Republic of Arg. v. NML Capital, Ltd.

• Decision Date: 16 June 2014
• Docket Number: No. 12–842.,12–842.
• Citation: 189 L.Ed.2d 234,573 U.S. 134,134 S.Ct. 2250
• Parties: REPUBLIC OF ARGENTINA, Petitioner v. NML CAPITAL, LTD.
• Court: U.S. Supreme Court

573 U.S. 134

134 S.Ct. 2250

189 L.Ed.2d 234

REPUBLIC OF ARGENTINA, Petitioner

v.NML CAPITAL, LTD.

No. 12–842.

Supreme Court of the United States

Argued April 21, 2014.

Decided June 16, 2014.

Jonathan I. Blackman, New York, NY, for Petitioner.

Edwin S. Kneedler, for the United States as amicus curiae, by special leave of the Court, supporting the petitioner.

Theodore B. Olson, Washington, DC, for Respondent.

Jonathan I. Blackman, Counsel of Record, Carmine D. Boccuzzi, Jr., Daniel J. Northrop, Michael M. Brennan, Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Petitioner The Republic of Argentina.

Robert A. Cohen, Dechert LLP, New York, NY, Theodore B. Olson, Counsel of Record, Matthew D. McGill, Scott P. Martin, Scott G. Stewart, Gibson, Dunn & Crutcher LLP, Washington, DC, for Respondent.

Justice SCALIA delivered the opinion of the Court.

We must decide whether the Foreign Sovereign Immunities Act of 1976 (FSIA or Act), 28 U.S.C. §§ 1330, 1602 et seq., limits the scope of discovery available to a judgment creditor in a federal postjudgment execution proceeding against a foreign sovereign.

I. Background

In 2001, petitioner, Republic of Argentina, defaulted on its external debt. In 2005 and 2010, it restructured most of that debt by offering creditors new securities (with less favorable terms) to swap out for the defaulted ones. Most bondholders went along. Respondent, NML Capital, Ltd. (NML), among others, did not.

NML brought 11 actions against Argentina in the Southern District of New York to collect on its debt, and prevailed in every one.¹ It is owed around $2.5 billion, which Argentina has not paid. Having been unable to collect on its judgments from Argentina, NML has attempted to execute them against Argentina's property. That postjudgment litigation "has involved lengthy attachment proceedings before the district court and multiple appeals." EM Ltd v. Republic of Argentina, 695 F.3d 201, 203, and n. 2 (C.A.2 2012) (referring the reader to prior opinions "[f]or additional background on Argentina's default and the resulting litigation").

Since 2003, NML has pursued discovery of Argentina's property. In 2010, " ‘[i]n order to locate Argentina's assets and accounts, learn how Argentina moves its assets through New York and around the world, and accurately identify the places and times when those assets might be subject to attachment and execution (whether under [United States law] or the law of foreign jurisdictions),’ " id., at 203 (quoting NML brief), NML served subpoenas on two nonparty banks, Bank of America (BOA) and Banco de la Nación Argentina (BNA), an Argentinian bank with a branch in New York City. For the most part, the two subpoenas target the same kinds of information: documents relating to accounts maintained by or on behalf of Argentina, documents identifying the opening and closing dates of Argentina's accounts, current balances, transaction histories, records of electronic fund transfers, debts owed by the bank to Argentina, transfers in and out of Argentina's accounts, and information about transferors and transferees.

Argentina, joined by BOA, moved to quash the BOA subpoena. NML moved to compel compliance but, before the court ruled, agreed to narrow its subpoenas by excluding the names of some Argentine officials from the initial electronic-fund-transfer message search. NML also agreed to treat as confidential any documents that the banks so designated.

The District Court denied the motion to quash and granted the motions to compel. Approving the subpoenas in principle, it concluded that extraterritorial asset discovery did not offend Argentina's sovereign immunity, and it reaffirmed that it would serve as a "clearinghouse for information" in NML's efforts to find and attach Argentina's assets. App. to Pet. for Cert. 31. But the court made clear that it expected the parties to negotiate further over specific production requests, which, the court said, must include "some reasonable definition of the information being sought." Id., at 32. There was no point, for instance, in "getting information about something that might lead to attachment in Argentina because that would be useless information," since no Argentinian court would allow attachment. Ibid. "Thus, the district court ... sought to limit the subpoenas to discovery that was reasonably calculated to lead to attachable property." 695 F.3d, at 204–205.

NML and BOA later negotiated additional changes to the BOA subpoena. NML expressed its willingness to narrow its requests from BNA as well, but BNA neither engaged in negotiation nor complied with the subpoena.

Only Argentina appealed, arguing that the court's order transgressed the Foreign Sovereign Immunities Act because it permitted discovery of Argentina's extraterritorial assets. The Second Circuit affirmed, holding that "because the Discovery Order involves discovery, not attachment of sovereign property, and because it is directed at third-party banks, not at Argentina itself, Argentina's sovereign immunity is not infringed." Id., at 205.

We granted certiorari. 571 U.S. ––––, 134 S.Ct. 895, 187 L.Ed.2d 701 (2014).

II. Analysis

A

The rules governing discovery in postjudgment execution proceedings are quite permissive. Federal Rule of Civil Procedure 69(a)(2) states that, "[i]n aid of the judgment or execution, the judgment creditor ... may obtain discovery from any person—including the judgment debtor—as provided in the rules or by the procedure of the state where the court is located." See 12 C. Wright, A. Miller, & R. Marcus, Federal Practice and Procedure § 3014, p. 160 (2d ed. 1997) (hereinafter Wright & Miller) (court "may use the discovery devices provided in [the federal rules] or may obtain discovery in the manner provided by the practice of the state in which the district court is held"). The general rule in the federal system is that, subject to the district court's discretion, "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense." Fed. Rule Civ. Proc. 26(b)(1). And New York law entitles judgment creditors to discover "all matter relevant to the satisfaction of [a] judgment," N.Y. Civ. Prac. Law Ann. § 5223 (West 1997), permitting "investigation [of] any person shown to have any light to shed on the subject of the judgment debtor's assets or their whereabouts," D. Siegel, New York Practice § 509, p. 891 (5th ed. 2011).

The meaning of those rules was much discussed at oral argument. What if the assets targeted by the discovery request are beyond the jurisdictional reach of the court to which the request is made? May the court nonetheless permit discovery so long as the judgment creditor shows that the assets are recoverable under the laws of the jurisdictions in which they reside, whether that be Florida or France? We need not take up those issues today, since Argentina has not put them in contention. In the Court of Appeals, Argentina's only asserted ground for objection to the subpoenas was the Foreign Sovereign Immunities Act. See 695 F.3d, at 208 ("Argentina argues ... that the normally broad scope of discovery in aid of execution is limited in this case by principles of sovereign immunity"). And Argentina's petition for writ of certiorari asked us to decide only whether that Act "imposes [a] limit on a United States court's authority to order blanket post-judgment execution discovery on the assets of a foreign state used for any activity anywhere in the world." Pet. for Cert. 14. Plainly, then, this is not a case about the breadth of Rule 69(a)(2).² we thus assume without deciding that, as the goverNMENT CONCEDED AT argument, Tr. of Oral Arg. 24, and as the Second Circuit concluded below, " in a run-of-the-mill execution proceeding ... the district court would have been within its discretion to order the discovery from third-party banks about the judgment debtor's assets located outside the United States." 695 F.3d, at 208. The single, narrow question before us is whether the Foreign Sovereign Immunities Act specifies a different rule when the judgment debtor is a foreign state.

B

To understand the effect of the Act, one must know something about the regime it replaced. Foreign sovereign immunity is, and always has been, "a matter of grace and comity on the part of the United States, and not a restriction imposed by the Constitution." Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983). Accordingly, this Court's practice has been to "defe[r] to the decisions of the political branches" about whether and when to exercise judicial power over foreign states. Ibid. For the better part of the last two centuries, the political branch making the determination was the Executive, which typically requested immunity in all suits against friendly foreign states. Id., at 486–487, 103 S.Ct. 1962. But then, in 1952, the State Department embraced (in the so-called Tate Letter) the "restrictive" theory of sovereign immunity, which holds that immunity shields only a foreign sovereign's public, noncommercial acts.

Id., at 487, and n. 9, 103 S.Ct. 1962. The Tate Letter "thr[ew] immunity determinations into some disarray," since "political considerations sometimes led the Department to file suggestions of immunity in cases where immunity would not have been available under the restrictive theory." Republic of Austria v. Altmann, 541 U.S. 677, 690, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004) (internal quotation marks omitted). Further muddling matters, when in particular cases the State Department did not suggest immunity, courts made immunity determinations "generally by reference to prior State Department decisions." Verlinden, 461 U.S., at 487, 103 S.Ct. 1962. Hence it was that "sovereign immunity decisions were [being] made in two different branches, subject to a variety of factors, sometimes including diplomatic considerations. Not surprisingly, the governing standards were neither...