Dreyfus v. von Finck Brief of Appellees August Von Finck and Merck, Finck & Co.

    (1 f  c:± ^ . i O O O  -X  y % <

75-7135
To be argued by 

W illiam Schurtman

Hmttfk (Bfmrt nt Appeals
FOR TH E SECOND CIRCUIT

D ocket No. 75-7135

W illy Dreyfus,
Plaintiff-Appellant,

v.

A ugust von F inck and Merck, F inck & Co.,
Defendants-Appellees.

O n A ppeal prom the U nited States D istrict Court 
for the Southern District of New Y ork

BRIEF OF APPELLEES AUGUST von FINCK 
AND MERCK, FINCK & CO.

W alter, C-onston, S churtman 
& Gumpel, P.C.
Attorneys for Defendants-Appellees 

August von Finch and 
Merck, Finch & Co.

330 Madison Avenue 
New York. New York 10017 
(212) 682-2323

W illiam S churtman 
Alan K anzer 

Of Counsel

249 Press of Fremont Payne, Inc., 417 Canal St., N . Y.-—966— 6570



TABLE OF CONTENTS

Page

Table of Cases and Other Authorities........................ iv-x

Preliminary Statement........................................  1

Statement of the Issues......................................  2

Statement of the Case........................................  3
The amended complaint...................................  3
The commencement of this action.........................  4
Defendants' motion to dismiss the original complaint... 4
The amended complaint...................................  7
The dismissal of the amended complaint.................. 7
Plaintiff's expansion of the issues on this appeal....  8

Argument...............................    9

POINT I -
The district court correctly held that plaintiff has 
failed to state a claim under any treaty of the United 
States................................    9

The decision of the district court.... ................  9
The treaties relied on by plaintiff...................  10
A. The Hague Convention..............................  10
B. The Kellogg-Briand Pact...........................  13
C. The Treaty of Versailles..........................  13
D. The Four Power Occupation Agreement............... 14

Plaintiff does not have the right to sue defendants 
under the Hague Convention, the Kellogg-Briand Pact, 
the Treaty of Versailles or the Four Power Occupation 
Agreement.........................    15

i



Page

POINT II -
The district court correctly held that plaintiff has 
failed to state a claim under the law of nations......  25

The law of nations.....................................  26

POINT III -
Plaintiff's claims are barred by the Act of State 
doctrine...............................................  31

The meaning of the Act of State doctrine..............  31
A. The Bernstein cases.............................. 32
B. First National City Bank v. Banco Nacional de Cuba 33
C. The Sabbatino decision........................... 34

Conclusion.........................    36

POINT IV -
The district court lacked subject matter jurisdiction 
over plaintiff's claim.................................  37

The district court's decision.......................... 37
Bell v. Hood...........................................  38
The treaties on which plaintiff relies.................  39
Plaintiff's claim......................................  40

POINT V -
Military Government Law No. 59 is not a "law of the 
United States", and no federal question arises under 
it. Moreover, plaintiff has not stated any claim for 
relief based on that military law...................... 42

ii



Page

The history of MGL 59..................................  ^2
MGL 59 is not a law of the United States..............  45
A. The legislative history of §1331................... ^5
B. Judicial construction of "laws of the United

States"...........................................  ^7
C. Military occupation cases......................... 50
Plaintiff's claim does not arise under a law of the 
United States..........................................  53

POINT VI -
The federal courts lack pendent jurisdiction to con­
sider plaintiff's common law claims.................... 56

Conclusion..................................................  60

iii



TABLE OP CASES AND OTHER AUTHORITIES

Page

CASES

Acheson v. Wohlmuth, 196 F.2d 866 (D.C. Cir. 1952).............. 50, 51

Adra v. Clift, 195 P. Supp. 857 (D. Md. 19 6 1)...................  26, 29

American Society and Trust Co. v. Commisioners of the District
of Columbia, 224 U.S. ¥91 TT912)............................ 50

Antoine v. Washington, 95 S. Ct. 944 (1975).....................  18, 20, 21

Asakura v. Seattle, 265 U.S. 332 (1924).......................... 22, 23

Association J. Dreyfus &_ Co. v. Merck, Finck &_ Co., Case No. 49,
Court of Restitution Appeals, March 7, 1951................  5, 8, 54

Bacon v. Rives, 106 U.S. 99 (1882)............. .................  37

Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)........  34, 35, 36

Bell V. Hood, 327 U.S. 678 (1946)................................ 37, 38

Bernstein v. N.V. Nederlandsche-Amerikaansche Stoomvaart-
Maatschappi,]', 210 F.2d 375 (2nd Cir. 1954).................  32, 33

Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246
(2nd Cir. 19^7)7 cert, denied, 332 U.S. 771 (1947).........  32, 33

Blanton v. State University of New York, 489 F.2d 377 (2nd Cir.
1973)........................................................ 38

Braden v. University of Pittsburgh, 3^3 F. Supp. 836 (W.D. Pa.
1972).........   48

City of New York v^ Richardson, 473 F.2d 923 (2nd Cir. 1973)....  57

Cobb yu United States, 191 F.2d 604 (9th Cir. 1951).............  50

Corbett v. Stergios, 381 U.S. 124 (1965)........................  21

Crabb v. Wedden Bros., 164 F.2d 797 (8th Cir. 1947).............  49

iv



Dandridge v. Williams, 397 U.S. 471 (1970)......................  30

Dassignienis v. Cosinos Carriers & Trading Corp., 321 F. Supp.
1253 (S.D.N.Y. 1970)........................................  37

DeCoteau v. District County Court, 95 S.Ct. 1082 (1975).........  18, 20

Dodge v. Nakai, 298 F. Supp. 17 (D. Ariz. 1968).......   19, 20

Edye v. Robertson, 112 U.S. 580 (1884)........................... 16, 17

Eisner v. United States, 117 F. Supp. 197 (Ct. Cl. 1954)....... . 50

Farmer v. Philadelphia Electric Company, 329 F.2d 3 (3rd Cir.
19FT).......................................................  47

First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759
(1972)......................................................  33, 34

Flick v. Johnson, 174 F.2d 983 (D.C. Cir. 1949)...........   42, 50, 51
52, 53

Gem Corrugated Box Corp. v. National Kraft Container Corp., 427
F.2d 499 (2nd Cir. 1970).......  57, 58

Gully v. First National Bank, 299 U.S. 109 (1936)...............  54, 55

Hagans v. La vine, 415 U.S. 528 (1974)............................ 57, 58, 59

Harris v. Boreham, 233 F.2d 110 (3rd Cir. 1956).................  50

Hauenstein v. Lynham, 100 U.S. 483 (1880)........................ 21, 22

Hidalgo County Water Control and Improvement District v.
Hedrick, 226 F.2d 1 (5th Cir. 1955)........................  23, 38

Illinois v. City of Milwaukee, 406 U.S. 91 (1972)...............  49

Ivy Broadcasting Co. v^ American Tel. &_ Tel. Co., 391 F.2d 486
(2nd Cir. 19^8").............................................  49

Karakatsanis v. Conquistador Cia. Nav. S.A., 297 F. Supp. 723
(S.D.N.Y. 1965)....... ...................................... 37

Page

v



Page

Khedivial Line, S.A.E. v. Seafarers' International Union, 278
F. 2d T49~T2nd Cir. I960).......................................  28

Klein v. Shields & Co., 970 F.2d 1394 (2nd Cir. 1972)...........  57

Kolovrat v. Oregon, 366 U.S. 187 (1961).......................... 21

Leech Lake Band of Chippewa Indians v. Herbst, 334 F. Supp. 1001
(D. Minn. 1971)............................    19

Lopes v. Reederei Richard Schroeder, 225 F. Supp. 292 (E.D. Pa.
1953).....................................................................................................  29> 30

Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149
(I90F)......................................................................................... ................. 38

McClanahan v. State Tax Commission of Arizona, 411 U.S. 164
(1973)77.77777.“ ' . ................ .77 ........................................................  18, 20, 21

McDaniel v. Brown & Root, 172 F.2d 466 (10th Cir. 1949).........  48

Makah Indian Tribe v. McCauly, 39 F. Supp. 75 (W.D. Wash. 1941).. 19

Martin v. Hunter's Lessee, 14 U.S. (1 Wheat.) 304 (1816)........  21

Mater v. Holley, 200 F.2d 123 (5th Cir. 1952)...................  49

Maximov v. United States, 373 U.S. 49 (1963)....................  23

Moore v. Sunbeam Corp., 459 F.2d 8ll (7th Cir. 1972)............  54

Murphy v. Colonial Federal Savings and Loan Ass'n., 388 F.2d 609
(2nd Cir. 1967)..... .......................................  47

Oneida Indian Nation v. County of Oneida, 4l4 U.S. 66l (1974).... 18, 19

Patton v. Administration of Civil Aeronautics, 217 F.2d 395 (9th
Cir. 1954).........  48

Pauling v. McElroy, 164 F. Supp. 390 (D.D.C. 1958), aff'd, 278
F.2d 252 (i960), cert, denied, 364 U.S. 835 (i960)........... 17

People of Puerto Rico v. Hermanos, 309 U.S. 543 (1940)............  50

vi



People of Puerto Rico v. Shell Co., 302 U.S. 253 (1937).........  50

People of Saipan v. United States Department of Interior, 356
P. Supp. 645 (D. Haw. 1973).................................18

Phelps v. Hanson, 163 F.2d 973 (9th Cir. 1947)...... .............  18

Romero v. International Terminal Operating Co., 358 U.S. 354
(1959).............    ^5, 46

Ryan v. J. Walter Thompson Co., 453 F.2d 444 (2nd Cir. 1971),
cert, denied, 4o6 U.S. 907 (1972)........................... 57, 58

Schulthis v. McDougal, 225 U.S. 561 (1912)......................  54, 55

Skokomish Indian Tribe v. France, 269 F.2d 555 (9th Cir. 1959)••• 18, 19

Stevens v. Carey, 483 F.2d 188 (7th Cir. 1973)..................  48

Stokes v. Adair, 265 F.2d 662 (4th Cir. 1959)...................  49

Underhill v. Hernandez, 168 U.S. 250 (1897).....................  31, 32

United Mine Workers of America v. Gibbs, 383 U.S. 715 (1966)..... 56, 57, 58, 59

United Optical Workers Union v. Sterling Optical Co., Inc., 500
F. 2d 220 (2nd C i r . T O T ) ....................................  38

Valanga v. Metropolitan Life Ins. Co., 259 F. Supp. 324 (E.D.
Pa. 1966).........  29, 30

Z&F Assets Realization Corp. v. Hull, 114 F.2d 464 (D.C. Cir.
1940), afrtd, 311 U.S. T 7 FTT941)......................... 17

Page

Constitutions

United States Constitution, article III, section 2..............  46, 47, 49

Treaties

Berlin Treaty of 1921, 42 Stat. 1939............................. 13, 17
vii



Page

Pour Power Occupation Agreement, 5 U.S.T. 2062 (1945)...........  6, 10, 14,
15, 22, 23,
39, 40, 42, 43

Hague Convention of 1907, 36 Stat. 2277.......................... 6, 10, 11,
12, 13, 15,
22, 23, 39, 40

Income Tax Convention between the United States and the United
Kingdom, 60 Stat. 1377 (1945)............................... 23

Kellogg-Briand Pact, 46 Stat. 2343 (1929)........................ 6, 10, 13,
15, 22, 23,
39, 40

Treaty of Amity and Commerce between Prance and the United States,
8 Stat. 12 (1778)...........................................  28

Treaty of Amity and Commerce between Prussia and the United
States, 8 Stat. 84 (1785)...................................  28

Treaty between Japan and the United States, 37 Stat. 1504 (1911). 23

Treaty between Mexico and the United States, 59 Stat. 1219 (1945) 24

Treaty between the United States and the Sioux Indians, 15 Stat.
505 (1867)..................................................  20

Treaty between the United States and the Swiss Confederation, 11
Stat 587 (1850)......   22

Treaty of Canandaigua of 1794, 7 Stat. 44.......................  19, 20

Treaty of Port Harman of 1789, 7 Stat. 33.................    19, 20

Treaty of Fort Stanwix of 1784, 7 Stat. 15......................  19, 20

Treaty of Friendship between Spain and the United States, 8 Stat.
138 ( 1795) ..................................................................................................................................................................... 28

Treaty of Peace and Amity between Algiers and the United States,
8 Stat. 133 (1795)..........................................  28

Treaty of Peace and Friendship between Morocco and the United
States, 8 Stat. 100 (178 7)..................................  28

viii



Page

Treaty of Versailles, S. Doc. No. 348, 67th Cong., 4th Sess.
3329 (1923)........ ......................................... 6> 10> 13’

14, 15, 17,
22, 23, 39, 40

Statutes

28 U.S.C. §1331..................................................  13, 38, 45,
46, 53, 55

28 U.S.C. §1332..................................................  37

28 U.S.C. §1343..................................................  58

28 U.S.C. §1350.................................................  13, 25, 26,
28, 29, 30, 32

28 u .s .c .  §1363...................................................................................................  50

28 u .s .c .  §1983...................................................................................................  58

Civil Rights Act of 1964, 42 U.S.C. §2000e.......................  54

Judiciary Act of 1789, 1 Stat. 73................................. 26

Judiciary Act of 1875, 18 Stat. 470.............................. 45, 46

Military Government laws

Military Government Law No. 59, 12 Fed. Reg. 7983 (1947) ......... 2, 6, 8,
14, 42, 44,
45, 53, 54, 55

Other Authorities

Brierly, The Law of Nations (6th ed. 1963).......................  27

Elliott, Journal of the Federal Convention.......................  46

ix



Page

Elliott's Debates (1888).........................................  27

The Federalist No. 80 (J. Cooke ed. 19 6 1) (Hamilton)............  28

Restatement (2nd) of Foreign Relations........................... 18

Warren, The Making'of the Constitution (1929)...................  ^6

x



UNITED STATES COURT OF APPEALS 
FOR THE SECOND CIRCUIT

■X

WILLY DREYFUS, :

Plaintiff-Appellant, :

-against- : Docket No. 75-7135

AUGUST von FINCK and MERCK, :
FINCK & CO.,

Defendants-Appellees.

•X

BRIEF ON BEHALF OF DEFENDANTS-APPELLEES 
AUGUST von FINCK and MERCK, FINCK & CO.

PRELIMINARY STATEMENT

Plaintiff-appellant ("plaintiff") appeals from an order dated 

January 21, 1975* of Judge Charles L. Brleant, Jr. of the United States 

District Court for the Southern District of New York dismissing plaintiff’ 

amended complaint (App. R) for failure to state a claim upon which relief 

can be granted.

* A copy of the January 21, 1975 order is set forth in the Joint 
Appendix as document "U". Hereafter, references to documents 
contained in the Joint Appendix will be to "App." followed by 
the letter by which the document is designated therein, as, e.g., 
"App. U".



STATEMENT OF THE ISSUES

1. Did the district court err in holding that plaintiff's 

amended complaint failed to state a claim for relief under the treaties 

alleged therein?

2. Did the district court err in holding that plaintiff's 

amended complaint failed to state a claim for relief under the law of 

nations?

3. Does the Act of State doctrine permit the exercise of 

jurisdiction over plaintiff's claims?

4. Do the federal courts have subject matter jurisdiction 

over plaintiff's claims under the law of nations and the treaties of the 

United States?

5. Do the federal courts have subject matter jurisdiction 

over plaintiff's claims under Military Government Law No. 59?

6. Has the plaintiff stated a claim for relief under Military 

Government Law No. 59?

7. Should plaintiff's common law claims be adjudicated under 

the doctrine of pendent jurisdiction?

-2-



STATEMENT OP THE CASE

This is an action commenced in the United States District 

Court for the Southern District of New York by a citizen and resident of 

Switzerland against two citizens and residents of West Germany based on 

events which took place entirely in Germany more than 25 years ago.

Plaintiff purported to obtain jurisdiction over the foreign 

defendants by attaching their bank accounts in New York and by mailing 

copies of the summons and complaint to the defendants in West Germany.

The amended complaint

The amended complaint (App. R) alleges that plaintiff Willy 

Dreyfus is a citizen and resident of Switzerland (f 1) and that de­

fendants are residents and citizens of West Germany (HH 3 and 4).

The amended complaint also alleges that in 1938 the Nazis 

compelled plaintiff, who was Jewish, to transfer the German banking firm 

of J. Dreyfus & Co., and all of his interests therein, to the defendants 

at a completely unfair, illegal, inadequate and inequitable price; that 

plaintiff and his family were forced to leave Germany; that plaintiff 

sought appropriate compensation from the defendants after the end of 

World War II and entered into a settlement agreement in 194b, which 

defendants thereafter allegedly refused to honor and, in fact, renounced.

- 3-



The amended complaint seeks damages and an accounting, but 

does not offer any explanation why plaintiff waited 25 years to bring 

the present action.

The commencement of this action 

On December 12, 1973 plaintiff filed his original complaint 

and on January 15, 197^ plaintiff obtained an ex parte order of attach­

ment from the district court in the amount of $150,000 which was used to 

tie up bank accounts maintained by defendants in New York (App. E). 

Plaintiff posted a $15,000 bond (App. F).

In order to free their bank accounts, and without in any way 

conceding the validity of the attachment or consenting to jurisdiction, 

the defendants had to post a bond of $150,000 (not $15,000 as plaintiff 

incorrectly alleges at page 5 of his appeal brief) (App. G) and the 

attachment was vacated by a consent order dated February 5, 1974.

Defendants' motion to dismiss the original complaint

Defendants moved (App. H), pursuant to Rule 12(b) of the 

Federal Rules of Civil Procedure, to dismiss the complaint on the 

following grounds: (a) lack of subject matter jurisdiction, (b) lack of 

personal jurisdiction, (c) forum non conveniens, and (d) insufficient 

service of process, but subsequently waived their challenge to suf­

ficiency of service and deferred, without prejudice, their claim of lack 

of personal jurisdiction and forum non conveniens.

-4-



In their motion papers, defendants pointed out, inter alia,

that the complaint neglected to inform the court that the parties had 

litigated the validity of the 194b settlement in the German courts and 

had ultimately entered into a new settlement agreement dated February 

12, 1951 which ended the litigation and settled all of plaintiff's 

claims against defendants upon payment by defendants to plaintiff of 

a substantial sum. Defendants submitted as Exhibit "B" a copy of an 

opinion dated March 7, 1951 by the Court of Restitution Appeals of the 

United States Courts of the Allied High Commission for Germany ("CORA") 

which states, at page 2:

"The motion was set for hearing before us on the 12th day 
of February, 1951. Whereupon, in open court, the parties 
announced to the Court that they had arrived at an ami­
cable settlement and they requested that a signed agree­
ment be recorded. This was accepted and recorded."

and at page 4:

"It is further ordered that the joint motion of the parties 
to withdraw the Motion for Recall and for other appro­
priate relief be, and the same is hereby granted. The 
claimants petition is dismissed."

(Reply Affidavit of William Schurtman, sworn to April 26, 1974; App. K)

The reference to this superseding 1951 court-approved settle­

ment, which was artfully omitted from the original and also from the 

later amended complaint*, is relevant on this appeal because of plaintiff's

Plaintiff is in error when he claims at page 4 of his brief on 
appeal that he alleged the 1951 settlement in his amended 
complaint. He did not.

-5-



decision to broaden the issues before this Court by relying on Military 

Government Law No. 59 - the very law under which CORA approved the 

1951 settlement some twenty-four years ago. (See plaintiff's appeal 

brief, p. 33).

Plaintiff's brief on this appeal alleges for the first time - 

but still without the particularity required by Rule 9(b) of the Federal 

Rules of Civil Procedure - that the 1951 settlement was fraudulent. 

Moreover, plaintiff's brief on appeal again fails to explain why plaintiff 

waited more than twenty years before making this claim.*

In a memorandum opinion dated May 20, 197^ (App. L), Judge 

Brieant concluded that the district court had subject matter juris­

diction, but dismissed the complaint for failure to state a claim upon 

which relief could be granted. He expressly held that the treaties on 

which plaintiff relied - the Hague Convention, the Kellogg-Briand Pact, 

the Treaty of Versailles and the Four Power Occupation Agreement - did 

not give rise to private causes of action, and also that the Act of 

State doctrine barred the district court from considering the legitimacy 

of the acts of the German government.

Since the district court twice dismissed the complaint for failure 
to state a claim, defendants have not been required to file an 
answer. If an answer were necessary, it would include not only a 
denial of the allegations of wrongdoing, but also defenses of pay­
ment, release, settlement, accord and satisfaction, statute of limi­
tations and laches. In addition, defendants would renew their 
motion to dismiss the action on the ground of forum non conveniens 
since the action involves a Swiss plaintiff, German defendants, events 
which took place entirely in Germany, evidence and witnesses located 
in Germany, proof in the German language, and no explanation by 
plaintiff why this action cannot or should not be brought in a West 
German court.

-6-



The amended complaint

Plaintiff moved for rehearing and reargument (App. N). By 

order dated June 26, 1974 (App. Q), the district court granted the 

motion and modified the May 20, 1974 memorandum opinion to permit 

plaintiff to file an amended complaint that:

"... shall allege with particularity specific pro­
visions of such treaty or treaties relied upon."

Plaintiff then served defendants with an amended complaint

(App. R) which was substantially similar to the original complaint (App.

B), but which purported to conform to the judge's requirement that the

treaty provisions be specified with particularity.

The dismissal of the amended complaint 

Defendants then moved (App. S) to dismiss the amended complaint 

principally on the grounds of failure to state a claim and lack of 

subject matter jurisdiction.*

By a memorandum opinion dated January 2, 1975, the district 

court dismissed the amended complaint for failure to state a claim on 

which relief could be granted. The district court also suggested, 

though it noted that it need not so hold, that the Act of State doctrine 

barred consideration of plaintiff's claims (App. T).

The motion also asserted the grounds of lack of personal juris­
diction and forum non conveniens, but these issues were deferred 
without prejudice.

-7-



Plaintiff's expansion of the Issues on this appeal

On February 18, 1975, plaintiff filed a Notice of Appeal and, 

on May 15, 1975, moved (App. V) to remand this action to the district 

court on the ground that plaintiff had failed to raise in the district 

court a question of law allegedly necessary for the resolution of the 

case, namely, the applicability of Military Government Law No. 59- De­

fendants objected on the ground that Military Government Law No. 59 

had been expressly called to the attention of the district court by de­

fendants in their Memorandum in Opposition to Plaintiff's Motion for 

Rehearing and Reargument, which stated, at page 10:

"The Four Power Occupation Agreement is neither self-executing 
nor sufficiently precise nor detailed to permit judicial en­
forcement. It was implemented by Military Government Law No.
59 (the "Restitution Law"), which expressly authorized victims 
of Nazi laws to institute restitution actions in Germany.
Actions were initiated in local German courts called Restitution 
Chambers; the Court of Restitution Appeals ("CORA"), an 
American court in Germany, had exclusive jurisdiction of 
appeals, (cf. the 1951 CORA decision in the Dreyfus action, 
annexed as Exhibit B to defendants' reply affidavit by 
William Schurtman, sworn to April 26, 197^0.
Since plaintiff himself invoked the benefits of the Restitution 
Law by suing the defendants and obtaining a disposition of the 
case in the Court of Restitution Appeals, it is most sur­
prising that he overlooks the fact that the basis for that 
action was Military Government Law No. 59, not the Four 
Power Occupation Agreement."

During oral argument on plaintiff's remand motion, defendants' 

counsel stipulated that in the interest of leaving a prompt disposition 

of plaintiff's appeal, defendants would not object to this Court's 

considering Military Government Law No. 59, the allegedly overlooked 

law. Counsel's stipulation was subsequently confirmed by letter. (App. X).



ARGUMENT

POINT I

THE DISTRICT COURT CORRECTLY HELD 
THAT PLAINTIFF HAS FAILED 

TO STATE A CLAIM UNDER ANY 
TREATY OF THE UNITED STATES

The decision of the district court

Judge Brieant, in his memorandum opinion of January 2, 1975 

(App. T), dismissed plaintiff's amended complaint for failure to state a 

claim upon which relief could be granted. The district judge did not, 

as plaintiff erroneously contends on this appeal, hold that the district 

court lacked subject matter jurisdiction but, on the contrary, expressly 

held that it did have subject matter jurisdiction:

"This District Court has subject matter jurisdiction, 
because the right of plaintiff to recover under his 
complaint will be sustained if the treaties of the 
United States are given one construction, and will 
be defeated if they are given another." (memorandum 
opinion of May 20, 1974 [App. L], incorporated by 
reference in the January 2, 1975 memorandum opinion 
[App. T]*.

Defendants do assert on this appeal, as an alternative argument 
to sustain the dismissal of the complaint, that the district 
court also lacked subject matter jurisdiction. (See Point 
IV, infra.)

- 9-



The treaties relied on by plaintiff

Plaintiff, In his amended complaint (App. R), claimed that he 

had been injured by actions which defendants allegedly took in viola­

tion of the Hague Convention of 1907, 36 Stat. 2277, the Treaty of 

Versailles, S. Doc. No. 348, 67th Cong., 4th Sess. 3329 (1923), the 

Kellogg-Briand Pact, 46 Stat. 2343 (1929), and the Four Power Occupa­

tion Agreement, 5 U.S.T. 2062 (1945).

As defendants show below, none of these treaties prohibited 

the German government or any of its citizens from expropriating 

property situated in German territory irrespective of whether it was 

owned by Germans or aliens. Furthermore, none of the cited treaties 

conferred any rights on private individuals.

A. The Hague Convention

The only portions of the Hague Convention on which 

plaintiff purports to rely are the Preamble and Articles 1, 41 and 46.

The Hague Convention was an attempt to impose restrictions on 

the ways in which belligerent powers could wage war, and governed such 

areas as the treatment of prisoners of war and inhabitants of occupied

- 1 0 -



territory.

The Preamble merely stated that in the absence of provisions 

covering specific situations, the warring nations should be governed by 

"the principles of the law of nations, as they result from the usages 

established among civilized peoples, from the laws of humanity, and the 

dictates of the public conscience." (36 Stat. 2280).

The Preamble does, however, cleanly define and limit the scope 

and applicability of the Hague Convention. The Convention's provisions, 

the Preamble states:
"... are intended to serve as a general rule of conduct for the 
belligerents in their mutual relations and in their relations 
with the inhabitants*." (36 Stat. 2279)-

While the reference to "inhabitants" is ambiguous, Judge Brieant 
concluded, and the context clearly shows, that the inhabitants 
referred to are the citizens and residents of countries occupied 
by, or at war with, the belligerent powers. See, e.g., Articles 2, 
44 and 45 of the Regulations respecting the laws and customs of war 
on land:

Article 2
"The inhabitants of a territory which has not been occupied, 
who, on the approach of the enemy, spontaneously take up arms 
to resist the invading troops without having had time to 
organize themselves in accordance with Article 1, shall be re­
garded as belligerents if they carry arms openly and if they 
respect the laws and customs of war." (36 Stat. 2296).

Article 44
"A belligerent is forbidden to force the inhabitants of ter­
ritory occupied by it to furnish information about the army of 
the other belligerent, or about its means of defense." (36 
Stat. 2306).

Article 45
"It is forbidden to compel the inhabitants of occupied ter­
ritory to swear allegiance to the hostile Power." (36 Stat. 
2306).

- 1 1 -



Article 1 of the Convention, which provides:

"The Contracting Powers shall issue instructions to their armed 
land forces which shall be in conformity with the Regulations 
respecting the Laws and Customs of War on Land, annexed to the 
present Convention." (36 Stat. 2290).

clearly pertains solely to nations and their armies, and defendants come

within neither category. Moreover, Article 2 specifically provides that

the Regulations cited by plaintiff:

"...do not apply except between Contracting Powers, and then 
only if all the belligerents are parties to the Convention." 
(36 Stat. 2290).

Article 4l of the Regulations provides:

" X  violation of the terms of the armistice by private persons 
acting on their own initiative only entitles tha,Jjiiiff£dJ2arty 
to demand the punishment of the offenders or, if ngpessary,? 
compensation for the losses sustained." (36 Star? 2;306j'.

But Article 40, which provides:

"Any serious violation of the armistice by one of the parties 
gives the other party the right of denouncing it, and even, in 
cases of urgency, cf recommencing hostilities immediately."
(36 Stat. 2305-2306),

clearly shows that the injured "party" referred to in Article 4l is a 

"state", with the consequence that only nations, and not private in­

dividuals, have the right to demand compensation in the event that a 

private party violates the Convention.

Article 46 is equally inapposite. It provides:

"Family honour and rights, the lives of persons, and private 
property, as well as religious convictions and practice, must 
be respected.

Private property cannot be confiscated." (36 Stat. 2306-2307).

- 1 2 -



At first glance the reference to confiscation of property 

might seem in point, but Article 46 is a part of a group of Regulations 

headed: "Military Authority over the Territory of the Hostile State". 

Consequently it is clear that Article 46 prohibits confiscation of 

property of citizens of occupied nations, and has no bearing on de­

fendants' alleged conduct or plaintiff's right to obtain relief under 

the Hague Convention.

B. The Kellogg-Briand Pact

The Kellogg-Briand Pact, 46 Stat. 2343 (1929), is equally 

inapplicable. As plaintiff has earlier conceded, it is but "a sweeping 

declaration renouncing war as an instrument of national policy"*, and 

there is nothing in the language or history of the Pact that indicates 

any intent to confer rights or impose duties on individuals or businesses.

C. The Treaty of Versailles

Even assuming that the Treaty of Versailles, S. Doc. No. 

348, 67th Cong. 4th Sess. 3329 (1923), is a treaty within the meaning of 

28 U.S.C. §1331 or §1350 (a most dubious proposition since it was never 

ratified by the United States, and since the 1921 Treaty of Berlin, 42 

Stat. 1939, on which plaintiff apparently relies, only provided that the

* Quoted from plaintiff's brief in support of his petition for re­
hearing and reargument, p. 1 9 .

-13-



United States would be granted by Germany some of the benefits bestowed 

by the Versailles Treaty upon its signatories), the Articles cited by 

plaintiff are patently unrelated to his claims. They merely required 

Germany to pay reparations for damages suffered by French nationals at 

the bands of German nationals (Article 124), permitted the Allies, with 

the cooperation of Germany, to prosecute German citizens for war crimes 

committed during World War I (Articles 227-230), fixed responsibility 

for damage done Allied countries and their citizens by Germany and her 

allies during World War I (Article 231), and provided that Allied 

nationals injured by acts done in Germany during World War I could file 

complaints in a newly created arbitration tribunal (Article 300).

D. The Four Power Occupation Agreement*

The Four Power Occupation Agreement (Agreement on Control 

Machinery in Germany), 5 U.S.T. 2062 (1945), simply provided for the 

governance of occupied Germany by the United States, England, the Soviet 

Union and France during the period at the end of World War II in which 

Germany was "carrying out the basic requirements of unconditional surrender". 

It contains no provisions that relate in any way to private individuals.

This treaty will be discussed in greater detail in relation to 
Military Government Law No. 59 in Point V, infra.

-14-



Plaintiff does not have the right to sue 
defendants under the Hague Convention, the 
Kellogg-Briand Pact, the Treaty of Versailles 
or the Four Power Occupation Agreement_______

After reviewing the provisions of the treaties relied on by 

plaintiff, Judge Brieant held that they conferred no express rights on 

individuals, and declined to imply a private right of action under 

them:

"We find no authority, and none is cited to us in which 
a private cause of action arising out of extraterritorial 
acts, but justiciable in the federal courts, has been 
asserted successfully as arising by implication out of 
any international treaty.

When the international lawyers and diplomats desire to 
create a private right arising out of a treaty, they 
know how to do so. The classic example, of course, is 
the Warsaw Convention, by which private causes of action 
were created by express language of the Convention it­
self, against international air carriers for the benefit of 
passengers and shippers. See Chapter Three thereof, 
and particularly Article 28(1) which fixes the venue 
for the private action.

The learning with respect to international compacts dif­
fers from the interpretation of legislative intent 
followed by our courts in implying private rights of action 
under remedial statutes such as the federal securities 
laws. An accepted principle of international law seems 
to be that to create a private right or obligation, the 
treaty must, as in the case of the Warsaw Convention, 
express a clear intent so to do." (Memorandum opinion 
dated May 20, 1974, pages 11-12, App. L)

Defendants submit that Judge Brieant's decision is correct

and in accord with a long line of cases (discussed below) in which the

courts, in recognition of the limited role the judiciary should play

-15-



in the area of foreign affairs, have, for the purpose of determining 

which claims could properly be adjudicated, distinguished between 

treaties which, either by their express terms or reasonable implica­

tion, confer rights on individuals, and those, like the ones on which 

plaintiff purports to rely, which are either broad policy pronouncements 

or pacts regulating the relations of the convenanting nations with one 

another.

The Supreme Court, in Edye v. Robertson, 112 U.S. 580 (1884) 

(the Head Money Cases), stated the distinction as follows:

"A treaty is primarily a compact between independent 
Nations. It depends for the enforcement of its pro­
visions on the interest and the honor of the govern­
ments which are parties to it. If these fail, its 
infraction becomes the subject of international ne­
gotiations and reclamations, so far as the injured 
party chooses to seek redress, which may in the end 
be enforced by actual war. It is obvious that with 
all this, the judicial courts have nothing to do 
and can give no redress. But a treaty may also contain 
provisions which confer certain rights upon the 
citizens or subjects of one of the Nations residing 
in the territorial limits of the other, which partake 
of the nature of municipal law, and which are capable 
of enforcement as between private parties in the 
courts of the country. An illustration of this 
character is found, in treaties which regulate the 
mutual rights of citizens and subjects of the con­
tracting Nations in regard to rights of property 
by descent or inheritance, when the individuals con­
cerned are aliens. The Constitution of the United 
States places such provisions as these in the same 
category as other laws of Congress by its declaration 
that 'This Constitution and the laws made in pursuance 
thereof, and all treaties made or which shall be made 
under authority of the United States, shall be the 
supreme law of the land.' A treaty, then, is a law 
of the land as an Act of Congress is, whenever its

-16-



provisions prescribe a rule by which the rights 
of the private citizens or subject may be determined.
And when such rights are of a nature to be enforced 
in a court of justice, that court resorts to the 
treaty for a rule of decision for the case before 
it, as it would to a statute." (Id. at 598-599).

And Z&F Assets Realization Corp. v. Hull, 114 F.2d 464 (D.C.

Cir. 1940), aff!d , 311 U.S. 470 (1941), applying the test set forth in 

the Head Money Cases, held that a private party’s claim that its rights 

under the Berlin Treaty of 1921* had been infringed did not state a 

justiciable controversy:

"The compact [the Treaty of Berlin] is between the 
two governments; the citizens [plaintiffs] are not 
parties thereto; and no provision is made or contem­
plated therein, for submitting any question to the 
courts." (Id. at 472.) (footnote omitted.)

Similarly, in Pauling v, McElroy, 164 F. Supp. 390 (D.D.C.

1958), aff'd, 278 F.2d 252 (I960), cert, denied, 364 U.S. 835 (I960),

the court held that a private citizen cannot enforce treaties that do

not purport to grant individuals rights:

"The provisions of the Charter of the United Nations, 
the Trusteeship Agreement for the Trust Territory of 
the Pacific Islands, and the international law principle 
of freedom of the seas relied on by plaintiffs are not 
self-executing and do not vest any of the plaintiffs 
with individual legal rights which they may assert 
in this Court. The claimed violations of such inter­
national obligations and principles may be asserted 
only by diplomatic negotiations between the sovereign­
ties concerned." (Id. at 393.)

As previously noted, on page 15, supra, the Treaty of Berlin is 
alleged by plaintiff as the basis for his assertion that the Treaty 
of Versailles, which was never signed or ratified by the United 
States, Is nevertheless a "treaty of the United States".

-17-



Accord: People of Saipan v. United States Department
of Interior, 35(Tf . Supp.“545 (D. Haw. 1973).

These principles have also been recognized and codified in the 

Restatement (2nd) of Foreign Relations, which bars actions by aliens 

against a state absent express authorization, §17 5, and remits to the 

state of which the alien is a national the sole right to seek redress of 

his Injuries, §174. See also §1, Comment f.

While plaintiff cites a plethora of cases where courts have 

held that they have jurisdiction to consider claims allegedly based on 

treaties, an examination of these cases shows that In every instance in 

which the courts held that the plaintiff had stated a claim upon which 

relief could be granted, the plaintiff was either itself a party to the 

treaty (as in the cases involving Indian tribes) and thus clearly had 

standing to sue under it, or the treaty relied on expressly conferred 

rights on private individuals.

The bulk of the cases cited by plaintiff involve the rights of 

Indians under treaties between the United States and their tribes.

These cases include: DeCoteau v. District County Court, 95 S.Ct. 1082 

(1975); Antoine v. Washington, 95 S.Ct. 944 (1975); Oneida Indian Nation 

v. County of Oneida, 414 U.S. 661 (1974); McClanahan v. State Tax Com­

mission of Arizona, 4ll U.S. 164 (1973); Skokomish Indian Tribe v.

France, 269 F.2d 555 (9th Cir. 1959); Phelps v. Hanson,* 163 F.2d 973

* Plaintiff's reference to Phelps v. Hanson is both puzzling and mis­
leading, since the Ninth Circuit held that the district court 
lacked subject matter jurisdiction Inasmuch as the complaint did 
not raise any federal question.

-18-



(9th Cir. 1947); Leech Lake Band of Chippewa Indians v. Herbst, 334 F. 

Supp. 1001 (D. Minn. 1971); Dodge v. Nakai, 298 F. Supp. 17 (D. Ariz. 

1968); and Makah Indian Tribe v. McCauly, 39 F. Supp. 75 (W.D. Wash.

1941).

Oneida Indian National, Skokomish Indian Tribe, Leech Take 

Band of Chippewa Indians, and Makah Indian Tribe, supra, all involve suits 

by Indian tribes to enforce specific rights conferred on them by treaties 

to which they were parties.

Oneida Indian Nation, supra, is representative of this group 

of cases and well illustrates the significant differences between the 

treaties relied on by the Indians and those alleged herein by plaintiff.

The plaintiffs in Oneida Indian Nation were the Oneida Indian 

Nation of New York State and the Oneida Indian Nation of Wisconsin. The 

defendants were the Counties of Oneida and Madison in New York State.

Plaintiffs alleged, inter alia, that pursuant to three treaties 

between the Oneidas and the United States - the Treaty of Fork Stanwix 

of 1784, 7 Stat. 15, the Treaty of Fort Harman of 178 9, 7 Stat. 33, and 

the Treaty of Canandaigua of 1794, 7 Stat. 44 - the Indians had the 

right to occupy certain land which had wrongfully been taken from them.

Since the plaintiffs were themselves parties to the treaties 

on which they relied, their standing to sue under those treaties could 

not be doubted. Moreover, the rights the Oneidas sought to enforce were 

specifically granted by those treaties. The Treaty of Fort Stanwix

-19-



stated that:

"[t]he Oneida and Tuscarora nations shall be 
secured in the possession of the lands on 
which they are settled",

and under the Treaty of Fort Harman, plaintiffs were "again secured and

confirmed in the possession of their respective lands". Moreover,

Article II of the Treaty of Canandaigua provided:

"The United States acknowledge the lands reserved 
to the Oneida, Qnandaga and Cayuga Nations, in 
their respective treaties with the state of New 
York, and called their reservations, to be their 
property; and the United States will never claim 
the same nor disturb them...in the free use and 
enjoyment thereof..." (The aforequoted passages 
from the Oneida treaties are set forth in the 
Supreme Court’s opinion at 414 U.S. 664, n.3-)

Dodge v. Nakai, supra, differs from the preceding Indian tribe

cases only in that the Indian tribe was a defendant, rather than a

plaintiff. The remaining Indian cases, DeCoteau v. District County

Court, Antoine v. Washington and McClanahan v. State Tax Commission of

Arizona, supra, are also readily distinguishable.

In DeCoteau, Sioux Indians claimed that under a 1867 treaty 

between their tribe and the United States, 15 Stat. 505, the states in 

which they resided had no jurisdiction over them. The Supreme Court 

held that the treaty had been superseded by a subsequent act of Congress. 

Consequently, the Court did not reach the question of their rights, if 

any, under that treaty.

In both Antoine and McClanahan, however, the Supreme Court

- 2 0 -



upheld the right of individual Indians to be free of state regulations. 

McClanahan involved the right of a state to tax the income earned by 

an Indian on a reservation. Following a long line of cases, the Supreme 

Court held that within reservations, Indians had exclusive sovereignty 

of their affairs. Consequently, the decision did not revolve around 

the rights of individual Indians under treaties but rather the 

jurisdiction of states within reservations and the question of whether 

federal law preempted the field.

Similarly, Antoine held that under an act of Congress which 

ratified an agreement between plaintiffs' tribe and the United States, 

the states were not free to interfere with the right of tribe members 

to hunt and fish. Like McClanahan, the central question was one of 

whether the federal government had exclusive power to regulate the 

affairs of the Indians.

The non-Indian cases cited by plaintiff are equally inap­

posite.

Corbett v, Stergios, 381 U.S. 124 (1965) 3 Kolovrat v. Oregon, 

366 U.S. Ib7 (1961), Hauenstein v. Lynham, 100 U.S. 433 (l880), and 

Martin v. Hunter’s Lessee, 14 U.S. (1 Wheat.) 304 (18 16), all involved 

the question of the rights of aliens to acquire, inherit, hold or sell 

land in the United States under treaties which specifically granted them 

those rights. Since Hauenstein v. Lynham, supra, is representative of 

these cases, defendants will limit their discussion to Hauenstein to

- 2 1 -



avoid unnecessary repetition.

Kauenstein held that Swiss citizens had the right, under an 

1850 Treaty between the United States and the Swiss Confederation, 11 

Stat. 587, to sell property which, under Virginia law, they were not 

permitted to inherit.

Unlike the Hague Convention, the Kellogg-Briand Pact, the 

Treaty of Versailles and the Pour Power Occupation Agreement, the Swiss- 

American Treaty specifically and unambiguously conferred rights on the 

citizens of those two nations. Article 5 of the Treaty states, in 

pertinent part:

"...in case real estate situated within the territories 
of one of the contracting parties should fall to a citi­
zen of the other party, who, on account of his being 
an alien, could not be permitted to hold such property 
in the State or in the canton in which it may be situated, 
there shall be accorded to the said heir, or other suc­
cessor, such term as the laws of the State or canton 
will permit to sell such property; he shall be at liberty 
at all times to withdraw and export the proceeds thereof 
without difficulty, and without paying to the government 
any other charges than those which, in a similar case, 
would be paid by an inhabitant of the country in which 
the real estate may be situated." (quoted in Hauenstein 
v. Lynham, 100 U.S. at 486) (emphasis supplied).

Asakura v. Seattle, 265 U.S. 332 (1924), although it does not

involve land, is quite similar to the foregoing group of cases. Plaintiff

was a Japanese citizen domiciled in the state of Washington who, because

of his nationality, was denied the right, under a Seattle ordinance, to

operate a pawnshop in that city. The Supreme Court held the ordinance

-22-



Invalid on the ground that it conflicted with a 1911 treaty between

Japan and the United States, 37 Stat. 1504.

Unlike the Hague Convention, the Kellogg-Briand Pact, the

Treaty of Versailles and the Four Power Occupation Agreement, the

Japanese-American Treaty was clearly intended to confer specific rights

on the citizens of Japan and the United States:

"The citizens or subjects of each of the high contracting 
parties shall have liberty to enter, travel and reside 
in the territories of the other to carry on trade, whole­
sale and retail, to own or lease and occupy houses, manu­
factories, warehouses and shops, to employ agents of their 
choice, to lease land for residential and commercial pur­
poses, and generally to do anything incident to or necessary 
for trade upon the same terms as native citizens or subjects, 
submitting themselves to the laws and regulations there 
established.... The citizens or subjects of each...shall 
receive, in the territories of the other, the most constant 
protection and security for their persons and property..." 
(Asakura v. Seattle, 265 U.S. at 340).

Maximov v. United States, 373 U.S. 49 (1963), merely held that 

a domestic trust was a separate taxable entity, apart from its bene­

ficiaries, and thus did not qualify for the benefits which the 1945 

Income Tax Convention between the United States and the United Kingdom, 

60 Stat. 1377, bestowed on residents of Great Britain.

Hidalgo County Water Control and Ixrprovement District v.

Hedrick, 226 F.2d 1 (5th Cir. 1955), the final case cited by plaintiff 

to bolster his contention that the district court improperly dismissed 

his claim under the Hague Convention, the Kellogg-Briand Pact, the 

Treaty of Versailles and the Four Power Occupation Agreement, held that 

the plaintiffs therein, two individuals and two political subdivisions

-23-



of the State of Texas, failed to state a claim for relief under the 

Mexican-American Treaty of 1945, 59 Stat. 1219 (19^5)-

Plaintiff has thus failed to cite a single case in which a 

court has held that a private individual has standing to sue under a 

United States treaty that does not expressly confer specific rights 

on the claimant.

Consequently, it is respectfully submitted that this Court 

should affirm the district court's holding that plaintiff has failed 

to state a claim under a treaty of the United States because:

(1) defendants' alleged conduct did not violate 
any of the provisions of the cited treaties;

(2) none of the treaties on which plaintiff 
relies confers specific rights on private 
individuals; and

(3) this Court should not imply private rights 
of action under such treaties.

- 2 4 -



POINT II

THE DISTRICT COURT CORRECTLY 
HELD THAT PLAINTIFF HAS FAILED 
TO STATE A CLAIM UNDER THE LAW 
__________ OF NATIONS__________

The court below also held that plaintiff failed to state a 

claim under the law of nations clause of 28 U.S.C. §1350, which pro­

vides, in pertinent part:

"The district court shall have original jurisdiction 
of any civil action by an alien for a tort only, 
committed in violation of the law of nations..."

Plaintiff, an alien suing two other aliens over an allegedly

tortious act occurring outside the United States, evidently claims that

any tort committed anywhere in the world by anyone (whether a United

States citizen or not) against anyone (other than a United States citizen),

which violates the law of nations, is cognizable by a United States

district court under §1350 even if the tort has no connection of any

kind with the United States.

Moreover, plaintiff apparently claims that the law of nations 

protects the rights of individuals as well as nations.

As defendants show below, neither the history of §1350 nor 

the decisions construing it support such a broad, untrammelled reading 

of the statute. Indeed, such a construction of §1350 would convert the 

United States courts into the policemen of the world.

Significantly, plaintiff has not cited, and defendants have 

not found, a single case in which a federal court accepted jurisdiction

-25-



under §1350 of an action that did not involve some nexus with the 

United States, such as a United States defendant or a tort committed in 

the United States.

Nor has plaintiff cited, or defendants found, a single case in 

which the courts held that an individual, as well as a nation, had 

rights protected by the law of nations. In the one case where a court 

upheld a claim under the law of nations clause of §1350, the Court made 

it clear that while the individual alien had standing to sue under §1350, 

his claim had to show that he was injured by a violation of his nation's 

rights.* *

The law of nations

Although it has been the law since 1789 that an alien can sue 

in the federal courts if he has been tortiously injured in violation of 

the law of nations**, defendants have found only one case in which 

jurisdiction was successfully asserted under the law of nations.* Con­

sequently, such judicial construction as there is of the "law of nations" 

is mainly dicta.

Scholarly commentary is not much more extensive, and centers 

primarily on the applicability of the law to nations, rather than to 

individuals. This is not surprising, however, since historically It was

* Adra v. Clift, 195 F. Supp. 857 CD. Md. 1961), discussed infra, at 
page 29.

** §9 of the Judiciary Act of 1789, 1 Stat. 73, 77 provided that the
district courts shall have cognizance of:

"...all causes where an alien sues for a tort only in
violation of the law of nations..."

This provision is now contained in 28 U.S.C. §1350.

-26'



the state, and not its citizens, that asserted rights 'under the law of 

nations.*

What little discussion there is of why the newly formed United 

States was interested in protecting aliens' rights under the law of 

nations suggests two principal reasons: first, a desire to expand the 

trade of the United States both by encouraging foreigners to invest in 

this country and by insuring reciprocal treatment of Americans abroad; 

and second, a fear that absent federal control of the treatment of 

aliens, one of the states might take action that could thrust the United 

States into war.

The first of these concerns was expressed by James Madison 

during the debates on the ratification of the Constitution, when he 

noted that the inability of foreign merchants to obtain the protection 

of the state courts had inhibited "many wealthy gentlemen from trading 

or residing with us". 3 Elliott's Debates 583 (1888). This concern is 

further evidenced by the fact that most of this nation's early treaties 

explicitly provided for the right of citizens of the signatories to do

Plaintiff, at page 19 of his appeal brief, quotes the following 
passage from Brierly, The Law of Nations (6th ed. 1963), but omits 
the underlined portion which supports defendants' contention that 
historically an individual could not sue under the law of nations:

"No state is legally bound to admit aliens into its 
territory, but if it does so it must observe a certain 
standard of decent treatment towards them, and their 
own state may demand reparation for an Injury caused 
to them by a failure to observe this standard.tT (id. 
at 276)(emphasis supplied).

-27-



business in one another's territory*.

The latter point was stressed by Alexander Hamilton, who

observed:

"The union will undoubtedly be answerable to foreign 
powers for the conduct of its members. And the re­
sponsibility for an injury ought ever to be accompanied 
with the faculty of preventing it. As the denial or 
perversion of justice by the sentences of courts...is 
with reason classed among the just causes of war, It 
will follow that the federal judiciary ought to have 
cognizance of all causes in which the citizens of 
other countries are concerned." (The Federalist,
No. 80)

Neither of these two concerns, however, would suggest any 

desire by the founding fathers to protect nonresident aliens from the 

acts of foreign governments taken outside the territory of the United 

States.

Nor do the few recent decisions Involving the law of nations 

afford plaintiff any basis for bringing an action under §1350.

In Khedivial Line, S.A.E. v. Seafarers' International Union, 

278 F.2d 49 (2nd Cir. i960), an action by an Egyptian ship owner to 

enjoin a U.S. labor union from picketing its ships, this Court held that 

the plaintiff did not state a claim for relief under the law of nations.

See, e.g., Treaty of Amity and Commerce between France and the 
United States, 8 Stat. 12 (1778); Treaty of Amity and Commerce 
between Prussia and the United States, 8 Stat. 84 (178 5); Treaty of 
Peace and Friendship between Morocco and the United States, 8 Stat. 
100 (178 7); Treaty of Peace and Amity between Algiers and the 
United States, 8 Stat. 133 (1795); and Treaty of Friendship between 
Spain and the United States, 8 Stat. 138 (1795).

-28-



After noting that despite the age of §1350 and its pre­

decessors, it had rarely been applied, and that the Court had found no 

case which squarely based jurisdiction on a claim under the law of 

nations, the Court observed that the plaintiff had failed to show that 

the law of nations bestows rights on individuals, and not solely on 

nations.

Adra v . Clift, 195 F. Supp. 857 (D. Md. 19 6 1), the one case 

upholding jurisdiction under §1350's law of nations clause, also re­

volved around the question of whether a nation's rights had been violated.

Plaintiff, a Lebanese national, alleged that his former wife, 

who had remarried and who lived in the United States, had used a false 

passport to get the child into the United States.

The court, in finding a violation of the law of nations, 

stressed that misuse of a passport injures both the country that issued 

it and the country that admits an alien in reliance on it:

"...despite the fact that the child Najwa was a Lebanese 
national, not entitled to be admitted to the United 
States under an Iraqi passport, defendant concealed Najwa's 
name and nationality, caused her to be included in defendant's 
Iraqi passport, and succeeded in having her admitted to 
the United States thereby. These were wrongful acts hot 
only against the United States, 8 U.S.C.A. §1182, 18 U1S.C.A. 
§1546, but against the Lebanese Republic, which is en­
titled to control the issuance of passports to its 
nationals." (195 F. Supp. at 864-865) (emphasis supplied).

Lopes y. Reederei Richard Schroder, 225 F. Supp. 292 (E.D. Pa.

1963), and Valanga v. Metropolitan Life Ins. Co., 259 F. Supp. 324 (E.D.

- 2 9 -



Pa. 1966), both held that the federal courts lacked subject matter 

jurisdiction under §1350 over the claims of the defendants therein, in 

the former case because the torts alleged - unseaworthiness and negli­

gence - did not constitute violations of the law of nations, and in the 

latter case because a suit for the recovery of insurance proceeds was 

not a true tort action.

However, the courts did discuss the law of nations in some 

depth and their review of its history supports defendants' contention 

that it is primarily concerned with: (a) the relations of nations with 

one another; and (b) offenses that disrupt or undermine the sovereignty 

or economic base of nations.

Lopes quoted extensively from Kent's Commentaries, which 

defined the "Law of Nations" as:

"that code of public instruction which defines the 
rights and prescribes the duties of nations in their 
intercourse with each other..." (quoted at 225 F.
Supp. 297),

and listed four offenses as coming within the scope of that law: vio­

lation of passports, violation of ambassadors, piracy and the slave 

trade.

Valanga concluded that:

"A violation of the law of nations means a violation 
of those standards by which nations regulate their 
dealings with one another inter se." (259 F. Supp. 
at 328.)
Consequently, since defendants' alleged conduct caused no 

injury to any nation, defendants have not violated the law of nations.

-30-



POINT III

PLAINTIFF'S CLAIMS ARE BARRED 
BY THE ACT OF STATE DOCTRINE

In addition to finding that plaintiff failed to state a 

claim either under a United States treaty or under the law of nations, 

Judge Brieant also suggested in his January 2, 1975 opinion that 

plaintiff's claims would in any event be barred by the Act of State 

doctrine.

After analyzing this doctrine and its exceptions, Judge 

Brieant concluded:

"We need not, however, rest our decision on this 
ground, since for the reasons stated above, the 
complaint fails to state a claim cognizable in 
this court." (App. T, p. 22)

Defendants submit that Judge Brieant was correct in his 

determination that It is not even necessary to reach the Act of 

State doctrine in this case. However, since plaintiff has argued 

the doctrine on this appeal, defendants further submit that if this 

Court should find it necessary to consider the Issue, It should find 

that plaintiff's claims are Indeed barred by the Act of State doctrine.

The meaning of the Act of State doctrine

The Act of State doctrine Is perhaps best set forth in Underhill 

v. Hernandez, 168 U.S. 250 (1897), where Chief Justice Fuller said for a

-31-



unanimous Supreme Court:

"Every sovereign state Is bound to respect the Indepen­
dence of every other sovereign state, and the courts 
of one country will not sit in judgment on the acts of 
the government of another done within its own territory. 
Redress of grievances by reason of such acts must be 
obtained through the means open to be availed of by 
sovereign powers as between themselves." (Id. at 252.)

A. The Bernstein cases

The Act of State doctrine was applied by this Court in 

Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246 (2nd Cir. 

1947), cert, denied, 332 U.S. 771 (1947), when it declined to take 

jurisdiction over a claim that the defendant had wrongfully obtained 

plaintiff's property at an unfair price as a result of duress applied by 

the Nazi government of Germany, a claim substantially similar to that 

alleged by plaintiff in the instant litigation.

Although there have been two major developments in the Act of 

State doctrine since Van Heyghen, defendants contend that Van Heyghen is 

still the controlling precedent in this Circuit and requires the dis­

missal of plaintiff's action.

The first of these developments was the decision of this Court 

in Bernstein v. N.V. Nederlandsche-Amerikaansche Stoomvaart-Maatschappij, 

210 F.2d 375 (2nd Cir. 1954), an action which, like Van Heyghen and the 

instant case, involved an alleged improper acquisition of property as a 

result of the actions of German officials prior to the commencement of 

World War II.

-32-



The crucial distinction between Van Heyghen and Nederlandsche-

Amerik^nsche is that after this Court ordered the plaintiff in Nederlandsche- 

Amerikaansche "to refrain from alleging matters which would cause the 

court to pass on the validity of acts of officials of the German govern­

ment", (210 P.2d at 375), the United States State Department issued a 

press release and sent this Court a letter stating that:

"The policy of the Executive, with respect to claims 
asserted in the United States for the restitution 
of identifiable property (or compensation in lieu 
thereof) lost through force, coercion, or duress 
as a result of Nazi persecution in Germany, is to 
relieve American courts from any restraint upon the 
exercise of their jurisdiction to pass upon the 
validity of the acts of Nazi officials." (quoted 
by the Court at 210 F.2d 376.)

In reliance on the State Department's pronouncement, this 

Court reversed its initial decision and held that the Act of State 

doctrine was not applicable in cases involving Nazi actions.*

B. First National City Bank v. 
Banco Nacional de Cuba

The second major development was the rejection of the 

Bernstein exception by six Justices of the Supreme Court in First National 

City Bank v. Banco Nacional de Cuba, 406 U.S. 759 (1972),** thus, in

* The view that the Act of State doctrine need not be applied when 
the Executive explicitly authorizes the courts to determine the 
controversy on the merits has come to be known, and will be re­
ferred to hereafter, as the "Bernstein exception".

** Plaintiff concedes that the Bernstein exception was rejected by six 
justices in Banco Nacional. Brief on appeal of plaintiff, pp. 38-39*

-33-



effect, reinstating the policy, followed by this Court in Van Heyghen, 

that courts should not review the validity of acts of other nations 

taken within their own territory.

Plaintiff, however, seeks to avoid the implications of the 

elimination of the Bernstein exception by contending that Banco Nacional 

holds only that the courts are now free to decide for themselves when to 

apply the Act of State doctrine, and that under the standards announced 

in Banco Nacional de Cuba v^ Sabbatino, 376 U.S. 398 (1964), this Court 

should consider plaintiff's allegations on the merits.

A close reading of Sabbatino, however, shows that the case 

supports defendant's contention that the Act of State doctrine bars 

plaintiff's claims.

C . The Sabbatino decision

In Sabbatino, the Supreme Court held that under the Act 

of State doctrine it was improper for the federal courts to consider the 

validity of Cuba's expropriation of a Cuban corporation which was a 

wholly-owned subsidiary of an American corporation.

Plaintiff points to a portion of the Supreme Court's 

opinion In which Justice Harlan said that the need to apply the Act of 

State doctrine was less where: (a) there was general agreement as to

the applicable law, (b) the act was taken by a government no longer in 

existence, and (c) the issue in dispute was of minor Importance, and

-34-



contends that the instant litigation presents just such a situation.

Plaintiff, however, has wholly ignored Justice Harlan's dis­

cussion of the widely divergent views which different nations have of 

acts such as those from which defendants allegedly benefited.

In the first place, plaintiff overlooks Justice Harlan's 

statement that:

"There are few if any issues in international law today 
on which opinion seems to be so divided as the limitations 
on a State's power to expropriate the property of aliens."
(376 U.S. at 428) (footnote omitted).

Plaintiff himself contends that he was an alien in Germany 

both because he had dual Swiss and German citizenship (amended complaint, 

112, App. R), and because Jews were regarded by the Germans as aliens 

(plaintiff's brief on appeal, p. 11).

The heart of plaintiff's allegations is that the German govern­

ment "...adopted the policy of making it impossible for Jews to own 

economic assets including banking firms in Germany" (amended complaint,

1l8, App. R), a decision quite similar to Cuba's determination that its 

sugar crop should not be controlled by foreigners. Consequently, plaintiff 

can hardly claim that defendants' alleged conduct is a clear violation 

of the law of nations.

Moreover, the right of a nation to expropriate the property of 

an alien is a highly sensitive and Important issue that the courts would 

do well to avoid:
"It is difficult to imagine the courts of this country em­
barking on adjudication in an area which touches more sen­
sitively the practical and ideological goals of the various 
members of the community of nations." (376 U.S. at 430.) 
(footnote omitted.)

-35-



Therefore, a decision that this Court is free to determine the 

propriety of the former German policy on Jewish control of banks will 

inevitably require this Court to take a position on the right of a 

foreign government to expropriate the property of aliens who own in­

dustries that are regarded as crucial to its economy, a decision the 

Supreme Court in Sabbatino was not prepared to make, and a decision 

which may have adverse effects on the State Department's negotiations on 

behalf of American companies whose property has been expropriated by 

countries throughout the Middle East and Latin America.

Similarly, if plaintiff is regarded as a German national 

rather than as an alien, adjudication of his claims will require the 

federal courts to take a position on the difficult and sensitive question 

of the right of a foreign government, within its own borders, to act in 

a discriminatory or even oppressive fashion towards classes of its 

citizens, a question which, defendants submit, should not be reached in 

a case having no legal nexus with the United States.

Conclusion

Consequently, this Court should decline to take jurisdiction 

of plaintiff's claims under the law of nations on the ground that the 

Act of State doctrine bars this Court from considering the validity of 

the alleged expropriation of plaintiff's property.

-36-



POINT IV

THE DISTRICT COURT MCKED 
SUBJECT MATTER JURISDICTION 

OVER'PLAINTIFF'S CLAIM

The district court's decision

Defendants asserted both in their motion to dismiss plaintiff's 

original complaint (App. H) and In their motion to dismiss plaintiff's 

amended complaint (App. S) that the district court lacked subject 

matter jurisdiction over plaintiff's claims. The district judge, how­

ever, In reliance on Bell v. Hood, 327 U.S. 678 (19^6), held that it had 

such jurisdiction:

"...because the right of plaintiff to recover under 
his complaint will be sustained if the treaties of 
the United States are given one construction, and 
will be defeated if they are given another." (memo­
randum opinion of Judge Brieant, dated May 20, 197^,
App. L, page 5, incorporated by reference in memo­
randum opinion of Judge Brieant, dated January 2,
1975, App. T.)*

For the reasons hereinafter set forth, defendants respectfully

During the hearing on defendants' motion to dismiss plaintiff's original 
complaint, plaintiff conceded that there was no diversity jurisdiction 
under §1332 since all parties were aliens. (App. L, p. 3)* Neverthe­
less, the amended complaint alleges jurisdiction under §1332 on the 
ground that defendants' bank accounts were attached in New York. (App.
R, 1f6)

Plaintiff misconstrues §1332. The cases are clear that it does 
not apply to controversies between aliens. Karakatsanis v. Conquistador 
Cia. Nav. S.A., 297 F. Supp. 723 (S.D.N.Y. 1965), Dassignienis v. Cosinos 
Carriers & Trading Corp., 321 F. Supp. 1253 (S.D.N.Y. 1970). The citizen­
ship of the banks which held defendants' funds Is wholly Irrelevant. In 
the first place, they are not parties. Secondly, the citizenship of 
garnishees does not affect or create diversity of citizenship jurisdic­
tion. Bacon v. Rives, 106 U.S. 99 (1882).

-37-



contend that the district judge's determination was erroneous and that 

the dismissal of the amended complaint should also be sustained for lack 

of subject matter jurisdiction.*

Bell v. Hood

In Bell v. Hood, supra, the Supreme Court held that if a 

plaintiff asserted a claim under the Constitution or the laws of the 

United States, there was federal question jurisdiction under 28 U.S.C. 

§1331 unless the alleged claim was "immaterial and made solely for the 

purpose of obtaining jurisdiction" or was "wholly Insubstantial and 

frivolous".** (327 U.S. at 682-683.)

The cases are clear that an appellee is free to raise on appeal:

"...any matter in the record in support of the district court's 
order, including arguments previously rejected by the district 
court..." United Optical Workers Union v. Sterling Optical 
Co., Inc., 500 F.2d 220, 224 (2nd Cir. 197I01

even though the appellee did not cross-appeal. Dandridge v. Williams, 
397 U.S. 471, 475, n.6 (1970); United Optical Workers Union v. 
Sterling Optical Co., Inc., supra; and Blanton v. State University 
of New York, 409 F.2d 377, 382, n.7 (2nd Cir. 1973).

Moreover, lack of subject matter jurisdiction may be raised at any 
time, even on appeal and even on the court's own initiative. 
Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149 
(1908).

There appears to be no reason why the test of subject-matter 
jurisdiction should vary when the claim is based on a treaty, 
rather than on the Constitution or laws of the United States. Cf, 
Hidalgo County Water Control v. Hedrick, 226 F.2d 1 (5th Cir. 
1955).

-38-



Defendants do not deny that plaintiff's original and amended 

complaint both seek recovery under treaties of the United States. They 

do, however, contend that jurisdiction is wanting since the Hague Con­

vention, the Kellogg-Briand Pact, the Treaty of Versailles and the Four 

Power Occupation Agreement clearly afford no basis for plaintiff's 

claims. This is not, as Judge Brieant suggested, a case where plaintiff's 

right to recover turns upon the manner in which a treaty is construed. 

Rather, it is a case where no reasonable interpretation of the treaties 

in question sustains plaintiff's action.

The treaties on which plaintiff relies

Defendants have discussed the Hague Convention of 1907, 36 

Stat. 2277, the Treaty of Versailles, S. Doc. No. 348, 67th Cong., 4th 

Sess. 3329 (1923), the Kellogg-Briand Pact, 46 Stat. 2343 (1929), and 

the Four Power Occupation Agreement, 5 U.S.T. 2062 (1945), in some 

detail in Point I, supra, and will not repeat that discussion herein. 

Defendants’ position, however, is that there is no reasonable basis for 

contending that plaintiff has a bona fide claim against defendants under 

those treaties.

The Hague Convention restricts the manner in which nations can 

conduct war. It does not impose any duties or restrictions on individuals 

such as defendants. The Kellogg-Briand Pact is but "a sweeping declaration 

of national policy".* The Treaty of Versailles is not even a treaty of

* Quoted from plaintiff's brief in support of his petition for re­
hearing and reargument, p. 19-

-39-



the United States (see Point I, pp. 13-14, supra), and in any event was

concerned only with reparations and prosecution for acts committed by 

Germany and the Axis powers during World War I. And the Four Power 

Occupation Agreement merely provided for the governance of occupied 

Germany at the close of World War II.

Plaintiff's claim

The amended complaint alleges that Germany undertook a war 

against "the civilized world" in violation of the Hague Convention, the 

Kellogg-Briand Pact, and the Treaty of Versailles, and to that end, 

adopted a set of laws that had the effect first of denying plaintiff the 

right to carry on his banking business in Germany, and second of forcing 

plaintiff to sell his bank to defendants at an unfair price. Plaintiff 

further alleges that Germany's aggressive war and racial laws were 

adopted and carried out by the German government and its "political and 

business leaders", but carefully stops short of alleging that defendants 

were among those leaders or played any role in determining Germany's 

policies.

At no point, therefore, does plaintiff connect defendants with 

the purported violation of any treaties, other than by suggesting that 

defendants were the indirect beneficiaries of acts taken by others.

Moreover, the failure to allege a violation of any treaties by 

defendants (rather than others) cannot be ascribed to oversight; Judge

- 10-



Brleant specifically conditioned plaintiff's right to file an amended 

complaint on plaintiff's alleging "...with particularity the specific 

provisions of such treaty or treaties relied upon." (endorsement order 

granting reargument, App. Q).

Consequently, plaintiff's assertion that his claims arise 

under treaties of the United States is obviously insubstantial and 

frivolous and his action should be dismissed for want of subject matter 

jurisdiction.

- 4 i -



POINT V

MILITARY GOVERNMENT LAW 
NO. 59 IS NOT A "LAW 

OF THE UNITED STATES",
AND NO FEDERAL QUESTION 

ARISES UNDER IT. MOREOVER, 
PLAINTIFF HAS NOT STATED 

ANY CLAIM FOR RELIEF BASED 
ON THAT MILITARY LAW.

Plaintiff claimed that the district court overlooked the ap­

plicability of Military Government Law No. 59 ("MGL 59"), which had not 

been cited in the original or amended complaints, and asked this Court 

to remand the case to Judge Brieant with directions to consider MGL 59.

Defendants contended that MGL 59 had clearly been called to 

the attention of the district court (see page 8 of this brief) and 

therefore consented, in the interest of economy, to have this Court 

consider whether the amended complaint states a claim under MGL 59- 

(App. X).

The history of MGL 59* *

Near the end of World War II, and in anticipation of Germany's 

surrender, the United States, Great Britain and the Soviet Union entered 

into an "Agreement on Control Machinery in Germany" (subsequently, after

* The description of military government in occupied Germany herein­
after set forth is taken primarily from Flick v. Johnson, 174 F.2d 
983 (D.C. Cir. 1949).

-42-



France joined in the Agreement, known as the Four Power Occupation 

Agreement), 5 U.S.T. 2062 (1945), whereby they agreed that collectively 

they would govern Germany until a legitimate German government could be 

formed, and administrative power and responsibility transferred to it. 

They further agreed that for administrative convenience, Germany would 

be divided into several sectors, the boundaries of which would be 

coterminous with the areas occupied by their respective armies.

Pursuant to the Four Power Occupation Agreement, a "Control 

Council", composed of the Commanders in Chief of each of the four 

Allies, was formed and acted as the supreme governing body of Germany. 

Thereafter, matters affecting Germany as a whole were determined by the 

Control Council; local matters were dealt with by the separate com­

manders, each exercising administrative responsibility in the sector 

controlled by his nation's troops. Where possible, the four nations 

were to endeavor to adopt similar regulations so the rules would be as 

uniform as possible throughout Germany.

In accordance with the Four Power Occupation Agreement, the 

President of the United States directed General Eisenhower, who was both 

the Commander in Chief of the American Forces in Germany and the Military 

Governor of the American Zone, to carry out and support the policies 

adopted by the Control Council.

Pursuant to the authority vested by the President, the Four 

Power Occupation Agreement and the Control Council, the American Military

-43-



Government, on November 10, 1947, promulgated MGL 59, 12 Fed. Reg. 7983 

(1947), which was designed:

"...to effect to the largest extent possible the speedy 
restitution of identifiable property... to persons who 
were wrongfully deprived of such property...for reasons 
of race, religion, nationality, ideology or political 
opposition to National Socialism." (Article 1(1)).

The procedure MGL 59 established was as follows:

The claimant would initially file his petition with a Central

Filing Agency which would then forward it to the appropriate Restitution

Agency (Article 55)- The Restitution Agency would then notify the holder

of the claimed property that a petition had been filed and the holder

would be given an opportunity to answer the petition (Article 6l).

If an objection were filed to the petition, the Restitution Agency would

attempt to effect an amicable settlement (Article 62). If this proved

impossible, the Restitution Agency would refer the case to the Restitution

Chamber, a German court granted jurisdiction over restitution claims

(Article 63).

The Restitution Chamber would hold public hearings and render 

written opinions (Article 68). An appeal from its decisions originally 

ran to the Board of Review, an American court situated in Germany 

(Article 69), all of whose members were United States citizens. (Regulation 

4 under MGL 59, 13 Fed. Reg. 4901 [1948].) Subsequently, the Board was 

replaced by the United States Courts of the Allied High Commission for 

Germany ("Court of Restitution Appeals" or "CORA"). (MGL 59, Amendment



3, 15 Fed. Reg. 1547 [1950].)

Pursuant to Regulation 7 under MGL 59:

"Decisions of the Court of Restitution Appeals shall 
be final and not subject to further review." (15 Fed.
Reg. 1548 [1950]).

Except as otherwise specifically provided by MOL 59 > any claim 

within its compass had to be prosecuted pursuant to its provisions 

(Article 57). Tort claims not based on wrongful taking of property 

were, however, permitted to be prosecuted in the ordinary German civil 

courts (Article 57)*

Article 56 of MGL 59 specifically barred any claim not filed 

on or before December 31, 1948.

MGL 59 is not a law of the United States

While defendants contend, for the reasons stated below, that 

plaintiff no longer has a claim under MGL 59 on any conceivable theory, 

defendants shall first address themselves to the jurisdictional question 

(raised during the argument on plaintiff’s motion to remand) whether 

MGL 59 is even a "law of the United States" under 28 U.S.C. §1331.

Federal question jurisdiction, pursuant to 28 U.S.C. §1331, is 

restricted to controversies arising under "the Constitution, laws or 

treaties of the United States". It is defendants' contention that MGL 

59 is not a law within the meaning of that provision.

A. The legislative history of §1331
■The Supreme Court, in Romero v. International Terminal

Operating Co., 358 U.S. 354 (1959), concluded that the slight differences 

in wording between 28 U.S.C. §1331 and its predecessor, §1 of the Judiciary

Act of 1875, 18 Stat. 470, "were not intended to change in any way the 

meaning or content of the Act of 1875"- (Id. at 359 n.5.) Moreover,

-45-



the Court noted, the language of the Judiciary Act of 1875 "was taken 

straight from Art. 3, §2, cl. 1" of the Constitution. (Id. at 363.) 

Consequently, in order to interpret the meaning of the word "laws" in 

§1331, it is necessary to turn first to the Constitution, which pro­

vides :

"The judicial Power shall extend to all Cases, in 
Law and Equity, arising, under this Constitution, 
the Laws of the United States, and Treaties made, 
or which shall be made, under their Authority..."
(U.S. Const., art. I, §2.)

The history of Article 3, Section 2 is sketchy. An examination 

of the debates on the Federal Constitution reveals that on July 18,

1787, James Madison proposed that the jurisdiction of the federal 

courts:

"... shall extend to cases under laws passed by the 
General Legislature..." (Warren, The Making of the 
Constitution 331 [1929].)

This association of laws with the enactments of the legislature is also 

indicated by the August 6, 1787 draft of the Committee of Detail, which 

provided:

"The jurisdiction of the supreme court shall extend 
to all cases arising under laws passed by the legislature 
of the United States..." (1 Elliott, Journal of the 
Federal Convention, at 380.)

Three weeks later, however, without any discussion, the words 

"passed by the legislature" were deleted. 1 Elliott, Journal of the 

Federal Convention, 483.

While it is hazardous in the absence of adequate information

-46-



to speculate as to the reasons for this change, It seems probable that 

It was more a question of phraseology than content.

Since the Constitution carefully withheld from the President 

the power to make laws, the only potential source of "law", other than 

the legislature, was the courts. And while the common law was of course 

quite familiar to the framers of the Constitution, the generally accepted 

jurisprudence in the l8th century was that courts "find", not "make" 

law. Consequently, it is likely that the phrase "passed by the legislature" 

was regarded as surplusage and stricken accordingly.

B. Judicial construction of "laws of 
the United States"________________

Although the courts have gradually expanded upon the 

apparent original meaning of the phrase, they have stayed close to the 

concept that a "law" is an enactment of the legislature.

While under certain circumstances, for example, courts 

will treat Executive Orders and administrative regulations as laws, in 

each instance where they have done so they have stressed that the order 

or regulation was issued pursuant to a specific Congressional authori­

zation. See, e.g., Murphy v. Colonial Federal Savings and Loan Ass'n.,

388 F.2d 609 (2nd Cir. 1967) (the Home Owners' Loan Act of 1933 specifically 

authorized the Federal Home Loan Bank Board to prescribe the regulation 

in question); Farmer v. Philadelphia Electric Company> 329 F.2d 3 (3rd 

Cir. 1964) (the Executive Order and regulation of the General Services

-47-



Administration were both authorized by the Federal Property and Ad­

ministrative Services Act of 1949 and the Defense Production Act of 

1949); Patton v. Administration of Civil Aeronautics, 217 F.2d 395 (9th 

Cir. 1954) (the regulation of the Administrator was issued pursuant to 

the Alaska Airports Act) and. Braden v. University of Pittsburgh, 343 F. 

Supp. 836 (W.D. Pa. 1972), vacated on other grounds, 477 F,2d 1 (3rd 

Cir. 1973) (the Executive Order was issued pursuant to the Federal 

Property and Administrative Services Act of 1949).

Stevens v. Carey, 483 F.2d 188 (7th Cir. 1973), in marked 

contrast, involved an Executive Order which, while duly issued, was not 

specifically authorized by statute. While holding that it lacked subject 

matter jurisdiction, the court stated:

"The plaintiff contends that all Executive Orders confer 
jurisdiction under 28 U.S.C. §1331 and that her action 
therefore should not have been dismissed on the jurisdictional 
ground. She cites several cases which purportedly state 
that controversies involving Executive Orders arise "under 
the laws of the United States," see, e .g ., Farkas v. Texas 
Instrument, Inc., 375 F.2d 62§ (5th Cir. 19 6 7), cert, denied, 
389 U.S. 977, 88 S.Ct. 480, 19 L.Ed.2d 471, and Braden 
v. University of Pittsburgh, 343 F. Supp. 836 (W.D. Pa.
1972). However, an analysis of the cases cited reflects 
the rationale that the Executive Orders involved were issued 
pursuant to statutory authority providing for presidential 
implementation and thereby have the force and effect of 
law. See also Farmer v. Philadelphia Electric Co., 329 
F.2d 3, 4-8 (3rd Cir. 1964). As we will note hereinafter, 
that rationale is not applicable in the case of the 
Executive Order here involved, even though the Order 
was not beyond the presidential power." (Id. at 190.) 
(emphasis in original.)

See also, McDaniel v. Brown & Root, 172 F.2d 466 (10th Cir. 1949), and

-48-



Crabb v. Wedden Bros., 164 F.2d 797 (8th Cir. 1947), both holding that 

jurisdiction cannot be founded on Executive Orders.

The major expansion of the meaning of "laws" has been the 

recognition of the significant role courts play in filling the gaps 

between federal statutes in areas of federal concern. Thus the Supreme 

Court in Illinois v. City of Milwaukee, 406 U.S. 91 (1972), relying 

heavily on this Court's opinion in Ivy Broadcasting Co. v. American Tel.

& Tel. Co., 391 F.2d 486 (2nd Cir. 1968), held that judicially created 

federal common law was also "law of the United States" for jurisdictional 

purposes.

The courts' treatment of territorial "laws" has also shown 

great sensitivity to the underlying thrust of Article 3 - to insure that 

issues of nation-wide concern will be determined by the federal, and not 

the state, courts.

Where the United States has exercised full sovereignty over 

newly acquired territory, the laws of that territory, enacted before the 

annexation, have been regarded as laws of the United States, unless 

Congress provides otherwise. See, e.g., Stokes v. Adair, 265 F.2d 662 

(4th Cir. 1959), and Mater v^ Holley, 200 F.2d 123 (5th Cir. 1952).

This, of course, is quite logical, since the alternative would be to 

require Congress to enact piecemeal an entire system of laws for such 

territories.

Where, however, the territories, although under the ultimate

-49-



control of the United States, are granted some autonomy, the laws which 

Congress does enact with respect to them are generally not regarded as 

"laws of the United States". See, e.g., People of Puerto Rico v.

Hermanos, 309 U.S. 543 (1940); People of Puerto Rico v. Shell Co., 302 

U.S. 253 (1937); and Harris v. Boreham, 233 F.2d 110 (3rd Cir. 1956).

The reasoning of these cases is that federal laws must be of general 

applicability. Where a "law" is concerned with local policy it is not 

really a law of the United States. See also, American Society and Trust 

Co. v. Commissioners of the District of Columbia, 224 U.S. 491 (1912), 

and 28 U.S.C. §1363, which provide that for jurisdictional purposes, 

laws applicable exclusively to the District of Columbia are not laws of 

the United States.

C. Military occupation cases

The few cases which defendants have found involving the 

legal status of the relationship between the United States and territory 

occupied by it as a conqueror have uniformly taken the position that the 

United States did not acquire sovereignty over the captured territory 

but served only as a caretaker government until such time as a legitimate 

government could be formed. See, e.g., Cobb v. United States, 191 F.2d 

604 (9th Cir. 1951), which dealt with American occupancy of Okinawa 

following World War II, and Acheson v. Wohlmuth, 196 F.2d 866 (D.C. Cir. 

1952), Flick v. Johnson, 174 F.2d 983 (D.C. Cir. 1949), and Eisner v.

United States, 117 F. Supp. 197 (Ct. Cl. 1954), all dealing with occupation

-50-



of post-World War II Germany.

Acheson v. Wohlmuth, supra, states the American policy

most fully:

"Occupation by our troops does not make conquered 
territory a part of the United States or mean that 
such territory 'ceased to be a foreign country...'

[0]ccupied territory is to be administered for 
the protection of the inhabitants and the occupying 
force; occupation should not be used as a device 
for transferring sovereignty.

Germany at all times remained a political entity 
- an entity to which men and women could give 
formal allegiance and in which they could hold 
citizenship. This situation was quite consonant 
with Allied policy. Although the destruction 
of the 'Nazi State* was one of our war aims, and 
the attempted eradication of Nazi influences was 
one of the first measures to be taken by our oc­
cupying forces, government units staffed by 
Germans and responsible for many aspects of domestic 
government remained in existence, or were revived, 
with the consent and support of the American Military 
Government. From the start of the occupation, 
it was the policy of our Government to reconstitute 
German administrative machinery and to initiate 
German selfgovemment, all looking toward the 
emergence of a new Germany." (196 F.2d at 868-869.)
(footnotes and citations omitted.)

Flick v. Johnson, supra, also merits extensive consideration, 

for it held that the authority of the American military governor to 

issue "laws" in the American zone stemmed directly from an international 

body, and that consequently a court established by the American military

-51-



governor was an international tribunal, rather than a "court of the 

United States":

"Upon the surrender of Germany, the Four victorious 
Powers, the United States, Great Britain, France 
and Russia, completed military control of the conquered 
land. Agreeably to plan, the armies of each occupied 
a separate zone. It was agreed that supreme authority 
over Germany would be exercised, on instructions from 
their Governments, by the Commanders in Chief, 'each 
in his own zone of occupation, and also jointly, in 
matters affecting Germany as a whole.' At the same 
time a 'Control Council' was constituted, composed of 
the four Commanders in Chief, as the supreme governing 
body of Germany. This plan of operation was expressly 
limited to the period of occupation 'while Germany 
is carrying out the basic requirements of unconditional 
surrender.' (That period has continued since, and still 
prevails.) Arrangements for the subsequent period 
were to be 'the subject of a separate agreement.' 
(Declaration of Berlin, June 5, 19455 12 U.S. Dept, of 
State Bull. 1054.)

In support of the foregoing arrangement for the temporary 
government of Germany, the President of the United 
States, acting through his Joint Chiefs of Staff, 
directed the Commander In Chief of the American Forces 
in Germany, in his capacity as Military Governor of 
the American Zone of Occupation, to carry out and 
support, in that Zone, the policies agreed upon in 
the Control Council, whose authority 'to formulate 
policy and procedures and administrative relationships 
with respect to matters affecting Germany as a whole will 
be paramount throughout Germany.' This document confirms 
and reinforces the supreme authority with which the 
American Military Governor, in his capacity as Zone 
Commander, was clothed by the Council." (13 U.S. Dept,
of State Bull. 596, October 17, 1945-) (emphasis supplied) 
(Flick v, Johnson, 174 F.2d at 984.)

"Thus the power and jurisdiction of that Tribunal stemmed 
directly from the Central Council, the supreme governing 
body of Germany, exercising its authority in behalf of 
the Four Allied Powers.

•52-



"Accordingly, we are led to the final conclusion that 
the tribunal which tried and sentenced Flick was not 
a tribunal of the United States." (Ib. at 986.)

Consequently, it would appear that MGL 59 is not a "law of the

United States". It was not enacted by Congress or by express authorization

of Congress, but rather by authorization of an international body. It

was local in its orientation, applying solely to Germany, a country over

which the United States claimed no sovereignty. It was, In effect, a

German law, promulgated by the acting government of Germany, and was

administered and enforced, in large measure, by German courts and German

officials.

Therefore, absent pendent jurisdiction (discussed below), the 

federal courts have no jurisdiction to consider plaintiff's claim under 

MGL 59-

Plaintiff's claim does not arise 
under a law of the United States

Even assuming, arguendo, that MGL 59 is a law of the United

States, the courts still have no jurisdiction under §1331 because plaintiff's

claim does not "arise" under MGL 59-

In the first place, MGL 59 established a self-contained set of

restitution rules. It stated that its procedures were exclusive (Article

57) and that the decisions of the courts it created to hear restitution

cases were final and non-reviewable (Article 59)- It further provided

that no restitution claims could be brought under it after December 31,

-53-



1948 (Article 56). Since plaintiff's complaint herein is not brought 

in a prescribed court, and was not commenced within the allowable time, 

it cannot be said to be brought under MIL 59-*

Secondly, plaintiff's claim for restitution has already been 

adjudicated by the courts designated by MGL 59 in the case of Association 

J. Dreyfus & Co. v. Merck, Pinck &_ Co., Case No. 49, Court of Restitution 

Appeals, March 7, 1951 (attached as an exhibit to the reply affidavit of 

William Schurtman in support of defendant's motion to dismiss plaintiff's 

complaint, App. K). See page 5 of this brief and pages 32 and 33 of 

plaintiff's brief on appeal.

Plaintiff's only remaining claim is that defendants wrongfully 

obtained the settlement incorporated in that CORA decision. Such a claim 

is based on the ordinary common law tort of fraud, and does not require

a construction of MIL 59 for its determination.
"A suit to enforce a right which takes its origin in the 
laws of the United States is not necessarily, or for that 
reason alone, one arising under those laws, for a suit 
does not arise unless it really and substantially involves 
a dispute or controversy respecting the validity, construction 
or effect of such a law, upon the determination of which 
the result depends." (Schulthis v. McDougal, 225 U.S.
5 6 1, 569 (1912), quoted with approval by Gully v. First Nat. 
Bank, 299 U.S. 109, 114 (1936).)

Here the "validity, construction or effect" of MGL 59 is not

When a federal statute which creates a right or confers juris­
diction on the federal courts provides that a party suing under it 
must do an act as a prerequisite to commencing an action, and a 
time period is prescribed for that act, the requirement is juris­
dictional. See, e.g., Moore v. Sunbeam Corp., 459 F.2d 8ll (7th 
Cir. 1972), which held that the failure of a claimant under the 
Civil Rights Act of 1964 to file an administrative notice within 
the period provided by the statute deprived the court of juris­
diction to consider his claim.

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in dispute. The only issue raised by plaintiff is whether in 1951 

defendants wrongfully procured a settlement of a restitution action 

commenced in Germany under MGL 59- Consequently, plaintiff's claim 

does not meet the test set forth in Gully and Schulthis, supra, and 

the federal courts lack jurisdiction under §1331 to consider it.

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POINT VI

THE FEDERAL COURTS LACK 
PENDENT JURISDICTION TO 
CONSIDER PLAINTIFF'S 

COMMON LAW CLAIMS

If this Court agrees with the district court that plaintiff 

failed to state a claim under the law of nations or any treaty of the 

United States, or if it should hold that the federal courts lack subject 

matter jurisdiction over plaintiff's claims under the law of nations and 

various treaties of the United States, then, in accordance with the 

policy expressed by the Supreme Court in United Mine Workers of America 

v. Gibbs, 383 U.S. 715 (1966), any remaining common law claims should 

also be dismissed.

After first noting that the federal courts have the power to 

hear state causes of action when the state and federal claims are 

derived from "a common nucleus of operative fact" and the federal claim 

has "sufficient substance" to confer subject matter jurisdiction on the 

court, Justice Brennan, speaking for a unanimous court in Gibbs (the 

Chief Justice not participating), detailed the circumstances under which 

that power should be exercised:

"It has consistently been recognized that pendent 
jurisdiction is a doctrine of discretion, not of 
plaintiff's rights. Its justification lies in 
considerations of judicial economy, convenience 
and fairness to litigants; if these are not present 
a federal court should hesitate to exercise jurisdiction

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over state claims, even though bound to apply 
state law to them, Erie R. Co. v. Thompkins,
304 U.S. 64___ Needless decisions of state
law should be avoided both as a matter of comity 
and to promote justice between the parties, 
by procuring for them a surer-footed reading 
of applicable law. Certainty, if the federal 
claims are dismissed before trial, even though 
not insubstantial in a jurisdictional sense, 
the state claims should be dismissed as well."
(38'3 U.S. at 726.) (footnotes omittedTJ 
(emphasis supplied.)

The instant case, of course, comes directly within the class 

of cases which the Supreme Court in Gibbs emphatically held should be 

dismissed for want of jurisdiction. Not only have plaintiff's federal 

claims been dismissed before trial, they have been dismissed at the very 

earliest stage at which dismissal is possible, before defendant has 

filed an answer. No conceivable benefit of judicial economy, convenience 

or fairness to litigants can possibly exist in these circumstances.

Dismissal of plaintiff's pendent common law claims, if any, 

is also consistent with the controlling decisions of this Court. In the 

recent case of City of New York v. Richardson, 473 F.2d 923 (2nd Cir.

1973), this Court held that the district judge properly dismissed a 

state cause of action for lack of jurisdiction where the plaintiff's 

federal claims were dismissed under Rule 12(b)(6) of the Federal Rules 

of Civil Procedure. See also Klein v. Shields &_ Co., 470 F.2d 1344 (2nd 

Cir. 1972).

In his arguments below, plaintiff sought to rely on Ryan v,

J . Walter Thompson Co., 453 F.2d 444 (2nd Cir. 1971), cert, denied, 406 

U.S. 907 (1972), Gem Corrugated Box Corp v. National Kraft Container Corp., 

427 F.2d 499 (2nd Cir. 1970), and Hagans v, Lavine, 415 U.S. 528 (1974), to 

support his claim of pendent jurisdiction.

Ryan v. J.Walter Thompson Co. and Gem Corrugated Box Corp. v.

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National Kraft Container Corp., supra, in no way require this Court to

retain plaintiff's common law claims. In Ryan, this Court approved the 

action of the district court in dismissing plaintiff's state cause of 

action at the same time as it dismissed his federal claims. In Gem, this 

court merely held that the district court had not acted improperly in 

retaining pendent jurisdiction over state law actions where the federal 

question causes of action were dismissed pursuant to stipulation of the 

parties prior to trial.

Hagans v. Lavine, supra, also does not compel a different 

result. Hagans involved a claim by certain welfare recipients that a 

welfare regulation which permitted a state to recoup prior emergency 

rent payments from subsequent welfare grants violated the U.S. Con­

stitution, a federal statute and federal and state welfare regulations. 

The constitutional argument was asserted pursuant to 2b U.S.C. §§1983 

and 1343 which permit suits in the federal courts to redress deprivation 

of Constitutional rights. The other claims invoked the Court's "pendent", 

rather than "federal question" jurisdiction, since less than $10,000 was 

at issue.

The Supreme Court held that the pendent claims should have 

been adjudicated. United Mine Workers of America \n_ Gibbs, supra, was 

distinguished on three grounds: (1 ) economy and convenience would result 

from disposing of the pendent claims; (2) disposition of the case on the



statutory claim would enable the Court to avoid ruling on the constitu­

tional claim; and (3) Gibbs’ rationale centered upon "considerations of 

comity and the desirability of having a reliable and final determination 

of the state claim by state courts", a consideration wholly irrelevant 

in Hagans since all claims were based on federal law.

Hagans in no way requires this court to retain jurisdiction of 

plaintiff's non-federal claims. No advantage of economy or convenience 

would result to the courts or the parties as a result. Moreover, like 

Gibbs, and unlike Hagans, the pendent claims in this case are non- 

federal.

Consequently, there is no reason for this Court to refrain 

from dismissing plaintiff's pendent claim concurrently with his federal 

claims.

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CONCLUSION

The decision of the district court to dismiss plaintiff's

amended complaint should be affirmed.

Respectfully submitted,

WALTER, CONSTON, SCHURTMAN & 
GUMPEL, P.C.
Attorneys for Defendants-Appellees 
August von Finck and 
Merck, Finck & Co.
330 Madison Avenue
New York, New York 10017
(212) 6«2-2323

William Schurtman 
Alan Kanzer

Of Counsel

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