Banco Nacional De Cuba v. Sabbatino

The United States imposed a reduction on its import quota for Cuban sugar. In retaliation, Cuba nationalized many companies in which U.S. nationals had interests. One such company was CAV, a sugar company in which Whitlock Farr (defendant), an American commodities broker, had an interest. Farr had contracted to buy a shipload of CAV sugar. After Cuba nationalized the company, Farr entered into a new agreement to buy the sugar from the Cuban Government. However, CAV promised to indemnify Farr for any losses suffered provided he would turn the sugar sales proceeds over to CAV instead of the Cuban government. Cuba assigned the bills of lading to its shipping agent, Banco Nacional (plaintiff), and Farr passed along the sugar and collected payments from his customers. Relying on the promise of indemnification from CAV, Farr passed along the proceeds to CAV instead of Cuba. Banco Nacional sued Farr for conversion of the bills of lading. It also sought to enjoin Sabbatino (defendant), the temporary receiver of CAV’s New York assets, from distributing the received proceeds. Farr defended on the ground that title to the sugar never passed to Cuba because the expropriation of CAV’s proceeds by Cuba violated international law. The district court granted summary judgment for Farr and Sabbatino as it found that the American act of state doctrine did not apply to a violation of international law by a foreign actor, and that Cuba’s expropriation violated international law. The appellate court affirmed, and the United States Supreme Court granted certiorari.