Em Ltd v. The Repub. Of Argentina

Decision Date07 April 2010
Docket Number03 Civ. 8845(TPG),06 Civ. 7792(TPG).,No. 03 Civ. 2507(TPG),06 Civ. 6646(TPG),05 Civ. 2434(TPG),03 Civ. 2507(TPG)
Citation720 F.Supp.2d 273
PartiesEM LTD., Plaintiff, v. THE REPUBLIC OF ARGENTINA, Defendant. NML Capital, Ltd., Plaintiff, v. The Republic of Argentina, Defendant. NML Capital, Ltd., Plaintiff, v. The Republic of Argentina, Defendant. NML Capital, Ltd., Plaintiff, v. The Republic of Argentina, Defendant. EM Ltd. and NML Capital, Ltd., Plaintiffs, v. Banco Central De La Republica Argentina and The Republic of Argentina, Defendants. Banco Central De La Republica Argentina, Interested Party.
CourtU.S. District Court — Southern District of New York

OPINION TEXT STARTS HERE

David W. Rivkin, Suzanne Michelle Grosso, Debevoise & Plimpton, LLP, Charles Platto, Law Office of Charles Platto, Charles I. Poret, Robert A. Cohen, Dechert, LLP, Gregory P. Joseph, Peter R. Jerdee, Gregory P. Joseph Law Office LLC, New York, NY, for Plaintiff.

Jonathan I. Blackman, Cleary Gottlieb Steen & Hamilton, LLP, Mark Stephen Sullivan, Dorsey & Whitney LLP, New York, NY, for Defendant.

Joseph Emanuel Neuhaus, Sullivan and Cromwell, LLP, New York, NY, for Interested Party.

OPINION

THOMAS P. GRIESA, District Judge.

In September 2006 the two plaintiffs in the above cases moved for provisional relief with respect to approximately $100 million deposited by the Central Bank of Argentina (“BCRA”) in the Federal Reserve Bank of New York (“FRBNY”). The purpose was to secure expected judgments, and to secure a judgment actually entered, against the Republic of Argentina in cases based on the Republic's default on its bond indebtedness.

The motions are granted.

As of September 2006, EM had obtained a judgment in case 03 Civ. 2507, dated October 27, 2003. Subsequent to September 2006, NML obtained a judgment in case 03 Civ. 8845, dated January 10, 2007, and judgments in cases 05 Civ. 2434 and 06 Civ. 6466, dated June 12, 2009.

In September 2006 both plaintiffs, EM and NML, filed a new action, 06 Civ. 7792, against the Republic and BCRA, seeking a declaration that BCRA is the alter ego of the Republic. In November 2007 the complaint in that action was amended, adding counts seeking money judgments against BCRA for amounts owed to plaintiffs on account of the Republic's bond default. In October 2008 a second amended complaint was filed pursuant to the court's order and in compliance with the Federal Rules of Civil Procedure.

Before discussing the September 2006 motions further, it is necessary to summarize proceedings in the District Court and the Court of Appeals regarding earlier applications as to the same funds.

The Earlier Applications

On December 30, 2005 plaintiffs filed motions in cases 03 Civ. 2507, 03 Civ. 8845, and 05 Civ. 2434, seeking pre-judgment attachment and restraining notices, as appropriate to the particular case. These remedies were sought with respect to $105 million on deposit in the name of BCRA at the FRBNY.

The theory of plaintiffs in making these motions was as follows. The President of the Republic of Argentina had issued two decrees that gave the Republic the authority to use funds of BCRA to repay the Republic's indebtedness to the International Monetary Fund. Funds of BCRA were so used, although not any of the $105 million on deposit at the FRBNY. In any event, plaintiffs argued that the decrees had the effect of making the $105 million the property of the Republic, rather than funds belonging to BCRA. Plaintiffs then argued that payment of the Republic's debt to the IMF was “commercial” activity, thus allowing attachment and restraint of these alleged funds of the Republic under the relevant provision of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1610. Plaintiffs also argued that there had been a waiver of the § 1611 immunity granted to central banks so that, even if the funds were still the property of BCRA, they could be attached and restrained. The Part I judge of this court granted the motions, and thus attachments and restraints were effected as to the $105 million.

On January 9, 2006, the parties entered into a stipulation and consent order to the effect that any garnishee holding an account or accounts in the name of BCRA “shall maintain in such account(s) a sum equal to not less than 95 percent of the amount credited to such account(s) as of the close of business on January 6, 2006[.] As of the close of business on January 6, 2006, BCRA had on deposit approximately $105 million at the FRBNY, which was the only garnishee where funds were found. In accord with this stipulation and consent order, approximately $100 million in BCRA funds has remained frozen at the FRBNY since January 9, 2006.

However, the regularly assigned judge vacated the attachments and restraints. The court, in a bench opinion of January 12, 2006, rejected plaintiffs' arguments and held that the presidential decrees did not change the ownership status of the funds of BCRA deposited at the FRBNY, and that in any event the repayment of the loan to the IMF would not have been commercial activity, noting, of course, that the $100 million was not actually used for this purpose. The court also held that there had been no waiver of central bank immunity. The court held that the $100 million could not be attached or restrained. However, the attachments and restraints in accordance with the January 9, 2006 stipulation and consent order remained in effect pending appeal.

Upon application of plaintiffs, the District Court certified the matter for appeal under 28 U.S.C. § 1292(b). The Court of Appeals accepted the appeal.

In an opinion issued January 5, 2007, the Court of Appeals affirmed. EM Ltd. v. Republic of Argentina, 473 F.3d 463 (2d Cir.2007). The Supreme Court denied certiorari on October 1, 2007, 552 U.S. 818, 128 S.Ct. 109, 169 L.Ed.2d 24. The Court of Appeals rejected the arguments of plaintiffs, expanding considerably on the District Court's bench opinion. An important point for present purposes is the court's extensive discussion of plaintiffs' potential argument that BCRA was the alter ego of the Republic and that, for this reason, funds of BCRA should be treated as funds of the Republic. 473 F.3d at 476-80. The court noted that plaintiffs chose not to make arguments of alter ego, “even though the Republic's alleged misdeeds cited in plaintiffs' briefs might have lent some credence to these arguments.” Id. at 480. Footnote 17, which appears at that point in the court's opinion, states:

For example, the Republic's alleged interference with BCRA's affairs and efforts to remove attachable assets from the United States arguably could have supported disregarding BCRA's separate juridical status in order to avoid fraud or injustice. This approach, rather than the legally unsupported one advanced by plaintiffs, might provide a means by which creditors could “avoid allowing Argentina to play a shell game to deprive creditors of their legitimate remedies.” Br. of Appellant NML 36.

The court went even farther and stated, id. at 480, n. 18, that if the court had agreed with what plaintiffs did argue regarding the Republic's ownership and control of BCRA funds at the FRBNY, there would be no need to be concerned about any specific waiver for BCRA. The footnote states:

We note, however, that if we agreed with plaintiffs' arguments concerning the effect of the Decrees on ownership and control of the FRBNY Funds, it would not be necessary to consider plaintiffs' arguments regarding the effect of the Republic's waiver on BCRA, as the Republic indisputably waived its assets' immunity from attachment under 28 U.S.C. §§ 1610(a)(1) and (d)(1). Cf. [ First City, Texas-Houston, N.A. v.] Rafidain Bank, 150 F.3d [172] at 174 [ (2d Cir.1998) ] (noting that if central bank were alter ego of other instrumentality, central bank would be subject “to jurisdiction under the FSIA's commercial activity exception to immunity to the same extent as [the other instrumentality]).

The significance of these footnotes in connection with the present motion will be discussed later in this opinion.

In any event, the Court of Appeals held that plaintiffs had not shown they were entitled to the attachments and restraints on the basis of the arguments then made.

The Present Motions

As earlier described, in September 2006, while the Court of Appeals proceeding was still pending, plaintiffs EM and NML commenced an action against both the Republic and BCRA, seeking a declaratory judgment to the effect that BCRA is the alter ego of the Republic. At the same time, plaintiffs notified the Republic and BCRA that they intended to move for attachments and restraining notices in the cases that were involved in the December 2005 applications (03 Civ. 2507, 03 Civ. 8845, 05 Civ. 2434, and 06 Civ. 6466), and that these new motions would be based on the alter ego theory, a theory not presented in the December 2005 applications.

In a Stipulation and Consent Order dated September 28, 2006, agreed to by the plaintiffs, the Republic, and BCRA, it was recognized that plaintiffs were moving for attachments and restraints as to the $100 million “on the ground that the Central Bank is the alter ego of Argentina (the ‘Alter Ego Motion’).” It was further agreed in effect that the hold on the $100 million would remain in place pending the decision by the court on the Alter Ego Motion.

In view of the Stipulation and Consent Order of September 28, 2006, plaintiffs did not make formal applications for attachment and restraints. The parties, including BCRA, have treated the September 28, 2006 Stipulation and Consent Order as the making of those motions. See Minutes of February 22, 2010.

As described earlier in this opinion, only one judgment had actually been obtained by plaintiffs as of September 2006. This was in 03 Civ. 2507. However, by now judgments have been obtained in 03 Civ. 8845, 05 Civ. 2434, and 06 Civ. 6446. No judgment, of course, has been obtained in the declaratory judgment action filed in September 2006 (...

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