Fontana v. Republic Argentina

• Decision Date: 18 June 2020
• Docket Number: August Term, 2019,No. 19-595,19-595
• Citation: 962 F.3d 667
• Parties: Hernan Lopez FONTANA, Mariana Mori de Lopez, Plaintiffs-Appellees, v. REPUBLIC OF ARGENTINA, Defendant-Appellee, v. Guillermo Gleizer, Movant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

962 F.3d 667

Hernan Lopez FONTANA, Mariana Mori de Lopez, Plaintiffs-Appellees,

v.REPUBLIC OF ARGENTINA, Defendant-Appellee,

v.Guillermo Gleizer, Movant-Appellant.

No. 19-595

August Term, 2019

United States Court of Appeals, Second Circuit.

Argued: March 19, 2020

Decided, June 18, 2020

Zachary G. Meyer, Sutton Sachs Meyer PLLC, New York, NY, for Movant-Appellant.

Mariana Mori de Lopez, pro se, Tierra del Fuego, Argentina.

Rahul Mukhi (Carmine D. Boccuzzi, Jr., on the brief), Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Defendant-Appellee.

Before: Katzmann, Chief Judge, Wesley and Park, Circuit Judges.

Katzmann, Chief Judge:

In this case, we consider in principal part whether the Foreign Sovereign Immunities Act ("FSIA") bars enforcement of New York Judiciary Law § 475 against the Republic of Argentina, and whether an attorney who secured a judgment for plaintiffs in Argentine bond litigation retains a lien, pursuant to New York Judiciary Law § 475, in the proceeds of a subsequent settlement used to satisfy that judgment, where the settlement was offered universally to bondholders and the attorney did not participate in the settlement process.

Movant-appellant Guillermo Gleizer represented plaintiffs-appellees Hernan Lopez Fontana and Mariana Mori de Lopez in litigation against the Republic of Argentina relating to defaulted Argentine bonds. Although judgment was entered for plaintiffs in 2006, plaintiffs ultimately settled their claims with Argentina in 2016 without Gleizer's involvement.¹ Almost three years later, Gleizer moved in the district court for an award of attorney's fees jointly and severally against both plaintiffs and Argentina, arguing that he had a lien on the settlement proceeds by operation of New York Judiciary Law § 475. The district court denied Gleizer's motion, as well as his subsequent motion for reconsideration, reasoning in both orders that, because Gleizer did not participate in the settlement, he was not entitled to a lien on the settlement proceeds.

Although the district court did not address foreign sovereign immunity, we conclude that Gleizer's claim against Argentina falls within the commercial activity exception of the FSIA. Argentina's settlement with plaintiffs constitutes an "act outside the territory of the United States in connection with a commercial activity of [Argentina] elsewhere." 28 U.S.C. § 1605(a)(2). And that act caused "a direct effect in the United States," id. , because it ended long-running litigation in New York. See Atlantica Holdings v. Sovereign Wealth Fund Samruk-Kazyna JSC , 813 F.3d 98, 109 (2d Cir. 2016).

Proceeding to the merits of Gleizer's claim, we hold that the enforceability of an attorney's lien against the proceeds of a settlement does not turn on whether the attorney personally participated in the settlement negotiations. Rather, as the plain text of Judiciary Law § 475 indicates and New York caselaw confirms, an attorney "has a lien upon his or her client's cause of action" that "attaches to" a subsequent settlement or judgment, and "the lien cannot be affected by any settlement between the parties." N.Y. Jud. L. § 475 ; see also Sargent v. N.Y. Cent. & Hudson River R. R. Co. , 209 N.Y. 360, 365, 103 N.E. 164 (1913) (holding that an attorney's estate was entitled to a lien on a settlement even though the attorney died before the settlement was negotiated).² We therefore vacate the district court's order and remand for further proceedings consistent with this opinion.

BACKGROUND

In 1994, Argentina issued bonds pursuant to a Fiscal Agency Agreement ("FAA"). See Attestor Value Master Fund v. Republic of Argentina , 940 F.3d 825, 827 (2d Cir. 2019). Plaintiffs, citizens and residents of Argentina, acquired bonds issued under the FAA, but in 2001 the Republic defaulted.³ Id. In 2003, plaintiffs, represented by Gleizer, commenced this suit to recover the unpaid amount owed on the bonds. The district court entered judgment for plaintiffs in 2006 in the amount of $696,385.14.

The case then lay almost dormant until 2016, when Argentina issued a settlement proposal (or "Propuesta") to all owners of the defaulted bonds. Under the terms of the Propuesta, bondholders could release their claims against the Republic in exchange for payment in amounts specified by a Master Settlement Agreement ("MSA"). See Attestor , 940 F.3d at 828. Pursuant to the MSA, on February 8, 2016, plaintiff Mori de Lopez, acting for herself and as executor of Fontana's estate, agreed to accept $690,000 in satisfaction of the existing judgment.

On November 6, 2018, counsel for Argentina asked the district court to "dismiss" the claims in this case because the judgment had been satisfied. Ltr. Dated Nov. 6, 2018 1–2, Dist. Ct. Dkt. No. 69. Gleizer then moved the court for an order granting him attorneys’ fees of $207,000 "jointly and severally" against both plaintiffs and Argentina, based on their "violation of New York Judiciary Law § 475." Proposed Order to Show Cause 1, Dist. Ct. Dkt. No. 72. Gleizer also sought a preliminary injunction to prevent Argentina from filing a Satisfaction of Judgment so "as to not prejudice the rights of co-plaintiff Hernan Lopez Fontana," Id . at 2, apparently unaware that Fontana had passed away. The district court denied Gleizer's request for injunctive relief as moot and without prejudice to a further application for fees. Order Dated Nov. 14, 2018, Dist. Ct. Dkt. No. 73. The court then entered the satisfaction of judgment on November 14 and dismissed plaintiffs’ claims against Argentina, while clarifying that it "retain[ed] jurisdiction ... to adjudicate collateral matters in this action such as attorneys’ fees." Order of Satisfaction of Judgment and Dismissal, Dist. Ct. Dkt. No. 74.

Gleizer renewed his motion for fees, arguing that he was entitled to 30% of the settlement proceeds under the terms of his retainer agreement. Mem. of Law in Supp. of Attorneys’ Fee Award, Dist. Ct. Dkt. No. 78. Gleizer asserted that, after the Propuesta was issued in 2016, plaintiffs "became non-responsive" and Gleizer began to suspect that they "had accepted the Bond Settlement Payment from Argentina, to the exclusion of Gleizer's rights under the Engagement Letter." Gleizer Decl. 4 ¶ 10, Dist. Ct. Dkt. No. 77. And because Argentina had "intentional[ly] circumvent[ed]" Gleizer's attorney's lien, Gleizer claimed that the Republic was jointly and severally liable. Id. at 10 ¶ 32, 11 ¶ 37. In response, Argentina argued that the primary responsibility to pay Gleizer lay with plaintiffs; that Gleizer's motion was untimely under both state and federal law; that Gleizer had no lien upon the settlement proceeds because he did not help secure the settlement; and that Gleizer's claim against the Republic was barred by sovereign immunity. Mem. of Law in Opp. 6–16, Dist. Ct. Dkt. No. 83.⁴

The district court denied Gleizer's motion. After observing that "[an] attorney's lien applies only to proceeds created through the attorney's efforts," the court concluded that Gleizer did not have a lien on the settlement proceeds because the Propuesta was a universal offer to all bondholders and was not the result of Gleizer's advocacy. Fontana v. Republic of Argentina , No. 03 Civ. 08531 (LAP), 2019 WL 8112476, at *1 (S.D.N.Y. Jan. 9, 2019) (quoting Oppenheim v. Pemberton , 164 A.D.2d 430, 433, 563 N.Y.S.2d 908 (3d Dep't 1990) ). Since Gleizer's "efforts were not determinative" in securing the settlement, id. at *2, no lien attached.⁵ The court did not address Argentina's alternative argument that sovereign immunity barred this claim.

Gleizer moved for reconsideration, arguing primarily that the court's ruling was inconsistent with its ruling as to fees in related litigation and that an attorney's lien under § 475 attaches to a subsequent settlement regardless of whether the attorney's efforts were "determinative" in producing that settlement. Mem. of Law in Supp. of Mot. for Reconsideration 5–16, Dist. Ct. Dkt. No. 91. He also claimed that the court failed to address his argument that plaintiffs had breached their contract with him by settling the case without his involvement. Id. at 23. The district court denied reconsideration, adhering to its original determination that, because Gleizer's efforts had not produced the settlement, he could not have a lien on the proceeds of that settlement. Fontana v. Republic of Argentina , No. 03 Civ. 08531 (LAP), 2019 WL 8112479, at *2–4 (S.D.N.Y. Feb. 28, 2019).

This appeal followed.

DISCUSSION

I. Standard of Review

We review de novo whether subject-matter jurisdiction over a claim against a foreign sovereign is barred by sovereign immunity. Rogers v. Petroleo Brasileiro, S.A. , 673 F.3d 131, 136 (2d Cir. 2012). Likewise, "the interpretation of a state statute[ is] a question of law that we review de novo." Eberhard v. Marcu , 530 F.3d 122, 129 n.3 (2d Cir. 2008).

II. Sovereign Immunity

Although the parties and the district court focused on the merits of Gleizer's § 475 claim, "we proceed, as we must, first to determine issues of subject matter jurisdiction." Rogers , 673 F.3d at 137. The Foreign Sovereign Immunities Act "provides the sole basis for obtaining jurisdiction over a foreign state in federal court." Argentine Republic v. Amerada Hess Shipping Corp. , 488 U.S. 428, 439, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). "Under the FSIA, foreign governments are presumptively immune from suit." Jam v. Int'l Fin. Corp. , ––– U.S. ––––, 139 S. Ct. 759, 766, 203 L.Ed.2d 53 (2019). The party challenging the immunity of a foreign state "has the burden of going forward with evidence showing that, under exceptions to the FSIA, immunity should not be granted, although the ultimate burden of persuasion remains with the ... foreign sovereign." Kensington Int'l Ltd. v. Itoua , 505 F.3d 147, 153 (2d Cir. 2007).

Gleizer argues that his claim falls within the FSIA's commercial activity exception, see 28 U.S.C. § 1605(a)(2), and waiver exception, see 28 U.S.C. §...