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New government legal tack could backfire

Litigation surrounding the 1933 double eagles of the Langbord family, whose pater familias Israel Switt has his pedigree on all of the known pieces that the government has seized, took a new twist Sept. 29.
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Litigation surrounding the 1933 double eagles of the Langbord family, whose pater familias Israel Switt has his pedigree on all of the known pieces that the government has seized, took a new twist Sept. 29.


That day the U.S. Mint amended the existing lawsuit to counterclaim for relief not only to require the Langbord family to forfeit the 10 1933 $20 gold coins that they asked the Mint to authenticate, but to seek the same fate for anybody else that has one, too.

In a way, the litigation has come the full circle. But since legal issues have changed over more than 75 years since the coins were struck, it pays to review them.

The Mint charges, and Alison Frankel’s 2006 book Double Eagle confirms, that sometime in 1937 Philadelphia jeweler and part-time coin dealer Switt acquired nearly two dozen 1933 $20 gold pieces that were lawfully struck at the Philadelphia Mint.

Mint officials claimed some 75 years ago that all of the double eagles struck that year were never placed into circulation because President Franklin D. Roosevelt issued an executive order banning private gold ownership and prohibiting banks, and by extension the Mint, from paying out gold coin.

“Rare and Unusual coin” ownership was still permitted, thanks to Treasury Secretary William H. Woodin, a genuine coin collector whose exploits as a pattern collector are well known to anyone who used the Adams-Woodin standard reference work that preceded Judd by two generations.

But the Mint’s position was that the 1933 double eagles were never lawfully issued – the term that they used in the 1990s was “monetized” – and they thus requested and received the assistance of the U.S. Secret Service in tracking them down, one by one.

Through months of interviews, the Secret Service determined that each of these 1933 double eagles could be traced back to Switt. They concluded that Switt and his business partner, Edward Silver, had obtained the 1933 double eagles from George A. McCann, a former cashier at the U.S. Mint in Philadelphia, in 1937. McCann was convicted in 1941 of stealing coins from the Mint and went to jail.

In the mid-1990s, one of the coins that was known to be abroad was brought into the U.S. in a sting operation that saw the arrest of British coin dealer Stephen Fenton, U.S. dealer Jasper “Jay” Parrino, and an expansive litigation that saw the fundamental assumptions of the Mint’s rights challenged.

Eventually, it came out that the coin in question had been exported with the consent of the Mint to King Farouk of Egypt, who bought it with an export license signed in 1943 or 1944 at the request of the Mint, only to put it into his collection. When the Palace Collection was sold by the revolutionary government of Egypt under Col. Nasser in 1954, the coin was cataloged.

Government inquiries from the United States and a demand that the coin be returned, wound up causing Sotheby’s to withdraw the coin from the lot in which it was included – absurdly, there were other double eagle rarities. The coin was cataloged by Fred Baldwin as Lot 185 together with a 1932 double eagle, and a 1925-D and S, 1926-D, 1927-S, 1928, 1929, 1930-S, 1931-P and D – all as a single lot including the 1933. These rarities were graded “mostly extremely fine,” after the European fashion, meaning they were uncirculated.

Result of the Fenton litigation is that the government settled; the coin was sold at auction by Sotheby’s and Stack’s in 2002 in New York. The U.S. split the $7.59 million auction proceeds with Fenton. (How the Egyptian government sought nothing, and evidently received nothing, for a coin that was owned by its monarch, that was paid for out of national funds, is probably worth its own story – but that’s another day).

Prior to that case, the government had found itself litigating the issue over and over again after gold ownership was outlawed in the United States.

One of the earliest cases to bear fruit was U.S. v. Barnard, whose history is found in volume 72 of the Federal Supplement, page 531 (Western District of Tenn., 1947).

That claim, in the nature of a replevin, or seeking the physical return of the coin, “was brought by the United States of America to recover from the defendant a $20 gold piece of the United States, commonly called a ‘double eagle‘, bearing date of the year 1933.”

History was judicially compacted when the court summarized that, “The coin in question was purchased in the year 1944 for $900, by the defendant, a member of the American Numismatic Association, from one Bell, who was also a collector of rare and unusual coins.” (Bell evidently had more than one to dispose of ).

The government “contends the coin in dispute was lawfully minted by the United States Mint at Philadelphia, but was never lawfully issued or put in circulation as money, and never became currency or legal tender of the United States.”

Feds claimed that although Barnard was “a bona fide purchaser, [he] acquired no title in the purchase of same against the United States Government, the rightful owner.” The theory: “the coin was illegally taken from the Mint upon substitution of a like coin of another year.” The government’s position: a thief cannot pass good title to property.

Barnard asserted that he was a “ collector of rare and unusual coins and, as such, purchased this one from another collector in good faith, in due course of trade and without knowledge that it had been stolen or surreptitiously taken from the Mint if it had, in fact, been so stolen, or taken.”

The phrase “rare and unusual” parallels the language used in 1933 to exempt coin collectors from having to turn in their gold coins.

Barnard went on to claim that the coin in controversy was lawfully minted as United States money, or currency, was issued as such, and that regardless of the manner in which the coin left the Philadelphia Mint, it was complete on its face, negotiable and transferable by delivery, and his right, title and interest in same is superior to any claim or title of the plaintiff (the government).
Not surprisingly, every legal claim has included this because at its essence, this is what money is. To hold to the contrary would make every $100 bill, every $1 bill – or for that matter every state quarter – hostage to possible theft. It would destroy the fluidity and homogeneity of “money.”

The court saw “proof” that the “coin could only be issued and circulated legally by the Philadelphia Mint, upon receipt by said Mint of an order from the Treasurer of the United States; that the Mint did not, at any time, receive such an order except one to deliver two of these coins to the Smithsonian Institution.”

A further finding: “In addition to the two coins sent to the Smithsonian Institution, 29 others were destroyed by testing and by the Assay Commission, leaving 445,469 double eagle coins for the year 1933 on hand at the Philadelphia Mint when they were later ordered melted into bullion.”

What about the rest? The court: “The remaining double eagle coins were carefully and meticulously weighed before and after they were melted and the weight of same, following the melting process at the Mint, equaled the weight of these coins prior thereto.”

The inevitable judicial conclusion: “In view of these undisputed facts, it is clear that the gold piece which is the basis of this lawsuit did not leave the Mint as regularly and lawfully issued money, or currency, therefore, the rule under the law merchant that title to money passes with delivery to a person who acquires it in good faith and for a valuable consideration, and which was adopted to insure the ready acceptability of money as currency in normal channels of trade, is not applicable here.”

The Barnard court guessed, “that it was abstracted by someone who substituted a similar coin for it before the coins were reduced to bullion.”

The court’s judgment went on to say that, “It is the Court’s opinion this coin was abstracted by someone who had in mind that it would have a special value as a rare and unusual coin and that it could be disposed of from that standpoint.” Victory for the government. It seized the coin.

Another case involved James Aloysius Stack of New York, no relation to the well known New York dealers. His case was litigated in a variety of different forums. It began in the State Supreme Court and was removed to federal court.

In an early part of the case in U.S. District Court for the Southern District of New York in 1950 (94 Fed.Supp. 54), the court laid out the legal issues as it then saw them. (New York State Supreme Court is not New York’s highest court but a court of general jurisdiction). Removed by the government to federal court, it eventually found its way for procedural reasons back in state court).
The facts as the court saw them a half century ago: “On March 15, 1933, there were minted by the United States in its mint at Philadelphia, Pa., 445,500 $20 gold coins, known as ‘double eagles’. On March 6, 1933, the President of the United States had proclaimed a bank holiday prohibiting banks from paying in gold coin. ... Pursuant to Executive orders of the President of the United States ... said ‘double eagles’ were withheld from circulation and none were ever issued as currency.”

Then some analysis of what happened next: “The Gold Reserve Act of 1934 ... prohibited the coinage and payment of gold coins by the United States. Nevertheless, in September 1943 [James A. Stack] came into possession of one of these ‘double eagle’ coins. The Treasury Department learned of this, and on May 15, 1945, Herbert E. Gaston, Assistant Secretary of the Treasury, wrote to Stack.

“This Department is advised that there is in your possession one double eagle minted in 1933; and an investigation of the circumstances under which this and several identical coins came into the hands of private persons has disclosed that they were embezzled or stolen from the United States.”

“I wish to advise that an Agent of the Secret Service will call upon you in the near future to receive from you the coin in question.” And so it was that “On June 20, 1945, [James A. Stack] delivered the said coin to ... [Harry Strang] a Secret Service Agent, for delivery to the Treasury Department.”

But Stack did not provide it willingly: “Pursuant to your letter of May 15, 1945, there is being delivered to your representative herewith under protest and under legal duress a gold coin described as follows: one double eagle coined in 1933. I reserve the right to institute such legal proceedings as may be necessary for its recovery.”

On March 23, 1950, suit was commenced in the Supreme Court of the County and State of New York. The original complaint alleged that the Stack, a collector of rare coins, was, and still is, the owner and entitled to immediate possession of a gold coin of the United States, known as a ‘double eagle’, and that Strang “wrongfully, unlawfully and against the will of the Plaintiff took said gold coin from the custody and possession of” Stack.

Alternatively, the complaint sought return of the coin or, if return could not be made, damages for its value and for the alleged wrongful detention. ( Stack v. Strang, 112 NYS2d 197 (Special Term, NY County Supreme Court, 1952).

By 1952, the case evolved to this summary: “This action has been brought ... to recover a $20 U.S. gold coin, known as a ‘double eagle’, dated 1933... [Stack] has since died and the action is continued by the executors of his estate. The defendant is a member of the United States Secret Service, Treasury Department.”

The court continued, “The deceased was a collector of rare coins and as such he acquired the coin which is the subject of this suit. The complaint against defendant is in his individual capacity, in that acting outside and beyond the scope of his statutory authority and power he wrongfully and unlawfully took said gold coin from the custody of Plaintiff.”

A new tack, but that didn’t work, either. “The moving papers reveal that this is the fourth motion made to dismiss the action. The first motion to dismiss was granted upon the ground that the action was one in effect against the United States of America and, since consent to be sued had not been obtained, the court was without jurisdiction in the action.”

The court allowed Stack (or his estate) “to serve an amended complaint” which was then removed from state court to U.S. district court. The district court “granted defendants motion to dismiss upon the ground that the action was one against the United States of America which had not consented to be sued, and the court was without jurisdiction of the action.”

Our court system provides that the government or sovereign must consent to be sued, and except under narrowly defined circumstances, it doesn’t allow suit to be brought.

On the authority of a U.S. Supreme Court case, the New York court dismissed the case against Secret Service agent Strang, who had seized the coin from Stack. The “powers of the officer are limited by statute. His actions beyond those limitations are considered individual and not sovereign actions.”

The court summarized: “The action is in replevin or if the coin cannot be returned then for an award of damages. Possession is not sought to be wrested from the United States which is not even a party to the action,” the court said. At the end of the day, James Stack lost the coin to the government without compensation.

The 2009 replevin action lists a series of other 1933 $20 gold coins seized by the government:

• Max Bernstein
• J. F. Bell
• Fred C.C. Boyd
• T. James Clarke
• Charles Williams
• James Stack
• Col. James W. Flanagan
• L.G. Barnard

As the government’s “in rem” complaint against the Langford family of Sept. 29, 2009, recites, “These eight 1933 double eagles were all traced back to three coin dealers, each of whom in turn had purchased them from Israel Switt in 1937.” (In rem means a suit over the property itself).

Two more 1933 $20s needed to be accounted for and the government complaint tells what happened to them: “The Secret Service investigation had identified a ninth 1933 double eagle that had been sold by Israel Switt in 1937. However, that 1933 double eagle was sold through a series of transactions to an individual who sold it to King Farouk of Egypt.”

This is the Stephen Fenton-Jasper “Jay” Parrino specimen that was resolved with the auction sale in 2002.

Here’s what the movement says about that in 2009: “The Treasury Department mistakenly issued an export license for the 1933 double eagle in February 1944, shortly before the Secret Service investigation began. Although the United States government requested the return of the double eagle (the “Egyptian Double Eagle”) from the government of Egypt, it was not returned through diplomatic channels.”

Then there’s another coin – a “tenth 1933 double eagle was recovered unexpectedly in 1952. Louis Eliasberg of Baltimore had purchased the double eagle in 1944 from one of the three collectors who had bought 1933 double eagles from Israel Switt in 1937.”

Here’s what happened to that: “Eliasberg learned when he was preparing to display his coin collection publicly that there was a cloud on the 1933 double eagle. When Eliasberg learned that there was a question about his right to possess the 1933 double eagle, he sent it to the Mint of his own initiative.”

Fast forward two generations. The Farouk specimen is in Europe and its owners are trying to arrange its sale. Here’s what the government complaint of September 2009 says happened.

“In February 1996, the Egyptian double eagle, the 1933 double eagle that had been exported to King Farouk in 1944, found its way back onto United States soil.”

Then this truly incorrect statement: “A British coin collector named Stephen Fenton had attempted to sell the long sought double eagle in a meeting at the Waldorf Astoria in New York to an American collector, and was arrested, although the charges were later dismissed. The American collector was working with the Secret Service to recover the Egyptian Double Eagle.”

The government summarized that “After six years of litigation between the United States government and Fenton, Fenton agreed to return the Egyptian Double Eagle to the United States Mint. The Mint, in turn, recognizing that an export license had mistakenly been issued for the Egyptian Double Eagle in 1944, shortly before the Secret Service investigation began, agreed to monetize the Egyptian Double Eagle, sell it, and split the proceeds with Fenton.”

Again the government’s complaint: on July 30, 2002, the Egyptian Double Eagle was auctioned for more than $7.5 million. In addition to paying the agreed price and the buyer’s premium (a fee to the auction company), the purchaser was required to pay $20 to the United States Mint in order to have the Egyptian Double Eagle “issued” as a lawful coin.

There are those who argue that coinage is money from the start and argue that it cannot be otherwise.

The declaratory judgment portion of the claim, besides being aimed at the Langbord coins, also aims to prevent any more litigation – from persons unknown (hence they are sued as John Doe 1, 2 and 3) – who might also have 1933 $20 gold pieces.

The “Does” are not further identified, which poses a problem as to service of process and ultimate relief.

Actual language says: “The United States seeks a declaration by this court that no 1933 double eagles were authorized to be removed from the United States Mint and that accordingly, as a matter of law, all 1933 double eagles in possession of John Does 1, 2 and 3 remain the property of the United States.”

It goes on to say in the 106th paragraph of the complaint that, “Such declaration of the rightful ownership of all 1933 double eagles will resolve further claims by John Does 1, 2 and 3 to title of any 1933 double eagles.”

Where Langbord and her sons are identified in the complaint, “Does 1, 2 and 3” are not identified in any way at all, other than inferentially. So just how the Mint is going to provide them notice of this declaratory judgment action isn’t that clear – and that creates a problem for enforcing the declaratory relief section against anyone but the Langbord clan.

The Federal Rules of Civil Procedure (Rule 57) and Title 28 of the U.S. Code govern declaratory judgments in federal court. Rule 57 provides, “These rules govern the procedure for obtaining a declaratory judgment under 28 U.S.C. § 2201”.

That section is also elusive: “any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.”

The next section of the code provides that, “ Further necessary or proper relief based on a declaratory judgment or decree may be granted, after reasonable notice and hearing, against any adverse party whose rights have been determined by such judgment”.

Note the words “reasonable notice” and “hearing”, which implies that the people or entities involved (there could be corporate ownership) receive a summons and a copy of the complaint.
In the government’s claim (count IV) seeking declaratory relief, they say that “The United States seeks a declaration by this court that no 1933 double eagles were authorized to be removed from the United States Mint and that accordingly, as a matter of law, all 1933 double eagles in possession of John Does 1, 2 and 3 remain the property of the United States.

They go on to say that “Such declaration of the rightful ownership of all 1933 double eagles will resolve further claims ... to title of any 1933 double eagles.” But would it?

That is the genius of Barry Berke, the attorney for the Langbords who also represented Fenton. He has forced the government to prove that his clients are not the lawful owners, where the other cases and instances all involved the collector trying to prove a negative, difficult at best.

Problematic is that if the court were to determine, and the judge decide, that the Mint’s points were valid, they could never serve process or obtain legal jurisdiction over “John Doe #1”, or for that matter 2 or 3.

If in the Barnard case in 1947 the Farouk specimen had been involved, instead of a Tennessee collector, is there any doubt that the Farouk specimen – which the Treasury Department allowed to be permitted for export – would have to be treated differently?

In a completely unrelated case, Owaki v. City of Miami, found in 491 F.Supp.2d 1140 (S.D. Fla., 2007), tests this theory. There, the court said, “an unknown Miami Police Officer, John Doe No. 1, struck Plaintiff from behind with a police baton ... However, John Doe No. 1 has never been identified in the three and a half years since the incident occurred ...”

The court concluded that even if there is no factual dispute on whether the unidentified police officer used excessive force ... fictitious party practice is not allowed in Federal Courts,” and concluded that the “unserved fictional defendant John Doe No. 1 must be dismissed.”

In another unrelated case, Pecarsky v. Marina Associates, 107 F.R.D. 107, D.C.N.J.,1985, a New Jersey federal district court judge described the conundrum that a “John Doe” defendant causes.
“The Federal Rules of Civil Procedure do not explicitly consider John Doe actions. Nevertheless, such actions have been allowed where the Plaintiff is able to identify the John Doe defendant sufficiently to enable his or her naming at a later date ... New Jersey Court Rule 4:26-4 (West 1985) does provide for the institution of John Doe actions, but is clearly drafted with the intention that the unnamed defendant eventually be identified and the complaint amended to reflect that identity.”

Significantly, that court explained, “the concluding sentence of the rule provides that “[n]o final judgment shall be entered against a person designated by a fictitious name.”

Put differently, with every complaint you need a summons that has to be served on someone to obtain jurisdiction over the person or the property. Who is the Mint going to name, where are they located, and how is it, precisely, if they don’t know who these people are that they are going to serve them with legal process so that they can defend against the claim?

Seeking declaratory relief against the Langbord family, if timely, is a practical course. The people are participating, the coins are present, and the need for a final determination obvious.
One other relevant point: while it may be said that the Mint doesn’t have jurisdiction over owner 12, 13 and 14 or 15 of other outstanding 1933 double eagles – I assume the Mint would not be doing this if they did not believe there were other coins out there – they have a substantial risk and downside if they fail to make their case.

That risk is that since the facts that are involved with the Langbord coins are fairly well outlined – subject to some surprises – a loss for the Mint might well be used against them in other proceedings. Seek one sort of declaratory relief, wind up with another. And so it goes.