indeed properly se- questerable. Thus, the specific monetary value of the defendants’ contact with Delaware awaits further adjudication. The Trustees seek to recover $4,000,000 from the defendants. Yet, there has not been any de- termination of the probability of success of the Trus- tees’ claim.” Since resolution of these underlying issues—which the dissent characterizes as phantom facts—is necessary before we can say with certainty that the Trustees’ judgment will exceed the amount of the property seized, the constitutional issue such an ‘“texcess’’ judgment would present is not yet ripe for determination. Accordingly, we decline to answer it at this time. We are not unmindful of the awkward position in which the defendants are left by our reluctance to de- cide whether, consistently with the Constitution, they may be subjected to a liability exceeding the value of the property sequestered. Given that the Delaware procedure does not provide for limited appearances, the defendants are now met with a choice between defaulting on the one hand and, on the other, entering a general appearance to defend the action. Since we 54. See text accompanying notes 10-16, supra. 55. At the time of a sequestration request, seizures will be ordered if the “complaint, regardless of its merits, is on its face a bona fide allegation.” Folk & Moyer, 73 Colum. L. Rev. at 755. sven 34a Court of Appeals Opinions (8/31/73) have left the question unanswered, defendants, if they choose to defend generally, and if they are found liable in an amount surpassing the value of their property legitimately seized, will be forced to litigate the con- stitutionality of the excess award in another appeal.™ If the constitutional question is decided adversely to i them on that appeal, their opportunity to limit their liability by defaulting will, quite obviously, have passed. Conversely, a decision to default now, with the attendant forfeiture of their property, would work to deprive them of the benefit of any subsequent judicial ; determination that an award in such an action may not ; exceed the value of seized property. Thus, by staying our hand on this point, it may well be that we have deprived the defendants of the opportunity to make a fully informed choice between default and general appearance. Moreover, it appears that the constitutional ques- tion presented by the possibility of a judgment exceed- ing in amount the value of defendants’ property is neither an insubstantial nor a frivolous one. If we ; assume that defendants will, as a practical matter, decide to defend this action generally, it may be no dis- tortion of language to maintain that they will have been *‘eoerced” into subjecting themselves to the in per- : sonam jurisdiction of the court.” The only justifiable basis of in personam jurisdiction is, of course, ‘*power”’ over the defendants’ person. Since the decision in 6 De Pua eP PEO eye Nae See ee 56. See discussion at p. 31, infra. 57. Indeed, at least one court has pointed out that the “avowed purpose of Delaware’s sequestration statute is to compel a general ap- pearance and thereby produce a basis for im personam jurisdiction.” U. S. Industries Inc. v. Gregg, 348 F. Supp. 1004 (D. Del. 1972). See also Folk & Moyer, supra, at 789. 58. See Pennoyer v. Neff, 95 U. S. 714 (1877). Court of Appeals Opinions (8/31/73) 35a International Shoe Co. v. Washington, 326 U. S. 310 (1945), the exercise by courts of in personam jurisdic- tion over persons without the territorial bounds of the forum has been tested against the so-called ‘‘minimum contacts’’ standards. Where a person elects to do business in a state, be it merely through the appoint- ment there of agents or salesmen, it is not conceptually difficult to conclude that that person, having voluntarily accepted the benefits conferred by the state upon those doing business, may be forced to accept the burdens implicit in subjection to personal jurisdiction. ‘‘ Mini- mum contacts”’’ voluntarily established, therefore, offer an acceptable predicate for in personam jurisdiction: a personal judgment rendered under such conditions ‘“‘does not offend ‘traditional notions of fair play and justice.’ ’’® In this connection, the Supreme Court in Hanson v. Denckla stated: ‘**TI]t is essential in each case that there be some act by which the defendant purposefully avail it- self of the privilege of conducting activities within 59. 326 U. S. at 316. 60. Id. Both the Court of Appeals of New York and the U. S. Court of Appeals for the Second Circuit have upheld the constitu- tionality of New York’s practice of allowing a plaintiff in an accident case to attach a contingent debt owed to the defendant by a New York insurer, although the defendant would not otherwise be subject to suit in New York. See Simpson v. Loehman, 21 N. Y. 2d 305, 287 N. Y. S. 2d 633, 234 N. E. 2d 669 (1967), reargument denied, 21 N. Y. 2d 990, 290 N. Y. S. 2d 914, 238 N. E. 2d 319 (1968) ; Minichiello v. Rosenberg, 410 F. 2d 106 (2d Cir. 1968) (en banc), cert. denicd, 396 U. S. 844 (1969). Significantly, the Court of Ap- peals of New York has held that recovery in an action brought pur- suant to this procedure must be limited to the amount of the debt seized, i.e., to the amount of the insurer’s liability. See Simpson, supra. 4 This Court, in an admiralty context, has expressly declined to adopt the New York practice. See Robinson v. Shearer & Sons, Inc., 429 F. 2d 83 (3d Cir. 1970). ’ ET rR Tee ERAN ERA OE A TARE REO Oil arid weareiaibiibdec dant 5 Xiph PASI she Nestea! Cac Ai et Nene bs AMO Ft cig SEE tai. EERE IAC Ce TE Tae ee ——e 36a Court of Appeals Opinions (8/31/73) the forum state, thus invoking the benefits and protections of its laws.’’® In a case such as this, it might persuasively be argued that since the ‘‘voluntariness’’ of defendants’ contacts with the forum state is, at best, attentuated, a personal judgment exceeding the value of their prop- erty—seizure of which is the only real jurisdictional base—would offend against due process. However, there appears to be substantial authority to the effect that a ‘‘coerced’’ general appearance will not be deemed involuntary at all, since by opting to appear generally the defendant has in fact ‘‘consented’’ to the court’s jurisdiction. In Ownbey v. Morgan, supra, the Court spoke with apparent approbation of this ‘‘conversion of a proceeding quasi in rem into an action in personam. . .’?* Tf consent to personal jurisdiction is the necessary implication of the entry of a general appear- ance, then application here of the ‘‘minimum contacts”’ tests seems misguided, and the in terrorem effect of the sequestration procedure might well pass constitutional muster. Ultimate resolution of this issue would de- pend, then, on which course of analysis a court were to pursue—the ‘‘voluntary contact”’ test of International Shoe and Hanson or the ‘‘implied consent’ view of Ownbey.® Having illustrated that seemingly divergent lines of Supreme Court and lower court decisions leave the 61. 357 U. S. 235, 253 (1958). (Emphasis added) 62. 256 U. S. at 111. Cf. Pennoyer v. Neff, supra, 95 U. S. at 730-31, where the court contrasted in personam judgments against absent defendants with those in which the party “voluntary ap- peared.” See Anderson v. Benson, 117 F. Supp. 765, 769-70 (D. Neb. 1953), and compare Salmon Falls Mfg. Co. v. Midland Tire & Rubber Co., 285 F. 214, 218-19 (6th Cir. 1922). 63. See generally Folk & Moyer, supra, at 789-95. a defendants virtually in the dark as to the constitu- tionally permissible extent of their liability, we re- iterate, with some disquietude, that we cannot at this time lay their uncertainty to rest. This Court has long honored the proposition that we are bereft of power to render ‘“‘an opinion advising what the law would be upon a hypothetical state of facts.””“ The interdiction against advisory opinions emanates from the very fountainhead of our jurisdiction, Article III of the Constitution. Like other doctrines falling under the general head uv: “‘justiciability,’’ it serves to assure that federal courts stay their mandate until confronted with ‘a question . . . precisely framed and necessary for decision... .”’™ The constitutional question here under discussion, albeit one of vital interest to the defendants, is not, at this juncture, ‘‘precisely framed and necessary for decision.’”’ The amount of the defendants’ property legally seizable remains undetermined; the precise value of any property legitimately seized is, perforce, unknown; the extent of their potential liability is yet to be resolved. There thus survives the real possi- bility that our resolution of the constitutional issue would indeed prove ‘‘advisory,’’ if defendants’ liability 64. Aetna Life Ins. Co. v. Haworth, 300 U. S. 299, 241 (1937) ; accord North Carolina v. Rice, 404 U. S. 244, 246 (1971). See Conover v. Montemuro, No. 71-1871 (3d Cir. Filed Dec. 20, 1972) slip op. at 18 (Adams, J., concurring) aff'd en banc (3d Cir. Filed May 8, 1973) ; Super Tire Engineering Co. v. McCorkle, 469 F. 2d 914 (3d Cir. 1972). 65. United States v. Fruehauf, 365 U. S. 146, 157 (1961). See South Carolina v. Katzenbach, 383 U. S. 301, 335 (1966) ; Muskrat vy. United States, 219 U. S. 346 (1911); C. Wright, Federal Courts 334 (1963). 66. Even if the amount of lawfully seizable property and the value thereof were known, the question whether the district court’s judgment will exceed that value would, obviously, remain unanswered. Court of Appeals Opinions (8/31/73) 37a _ Meee ne he - 4 be r vere PE as eee a eS fe iid Bano: wee Saket ‘piioics Neck cin a i it AN al ia cel AT OSA OANA CATES 38a Court of Appeals Opinions (8/31/73) happens to be less than the value of the seized property. As much as our appreciation of the hardship visited upon the defendants may move us to reach the constitu- tional question, the counsel of recognized limitations upon our jurisdiction is more compelling. Accord- ingly, we hold that resolution of the question would be premature. One further consideration convinces us of the wisdom of declining to settle this due process issue now. As indicated above,” the Supreme Court of Dela- ware has held that the Delaware sequestration pro- cedure does not permit a limited appearance to defend on the merits.“ However, the Delaware court has ap- parently never given its full attention to the constitu- tional argument that may be mounted against the sequestration statute, insofar as that statute is con- strued to permit a judgment exceeding the value of property seized.” It is not inconceivable that prior to determination by the court below of the extent of de- fendants’ liability, the Supreme Court of Delaware, moved by its perception of this specific constitutional issue, will re-interpret the sequestration statute to prohibit judgments in excess of property seized. Such an interpretation, authoritative and binding upon the federal judiciary, would, of course, obviate any need for this Court to gauge the Delaware statute against constitutional standards. We think, too, that where the courts of a state have, over the years, repeatedly upheld a statute such as the 67. See text accompanying note 48, supra. 68. See Sands v. Lefcourt Realty Corp., supra, 117 A. 2d at 368. 69. See generally Folk & Moyer, supra, at 789-95. Compare the analysis in U. S. Industries v. Gregg, supra, 348 F. Supp. at 1019-21, where Judge Stapleton apparently found no constitutional violation worked by the statute’s avowed purpose of “coercing” gen- eral appearances. Court of Appeals Opinions (8/31/73) 39a Delaware sequestration law, notions of comity militate in favor of allowing those courts the first opportunity to test the statute against new inroads of constitutional attack. The courts of Delaware have only recently reaffirmed their readiness, in a proper case, to subject the sequestration law to thoroughgoing constitutional analysis.” This is not to say that we would defer decision of the constitutional question were it properly before us, merely to allow the Delaware court the first opportunity to pass on the constitutional validity of the statute.” But where, as here, the constitutional issue is not yet ripe for decision in a federal court, a salutary effect upon state-federal relations may be had by holding in abeyance our power to strike down the state statute under attack.” Having set forth our reasons for refusing to settle the constitutional issue at this time, we are not disposed to conclude that we are powerless to meliorate defend- ants’ plight. While Rule 4(e) of the Federal Rules of Civil Procedure permits commencement of this ac- tion by the ‘‘borrowing’’ of Delaware’s quasi in rem procedure, nothing in the Rule appears to require that we ‘‘borrow,’’ as well, all the accoutrements of Dela- ware’s practice. Thus in the interest of fairness, the defendants, even if they elect to enter a general appear- ance and defend on the nierits, shall not be deemed to have waived their constitutional claim. Accordingly, 70. See Gordon v. Michel, 297 A. 2d 420 (Del. Ch. 1972). 71. Compare Railroad Comm. of Texas v. Pullman, 312 U. S. 496 (1941). 72. Were the highest court of Delaware to be of the opinion that “excess” judgments are, indeed, invalid, it would appear to have statutory authority to “sever” from the sequestration statute those words thought to permit the rendition of the excess award. See 1 Del. C. § 308; Conrad v. State, 41 Del. 107, 16 A. 2d 121 (1940). Tete Fs ae Seeteabiat EPR ALE Killa hh RS LAIBLE ALLA Teles CL BO essinbed eT a SVR beer : 4 ! ; a 4 A 40a Court of Appeals Opinions (8/31/73) if a judgment by the district court exceeds the value of defendants’ lawfully seized property, such would be open to constitutional attack either in the district court or on appeal. We hold, therefore, that the presence of property in Delaware and the involvement of the Penn Central with Delaware provide sufficient basis for the assump- tion of jurisdiction by Delaware. Thus, we reject, within the context of this appeal, the claims of the de- fendants that employment of the sequestration statute deprives them of due process. The defendants further contend that the seizures made by the sequestrator ® violate the Fourth Amend- ment since they were not made pursuant to a warrant based on probable cause. An examination of early cases indicates quite clearly that the protection of the Fourth Amendment was not considered to extend to seizures of a civil nature. In Boyd v. United States," the Supreme Court stated in dicta: ‘‘The entry upon the premises, made by a sheriff or other officer of the law, for the purpose of seiz- ing goods and chattels by virtue of a judicial writ, such as an attachment, a sequestration, or an exe- cution, is not within the prohibition of the Fourth or Fifth Amendment.’ ” While it is clear that the concept of what consti- tutes a search or seizure impermissible under the Fourth Amendment has evolved significantly since the late nineteenth century, the path of that evolution has 73. The sequestrator is an officer of the court empowered to serve writs, similar to a sheriff or constable. E. Folk, supra note 1 at 581. 74. 116 U. S. 616 (1886). 75. Id. at 624. Court of Appeals Opinions (8/31/73) 4la been neither so straight nor so inexorable“ that it encompasses sequestration proceedings, at least at this time.” Moreover, in Lebowitz, the same Fourth Amend- ment claim was raised, and this Court dismissed the contention summarily.” Bound by the holding of this Court in Lebowitz and guided by the unrepudiated pronouncement of the Supreme Court in Boyd, we reject the defendants’ Fourth Amendment claim. IV. The constitutional challenge mounted by the de- fendants on this appeal has impelled this Court to examine carefully a statute of the State of Delaware. Our examination has, however, been confined to the statute’s impact on the litigants present here, in the factual setting of this case. Save for litigation involv- ing the right of free speech,” inquiry into a statute beyond that required for deciding the immediate dis- pute is not only doctrinally impermissible but indica- tive of a misapprehension of the role of a court in our society. Invalidating legislation is serious business, and should not be indulged in lightly, if there is any basis for substantiating it- Recognition that the task of the judiciary is de- ciding cases, and that cases are comprised of discrete, 76. Compare Camara v. Municipal Court, 387 U. S. 523 (1967) with Wyman v. James, 400 U. S. 309 (1971). 77. See generally Comment, Laprease and Fuentes: Replevin Reconsidered, 71 Colum. L. Rev. 886, 898-901 (1971). 78. 456 F. 2d at 980. 79, See e.g. Thornhill v. Alabama, 310 U. S. 88 (1940). “It is not merely the sporadic abuse of power by the censor but the perva- sive threat inherent in its very existence that constitutes the danger to freedom of discussion.” Jd. at 97. Sed ee oe a ae ee ee Geet a eee ew See) ot erane es Tey a. ee ee ee ee ee 42a Court of Appeals Opinions (8/31/73) at times even unique facts, is necessary to a proper appreciation of the place of the court in our federal system. We are not empowered to be knights-errant, striking dowa any statute that appears to us to be un- attractive. Rather, we may invalidate a statute only when its actual effect on a litigant before the court is to deprive that litigant of a right secured by a superior law, here the United States Constitution.” Moreover, this Court is neither equipped nor em- powered to act as a finder of fact. Appellate adjudica- tion involves reviewing the application of law to facts found by the district courts, even though at times it may be enticing to forego this necessary albeit time- consuming step. On occasion, in a zeal to decide all issues presented, some have asserted that a particular issue involves only the application of law, thus obvi- ating the need for facts found by a district court. Although this approach, having the advantage of celerity, is to some inviting, sound judicial procedure requires that it be eschewed in favor of a more orderly resolution of a particular case. For all the reasons set forth above, the judgment of the district court will be reversed and the case re- manded for action consistent with this opinion. Gissons, Circuit Judge, dissenting I coneur in that part of Judge Adams’ opinion affirming the vacation of a default entered against the defendants. I dissent from the reversal of the district court’s order because of my disagreement with the 80. “This Constitution, and the laws of the United States which shall be made in pursuance thereof . . . shall be the supreme law of the land.” U. S. Const. Art. VI, § 2. Court of Appeals Opinions (8/31/73) 43a majority over the proper interpretation of the Dela- ware Sequestration Statute, over the treatment of the defendants’ due process contentions, and over post- ponement of the resolution of issues properly before us. Since the district court’s interpretation of the Delaware Sequestration Statute provides an adequate nonconstitutional basis for decision, I would affirm on that ground, and will commence analysis of the case at that point. A. Application of the Delaware Sequestration Law This diversity action (that is the only federal jurisdiction alleged) was brought by the Trustees of Penn Central Transportation Company against Fidel Gotz, a West German national, Volker Gotz, a Swiss national and seven business entities organized in Switzerland or Liechtenstein. The complaint charges that Fidel Gotz controls the seven business entities, and that acting through them in Europe he fraudu- lently m sappropriated four million dollars belonging to the estate being administered by the plaintiffs. None of the defendants are residents of Delaware or qualified to do business there. The transactions giving rise to the alleged misappropriation did not take place in Delaware. The only process which has issued from the district court is a sequestration order issued pur- suant to the borrowing provision of Fed. R. Civ. P. 4(e)(2)- Prior to 1963, an action could not have been commenced in a United States District Court in this manner. Big Vein Coal Co. v. Read, 229 U. 8. 31 (1913) ; Davis v. Ensign-Bickford Co., 139 F. 2d 624 (8th Cir. 1944). The 1963 amendment to Rule 4(e) made it possible to bring an original quasi in rem action in the federal court. But the district court in — ant. te —. s tive t th | bens iin > tta Court of Appeals Opinions (8/31/73) a diversity case can go no further in compelling a de- fendant’s appearance by the quasi in rem device than could the state court whose jurisdictional device it borrows- The sequestration by which this action commenced was issued on the basis of a conclusively framed affi- davit alleging, on information and belief without specifying the source of the belief in any detail, that one or more of the nine defendants had a legal or an equitable interest in one or more of thirteen different categories of property. The sequestrator’s return in- dicated that three of the defendants, Inter-Marketing Corp. Anstalt, Minolta Anstalt, and Vileda Anstalt, had an interest in property in three of the sixteen concerns in Delaware to whom notice of the sequestration had been addressed. As to six of the nine defendants, the sequestrator reported no property subject to sequestra- tion. By an order dated September 14, 1971, the dis- trict court vacated the sequestration as to these six defendants and no appeal has been taken from that order. On December 20, 1971, the district court quashed the sequestration as to Inter-Marketing, Minolta and Vileda on the ground that the affidavit supporting it was insufficient under the applicable Delaware statute and rules. See 336 F. Supp. 197 (D. Del. 1971). The property in issue, as disclosed in the return of the sequestrator, is as follows: (1) Sequestered at SSI Computer Corp. (now ITEL Computer Leasing Corp.) (a) 50 shares of SSI common stock owned by Inter-Marketing (b) 30,000 warrants to purchase SSI common stock, owned by Inter-Marketing Ve Court of Appeals Opini [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1796%3A1. Public record. Not legal advice.