TWISTED THREADS: H. KEMPNER AND THE COTTON SPINNERS LITIGATIONS, 1919-1956 (CONTRACTS, CONVERSION; TEXAS)
GUIDRY, BARBARA F.
Doctor of Philosophy
H. Kempner (Unincorporated), of Galveston, Texas, is a dynastic business trust. During the early 1920s, the firm, through two subsidiaries, permitted a group of German and French textile mills to finance cotton purchases by combining an ordinary business practice--speculation in the futures market on borrowed money--with a standard business form--the conversion contract. The practice, while both common and legal in the United States, produced a voidable contract in Germany, dependent on the whether the parties principally intended legitimate business purposes or speculative ones. When the American futures market declined, the spinners absorbed ever-increasing losses until, confronted with bankruptcy, they repudiated their contractual obligations. After failing to settle the disputes by negotiation, H. Kempner sued the mills. From 1928 until the outbreak of World War II, the cases gradually worked their way through the German and French courts. Although both sides presented consistent positions throughout the litigations, decisions varied from case to case as judges evaluated the individual actions to discover intent. Statutory gambling prohibitions, procedural evidentiary requirements, Great Depression economic factors and Nazi racial policies complicated the legal course. The 1940 German invasion of France, which plunged Europe into total war, effectively terminated the pending suits. H. Kempner subsequently sought redress, through private Congressional legislation, from the Alien Property Custodian's Fund which contained assets seized from German nationals during World War I. After substantial efforts by Senator Tom Connally and Congressman Clark Thompson, both from Texas, Congress enacted a relief bill for H. Kempner in 1946. President Truman vetoed the bill. However, within a year, Truman signed similar legislation on behalf of the Association of American Awardholders. A powerful group of large corporations with claims similar to H. Kempner's, the Association succeeded where H. Kempner failed because of superior political position. H. Kempner subsequently renewed its efforts. Texas congressmen in both houses, including Lyndon B. Johnson in the Senate, introduced relief bills in every legislative session. Finally, in 1953, after several years of committee wrangling, Congress enacted a second bill. Relying on Truman's precedent, President Eisenhower vetoed the legislation. This set-back, after more than a generation of controversy, litigation, and legislation, caused H. Kempner to abandon its cause.