15 March/April/May 2019 Federal Bar Council Quarterly

Developments fought for justice for all liti- very bright 11 and 12 year old gants. In 1937, he won an boys and girls at a south Bronx Ernest Collazo appeal overturning the con- elementary school. I met with viction of Angelo Herndon, my class weekly for an hour; Receives Whitney a young Black communist, and every other week, I would North Seymour Award convicted of violating Geor- bring with me an African gia’s anti-insurrection law, American or Hispanic part- By Pete Eikenberry largely because he had com- ner to show them how each of munist literature in his room. these partners broke the barri- er to become a successful big- As the president of the ABA time lawyer. Each individual and numerous other bar, civic, I brought with me was pep- and human rights organizations, pered with questions and each Seymour took time to mentor in- had a great time regaling them dividuals, including Judge Vys- with their individual stories. kocil and Collazo, both of whom became his partners at Simpson In his remarks, Collazo ex- Thatcher. Collazo recalled being pressed gratitude for his nomi- invited to confer with Seymour nation, first to his wife, Denice, “on how he was doing” when Col- then to Judge Dennis Jacobs, for- lazo had been an associate at the mer partner George Davidson, firm for only four months. and Judge William Kuntz. Judge Vyskocil noted that Collazo’s career as early presi- At the Federal Bar Council’s dent of the Puerto Rican Legal Winter Bench & Bar Conference Defense and Education Fund, his in Hawaii, my friend of 45 years, long term service on the First De- Legal History Ernest Collazo (whom I first knew partment Grievance Committee, as a fine point guard on a- law and his numerous civic and bar yer’s league basketball team) was services as well as his mentoring The Supreme Court awarded the Federal Bar Council’s of young students in the South Wrestles with the Gold Whitney North Seymour Award. Bronx emulated Seymour. Clause In presenting the award, Coun- As to mentoring, Collazo sel President Mary Kay Vyskocil stated that: By C. Evan Stewart gave tribute to the award’s name- sake, Whitney North Seymour. One of the most satisfying For decades, Seymour was activities I have undertaken one of two or three most promi- over these many decades has nent New York City lawyers. been the teaching of leader- Judge Vyskocil stated: ship skills to young boys and He was an expert in antitrust girls in the South Bronx. I laws and a recognized author- did that for the spring semes- ity in the field of civil liber- ter of 1971 when I graduated ties, arguing more than 50 early from college. Last year, cases before the United States almost 50 years later, I again Supreme Court. Mr. Seymour taught leadership skills, to 10 Federal Bar Council Quarterly March/April/May 2019 16

The greatest economic disas- 1932 to replace him a certainty. for economic revival was to bal- ter in our country’s history was It is interesting that Roosevelt’s ance the federal budget). undoubtedly the Great Depres- campaign rhetoric on how to dig Desperately trying to win sion. It also destroyed Herbert out of the crisis was vague and re-election, Hoover directly at- Hoover’s presidency, and made sometimes contradictory (for ex- tacked Roosevelt, warning the Franklin Roosevelt’s election in ample, one of his central tenets country that, if elected, his oppo-

Franklin D. Roosevelt campaigning in 1932. Photo courtesy of the Franklin D. Roosevelt Library archives. 17 March/April/May 2019 Federal Bar Council Quarterly nent would follow William Jen- of farm commodities. Although countries), there was a provision nings Bryan’s opiate and “issue there were many ways to per- known as the gold clause. This greenback currency.” haps achieve that goal over the meant that the contracting parties Hoover further warned that mid- to long-term, the way to do agreed to all debts being paid in that would inevitably lead to the that quickly was to (i) give up the gold or gold-equivalents. If these country going off the gold stan- gold standard, and (ii) devalue clauses remained in place, de- dard, which would create “one of the dollar. valuation of the currency would the most tragic disasters to…the This first step came with Ex- make matters exponentially independence of man.” ecutive Order No. 6102 on April worse: the dollar would be worth Roosevelt, recognizing the 5, 1933, in which the president much less, but all debts would danger of this attack, replied that decreed that all gold held by pri- have to be repaid at the official Hoover was conducting a “cam- vate citizens had to be sold to the price of gold: $20.67 per ounce paign of fear,” that he (Roos- Federal Reserve. This was fol- (set by the Gold Act of 1900). In evelt) was not a “devolutionist,” lowed by Executive Order 6111 other words, farmers (and oth- and that he (Roosevelt) believed on April 20, which prohibited ers) would have even less money in “sound money.” This reply (indefinitely) all exports of gold (in terms of value) to make good was carefully chosen to obfus- from the United States. By these on their fixed contractual obliga- cate the fact that Roosevelt (and two actions, the United States ef- tions; the bankruptcies prior to his “Brains Trust”) really did not fectively went off the gold stan- Roosevelt’s election would be a have a set of definitive plans. dard. (Roosevelt’s budget direc- trivial number if this state of play What was more candid and re- tor, Lewis Douglas, said privately was allowed to exist. Roosevelt’s vealing was what Roosevelt that this was “the end of Western advisors (principally George F. voiced publicly as his overriding, civilization.”) Warren, a professor of agricul- governing principle: “The coun- At the same time, legislation tural economics at Cornell) were try needs and, unless I mistake was moving through Congress to aware of this danger, but believed its temper, the country demands give the president the authority to there was an easy answer: if Con- bold, persistent experimenta- end deflation by,inter alia, doing gress could devalue the dollar, it tion. It is common sense to take exactly what Hoover had warned could also void the gold clause in a method and try it. If it fails, ad- of: issuing greenback currency contracts. mit it frankly and try another. But and monetizing silver (at a 16 to On May 7, 1933, Roosevelt above all, try something.” 1 ratio to gold – one of Bryan’s gave his second “Fireside Chat” Once he became president on campaign slogans in 1896). And to the nation over the radio. Still March 4, 1933, Roosevelt lived while these steps would likely within the famous, first 100 days up to his promise of experimen- help to jump start farm commod- of his administration, the presi- tation. One result of that was im- ity prices by devaluing the dol- dent recounted all that had already mensely consequential litigation lar, there was one last leg of the been done to tackle the Great De- up to the Supreme Court that is monetary stool that also had to pression. He also addressed the little remembered today. be fixed, and that was the gold country’s currency and, in particu- clause. lar, the fact that the government First We Must Devalue and public had approximately the Currency Deep Sixing the Gold Clause $120 billion in debt that was sub- ject to the gold clause. Roosevelt One of Roosevelt’s first pri- In virtually all private con- explained that this was much ado orities was to get monetary re- tracts, as well as in government about nothing, since “all the gold lief for the country’s farmers issued securities (and World in the United States amounted to – to raise (somehow) the price War I debt incurred by foreign only between three and four bil- Federal Bar Council Quarterly March/April/May 2019 18 lions and that all of the gold of the tempted to exempt government in legal tender what was owed world amounted to only eleven securities and debts owed to the at the equivalence of the legal billion.” Thus, according to the United States arising out of World price of gold; and president, very few could really War I, but that failed to carry the (2) Was the party relying on the be repaid in gold; instead, virtu- day in the Senate. gold clause entitled to money ally all debtors would repay in pa- Notwithstanding predictions damages as a result of Con- per currency, and every creditor, that foreign governments owing gress’ abrogation of the gold therefore, would have no recourse America many billions in World clause. but to accept that paper. War I obligations would default Like much of his campaign on their debts if the legislation In the government’s briefs, rhetoric, Roosevelt was dissem- became law, the House of Rep- the principal argument was that bling in his Fireside Chat. The resentatives overwhelmingly ap- Congress’s action was based gold clause did not actually re- proved the measure on May 29; upon a national “necessity”; as quire a physical delivery of gold; the Senate quickly followed suit articulated by Assistant Solicitor rather, it required that the debt on June 3. Two days later, Roo- General Angus MacLean: “[I]f be repaid in gold or in currency sevelt signed the legislation. the gold clauses were maintained valued at the price of gold (see Where people stood on this law [at the same time the other steps the “Legal Tender Cases,” de- depended upon, among other were taken to devalue the cur- cided by the Supreme Court after things, their political party, not rency]…, this meant bankruptcy the Civil War; e.g., Knox v. Lee, to mention their status as creditor on a national scale.” (It had been 79 U.S. 457 (1871); Juilliard v. or debtor. Although the executive estimated that it would take $1.69 Greenman, 110 U.S. 421 (1884)). and legislative branches had spo- to make good on a gold clause’s Thus, the problem still remained ken and acted, the issue had to be $1.00 value.) Thus, Congress had – notwithstanding the president’s resolved by the courts and, ulti- to act and the Supreme Court was facile dismissal – and it had to be mately, by the Supreme Court. obligated to uphold that action addressed pronto. “in order to save the country.” On May 26, the administration Was the Law Constitutional? The government also argued – contemplating the issuance of (in addition to Roosevelt’s spe- new government securities in June In short order, there were a cious contention that this was all without the gold clause – asked number of legal challenges to the no big deal because there was not Congress to void (permanently) retroactive voiding of the gold enough actual gold to make good the gold clause for all future and clause; four of them ultimately on $120 billion in contractual ob- past contracts. There was immedi- were consolidated together before ligations) that the plaintiff had ate (and strong) push back. Carter the Supreme Court – and they be- suffered no actual (and action- Douglas, Democratic Senator came known as the “Gold Clause able) damages – because of wide- from Virginia (and someone who Cases”: Norman v. Baltimore scale deflation, the same amount had been a key ally in repelling and Ohio Railroad (New York of paper currency actually had far Hoover’s economic attacks on State); U.S. v. Bankers’ Trust Co. more purchasing power in 1934- Roosevelt during the 1932 cam- (8th Cir.); Perry v. United States 35 than it had prior to October paign) publicly denounced “the (Court of Claims); and Nortz v. 1929. As precedent for its vari- proposal to repudiate all outstand- United States (Court of Claims). ous positions, the government ing gold contracts [as] unconstitu- The key issues teed up by these cited to the Legal Tender Cases, tional and the courts will so hold cases were: where the Court, inter alia, had if there is any integrity left in the written: “Whatever power there courts with respect to the sanctity (1) Was the party relying on the is over the currency is vested in of contracts.” He subsequently at- gold clause entitled to receive Congress.” 19 March/April/May 2019 Federal Bar Council Quarterly

Oral argument on the consoli- (2) New legislation voiding any to authorize such debt, had “not dated “Gold Clause Cases” took counterparty’s rights to sue been vested with authority to al- place on January 8, 9, and 10, the government based upon ter or destroy those obligations.” 1935. The general consensus was the gold clause; Notwithstanding, by a 5 to 4 vote that the government had not done (3) New legislation changing the Court went on to rule that the well before a very skeptical Court, the jurisdiction of the Court public debt holders (for example, and there were apocalyptic predic- of Claims (so no gold clause Perry) had not suffered “any loss tions of what would happen if the claims could be brought whatsoever” – that to permit “pay- Court struck down the legislation. therein); and ment to the plaintiff…would ap- Not surprisingly, financial markets pear not a recoupment of loss…, reacted negatively, as did com- (4) An unprecedented attack by but an unjust enrichment.” modity prices. Foreign nations, the president on the Supreme In other words, the law was owing huge sums to the United Court over the airwaves. unconstitutional as applied to States in World War I obligations, government bonds (only), but publicly fretted about what to do. While Roosevelt and his ad- there would be no actionable According to a report in The New visors pondered these and other remedy in money damages. York Times, unnamed members scenarios, they, the nation, and On behalf of the “Four Horse- of the Senate were studying in- the world waited for the Supreme men” (Justices Butler, Suther- creasing the number of Supreme Court to render a decision. land, and Van Devanter), Justice Court Justices to get to whatever James Clark McReynolds issued number of votes were needed to The Supreme Court Decides a vociferous dissenting opinion sustain such a law (shades of Roo- (although it obviously concurred sevelt’s Court-Packing Scheme of On February 18, 1935, Chief with the first holding inPerry and 1937! See, “Sick Chickens in the Justice Charles Evans Hughes Nortz): “Just men regard repudia- Second Circuit Threaten FDR’s announced the Court’s decisions tion and spoliation of citizens by New Deal,” Federal Bar Council in open court. In the two cases their sovereign with abhorrence; Quarterly, February 2008). Sub- involving private debt (Nor- but we are asked to affirm that sequently, the New York Stock man and Banker’s Trust), by a the Constitution granted power to Exchange (fearing the worst) 5 to 4 vote the Court ruled that accomplish both.” According to publicly announced that it would Congress’s nullification of the Justice McReynolds, the Found- (if necessary) suspend trading gold clauses was constitutional ing Fathers never “intended that upon the Supreme Court’s de- – that Congress had been granted the expected government should cision. Also fearing the worst, power over such matters by the have the authority to annihilate Roosevelt’s administration began Constitution. (“We are not con- its own obligations and destroy thinking up a “Plan B” – among cerned here with the wisdom of the very rights which they were the contingencies contemplated [Congress’s enactment]. We are endeavoring to protect.” Noting in the face of an adverse decision concerned with power, not with that the “so-called gold clause- were: policy.”) promise” had existed for more But with respect to the two than 100 years in U.S. contracts, (1) The declaration of a national cases involving public debt (that both private and governmental, emergency by the president is, government bonds, Perry what Congress had done was for 90 days (or longer, up to a and Nortz), by an 8 to 1 vote the contrary both to the sanctity of year), staying payment of any Court ruled that Congress’ nul- contracts (private and public) and debts greater than the nomi- lification of the gold clauses was the country’s most solemn obliga- nal dollar amount of the obli- unconstitutional – that Congress, tions: “[I]t destroys directly” and gation; having been granted the power thus violates the Fifth Amend- Federal Bar Council Quarterly March/April/May 2019 20 ment, there being “no provision strictions upon the future exercise confusion, Roosevelt and his ad- for compensation” – i.e., “[o]bli- of the [Congress’] power to regu- visors were relieved and “very gations cannot be legally avoided late the currency.” Even so, in Jus- jolly.” While they could not fore- by prohibiting the creditor from tice Stone’s mind the formality of see the New Deal’s setbacks in recovering the thing promised.” said “restrictions” perhaps did not the Court that would lead to the Then, invoking Alexander in fact kick in because the Hughes Court-Packing Scheme in 1937, Hamilton (regarding the govern- opinion on the constitutionality for now they had radically de- ment’s moral and constitutional of cancelling the gold clause vis- valued the currency and gotten obligations to honor matters of à-vis public debt had gotten only the Court to uphold Congress’s contract), as well as the fact the four votes (he dissented on that retroactive invalidation of the na- sanctity of contracts had built ruling, and Justice McReynolds’ tion’s contracts. As for the finan- America into the greatest nation opinion had a different rationale cial markets – which had been in the world, Justice McReyn- vis-à-vis Congress’ statute); Stone braced for bad news – they re- olds questioned who would do privately wrote that the “Court has acted positively; not so much for business in the future with such a not declared, decided, or adjudged the Court’s validation of the na- government. He ended the opin- that the Government is bound by tion acting like a banana republic ion as follows: “Loss of reputa- the Gold Clause.” (i.e., repudiating its legal obliga- tion for honorable dealing will The media’s immediate reac- tions), but rather for the certainty bring us unending humiliation; tion to what the Court decided that seemed the clear result of the the impending legal and moral was, to say the least, “confused.” Court’s decisions. chaos is appalling.” (When he The Associated Press announced Although Milton Friedman read his opinion in open Court that the government had “lost.” and Anna Schwartz would later on February 18, Justice McReyn- The Atlanta Constitution’s head- write that the Supreme Court’s olds started off by saying, “The line read: “‘New Deal’ Upheld in rulings retarded the country’s Constitution as many of us under- High Court.” Closer to what actu- emergence from the Great De- stood it, the instrument that has ally happened was headlined by pression (A Monetary History meant so much to us, is gone.” He The Wall Street Journal: “Moral of the United States, 1867-1960 ended with these words: “Shame Defeat, Practical Victory, for Gov- (1963)), the U.S. government in and humiliation are upon us now. ernment.” Similarly, the Times of fact had no difficulty going back Moral and financial chaos may be London opined that “[y]esterday’s to the financial markets and is- confidently expected.”) judgement…leaves the Admin- suing new debt in short order. The subject of little focus at the istration free to act as if what is Thus, unlike when Third World time was Justice Harlan Stone’s declared unconstitutional were in countries have defaulted on their separate opinion on the public fact constitutional.” And as Wal- debts and investors punished debt cases (Perry and Nortz). It ter Lippmann wrote a week later, them severely, our nation radical- was Justice Stone’s view that, the decision constituted “a vic- ly changed the rules of the game once Justice Hughes had opined tory but not…a vindication of the at half time and seemingly paid that the debt holders had no dam- government…. The abrogation no price for it (indeed, benefitted ages, the Court should not have destroys a vested right. It repudi- from it). Could this work a sec- then gone on and ruled (unneces- ates a contract…. And unless one ond time? sarily, in his opinion) that the law is prepared to agree that legitimate – as it applied to public obliga- rights can never be extinguished, Postscripts tions – was unconstitutional (hav- the gold clauses cannot be dealt ing determined the opposite for with on the theory that contracts • Like, I presume, most law- private obligations). By that extra are absolute.” yers, I was never taught step, the Court had “imposed re- Irrespective of the media’s about the Gold Clause Cases 21 March/April/May 2019 Federal Bar Council Quarterly

when I was in law school. evelt, thanking the president sible to say with assurance is Rather, I just learned about for allowing him to serve in that the plaintiff[s]…did not them at a recent, fascinating such “stirring times.” There- recover.” symposium at the Council after, Acheson – despite his on Foreign Relations, which views – never expressed them featured a presentation by publicly. Roosevelt never for- Professor Sebastian Edwards, got Acheson’s “appropriate” What’s on Your Wall? an economics professor at behavior and, when another UCLA. His book – American subordinate tendered a very Default (Princeton 2018) – is different type of resignation, A Rockwell Print a must read for anyone seek- the president told his press ing more information on this secretary, “Return it to him By Lisa Denig little remembered but fasci- and tell him to ask Acheson nating part of our nation’s le- how a gentleman resigns.” gal and economic history. Acheson’s actions also had • The devaluation of our cur- the effect of allowing him rency and abrogation of the back into the government gold clause did not seem during World War II to a high to have a beneficial impact level post in the State Depart- upon foreign countries’ will- ment (and, later, under Presi- ingness to repay their World dent Truman, he became the War I obligations to America. Secretary of State). Of the 17 countries that bor- • The last word on the Gold rowed over $10 billion from Clause Cases is given to the the United States (a huge sum legendary Harvard Law Pro- in 1914-18 dollars), only Fin- fessor Henry M. Hart, Jr., The very first Norman Rock- land paid its debts in full. who wrote a seminal piece well print I bought was “The • Dean Acheson was under- in the May 1935 issue of the Runaway.” I am sure you know secretary of the Treasury De- Harvard Law Review (“The it. It depicts a small boy, sitting at partment in early 1933, and Gold Clause in United States a lunch counter, all of his earthly because of the illness of the Bonds”). In Professor Hart’s possessions tied up in a bandana secretary he was pretty much view, “Few more baffling at the end of a stick lying on the running the department on a pronouncements, it is fair to floor. A kindly looking police of- day-to-day basis. He (like so say, have ever issued from ficer is sitting next to him, leaning many establishment figures) the United States Supreme over, presumably attempting to considered Roosevelt’s plan Court…. Seldom has a legal persuade the young man that life to go off the gold standard controversy been touched on his own will be much harder and to devalue the currency, with ramifications so various than life at home with his parents. etc., to be improper and ille- and extensive. So much the I bought this print for my first gal. As such (and depending more astonishing, therefore, husband. He was a police officer on which version of history is the Delphic character of the with the New York Police De- you believe), he was either Court’s utterance in the most partment, in the Highway Unit, asked to resign or resigned difficult of the cases before and the uniform in the painting of his own volition. In any it.… [With respect to the pub- was remarkably similar to the event, in doing so Acheson lic debt plaintiffs,] [a]lmost one he wore every day. However, wrote a short letter to Roos- the only thing which is pos- there was so much more to that