Em Ltd. v. Republic of Argentina, 03-9275.

• Decision Date: 31 August 2004
• Docket Number: No. 03-9275.,03-9275.
• Citation: 382 F.3d 291
• Parties: EM LTD., Plaintiff-Appellee, v. THE REPUBLIC OF ARGENTINA, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

382 F.3d 291

EM LTD., Plaintiff-Appellee, v. THE REPUBLIC OF ARGENTINA, Defendant-Appellant.

No. 03-9275.

United States Court of Appeals, Second Circuit.

Argued June 10, 2004.

Decided August 31, 2004.

Appeal from the United States District Court for the Southern District of New York, Thomas L. Griesa, J Jonathan L. Blackman, New York, N.Y. (Carmine D. Boccuzzi and Cleary, Gottlieb, Steen & Hamilton, of counsel), for Defendant-Appellant.

David W. Rivkin, New York, N.Y. (John B. Missing, Dennis H. Hranitzky and Debevoise & Plimpton, LLP, of counsel), for Plaintiff-Appellee.

Before OAKES and RAGGI, Circuit Judges, and HOLWELL,^* District Judge.

PER CURIAM.

The Republic of Argentina ("Argentina") contests the right of its bondholder, EM Ltd. ("EM"), to collect the amount due on defaulted bonds in United States dollars rather than Argentine pesos, which are significantly devalued in relation to the dollar. There is no question that Argentina defaulted on the bonds or that EM has declared due the principal amount it is owed. Rather, the parties take differing views as to whether the bond certificates and Fiscal Agency Agreement (collectively "the bond documents") require EM to collect what it is owed in pesos, thereby receiving a substantially smaller sum, or whether EM is allowed to elect to receive payment in dollars at the contractually set rate of one dollar per peso. The United States District Court for the Southern District of New York, Thomas L. Griesa, Judge, granted summary judgment to EM, concluding that the language of the bond documents, specifically the acceleration provision and the election provision, allowed for EM to elect to be paid in dollars at the one-to-one ratio.

We are presented in this appeal with a simple question of contract interpretation. The bond documents provide in an acceleration clause that when accelerating in the event of a default, the bondholder "shall declare the principal amount (that is, the par value)" of the bonds due and payable as a consequence of the default. The documents contain an election provision which states that:

with respect to any payment, the Holder of this Security elects to receive such payment in U.S. dollars by giving notice to the Fiscal Agent in writing not later than the close of business on the fifth business day prior to the applicable Interest Payment Date, the Maturity Date or other date of payment, as the case may be[.]

The documents are explicit that when payment in dollars is elected, "payment will be made in U.S. dollars at the ratio of one U.S. dollar to one Argentine peso regardless of the changes in foreign exchange rates."

Argentina argues that the words "par value" in the acceleration clause mean the face value of the bonds, which in this case is denominated in pesos.¹ In other words, because the acceleration clause uses the term "par value," an accelerated payment must be made in pesos for the peso amount on the face of the bonds. Argentina also contends that the election clause cannot be read to apply to an accelerated payment, thereby removing any possibility that such a payment can be required in dollars. We find both of these arguments to be without merit.²

First, we cannot agree with Argentina that because the bonds are denominated in pesos, an accelerated payment of the principal amount can only be made in pesos. To support its position, Argentina cites the decision of the New York Court of Appeals in Village of Fort Edward v. Fish, 156 N.Y. 363, 370, 50 N.E. 973 (1898), where the court held that "`[p]ar' means equal, and par value means a value equal to the face of the bonds." But in Fish, the face value of the bonds was found to be $50,444.44: the $50,000 amount denominated on the bonds plus accrued interest of $444.44: Id. at 371, 50 N.E. 973. If the "par value" of the bonds was equal to the face value, as stated by the court, then the par value was not the amount actually denominated on the bonds. We are therefore unwilling to rely on Fish to give "par value" the determinative reading Argentina urges in this case. Instead, because the term "par value" as used here modifies the term "principal amount," the acceleration clause more readily lends itself to the interpretation that "par value" means the amount due or owed to the bondholder. Indeed, it was this amount that was found to be the face value in Fish. Accordingly, we reject Argentina's position that the use of the words "par value" requires that payment of accelerated principal must be in pesos.

Although the words "par value" do not, in and of...