DEAN WITTER REYNOLDS, INC. v. FERNANDEZ

CLARK, Circuit Judge:

Appellant, Gilbert McDonald, appeals from a final judgment entered November 2, 1982, awarding two Cuban government corporations, Banco Nacional de Cuba and Empresa Cubana Exportadora de Alimentos y Productos Varios (hereinafter "CUBAEXPORT"), a judgment in the sum of $1,334,250 against McDonald and dismissing his counterclaim. The district court had previously granted the Cuban parties' motion for summary judgment on the ground that McDonald had been unjustly enriched by receipt of his portion of the proceeds of a fraud committed against the Cuban parties. On appeal, McDonald argues that the Cuban parties' failure to comply with the Cuban Assets Control Regulations1 and obtain authorization to sue from the United States Department of Treasury prior to commencing the action deprived the district court of subject matter jurisdiction and, therefore, the judgment is void.2 We have jurisdiction. 28 U.S.C. § 1291 (1982).

I.

A.

In an effort to stifle Cuban efforts to destabilize governments in the Western Hemisphere, the President, on July 8, 1963 issued the Cuban Assets Control Regulations (hereinafter "Regulations"). The Regulations, originally promulgated pursuant to § 5(b) of the Trading With the Enemy Act3 (TWEA) but now authorized by the International Emergency Economic Powers Act of 1976,4 prohibit all unlicensed financial and commercial transactions with Cuba or Cuban nationals.5 A "transaction" generally includes "[a]ny payment or transfer" of property to Cuba or a national thereof.6 More specifically, a "transfer" includes "the issuance, docketing, filing, or the levy of or under any judgment, decree, attachment, execution, or other judicial or administrative process or order."7

The Regulations, in connection with § 5(b) of the TWEA,8 make it unlawful to effect any of the described transactions unless a license authorizing the transaction has been issued by the Office of Foreign Assets Control acting on behalf of the Secretary of the Treasury or by the Federal Reserve Bank of New York.9 Licenses can be either general or specific. A general license authorizes a broad class of transactions which the Regulations would otherwise prohibit. All general licenses are set forth in Subpart E.10 A specific license authorizes an individual transaction not authorized by a general license.11 Any person having an interest in a transaction or proposed transaction may apply for a specific license.12 The Office of Foreign Assets Control considers applications on an individual basis and advises each applicant of its decision. The decision to approve or disapprove the application constitutes final agency action.13

B.

On January 10, 1979, Dean Witter Reynolds, Inc. (hereinafter "Reynolds"), a brokerage firm, filed a complaint in interpleader naming Banco Nacional de Cuba and CUBAEXPORT as defendants along with Karl Fessler and others. Banco Nacional de Cuba and CUBAEXPORT are wholly owned corporations of the Government of Cuba with offices in Havana, Cuba.

Reynolds alleged that the defendants had made conflicting claims to the funds and securities standing in Fessler's name on its books and that it was unable to determine to whom the funds and property were due and payable. In a February 9, 1978 order, the district court found that Reynolds' complaint stated a proper claim for interpleader and that the court had jurisdiction over the action. On October 15, 1979, the court ordered Reynolds to use the balance in Fessler's cash credit account to purchase shares in a money market fund in the names of the Clerk of the United States District Court for the Southern District of New York and Karl Fessler, and to deliver the money market shares and the other securities held by it for Fessler's Reynolds account to the Clerk of the Court. The Clerk was ordered to maintain same and all dividends resulting therefrom in his custody subject to further order of the court.

In response to the February 9, 1978 order, Banco Nacional de Cuba and CUBAEXPORT, jointly, and Karl Fessler filed claims to the fund; none of the other parties did. The Cuban parties also filed a cross-claim against the defendants Fessler and Tanvest, N.V., naming Peter Franklin Paul and the appellant here, Gilbert McDonald, as additional defendants. On December 10, 1979, the court denied the motions of Paul and McDonald to dismiss the cross-claims for want of jurisdiction and other grounds. 489 F.Supp. 434.

The same allegations of fact and law supported the Cuban parties' claim to the interpleaded fund and their cross-claim. Banco Nacional de Cuba and CUBAEXPORT alleged that McDonald, Fessler and Paul, together with others, successfully defrauded them of the proceeds of a letter of credit in the sum of $8,775,000. In essence, they alleged that the defendants on the cross-claim, knowing and intending that there would be no shipment of coffee, induced CUBAEXPORT to enter into a purchase contract which provided for payment of the coffee in advance of delivery. They further alleged that these defendants induced Banco Nacional de Cuba to issue a letter of credit at the request of its customer, CUBAEXPORT, for the payment of the purchase price of the coffee upon presentation of documents manifesting that the coffee had been loaded on board a vessel in a port of the Dominican Republic bound for Havana, Cuba; that they knowingly caused documents to be presented under the letter of credit falsely representing that the coffee had been loaded as required by the contract and the letter of credit; and they thereby induced Banco Nacional de Cuba through its agent to issue the letter of credit in the sum of $8,775,000.14

McDonald asserted a counterclaim alleging that the Cuban parties had tortiously caused Banco de Iberoamerica of Panama City, Panama, to deliver to them a $700,000 certificate of deposit owned by McDonald. On January 24, 1980, the Cuban parties filed a reply alleging that the certificate of deposit had been delivered to them by order of the Attorney General of Panama. They maintained that the act of state doctrine barred a court of the United States from entertaining the counterclaim in those circumstances and, further, that they were not liable as a matter of substantive law even if the merits of the counterclaim were reached.

On February 23, 1982, the Cuban parties filed a motion for summary judgment. On October 1, 1982, the district court granted the motion, concluding that Banco Nacional de Cuba and CUBAEXPORT were entitled to summary judgment against McDonald and Fessler on the theory of unjust enrichment15 and that McDonald's counterclaim was without merit. Accordingly, the court ordered that the Cuban parties have judgment against McDonald for the sum of $1,334,250, this amount being equal to the portion of the letter of credit proceeds McDonald had obtained. With regard to Fessler, the court awarded a constructive trust in favor of Banco Nacional de Cuba and CUBAEXPORT over property within the jurisdiction traceable to the letter of credit proceeds, viz. the interpleaded fund and certain other tangible property. In addition, the court awarded judgment against Fessler in the sum of $276,396, that amount being equal to the portion of the proceeds received by Fessler which he had not invested in the brokerage account or tangible property within the jurisdiction. On November 2, 1982, the court entered a final judgment consistent with its disposition of summary judgment. McDonald filed a notice of appeal on November 24, 1982.

Subsequently, appellees apparently became concerned over the lack of Treasury Department authorization of their actions in the U.S. District Court. Probably out of an abundance of caution, on April 22, 1983, appellees' counsel contacted by letter the Office of Foreign Assets Control, requesting that a license be issued with respect to the action captioned Dean Witter Reynolds v. Fernandez v. McDonald & Paul, No. 79-112 CIV-CA (S.D.Fla.). On May 12, 1983, the office issued license No. C-10024, authorizing the following:

The license further provided that the authorization extends "retroactive[ly] to the date of the filing of the Reynolds action [i.e., January 10, 1979]."

Appellant raised no challenge to the jurisdiction of the district court based on the absence of a license issued prior to filing suit until the case reached this court.

II.

This appeal presents both important substantive and procedural issues. The substantive question presented is whether a Cuban national must obtain a license pursuant to the Cuban Assets Control Regulations before initiating an in personam lawsuit in a U.S. court. The threshold procedural question is whether this question can be raised for the first time on appeal.

In determining these issues, the nature of a Treasury Department license must be resolved. Appellant argues that the license is jurisdictional in nature. If it is jurisdictional, appellant suggests that he should prevail on both the procedural and substantive issues before this court. First, appellant contends that the issue has not been waived by failing to raise it in the district court because questions of subject matter jurisdiction can be raised at any stage of the proceedings. Second, appellant submits that even though a license was issued retroactively, the proceeding was a nullity because the license was a jurisdictional prerequisite, and jurisdiction is to be determined at the time of filing suit. Appellees adduce that the license is not essential to establish subject matter jurisdiction and further that no jurisdictional doctrines preclude retroactive effect for the license. Appellees additionally maintain that appellant has waived the issue by failing to raise it below.

Whether a license which would authorize judicial proceedings involving Cuban nationals in U.S. courts has jurisdictional implications is unclear.16 We find that such a license is not jurisdictional in nature and that a federal district court has jurisdiction to entertain a suit such as the one here. The effect of the Regulations is to prohibit, as a matter of the Executive's discretion in the area of foreign affairs, the federal district courts from entering any order or judgment that can be the basis for a transfer of property or funds to a foreign country or foreign national subject to TWEA, unless the Treasury Department has issued the appropriate license.17 Before reaching this holding, however, we must overcome the procedural bar to addressing nonjurisdictional questions for the first time on appeal.

A.

Except for questions concerning the power of the court to order relief,18 an appellate court generally will not consider a legal issue or theory unless it was presented to the trial court.19 This principle is not a jurisdictional limitation but merely a rule of practice,20 and "[t]he decision whether to consider an argument first made on appeal ... is `left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases.'"21 The courts of appeals have identified certain exceptional circumstances in which it may be appropriate to exercise this discretion and deviate from this rule of practice. First, an appellate court will "consider an issue not raised in the district court if it involves a pure question of law, and if refusal to consider it would result in a miscarriage of justice."22 Second, the rule may be relaxed where the appellant raises an objection to an order which he had no opportunity to raise at the district court level.23 Third, the rule does not bar consideration by the appellate court in the first instance "where the interest of substantial justice is at stake."24 Fourth, "a federal appellate court is justified in resolving an issue not passed on below ... where the proper resolution is beyond any doubt."25 Finally, it may be appropriate to consider an issue first raised on appeal if that issue presents significant questions of general impact or of great public concern.26

The instant case meets the requirements of the "great public concern" exception. McDonald appeals from a summary judgment in which the district court ordered that two Cuban nationals have judgment in the amount of $1,334,250. Bearing in mind that a principal purpose of the Cuban Assets Control Regulations was to deny Cuba access to American dollars which could finance acts of aggression or subversion,27 this issue is of great public concern. If we were to decline to reach the effect of the Cuban parties having failed to comply with the Regulations prior to filing suit, a vacuum would be left with respect to whether a license is required to invoke federal court jurisdiction under facts such as we have here. Thus, we shall address appellant's claim even though he failed to raise it below.

B.

Appellant claims that the district court's order that the Cuban parties have judgment against appellant effects a transaction or transfer of property proscribed by the Cuban Assets Control Regulations. Because the Cuban parties did not obtain authorization from the Treasury Department prior to filing suit against appellant, appellant argues that the proceedings were a nullity. Without expressing any opinion as to the validity of a retroactively issued license,28 we find no merit in appellant's argument.

In the instant case, the Cuban parties asserted a cross-claim against appellant and obtained an in personam judgment for damages. The statute, the regulations and the cases which have examined the issue make clear that a Treasury Department authorization or license is not a prerequisite to initiating an in personam lawsuit. The Assets Control Regulations forbid only those judicial acts that transfer a property interest. Since an in personam lawsuit is merely an attempt to establish liability and fix damages so that one's interests will be protected until a license is secured or until the Regulations are suspended, the action does not focus on any particular property within the jurisdiction.

Although in this case Reynolds paid a fund into court in an interpleader action, the litigation between appellant and appellees was in personam. It was not until after judgment that a transfer of property became possible. Entry of judgment triggered the application of the Regulations because of the nationality of appellees, and all subsequent proceedings to enforce the judgment must therefore be licensed. In Tagle v. Regan, 643 F.2d 1058 (5th Cir. Unit B 1981), the government argued that Propper v. Clark, 337 U.S. 472, 69 S.Ct. 1333, 93 L.Ed. 1480 (1949), prohibited a Florida trial court from entering an order that determined that three children of the deceased, one of whom was a citizen and resident of Cuba and therefore a designated national subject to the Cuban Assets Control Regulations, were entitled to one-third each of the decedent's estate. The government read certain language from Propper broadly to mean that, in the absence of a license, "any judicial transfer of assets is barred." While this legal conclusion urged by the government is correct, the court distinguished Propper on its facts, stating that

643 F.2d at 1067. Other courts have taken the same approach in construing analogous regulations concerning Iran,29 Vietnam,30 and Germany and other access countries.31 Thus, the conclusion seems clear that no license need be obtained from the Treasury before initiating an in personam suit which merely establishes liability and fixes damages.32 While a license is not necessary to litigate, a district court should not enter judgment in a form that would permit a foreign national plaintiff to levy upon property or collect funds when that plaintiff is prohibited from transferring assets out of this country by TWEA. It is at that point that plaintiff must secure a license.

III.

Appellant's contentions have no merit, and the judgment of the district court accordingly is

AFFIRMED.