Opposition Brief — Bumsted v. Markham

ees s eae

CITATIONS

Cases:

Banco Mericano v. Deutsche Bank, 263 U. 8. 591.--------

Becker Co. v. Cummings, 296 U. 8. 74..-.---------------

Castell v. United States, 98 F. 24 88, certiorari denied, 305.

27

27

‘ 27

Clark v. Uebersee Finanz-Korp., 332 U. 8. 480. -~--------- 23

Confiscation Cases, 7 Wall. 454_._...------------------- 27

Cummings v. Deutsche Bank, 300 U. 8. 115--.----------- 27

Draeger Shipping Co. v. Crowley, 49 F. Supp. 215-- ------ 16

Markham v. Cabell, 326 U. 8. 404-~--.-------------- 23, 25, 26

McGrath v. Manufacturers Trust Co., 338 U. 8. 241..----- 25

New York v. New Jersey, 256 U. 8. 296 Rais) a cundebies 27

Sielcken-Schwarz v. American Factors, 60 F. 2d 43, certiorari

Sigg-Fehr v. White, 285 Fed. 949. __..-.----.----------- 16

Silesian-American Corp. v. Clark, 382 U. 8. 469 Tae barre 23, 24

Standard Oil Co. v. Markham, 57 F. Supp. 332_-.-------- 16

Standard Oil Co. v Markham, 64 F. Supp. 656, modified

sub nom., Standard Oil Co. v. Clark, 163 F. 2d 917, certio-

rari denied, 333 U. 8. 873----- PP SMC n ean Swe re 24, 27

Stoehr v. Wallace, 255 U. 8. 239..---.------------------ 16

Sutherland v. International Ins. Co. of New York, 43 F. 2d

969, certiorari denied, 282 U. 8. 890--..--------------- 27

Swift & Co. v. United States, 276 U. S. 311..------------ 28

United States v. California, 332 U. 8. 19....-.----------- 28

United States v. San Jacinto Tin Co., 125 U. 8. 273...---- 27

@

Statutes and Rules:

Act of June 22, 1870, 16 Stat. 162, 5 U. S. C. 291, 306,

900, $16_.............-------- 2-2 - +--+ ----- = ===

Judiciary Act of 1789, Ch. 20, Sec. 35, 1 Stat. 73, 92_.-.--

Trading with the Enemy Act, 40 Stat. 411, as amended, 50

U. 8. C. App. 1, ef seg:

See. 5 (b)...-.--.----------+------ ‘22, 23, 24, 25, 26,

Sec. 9 (a)...------------------------ 16, 22, 25, 26,

26,

8 C. F. R., 1943 Supp., Part 501, 8 F. R. 16709.......---

Federal Rules of Civil Procedure:

Rule @0 @) 22... 2 22222 cece wenn ee eo eeseee-ee

Executive Orders:

No. 2813, Feb. 26, 1918._...--------------------------

No. 6166, June 10, 1933, Sec. 5, following 5 U. 8. C. (1952

ed.) Secs. 124-132, p. 112, 114....----------------

No. 6237-A, July 30, 1933, 50 U. 8. C. App., Sec. 12 n.,

No. 9142, Apr. 21, 1942, 7 F. R. 2985......-..----.-- 25, 26,

No. 9193, July 6, 1942, CPi Bi BENS. ss i ccdiscsssesce

of Attorney General:

OF thls WE NS 1. snueseveeindatecte clans

H. Rep. No. 1507, 77th Cong., Ist Sess., pp. 2-3...------

8. Rep. No. 911, 77th Cong., 1st Sess., p. 2... ..----------

B88 BR YVsss

Futhe Supreme Gourt of the Vinited States

OctToBER TERM, 1953

No. 562

EvizasetH §. HarBach AND Franxuin H. Srar-

FORD, AS TRUSTEES UNDER AGREEMENT OF TRUST

Mane sy Ernest K. HaupacnH, Daten DECEMBER

6, 1940, PETITIONERS

v.

James E. MarKHAM, AS ALIEN PROPERTY

CusToDIAN

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the District Court for the

District of New Jersey (R. 66-79) is reported

at 106 F. Supp. 475. The per curiam opinion of

the Court of Appeals for the Third Circuit (R.

398-399) is reported at 207 F. 2d 503.

JURISDICTION

The judgment of the Court of Appeals was

entered on November 2, 1953 (R. 399). The

petition for a writ of certiorari was filed on

(1)

2

January 30, 1954. The jurisdiction of this Court

is invoked under 28 U. 8. C. 1254 (1).

1. Were the two courts below correct in holding

that there has been a “‘complete failure to prove

duress’’ in the agreement of settlement of this case

in 1945, and that the proofs “expressly eliminate

any thought of deprivation of free agency in

Halbach and his family’’?

2. Were the Attorney General and the Custo-

dian authorized, in a suit for the return of vested

property under Section 9 (a) of the Trading

with the Enemy Act, to settle the case by relin-

quishing to the plaintiff the portion of the

property agreed by the compromise to be non-

enemy, and retaining the remainder, agreed to be

enemy ?

STATUTES INVOLVED

The relevant provisions of the Trading with

the Enemy Act, 40 Stat. 411, as amended, 50

U.S.C. App. 1 et seq., are set forth in the Appendix,

infra, pp. 30-34.

STATEMENT

The present litigation concerns the propriety

of the settlement, in 1945, of an action under

Section 9 (a) of the Trading with the Enemy

Act for the return of certain shares of stock in

General Dyestuff Corporation which had been

vested by the Alien Property Custodian. These

3.

shares of stock were held under a trust, created

in 1940, and petitioners are the successors in in-

terest to the trustees. The pertinent facts are as

follows:

Prior to the outbreak of World War II, General

Dyestuff Corporation, hereinafter referred to as

“Q@DC,” was engaged in the importation and

sale of dyestuffs produced by I. G. Farben in Ger-

many. It was also the exelusive sales agent for

dyestuffs manufactured by General Aniline &

Film Corporation, a Delaware corporation (R.

84-85, 135). Both properties were vested by the

Alien Property Custodian in the first half of 1942

(R. 30-31).

The donor of the trust involved, who is also the

father of the beneficiaries (the present peti-

tioners), is Mr. Ernest K. Halbach, a native-born.

American citizen (R. 20, 22). Mr. Halbach had

been an officer and director of GDC from its in-

corporation in 1925, general manager from 1926,

and president from 1930 to the vesting in 1942

(R. 21, 110). He is referred to herein as the

petitioner, because the merits of the case have re-

volved about him and because he controlled the

settlement in 1945.

Mr. Halbach had also been a stockholder in

GDC from the outset, and from 1940 he was the

majority stockholder. The trust he created in

_ 1940 consisted of his majority interest in GDC—

3150 shares—increased to 4725 shares by a stock

dividend made before the vesting in 1942 (R. 21-

4

23, 41). The shares in GDC had from the time

of incorporation been subject to a purchase option

binding the stockholders. Originally, the options

ran directly to I. G. Farben; they were continued

and renewed and at the time of vesting ran to

GDC itself. The option price, at which the

shares could be repurchased from the stockhold-

ers, remained constant, and was the par value of

the stock, $100 plus 6% interest from the date of

the last dividend. The stockholders paid $100

for their shares when they bought them (R. 32

(ftn.)-33, 135-136, 141-142).

Accordingly, Mr. Halbach had paid $210,000 for

2100 shares. These were increased to 3150 shares

by a 50% stock dividend prior to the creation of

the trust in 1940. After the creation of the trust

but before the vesting, the 3150 shares were in-

creased by another 50% stock dividend to a total

of 4725 shares. In the gift tax return made on

the gift in trust in 1940, Mr. Halbach, consist-

ently, valued the shares transferred at $100 each

(R. 70, 22-23, 92, 135-136, 141-142).

Immediately upon the declaration of war in

December 1941, the Treasury took over super-

vision of GDC (R. 83). Vesting of all the stock

of GDC, by the Alien Property Custodian pur-

suant to the Trading with the Enemy Act, fol-

‘lowed on June 30, 1942, and in the next month

the Treasury, under the same Act, froze Mr.

Halbach’s personal bank accounts (R. 8-10, 83,

5

101-102, 107). The Vesting Order provided,

inter alia (R. 8-9):

Such property and any or all of the pro-

ceeds thereof shall be held in a special

account pending further determination of

the Alien Property Custodian. This shall

not be deemed to limit the powers of the

Alien Property Custodian to return such

property or the proceeds thereof, or to in-

dicate that compensation will not be paid

in lieu thereof, if and when it should be

determined that such return or compensa-

tion should be made.

The Order was issued and signed by Mr. Leo

T. Crowley, Alien Property Custodian from the

beginning of the Office on March 12, 1942 until

March 1944 (R. 30-31). The issuance of the

Order was recommended by the Executive Com-

mittee of the Office of Alien Property Custodian,

whose members were the ranking members of

Mr. Crowley’s staff (R. 106).

Mr. James E. Markham, Deputy Custodian

from March 1942 to March 1944 (and Custodian

thereafter, to 1946), was at the time of vesting

a member of the Executive Committee. Mr.

Markham testified in this proceeding that the

Committee was unanimous in its recommendation

to vest. Further, he testified that it acted on

evidence gathered by the Treasury Department

in its investigations of GDC and General Aniline

& Film Corporation early in 1942 ‘‘tending, to

show that GDO was under enemy domination and

control, that Halbach was acting as a cloak for

the enemy, and that the enemy had beneficial

ownership of all of the capital stock of the cor-

poration through a series of option agreements

to which the stock had been subject.”” (R. 105-

106.)

Mr, Markham testified, too, that he “‘realized

that there was evidence of Halbach’s long and

intimate association with the enemy and of the

enemy’s beneficial ownership of his stock’’ (R.

109). He ‘followed the case carefully during

his] tenure’? (R. 105). ‘Never during my ten-

ure as Deputy Custodian and Custodian did I

eome to the conclusion that the vesting was not

justified or that ways should be explored to re-

turn the stock to Halbach’”’ (R. 107).

After the vesting Mr. Halbach resigned as

president of GDC but was retained as a consultant

(R. 21-22, 107, 109). From the time of vesting

in 1942 until his retirement on pension on August

1, 1950, his salary and bonuses from the corpora-

tion totaled $558,600 (R. 110-111).

On January 3, 1944, a year and a half after the

vesting, petitioner filed with the Office of Alien

Property Custodian an administrative claim for

the return of the 4725 shares vested from him

(R. 7, 12). He did not ask for a hearing under

the regulations then in foree but rather brought

suit on March 17, 1944 (8 O. F. R., 1943 Suapp.,

7

Part 501, p. 370, 8 F. R. 16709). His complaint

(R. 5-10) sought the return of the stock under

Section 9 (a) of the Trading with the Enemy

Act. The Custodian’s answer denied that peti-

tioner was the owner of the stock (R. 11-12).

- In January 1945, as the case was approaching

trial, the parties agreed to a settlement and early

in February petitioner dismissed his case in con-

sideration of $557,550, or $118 per share for the

4725 shares in dispute, the amount payable on the

exercise of the option (R. 67, 13-16, 86-88, 89-

104, 108-109, 119-120, 133-145, 146-153). It is

this settlement which is being attacked in this

proceeding.

Negotiations leading to the settlement had be-

gun three months earlier in November 1944. In

these negotiations petitioner was represented by

Stoddard M. Stevens, Jr., Esq., a partner in

Sullivan & Cromwell. Respondent was repre-

sented by then Assistant Attorney General Her-

bert Wechsler, a New York lawyer and professor

of law. The Office of Alien Property Custodian

was then an agency separate from the Department

of Justice and Assistant Attorney General

Wechsler was acting for the Attorney General,

whose duty it was to represent the Custodian in

litigation (R. 69-70, 89-91, 112-114, 116).

i Negotiations were initiated by petitioner and

were continued at a series of meetings between

rounsel. At one meeting Mr. Halbach was present

290218—54—_2

8

and actively participated in the discussions (R.

69-71, 60-61, 90-91, 95-98, 116-117).

Mr. Wechsler, in a detailed affidavit based

on memoranda he wrote as the events occurred,

testified to the course of the negotiations (R.

89-104). He refused to include in the negotia-

tions any consideration of such extraneous issues

as Mr. Halbach’s future employment with the

corporation, the disposition of a pending indict-

ment against Mr. Halbach for an antitrust viola-

tion, and the question of the freezing of Mr.

Halbach’s assets by the Treasury (R. 70-71, 91,

92-93, 97-98, 101-102). He testified that the

Department of Justice did not, in the negotia-

tions, seek to resolve the money differences be-

tween the parties merely in bargaining terms

(R. 97). The Government’s theory of settlement

was based upon the option, which in the Govern-

ment’s view was the means by which the enemy

interests had exercised control of the corporation.

The amount payable on exercise of the option,

$118 per share, was therefore, under Mr. Wecehs-

ler’s position, the maximum interest assertible or

recoverable by the petitioner (R. 70, 91-92, 94,

96-97, 108-109).

Mr. Stevens, without the benefit of contempo-

raneous memoranda such as Mr. Wechsler had

made, remembered some but not all the facts

testified to by Mr. Wechsler, among them Mr.

Wechsler’s position that the option put a ceiling

9

on a possible settlement price (R. 125-133)."

This ceiling, insisted upon by the Government,

was the basis of the settlement agreement (R. 79,

100, 108-109, 120, 135-136, 141-145).

Of very substantial significance in the agree-

ment reached was the fact that Mr. Halbach

himself had in 1940 valued the shares at $100

each, in the gift tax return he made at the time

he placed the shares in trust (R. 70, 92, 108-109).

In the course of the negotiations, Mr. Wechsler

pointed to this valuation as confirming his posi-

tion. He also pointed out the possibility that

settlement at $169, proposed by Mr. Halbach,

would result in a tax on the additional $69 as

income rather than as capital gain, with only a

small actual monetary difference to the petitioner.

(R. 92, 99.)

The eventual settlement involved here was only

one of three settlements involving four parties—

the trustees, Mr. Halbach, the Alien Property

Custodian and the: Bureau of Internal Revenue.

The basic settlement figure of $100 per share,

agreed to by Mr. Halbach, the trustees and the

Custodian, was accepted by the Bureau of In-

ternal Revenue as settling both the gift tax

1 The details which Mr. Stevens could recall of the settle-

ment negotiations corroborated the facts as stated in Mr.

Wechsler’s affidavit. As to other details mentioned by Mr.

Wechsler, Mr. Stevens made it clear that his lack of recol-

lection did not mean that the facts were not as stated by

| Mr. Wechsler. After reading Mr. Wechsler’s affidavit, Mr.

| Stevens testified that “I have not any reason to challenge any ~~~

of the statements that Mr. Wechsler has made here” (R. 126).

10

controversy with Mr. Halbach and an income tax

issue with the trustees. The $100 became the

agreed valuation on which the Bureau based the

tax due from Mr. Halbach on the gift in trust of

the shares in 1940, as well as the income tax due

from the trustees on the amount realized from

the settlement. This income, moreover, was

agreed to be taxed as capital gain rather than

ordinary income (R. 70, 100-102, 132-134, 135-

145). Mr. Stevens testified that the gift tax and

income tax closings with the Bureau of Internal

Revenue were a part of and conditions precedent

to the settlement (R. 121-122, 124-125, 132-134,

135-145). His associate informed the Bureau at

the time that the tax considerations were ‘‘a prin-

cipal motivating consideration in making the

settlement’’ (R. 145).

After agreement was reached between Mr.

Wechsler and Mr. Stevens, Mr. Markham, the

Alien Property Custodian, recommended that the

Attorney General accept the settlement because,

he testified, ‘‘I was satisfied that settlement at

that price represented a fair settlement both for

Halbach and for the Government’? (R. 108).

The Attorney General then gave his approval (R.

102). The Custodian made payment by using

dividends on the GDC stock paid to him as the

sole stockholder and thereafter deposited in a

special account with the Treasurer of the United

States, established pursuant to the Vesting Order

(R. 7-78, 135-136, 143-145). The Attorney

General advised the Custodian that he had

authority so to do (R. 102).

Trial had been set for January 29, 1945 (R. 67,

135-136, 141-145). On January 26 and 27, the

trustees, Mr. Halbach, and the latter’s wife and

two children, the beneficiaries, all executed re-

leases and covenants not to sue, in return for

$557,550 paid to them by the Custodian (R. 67,

13, 20-21, 146-153). Accordingly, a stipulation of

discontinuance with prejudice was filed on Febru-

ary 2, in pursuance of Federal Rule 41 (a) (1)

(ii) (R. 67, 16, 1383-134, 139).

Mr. Stevens, counsel for Halbach and the trus-

tees, was also counsel for seven other stockhold-

ers in GDC who had filed similar suits. The

settlement which Mr. Stevens negotiated for Hal-

bach was on behalf of these other stockholders as

well. Documents signed simultaneously settled

their actions on the same terms as the Halbach

action; they, too, were parties to income tax

settlement with the Bureau of rnal Revenue.

(R. 115-116, 132-134, 135-145.)

T for five and a half

—2ars._.

In August 1950, Mr. Halbach, having earned

$558,600 from his employment with GDC since

1942, retired on a pension of $18,000 per annum

(R. 68, 110-111).

On January 23, 1951, five months thereafter,

and almost six years to the day after the settle-

ment, ‘a motion

12

of the Federal Rules of Civil

asidé otttemen

to restore the case to the trial-ealendar. The

grounds were (a) duress upon Mr. Halbach in

the settlement and (b) a lack of legal authority

on the part of the Attorney General and the

Custodian to make the settlement (R. 2, 17 et

seq.). Proof was made by deposition and affi-

davits, as set out above. After hearing, the

District Court, per Circuit Judge Gerald Me-

Laughlin, specially designated, denied the motion

with an opinion (R. 66-79, 80). The Court of

? Rule 60 (b) provides as follows:

“MisraKes; INADVERTENCE; EXCUSABLE NEGLECT; NEWLY

DISCOVERED EVIDENCE; FRAUD, ETc. On motion and upon such

terms as are just, the court may relieve a party or his legal

representative from a final judgment, order, or proceeding

for the following reasons: (1) mistake, inadvertence, sur-

prise, or excusable neglect; (2) newly discovered evidence

which by due diligence could not have been discovered in

time to move for a new trial under Rule 59 (b); (3) fraud

(whether heretofore denominated intrinsic or extrinsic), mis-

representation, or other misconduct of an adverse party (4)

the judgment is void ; (5) the judgment has been satisfied, re-

leased, or discharged, or a prior judgment upon which it is

based has been reversed or otherwise vacated, or it is no longer

equitable that the judgment should have prospective applica-

tion; or (6) any other reason justifying relief from the opera-

tion of the judgment. The motion shall be made within a rea-

sonable time, and for reasons (1), (2), and (3) not more than

one year after the judgment, order, or proceeding was entered

or taken. A motion under this subdivision (b) does not

affect the finality of a judgment or suspend its operation.

This rule does not limit the power of a court to entertain

an independent action to relieve a party from a judgment,

Procedure

ALG GIS

55a ' Ne Ss

.

.

13

Appeals affirmed per curiam, on the “compre-

hensive and well reasoned opinion filed by Judge

-McLaughlin’”’ (R. 398-399).’

ARGUMENT

I

THE CLAIMED DURESS AND OVERREACHING

Petitioner contends (Pet. 5, 9, 20, 33 et seq.)

that the two courts below applied an improper

standard in judging his contentions of duress.

The record rather shows that the District Court,

approved by the Court of Appeals, applied the

highest possible standard, examining the facts of

each contention made by petitioner and finding

| that the showing “utterly fails” to support the

| allegations of duress (R. 67, 72). Each charge

was found to be baseless and petitioner does not

here seem to renew the charges he made before

order, or proceeding, or to grant relief to a defendant not

actually personally notified as provided in Section 57 of the

Judicial Code, U. S. C., Title 28, § 118, or to set aside a judg-

ment for fraud upon the court. Writs of coram nobis,

coram vobis, audita querela, and bills of review and bills in

the nature of a bill of review, are abolished, and the proce-

dure for obtaining any relief from a judgment shall be by

motion as prescribed in these rules or by an independent

action.”

* No question has been raised as-to failure to substitute Mr.

Markham’s successors as Alien Property Custodian because

the motion sought such a substitution (R. 17-19). Substi-

tution under Federal Rule 25 (d), moreover, applies to

pending actions and between 1945 and 1951 the original

proceeding wasclosed. It remains closed unless and until the

present motion is granted. Cf. Rule 60 (b), n. 2, supra, p. 12.

14

the District Court.‘ Those charges have now

been properly rejected by two courts and should

not be again reviewed here. The new charge on-

which the petition is mainly based was rejected

by the court below and is no more worthy of

consideration by this Court.

1. For the charges canvassed in detail by Judge

MeLaughlin, petitioner now substitutes another,

‘made for the first time in the Court of Appeals

two years after the motion to reopen the settle-

ment and eight years after the event. This

is a charge that Assistant Attorney General

Wechsler threatened Halbach’s counsel, Mr.

Stevens of Sullivan & Cromwell, with an illegal

‘“‘stratagem.’’ This ‘‘stratagem’’ is said to have

been the threatened discharge of Halbach or a

threatened offer of sale of the vested stock which,

in turn, would bring the option into play and

thereby give the Government the right to buy out

Halbach at the option price of $118 (the sum at

+ Petitioner quotes, from the record of a legislative hearing,

letters on behalf of Halbach, from the late Senator Taft and

from Senator Langer (Pet. 6-7, 39-40). From the same

hearing, petitioner also quotes (Pet. 38-39) a statement by

Colonel Dallas S. Townsend, the present Director of. the

Office of Alien Property and one of undersigned counsel.

Colonel Townsend stated that there were aspects of the treat-

ment of Mr. Halbach which should be “deeply regretted.”

The statement had reference to the interrogation of Mr.

Halbach’s wife by Government agents at a time when she

was ill. The District Court pointed out that there is no sign

that these agents, wholly unidentified, questioned Mrs.

Halbach against her will or had any knowledge that she was

ill (R. 69, 165).

15

which settlement was eventually agreed) (Pet.

36-37, 9, 18-19, 20).- This intricate structure

(said by petitioner to be conclusive of duress) is

built entirely upon the first sentence of Mr.

Wechsler’s response, at the first settlement meet-

ing, to Mr. Stevens’ statement that if the case

went to trial Halbach might recover everything

or nothing. Mr. Wechsler’s affidavit states (R.

92):

I remember commenting that that position

seemed impossible to me, since I believed

that the Custodian could bring about a

situation in which he could exercise the

options on the basis of the $100 figure. I

also called attention to the fact that when

Mr. Halbach had transferred the shares of

stock to the plaintiff trustees, the stock had

been valued at $100 a share for gift tax

purposes. I urged therefore that Mr. Hal-

bach himself had recognized the validity of

the Department’s position that his maxi-

mum economic interest in the stock, if any,

did not exceed $100 a share.

Mr. Wechsler was stating the Government’s

legal position that, at the least, the right to con-

trol the corporation and exercise the option was

enemy property ; that the $100 option price there-

fore put an economic limit on Halbach’s interest

in the property and that in any event the Govern-

ment could come out of the trial of the case with

a judgment under which it would have the benefit

of the option. The District Court found this

290218543

16

position to be based on ‘‘substantial grounds”’

(R. 79, 70, 91-92, 94, 96-97, 108-109).

In any event, and whatever the meaning of Mr.

Wechsler’s statement, there is nothing to show

that Mr. Stevens took the statement to be

coercive or to mean what petitioner now takes it

to mean. Mr. Stevens’ only response to Mr.

Wechsler was a comment that the $100 valuation

for gift tax purposes was disputed by the Treas-

ury (R. 92). He certainly did not interpret Mr.

Wechsler’s statement as a threat of illegal action R

or as otherwise improper. For he testified that

Mr. Wechsler and the Department of Justice

acted with propriety throughout and petitioner

did not cross-examine him at all, not even to ask

how he understood Mr. Wechsler’s statement (R.

71, 245, 135). Petitioner must therefore fail in

5 An attempt to sell the stock despite the pendency of the

action would have brought into play Section 9 (a) of the

Act, which provides that when a suit for return of vested

property is instituted the “property shall be retained in the

custody of the Alien Property Custodian * * * until any

final judgment” is rendered in the suit (Sec. 9 (a), App.

pp. 32, 33, infra). The cases hold that “the property is to be

retained by the Custodian to abide the result.” Stoehr v.

Wallace, 255 U. S. 239, 246. In Standard Oil Co. v. Mark-

ham, 57 F. Supp. 332 (S. D. N. Y.), decided September 5,

1944, in the month before the settlement negotiations began

(R. 90), the court stated that it had full power to compel

the Custodian to keep the property intact (57 F. Supp. at

334-335). See also Sielcken-Schwara v. American Factors,

60 F. 2d 43 (C. A. 2), certiorari denied, 287 U. S. 654;

Draeger Shipping Co. v. Crowley, 49 F. Supp. 215 (S. D.

N. Y.). Cf. Sigg-Fehr v. White, 285 Fed. 949, 954 (C. A.

D. C.).

17

his attempt to prove duress simply by citing the

Government’s bona fide statement of its legal

position, which was, at the very least, a substan-

tial one (R. 79, 70).

2. In the courts below the Government was not

content to argue that petitioner failed to meet his

burden or to satisfy a given standard of duress.

In view of the serious nature of the charges, the

Government made no defenses which might be

called ‘‘technical,’’ and set out to prove affirma-

tively that there had been no impropriety what-

soever. And the courts below held that the

proofs submitted by the Government ‘‘expressly

eliminate any thought of deprivation of free

agency in Halbach and his family at the time of

the execution of these instruments’’ (R. 72).

These proofs include the nature and conduct

of the settlement negotiations, the absence of

threats or improper considerations, the profit

to Halbach from the bargain he struck, his access

to the courts for a trial, his refusal to accept the

advice of his supporters that he go to trial if he

wanted vindication, and his years of delay in

charging duress. We turn to these matters.

a. The settlement negotiations.—The settlement

negotiations were reviewed in detail by the Dis-

trict Court (R. 69-72). They were ‘‘protracted”’

and at ‘‘arm’s-length’’; Halbach was represented

by ‘‘outstanding independent counsel’’ (R. 69-70,

72). Halbach participated in the negotiations

(R. 70-71, 95-98). He negotiated in a coherent,

18

rational and forceful manner, as a careful busi-

nessman would when seeking to make a good

bargain (R. 98). He never intimated that he felt

under duress (R. 71, 90, 98, 104). The Govern-

ment’s theory of settlement (discussed supra,

pp. 8, 15-16), far from being extreme, was explicitly

held below to rest on “‘substantial grounds” (R.

79, 70).

b. The absence of threats or impropriety.—The

record shows that no improper considerations

were taken into account by the Government (R.

70-71, 91, 97-98, 101). No threats were made

and petitioner’s charges of threats or improper

action were retracted or shown to be baseless, as

follows:

(i) Mr. Halbach charged that Mr. Markham,

in a conversation with Mr. Stevens, had threat-

ened him (Halbach) with a concentration camp

(R. 166, 217-221, 389). Mr. Markham denied

this (R. 106). Demonstration that the charge was

without foundation was supplied by Mr. Stevens,

who testified firmly that he had no recollection of

any concentration camp statement by Mr. Mark-

ham; that he would have resented any such re-

mark if it had been made; that he would have

expressed his resentment; and that he did not

recall expressing any such resentment (R. 217-

221).

(ii) Other charges of illegal threats and actio

were made in an affidavit drawn for Mr. Crowley

and signed by him. The affidavit used such words

SR MEE TON et TS ekg os ak gee Rte eT ig hey eee Z

19

as ‘‘contrived constant pressure,”’ ‘‘compulsion,”’

*‘extra-legal methods,” ‘‘hunted,’’ ‘‘hounded,”’

and ‘‘foreed.’’ Presented with this affidavit in

his deposition, Mr. Crowley disavowed every one

of these charges (cf. R. 171 with R. 265-273,

288-292, 296-302; cf. R. 181 with R. 355-356;

ef. R. 177 with R. 329-331; ef. R. 181 with R.

357-363).

(iii) Mr. Wechsler, Mr. Markham, Mr. Crow-

ley and Mr. Stevens denied any improper conduct

or any knowledge of improper conduct (R. 71,

98, 105, 106, 108, 225-228, 238-256, 355-363).

**Tt is evident from the Stevens deposition,’’ the

District Court held, “‘that there was no duress

exercised on behalf of the Government to bring

about the settlement’’ (R. 71).

ce. Halbach’s opportunity to reflect and his de-

‘sire to settle—The negotiations continued from

November 1944 through January 1945. Halbach

had ample opportunity to reflect and consult with

his counsel, his family and advisors (R. 69-70,

90-102). He was advised by his family, by his

trustees, and by Mr. Crowley to go to trial if he

wanted vindication (R. 186-189, 354-355; cf. 336,

339, 346-347, 367-369). (He has neither revealed

the advice he received from Mr. Stevens nor

waived his privilege so as to permit Mr. Stevens

to testify (R. 71, 212-217, 220-223, 233-235, 256-

258)). He was under no economic necessity, hav-

ing earned $228,600 in the three years 1942, 1943,

and 1944 (R. 110). The District Court empha-

20

sized that the ‘‘Federal court was open to him for

a consideration on the merits of his family’s

rights in the stock’ (R. 72). He nevertheless

wanted to make a bargain and not go to trial.

d. Halbach’s bargain.—As we have already

noted, the bargain was based on the $100 option

price plus the interest specified in the option.

The $100 figure was the amount at which Halbach

himself had valued the stock (R. 70, 92, 108-109;

see pp. 4, 9,15, supra). Moreover, he had paid only

$100 for each of the shares which he bought.

Many of the shares he had not bought, but re-

ceived as stock dividends (R. 22, 135-136, 141-

142; see pp. 3-4, supra). For his 4725 shares he

had paid only $210,000, while the Government’s

offer totaled $557,550 (R. 67, 70; see pp. 4, 7,

supra). Aside from these attractions, the set-

tlement had income and gift tax features ad-

vantageous to him (R. 70, 133-134, 135-145; see

pp.9-10, supra). (Other stockholders, whose stock,

subject to the same option, had also been vested,

also found the offer fair and settled on this same

basis (see p. 11, supra).) An associate of Mr.

Stevens informed the Bureau of Internal

Revenue at the time that “the taxable status”

of the settlement “is, from the point of view of

the claimant stockholders, a principal motivating

consideration in making the settlement” (R. 145).

e. The long delay—Petitioner has as yet, eight

years after the settlement, made no attempt to

21

explain what Judge McLaughlin called the “un-

warrantably long delay’’ in charging duress (R.

72). One possible explanation of the delay from

January 1945 until January 1951 is that petitioner

waited until he had finished his career with GDC,

a career which had brought him, in the nine years

since the vesting, a total of $558,600, and a pension

of $18,000 per annum (supra, p. 11). The Dis-

trict Court pointed out that ‘‘Second guessing, sub-

sequent events, hope of further gain, expediency,

however worded, can never spell out duress”? (R.

72). So far as the Government is concerned the

fact is that by 1951 the evidence had grown stale,

witnesses had died, and proof of the enemy interest

in the vested shares would be much more difficult.

II

THE CLAIMED LACK OF LEGAL AUTHORITY TO MAKE

THE SETTLEMENT

With no citations to the record, petitioner re-

peatedly asserts that the Custodian classified Hal-

bach as both enemy and nonenemy (Pet. 5, 8,

19-20, 23, 30-31). To these assertions are added the

parallel conclusion that in dealing with Halbach

the Custodian was violating the Act by trading

with an enemy (Pet. 5). The fact is, however,

that neither the Custodian nor the Attorney Gen-

eral intimated or approved such inconsistent

positions, or took any action on the premise ©

that Halbach was part enemy and part nonenemy.

The action taken was, rather, on the basis of the

division of property interests in the stock in

issue.

Halbach was an American citizen. The Vest-

ing Order (R. 8-9) was issued in the belief that

the stock and the option were entirely enemy

property. The agreed settlement was founded

upon the all but explicit recognition by both

parties that ‘the stock in Halbach’s hands had

been subject to an option which, though it ran

to GDC, was in fact under enemy control and

thus could be exercised by the enemy on payment

to Halbach of $118 per share; that this option was

the property of the Custodian by virtue of the

Vesting Order; that the stock had a value in Mr.

Halbach’s hands of at most $118 per share; and

that such a dollar interest in each share, and no

more, was by agreement to be treated as non-

enemy property and returned to Mr. Halbach,

the remainder to be retained as enemy property

by the same agreement. See pp. 4, 8-9, 15-16,

supra.

A settlement agreement on this basis may be

rested upon either or a combination of several

powers available to the Custodian and the Attor-

ney General, then separate officers. These powers

are found in Section 5 (b) of the Trading with

the Enemy Act, in Section 9 (a), and generally

in the Attorney General’s authority over Govern-

ment litigation.

1. Section 5 (b).—Section 5 (b) (App. pp. 30, 31,

infra) provides that vested property

shall be held, used, administered, liqui-

dated, sold, or otherwise dealt with in the

interest of and for the benefit of the

United States.

This Court has had occasion to comment on the

intended flexibility and breadth of these Section

5 (b) powers, conferred by the First War Pow-

ers Act. See Markham v. Cabell, 326 U. 8. 404,

411-413; Clark v. Uebersee Finanz-Korp., 332

U. S. 480, 485-486; Silesian-American Corp. Vv.

Clark, 332 U. S. 469, 479; see also S. Rep. 911,

77th Cong., Ist Sess., p. 2; H. Rep. 1507, 77th

Cong., 1st Sess., pp. 2-3."

The District Court concluded, first, that the

settlement was authorized by Section 5 (b) as a

partial return, the right to make such a return

having been reserved explicitly in the Vesting

Order (R. 75-76, 8-9) (supra, p. 5). In this

the court was surely correct, for in simplest terms

the settlement was the return of the non-enemy

part conceded, for settlement purposes, to be

Mr. Halbach’s and the retention of the part which

for settlement purposes was conceded to be enemy.

*In addition to the broad purposes of the Act, as stated

by the two Congressional committees in the reports cited in

the text, there was explicit recognition on the floor of the

Senate that the enlarged powers of Section 5 (b) would per-

mit such payments in settlement as were made to Halbach.

In the course of the debate in the Senate on the First War

Powers Act, the following transpired (87 Cong. Rec. 9845) :

“Mr. Taft. There was always a good deal of scandal and

danger of scandal in connection with the office of the Alien

Property Custodian, particularly because when a man came

in and claimed property back there perhaps was nobody on

24

Second, the District Court held that the settle-

ment was authorized by the provision of Section

5 (b) that vested property shall be “dealt with”

in the interest of the United States (R. 76-77).

The settlement was also an exercise of other of the

powers granted in Section 5 (b). It was a ‘‘use’’;

and viewed either as a quieting of title to the

portion of the property retained, as the satisfac-

tion of an adverse claim to the property vested,

or as the exercise of a vested option, the settle-

ment was an act incidental to administration or

to liquidation. Cf. Silesian-American Corp. v.

Clark, 332 U. S. 469, 477. That a relinquishment |

of property rights in the course of a settlement is

within the Section 5 (b) powers has been held in the

only other case on the point. Standard Oil Co. v.

Markham, 64 F. Supp. 656, 666-667 (S. D. N. Y.),

modified sub nom., Standard Oil Co. v. Clark, 163

F. 2d 917, 932 (C. A. 2), certiorari denied, 333

U. S. 873.

the other side. I wonder if any such danger is guarded

against in this particular measure, or whether that is some-

thing to be dealt with after the war is over.

“Mr. Van Nuys. J think that is largely a matter of ad-

ministration rather than of legislation. I may be mistaken

about that, but I think so.

“Mr. Taft. If the time ever comes when there is an alien

custodian with power to give property back té any-

body or pay him for it, it seems to me some better provision

should be made than was made after the World War.

“Mr. Van Nuys. I will say to the Senator from Ohio that

I think that is largely an administrative matter, and that the

power here is ample to put in operation such administrative

processes as will accomplish those results” [emphasis added].

25

Petitioner makes much of the fact that Section

32 (60 Stat. 50, as amended, 50 U. 8S. C. App.

32), enacting detailed conditions for the return of

property to enemies, was not passed until after

this settlement (Pet. 5, 21-22, 23, n. 6, 26-28).

But Section 5 (b) gave authority for the action

here taken, at the time of the action. It is of no

moment that Section 32 may thereafter have

limited the power to make administrative returns

(other than those made in the course of settle-

ments of litigated cases). And, in any event, the

return in this case was of the portion of the prop-

erty which by compromise agreement was agreed

to be non-enemy, and thus not within the area of

concern of Section 32. |

2. Section 9 (a).—Section 9 (a) of the Act has

been said to govern ‘‘the administrative consider-

ation and allowance of claims to property trans-

ferred to the Custodian.” McGrath v.

Manufacturers Trust Co., 338 U. S. 241, 246, n. 8.

It provides that on filing of notice of claim the

Custodian, as delegate of the President,’ may

return either the property claimed or ‘‘the interest

‘The President’s authority has been delegated to the Cus:

todian. Sec. 1, Executive Order No. 8136, May 15, 1939,

4 F. R. 2044; Sec. 1, Executive Order No. 9142, April 21,

1942, 7 F. R. 2986. “The Alien Property Custodian, in tak-

ing over the administration of the Trading with the Enemy

Act, is entitled to the full scope of its permanent provisions

whether found in Sec. 5 (b) or Sec. 9 (a) or elsewhere.” Mr.

Justice Burton, concurring in Markham v. Cabell, 326 U. Ss.

404, at 424.

‘

26

therein to which the President shall determine

said claimant is entitled.”” (App. p. 32, infra.)

Halbach having filed such a claim (R. 7, 12), a

return of part of the property, as in this settle-

ment agreement, became plainly authorized and

the courts below so held (R. 78-79).

Petitioner seems to contend that the courts

below misconstrued Section 12 of the Act (App.

p. 33, infra) in holding it no bar to the exercise

of authority under Sections 5 (b) or 9 (a). But

it appears rather that petitioner admits that the

requirement, in Section 12, of deposit of moneys

in the Treasury is no bar if (as has been shown

above) the payment in settlement was authorized

under other provisions of law (Pet. 28-29). In

any event, Section 12 did not impede the mechan-

ies of payment in settlement, for the variety of

reasons stated by the District Court.’

3. The powers of the Attorney General to com-

promise Government litigation—The settlement

® To the review by the District Court of petitioner’s argu-

ment on Section 12 (R. 77-78), it might be added that the

power of the Secretary of the Treasury to withdraw moneys

from the Treasury, granted by Section 5 (d) of Executive

Order No. 2813 of February 26, 1918, was thereafter trans-

ferred to the Custodian and repeatedly confirmed in him.

Executive Order 6237—A, July 30, 1933, 50 U. S. C. App.

12 n., p. 5659; Sec. 1, Executive Order No. 6694, May 1, 1934;

Sec. 1, Executive Order No. 8136, May 15, 1939, 4 F. R. 2044;

Sec. 1, Executive Order No. 9142, April 21, 1942, 7 F. R. 2985.

See Markham v. Cabell, 826 U. S. 404, concurring opinion of

27

is entitled to the support of the Custodian’s au-

thority under the Act, discussed above, because

the Custodian recommended execution of the. set-

tlement (R. 105, 108-109). But it was executed

by the Attorney General, as counsel for the Cus-

todian and the United States, the suit being one

against the United States (R. 16, 89, 102). Sec.

5, Executive Order No. 9142, April 21, 1942, 7

F. R. 2985; Sec. 5, Executive Order No. 6166,

June 10, 1933, 5 U. S. C. (1952 ed.) Sees. 124-

132, n., p. 112, 114; Sutherland v. International

Ins. Co. of New York, 43 F. 2d 969 (C.A. 2),

certiorari denied, 282 U. S. 890; Cummings v.

Deutsche Bank, 300 U. S. 115, 118; Becker Co. v.

Cummings, 296 U. S. 74, 78; Banco Mexicano v.

Deutsche Bank, 263 U.S. 591, 603. Accordingly,

the Attorney General had his traditional power

to make the compromise, though it involved re-

linquishment of claim to part of the property in

suit. R. 73-74; Confiscation Cases, 7 Wall 454;

New York v. New Jersey, 256 U. S. 296, 307-308;

United States v. San Jacinto Tin Co., 125 U. S.

273, 278-280, 284-285; Castell v. United States,

98 F. 2d 88, 91 (C.A. 2), certiorari denied, 305

U. S. 652; Standard Oil Co. v. Markham, 64 F.

Supp. 656, 666-667 (S. D. N. Y.), modified sub

Mr. Justice Burton, at 494.

The President has explicitly forestalled any challenge to

the authority of either the Secretary or the Custodian, based

on an allegedly exclusive delegation to the other. Sec. 12,

Executive Order No. 9198, July 6, 1942, 7 F. R. 5205.

nom. Standard Oil Co. v. Clark, 163 F. 2d 917,

932 (C.A. 2), certiorari denied, 333 U. S. 873;

38 Op. A. G. 98; 2 Op. A. G. 482, 486; Sec. 35,

Judiciary Act of 1789, 1 Stat. 73, 92; Act of June

22, 1870, 16 Stat. 162, 164, 5 U. S. ©. 291, 306,

309, 316.

Petitioner contends that these authorities are

inapplicable where the Attorney General settles

‘in a manner prohibited by statute” (Pet. 31,

n. 14), but no statute is or can be cited which

controls the power of the Attorney General to

settle cases under the Trading with the Enemy

Act. Certainly, neither Section 5 (b), Section

9 (a), nor Section 12 prohibits the Attorney

General from exercising his normal authority to

settle and compromise Government litigation.

(Supra, pp. 22-26). It follows that the contention

of lack of authority must fail. United States

vy. California, 332 U. S. 19, 27; Swift & Co. Vv.

United States, 276 U.S. 311, 331.

CONCLUSION

The two courts below have concluded that

(R. 79, 399) :

Under the facts and law the settlement

of this litigation was properly entered

into and carried to a conclusion by the

Attorney General. and the Alien Property

Custodian representing the United States.

It should not be set aside.

29

It is respectfully submitted that the petition

for the writ of certiorari should be denied.

Sron E. Soserorr,

Solicitor General.

Dattas §. TowNsEnn,

Assistant Attorney General.

James D, Hu,

Grorce B. Szakzs,

Davw ScHwaktz,

Pavut E. MoGraw,

Attorneys.

Marcu 1954.

- APPENDIX.

Trading with the Enemy Act, 40 Stat. 411, as

amended, 50 U. 8. C. App. 1, ef seq.

a. 2 ” * *

Section 5

* * * * —

| (b) (1) During the time of war or dur-

| _.-. ingany other period of national emergency

| declared by the President, the President

| may, through any agency that he may des-

ignate, or otherwise, and under such rules

| and regulations as he may prescribe, by

| means of instructions, licenses, or other-

wise—

(A) investigate, regulate, or prohibit,

any transactions in foreign exchange,

transfers of credit or payments between,

by, through, or to any banking .institution,

and the importing, exporting, hoarding, melt-

ing, or earmarking of gold or silver coin

or bullion, currency or securities, and

(B) investigate, regulate, direct and

compel, nullify, void, prevent or prohibit,

any acquisition holding, withholding, use,

transfer, withdrawal, transportation, im-

portation or exportation of, or dealing in,

or exercising any right, power, or privilege

with respect to, or transactions involving,

any property in which any foreign country

or a national thereof has any interest,

by any person, or with respect to any

le , subject to the jurisdiction of the

nited States; and any property or interest

of any foreign country or national thereof

(30)

31

shall vest, when, as, and upon the terms,

directed by the President, in such agency

or person as rag Peselhmr ns yep from time

to time by the ident, and a such

terms and conditions as the President may

prescribe such interest or property shall be

held, used, administered, liquidated, sold,

or otherwise dealt with in the interest of

and for the benefit of the United States,

and such designated agency or nm may

perform any and all acts incident to the

accomplishment or furtherance of these

purposes; and the President shall, in the

manner hereinabove provided, ire any

n to keep a full record of, and to

ish under oath, in the form of reports

or otherwise, complete information relative

to any act or transaction referred. to in

this subdivision either before, during, or

after the completion thereof, or relative to

any interest in foreign property, or rela-

tive to any property in which any foreign

country or any national thereof has or has

had any interest, or as may be otherwise

necessary to enforce the provisions of this

subdivision, and in any case in which a

report could be eee. the President

may, in ao severe ereina reg provided,

require the p ction, or if necessary to

the national security or defense, the sei-

zure, of any books of account, records, con-

tracts, letters, memoranda, or other papers,

in the custody or control of such person;

and the President may, in the manner

hereinabove provided, take other and fur-

ther measures not inconsistent herewith

for the enforcement of this subdivision.

* * a * *

32

SEor10n 9

(a) Any person not an enemy or ally of

enemy claiming ay interest, right, or title

in any money or other property which may

have been conveyed, transferred, assigned,

delivered, or paid to the Alien Property

Custodian or seized yi him hereunder and

held by him or by the Treasurer of the

United States, or to whom any debt may be

owing from an enemy or ally of enemy

whose property or any part thereof shall

have been conveyed, transferred, assigned,

delivered, or paid to the Alien Property

Custodian or seized by him hereunder and

held by him or by the Treasurer of the

United States may file with the said custo-

dian a notice of his claim under oath and

in such form and containing such particu-

lars as the said custodian shall require;

and the President, if application is made

therefor by the claimant, may order the

payment, conveyance, transfer, assignment,

or delivery to said claimant of the money

or other cas ad so held by the Alien

rty Custodian or by the urer of

the United States, or of the interest therein

to which the President shall determine said

claimant is entitled: Provided, That no such

order by the President shall bar any person

from the prosecution of any suit at law or in

equity against the claimant to establish any

right, title, or interest which he may have in

such money or other property. If the Presi-

dent shall not so order within sixty days after

the filing of such application or if the claim-

ant shall have filed the notice as above re-

yp and shall have made no application to

e President, said claimant may institute a

suit in equity in the Supreme Court of the

District of Columbia or in the district court

oe a

33

of the United States for the district in

which such claimant resides, or, if a corpo-

ration, where it has its principal place of

business (to which suit the Alien Property

Custodian or the Treasurer of the United

States, as the case may be, shall be made a

party defendant), to establish the inte

right, title, or debt so claimed, and if so

. established the court shall order the pay-

ment, conveyance, transfer, assignment, or

delivery to said claimant of the money or

other property so held by the Alien Pro

erty Custodian or by the Treasurer of the

United States or the interest therein to

which the court shall determine said

claimant is entitled. If suit shall be so

instituted, then such money or property

shall be retained in the custody of the Alien

Property Custodian, or in the Treasury of

the United States, as provided in this Act,

and until any final judgment or decree

which shall be entered in favor of the

claimant shall be fully a by pay-

ment or conveyance, transfer, assignment,

or delivery by the defendant, or by the

Alien Property Custodian, or Treasurer of

the United States on order of the court, or

until final judgment or decree shall be

entered against the claimant or suit other-

wise terminated.

SEcTION 12

All moneys (including checks and drafts

payable on demand) paid to or received

by the alien property custodian pursuant

to this Act shall be deposited forthwith in

the Treasury of the United States, and may

be invested and reinvested by the Secretary

of the Treasury in United States bonds or

34

United States certificates of indebtedness,

under such rules and tions as the

President shall prescribe for such deposit,

investment, and sale of securities; and as

soon after the end of the war as the Presi-

dent shall deem practicable, such securities

shall be sold and the proceeds deposited

in the Treasury.

* *

* * *

+ § GOVERNMENT PRINTING OFFICE: 1984

IN THE

Supreme Court of the United States

Oocroszr Tzrm, 1953

No. 562

Anne Hatsacn Bumsrep anp Mary Eximasera KemMeEnrer,

Successors in Interest to Elizabeth S. Halbach and

Franklin H. Stafford, Trustees under Agreement. of

Trust Made by Ernest K. Halbach, dated December 6,

1940, Petitioners,

v

James KE), Marxuam, as Alien Property Custodian,

Respondent.

Joseru B. Keenan,

Woodward Building,

Washington 5, D. C.,

Attorney for Petitioners.

Pass or Brnow S. Apanes, W4smmraron, D.C.