United States v. Isthmian Steamship Company – Oral Argument – February 25, 1959 (Part 1)

Media for United States v. Isthmian Steamship Company

Audio Transcription for Oral Argument – February 25, 1959 (Part 2) in United States v. Isthmian Steamship Company

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Earl Warren:

Number 285, United States of America, Petitioner, versus Isthmian Steamship Company.

Mr. Spritzer.

Ralph S. Spritzer:

Mr. Chief Justice, Your Honors.

This is an admiralty case which presents two issues.

The first of these which I’ll State quite generally for the moment involves the question whether the courts below improperly delimited or restricted the controversy which was tendered for trial.

The second question which is quite distinct is whether the District Court, having rendered judgment for the respondent, the Isthmian Steamship Company, made an award of the interest, compound interest which exceeds the statutory limit imposed by these suits in Admiralty Act.

The libel in this case was filed by the Isthmian Steamship Company against United States.

And the pleadings disclosed that there are two commercial transactions involved.

I need not go into any of the detail of those transactions merely it is, however, necessary to state their substance.

First, in 1946, the United States, through its agency, the War Shipping Administration, leased or chartered eight government-owned vessels to Isthmian.

The amount of the charter hire was to be determined on a sliding scale.

It was made dependent upon the amount of net voyage profits that were realized from the operation of the ships.

A disagreement led ultimately to dispute, and the United States claimed Isthmian not acquiescing.

The Isthmian owed some $115,000 in charter hire beyond what it had paid.

Now, the second transaction, in 1953, an Isthmian vessel known as the Steelworker, which is not one of the vessels involved in the charter parties, carried a large quantity of military freight for the Government and in due course, submitted a freight bill.

That bill was for $116,000 using round figures.

At this point, the United States paid Isthmian roughly $1000 in cash and advised Isthmian that it was applying the balance of the amount due on the affreightment in satisfaction of the Government’s preexisting claim against Isthmian for additional charter hire.

Isthmian thereupon went to court initially as it happens to the wrong court.

It filed suit in the Court of Claims alleging all of the facts, which I’ve just outlined.

It asserted in the Court of Claims complaint that the Government’s claim for additional charter hire was groundless and that the Government was withholding money which was due to Isthmian.

Now, the Court of Claims dismissed that complaint on the Government’s motion.

The Government argued, we think correctly in its motion, that whether one view the subject of the litigation as being Isthmian’s claim for maritime freight or a claim that the Government was improperly withholding money because it — charter hire claim was groundless.

In either event, it was a maritime transaction and within the exclusive jurisdiction of the District Court.

And the Court of Claims agreed and Isthmian thereupon when into the District Court, filed a libel there but followed a different tactic at this point.

Wherein its libel, it makes no reference whatever to the Government’s claim for additional charter hire.

Isthmian’s libel as the Court will note in the record merely pleads that it had performed within the limitations period certain freight services that it submitted a bill for $416,000 and that it received only $1000.

Now, the Government’s answer to that libel unqualifiedly admitted the correctness of Isthmian’s freight bill.

The Government then pleaded that it had applied the balance, that is the $115,000, in satisfaction of a claim which the United States asserted against Isthmian, and the answer then proceeded to set forth the facts upon which that additional claim for charter hire is based.

In addition to filing this — in addition to making this affirmative defense, the Government also filed a cross-libel in which it repeated its claim for additional charter hire.

Now, Isthmian’s response to the Government’s position in the pleading was two-fold.

Ralph S. Spritzer:

First, it said that the Government’s defense that it had withheld the amount due on the freight bill and applied it to the Government’s preexisting claim could not be regarded as a plea in the nature of payment or satisfaction, could not be regarded as an affirmative defense.

It said it must be regarded as a counterclaim.Secondly, it argued if you regard it as a counterclaim, then it is not in our — in Isthmian’s view, cognizable in admiralty because Isthmian argues admiralty can only recognize counterclaims which arise out of the same transaction which is the basis of the libel.

Both courts below accepted that position and concluded on that basis that a judgment pro confesso should be entered for Isthmian and that the United States then should institute a second suit to determine if it is entitled to get back with the right hand what it has just been ordered to pay over was left.

Charles E. Whittaker:

(Inaudible)

Ralph S. Spritzer:

The District Court did that.

It said once it struck out the affirmative defense, there was no common issue and that it was then independent counterclaim and that admiralty could not hear an independent counterclaim.

Charles E. Whittaker:

The thought of the interest is to overrule a motion to consolidate (Inaudible) in fact strike out the cross-libel.

Ralph S. Spritzer:

Well, he first ruled, as I recall it, that this was not a matter of affirmative defense and he struck that from the answer.

Then he said at this point the libel and the cross-libel no longer have a common issue and therefore cannot be heard and the Government has relegated to bringing it back in lawsuit.

I should add one further word about the proceedings below.

The Court of Appeals opinion here is really the opinion in the Grace Line’s case and not in this case.

We reprinted the Grace Line’s opinion as an appendix to our petition.

The Grace Line’s case involved the same issue as this but involved additional issues, and we did not petition in the Grace Line case because of the fact that there were these additional complicating factors in that case.

Potter Stewart:

That case involved what?

Time limitation —

Ralph S. Spritzer:

It involved a limitation problem in addition.

Potter Stewart:

And those problems are not present here.

Ralph S. Spritzer:

They’re not.

Potter Stewart:

All right.

Ralph S. Spritzer:

Correct, Your Honor.

Now, it’s apparent, I think, that the result which — of the kind which has been reached here would certainly not be required inequity or under the Rules of Civil Procedure whether one views the Government’s position here as the assertion of an affirmative defense or as the assertion of a permissive counterclaim.

And the question which this case presents is whether the result is required in admiralty.

Potter Stewart:

Is it the distinction used to be made between a — between a counterclaim and a setoff?

Didn’t the — did the Court — the Court of Appeals had in fact hold that an admiralty would have jurisdiction only if this were a setoff?

Ralph S. Spritzer:

Yes.

Potter Stewart:

Is that right?

Ralph S. Spritzer:

If it arose from the —

Potter Stewart:

(Voice Overlap) —

Ralph S. Spritzer:

— same transaction.

I perhaps been using the term “setoff” and “counterclaim” —

Potter Stewart:

Well, that —

Ralph S. Spritzer:

— more loosely as synonymous.

Potter Stewart:

(Voice Overlap)

Ralph S. Spritzer:

I think that’s what the Court of Appeals was saying.

Yes.

Now, our first line of argument doesn’t involve a consideration of the Admiralty Rules at all because the argument is this, that the United States has a right which is founded on statute and finds support in decisions of the Court over many decades, its substantive right to withhold and apply when it is both debtor and creditor.

At that so, if there is such a power in the United States, then the courts are, of course, open to determine whether the United States had a valid claim, open to determine whether the United States had a proper basis for making this administrative setoff.

We say however if there is this right to withhold and apply when the United States is both debtor and creditor, one doesn’t reach any question under the Admiralty Rules because our defense then is that we’ve made satisfaction we paid.

It is a plea in the nature of satisfaction.

And we say in that situation, the — the controversy, the real controversy as the Court to put it in the somewhat similar New Haven case last term, the real controversy is whether the claim to — upon which the Government is resting when it says we’re applying what we owe you in satisfaction of what you owe us, whether that claim of the Government is a valid one.

Now, basically, the — the position of the respondent which we have to meet its basic objection to this line of argument, I think, is summed up by what is said at page 23 of the respondent’s brief.

And they quote Williston for the proposition that mutual debts do not extinguish one another either automatically or by manifestation of election of one party either agreement of the parties or judicial action is necessary.

And then they go on to say that lapse of time may borrow recovery on one-forth debt and leave the other still enforceable.Now, acknowledging that this may be the general rule, and we don’t think it would add exception, we don’t think it touches the question whether the United States has a statutory right to make it administrative setoff without agreement of the other party when it is both debtor and creditor.

Now, such a right is not unknown, we think, to private party relationships.

A primary example of it in the common law is what is often times referred to as the banker’s right of setoff.

I think it’s settled in almost every jurisdiction in this country perhaps in all that if a bank holds my note and I’m delinquent on it or to demand note, and I have a deposit with the bank that the bank may apply that deposit in satisfaction of my obligation on the note.

If I think that the bank has made a mistake and that I’m not obligated on my note and I sue to get my deposit from the bank, the bank has a good defense if it can show that it in fact had a valid enforceable claim against me based on the note.

Now, we think this is analogous — excuse me.

Charles E. Whittaker:

(Inaudible) but I have no trouble here and that is the rule, as you denounce it, I had a (Inaudible) and to the extent they (Inaudible) a pro tanto discharge of that.

Now, would it be fair that (Inaudible) announcement of the judges to make findings but only the (Inaudible) rent is not liquidated.

Ralph S. Spritzer:

That’s quite true, Your Honor.

And I think it is, Your Honors, quite correct in suggesting that in most jurisdictions at least the banker’s setoff is limited to liquidated debts.

And I am imposing that by way of an analogy to — to illustrate the kind of power which we are claiming.Obviously, we must rest upon statutes which pertain to the United States and decisions which pertain to it.

Now, turning then from the — this private banker illustration to the public banker, to the position of the Comptroller General of the United States.

We believe there’s a long tradition which finds its counterpart in continental law countries as well as at common law that the sovereign may settle accounts between itself and those with whom it deals in the situation where it finds itself both debtor and creditor.

And that goes back that power at least to the — so far as statutory basis is concerned, to at least to 1817 when Congress enacted the predecessor of 31 U.S.C. 71 upon which we here rely.

And that statute provides broadly that all claims or demands by or against the United States Government shall be settled and adjusted in the General Accounting Office.

Charles E. Whittaker:

(Inaudible)

Ralph S. Spritzer:

Yes.

I think it has been construed time and again as giving a power entirely beyond the power to adjust between different departments of the Government, a power to settle where the Government is both creditor and debtor and where there is a dispute between the private party involved.

Charles E. Whittaker:

Is that why (Inaudible)

Ralph S. Spritzer:

Yes.It has — has been so applied.

This, I would like to make perfectly clear, does not suggest that the adverse party can’t secure a full determination by the Court as to whether the Government’s claim which gives it — its asserted basis for withholding as a valid claim.

I’m —

Charles E. Whittaker:

(Inaudible)

Ralph S. Spritzer:

No, I think the Government has a quite independent power in Section 227 to withhold payment of judgments.

And I think that’s quite apart from 31 U.S.C. 71 and the cases which have relied on 31 U.S.C. 71.

At least since the McKnight case in 98 U.S., we think the Court has repeatedly indicated or held that the Government has the authority and as the Court has indicated the duty to set off one against the other when it is both debtor and creditor.

More recently in the Munsey Trust case, the Court used the language that when the Government acts under this Code Section, it strikes a balance between the debts and credits of the Government.

Now, what happens when the Government follows this practice which has been traditional with the General Accounting Office?

Well, normally, the complaining party filed a complaint if he doesn’t acquiesce that the Government has a basis for withholding in which he alleges that the Government’s claim, the claim upon the basis of which it made the deductions is invalid and that issue gets determined.

That, for example, was the situation in the Alcoa Steamship case which we cite in our brief, a case which was before the Second Circuit and later came here.

In that case, the Government paid a freight bill which was submitted by Alcoa and later on decided that the maritime freight had not in fact been earned.

It then withheld an equivalent amount in paying a subsequent bill.

Alcoa sued upon the subsequent bill reciting the facts as to both transactions.

And Judge Learned Hand in the Court of Appeals said in that case that the question in the case, I think one may interpolate only, the only question in the case was whether the United States overpaid when it paid the first bill.

Now, we’re, of course, not questioning that the Government made itself liable under the suits in Admiralty Act or amenable to the ordinary admiralty practice.

What we are suggesting is that the suits in Admiralty Act doesn’t touch the question whether the Government has what we urge to be this long settled power to settle and adjust debts in a manner I’ve indicated.

Felix Frankfurter:

Could you clear up one thing for me?

Am I right in understanding that the Government contends or rather does not contend that the legality or correctness of its claim has the validity of the claim or the amount of the claim could all had been settled in this libel suit?

Ralph S. Spritzer:

That is our contention.

Yes.

That it all should have been settled —

Felix Frankfurter:

I mean that the —

Ralph S. Spritzer:

— in one litigation.

Felix Frankfurter:

Yes.

But most specifically that whether or not — was it audit a general — properly withheld could have been contested by the respondent in this case?

Ralph S. Spritzer:

Yes, but we say that there were — the — the Government acknowledged when it withheld that it owed the freight.

Owed the —

Felix Frankfurter:

Yes.

Ralph S. Spritzer:

— money on the freight bill.

The Government said, “We’re holding that money in satisfaction of our claim for additional charter hire.”

We say when Isthmian does not acquiesce in our view that we can properly withhold and apply that the real complaint, the real subject matter of the litigation is whether we have a basis for withholding in applying.

Felix Frankfurter:

Let me put it more concretely to my simple mind.

The controversy here is whether this claim by Isthmian as against the claim by the Government unrelated, if you please, unrelated claim, all been settled in this single litigation or whether the Government owing this thing should have paid and then brought a separate suit for its claim.

Ralph S. Spritzer:

That is —

Felix Frankfurter:

That was the controversy then.

Ralph S. Spritzer:

That is what the controversy —

Felix Frankfurter:

It’s all it is about, is it?

Ralph S. Spritzer:

That’s what this is about.

That’s all.

Felix Frankfurter:

And the claim is that something inherent in admiralty precludes this thing from being settled in a single litigation.

Ralph S. Spritzer:

Yes.

Potter Stewart:

Is that right?

Ralph S. Spritzer:

Now, I have been, up to this point, contending that this was properly a matter of affirmative defense that it was in the nature of a plea of satisfaction or payment.

If it was that, then nobody would doubt that it was within the admiralty jurisdiction.

Now, let me get to the further — to the other side of —

Felix Frankfurter:

That’s a — that’s a claim, that’s an argument that was — was appealed to (Inaudible) let us say (Inaudible) I mean what difference?

That’s — that’s a legal technical thing, isn’t it?

Ralph S. Spritzer:

Is it —

Felix Frankfurter:

(Voice Overlap) the Court is in satisfaction or not.

Ralph S. Spritzer:

It is a technical matter but in this instance, the technical argument, as it were, enables the Court to deal with the reality and not with the mere formality that it enables the Court to decide the one issue, the only issue that’s really in dispute between the parties.

Felix Frankfurter:

Namely, whether you all —

Ralph S. Spritzer:

Namely, whether we have a good claim for additional charter hire.

William J. Brennan, Jr.:

Tell me, Mr. Spritzer —

Ralph S. Spritzer:

Yes.

William J. Brennan, Jr.:

— does it made any difference, a matter of burden of proof or any other practical phase of the lawsuit that the Government should have to sue separately rather than to maintain this — this counterclaim in this case?

Ralph S. Spritzer:

I think in this case probably the only practical difference is that the result reached below requires a multiplicity of litigation rather than a single one.

Felix Frankfurter:

You haven’t even the disturbing factor, jury trial or not in this case?

Ralph S. Spritzer:

That’s right.

Ralph S. Spritzer:

And that brings up to the point —

Of course, you haven’t got any statute of limitation’s point.

Ralph S. Spritzer:

In this case.

That’s right.

But if you’re right in a case where the statute of limitation is involved, that the Government has this power to apply so as to enable it to set up a defense of payment, it could do that even though the statute limitations had run on its affirmative claim if it had chosen to sue separately?

Ralph S. Spritzer:

I would suppose that that would depend upon —

That’d be a (Voice Overlap) —

Ralph S. Spritzer:

— the statute and how you construe it —

Yes.

Ralph S. Spritzer:

— as to whether the statute applies —

So it does —

Ralph S. Spritzer:

— to the claims or to lawsuits.

It may be a procedural quirk in this instance but it does have consequences —

Ralph S. Spritzer:

It does.

— that leave behind this, doesn’t it?

Ralph S. Spritzer:

It does.

May I point out —

Felix Frankfurter:

Does it need to have those consequences?

Ralph S. Spritzer:

Pardon, sir?

Felix Frankfurter:

Does it need to have those consequences?

Ralph S. Spritzer:

Well —

Felix Frankfurter:

The mere fact that you allow this to be settled in one suit doesn’t disallow you to say, of course, it must be a billing claim and not one which is told as to which the statute has filed the claim.

Ralph S. Spritzer:

Well, let me point, if I may, to — to this practical consequence, Your Honor.

If we suppose, and this is not the case here, that the Government is subject to a one-year or two-year statute of limitation, if that so and the General Accounting Office follows its usual practice and withholds payment on a subsequent bill because it has a preexisting claim, if we do that and our action of withholding is not available to us as a defense but must be asserted as an — as the basis of an independent suit, we cannot afford to rest and wait to be sued.

We cannot wait until our action of withholding is challenged because time may run out.

In other words, we may be required to give up this method of adjusting.

And — and the Government is involved in multiple transactions, of course, with all of these major shipping companies.We may have to go ahead and make sure that we bring suit on every claim which involves a point of difference rather than wait for the other party to decide to what extent it’s going to challenge the Government’s action and withholding.

Felix Frankfurter:

But that doesn’t quite or does it reach my suggestion, my feeling that the mere fact if you’re allowed to settle it all in one litigation for the right to challenge judicially, the rightness of, whatever you call it, counterclaim setoff —

Ralph S. Spritzer:

Yes.

Felix Frankfurter:

— ought not to enlarge the substantive rights of the Government on what they would be if the Government had to sue independently?

Ralph S. Spritzer:

Well, our initial argument is that the — we are not seeking to enlarge that —

Felix Frankfurter:

Well, if the statute of limitation —

Ralph S. Spritzer:

— that the Government has —

Felix Frankfurter:

— if Justice Harlan’s suggestion prevails for the instance that the possibility of what he suggested.You would enlarge it if a suit by the Government would have a good defense of the statute of limitations, that defense ought not to be (Inaudible) because you set it off in a — in a libel suit by the —

Ralph S. Spritzer:

That’s right.

But our first —

Felix Frankfurter:

— libelant.

Ralph S. Spritzer:

— our first line of argument is that we are not seeking to enlarge the Government’s powers but are resting on what we believed to be a statutory power which has a long history.

But the —

Felix Frankfurter:

Yes.

But —

Excuse me.

Felix Frankfurter:

But I was construing that statute — that statute not to give power to the Accounting Office to get something by way of setoff which they couldn’t get by way of independent suit.

Ralph S. Spritzer:

Well, in this —

Felix Frankfurter:

That would — that’s the construction of the statute I’m suggesting.

Ralph S. Spritzer:

Yes.

I think that it gets back to it, Mr. Justice.

Yes, but your argument is that one of the virtue, one of the arguments in your favor is that it does permit the Government to deal as a practical matter with the enormous amount of business it has not to worry about the statute of limitations.

Ralph S. Spritzer:

Well, in most instances — in many instances, I should say, the Government does not have to worry in any event because it’s not subject to a —

No —

Ralph S. Spritzer:

— specific statute —

— but the —

Ralph S. Spritzer:

— (Voice Overlap) such case.

Yes.

Ralph S. Spritzer:

The — the Grace Line’s case did involve a statute of limitations question.

That is, I suspect, the — the more unusual rather than the customary.

Felix Frankfurter:

Mr. Spritzer, you’re usually very unequivocally clear but I do not yet know whether you’re contending, though this isn’t in this case, that by virtue of this statute, a stale claim, i.e. one that could not be sued upon, could be used to wipe out a claim against the Government.

That you read the statute so as to dispense, so as to told the statute of limitations that otherwise would be there.

Ralph S. Spritzer:

Well —

Felix Frankfurter:

Now, what is meant?

Ralph S. Spritzer:

— in this case, there is no question —

Felix Frankfurter:

There’s no problem.

Ralph S. Spritzer:

— of the stale claim because there’s no statute of —

Felix Frankfurter:

All right.

Ralph S. Spritzer:

— limitations to apply.

If the Government does have this power to withhold and there is a statute of limitations applicable, then, I think, one would have to construe that statute in order to decide whether the statute not only relates to the filing of suit but also relates to administrative action by way of effectuating an administrative setoff.

Now, I — I don’t think the Court has resolved — has had occasion to deal with that second possibility.

Felix Frankfurter:

Has not had?

Ralph S. Spritzer:

No.

Does the —

Felix Frankfurter:

It’s not merely the statute of limitation if you forgive me.

It’s not merely statute of limitation but other defenses.

I don’t have to read this statute as a personal advice.

I see no reason for reading it so as to lift all defenses that would be available against the Government if separate suits were brought —

Ralph S. Spritzer:

I know —

Felix Frankfurter:

— in case it’s a — in case it’s a defense.

Ralph S. Spritzer:

I know of no possible effect which this — which deciding this case in one lawsuit could have upon the respondent’s rights —

Felix Frankfurter:

In this case.

Ralph S. Spritzer:

— in this litigation.

Now, the only other possible question is the operation in unrelated — in other situations of the statute of limitation.

I don’t see how it would affect any defenses which go to the merits at all or burden of proof for that matter.

Felix Frankfurter:

Fraud overreaching would be a good defense assumed — assumed for the moment that that limitation has gone the other way.

That would be a good defense if brought separately.

Now, I don’t see no reason why one should construe the statute so as to erase all such defenses.

Ralph S. Spritzer:

I — I can’t see how the opposing party would be any more limited if it had to set out its claim in — its full claim in its libel other than — than that it is at present.

The — the fact of the matter is that — that Isthmian in the Court of Claims said the Government is not paying us because it’s withholding on the basis of a groundless claim.

When it got to the District Court, it said the Government is not paying us —

Felix Frankfurter:

I understand.

Ralph S. Spritzer:

— then.

At that point, the Government said, “Well, this is the full story.”

Ralph S. Spritzer:

And we pleaded the additional facts in our answer, and we failed to see why the Court can’t make as full disposition by reading both sides pleading as it can in the situation where the full story is told in the libel by the moving party.

Charles E. Whittaker:

May I ask you in that connection then?

What effect does it give to the local rules that in the admiralty courts (Inaudible)

Ralph S. Spritzer:

Well, our — our first argument, as I’ve attempted to indicate, is that the rules do not apply because this is a matter of defense.

Charles E. Whittaker:

Yes.

Of payment.

Charles E. Whittaker:

Of payment.

Ralph S. Spritzer:

That’s right.

Satisfaction or (Voice Overlap) —

If it’s construed as payment —

Ralph S. Spritzer:

— in the nature of satisfaction (Voice Overlap)

— then it’s necessary — if it’s construed as payment, then I suggest it necessary carries the consequence that in a statute of limitations case, the statute is to be construed this way.

The statute is in no effect as against the Government (Voice Overlap) —

Ralph S. Spritzer:

I — I would think that that would depend upon a construction of the particular statute, Your Honor.

I — I agree that it might have consequences from the standpoint of limitations problem.

Now, our — our argument on the rules is that admiralty’s reluctance to hear independent counterclaims and the reasons which prompt that have no application to a situation where there are only two parties, no third party rights, where there’s only one real matter in dispute and that matter is admittedly a maritime matter.

And we think if the rules are to be — are construed as barring the local rules, as barring a full disposition of the controversy in that situation, that they would run counter to the basic policy of the general admiralty rules which is to promote the effective and fair disposition of maritime matters in a single case.

I am going to have to rest as to the interest question on the Government’s brief, Your Honor.

Earl Warren:

Mr. Rinehart.

Clement C. Rinehart:

Mr. Chief Justice, may it please the Court.

The argument for the United States has obscured the only question presented by the record produced to its real substance.

The sole question presented is merely this.

Whether as both the District Court and the Court of Appeals held suits against the United States in admiralty shall, as Section 3 of the Act expressly requires, proceed and to be heard and determined according to the principles of law and to the rules of practice obtaining in like cases between private parties.

That’s the express language of the statute.

The District Court, applying a rule of practice regarding setoffs which would unquestionably guard in a suit between private parties, sustained exceptions to the answer of the United States which have admitted the claim in the libel but have sought contrary to the rule to set off a claim of the United States against the respondent which was wholly unrelated to the contract upon which the libel was based.

Felix Frankfurter:

Am I barred by decisions of this Court to hold that this kind of a case between private parties was not allowed the defense that was — to be adjudicated in this libel suit?

Clement C. Rinehart:

There are 31 decisions all uniform on the point in the various circuits where maritime cases have been dealt within.

They’ve been the rules since about 1832 at least when Mr. Justice Story —

Felix Frankfurter:

That may be the trouble.

Clement C. Rinehart:

Well, perhaps it is.

Clement C. Rinehart:

But the point that I’m making is that it is the rule and that the only way in which a — a rule of practice in admiralty may properly be changed is to follow the statutory procedure laid down in Title — in Section 2073, which I’ve quoted in the brief.

Just as you have to have certain procedures to change the rules of civil practice or — well, they’re all equity and law oppose together in the civil suits now.

You —

Felix Frankfurter:

What is the — what is the controlling case to which you would refer holding that non-related — that the defense not arising out in the same transaction can’t be dispose of in a single libel suit?

Clement C. Rinehart:

There is no case one way or the other in this Court, Your Honor, but the —

Felix Frankfurter:

(Voice Overlap) —

Clement C. Rinehart:

— there are 31 decisions which I cited in the margin of pages 12 — 13 and 14 of my brief and many of them in the Courts of Appeals and many of them quite recent ones.

Felix Frankfurter:

Well, I am a little troubled as I used to think that admiralty was very advance in its —

Clement C. Rinehart:

Well —

Felix Frankfurter:

— procedural way.

Clement C. Rinehart:

— of course, as Your Honor will recall, setoff is the — is the creature of statute.

It — it wasn’t something that existed all the time.

It’s been cut down by admiralty.

The — the — it’s the other way around.

The statute have set off — enlarge what was the rule in common law proceedings.

And it wasn’t until 1910 when the equity rules were changed to permit.

Up until 1910, equity was like admiralty as now.

And there was a statutory rule changed by rule merging.

Felix Frankfurter:

But haven’t we have — haven’t we saw change that rule outlaws that one might say a progressive body of law like admiralty would have absorbed it by now without formal absorption.

Clement C. Rinehart:

Well, I — I don’t think so, Your Honor, because admiralty presents very particular situations which do not exist in either law or in equity.

And I tried to set out in — on pages 15 and 16 of my brief some of the considerations which make it a special situation in admiralty.

But the point that I am making is that the rule does exist and that the statutes —

Felix Frankfurter:

Or obey.

Clement C. Rinehart:

— have said that they only may change the rule by the rulemaking procedures that are specified in the Title 28, Section 2073.

Felix Frankfurter:

This Court —

Clement C. Rinehart:

I beg your pardon, sir?

Felix Frankfurter:

This Court the next Monday enunciated new Admiralty Rules.

Clement C. Rinehart:

Well, they could enunciate a new Admiralty Rule so I suppose if you disregard the fact that the statute says that they have to be proclaimed in a certain way before this session of Congress begins to take effect 90 days after —

Felix Frankfurter:

(Voice Overlap) —

Clement C. Rinehart:

— being announced and things of that sort that —

Felix Frankfurter:

That is put by Admiralty Rules too, isn’t it?

Clement C. Rinehart:

Yes, sir.

That is expressly the — the section that deals expressly with changes in the Admiralty Rules.

And all I’m saying is right or wrong the rule exist and the suits in Admiralty Act requires that it’d be observed and —

Felix Frankfurter:

None of their rule that expressly — is there a specific rule governing this situation?

You read the general rule.

And that general rule like (Voice Overlap) —

Clement C. Rinehart:

It’s a —

Felix Frankfurter:

— statutes that have grow with time or sought new conditions.

Clement C. Rinehart:

It’s not only a general rule announced in these uniform decisions throughout the admiralty courts of the country from their very inception but also, it is recognized in the general rules of this Court in Rule 44 of the General Admiralty Rules and in the —

Felix Frankfurter:

The general rule, not that it should be in accordance with but is there an admiralty rule that specifically deals with the problem of this kind of a defense not allowed?

Clement C. Rinehart:

Well, if Your —

Felix Frankfurter:

Is there a specific rule?

I’m not saying you’re not right on the general proposition.

Clement C. Rinehart:

It — by that —

Felix Frankfurter:

I want to know if there’s a specific rule dealing with this problem.

Clement C. Rinehart:

Well, Your Honor, perhaps, I don’t understand but do you mean a — a specific statement in the rules as promulgated now by this Court?

There is no such actual —

Felix Frankfurter:

But is there — is there a specific rule of the Southern District of New York dealing with —

Clement C. Rinehart:

Yes, Your Honor.

Felix Frankfurter:

— this very problem?

Clement C. Rinehart:

Yes, Your Honor.

That’s quoted.

Felix Frankfurter:

Where is it?

Clement C. Rinehart:

That’s quoted right on the — in my brief.

Felix Frankfurter:

What page?

Clement C. Rinehart:

No, it’s in the Government’s brief.

Excuse me.

William O. Douglas:

That’s the one you read at the beginning of your argument?

Clement C. Rinehart:

Yes.

Felix Frankfurter:

But that’s — that’s what I call a general rule, Mr. Rinehart.

Is there a rule which says —

Clement C. Rinehart:

Rule 16, page 4, Your Honor.

It’s a — it’s a different (Voice Overlap)

Felix Frankfurter:

Is there a rule which says that no setoff can be allowed except arising out at the same transaction?

Clement C. Rinehart:

Well, it’s been repeated in decision from time to time.

They are saying that — there’s no jurisdiction in admiralty to consider an unrelated setoff.

Felix Frankfurter:

I’m not denying that.

And that may be binding on me.

But I regard it as a general rule and not a rule that specifically deals with this problem.

Clement C. Rinehart:

Well, you mean related to government suits, Your Honor?

Felix Frankfurter:

No, any suit.

Is there a rule that deals with setoff and counterclaims?

Is there a statute — is there a rule promulgated by the District Court —

Clement C. Rinehart:

Yes, Your Honor.

Felix Frankfurter:

Where is it?

Clement C. Rinehart:

In the — that’s Rule 16.

You — I don’t understand Your Honor’s distinction between a —

Felix Frankfurter:

(Voice Overlap) —

Clement C. Rinehart:

— general rule and —

Felix Frankfurter:

All right.

Clement C. Rinehart:

— and a rule.

That’s a rule.

Felix Frankfurter:

Well, you — you point me to Rule 16.

All right.

Earl Warren:

We’ll recess now, Mr. —

Clement C. Rinehart:

Yes, Your Honor, and also Rule 44.

Earl Warren:

We’ll recess now.