CITIBANK, N.A., PETITIONER V. NGOC QUANG TRINH No. 88-1031 In The Supreme Court Of The United States October Term, 1989 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Sixth Circuit Brief For The United States As Amicus Curiae This brief is filed in response to the Court's order inviting the Solicitor General to express the views of the United States. TABLE OF CONTENTS Question Presented Statement Discussion Conclusion QUESTION PRESENTED Whether, contrary to the design of federal banking regulation, a United States bank may be held liable for deposits made with its branch in a foreign country when the foreign government prevents the branch from repaying those deposits. STATEMENT Petitioner Citibank N.A. (Citibank) seeks review of a court of appeals' decision holding that Citibank's New York office is obligated to repay, in dollars, piaster-denominated deposits that a Vietnamese citizen placed with a Citibank branch formerly operated in Saigon, Republic of Vietnam. The court of appeals concluded that the deposit agreement, interpreted under Vietnamese law, absolved Citibank's Saigon branch of liability to respondent when the branch closed in anticipation of Saigon's imminent fall to hostile forces. The court further concluded, however, that respondent could seek repayment from Citibank's New York office because the deposit agreement did not expressly prohibit such an action. See Pet. App. 1a-32a. /1/ 1. During the Vietnam conflict, Citibank maintained a branch office (Citibank/Saigon) in the Republic of Vietnam (South Vietnam). /2/ Citibank operated Citibank/Saigon in accordance with Vietnamese law, which required that Citibank conduct its banking operations through a branch (rather than a subsidiary), that the branch keep all of its assets in the local currency (piasters), and that it maintain a specified level of paid-in capital reserves. Citibank/Saigon accepted passbook savings deposits from Vietnamese citizens, paid interest far in excess of that available on United States accounts, and required that depositors execute a standard deposit agreement setting forth withdrawal conditions and liability provisions. Pet. App. 2a-3a, 20a-21a. On July 25, 1974, Quang Quy Trinh, a retired Vietnamese senator, opened a passbook savings account at Citibank/Saigon. He deposited 2 million piasters, named himself and respondent (his son who was attending school in Michigan) as joint account holders, and signed the branch's standard deposit agreement. The agreement stated that the deposits would be payable only at "Citibank's place of business," which was identified as "28-30 Nguyen Van Thinh, Saigon, 1 Republic of Vietnam," and that they would be payable only in the form of piasters. In addition, the deposit agreement stated that "Citibank does not accept responsibility for any loss or damage suffered or incurred by any depositor resulting from government orders, laws, levies, taxes, embargoes, moratoriums, exchange restrictions or from any other cause beyond its control." On October 25, 1974, Senator Trinh deposited an additional 1 million piasters. At that time, Citibank/Saigon paid interest on passbook savings accounts at a rate of 19% annually, compounded daily. Pet. App. 2a-3a, 20a-21a. In April 1975, hostile forces converged on Saigon. The American Embassy developed plans for the evacuation of United States and selected Vietnamese citizens, including Citibank employees. During this period, Citibank/Saigon informally encouraged its depositors to withdraw their money, but "the situation did not safely allow for the posting of formal notices suggesting such withdrawals" (Pet. App. 4a, 21a). On April 24, 1975, Citibank/Saigon ceased operations, and its officers and employees left the city. The officers left the books and records at the branch and entrusted the branch's cash, keys, vault combination, and official documents to Embassy officials with instructions that the items should be turned over to the National Bank of Vietnam, the government's central banking authority. The following day, the Vietnamese government issued a communique stating that Citibank/Saigon had "closed temporarily without asking for permission" and that "the National Bank guarantees to return all the money legally deposited." Id. at 4a, 5a, 21a-22a. On April 30, 1975, the Vietnamese government collapsed and the following day the revolutionary forces announced the formation of a communist administration. The new government declared that all banks would be "confiscated and, from now on, managed by the revolutionary administration" (Pet. App. 4a, 22a). The communist government reopened the National Bank of Vietnam and stated that it intended to liquidate "all debtor banks, including all foreign banks" and "pay out savings to workers and people according to new banking regulations" (id. at 22a). In the case of "banks whose owners have fled the country, the national bank will inventory and re-evaluate their assets and settle their accounts in order to determine their ability to return the savings of account holders" (id. at 23a). The National Bank indicated that "the savings accounts of workers, who legitimately earn their income through their own efforts and labor, will gradually be paid to them," but the property of "comprador bourgeoisie" would be "confiscated completely or partly according to the gravity of their crimes." Id. at 4a-5a, 23a, 51a-52a. Senator Trinh was placed in a "re-education" camp. After his release in 1980, he sent his Citibank passbook to respondent, who resided in Michigan and had become a United States citizen. Respondent contacted Citibank's New York office and requested payment of the deposit. Citibank informed respondent that the National Bank of Vietnam was now responsible for the account. Pet. App. 5a, 38a. 2. Respondent brought suit in the United States District Court for the Eastern District of Michigan to collect the sums allegedly owed under the deposit agreement. After a bench trial, the district court concluded that Citibank was liable and awarded respondent the current value of the account -- $1400 plus interest. Pet. App. 37a-59a. The district court began its analysis by noting that the Second Circuit had held in Vishipco Line v. Chase Manhattan Bank, N.A., 660 F.2d 854 (1981), cert. denied, 459 U.S. 976 (1982), that a United States bank was liable to its Vietnamese depositors when it closed its Saigon branch in virtually identical circumstances. See Pet. App. 38a-39a. It therefore viewed the question as whether this case was distinguishable from Vishipco. The district court first concluded that it could properly exercise jurisdiction because the parties satisfied the diversity of citizenship requirement (28 U.S.C. 1332) and, alternatively, because disputes arising out of foreign banking transactions are "deemed to arise under the laws of the United States" (12 U.S.C. 632). See Pet. App. 39a-40a. The court next agreed with Citibank that, under either jurisdictional basis, the applicable choice of law rules dictated that Vietnamese law governed the dispute. Id. at 41a-44a. The court then concluded that while Vishipco was decided under New York law, the same result would obtain under Vietnamese law, including Vietnamese principles of force majeure. Id. at 45a-50a. It also concluded that Citibank had failed to prove that the National Bank of Vietnam had assumed liability for respondent's account; instead, the court ruled as a matter of law that when Citibank closed its Saigon branch the home office assumed liability for that account. Id. at 50a-51a. The court then converted the value of the piaster account into dollars to determine Citibank's liability. Id. at 54a-59a. 3. Citibank appealed and the United States filed an amicus curiae brief urging reversal. The court of appeals affirmed (Pet. App. 1a-32a), rejecting Citibank's "primary argument" that the deposit agreement construed under Vietnamese law placed the risk of loss for a political revolution on the depositor (id. at 7a-13a). The court started from the premise, followed in Vishipco, that "it is a general banking principle that the home office is ultimately liable on a deposit placed in its foreign branch if, as here, the branch closes or otherwise wrongfully refuses to return a deposit" (Pet. App. 9a, citing Sokoloff v. National City Bank, 130 Misc. 66, 73, 224 N.Y.S. 102, 114 (Sup. Ct. 1927), aff'd, 223 A.D. 754, 227 N.Y.S. 907, aff'd, 250 N.Y. 69, 164 N.E. 745 (1928); Bluebird Undergarment Corp. v. Gomez, 139 Misc. 742, 249 N.Y.S. 319 (City Ct. 1931); Heininger, Liability of U.S. Banks for Deposits Placed in Their Foreign Branches, 11 Law & Pol. Int'l 903, 926 (1979)). The court acknowledged that "the bank is surely correct in arguing that absent special circumstances, deposits made in branch banks are payable only there" (Pet. App. 9a), but it added: However, as we read Sokoloff, Bluebird and similar cases, one of the "special circumstances" triggering liability against the home office is the closing of a branch." Bluebird, 249 N.Y.S. at 321-22. Thus, while it is true that the payment obligation exists primarily between the branch bank and the depositor, the ultimate obligation on the deposits remains with the home office. Id.; Vishipco, 660 F.2d at 863; see also Annotation, Branch Banks, 136 A.L.R. 471, 493-97 (1942). Ibid. The court stated that Vietnamese law supported that conclusion because it required Citibank/Saigon to operate as a branch, rather than a subsidiary, and thereby implicitly indicated that Citibank's home office would be liable for the deposits. Id. at 10a. The court concluded that the deposit agreement's waiver of liability for government action "did not dispel these expectations" (id. at 11a), observing: while we recognize that the deposit agreement absolved the branch office of responsibility for losses resulting from government orders and "any other cause beyond its control," we do not find in that agreement any indication that the depositor could not proceed against the home office if the branch failed to pay. Ibid. The court stated that contractual provisions limiting home office liability "must be explicit and must clearly and unmistakably inform depositors that they have no right to proceed against the home office" (id. at 12a). The court also concluded that Vietnamese principles of force majeure did not excuse repayment because Citibank "remains able to this day() to discharge those debts either in New York or at a variety of other points outside of Vietnam" (id. at 13a). The court of appeals also rejected Citibank's defense that the National Bank of Vietnam had assumed liability for the respondent's account. Pet. App. 13a-17a. It concluded that South Vietnam's guarantee that all deposits would be repaid was not legally binding on the new government and that the various communiques failed to establish that, "by confiscating the nation's banks, the new government undertook to assume the liabilities of foreign banks, like Citibank Saigon, that fled the country in the face of the fall of South Vietnam" (id. at 15a). The court further reasoned, in accordance with Vishipco, that when Citibank closed its Saigon branch, "the deposits in Citibank Saigon no longer had their 'situs' in Vietnam" (id. at 16a). Instead, their situs "sprang" and attached to the home office, and the Vietnamese government was powerless to affect them (ibid., citing Heininger, supra, 11 Law & Pol. Int'l Bus. at 975). Finally, the court agreed with the Second Circuit that holding the home office liable was "fair and equitable under the circumstances" (Pet. App. 17a, citing Vishipco, 660 F.2d at 864). Judge Brown dissented, concluding ("(w)ithout intending to deprecate Citibank's other defenses") that the deposit agreement, read in light of Vietnam's force majeure principles, placed the risk of loss on respondent. Pet. App. 19a-32a. He stated: I agree with Citibank that Trinh must bear the loss of his savings deposit. I would so hold because I believe the deposit agreement so requires. * * * Here, the communist overthrow of South Vietnam and subsequent confiscation and nationalization of Citibank's Saigon branch surely falls within the deposit agreement's discharge-of-liability provision and prevents Citibank's domestic home office from paying Trinh in Vietnam in piasters. Consequently, the deposit agreement calls for Trinh to suffer the loss and, in turn, Trinh's action against Citibank must fail. Id. at 30a. DISCUSSION Citibank asserts that the court of appeals erred in holding that the deposit agreement in this case obligated Citibank's New York office to repay foreign branch deposits when the branch closed on account of imminent invasion. It urges this Court to review the case and clarify, as a matter of federal law, that a United States bank is not liable for repayment of a foreign branch deposit when a foreign sovereign prevents the branch from making repayment. We believe that Citibank is correct in asserting that the court of appeals misconstrued the parties' deposit agreement and the principles of banking law that govern it. We also agree that the decision reflects a departure from established law and could portend future difficulties for United States banking interests. Notwithstanding these failings, we are unable to conclude that this decision, standing alone, would normally warrant this Court's review. Nevertheless, the decision raises issues related to those presented in Citibank, N.A. v. Wells Fargo Asia Ltd., No. 88-1260, a case that we believe does merit review. If this Court grants Citibank's petition for a writ of certiorari in Wells Fargo, it may wish to grant this petition and to consider the related issues in a consolidated proceeding. In the alternative, it may wish to hold this petition and dispose of it in accordance with its disposition of Wells Fargo. 1. This case presents a factual situation that is virtually identical to that presented in Vishipco Line v. Chase Manhattan Bank, N.A., supra. The Court invited the United States' views concerning the petition for a writ of certiorari filed in that case. The government noted the significant practical consequences of the court of appeals' decision and expressed serious reservations about the court of appeals' application of the relevant law. /3/ The government concluded, however, that the decision did not warrant this Court's review. 81-1591 U.S. Amicus Br. 7. We explained that this isolated decision, which purported to resolve conflicting claims under local contract law, did not present an issue that this Court normally would examine. Id. at 15. /4/ The court of appeals in the present case has essentially repeated the Second Circuit's mistakes in Vishipco. The court of appeals correctly ruled that the deposit agreement was subject to the law of Vietnam and that Vietnamese law would recognize "general banking principle(s)" that are customarily followed worldwide (Pet. App. 7a n.2, 9a). /5/ The court erred, however, in applying those principles to the parties' deposit agreement. For reasons similar to those we set forth in our Vishipco brief, we are unable to say that this case, viewed by itself, has sufficient practical significance to warrant plenary review. Nevertheless, the federal bank regulatory agencies are deeply concerned by the court of appeals' decision, and that concern is magnified by the fact that Vishipco is no longer an isolated aberration. a. As we explain in our amicus curiae brief in Citibank, N.A. v. Wells Fargo Asia Ltd., No. 88-1260, there is essentially universal consensus that, as between private parties, "'(t)he situs of a bank's debt on a deposit is considered to be at the branch where the deposit is carried' and that 'the consequence of this limitation is that a debt on a deposit normally authorizes a demand for the money only at the relevant branch'" (U.S. Amicus Br. 10). There is also widespread consensus that, if the branch wrongfully refuses to repay the deposit on demand, the depositor may have a cause of action against the home office for the branch's breach of the deposit agreement. Id. at 12-13 n.17. The court of appeals properly assumed that Vietnamese law would recognize these principles. See Pet. App. 9a. The court erred, however, in failing to give effect to the specific terms of the deposit agreement in this case, which (among other matters) expressly stated that Citibank would repay the deposits only at its Saigon place of business and provided that Citibank would not be liable for losses resulting from "government" action "or from any other cause beyond its control" (id. at 3a, 21a). There can be no serious dispute that the communist invasion of Saigon prevented Citibank from fulfilling its contractual obligation to repay respondents' account at Citibank's Saigon place of business. Nor can there be any serious dispute that this was the "cause" of respondent's loss and that this cause was beyond Citibank's control. Indeed, the court of appeals recognized that the deposit agreement's disclaimer "absolved the branch office of responsibility" in these circumstances. Pet. App. 11a (emphasis in original). The court nevertheless was unable to "find in that agreement any indication that the depositor could not proceed against the home office if the branch has failed to pay" (ibid. (emphasis in original)). But the court failed to recognize that respondent was entitled to proceed against Citibank's home office only for breach of the deposit agreement, which contractually obligated Citibank to repay respondent's deposit at the Saigon branch. Respondent has no cause of action at all unless there was an actionable breach of that obligation. And there was no actionable breach in this case because the deposit agreement excused a failure to pay that was caused by events beyond Citibank's control. As Judge Brown's dissent recognizes, the deposit agreement's disclaimer must necessarily discharge both Citibank's Saigon branch and its home office "if the governmental action or other cause precludes payment in Vietnam in piasters" (id. at 30a). The court of appeals' contrary conclusion judicially modifies the essential terms of the parties' agreement and holds Citibank contractually liable for obligations that it specifically declined to undertake. /6/ b. The parties' submissions concerning the law of Vietnam and general banking principles indicate that the same result would obtain even in the absence of the deposit agreement's disclaimer. /7/ Article 701 of the Vietnamese Commercial Code (V.C.C.) provides that a "debtor does not have to pay damages if his violation or non-performance of contractual obligations is due to a fortuitous cause or case of force majeure" (Pet. App. 8a n.3). Article 1206 of the V.C.C. provides, more specifically, that a "depositary is not liable for accidents or risks resulting from force majeure, unless previously he had been given notice to return the deposited objects" (ibid.). As we have explained, Citibank's contractual obligation was to repay respondent's funds, in the form of piasters, solely at Citibank's place of business, which the deposit agreement defined as the Citibank/Saigon branch. As the court of appeals acknowledged (id. at 13a), the circumstances that prevented Citibank from fulfilling that contractual obligation fell within the meaning of force majeure. Since Vietnamese law provided that Citibank "is not liable" and "does not have to pay damages" (id. at 8a n.3, 12a) in those circumstances, it relieved Citibank of its contractual obligation. The court of appeals' suggestion that Vietnamese law "did not relieve Citibank of its obligation to perform elsewhere" (id. at 13a) again overlooks the fact that Citibank's contractual obligation was to perform at Citibank/Saigon. As Justice Holmes stated in a similar circumstance involving an Austria-Hungarian bank account: The only primary obligation was that created by the law of Austria-Hungary and if by reason of an attachment of property or otherwise the courts of the United States also gave a remedy the only thing that they could do with justice was to enforce the obligation as it stood, not to substitute something else that seemed to them about fair. Zimmerman v. Sutherland, 274 U.S. 253, 255 (1927). Thus, "if that law discharged the debt the debt was discharged everywhere" (id. at 256). c. The court of appeals also seems to have erred in rejecting Citibank's contention that the new Vietnamese government, which had "confiscated" Citibank's branch (Pet. App. 4a), had assumed responsibility for the depositor's account. The court's conclusion is inconsistent with common sense and the practical realities of the communist overthrow of the Vietnamese government. Indeed, the new government's own communiques stated that the government's central bank would liquidate "all debtor banks, including all foreign banks," and "pay out savings to workers and people according to new banking regulations" (id. at 22a; see also id. at 5a, 23a). The court's conclusion is also inconsistent with the Foreign Claims Settlement Commission's determination that "accounts in South Vietnamese banks owned by persons or entities located outside the country were nationalized, expropriated, or otherwise taken, within the meaning of the present (International Claims Settlement) Act, as of May 1, 1975." See In re Claim of Hugh R. Harris, Dec. No. V-0446, at 2 (Aug. 22, 1985) (Citibank C.A. Br. App. C). The court of appeals' alternative ruling that the new Vietnamese government could not have seized the deposit also is unsatisfactory. The court endorsed Vishipco's "springing debt" theory, which holds that if a bank closes a foreign branch, "'the situs of the debt represented by the deposit would spring back and cling to the home office'" (Pet. App. 16a & n.5). See also Edelmann v. Chase Manhattan Bank, N.A., 861 F.2d 1291, 1304 (1st Cir. 1988) (dicta). This theory has no firm foundation in the law; instead, it rests on a metaphor that a commentator used to describe Judge Cardozo's decision in Sokoloff v. National City Bank, 239 N.Y. 158, 145 N.E. 917 (1924). See Heininger, supra, 11 Law & Pol. Int'l Bus. at 975. As Justice Cardozo himself later warned, "Catch words and labels * * * are subject to the dangers that lurk in metaphors and symbols, and must be watched with circumspection lest they put us off our guard." Henneford v. Silas Mason Co., 300 U.S. 577, 586 (1937). This case aptly illustrates that point. Judge Cardozo's decision in Sokoloff -- which the New York courts quickly confined to its facts, see note 11, infra -- addressed whether the Bolshevik government's seizure of a New York bank's Russian branch discharged the bank's liability to a depositor at that branch. The court determined, on the pleadings, that the depositor could maintain an action "based upon the theory of rescission with an accompanying right to restitution" or "based upon the theory of the breach of an outstanding contract" (239 N.Y. at 171, 145 N.E. at 921). The court did not determine that the closure of the branch office altered the situs of the debt. /8/ The "spring and cling" proposition is simply a commentator's lively, but inaccurate, description of the case. /9/ We believe that Justice Harlan's dissent in United States v. First Nat'l City Bank, 379 U.S. 378 (1965), correctly explained the principle set forth in Sokoloff. The Court held that the district court in that case had jurisdiction to issue a temporary tax injunction freezing a corporation's account in a U.S. bank's Uruguayan branch pending personal service on the corporation (id. at 385). It found no occasion to address the Sokoloff case (id. at 380-381). Justice Harlan disagreed with the Court's holding and in the course of his opinion he described the status of the Uruguayan branch account under Sokoloff as follows: The bank account is a contract for payment on demand at the Montevideo branch. If demand were wrongfully refused, a cause of action for breach of contract would be created on which (the depositor) could sue in New York. Thus, analytically, it is not the account itself which would become payable in New York, but damages for breach of the contract to pay on demand in Montevideo. 379 U.S. at 405 n.27 (emphasis added). /10/ As we have explained, there is no actionable breach of contract action in this case because the deposit agreement and Vietnamese law absolved a failure to pay where the cause of the failure was beyond the bank's control. /11/ d. The federal banking agencies, including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, are greatly troubled by the court of appeals' fundamental misapplication of familiar banking law principles to the deposit agreement in this case. The Second Circuit's decision in Vishipco created substantial uncertainty concerning the status of Vietnamese bank deposits and, more generally, the potential legal liability of United States banks for foreign branch deposits. The court of appeals' decision in this case has only compounded that uncertainty. As we explained in amicus curiae brief in Citibank, N.A. v. Wells Fargo Asia Ltd., supra, this Court normally does not review a court of appeals' interpretation of a particular contractual agreement (88-1260 U.S. Amicus Br. 15-16). That case, we have suggested, presents an appropriate occasion for an exception to that general rule because the lower court's interpretation of the Eurodollar deposit agreements at issue there would have immediate and serious consequences for the functioning of the Eurodollar market. In contrast, the practical consequences of the court of appeals' decision in this case are not so immediate that they call as powerfully for this Court's review. As an initial matter, the dispute in this individual case involves a relatively small amount of money -- about $1400 plus accrued interest (Pet. App. 59a). Furthermore, it is not clear that United States banks are likely to face large liabilities for new claims arising from deposits held in Saigon branches during the Vietnam conflict. Other lower courts have rejected claims filed after 1981 on statute of limitations grounds. See Tat Ba v. Chase Manhattan Bank, N.A., 616 F. Supp. 10 (S.D.N.Y.), aff'd without opinion, 762 F.2d 991 (2d Cir. 1985); Ngoc Dung Thi Tran v. Citibank N.A., 586 F. Supp. 203 (S.D.N.Y. 1983). /12/ Thus, the court of appeals' interpretation of the deposit agreement, Vietnamese substantive law, and the actions of the new Vietnamese government with respect to foreign branches, are unlikely to have lasting significance. /13/ Applying the standards that the United States normally employs in determining whether to petition for a writ of certiorari, we therefore cannot say that this case clearly warrants this Court's review. If the court of appeals' decision is viewed in its proper context, it has limited practical or precedential importance. Obviously, the Sixth Circuit's replication of the Second Circuit's errors in Vishipco increases the danger that other courts may give those decisions greater credence or broader application than they deserve. In particular, there is a substantial possibility that American courts may mistakenly apply those cases as precedent in interpreting other deposit agreements, other foreign substantive law, and other foreign governmental actions. See Edelmann v. Chase Manhattan Bank, N.A., 861 F.2d 1291, 1304 (1st Cir. 1988). But such possibilities are present in many cases in which review is sought from this Court, and we are reluctant to urge that this Court grant the petition based on that ground alone. That being said, this Court may, by virtue of Wells Fargo's pendency, find benefit in reviewing this case at this time. The court of appeals relied upon the same general banking law principles that are implicated in Wells Fargo. If, as we have urged, this Court grants the petition for a writ of certiorari in that case, it may wish to grant this petition as well and consolidate the cases for review. That procedure would allow the Court to examine a broader range of issues -- and to correct the potentially troublesome decision in this case -- with minimal additional expenditure of its limited resources. In the alternative, if the Court grants the Wells Fargo petition, it may wish to hold this petition for disposition in accordance with its resolution of that case. 2. Citibank principally argues that the Court should grant review in order to articulate a "uniform federal rule," based on federal preemption or federal common law, "that United States banks are not liable for the risk of foreign sovereign actions preventing or restricting payment of foreign deposits" (Pet. 12). In our view, however, if the Court were to grant the petition in this case it would find it unnecessary to articulate a "uniform federal rule." Citibank argued in the courts below "that the deposit agreement construed under Vietnamese law places the risk of loss for a political revolution on the depositor not on the domestic home office" (Pet. App. 7a). As we have explained, the court of appeals erred in rejecting that argument and correction of that error would provide a sufficient basis for reversal. The question presented in Citibank's petition appears to be sufficiently broad to subsume that issue. Citibank did not propose to the court of appeals, however, that a "uniform federal rule" governing home office liability for foreign branch deposits applies in this case. This Court generally does not address arguments that the court of appeals did not have an opportunity to consider. See, e.g., Granfinanciera, S.A. v. Nordberg, 109 S. Ct. 2782, 2788-2789 (1989). This practice rests, at least in part, on prudential concerns. For example, the Court indicated in Granfinanciera that it may obtain useful guidance from the considered views of a court of appeals and a district court that have developed a record for review. See id. at 2789. That concern is relevant here. For example, Citibank contends (Pet. 19-20; Reply Br. 9-10) that a uniform federal rule is necessary because United States banks may be unable to employ deposit agreements that would unambiguously relieve them of liability. This Court does not have the lower courts' views of this essentially factual matter. Furthermore, Citibank did not introduce evidence at trial to support that assertion. Thus, the Court may ultimately find that the record in this case is inadequate to assess the matter properly. There also are important jurisprudential reasons why the Court should decline to address an issue that was not raised below. If "Citibank's primary argument" below is correct and conclusively resolves this case, there is no need to search for a broader rationale. /14/ The Court should be especially reluctant to employ principles of federal preemption or federal common law to correct a court of appeals' mistaken interpretation of a contractual agreement. As we observe in our amicus curiae brief in Wells Fargo, federal preemption and federal common law come into play only if there is a conflict between federal law or policy and otherwise applicable law. See Boyle v. United Technologies Corp., 108 S. Ct. 2510, 2515 (1988); City of Milwaukee v. Illinois, 451 U.S. 304, 312-314 (1981). Those doctrines -- which have the far-reaching effect of displacing positive law -- are not necessary if otherwise applicable law adequately protects federal interests. This point has special relevance in the case of banking law. International banking transactions are conducted in accordance with generally understood banking law principles. Federal bank regulation has developed in tandem with, takes account of, and typically reflects those established principles. In most situations, there should be no conflict between federal interests and general banking law principles if the content of each is correctly recognized and applied. This case aptly demonstrates that point. If the court of appeals had correctly interpreted Citibank's agreement with respondent, there would be no conceivable conflict with federal interests. We cannot say with assurance that this Court may never need to rely on federal preemption or federal common law to resolve international banking disputes. Indeed, the federal act of state doctrine and the exceptions thereto indicate that judicially-made federal law may figure prominently in such cases. /15/ And we cannot deny that an advisory ruling would "provide clarity for bank management and federal regulators" (Pet. 19). But we are obliged to observe that this Court does not exercise its Article III powers for that purpose. Until a conflict materializes, in the form of a concrete legal dispute that requires application of federal law, there is no need to articulate a federal rule. /16/ CONCLUSION The petition for a writ of certiorari should be disposed of in accordance with the disposition of the petition filed in Citibank, N.A. v. Wells Fargo Asia Ltd., No. 88-1260. Respectfully submitted. KENNETH W. STARR Solicitor General STUART M. GERSON Assistant Attorney General THOMAS W. MERRILL Deputy Solicitor General JEFFREY P. MINEAR Assistant to the Solicitor General ABRAHAM D. SOFAER Legal Adviser Department of State Washington, D.C. 20520 EDITH E. HOLIDAY General Counsel Department of the Treasury Washington, D.C. 20220 J. VIRGIL MATTINGLY General Counsel Board of Governors of the Federal Reserve System Washington, D.C. 20551 MARK I. ROSEN Deputy General Counsel Federal Deposit Insurance Corporation Washington, D.C. 20429 ROBERT B. SERINO Acting Chief Counsel Office of the Comptroller of the Currency NOVEMBER 1989 /1/ Citibank also has filed a petition for a writ of certiorari seeking review of a decision of the United States Court of Appeals for the Second Circuit holding that Citibank's New York office is obligated to repay two Eurodollar deposits that a Singapore bank placed with a Citibank branch located in Manila, Republic of the Philippines. See Citibank, N.A. v. Wells Fargo Asia Ltd., No. 88-1260. The Solicitor General has filed a separate brief setting forth the United States' views in that case. /2/ Our amicus curiae brief in Citibank, N.A. v. Wells Fargo Asia Ltd., No. 88-1260, provides a brief description of the federal law governing foreign branch operations. See U.S. Amicus Br. 2-3. /3/ Our brief noted that the outcome of the case has "significant practical implications," "implicates the interests of federal regulatory agencies," and "raises serious concerns about the protection of American citizens and investments overseas" (81-1591 U.S. Amicus Br. 7). It also expressed "substantial misgivings about the correctness of the decision" (id. at 10), noting that the deposit agreement seemed to relieve the bank of liability under the circumstances, that there is "room to doubt whether the 'spring(ing) deposit' theory applied by the court of appeals is soundly grounded in New York law," and that "it could reasonably be concluded that when Vietnam confiscated the assets abandoned by petitioner in Saigon, and thereafter assumed banking operations, it simultaneously assumed responsibility for making repayment to depositors" (id. at 10-11). For the convenience of the Court, we have reproduced our amicus curiae brief in Vishipco as an addendum to this brief. See Add., infra, 1a-17a. /4/ The petition had asserted that the court of appeals erroneously applied the act of state doctrine. We explained that the court of appeals' opinion "does not support that argument. Rather, the court merely applied state law * * * to resolve a somewhat unusual breach of contract dispute. The court's resolution may well be erroneous, but it does not present a substantial federal question" (81-1591 U.S. Amicus Br. 7). We also noted that this result might be avoided in the future "by amendment of the deposit contracts in question, or by separate incorporation in foreign nations that permit that course of action," which in turn "highlight(s) the fact that the decision of the court of appeals turns on the particular deposit contracts consummated by petitioner and respondents, not on any issue of federal law warranting this Court's review" (ibid.). /5/ As we explain in our amicus curiae brief in Citibank, N.A. v. Wells Fargo Asia, Ltd., supra, the courts' references to general banking principles refers to positive banking law that enjoys virtually universal acceptance. 88-1260 U.S. Amicus Br. 9-10 n.12. /6/ Citibank's specific promises to repay the deposit only at Citibank's Saigon's place of business and only in piasters are plainly essential terms of the agreement. Indeed, United States interest rate restrictions and Vietnamese foreign exchange controls prohibited Citibank from offering a Vietnamese citizen a dollar-denominated savings account, earning interest at a 19% annual rate, payable in the United States. See Pet. App. 2a-3a, 27a; C.A. App. 65-66, 70-72. And the court's suggestion that the deposit agreement "must clearly and unmistakably inform depositors that they have no right to proceed against the home office" (Pet. App. 12a) is inconsistent with the general understanding, reflected in the Federal Reserve Board's regulations, that a United States bank's home office is not liable for foreign sovereign interference with a foreign branch's failure to repay a deposit unless the home office expressly undertakes that liability. See 12 C.F.R. 204.128. /7/ American courts would look to the law of the place where the deposit was made to determine whether there has been an actionable breach and any consequent remedy. See, e.g., Zimmerman v. Sutherland, 274 U.S. 253, 255-256 (1927); Dunn v. Bank of Nova Scotia, 374 F.2d 876, 877 (5th Cir. 1967); U.C.C. Section 4-102(2) (1977). /8/ The Court of Appeals made only a brief mention of the situs of the deposit, stating: The intangible chose in action, at least when it is the result of a deposit in a bank, has for some purposes a situs at the residence or place of business of the debtor, though the creditor be far away * * *. The debtor in this instance, though domiciled in the United States, may have had what was equivalent to a residence in Russia while it was doing business at its Russian branch. There is doubt whether its residence in Russia can be said to have continued after its branch had been seized and its business had been closed * * *. The decision of this case does not require that such doubts should be resolved. 239 N.Y. at 169, 145 N.E. at 920. /9/ Sokoloff ultimately elected to characterize his suit as a breach of contract action and eventually was awarded damages based on the value of the rubles on deposit on the date that the bank's Russian branch ceased to function. See 130 Misc. 66, 224 N.Y.S. 102 (Sup. Ct. 1927), aff'd, 223 A.D. 754, 227 N.Y.S. 907 (1928). The New York Court of Appeals affirmed the judgment, stating that the bank was precluded from arguing that the Russian government's seizure of its property rendered performance impossible because "the United States has not recognized the Soviet government, and in consequence, the seizure and nationalization of the banks is not an act of government within the recognized principles of international law" (250 N.Y. 69, 81 164 N.E. 745, 749 (1928)). Cf. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 428 (1964); United States v. Belmont, 301 U.S. 324 (1937). /10/ See also Tillman v. National City Bank, 118 F.2d 631, 633 (2d Cir.) ("the deposits in defendant's branches were not converted into continuous deposits payable in New York on account of the closing of the Russian branches"), cert. denied, 314 U.S. 650 (1941); 118 F.2d at 635 (a cause of action for "the frustration of the deposit contract through the closing of the Petrograd branch, or through breach of that contract" was time barred). Accord Tat Ba v. Chase Manhattan Bank, N.A., 616 F. Supp. 10 (S.D.N.Y.), aff'd without opinion, 762 F.2d 991 (2d Cir. 1985). /11/ Moreover, as Judge Brown correctly observed, "the Sokoloff cases simply do not stand for the broad general proposition that an American bank's home office is always ultimately liable for the debts of its foreign branches" (Pet. App. 31a). The New York courts have confined Sokoloff to its peculiar facts, which involved a Russian citizen that placed his deposit, in dollars, at the U.S. bank's home office and instructed that the deposit be credited to the foreign branch. See Dougherty v. Equitable Life Assurance Society, 266 N.Y. 71, 88, 193 N.E. 897, 903 (1934); Dougherty v. National City Bank, 157 Misc. 849, 862-864, 285 N.Y.S. 491, 506-508 (Sup. Ct. 1935). The Sokoloff referee himself drew this distinction, observing that "we are not concerned with questions of liability for transactions originating in Russia and wholly to be performed in Russia, but with a debt incurred in this state which the defendant agreed to pay on demand at its own branch in Petrograd" (130 Misc. at 73-74, 224 N.Y.S. at 114-115). The trial court later added in determining the measure of damages: Where the cause of action arose exclusively in the foreign country and the jurisdiction of our courts is secured merely because the debtor has been served or his property has been attached in the state of the forum, the courts here will only grant that relief that the creditor could have secured if the action had been brought in the courts of that country; but where the jurisdiction of our courts was sought to enforce rights which arose under our laws, then the relief would be granted as of the time when the liability accrued under our laws. The decisions in this State are in harmony with the above rule. 130 Misc. at 87, 224 N.Y.S. at 128-129. See also Restatement (Third) of the Foreign Relations Law of the United States Section 414 reporter's note 6 (1987) (characterizing Sokoloff as involving a "New York depositor"). /12/ Those courts held that the plaintiffs' suits were necessarily based upon a theory that the closing of the Saigon branches breached the deposit agreements and that the limitation period therefore commenced running upon the closing of the branch. 616 F. Supp. at 12; 586 F. Supp. at 205, 206. That approach implicitly rejects the "springing debt" theory. Other courts, however, have permitted claims to proceed long after the closing of the foreign branch. See Edelmann v. Chase Manhattan Bank, N.A., 861 F.2d 1291 (1st Cir. 1988) (Cuban certificate of deposit). /13/ It is also relevant that, as a prospective matter, United States banks may have greater latitude with respect to passbook savings accounts to set forth terms and conditions concerning home office liability in the event that a foreign government prevents a branch from repaying deposits than those banks have in the minimally documented Eurodollar market. Furthermore, United States banks may be able to amend existing agreements: the deposit agreement in this case subjected the depositor to "all subsequent amendments" of the deposit agreement (C.A. App. 126). We must assume, notwithstanding the decision in this case, that the courts would enforce such agreements or amended agreements in accordance with their terms. /14/ Citibank's call for a "uniform federal rule" may reflect a concern, which we have acknowledged (see p. 15, supra), that this Court normally would not review a court of appeals' interpretation of a particular contract. We nevertheless believe that this Court may find it desirable to review such a case in appropriate circumstances. If this case warrants such review, then it warrants reversal on the grounds argued below. /15/ As we explain in our amicus curiae brief in Wells Fargo (88-1260 U.S. Amicus Br. 19 & n.29), the act of state doctrine recognizes that a foreign sovereign has authority to affect debtor-creditor relationships involving debts payable within its jurisdiction. See generally Banco Nacional de Cuba, 376 U.S. at 428. Thus, a U.S. bank may be relieved of its obligation to return a deposit if a foreign government seizes the depositor's foreign branch account. See, e.g., Perez v. Chase Manhattan Bank, N.A., 61 N.Y.2d 460, 463 N.E.2d 5, 474 N.Y.S.2d 689, cert. denied, 469 U.S. 966 (1984). There is no need to address that issue here, however, because the deposit agreement and provisions of Vietnamese law, properly construed, excused Citibank from performing its contractual obligation to repay the deposit. There is good reason to believe that the court of appeals committed multiple errors in concluding that (1) the new Vietnamese government seized Citibank/Saigon's assets but not its deposit liabilities (see p. 11-12, supra); (2) the act of state doctrine would require a U.S. court to honor such a confiscation (cf. Belmont, 301 U.S. at 333-334 (Stone, J., concurring)); and (3) federal law (which would govern the situs of a bank deposit for act of state purposes) would recognize the "springing debt" theory (see p. 12-14, supra). But there is no occasion to reach any of those questions in this case. /16/ Indeed, we are not aware of any judicial decisions that have addressed the question whether a "uniform federal rule" governs these disputes. We submit that this Court, which would have the last word on the question, should not be the first court to address it. APPENDIX