Mr. HALBACH. Millions. Ours was not $2 million and theirs was $50 million or $45 million.

Mr. NAIRN. Have you sold any dyes to date in competition with General Dyestuff Corp.?

Mr. HALBACH. We have sold some dyes in the market; yes, sir. Mr. NAIRN. In any sizable amount?

Mr. HALBACH. No; I don't think so. I wouldn't call it sizable. Mr. NAIRN. What do you mean by sizable or not?

Mr. HALBACH. Well, we haven't sold any ton lots or anything like that. We might have sold a barrel here or there or 200-pound lots, something of that sort.

Senator DIRKSEN. Mr. Hayes?

Mr. HAYES. Mr. Halbach, you heard the testimony which the chairman read attributed to Mr. Frye in which he used the term "raid," raiding the employees of the General Dyestuff Corp. Will you tell the committee the number of people now employed by Verona Chemical Co. who were former employees of General Dyestuff?

Mr. HALBACH. You mean in the Dyestuff division?

Mr. HAYES. Yes.

Mr. HALBACH. In the Dyestuff division we have, I think, 12, no more, of which approximately half might be considered better class workers and the other half would be stenographers, shipping clerks, or laboratory boys.

Mr. HAYES. Have you in the statement which you have submitted to the record told the story of how those people came to you? Mr. HALBACH. Yes, sir.

Mr. HAYES. Can you in a few sentences give the committee here your ideas of how those people came to you, how you acquired their services, or whether they came to you voluntarily or otherwise?

Mr. HALBACH. We didn't talk to anybody who was not unhappy where he was. Either he told us himself or he sent word. We didn't pay anybody more than they were getting in their General Dyestuff position. They all had to sacrifice their pension because we did not have a pension plan. I think without exception they must have made, every one of them, some sacrifice to come with us.

Mr. HAYES. Do you know the names of those individuals offhand? Mr. HALBACH. You mean how to classify them?

Mr. HAYES. Those 12 you say came from General Dyestuff. Mr. HALBACH. No; I don't. We had a letter from General Dyestuff advising us about those 12 people and they talked about getting an injunction.

Mr. HAYES. Do you know whether they have instituted any sort of a program along that line?

Mr. HALBACH. I got a telephone message this morning from my son-in-law, who is vice president of the Verona Chemical Co., advising me the Newark Evening News had called him up and said there was a suit filed in the Newark Federal court or the Newark court by General Dyestuff Co. charging us with conspiracy and wanting a statement from me, if I would make one, because they had to have it by 11 o'clock because they were going to press. I said I would not make any statement.

Mr. HAYES. You have not been served in that suit?

Mr. HALBACH. That is right. Up until the time I came here no service had been made. I think it was an awfully childish small thing.

Senator DIRKSEN. Is there anything more?

STATEMENT OF JACK FRYE, PRESIDENT, GENERAL ANILINE & FILM CORP., ACCOMPANIED BY DONALD 0. LINCOLN, COUNSEL

Senator DIRKSEN. I do not know that there is too much we need venture into unless Senator McCarran has a question or Mr. Hayes or Mr. Nairn.

Mr. NAIRN. I have no questions.

Senator DIRKSEN. It ran in my mind you were going to make a suggestion as to how to meet this problem that we have before us at the present time, namely, to get this company back into private management. I wondered whether you had brought that suggestion along and care to venture that to us now or do you want Mr. Lincoln to come up?

Our whole hope is to liquidate this operation without having to take too many years in which to do it. Conseqnently, we have asked, I think, nearly every witness in and out of Government for any suggestions that they might have for the more expeditious liquidation of this activity. I wondered now whether you wanted to round out for us any observations or suggestions that you might have.

Mr. FRYE. I would like to suggest or present you with a draft of the suggested amendment to section 9 (a) which we discussed before. I would have a few other points I would like to mention.

Here is a copy of it if you would like me to read it.

Senator DIRKSEN. Is it long?

Mr. FRYE. It is fairly long, about four pages.

This is headed, "Proposed legislation." To amend section 9 (a) of the Trading With the Enemy Act, as amended. That section 9 (a) of the Trading With the Enemy Act, as amended, is amended by striking out the period at the end thereof and inserting in lieu thereof a colon and the following:

Provided further, That upon a determination made by the President, in time of war or during any national emergency declared by the President, that the interest and welfare of the United States requires the sale of any property or interest or any part thereof claimed in any suit filed under this subsection and pending on or after the date of enactment of this proviso the Alien Property Custodian may sell such property or interest or part thereof, in conformity with law applicable to sales of property by him, at any time prior to the entry of final judgment in such suit. No such sale shall be made until 30 days have passed after the publication of notice in the Federal Register of the intention to sell. The proceeds of any such sale shall be deposited in a special account established in the Treasury, and shall be held in trust by the Secretary of the Treasury pending the entry of final judgment in such suit. Any recovery of any claimant in any such suit in respect of the property or interest or part thereof so sold shall be limited to the net proceeds of such sale, or, if more than one claimant, then to each claimant's proportionate share of the net proceeds of such sale, unless such claimant, within 60 days after receipt of notice of the amount of the net

proceeds of sale, or, if more than one claimant, then notice of the amount of claimant's asserted proportionate share of the net proceeds of sale, serves upon the Custodian and files with the court an election to waive all claims to the net proceeds and to claim just compensation instead. If the court finds that the claimant has established an interest, right, or title in any property in respect of which such an election has been served and filed, it shall proceed to determine the amount which will constitute just compensation for such interest, right or title, and shall order payment of the claimant of the amount so determined. An order for the payment of just compensation hereunder shall be a judgment against the United States and shall be payable first from the net proceeds of the sale in an amount not to exceed the amount the claimant would have received had he elected to accept his proportionate part of the net proceeds of the sale and the balance, if any, shall be payable in the same manner as are judgments in cases arising under section 1346 of title 28, United States Code. The Alien Property Custodian shall immediately upon the entry of final judgment notify the Secretary of the Treasury of the determination by final judgment of the claimant's interest and right to the proportionate part of the net proceeds from the sale, and the final determination by judgment of the amount of just compensation in the event the claimant has elected to recover just compensation for the interest in the property he claimed July 3, 1952.

This, sir, in explanation, was developed by our counsel who I believe attempted to get the best vises they could in various places as to a suggestion that would be constitutional and fair and reasonable and was, as I understand it, approved by the Attorney General last year, that is, Attorney General McGranery late last spring or early summer. That is what we would like to suggest along that line.

Senator DIRKSEN. I suppose your office has had opportunity to explore the constitutional aspects of such a proposal? Mr. LINCOLN. We have, sir.

Senator DIRKSEN. Have you any comment to make?

Then I would suggest in addition to any informal comment that you may have a supporting brief to file.

Mr. FRYE. We do have a memorandum opinion which we prepared at the time we were working on this legislation clause of the company's interest in it. I might just briefly state our conclusion. We are aware of the constitutional doubts with respect to this legislation and are also aware that it will probably be a close constitutional question. We concluded, however, that it would probably be held to be constitutional, particularly with the provisions that are in the proposed legislation. First, a finding by the President that the sale pending the disposition of the suit would be in the national interest. Second, that the claimant would have the option of receiving either the proceeds of the sale or just compensation.

Senator MCCARRAN. That embraces a full view in contemplation of the whole proceeding from the time of vestiture? Mr. FRYE. That is correct.

Senator MCCARRAN. Because the question of constitutionality of seizure of private property is very much involved there. I would want to give that a pretty close look as regards its constitutionality. Mr. FRYE. We have. We realize it is a close question. I think perhaps to save the time of the committee I might offer this memorandum opinion.

Senator DIRKSEN. I think it ought to be inserted at this point along with the proposed draft.

(The material referred to is as follows:)

I. THE LEGAL QUESTION

The question is whether Congress could lawfully authorize the Attorney General to dispose of vested property which is now being held pending the outcome of suits to establish the status of the former owners. Stated another way, the problem is whether Congress could constitutionally amend the Trading With the Enemy Act in such a manner as to limit persons, whose property has been vested, to an action for "just compensation" by eliminating the provision which permits former owners to seek the return of the property.

II. INTRODUCTION-INCLUDING A DISCUSSION OF THE PRESENT REMEDIES UNDER THE TRADING WITH THE ENEMY ACT

The Trading With the Enemy Act has two basic objectives: (1) To keep an enemy from using for his own purposes any property located within the United States which he owns or controls; and (2) to make that same property available for the purposes of the United States. In order to promote the first objective, the act provided "freezing controls" which prohibited transfers of the property affected, but did not change its ownership. We are not concerned with that aspect of the statutory scheme.

The second objective of the act, the utilization of the enemy property, is achieved by transferring the ownership of the property to the United States, there to remain unless the former owner can fit himself into one of the sections of the act which provide for return.

While the question of what interests may be vested is not directly involved in our inquiry, the close relationship of the provisions of the act indicates that a brief description of the sections permitting vesting may be helpful background for a discussion of the remedies available to one whose property has been erroneously vested.

Under section 7 (c) of the original Trading With the Enemy Act, operative during World War I, the President could seize and confiscate the property of an enemy or ally of an enemy. That provision is still a part of the act. At the outbreak of World War II, however, Congress authorized the seizure of another class of property by amending section 5 (b) of the act to enable the President to vest the property of any foreign national. Thus, friendly alien property as well as enemy property located in this country became liable to seizure. Furthermore, the act expressly provides that the Custodian's administrative determination of the status of the property owner shall be conclusive for purposes of initial transfer. This provision for summary seizure has consistently been held constitutional. See, for example, Commercial Trust Co. v. Miller (67 L. ed. 859 (1923)).

Recognizing the danger implicit in summary seizure, Congress provided in section 9 (a) of the original act a remedial procedure by which nonenemies could obtain redress for the sequestration of their property. As a part of the original act, section 9 (a) was the procedural complement of section 7 (c), and so its terms extend relief to a broad class of nonenemies. Specifically, it provided: "Any person not an enemy or ally of enemy claiming any interest, right, or title in any money or other property which may have been conveyed * * * to the Alien Property Custodian or seized by him *** may file with the said custodian a notice of his claim. ***Said claimant may institute a suit in equity *** to establish the interest, right, title, or debt so claimed, and if so established the court shall order the payment, conveyance ***. If suit shall be so instituted, then such money or property shall be retained in the custody of the Alien Property Custodian * * * until final judgment or decree shall be entered against the claimant or suit otherwise terminated" (50 U. S. C. sec. 9 (a)).

When Congress amended section 5 (b) of the act, in 1941, so as to permit the vesting of property belonging to foreign nationals, it neglected to amend section 9 (a). The result is that while the property of a foreign national can be vested, section 9 (a) seems to allow him to recover the property upon a mere showing that he is neither an enemy nor an ally. It is clear that Congress did not intend such a result. The Government took the position that the enactment of section 5(b) must be construed to have amended section 9 (a) to require that plaintiffs show that they were not foreigners, in order to recover.

Since section 9 (a) is the only section which provides for a judicial determination of the former owner's status, and since section 7 (c) expressly provides that "the sole relief and remedy of any person having any claim to any money

or other property * transferred to the Alien Property Custodian shall be that provided by the terms of the act," the friendly alien claimant has been enmeshed in a procedural dilemma.

In the course of the past few years, this quandary has produced extensive litigation, finally resulting in a pair of decisions by the Supreme Court: Silesian American Corporation v. Clark (92 L. ed. 81 (1947)); Clark v. Uebersee Finanz-Korporation (92 L. ed. 88 (1947)). The significance of the two cases, insofar as we are presently concerned, is that they brought the question of remedies under the act into sharp focus.

In both cases, the essence of the Government's contention was that foreign nationals who were free of enemy taint could bring suit under the Tucker Act (28 U. S. C. sec. 250, 1940) and that this form of redress would meet the constitutional objections to the retention of friendly alien property. In so arguing, the Government was considerably hampered by the fact that Congress had twice refused to pass legislation which would have specifically outlawed suits under section 9 (a) and relegated alien friends to actions for just compensation under the Tucker Act.

For example, H. R. 5089, 79th Congress, second session (1946), provided, in section 33 (a), that:

"A foreign country or national thereof may not institute, prosecute, or further maintain a suit pursuant to section 9 (a) hereof in respect to any property or interest vested in or transferred to the Alien Property Custodian *** or the net proceeds thereof. * * *"

Section 33 (b) provided that:

"Notwithstanding the provisions of section 7 (c) such persons shall have the right to bring suit in the Court of Claims for just compensation if so entitled under the fifth amendment."

This section was deleted by the House Judiciary Committee.

The bill, containing section 33, was reintroduced as H. R. 6890 and passed by the House with amendments not material here. However, the same section was deleted by the Senate Judiciary Committee. S. 2378, 79th Congress, 2d session (1946). The Senate report accompanying the bill explained the deletion, page 2, as designed to: "eliminate the proposal to cut off the right of a friendly foreign national to sue for and obtain return of his property under section 9 (a), (thus preserving) in full these rights under section 9 (a) which the friendly foreign national, together with the United States citizen, has had for more than 25 years under the act." (S. Rept. 1839, 79th Cong., 2d sess. (1946).)

The Senate bill as amended by the committee was passed by both Houses with a few Members expressing regret over the deletion of section 33. (92d Congressional Record 10628 (1946).)

In the Uebersee case the Supreme Court held that the Government's position was untenable and that Congress must have intended that friendly aliens were entitled to bring section 9 (a) suits. In reaching this result, both the circuit court of appeals and the Supreme Court relied upon the congressional rejection of the proposed amendment.

Therefore, redress for erroneous vesting is presently available under section 9 (a) to former owners who can show that they are neither enemies nor allies of enemies nor cloaks for enemy interests. If a former owner brings suit before the Custodian has disposed of the property, the Custodian's power of disposition is suspended, by the terms of the act, until the suit has been deter mined. If no action is commenced until the Custodian has already disposed of the property, the claimant is limited by section 7 (c) to a suit for the net proceeds."

The present inquiry deals with the constitutionality of altering the remedy presently available, so as to allow the Attorney General to dispose of the property even though actions are pending. The problem may be conveniently divided into two sections, the first dealing with the constitutionality of providing compensation as the exclusive remedy under the Trading With the Enemy Act, and the second, dealing with the constitutionality of amending the act to authorize the Attorney General to dispose of property over which suits are pending.

III. CONSTITUTIONALITY OF PROVIDING COMPENSATION AS THE EXCLUSIVE REMEDY UNDER THE TRADING WITH THE ENEMY ACT

The question with which this portion of the memorandum deals is whether Congress could have from the outset constitutionally restricted the remedy afforded by the Trading With the Enemy Act to just compensation.