Black v. Amen

PETITIONER:Black
RESPONDENT:Amen
LOCATION:United States District Court for the Northern District of Illinois, Eastern Division

DOCKET NO.: 13
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Tenth Circuit

CITATION: 355 US 600 (1958)
ARGUED: Nov 12, 1957 / Nov 13, 1957
DECIDED: Mar 03, 1958

Facts of the case

Question

  • Oral Argument – November 12, 1957
  • Audio Transcription for Oral Argument – November 12, 1957 in Black v. Amen

    Audio Transcription for Oral Argument – November 13, 1957 in Black v. Amen

    Earl Warren:

    Number 13, William H. Black and Ruth H. Black, Petitioners, versus A. M. Amen, et al.

    Mr. Smith, you may proceed.

    Douglas F. Smith:

    May it please the Court.

    To recapitulate for just a moment, I should like to emphasize that in our view, the question here is essentially one of fact not of law.

    We say that on the facts here, the question posed by the Court on certiorari is not presented, it’s not presented by the facts.

    Petitioner cites a number of decisions by distinguished courts and judges which hold as — he stated in one quite graphically that the Court does not have jurisdiction to deal with non-diverse interveners in a case in which the claims are simply a conjury of separate claims involving only common questions.

    We don’t find it necessary to deal with those cases.

    They do not relate to the facts of the case before the Court.

    They’re germane to the argument that Brother Acheson has with Professor Moore which is an interesting question but it’s an academic one in this case.

    On the other hand, we rely on many cases in which this Court and other federal courts have held that if the claims are interdependent claims to funds of which the federal court has taken control, that then jurisdiction exists to make a full disposition of that property subject to the control of the Court.

    Petitioner purports not to question these decisions naturally.

    He says yes but in those cases, there were — there were really funds there.

    Well, let’s see about that.

    In the leading case of Stewart versus Dunham, decision of this Court, there was an equitable trust imposed upon money in the hands of the fraudulent transferee.

    It wasn’t locked in the Court’s safe or in the physical possession of the Court.

    It was — it was just money in the hands of the fraudulent transferee.

    Let’s look at Hanley versus (Inaudible).

    There, there wasn’t any money in possession of the Court in the literal sense.

    It was money in the hands of stockholders who hadn’t paid for their stock subscriptions and the creditor is one to get to him.

    And the Court impressed a constructive trust on it and then heard the property, was property in the assets of an insurance company.

    And in Dickinson versus Burnham, there is a case that’s particularly an uncomfortable one from my friend.

    It was decided by the Second Circuit Court of Appeals fairly recently.

    There, there had been money collected for a corporate purpose.

    But as the District Court said in that case, the case was not one to collect from a trustee of that money that had been collected, the trustee wasn’t in court.

    It was not a case to reinstate a trust.

    If you please, it was precisely the situation we have here, the Court impressed a constructive trust upon unjust enrichment that came into the hands of a fraud feasor, exactly the situation we have here and the Court said that there were independent claims in an order fully to distribute the fund.

    It should be done by one court.

    And he took — he took jurisdiction of non-diverse interveners and this Court denied certiorari.

    Felix Frankfurter:

    Mr. Smith, you can sustain your judgment of course on any ground on which you can sustain it.

    Douglas F. Smith:

    That’s right.

    Felix Frankfurter:

    What was the ground of the Court of Appeals in sustaining jurisdiction?

    Douglas F. Smith:

    I was going to put that last but —

    Felix Frankfurter:

    Well, that’s — they only added —

    Douglas F. Smith:

    If you don’t mind, I — I will.

    I’m going to — I’m going to get to it.

    Felix Frankfurter:

    Please do.

    Douglas F. Smith:

    So, they can’t do much with this fund distinction.

    And so finally and belatedly and in the fourth brief, they filed in this Court, they come to the reality of dealing with the facts.

    And I’ve put together some of these sentences and that’s where I left off when the Court rose yesterday.

    In which they say, the total number of validly issued shares at liquidation is a fact to be determined.

    In determining the fact from the proof, a court must decide the number of validly issued shares at the time of liquidation.

    Mark this please, “Facts that go beyond an individual plaintiff’s interests must be considered in working out the amount of recovery.

    Here, the amount per share to which he is entitled.”

    Now, I earnestly ask the Court to compare that admission, that in order to decide this case, the Court’s got to know how much everybody else is entitled to with this statement upon which they — by which they induced this Court to grant certiorari.

    Just please compare what I’ve read in the reply brief with his statement.

    “The Court of Appeals formula,” and I’m quoting, “produces the same fixed absolute amount to each claimant regardless of the number of claimants.”

    That’s the — that’s the representation upon which you granted certiorari.

    Now, for the first time in their reply brief, they come to face with the reality, namely the intensely practical fact that the amount that every person gets out of this fund on which the courts impressed the constructive trust.

    The — everybody’s claim is for more or fewer dollars depending upon the merits of the claim of every other individual who stopped was arbitrarily retired.

    For the first time, they have conceded in their reply brief that the actual, factual interdependence here makes it necessary to determine on the evidence as to each of these claims whether the individual parted with his stock through fraud and the amount of his claim.

    They concede in the part I’ve read to the Court that they — you have to do that in order to determine how much the plaintiffs are entitled to.

    Now, let’s see what this means further.

    It means that after the Court has determined the precise amount of the unjust enrichment and determined exactly the amount that all the victims of this fraud are entitled to.

    That then, the Court can’t distribute that unjust enrichment of which he’s taking control, but he’s got to the people that have been shown by this evidence that they say is necessary to be entitled to it.

    He can’t distribute this fund of which he’s taking control.

    But he’s got to turn back to the trustee ex maleficio.

    He’s got to turn back to Black.

    That part of this fund which has been shown to be due to the non-diverse interveners.

    Well now, in this case for example, what that means is that you’ve got to determine from the evidence of Mr. and Mrs. Constant whether they parted with their shares through fraud and how much they are entitled to.

    You’ve got to do that, they say, in order to determine what the plaintiff is entitled to, but after you have determined what the Constants are entitled to, then they say, “The Court must turn them out of court because they’re non-diverse and it can’t give them their established part of this fund.

    Douglas F. Smith:

    Professor (Inaudible), one time, characterized the type of cases in which federal courts exercise ancillary jurisdiction over non-diverse people.

    I say in that non-diverse people are permitted to come in order to dispose of the property of which the Court has taken jurisdiction.

    And that he says it’s like dividing up a pie.

    He says you’ve got to count the people around the table.

    You’ve got to know who’s there before you cut the pie, before you know how many pieces there are.

    Well, my friend on the other side goes partway.

    They — they have to count the Constants.

    They have to count the people.

    They have to find out about it.

    But after the pie has been cut, then the Constants are turned away from the table, they are not permitted to get their pieces of the pie.

    But those pieces of the pie are turned back to the fraud feasor out of this property of which the Court has taken jurisdiction.

    Now, we submit that what this contention adds up to is a brand new contention in this lawsuit that federal courts just don’t have after all — federal courts don’t have the jurisdiction they have exercised from the beginning of the Court to deal with non-diverse interveners in order to adjudicate interdependent rights to property on which the Court has impressed a constructive trust.

    The petition here was aimed primarily and naturally so at the substantive judgment alone, the judgment holding Black guilty of fraud and require him account for his unjust enrichment.

    But the Court denied certiorari on the merits of that substantive judgment and left Black only with this narrow jurisdictional point.

    The jurisdictional point is so self-limiting that Black has found that an extremely poor substitute for the review on the merits which he sought.

    The jurisdictional point involving the Constants is a self-limiting point because the very heart of the contention on which it rest is that the claims of the Constants are wholly separate and distinct from those of every other party.

    So, if we accept completely here and I think my friend on the other side conceded this in a question from Justice Black or Justice Douglas, its — if we accept fully the proposition that the Court’s question was correctly posed on the facts which we say it was.

    And if we concede arguendo that non-diverse parties should not be permitted in this case, concede everything that petitioner is entitled to argue under the limited grant of certiorari that we have here.

    What we come to is the proposition, that two parties, the Constants were non-diverse, were permitted to intervene here and ought to be dismissed out of this case without questions.

    Well now, that would be most unfortunate for the Constants.

    We’ve devoted our entire defense here substantially to showing that it would be an unjust and improper result.

    But at the same time, its very poor comfort for Mr. Black, and so he asks an opportunity to perform a very delicate operation which he didn’t really elaborate here in argument as he did in his brief.

    The judgment against the Constants would — the dropping out of the Constants would reduce the judgment only insignificant.

    And so Black has deemed it to be utterly essential to find some basis on which he could defeat the participation of the other plaintiffs as well as the Constants.

    And since the majority of the other parties are residents of Illinois, the expedient which he has adopted is an effort to destroy the diversity of the Illinois people.

    And here’s where the delicate operation comes in.

    He sees as his vehicle on Black Marshall Oil Corporation.

    He wants the Black Marshall Oil Company to be held to be a necessary party in order to destroy the diversity that exist between the bulk of the plaintiffs and Black Marshall.

    William O. Douglas:

    But that question isn’t here.

    Douglas F. Smith:

    It is not here — It is not here.

    Douglas F. Smith:

    Somehow however, he must contend that Black Marshall is a necessary party and must be aligned as a defendant, not withstanding the fact that it was dissolve and fully liquidated before this suit was brought, not withstanding the fact that in their petition, own petition for removal, they said it wasn’t a necessary party.

    It seems I have five minutes.

    Earl Warren:

    Five minutes, yes.

    Douglas F. Smith:

    Well, now the sufficient reason why that didn’t work has been observed by Justice Douglas.

    The Court did not take jurisdiction of that question, did not grant certiorari as to that question.

    The Court of Appeals held that there was no equity in the corporate claim because the money would go to N.C.R.A., the purchaser which had gotten full value for what it paid.

    But the Court held that Black equity would not permit Black to participate in the proceeds of this sale in respect to this 32,000 shares.

    That contention was vigorously attacked in this Court on the petition for certiorari by the petitioner asserting that the wrong resulted not to the stockholders but to the corporation.

    The Court denied certiorari on that issue, not withstanding that denial and limitation on certiorari in a desperate effort to defeat the participation of this Illinois people.

    They simply reargue all over again that question and what they asked is a remand to the District Court that will broad enough to enable them to argue that question to the District Court, and thus, achieve the same result as if they have gotten a certiorari on the merits which was denied, and then gotten the substantive judgment set aside.

    Now, I — I come to this action of the Court of Appeals, Mr. Justice Frankfurter.

    I want to say first and correct a misstatement of my brother Acheson on the opening, in which he said twice that it was a divided court that reversed, it was not.

    It was a unanimous court with reference to the basic fraud that Black had committed wholly and that he must account for his unjust enrichment.

    One judge dissented on some technical grounds with reference to the corporation and the 32,000 shares.

    Now, to avoid coming to grips with the facts, as the interdependence here, they relied throughout three of their briefs on what the Circuit Court of Appeals had done here.

    They rely upon the circumstance that in a different context and in reply to a different argument, the Court of Appeals had said that these questions involved this claim, this suit involves common questions of law and fact.

    As of course most obviously it does, and that it does met the requirements of spurious class action.

    Now, let’s see, if you please, what contention the Court was responding to and what significance that has if any in relation to the question under discussion here.

    Petitioner’s position in the Court of Appeals was exactly the opposite of their position here.They said there that these claims didn’t present common questions of law and fact.

    They didn’t present common questions of law and fact because they said that the fraud had been separately committed.

    They said it wasn’t a spurious class action and for that reason — for that reason because it wasn’t a spurious class action, the Court couldn’t hear non-diverse interveners.

    Well, they — they made their assertion that these claims didn’t present common questions of law and fact, Mr. Justice, on the theory that they had been separately committed not by one prospectus or at one meeting.

    The Court of Appeals responding to that held that the fraudulent representations were made in pursuance of a definite plan to eliminate a large family of stockholders, I’m quoting, “and that the testimony indisputably shows the general pattern of action.”

    And so, he said that the claims do present common questions of law and fact.

    Now, that was the only question before the Court on this point.

    It had no occasion whatever to find out or to say whether in addition to presenting common questions of law and fact which of course they do, they were also interdependent.

    With the Court’s formula, you will find when you study it, does recognize the interdependence of the claims and makes provision for it.

    Felix Frankfurter:

    Well, they said in terms — I repeat you’ve — you’ve been sustained in those judgments on anything that sustained.

    And while their claims and demands were separate, they allege substantially.

    Now, what does that mean?

    Douglas F. Smith:

    The Court was responding — you’ve got to take that in context, Mr. Justice.

    Felix Frankfurter:

    Your argument —

    Douglas F. Smith:

    All right, that —

    Felix Frankfurter:

    Your argument requires us hereafter, to look at all the briefs that —

    Douglas F. Smith:

    Well —

    Felix Frankfurter:

    — the counsel below to find out what they were addressing themselves to.

    Douglas F. Smith:

    Well, I — I think maybe that —

    Felix Frankfurter:

    But you do that sometimes.

    Douglas F. Smith:

    — that becomes necessary when — when a petitioner relies not on the facts of his case but upon what somebody has said about it.

    But bear mind, if you please —

    Felix Frankfurter:

    I don’t care what the petitioner says, is what I read in the opinion.

    Douglas F. Smith:

    Well, I — I think it’s just a matter of fairness to the Court of Appeals to point out that they weren’t dealing at all with the question that’s presented here.

    They heard no argument on it.

    They were dealing simply with a question as to whether these frauds had been separately committed and that’s all they were dealing with.

    But they did make provision for the interdependence of these claims in the formula and why did they do so?

    Simply because, Mr. Justice, they couldn’t spell out the mechanics by which the District Court should deal with these claims below without confronting the facts of interdependence and that’s the thing that has forced these people when they come to deal with the facts to admit the interdependence.

    Thank you very much.

    Hugo L. Black:

    May I ask you one question, Mr. Smith?

    That the plaintiff seems to allege what you have been insisting on that impressing of the trust by reason of fraud and as their prayer calls for relief on that basis, what position did the defendant has taken to answer to that charge as to the Court was arising on the count of fraud?

    Douglas F. Smith:

    Well, Your Honor, my recollection of that answer and I think it’s accurate, is that they went down through the complaint mostly with denials.

    They just denied, for example, existence of a federal question, they just denied this and denied that and then —

    Hugo L. Black:

    They claim —

    Douglas F. Smith:

    Prayed that —

    Hugo L. Black:

    Did they claim that that phase of the bill failed to state any cause of action on which relief would be granted, anything of that kind?

    Douglas F. Smith:

    Well, no.

    They — they didn’t.

    They just — they just answered and asked judgment for the defendants which we normally do.

    Hugo L. Black:

    You mean, they just deny the fraud?

    Douglas F. Smith:

    I beg your pardon?

    Hugo L. Black:

    You mean they just denied the fraud?

    Douglas F. Smith:

    Oh, yes.

    They just denied the fraud and asked that no relief be granted.

    Hugo L. Black:

    There was no — there seems to have been no sharply, contest at issue between the parties that I’ve seen yet in here as to that charge.

    Douglas F. Smith:

    No, not at all.

    Hugo L. Black:

    The allegations brought to the assumption that if you could prove your fraud, it wouldn’t bring about the — show (Inaudible) —

    Douglas F. Smith:

    Your Honor there was — there was —

    Hugo L. Black:

    — an ex maleficio.

    Douglas F. Smith:

    It was not assemblance of — of an attack made on that theory, not at all.

    Earl Warren:

    Mr. Acheson, proceed.

    Dean G. Acheson:

    If the Court please.

    Two points that I would like to stress.

    My learned — learned friend’s argument, I think, brings out forcefully the tyranny of words.

    I’m not clear whether his — the victim or whether he’s using words as an ally to impose their tyranny on us.

    Here, the tyrannical word is “fund”.

    He accuses me of believing, which would certainly be a naïve thing for a lawyer to believe, that there is no fund unless there is some money locked up in the safe in the clerk’s office, of course, I have no such fantastic idea as that.

    The term “common fund” and he always keeps dropping off the important word “common”.

    The term “common fund” as it’s used in the law means a definite sum of money in which people have rights, usually the rights exceeding the amount of money.

    The amount of money is before the Court either because the person who owns it as before the Court or because it is paid in.

    Let’s figure all about it’s being paid in.

    In the Dickinson case which is his favorite case and it is my favorite case also because it brings out very clearly what this case is not.

    In the Dickinson case, the fund was a 106 — $176,000.

    It was not in Court, of course, it wasn’t in court.

    It was owned by two men who had stolen it and the subscribers to the original fund of $600,000 said, “We have a pro rata interest in that fund.”

    And the Court said, “You have.

    We now decide that this fund was improperly taken by these two men.

    All of you who put up the original $600,000 have got a pro rata interest and you may all come in and get your interest.”

    But the way my learned friend uses the term “fund”, it means the sum of all the separate demands of all the separate plaintiffs in this case.

    He uses — it would be a fund in his sense of the word if I ran down an automobile — with my automobile, it went down a loading platform on which 50 people were standing and heard all of them.

    If they all sued me that some total of their claims would be, in his view, a fund, because they all have claims against me.

    It all has — came out of a common transaction, their common questions of law involved.

    Dean G. Acheson:

    Therefore, it’s a fund.

    Any one person on the loading platform had diversity of citizenship with me, then according to his argument, they could all come into a federal court.

    But then he keeps talking about a trust fund, the Court impressed a trust on a fund, or what did the Court impress anything on.

    It isn’t a fund.

    If there’s any fund at all and this — these words of trust are merely used to describe the nature of the recovery, not a sum of money.

    He can’t tell you what sum of money is in this fund, he doesn’t know.

    Nobody will know until the individual recoveries are added up.

    There isn’t a trust imposed on something.

    In the language of the Court, there are all kinds of trust that as — as many trusts as there are defendants, but they are separate.

    The point is not to be confused with the word “fund”.

    There’s nothing common about this.

    Each plaintiff has his own separate recovery.

    That — and that again is brought out very clearly in cases like Ayer versus Kemper and Miller versus the National — the National City which I talked about yesterday.

    Then that brings me to the second part of — of — second point I want to make.

    Counsel was asked, what is the basis of the Court of Appeals decision?

    It’s an unjust enrichment.

    That is the basis of their decision and why was it the basis?

    Because there is a finding of fact which is concurred in by all four judges who heard this case and by counsel, he can’t say one single word against him.

    And that is that Black paid these people, the full value of their stock when they bought it.

    Absolutely down to the last cent of the full value.

    Therefore, they have no cause of action for in fraud or in tort.

    So, what did they do?

    They say, “Well, there’s a trust on this.”

    There was misrepresentation here and therefore, you hold each one of these blocks of stock, entrust for its owner until the corporation is dissolved, and then you pay him out.

    Now, two things come out of this.

    One of them is, if there is not a common trust but even on the language of — of the Court, there is a specific trust imposed on each block of stock for each owner.

    And the second thing that comes out of it that I want to stress is over and over and over again where we have been arguing here, my friend has been arguing here as though you hadn’t granted certiorari on the first point, as though we were attacking or — or defending the Court of Appeals in overruling the decision of the District Court.

    The District Court found there was no fraud at all, not a different fraud.

    When we come to the Court of Appeals, my friend says there was not a dividend court on this question.

    There was divided court on this question, a proof of this comes from reading the opinion.

    Dean G. Acheson:

    What the Judge Phillips decide on this question?

    He decided that the man who made the misrepresentations, made it within the scope of — of an agency which Black had given him.

    He did not find.

    In fact, he specifically found the other way that Black was not responsible for what this man said.

    Therefore, we have two judges, the judge who heard the case, the Chief Judge of the Court of Appeals who said this man is not guilty of any fraud.

    But Judge Phillips joins with the others and say, “We must hold him liable for somebody else’s fraud because he comes within — it came within the scope of an agency given to him.”

    The other two judges of course go further and — and say the opposite.

    But in impressing all of this evidence when they talk about fraud on this Court, please remember that out of the four judges who heard it, the judge who heard the testimony did not believe it and either did the Chief Judge in the Court of Appeals.

    One last word.

    We’re talking — keep talking, my brother does about the federal question which is involved.

    I went over it yesterday to show you that this federal question had never been mentioned in any proceeding, in any argument, in any evidence, in any brief filed throughout the entire length of this case.

    And my brother said that the Court of Appeals opinion if fairly read would read on this federal question.

    The Court of Appeals didn’t have the remotest idea that anyone dreamed that there was a federal question.

    It wasn’t mentioned to it.

    It wasn’t in the record when — which went up to it.

    It wasn’t any brief which was before it.

    This federal question has not been followed until the brief filed on October 11th, 1957.

    Thank you, Your Honor.

    Hugo L. Black:

    Would that affect the jurisdiction of the Court?

    Dean G. Acheson:

    Well, Mr. Justice Black —

    Hugo L. Black:

    (Voice Overlap) — for?

    Dean G. Acheson:

    What — what the — what my friend on the other side is now arguing.

    The truth is that you don’t need to worry about this question of federal jurisdiction on diversity.

    But as he says a federal statute is involved.

    Hugo L. Black:

    Well, is he — is he right in relying on that if he is — if his petition is valid?

    Dean G. Acheson:

    No, sir.

    He is not.

    Hugo L. Black:

    Would — would in fact (Voice Overlap) —

    Dean G. Acheson:

    No, that every single decision which is — is cited in my friend’s brief, Your Honors, every decision of this Court that he cites and I would be glad to apologize if there’s a single one of which this isn’t true.

    Every one of those single decisions says that, if you have not litigated the case or put it the other way, that in all those cases, the federal statute was the center of the litigation.

    Dean G. Acheson:

    A testimony was taken on it, briefs were written about it, arguments were made upon it.

    Any of the cases, the lower court dismissed the federal question and said, “No, we don’t think it is involved on the Court.”

    And when they went up to the Court of Appeals, they said, “Certainly, we think it’s involved, it was the center of this case.”

    Therefore, it is a federal law case.

    But there, he cannot find one single solitary case to say that when — not a word has been said about it, not as single solitary word after the filing of the complaint, then when we go through the District court, the Court of Appeals and come to this Court.

    He can certainly discover that all the time that was lurking in the background here, have question under a federal law.

    And if we now read all the proceedings as though they had been taken under that statute, then he can sustain his jurisdiction.

    Now, there’s no support for that theory in anything Your Honors to decide it.

    Earl Warren:

    Mr. Acheson, assume that we’re to agree with you that this case should go back the — for the purpose of determining who have diversity citizenship and who did not.

    How do you get into the case?

    Your suggestion that we also send it back to see or to see if you can get the corporation into the case?

    Dean G. Acheson:

    Your Honor, in — in the first place — let me be clear that we have not asked in our brief and I do not ask in argument that this Court consider that question.

    I do not ask this Court to consider whether or not the oil company is a necessary party defendant.

    You have not granted certiorari on that question and I quite understand that your jurisdiction here under your granting of the writ is limited to the federal jurisdiction question.

    Now, if Your Honors decide that question in a way in which we urge you to decide it, then when we go back to the District Court, we will say, “Let’s realign these parties in accordance with the Supreme Court’s decision.”

    You had in this case not brought in by us but by the other side as their principal defendant, the first one named in the list of defendants, the first one described in the complaint, the Black Marshall Oil Company, a corporation of Illinois.

    We say that corporation — we will say to the District Court, this corporation is a necessary party.

    Why is it?

    Because if you read that prayer in the complaints, you will see that each one of these interveners and stockholders asks to be restored to his right as a stockholder of a corporation to be given back his stock, to be allowed to participate in the liquidating dividend of the corporation.

    And we say the corporation of course is a necessary party.

    They thought it was when they brought the suit.

    And how did it disappear?

    Because they appointed receivers for it.

    The receivers came in as party’s plaintiff.

    They asked for the dismissal of the corporation and the corporation was dismissed.

    Now, we say that the Court of Appeals dismissed the receivers out of the case, said they have no standing to sue.

    It was — it’d be inequitable to allow them to recover.

    Therefore, they are gone and back must come, the corporation.

    The corporation must be a party defendant.

    It cannot be a party plaintiff.

    Dean G. Acheson:

    And if it is, then we all go back to the District Court.

    We’re not saying that anyone is going to be denied any of their rights to make any proof.

    They all go back to the state court and in the state court, they will discover the questions of state law which were erroneously decided by the Court of Appeals if you decide it correctly.

    And this of course is — is an aftermath to my — my brother.

    Earl Warren:

    Was the corporation in existence when the complaint was filed?

    Dean G. Acheson:

    The Corporation hadn’t been dissolved but was within two years of being resolved.

    And under the law of Illinois, on application, it could be revived for litigating purposes and that action was done, Your Honor.

    Hugo L. Black:

    In order — just one more question but I’m not sure about one point.

    The complaint alleges facts which are supposed was their nature for arguments that there was a trust fund created and that there — this trust fund is shown in the bill.

    Assuming that all the parties were, this is if they were (Inaudible) it seems to me that your argument rest on the basis that the complaint just does not state a cause of action in that respect.

    Dean G. Acheson:

    No.

    Hugo L. Black:

    (Voice Overlap) –And I assume if it did — If it did show upon as they alleged and as they prayed for that they wouldn’t have to be diversity, would be among others?

    Dean G. Acheson:

    No, Your Honor.

    I think I’ve not made myself clear.

    We — we do not question the fact that this complaint states a cause of action.

    Hugo L. Black:

    On that phase of the complaint I’m talking about, whether they (Voice Overlap) —

    Dean G. Acheson:

    That — that phase —

    Hugo L. Black:

    — and the trust — and the trust fund.

    Dean G. Acheson:

    That phase, Your Honor, is — is only a way of praying for relief.

    Hugo L. Black:

    But its — it’s a way of charging the facts too.

    They charge that it was there.

    Now, I can understand that if it does not state a cause of action on that basis, that you could raise your question of diversity.

    But if it does state a cause of action, why would that not be enough.

    If it states a cause of action as to their being a trustee, I don’t think it’s maleficio, then — assuming that’s the fact, would there have to be diversity among other interveners?

    Dean G. Acheson:

    Yes, — yes, Mr. Justice Black.

    Hugo L. Black:

    You think there would be?

    Dean G. Acheson:

    This — this has been the whole — this is what I’ve been trying to — to urge and that is that there is not a trust fund.

    Hugo L. Black:

    I understand that.

    Dean G. Acheson:

    This is a separate —

    Hugo L. Black:

    But assuming that there is, assuming they are right in charging that there is.

    Hugo L. Black:

    What would happen to your argument?

    Dean G. Acheson:

    Your Honor, they do not charge that there is.

    Hugo L. Black:

    Well, I suppose (Voice Overlap) —

    Dean G. Acheson:

    The Black — Mr. Black brought — Mr. —

    Hugo L. Black:

    I so read the complaint both as to the allegations in the trial, maybe I’m wrong with that.

    That’s the only — their problem.

    Dean G. Acheson:

    I — I think you are wrong, Mr. Justice Black.

    Hugo L. Black:

    Well, we —

    Dean G. Acheson:

    If —

    Hugo L. Black:

    Let’s us assume that’s correct.

    What would you say then because I — I look at it further, I just want — assuming they are, do you still say that your position would be well taken?

    Dean G. Acheson:

    Yes, I would say that our position would be well taken because I would say that it’d be perfectly obvious on the phase of the complaint that what they mean by a trust fund is a series of trust funds.

    Hugo L. Black:

    And you would — you’d — you’d say, then it doesn’t state a cause of action on that phase of the case.

    Dean G. Acheson:

    No, it does — does state a cause of action because each fellow —

    Hugo L. Black:

    On that phase of the case —

    Dean G. Acheson:

    — states his own cause of action.

    Hugo L. Black:

    On that phase of the case there, were they charged that there’s a — there been this fraud — perpetrated that that made them, created to impress the trust on the fund that he had gotten and on the stock that he had gotten and that — then they ask for a prayer on that basis.

    Dean G. Acheson:

    Your Honor —

    Hugo L. Black:

    Assuming if that is well-charged, then states a cause of action.

    What I’m trying to find out is, because I’m not (Inaudible) would you still say that your position is well taken?

    Dean G. Acheson:

    Yes, I would Mr. Justice Black.

    Hugo L. Black:

    Why?

    Dean G. Acheson:

    Because it is inherit in the situation that there is not one fraud, the 20 frauds.

    Hugo L. Black:

    Well I understand —

    Dean G. Acheson:

    There are 20 people, he had separate people and each one of them says, I have been defrauded.

    Hugo L. Black:

    That’s right.

    You’re still — you are saying again that there could have been no trust fund, there aren’t ex maleficio created.

    Dean G. Acheson:

    No, no, I’m not saying that, Mr. Justice Black.

    Hugo L. Black:

    None.

    Dean G. Acheson:

    I’m saying that each one of these can claim that there is a trust fund created for him out of the proceeds of his stock.

    Hugo L. Black:

    Well, that’s — that’s your line.

    Dean G. Acheson:

    But he has no interest in — in the proceeds of the next man in stock.

    Each fellow is interested only in his own stock and if there’s any trust fund created, it’s a trust fund for each man out of the proceeds of the securities of each man.

    Hugo L. Black:

    Well, assuming that they obtained in the end enough money or — or — show the money they’ve received from him through the cause will be an evidence that they own them, would that create — make a difference?

    Dean G. Acheson:

    Not in the slightest bit.

    Each one would be dealt with by himself.

    Here is a man who has 10 shares.

    That’s all he has.

    He can’t have any right in anything more than the proceeds of his 10 shares.

    Now, either Mr. Black can pay him that or he can’t pay him that.

    He doesn’t grow on somebody else’s shares.

    If he draws on that — the proceeds of those shares.

    Hugo L. Black:

    Well, I understand that you have not raised the question as to the jurisdiction of the Court to try this case if it were real, genuine trust fund which was to be administered by the Court and divided up among them.

    Dean G. Acheson:

    I’m not even challenging the jurisdiction of the Court to try it at all, Your Honor but —

    Hugo L. Black:

    Well, I mean if I’m (Voice Overlap) —

    Dean G. Acheson:

    But because there are some people —

    Hugo L. Black:

    I don’t think not well used, I’m talking about the, how to try it by reason of diversity?

    Dean G. Acheson:

    If — if there were — there was no diversity in here at all, the Court would not have power to decide the case, no.

    Clearly, it would not.

    Now, I think that Your Honor perhaps asking me is this.

    Are you asking me — suppose one person had diversity and everyone else did not, would the case then be properly in the federal court in regard to those who have no diversity?

    It clearly would not because there is no common fund, Your Honor.

    Hugo L. Black:

    That’s not what I meant to ask (Voice Overlap) —

    Dean G. Acheson:

    Oh, wasn’t that?

    I’m sorry.

    Hugo L. Black:

    — that way.

    Isn’t — isn’t your point, if I understand it correctly, that the jurisdictional purposes is a distinction between a complaint or the recovery is sought in a common fund and a complaint that alleges a cause of action, the damage is based on the theory of impressive — constructed trust.

    Dean G. Acheson:

    A series of constructive trust.

    And that would have been?

    Dean G. Acheson:

    Yes, Mr. Justice Harlan.