NML Capital, Ltd. v. Republic of Argentina

• Decision Date: 23 August 2013
• Docket Number: Docket No. 12–920(CON).,Docket No. 12–185(CON).,Docket No. 12–176(CON).,Docket No. 12–919(CON).,Docket No. 12–4865(CON).,Docket No. 12–4829(CON).,Docket No. 12–951(CON).,Docket No. 12–926(CON).,Docket No. 12–214(CON).,Docket No. 12–109(CON).,Docket No. 12–189(CON).,Docket No. 12–909(CON).,Docket No. 12–158(CON).,Docket No. 12–923(CON).,Docket No. 12–968(CON).,Docket No. 12–916(CON).,Docket No. 12–157(CON).,Docket No. 12–164(CON).,Docket No. 12–971(CON).,Docket No. 12–163(CON).,Docket Nos. 12–105(L).,Docket No. 12–111(CON).,Docket No. 12–939(CON).,Docket No. 12–924(CON).,Docket No. 12–170(CON).,Docket No. 12–934(CON).,Docket No. 12–4694(CON).,Docket No. 12–914(CON).
• Citation: 727 F.3d 230
• Parties: NML CAPITAL, LTD., Aurelius Capital Master, Ltd., ACP Master, Ltd., Blue Angel Capital I LLC, Aurelius Opportunities Fund II, LLC, Pablo Alberto Varela, Lila Ines Burgueno, Mirta Susana Dieguez, Maria Evangelina Carballo, Leandro Daniel Pomilio, Susana Aquerreta, Maria Elena Corral, Teresa Munoz De Corral, Norma Elsa Lavorato, Carmen Irma Lavorato, Cesar Ruben Vazquez, Norma Haydee Gines, Marta Azucena Vazquez, Olifant Fund, Ltd., Plaintiffs–Appellees, v. THE REPUBLIC OF ARGENTINA, Defendant–Appellant, The Bank of New York Mellon, as Indenture Trustee, Exchange Bondholder Group, Fintech Advisory Inc., Non–Party Appellants, Euro Bondholders, Ice Canyon LLC, Intervenors.
• Court: U.S. Court of Appeals — Second Circuit

727 F.3d 230

NML CAPITAL, LTD., Aurelius Capital Master, Ltd., ACP Master, Ltd., Blue Angel Capital I LLC, Aurelius Opportunities Fund II, LLC, Pablo Alberto Varela, Lila Ines Burgueno, Mirta Susana Dieguez, Maria Evangelina Carballo, Leandro Daniel Pomilio, Susana Aquerreta, Maria Elena Corral, Teresa Munoz De Corral, Norma Elsa Lavorato, Carmen Irma Lavorato, Cesar Ruben Vazquez, Norma Haydee Gines, Marta Azucena Vazquez, Olifant Fund, Ltd., Plaintiffs–Appellees,

v.THE REPUBLIC OF ARGENTINA, Defendant–Appellant,The Bank of New York Mellon, as Indenture Trustee, Exchange Bondholder Group, Fintech Advisory Inc., Non–Party Appellants,Euro Bondholders, Ice Canyon LLC, Intervenors.

Docket Nos. 12–105(L), 12–109(CON), 12–111(CON), 12–157(CON), 12–158(CON), 12–163(CON), 12–164(CON), 12–170(CON), 12–176(CON), 12–185(CON), 12–189(CON), 12–214(CON), 12–909(CON), 12–914(CON), 12–916(CON), 12–919(CON), 12–920(CON), 12–923(CON), 12–924(CON), 12–926(CON), 12–939(CON), 12–943(CON), 12–951(CON), 12–968(CON), 12–971(CON), 12–4694(CON), 12–4829(CON), 12–4865(CON).^*

United States Court of Appeals,Second Circuit.

Argued: Feb. 27, 2013.

Decided: Aug. 23, 2013.

Theodore B. Olson (Matthew D. McGill, Jason J. Mendro, on the brief), Gibson, Dunn & Crutcher LLP, Washington, D.C.; Robert A. Cohen, Eric C. Kirsch, Dechert LLP, New York, NY, for Plaintiff–Appellee NML Capital, Ltd.

Leonard F. Lesser, Simon Lesser, P.C., New York, NY, for Plaintiff–Appellee Olifant Fund, Ltd.

Michael C. Spencer, Milberg LLP, New York, NY, for Plaintiffs–Appellees Pablo Alberto Varela, et al.

Edward A. Friedman, Daniel B. Rapport, Friedman Kaplan Seiler & Adelman

LLP, New York, NY; Roy T. Englert, Jr., Mark T. Stancil, Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, Washington, D.C., for Plaintiffs–Appellees Aurelius Capital Master, Ltd., ACP Master, Ltd., Blue Angel Capital I LLC, and Aurelius Opportunities Master Fund II, LLC.

Jonathan I. Blackman (Carmine D. Boccuzzi, Ezequiel Sanchez–Herrera, Sara A. Sanchez, Michael M. Brennan, on the brief), Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Defendant–Appellant the Republic of Argentina.

James C. Martin (Colin E. Wrabley, on the brief), Reed Smith LLP, Pittsburg, Penn.; Eric A. Schaffer, Reed Smith LLP, New York, NY, for Non–Party Appellant The Bank of New York Mellon, as Indenture Trustee.

David Boies (David A. Barrett, Nicholas A. Gravante, Jr., Steven I. Froot, on the brief), Boies, Schiller & Flexner LLP, New York, NY; Sean F. O'Shea, Michael E. Petrella, Daniel M. Hibshoosh, O'Shea Partners LLP, New York, NY, for Non–Party Appellants the Exchange Bondholder Group.

William F. Dahill, Wollmuth Maher & Deutsch LLP, New York, NY, for Non–Party Appellant Fintech Advisory Inc.

Christopher J. Clark, Craig A. Batchelor, Michael E. Bern, Latham & Watkins, LLP, New York, NY, for Intervenors Euro Bondholders.

Bruce Bennett, James O. Johnston, Beong–Soo Kim, Jones Day, Los Angeles, Cal.; Meir Feder, Jones Day, New York, NY, for Intervenor ICE Canyon LLC.

David W. Rivkin, Suzanne M. Grosso, Debevoise & Plimpton LLP, New York, NY, for Amicus Curiae EM Ltd., in support of Plaintiffs–Appellees.

Ronald Mann, Esq., New York, NY, Amicus Curiae pro se, in support of Plaintiffs–Appellees.

Jack L. Goldsmith III, Cambridge, Mass.; Judd B. Grossman, Grossman LLP, New York, NY, for Amici Curiae Montreux Partners, L.P. and Wilton Capital, in support of Plaintiffs–Appellees.

Richard A. Samp, Cory L. Andrews, Washington Legal Foundation, Washington, D.C., for Amicus Curiae the Washington Legal Foundation, in support of Plaintiffs–Appellees.

Kevin S. Reed, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, for Amicus Curiae Prof. Kenneth W. Dam, in support of Plaintiffs–Appellees.

Anthony J. Costantini, Rudolph J. Di Massa, Jr., Suzan Jo, Mary C. Pennisi, Duane Morris LLP, New York, NY, for Duane Morris Individual Plaintiffs–Appellees.

Paul Saltzman, Joseph R. Alexander, The Clearing House Association L.L.C., New York, NY; H. Rodgin Cohen, Michael M. Wiseman, Sergio J. Galvis, Joseph E. Neuhaus, Michael J. Ushkow, Jared P. Roscoe, Sullivan & Cromwell LLP, New York, NY, for Amicus Curiae The Clearing House Association L.L.C., in support of Defendant–Appellant.

Eugenio A. Bruno, Estudio Garrido, Buenos Aires, Argentina; M. Darren Traub, Akerman Senterfitt, LLP, New York, NY for Amicus Curiae Alfonso Prat–Gay, in support of Defendant–Appellant.

Edward Scarvalone, Doar Rieck Kaley & Mack, New York, NY, for Amicus Curiae Prof. Anne Krueger, in support of Defendant–Appellant.

Paul T. Shoemaker, Greenfield Stein & Senior LLP, New York, NY, for Amicus Curiae Euroclear Bank SA/NV, in support of Defendant–Appellant.

Marco E. Schnabl, Timothy G. Nelson, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for Amicus Curiae Puente Hnos. Sociedad de Bolsa S.A., in support of Defendant–Appellant.

Matthew D. Ingber, Chrisopher J. Houpt, Mayer Brown LLP, New York, NY; Charles A. Rothfeld, Paul W. Hughes, Mayer Brown LLP, Washington, D.C., for Amicus Curiae the American Bankers Association, in support of Non–Party Appellant The Bank of New York Mellon.

Before: POOLER, B.D. PARKER, and RAGGI, Circuit Judges.

BARRINGTON D. PARKER, Circuit Judge:

This is a contract case in which the Republic of Argentina refuses to pay certain holders of sovereign bonds issued under a 1994 Fiscal Agency Agreement (hereinafter, the “FAA” and the “FAA Bonds”). In order to enhance the marketability of the bonds, Argentina made a series of promises to the purchasers. Argentina promised periodic interest payments. Argentina promised that the bonds would be governed by New York law. Argentina promised that, in the event of default, unpaid interest and principal would become due in full. Argentina promised that any disputes concerning the bonds could be adjudicated in the courts of New York. Argentina promised that each bond would be transferable and payable to the transferee, regardless of whether it was a university endowment, a so-called “vulture fund,” or a widow or an orphan. Finally, Argentina promised to treat the FAA Bonds at least equally with its other external indebtedness. As we have held, by defaulting on the Bonds, enacting legislation specifically forbidding future payment on them, and continuing to pay interest on subsequently issued debt, Argentina breached its promise of equal treatment. See NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir.2012) (NML I ).

Specifically, in October 2012, we affirmed injunctions issued by the district court intended to remedy Argentina's breach of the equal treatment obligation in the FAA. See id. Our opinion chronicled pertinent aspects of Argentina's fiscal history and the factual background of this case, see id. at 251–57, familiarity with which is assumed.¹ Those injunctions, fashioned by the Hon. Thomas P. Griesa, directed that whenever Argentina pays on the bonds or other obligations that it issued in 2005 or 2010 exchange offers (the “Exchange Bonds”), the Republic must also make a “ratable payment” to plaintiffs who hold defaulted FAA Bonds. We remanded, however, for the district court to clarify the injunctions' payment formula and effects on third parties and intermediary banks, and retained jurisdiction pursuant to United States v. Jacobson, 15 F.3d 19 (2d Cir.1994).

On November 21, 2012, the district court issued amended injunctions with the clarifications we requested,² as well as an opinion explaining them, which are challenged on this appeal by Argentina as well as by non-party appellants and intervenors. See NML Capital, Ltd. v. Republic of Argentina, No. 08 Civ. 6978(TPG), 2012 WL 5895786 (S.D.N.Y. Nov. 21, 2012) ( NML II ). Recognizing the unusual nature of this litigation and the importance to Argentina of the issues presented, following oral argument, we invited Argentina to propose to the appellees an alternative payment formula and schedule for the outstanding bonds to which it was prepared to commit. Instead, the proposal submitted by Argentina ignored the outstanding bonds and proposed an entirely new set of substitute bonds.³ In sum, no productive proposals have been forthcoming. To the contrary, notwithstanding its commitment to resolving disputes involving the FAA in New York courts under New York law, at the February 27, 2013 oral argument, counsel for Argentina told the panel that it “would not voluntarily obey” the district court's injunctions, even if those injunctions were upheld by this Court. Moreover, Argentina's officials have publicly and repeatedly announced their intention to defy any rulings of this Court and the district court with which they disagree. ⁴ It is within this context that we review the amended injunctions for abuse of discretion and, finding none, we affirm.⁵ However, in view of the nature of the issues presented, we will stay enforcement of the injunctions pending resolution of a timely petition to the Supreme Court for a writ of certiorari.⁶

In its opinion, the district court first explained that its “ratable payment” requirement meant that whenever Argentina pays a percentage of what is due on the Exchange Bonds, it must pay plaintiffs the same percentage of what is then due on the FAA Bonds. Id. at *2. Under the express terms of the FAA, as negotiated and agreed to by Argentina, the amount currently due on the FAA Bonds, as a consequence of its default, is the outstanding principal and accrued interest. See id.; NML I at 254 n. 7;see also Appellant Argentina 2012 Br. at 26 (“[T]he contractually agreed upon remedy [for default] is acceleration of principal, an action already taken by these plaintiffs.”). Thus, as the district court explained, if Argentina pays Exchange Bondholders 100% of what has come due on their bonds at a given time, it must also pay plaintiffs 100% of the roughly $1.33 billion of principal and accrued interest that they are currently due. See NML II at *3.

Second, the district court explained how its...