National Equipment Rental, Ltd. v. Szukhent

PETITIONER:National Equipment Rental, Ltd.
RESPONDENT:Szukhent
LOCATION:Cumberland Hospital

DOCKET NO.: 81
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 375 US 311 (1964)
ARGUED: Nov 20, 1963
DECIDED: Jan 06, 1964

Facts of the case

Question

Audio Transcription for Oral Argument – November 20, 1963 in National Equipment Rental, Ltd. v. Szukhent

Earl Warren:

Number 81, National Equipment Rental, Limited, Petitioner, versus Steve Szukhent.

Mr. Silverman.

Wilbur G. Silverman:

Mr. Chief Justice, may it please the Court.

This is on certiorari from the Circuit Court of Appeals from the Second Circuit affirming an order of the District Court quashing the service of process upon the respondents, the defendants in the court below.

The facts are — I think without dispute, petitioner is a Delaware corporation whose principal place of business is located in the State of New York and whose principal business is that of purchasing industrial equipment pursuant to its costumer’s orders in order that it may lease that equipment over a term of months or years to that lessee.

In accordance —

The purpose being (Inaudible) —

Wilbur G. Silverman:

No sir.

Straight lease?

Wilbur G. Silverman:

It’s a straight lease.

In what terms?

Wilbur G. Silverman:

Well the terms vary in accordance with the desires of the lessee.

In this instance, I believe it was for 36 months.

The lease is written on a printed form, the last paragraph of which provided that the laws of the State of New York were applicable and that the contract was deemed to have been executed in the State of New York and it contained the name of the designated individual as a process agent upon whom the lessee may be served within the State of New York.

I might say that this paragraph was drafted primarily to conform with the provisions of Rule 4, subdivision d, Subdivision 1 which provides of the Federal Rules of Civil Procedure which provides for the service upon such a designated agent.

Service was affected on such agent by the United States Marshall and —

(Inaudible) Mrs. Weinberg?

Wilbur G. Silverman:

Mrs. Weinberg.

She was the wife of the —

Wilbur G. Silverman:

That’s not correct judge.

(Inaudible)

Wilbur G. Silverman:

She was not the wife of any of the principals.

Who was she?

Wilbur G. Silverman:

She was related to one of the officers but not as a wife.

I think she’s the assistant of one of the vice presidents.

(Inaudible)

Wilbur G. Silverman:

Lessor, yes sir.

She worked from that time?

Wilbur G. Silverman:

No sir.

As the record discloses, she received no compensation from any source.

Wilbur G. Silverman:

Immediately upon service having been affected, the process agent forwarded the summons of complaint to the two defendants and a register — a letter — by register — a certified mail was served or sent by the petitioner here to the defendants notifying them that process had been served on that date.

A motion was then made by the respondent here to quash the service primarily on the ground that the designation of agent was buried in fine print in the lease and secondarily, on the ground that the agent name was unknown to these defendants.

The District Court found that this designation of agent was not in fact a very fine print clause.

It was readily apparent and that prompt and punctilios notice was given to the defendants, it quashed the service nevertheless on the ground that that court felt and will sustain by divided court by the Circuit Court that there should have been an inherent provision or notice to be given.

And that not withstanding the fact that that prompt and punctilios notice was given the failure for — of the contract to have had included in it a provision for a notice, rendered that portion of the contract providing for the designation of agent unenforceable.

Was — was there any dispute or the fact of its own proceedings?

Wilbur G. Silverman:

No sir.

It was conceded in the opposing affidavit rather — rather in the moving affidavit.

Now, the parallel drawn by both the District Court and the Court of Appeals was that of Wuchter against Pizzutti, a decision of this Court which rendered invalid a statute of the State of New Jersey involving the service upon the Secretary of State as an agent of motorists using the highways of the State of New Jersey wherein no provision was made or noticed by the Secretary of State upon the proposed defendant.

And this Court struck down that statute as being violative of Due Process Clause on the ground that not withstanding in that case the Secretary of State did in fact notify the defendant of the service that since the state was imposing an agency upon perspective defendants using their highways it was incumbent upon that state to provide for due notice.

And while the courts below recognized the fact that this is a private contract not inhibited by the statute or the constitutional requirements of the Fifth and Fourteenth Amendments with respect to statutes.

They nevertheless drew a parallel and struck down this provisional contract.

I respectfully submit to the Court that on times of the contract, the laws of the State of New York were applicable.

And these provisions have been sustained by the highest court of the State of New York in the case of Gilbert against Burnstine referred to in my brief, and has been followed by the federal courts.

I have cited in my brief one case from the Circuit Court of Appeals from the District of Columbia where in a private contract, the clerk of the District Court was designated as such process agent and in another case in the highest court of the State of Vermont where the Secretary of State — of that state was designated as a process agent.

(Inaudible)

Wilbur G. Silverman:

I have no such case judge —

(Inaudible)

Wilbur G. Silverman:

— because the leasing industry, if Your Honor pleases, is relatively (Inaudible), I’m sure the Court is aware but the Court of Appeals in this case oddly enough said they would have accepted a provision in the contract which says that no service or process need be made.

Now to me this seems an enormous anomaly because if they say you could have provided that no process need be served then why do they strike down a provision which says, “We designate Mrs.Weinberg or anybody else.”

Now I — I submit if there were many instances in — in commerce where the agent designated, and I say the word agent is a semantic term because it’s merely used as a device by which someone is named.

I don’t think it’s intended to be used in the generic sense of agency to carry out large details.

Provisions of this contract specifically provided it was a process agent, nothing more.

So (Inaudible) the Court of Appeals and it appeared to you that it would be permissible to say (Inaudible)?

Wilbur G. Silverman:

Yes.

As I say that’s — I say that’s exactly in conformity Your Honor with the cognovit notes for example where it —

(Inaudible)

Wilbur G. Silverman:

Confession of judgment, the right in the note, (Inaudible) permits any attorney to confess judgment in any court in the United States that’s recognized in many of our states, Illinois, Ohio, the two that I can name.

(Inaudible)

Wilbur G. Silverman:

Yes.

It also follows inevitably the due process to require (Inaudible) a confession to set aside because any showing (Inaudible).

Wilbur G. Silverman:

Well, we — we are not discussing defenses.We have no objection to their coming in and defending the suit.

As I — and as I’ve indicated, they’ve — and the courts below have reiterated, there was prompt and punctilious service in this notification in this so that counsel could come in and challenge jurisdiction.

You’re asking me (Inaudible).

Wilbur G. Silverman:

That’s correct

(Inaudible)

Wilbur G. Silverman:

Yes

(Inaudible)

Wilbur G. Silverman:

He could — could very well of them.

He could — it is my theory judge.

I — I have not raised that as the question in this case.

I’ve tried to limit the appeal here to the facts before the Court but of course this Court can go even broader than the question raised by the petitioner herein.

So that the courts of New York under which were — the parties had to agree.

This case would be decided as authorizing this type of service and private contracts, privately negotiated are not bound by the Fifth or the Fourteenth Amendments with respect to due process.

Those inhibitions imposed by the Constitution.

The court below, in an attempt to arrive or to come to the conclusion which it did, used the expression that it was construing a contract.

Well, I respectfully submit that construction can in nowise change the terms of a contract.

I might point out that the contract was first signed by the respondents here.

They made no challenge to any of the provisions of this contract.

They signed it and acknowledged it, returned it for execution by the petitioners.

It was only after they were in the (Inaudible) under the contract where — and incidentally at no time have they ever returned the equipment leased and are still in possession of it, seek to modify or excise from the contract that portion of it which it finds distasteful.

Now I — I would suggest that these respondents should be stopped from challenging this provision particularly under the circumstances where they still retain the fruits of the contract but don’t want to submit to that portion which they find is difficult.

Now, the court below, and that is the Court Of Appeals, made a passing reference to contracts of adhesion with respect to this and I submit that there is nothing in the record to indicate that this is a contract of adhesion at all.

As I understand the time it refers to, opprobrious provisions usually imposed by those having greater economic power over those who having lesser economic power and had been invoked, as I understand it, primarily in insurance cases.

There is nothing in this record to show who has the greater economic power, the petitioner or the respondents.

And the reference to contracts of adhesion must only go to the fact that is a printed contract insofar as I’m able to ascertain and —

(Inaudible)

Wilbur G. Silverman:

I beg you pardon sir?

Offering (Inaudible).

Wilbur G. Silverman:

A small part.

Wilbur G. Silverman:

That’s — that’s what were said although that both courts below said it was not small.

Earl Warren:

It might help us if we could see a copy of the contract, would you have it Photostatted for us or is it here?

Wilbur G. Silverman:

I — I don’t have a copy —

Earl Warren:

Yes.

Wilbur G. Silverman:

— but my adversary happens to have it.

Earl Warren:

Is it — is it — it is the contract itself not just —

Wilbur G. Silverman:

Yes.

Earl Warren:

— the copy of it then?

Wilbur G. Silverman:

I think it is a photo sir.

(Inaudible)

Earl Warren:

That’s alright.

Wilbur G. Silverman:

So that no objection was made as I said before to the designation of the person named, nor was any attempt made to substitute someone else.

(Inaudible)

Wilbur G. Silverman:

Yes it does sir, based upon affidavit duly acknowledged.

And after the requirement (Inaudible)?

Wilbur G. Silverman:

No — no sir, that’s not the same.

New York does not recognize a confession of judgment as part of another.

(Inaudible)

Wilbur G. Silverman:

Yes.

New York will authorize a confession of judgment separately from a note either for past due consideration or future consideration.

So that a prospective debt for example, if I would loan — A would loan B some money, A could take back a confession of judgment from B and enter it, and we are providing the affidavit set forth, what the consideration was.

For the investment (Inaudible)?

Wilbur G. Silverman:

Yes.

In other words, true or not — and not done to practice a fraud on other creditors.

(Inaudible)

Wilbur G. Silverman:

I don’t believe it’s permitted as part of the note itself.

I might also indicate another example instead of a cognovit note, and as to agreement, a third party has no obligations to anybody.

And they made a fact that the — the — or — or you might — the escrow might be the attorney for one of the parties, that’s frequently done in New York.

That doesn’t make the escrow agreement invalid and none — none are unenforceable by — by that reason.

Now, it would seem to me that this is a — a question of whether private persons entering into arm’s length contracts can have portions of them set aside.

Wilbur G. Silverman:

And I have cited in my brief cases in this Court and Circuit Courts of Appeal in the highest states of New York, the effect of it — a contract is the highest form or evidence of the terms of an agreement between parties.

And where one party relies on the terms of that contract, the other party should not be permitted to weasel out from under it or that portion of it which he finds opprobrious, simply because (a) he hasn’t read it or (b) he didn’t understand it or (c) any another reason.

His — his opportunity to challenge the terms of the contract comes prior to execution not subsequent thereto and particularly not after he has breached it.

Hugo L. Black:

Suppose he had agreed a court to have jurisdiction that couldn’t possibly have jurisdiction in the subject matter.

Wilbur G. Silverman:

Well that — that’s something else again judge.

One — that the — the cases are uniformed that if the Court has jurisdiction over the subject matter, then jurisdiction over the person maybe consented too.

Hugo L. Black:

Are they —

Wilbur G. Silverman:

Obviously —

Hugo L. Black:

Are they uniformed to the effect if that can be done by an original contract before any lawsuit arrives?

Wilbur G. Silverman:

I would say to Your Honor that no contract in — that can grant jurisdiction to that court which that court doesn’t have to start with.

Hugo L. Black:

Well I was talking about the merits.

I have in mind this situation, I happen to know it but formally the practice somewhere to your — he will lend money, take notes, they promise to pay within a certain length of time.

They agreed that if they do not pay at that length of time, a suit can be filed.

That the money lender can accept service for the lender that he can go into court and confess judgment not merely for the amount of the judgment but for reasonable attorney’s fee.

Would your argument say that that’s valid under the Due Process Clause?

Wilbur G. Silverman:

I think it is.

If it’s between two individuals and I think Mr. Justice Goldberg has indicated that that is permitted in the State of Illinois.

And I — my research indicates that it is permitted in the State of Illinois subject to be opened if there was no contract.

Hugo L. Black:

And that goes on the theory as I understand your philosophy of debate.

The basic philosophy on which you rest, that is within this country, people who deal at arm’s length have their contracts made as it please, nobody can — they can never, as you say we’ve allowed them.

Wilbur G. Silverman:

Except — except if it offends the public policy.

I would — I would say that what Your Honor has just stated is my understanding of the law unless it’s a violation of the public policy of the area in which this contract is negotiated or consummated.

Hugo L. Black:

Well, have any states held that that is not adequate notice simply to give it to the money lender who has bought or owned the money?

Wilbur G. Silverman:

I’m on (Inaudible) of any decision one way or the other on that.

But I do know that my research did disclose that in Ohio and in Illinois that that was authorized.

I hope to put — I understood Mr. Justice Goldberg to say that he understood it that way in Illinois too.

Arthur J. Goldberg:

(Inaudible)

Wilbur G. Silverman:

So there is one last thing I wanted to bring out.

Hugo L. Black:

Have you any cases cited where it has been challenged and the Supreme Courts have sustained it where the situation is such as I’ve stated?

Wilbur G. Silverman:

I have cited no such cases in my brief judge, Your Honor.

Hugo L. Black:

Of course someone said a long time ago that equality of bargaining, how it sometimes ends.

And you are saying that whether the deal at arm’s length with the equality of bargaining power which would be allowed to make any economy contract they were achieving if they would consent that they’ll never be notified of a lawsuit and they would have a chance to defend it?

Wilbur G. Silverman:

Well, I — I’m saying Mr. Justice Black that unless the public policy is offended thereby, what Your Honor has stated I think is an accurate statement of the law and that is the basis I think of our Government, the free people may freely bargain and contract.

And those who do contract have the power.

They have the freedom to do so and to waive whatever rights, privileges they may have.

Hugo L. Black:

Rather than some cases, I think it has drawn distinctions in waiving their rights to go to court.

I think this Court’s even gone so far as to say the right to come in the federal court is a right which is pretty a sacred right.

Wilbur G. Silverman:

Well, I — I would submit Your Honor that that comes within the area where the public policy was offended and that was the exception to which I advert it.

Hugo L. Black:

I hear you are saying that you don’t have to offend both public policy, any code of the state —

Wilbur G. Silverman:

Well —

Hugo L. Black:

— and they cannot be elevated to a constitutional protection.

Wilbur G. Silverman:

Well I say, the Constitution protects all citizens and I’m saying simply that this is not a violation of the Constitution, what was done in this case and I — and I —

Hugo L. Black:

Does that mean that when any purchase was made, in one part of the country, a mail order (Inaudible) or anybody else.

That — that they make the contract, one of these contracts, it says that we have — I waive jurisdiction and agreed for this to be tried 3000 miles away for the — person from whom — with whom he made a contract to accept service on our behalf and pay a reasonable attorney’s fee and let that be fixed?

Wilbur G. Silverman:

I would say, I would —

Hugo L. Black:

That — that — that would be a valid contract.

Wilbur G. Silverman:

I would say it would be a valid contract because there’s no one forcing the other contracting party to execute that contract.

There’s a — there’s no compulsion upon any individual to sign a contract.

Hugo L. Black:

Well this considerable compulsion in many instances where the — the bargaining power is wholly unequal.

One person is compelled by the force of circumstances and they feel generally to buy here or borrow here or need not buy or borrow at all.

Wilbur G. Silverman:

That — that would —

Hugo L. Black:

Do you say that makes no difference?

Wilbur G. Silverman:

No.

I don’t say that at all.

I said, then, that would be a true contract of adhesion.

Hugo L. Black:

Of what?

Wilbur G. Silverman:

Of adhesion.

That was the expression used by the Circuit Court of Appeals for the Second Circuit, so it’s a contract of adhesion.

But I submit that there’s nothing in this record to establish that either of these parties had a greater power over the other, nothing at all, for all we know, for all I know, for all any members of this Court knows.

The greater bargaining power might have been with the respondents.

Hugo L. Black:

Were they buying farm equipments?

Wilbur G. Silverman:

They were — they were leasing some of equipment, I don’t even know the —

Hugo L. Black:

What kind of equipment?

Wilbur G. Silverman:

It was a farm equipment Mr. — I — I — I honestly couldn’t say what the nature of —

Hugo L. Black:

So that I could farm or buy (Inaudible) flowers?

Wilbur G. Silverman:

I think that even if (Inaudible).

Hugo L. Black:

Or a sewing machines from Singer?

Wilbur G. Silverman:

I don’t — I don’t know what it is but I — I do know that I read the newspapers that many farmers’ economic powers take this as a result of a — of required storing of grain and things of that kind have accumulated far greater wealth than other individuals.

So that the — the mere — the fact that there was a farmer using or a renting farm equipment or — and had this tax or anything else would indicate who had a — a greater bargaining power.

Hugo L. Black:

That would indicate that an individual farmer at Nebraska, Alabama, Mississippi had an equal bargaining power with companies that manufacturers (Inaudible) themselves?

Wilbur G. Silverman:

Depending upon which farm, what farmer it is.

I wouldn’t say that each farmer have the same bargaining powers than other farmers.Each must stand on his own.

Hugo L. Black:

That’s the omnipotence of contracts.

Wilbur G. Silverman:

I — I think Your Honor expressed that very well.

I come to the last point that I wanted to make and that is the argument raised that the agency so-called was not an agent and I refer my brief to the restatement of the law of agency and a fact that — designation of agent as I said before as a semantic rather than a true turn —

Arthur J. Goldberg:

The Government is the one presented (Inaudible).

That would be the (Inaudible)?

Wilbur G. Silverman:

That’s Supreme Court, that’s the Court of original jurisdiction.

Arthur J. Goldberg:

(Inaudible) in the contract itself?

Wilbur G. Silverman:

I’m not certain whether the Gilbert-Burnstine case which is a Court of Appeals, which is the highest court of New York has any — had any such provision in it, I’m not aware.

That’s the case the Government (Inaudible) in accordance to New York law.

Wilbur G. Silverman:

Well —

(Inaudible)

Wilbur G. Silverman:

I — I’m fairly familiar with the opinion in the Gilbert case and this — with due respect, I submit that there’s nothing in that case which would warrant the courts coming to that conclusion except that in that case, there is quoted and it’s quoted in my brief as well on page 6 and is quoted with approval — a quotation from Scott on Fundamentals of Procedures.

That’s the general (Inaudible)?

Wilbur G. Silverman:

That’s exactly what — what — I think that that — that’s the reference to which —

Now, the specific point here (Inaudible) and that is the (Inaudible) authorization clause it serves (Voice Overlap) —

Wilbur G. Silverman:

I don’t think — I don’t think that question was — was raised, I don’t think it’s been raised in a — in an appellate court prior to this.

Arthur J. Goldberg:

But we have no authority of interpretations and figure of the law here in a specific (Inaudible), is that correct?

Wilbur G. Silverman:

That’s correct so far as I’m able to ascertain.

Hugo L. Black:

You’re asking us to reverse them on New York law.

Wilbur G. Silverman:

I’m asking you to reverse them not only on New York law Mr. Justice Black.

Hugo L. Black:

But isn’t that one of the terms?

Wilbur G. Silverman:

One of the terms, yes.

Hugo L. Black:

If they are right on New York law then they should not be reversed, could they?

Wilbur G. Silverman:

Well, I say number one, they’re wrong on New York law.

Hugo L. Black:

I understand that but suppose they are right?

Wilbur G. Silverman:

No.

I would say that they should be reversed nevertheless.

Hugo L. Black:

Why?

Wilbur G. Silverman:

Because this is — their — their basis was not based upon New York law.

Hugo L. Black:

Well suppose it was.

Wilbur G. Silverman:

Well, if it solely on New York law, then they have to be right.

Hugo L. Black:

Then we should accept it.

Wilbur G. Silverman:

That’s right.

Hugo L. Black:

And we’ve got to say they were not right?

Wilbur G. Silverman:

That’s right.

I see — I see my time is up.

Earl Warren:

No.

No you have until the red light comes on Mr. Silverman.

— turning on the federal rule of New York law.

Wilbur G. Silverman:

No.

I just wanted to call attention to the fact that there was an agency set up for the purpose solely of — of accepting service.

Service was affected, notice was in fact given and the whole basis upon which the court below, both courts below predicated it — each of the decisions was the fact that inherently, in the contract, there should’ve been a provision for notice and I say that’s academic regardless of the fact that it wasn’t there because ample and punctilious notice was given.

Nowhere does — do the respondents themselves submit anything in the record to say that they were imposed upon, only their attorneys’ affidavit that this was a fine print clause.

Thank you very much.

Earl Warren:

Mr. Schwartz.

Harry R. Schwartz:

Mr. Chief Justice Warren, if it please the Court.

First, by the — with permission of the Court, I like to hand up the particular article which we are concerned with since Mr. Justice Black mentioned something about what it was and I have an ad here which gives a picture of it.

So with the permission of the Court, I could hand it up so it can be looked at.

Earl Warren:

Mark them so they could search (Inaudible).

Harry R. Schwartz:

Now on this particular case, the defendants, of father and son, two very small farmers in some town in Michigan signed this lease on a printed form which I’ve handed up to the Court and something has been said about the economic status or equality of the of contending parties and the — the law as it had been said, this particular petitioner is listed on the American Stock Exchange, does business all over the country.

As a printed form of contract, evidently does a tremendous amount of business and to compare what these two little farmers out there and talk about economic equality, I think just isn’t so.

Now the type of product here, I think what — give the Court some idea to what’s involved, it appears that these farmers were sold something on the idea where if they purchased this article, it will produce grass, some kind of grass, I’m not a farmer, which will contain the nutrients that would be similar in quality so the nutrients that would be produced in the summer time and thereby enable their cows to give the same, if not greater quantity and quality of milk in the winter times with the summer time and thereby by purchasing this expensive equipment, why they would make money of it.

Well, and that was term and not to be the fact, payment was just not made.

And we find now that in order to defend this lawsuit, they would have to travel a distance of about 2000 miles in a strange part of the country, to them strange, whereas the plaintiff who sought them out and sought that — sent this representative there to do business could very easily come out there.

They don’t have to produce any witnesses.

They’ve got their contract and institute an action there.

I — I’m sort of coming into this backwards because this is what had end to — the argument ended on and I maintain that this is strictly a contract of inherence and not a freely entered into contract at arm’s length.

The defendant, rather the petitioner have prepared this contract over God knows how many weeks and months checking, God knows what law and with how many attorneys and finally handed to these people without any attorney and they just signed it.

And then they come here and they start to sue.

And therefore, when I first saw this, it was the inequity that struck me.

And I made this motion towards the service and I find that there is a rule.

I like to speak about the rule because I do not know what may influence the Court.

And as long as it has mentioned, I will speak about it.

I say that this rule — what it refers to an agent means just that, an agent.

I maintained that this reported agent is not an agent that had misstated that she’s the wife — pardon me, the sister of the vice president, was my recollection at the time of the argument for this motion in the lower court that it was stated, she was the wife of one of the officers.

And I so set forth and my affidavit had never been challenged until now.

So the farmer never in that regard was not willful, but still the relationship was close enough and I maintain that the type of an agent referred to is an agent in the ordinary sense of the word.

An individual appoints an agent and I think we all know what that means without my going into great detail, someone had somebody give that kind of control or at least acts on his behalf.

There’s been another brief submitted here why, I understand the representatives of the American Bankers Association.

I understand they will not argue here this morning.

What the — they might mention of a — cite references to the restatement of the law of agency.

And they just plot words and then they applied the general statements to the facts of this case.

If the illustrations refer to in the restatement of their agency are read, it becomes very obvious that the reference made to those sections as quoted by the petitioners are not so.

The illustrations refer to something entirely different and if I may just quote one.

For example, they point to Section 15 (b) of the restatement of agency and if this setting forth while it states, at least they will — we comply with it in our case.

But when one reads the illustration is brought to, one finds the following, (1) P writes A, whose business is purchasing for others telling him to select described goods and ship them at once to P.

Before answering P’s letter, A does as directed charging goods to P.

A is authorized to do this.

Harry R. Schwartz:

In all of these illustrations it becomes very obvious that the type of an agent that’s referred to is the type of agent we all have in mind in everyday life.

Now, to get to this contract, I had quoted the case of Wuchter against Pizzutti, 276 United States 13 in which this Court held statute of New Jersey unconstitutional because the statute did not direct that notice be sent to the non-resident.

And it has now stated that that rule of law would not apply for this case because that’s the state and we’re individuals.

Well on the contrary, I think if it applies to a situation of that type, all the more reason why it should apply to a situation of our type because the secretary of a state to serve a process, it’s more reasonable to assume that such an official with (Inaudible) process to the defendant.

And where an individual is involved, especially in a situation of this type whereas the person relationship — all the more reason why the Court should hold that such a — in such a contract that it should be a specific provision requiring that process be forwarded to the defendant because such an individual is less likely and is less responsible than an individual who hold an official office.

What —

Harry R. Schwartz:

So —

— irrelevancy do you think and the fact that there was actual notice received here Ms. —

Harry R. Schwartz:

I —

Mrs. Weinberg sent — actually sent notice, didn’t she?

Harry R. Schwartz:

Yes.

And the — your — your opponent’s company sent a notice.

Harry R. Schwartz:

I would like to use the same argument that’s been used by a Supreme Court in that case.

On page 24, what it has said “that the defendant here had actual notice by service out of New Jersey and Pennsylvania.”

It’s on my brief page 4, I’m sorry I was quoting from page 24 of the — of the decision, on page 4 on my brief.

Well, what (Inaudible)?

Harry R. Schwartz:

What it has said about the defendant here had actual notice by service out of New Jersey and Pennsylvania.

He did not however appear in the courts and such notice was not required by the statute.

Not having been directed by the statute, it cannot therefore supply constitutional validity to the statute or to service under it deciding various cases.

I therefore maintain that to leave it up to an individual who was not our agent has no connection with us and whose interest is diametrically opposed to ours would make that law.

Hugo L. Black:

Does the record show whose agent she was?

Harry R. Schwartz:

The lease of course speaks for itself.

Counsel has admitted that she’s the assistant of the vice president of the petitioner.

We don’t know her.

We never heard of her, never had any correspondence, no obligation on her part to act for us.

Byron R. White:

Did — did the agency (Inaudible)?

Harry R. Schwartz:

When I — I would but not under that point.

I’d make it out of another point.

Byron R. White:

You may not (Inaudible)

Harry R. Schwartz:

Right.

Byron R. White:

You didn’t make (Inaudible)

Harry R. Schwartz:

That’s right.

Byron R. White:

(Inaudible)

Harry R. Schwartz:

Pardon me.

Byron R. White:

It makes it harder to (Inaudible).

Harry R. Schwartz:

No.

I think on several grounds and I make it on several grounds.

On page 25, before the first paragraph to a lot — the sentence before the first paragraph the court stated, “We agree with the District Court that no valid agency of Weinberg for defendants was created by the instrument in the suit and affirmed the order.

It is my contention that the mere fact that she would be required to serve or other that there was that provision that she would be required to serve running would still not make her an agent and the Court so held there.”

That court further stated in the first paragraph, “The lease constructed here was in a printed from provided by plaintiff.”

And although the next sentence does not apply, we skip down to “lack of such a provision on a contract of adhesion here involved may however be considered in determining the meaning and effect of the provisions of the contract.”

There is no provision on the lease for any undertaking by the purported agent to act for or give notice to help purport a principle.

So that if we want to assume that there was a provision that she was to — for this process, we will still be faced with the question, she impose, suppose she didn’t, what remedy — what the defendants have?

What protection would they have?

She maybe some kind of non-entity and we would still be faced with a greater problem which is a question of due process under the Constitution.

Arthur J. Goldberg:

You have to assume that on (Inaudible) authorized by the plaintiff after they admit they authorized the (Inaudible).

And therefore the rule was (Inaudible) to authorize service of the (Inaudible) an agent authorized by (Inaudible) under a state law.

Harry R. Schwartz:

I —

Arthur J. Goldberg:

(Inaudible)

Harry R. Schwartz:

That’s if — and I — and I — and I agree with you and I would’ve normally stopped there.

But the reason I don’t is because there are nine judges seating and I don’t know whether — that is your concept and whether all nine judges would agree, so therefore I have to go further.

That’s — I think that’s for (Inaudible).

William J. Brennan, Jr.:

Your point is that the (Inaudible).

Harry R. Schwartz:

Well —

William J. Brennan, Jr.:

Not the rules.

Harry R. Schwartz:

I’ll — I first attacked it on the question that this rule was not followed because she is no agent.

I — I think I argued that she was no agent.

Thought her interest were opposed to ours and she’s not considered an agent under that section.

And the — that Supreme Court decision of Wuchter applies on the question of due process.

And then I carry to step further or I come now with this question of the adhesion contract and I maintain that this is a contract of adhesion.

Harry R. Schwartz:

I maintain that to require these farmers to travel 2000 miles to defend this lawsuit.

Is it not inequitable and unjust and deprives them of the right to a trial in any court because by placing an undue burden upon them and compel them to travel such a great distance under the circumstances is an effect depriving him to a right to a court hearing, and thus it deprives him of due process under the law.

Some questions were passed about cognovit judgments and although I didn’t make note of the cases that hold them invalid, I remember in this article which I’d not quote, it’s not in the brief and I — I didn’t mention it because I started clearly — clearly for the question at hand.

And this is an article by Hobson entitled “Cognovit Judgments” and ignored problem of due process and full faith in credit, 29 University of Chicago Law Review 111, 1961.

And in that article, he conducted a survey amongst many of the lending companies throughout the country asking them this question as to whether to use to it, how far they use it and what effect is.

And there are many states that declared it was invalid and I think only three or four states hold it valid of which Illinois was one.

And —

Earl Warren:

What is the law in New York.

As — as you — are there cases, Court of Appeals’ on that thing?

Harry R. Schwartz:

Frankly, I didn’t check into the law of New York on the cases except that as counsel stated, in order to enter judgment by confession, one would set forth the facts upon which that judgment is based.

And if one attempts to enter a judgment just by means of an agreement or a note, that is invalid, one cannot do that.

Therefore —

Earl Warren:

You — you — you think it does depend on state law, well, do you?

Harry R. Schwartz:

Do you mean this question here?

Earl Warren:

Yes.

Harry R. Schwartz:

No, I don’t think it depends exactly on state law.

I think the broader question is the federal law and then the smaller question —

Earl Warren:

Federal standard applies.

Harry R. Schwartz:

Federal standards and then —

Earl Warren:

That leads you to Rule 4 (b) 1, doesn’t it?

Harry R. Schwartz:

No, I don’t — I don’t think it applies in this case.

What I — what I — what I say is that if he attempted to commit under 4 (b) 1 or whatever the rule might be, I don’t know.

There’s nothing set forth specifically one way or the other.

But if he came under that section and if that’s — for determining issue, I say it doesn’t apply in this particular case.

I — I say the New York law as cognavit judgments — frankly, I don’t see how it applies here because I’m not asking for a judgment here.

Although indirectly, it may have that effect because of the fact that we would not be in the position to defend and therefore it couldn’t affect and take a judgment against us.

But the specific fact, the specific issue on that question to my mind is not before us because it’s — they’re not seeking to enter a judgment based on our confession.

It is for that reason but I don’t think it’s a question of New York law.

Hugo L. Black:

They’re seeking to sustain the validity of a service of process, aren’t they?

Harry R. Schwartz:

That’s right.

Hugo L. Black:

Well, do you say that’s not governed by New York law?

Or is it?

Harry R. Schwartz:

Well, I think that’s governed by federal law because they’re in the federal court, they say that — that the process as they claimed pursuant to a federal section and they mailed it out to Michigan, if anything it may be a question whether Michigan law applies, where the service is affected.

Hugo L. Black:

But the service wasn’t in Michigan, was it?

Harry R. Schwartz:

Well, the action is here but where — if it’s a question of service as such, where did the service take place?

Well, of course they contend — they serve the so-called agent here.

It is their contention then and of course that it probably took place here but it’s a — a federal service question as I see it, not a New York service question.

That is just on the question of service.

Now, a lot was said about the question of — or freedom of contract but if we were to take this question of freedom of contract just by itself, yes.

A — a person should have a right to make a contract but I maintain there’s a limit.

There’s a difference between a freedom to contract and so-called freedom to adhere.

If a person adheres to a contract that’s already sent before them in fine print with no discussion of any terms, then that’s not a freedom of contract, there’s been no discussion of anything.

These are just something that’s been handed to them to take it or leave it.

And so, it’s not a question of a freedom of contract but all involved in this case.

If the terms were discussed and arrived at — at arm’s length, that’s one question.

Or where something is submitted to someone in a fine printed form on the circumstance of this case then I say this is not a question of freedom of contract at all.

In fact, it’s an abuse of the freedom of contract because if we continue this concept, what effect we will have will eventually be legislation by contract, if we don’t have it already in many cases by the so-called large companies.

So if we want to keep freedom of contract, we should really keep it in its broad sense where two people sit down and eye now a contract and agree upon the terms and the terms are discussed, not on the so-called form of a contract by adhesion.

Thank you.