United States v. Belmont

With dozens of similar claims involving millions of dollars pending in other courts, the federal government persisted, appealing the New York court's decision before the U.S. Supreme Court on 4 March 1937. This time, the Belmont firm was found to be liable to legal action. On 3 May 1937, the Supreme Court reversed the New York court's decision, paving the way for the federal claim to proceed.

In an opinion written by Justice Sutherland, six of the nine justices agreed that President Roosevelt had acted within his power to recognize the Soviet Union as a sovereign state. Consequently, any diplomatic agreements arrived at through executive action, such as the Litvinoff accord, were legitimate. Justice Sutherland noted that binding treaties between the U.S. and foreign nations required approval by the Congress. The Litvinoff agreement, however, was an "international compact" made by executive order and was legal as an exercise of presidential power.

The Court would not consider the idea that appropriating the Petrograd account might violate any New York State policies. Under no circumstances, the Court ruled, could a state policy be found to legally supersede an agreement between the national government and a sovereign foreign power. The external powers of the U.S. government could be exercised without regard to state laws.

Furthermore, the Court did not accept the argument that U.S. government claims on the Petrograd account were in violation of the Fifth Amendment's clause prohibiting the confiscation of private property. Justice Sutherland's written opinion noted that the money in question was not the private property of the Belmont firm, which was only a custodian of the disputed sum. The money had been the property of the Petrograd Metal Works, which had been dissolved by the Soviet government. As a matter of general principle, the Supreme Court was not in the business of judging the acts of foreign governments on their own soil.

Three justices agreed with the result of Justice Sutherland's opinion, but for a different reason. Justices Stone, Brandeis, and Cardozo were uneasy about the majority's theory that the state of New York had no right to refuse to transfer funds. Still, the justices agreed that the federal government had the right to pursue a legal claim to the Petrograd account, just as long as it was understood that the government had no more or less legal standing in the suit than the Soviets as a claimant.

Ultimately, the Court's decision in the Belmont case would be of less significance to the parties involved in the lawsuit over the Petrograd Metal Works account than as a precedent establishing that presidential executive power was not to be subjected to the rules of individual states.