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Dr. Endre Ungar v. William French Smith, Attorney General of the United States
Citations: 667 F.2d 188; 215 U.S. App. D.C. 145; 1981 U.S. App. LEXIS 16478Docket: 80-1591
Court: Court of Appeals for the D.C. Circuit; October 30, 1981; Federal Appellate Court
The United States Court of Appeals, D.C. Circuit, reviewed an appeal from the District Court's dismissal of a complaint filed by Dr. Endre Ungar and others against Attorney General William French Smith. The case centered on the denial of claims for the return of assets confiscated from Chinoin Chemical and Pharmaceutical Works, a Hungarian company, during World War II under the Trading with the Enemy Act. The appellants contended that the Department of Justice's rejection of their claims was unjust and unconstitutional, despite legislation passed by Congress aimed at aiding persecuted shareholders of enemy corporations. The Department of Justice had determined that Chinoin qualified as an "enemy" corporation, thereby justifying the seizure of its assets, which included patents and trademarks, that generated $239,616.47 upon liquidation. The appellants, who had faced hardships during the war, including imprisonment and death of family members, argued that they were entitled to the return of these assets due to their status as persecuted shareholders. After years of unsuccessful attempts to reclaim the property through the administrative process, Congress enacted Pub. L. 90-421 in 1968, allowing persecuted shareholders to pursue the return of vested corporate assets. The court found the administrative process flawed and that Congress did not intend to preclude judicial review of such unconstitutional administrative actions. Consequently, the court vacated the District Court's decision in part, affirmed it in part, and remanded the case for further proceedings. Appellants filed new claims under section 1631o on December 19, 1968, and January 13, 1969, with follow-up communication from the Office of Alien Property indicating a review of the claims was pending. A letter dated October 5, 1978, informed appellants' counsel that the office was closing and warned that the claims might be disallowed due to failure to prosecute. Counsel responded on October 11, 1978, asserting no intention to withdraw the claims and requesting a conference. On February 1, 1979, Bruno A. Ristau from the Office of Foreign Litigation expressed confusion about the claims' nature and noted the lack of any action taken since their filing in 1968, suggesting they might not be valid under the Trading with the Enemy Act. Subsequently, on July 13, 1979, counsel submitted materials to support the claims and sought clarification on additional documentation required by the Department of Justice. The Department of Justice located the 1968 file and, in a letter dated July 26, 1979, imposed a deadline for the appellants to perfect their claims, specifying the need for evidence regarding claimants' identities, stock interests in Chinoin, total shares, and powers of attorney. Appellants responded on August 21, 1979, with legislative history and partial documentation, but the Department deemed this submission unresponsive. A follow-up letter on August 30 reiterated that the appellants had not provided a fully-documented claim and warned that failure to submit appropriate evidence by September 30, 1979, would lead to a recommendation for disallowance. Appellants' counsel provided additional materials to the Department of Justice regarding their claims. In a letter dated November 9, 1979, the Department recommended denial of these claims, citing insufficient powers of attorney from a New York lawyer not listed as a practicing attorney. The Department concluded that none of the claimants were entitled to assets held by the Office of Alien Property, specifically deeming National Securities Corp. Ltd. and Sandoz Chemical Works ineligible as they were nonenemy enterprises. Appellant Ungar failed to prove ownership of Chinoin shares during the relevant period, while appellant Susan Gyarmati did not provide evidence of inheriting such shares, with the Department expecting her to submit her father's probate record from Belgium. Appellant Ernest Szekely was also considered ineligible due to his residency in France and England during the war, suggesting he was not persecuted by Hungary, and he did not demonstrate ownership of Chinoin shares at the relevant time. On January 17, 1980, Mr. Ristau sent a memorandum to appellants' counsel recommending denial of the claims, inviting responses within 30 days. The final memorandum was submitted to the Assistant Attorney General on March 24, 1980, noting that no response had been received from appellants' counsel. Assistant Attorney General Alice Daniel issued a denial of the claims on April 7, 1980. Prior to this, on September 28, 1979, appellants had initiated a lawsuit seeking various forms of relief, including a ruling on their claims and a preliminary injunction against asset transfer to the War Claims Fund. The case was held in abeyance while the Department’s administrative process concluded. On April 28, 1980, appellants' counsel submitted a status report, claiming to have filed exceptions to the Department's memorandum, mainly addressing challenges in obtaining necessary Hungarian corporate records. Dr. Endre Ungar and Ernest Edgar Szekely are the only surviving individuals with detailed knowledge of the circumstances regarding Chinoin during the Nazi occupation, with Dr. Ungar, nearing ninety, having documented steps taken to conceal foreign interests in memoranda to counsel. Recently, an attempt to gather further evidence from Dr. Ungar was thwarted due to his illness. There is potential to obtain a detailed statement from him and additional supporting evidence from other claimants, contingent on his recovery. On April 29, 1980, the District Court dismissed a complaint related to a request for a preliminary injunction as moot, linking this decision to an administrative ruling that denied the claims, which rendered the injunction unnecessary. The District Court asserted that under section 1631o, judicial review of decisions made by the President's designee regarding claims is prohibited. The court faces significant challenges regarding its authority to review administrative decisions under section 1631o, which is stated to be "final" and "not subject to review." The appellees reference the Supreme Court case Schilling v. Rogers, which affirmed that the Trading with the Enemy Act shields decisions from judicial scrutiny. The court concluded that if Congress explicitly restricts review, as in Schilling where no constitutional issues were raised, courts lack the jurisdiction to review administrative findings. However, if a plaintiff asserts constitutional claims, both the Supreme Court and the current court have suggested that only a clear indication of congressional intent can prevent judicial review, especially to avoid constitutional risks associated with denying a forum for such claims. In Johnson v. Robison, the Supreme Court ruled that 38 U.S.C. § 211(a) (1976), which prevents judicial review of Veterans Administration determinations regarding benefits eligibility, does not preclude judicial examination of claims alleging unconstitutional discrimination against conscientious objectors. The Court emphasized that only strong evidence of congressional intent could justify barring judicial access to constitutional claims. Following this precedent, the court in Ralpho v. Bell applied the same standard, determining that a statutory provision prohibiting review of a claims commission's decisions did not prevent judicial review of claims alleging due process violations in the commission's procedures. Judge Robinson articulated that legislation preventing judicial review of administrative agency actions may raise constitutional concerns, as it undermines the checks and balances inherent in the Constitution. The ruling highlighted the necessity of judicial oversight to ensure administrative compliance with constitutional standards. Consequently, the current case will require a thorough examination of the legislative history of section 1631o to ascertain whether Congress intended to restrict judicial review of constitutional claims, presuming such intent does not exist unless clearly demonstrated. Section 1631o was enacted to address gaps between the Trading with the Enemy Act and the International Claims Settlement Act, specifically allowing nonenemy stockholders of enemy corporations to claim vested corporate assets. Prior to this, nonenemy claimants, such as those involved with Chinoin Chemical and Pharmaceutical Works, Ltd., faced barriers in seeking asset recovery due to their technical enemy status. Senator Morse emphasized that the amendment aimed to rectify inequities within existing laws, particularly benefiting those persecuted during World War II who were not American citizens. The legislative history highlights the executive branch's support for this initiative, underscoring the need for fair treatment of both nonenemy nationals and persecuted individuals. Despite the documented concern for the appellants, the legislative history lacks clarification on the nonreviewability of determinations made under section 1631o. In contrast, the International Claims Settlement Act allows nonenemy shareholders to pursue either equitable suits or administrative proceedings, suggesting a more accessible route for claims but offering limited guidance on the interpretation of section 1631o(c)’s nonreviewability clause. The legislative history of section 32 of the Trading with the Enemy Act does not indicate a clear congressional intent to eliminate judicial review of constitutional claims. Added in 1946, neither the House nor Senate Reports accompanying the amendment provide clarity on the judicial review prohibition linked to section 32, nor do they explain the exclusion of judicial review in relation to remedies under the Act. The examination of relevant legislative sources reveals no explicit intent by Congress to restrict courts from addressing constitutional claims concerning vested assets. Consequently, section 1631o(c) does not prevent the consideration of these constitutional issues. Upon reviewing the Department of Justice's actions, it is determined that the individual appellants were entitled to procedural due process but were denied it. Section 1631o creates a protected property interest in the vested assets, necessitating due process in administrative decisions regarding their return. The duration allotted for claim preparation was deemed inadequate, especially after a ten-year period of governmental inaction. The analysis of due process in administrative actions involves assessing whether a liberty or property interest exists, which is protected by the Fifth or Fourteenth Amendment. A legitimate expectation of entitlement to something of value must derive from a legal source outside of these due process clauses. The statute 22 U.S.C. 1631o(1976) provides such a source, suggesting to claimants that they are entitled to the vested assets. The statute explicitly states that a persecutee of enemy nationality is "eligible to receive the return of his interest in property," reinforcing their expectation of entitlement, supported by legislative history that emphasizes their rights to reclaim these assets. The Fifth Amendment permits the summary seizure of property belonging to aliens classified as enemies, but does not negate the due process rights of individual appellants in this instance. Section 1631o was enacted by Congress to facilitate the return of property to individuals like the appellants, despite a general policy against returning property owned by enemies. This legislative intent creates an entitlement protected by the Fifth Amendment, notwithstanding the appellants' connection to an enemy state. However, the two corporate claimants, registered in Switzerland and Britain, do not qualify for relief under section 1631o, which is limited to individuals formerly nationals of Bulgaria, Hungary, or Romania. Consequently, they lack an entitlement to the vested assets of Chinoin and cannot assert procedural due process protections. The court acknowledges the appellants' entitlement to due process, necessitating a consideration of what constitutes adequate process. The main concern raised by the appellants is insufficient time to prepare their case, prompting the court to conclude that they should be afforded reasonable additional preparation time. There is also concern that the Department of Justice may limit the types of evidence accepted, a practice the court has previously criticized. The court emphasizes that the Department must consider all relevant evidence presented by the appellants, even if certain documentation is missing. The specific procedures for addressing these concerns will be determined upon remand. Procedures allowing the individual appellants to prove their entitlement to vested assets were found inadequate in terms of due process. The District Court's decision is vacated for the individual appellants but affirmed for the corporate appellants. The case is remanded to establish appropriate procedures for the Department of Justice to evaluate the claims. The court refrains from detailing these procedures due to uncertainty about the evidence the appellants intend to present and its relevance. On remand, the appellants are expected to specify the evidence they wish to offer, and the parties should collaborate to establish procedures for the Department of Justice to consider relevant evidence. If a settlement cannot be reached, the District Court will determine the necessary administrative procedure based on the arguments presented during remand. Ultimately, the Department of Justice will decide the entitlement of the appellants to the vested assets in question. The court orders that, despite the absence of a formal motion to dismiss under Fed. R. Civ. P. 12(b)(6), the District Court's dismissal without a hearing mandates that all material allegations in the complaint be treated as true during appeal. An earlier version of H.R. 6890 proposed a detailed process for handling just-compensation claims in the Court of Claims, but this was removed, likely due to Congress's intention to limit U.S. financial liability regarding the Alien Property Custodian's assets. The Alien Property Custodian indicated that the amendments did not exempt his office from potential Takings Clause actions, suggesting that courts could still recognize an implied remedy for just compensation under the Tucker Act instead of the Trading with the Enemy Act. The case Schilling v. Rogers does not contradict this interpretation; it focused on legislative history to find congressional intent for judicial review, indicating no intent to prevent review based on constitutional grounds. Furthermore, the court believes that its partial affirmation of the District Court's decision will not inhibit individual claimants from seeking relief, as the statute requires only that 25% of stock be owned by non-enemies or persecuted enemies, rather than requiring that 25% of stockholders qualify under section 1631o. The claimants assert that over 25% of Chinoin stock is held by eligible individuals, and they may also meet the statutory requirement by demonstrating that the corporation was subject to specific laws due to the "enemy character" of its stockholders.