UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Thurgood Marshall U.S. Courthouse 40 Foley Square, New York, NY 10007 Telephone: 212-857-8500 MOTION INFORMATION STATEMENT Docket Number(s): Caption [use short title] Motion for: Set forth below precise, complete statement of relief sought: MOVING PARTY: OPPOSING PARTY: 9 Plaintiff 9 Defendant 9 Appellant/Petitioner 9 Appellee/Respondent MOVING ATTORNEY: OPPOSING ATTORNEY: [name of attorney, with firm, address, phone number and e-mail] Court-Judge/Agency appealed from: Please check appropriate boxes: FOR EMERGENCY MOTIONS, MOTIONS FOR STAYS AND INJUNCTIONS PENDING APPEAL: Has movant notified opposing counsel (required by Local Rule 27.1): Has request for relief been made below? 9 Yes 9 No 9 Yes 9 No (explain): Has this relief been previously sought in this Court? 9 Yes 9 No Requested return date and explanation of emergency: Opposing counsel’s position on motion: 9 Unopposed 9 Opposed 9 Don’t Know Does opposing counsel intend to file a response: 9 Yes 9 No 9 Don’t Know Is oral argument on motion requested? 9 Yes 9 No (requests for oral argument will not necessarily be granted) Has argument date of appeal been set? 9 Yes 9 No If yes, enter date:__________________________________________________________ Signature of Moving Attorney: ___________________________________Date: ___________________ Has service been effected? 9 Yes 9 No [Attach proof of service] ORDER IT IS HEREBY ORDERED THAT the motion is GRANTED DENIED. FOR THE COURT: CATHERINE O’HAGAN WOLFE, Clerk of Court Date: _____________________________________________ By: ________________________________________________ Form T-1080 Case: 12-105 Document: 955-1 Page: 1 04/22/2013 915179 1 1 of 49
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UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUITThurgood Marshall U.S. Courthouse 40 Foley Square, New York, NY 10007 Telephone: 212-857-8500
MOTION INFORMATION STATEMENT
Docket Number(s): Caption [use short title]
Motion for:
Set forth below precise, complete statement of relief sought:
[name of attorney, with firm, address, phone number and e-mail]
Court-Judge/Agency appealed from:
Please check appropriate boxes: FOR EMERGENCY MOTIONS, MOTIONS FOR STAYS AND
INJUNCTIONS PENDING APPEAL:
Has movant notified opposing counsel (required by Local Rule 27.1): Has request for relief been made below? 9 Yes 9 No
9 Yes 9 No (explain): Has this relief been previously sought in this Court? 9 Yes 9 No
Requested return date and explanation of emergency:
Opposing counsel’s position on motion:
9 Unopposed 9 Opposed 9 Don’t Know
Does opposing counsel intend to file a response:
9 Yes 9 No 9 Don’t Know
Is oral argument on motion requested? 9 Yes 9 No (requests for oral argument will not necessarily be granted)
Has argument date of appeal been set? 9 Yes 9 No If yes, enter date:__________________________________________________________
Signature of Moving Attorney:___________________________________Date: ___________________ Has service been effected? 9 Yes 9 No [Attach proof of service]
ORDER
IT IS HEREBY ORDERED THAT the motion is GRANTED DENIED.
FOR THE COURT:CATHERINE O’HAGAN WOLFE, Clerk of Court
disdain for our courts by restating its intention to pay Exchange Bondholders
“no matter what[.]”1
In its post-argument Order of March 1, this Court directed the Republic to
“submit in writing to the court the precise terms of any alternative payment
formula and schedule to which it is prepared to commit.” See NML Capital Ltd.
v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 903, at 1 (2d Cir. Mar.
1, 2013). Specifically, the Court directed the Republic to indicate:
(1) how and when it proposes to make current those debt obligations on the original bonds that have gone unpaid over the last 11 years; (2) the rate at which it proposes to repay debt obligations on the original bonds going forward; and (3) what assurances, if any, it can provide that the official government action necessary to implement its proposal will be taken, and the timetable for such action. Id. at 2.
In response, the Republic submitted a response that simply mimicked its 2005
and 2010 debt exchanges, which the holdout bondholders have already rejected.
The Duane Morris Individual Plaintiffs seek to file their amicus brief in
order to aid the Court in its evaluation of the Republic’s proposal. In this
regard, the amicus brief analyzes several fatal flaws in the Republic’s proposal
1 See Declaration of Suzan Jo, dated April 22, 2013 (hereinafter “Jo
Decl.”), Ex. B (Katia Porzecanski, New York-for-Buenos Aires Swap Theory Spreads: Argentina Credit, BLOOMBERG NEWS, Apr. 03, 2013, available at http://www.bloomberg.com/news/print/2013-04-03/new-york-for-buenos-aires-swap-theory-spreads-argentina-credit.html).
bondholders . . . .”2 Id. at 3. Moreover, this Par Option offer is limited to
paying interest only for the period during which the current holder actually held
the bonds: this additional limitation allows the Republic to (a) “self-forgive” its
obligation to pay some accrued payment, and (b) ignore the Court’s directive
that the Republic explain how interest would be paid on the original bonds. In
short, the Republic has ignored this Court’s March 1 Order by taking the
position that it will only make a lump-sum payment of a small fraction of
indebtedness accumulated during eleven years of unilaterally-imposed non-
payment.3 This deficiency is reason enough to reject the Republic’s Proposal.
The Republic explains that its proposal, with respect to the past due
payments, matches the amounts paid to the Exchange Bondholders. Id. at 4-5,
2 Individual bondholders who have more than $50,000 in “Eligible
Amount” (a category including many retirees) would be forced to take the “Discount Option,” further reducing the lump-sum cash payments made available to the holdouts. As a consequence, the $50,000 limitation would deprive many retirees of a significant cash payment they badly need.
3 The scope of the Republic’s proposal is limited to the plaintiffs in this action (who are a sub-set of the holdouts). This Court specifically directed that the Proposal address all the holdout bonds, and this directive was ignored as well.
NML Capital Ltd., Dkt. # 903, at 2. This Court’s acceptance of Argentina’s
proposal would do nothing more than cancel the original bonds and force the
Exchange bonds on all the holdouts, who would be effectively subjected to a
judicial cram-down. This portion of the Republic’s proposal ignores the fact
that this Court specifically recognized the right of individual holders to reject the
Republic’s penny-ante exchange offers.5
With respect to the Accrued Payment Component, the Republic should be
ordered that immediately. With respect to the future component, the Proposal is
not responsive to the Court’s request, and should be rejected.
5 Argentina’s flagrant disregard of U.S. courts has not gone unnoticed. The
Institute of International Finance (IIF), which is comprised of the major banks of the world, has remarked that “Argentina finds itself in this complicated situation by its own behavior, evidenced by more than a decade of unilateral treatment of its creditors.” See Jo Decl., Ex. C (Mariana Shaalo, Argentina vs. Holdouts: Moody’s Minimizes Impact of Litigation with Vultures and Recalls that the Swap was Unilateral and Coercive, AMERICAN TASK FORCE ARGENTINA, Apr. 10, 2013, available at http://www.atfa.org/argentina-vs-holdouts-moodys-minimizes-impact-of-litigation-with-vultures-and-recalls-that-the-swap-was-unilateral-and-coercive/). The IIF also commented that the determination of the remedy “should be done carefully to not condone the unilateral actions by a sovereign debtor and weaken the rights of subsequent creditors, especially the right to demand reparations in court.” See Jo Decl., Ex. D (Veronica Dalto, Global Bankers Warn About The Risk of Pardoning Argentina, AMERICAN TASK FORCE ARGENTINA, Apr. 5, 2013, available at http://www.atfa.org/global-bankers-warn-about-the-risk-of-pardoning-argentina/).
Argentina vs. holdouts: Moody’s minimizes impact of litigation with vultures and recalls that the swap was unilateral and coerciveEl Cronistsa
April 11, 2013 By Mariana Shaalo
The risk ratings agency Moody’s asserted yesterday in a report that the Argentine debt restructuring was a unique case in the last 15 years for its “unilateral” and “coercive” character.
In this manner, it minimized the argument from the Argentine government that argues that an unfavorable sentence in the Court of Appeals in New York which benefits the holdouts would put at risk future sovereign debt restructurings.
Last week, the Institute of International Finance (IIF) which is made up of the main banks of the world, had remarked in a report that “Argentina finds itself in this complicated situation by its own behavior, evidenced by more than a decade of unilateral treatment of its creditors.”
“The sovereign debt restructurings of the last 15 years generally have been resolved in a rapid manner and almost always without holdout litigation,” Moody’s pointed out in its report to investors. Reviewing 34 debt swaps since 1997, it remarked that only two – from Argentina and from the Dominican Republic – had a balance of a large percentage of holdouts and remarks that only in the Argentine case was there “persistent litigation” with the creditors that didn’t accept the restructurings.
“In almost all the swaps a creditors’ committee was created in a reasonable amount of time and there were relatively rapid negotiations, but the Argentine case was and continues to be unique by its unilateral and coercive focus,” said Elena Duggar, author of the report.
According to the analysis, on average, sovereign debt restructurings closd 10 months after the government made known its intention to hold exchanges and seven months aftr the start of negotations with creditors.
Moody’s asserted that, in the last 34 cases analyzed, the rate of participation by debt holders was 95%, versus 75% in Argentina and 72% in the Dominican Republic. However, it pointed out that these percentags rose to 93% in the former and 100% in the latter.
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In mid-March the ratings agency has lowered Argentina’s restructured debt rating a notch (from ‘B3’ to ‘Caa1’) for the litigation in the U.S. courts.
Event the Greylock fund which holds Argentine restructured bonds whose payments could be blocked incase of an adverse ruling asked that the country’s “unusually intransigent conduct” not be tolerated, in an article recently published in the Financial Times. “There is no evidence that the recent court decisions against Argentina, which never made a good will offer, will impede future sovereign restructurings. Quitethe contrary,” it said.
The same point was made days earlier by the vulture fund Aurelius, one of the plaintiffs. “Argentina is the best example in the world of how a country should not treat its creditors. The global financial system is at risk by compensating this conduct and by not making it honor its contracts,” wrote its head, Mark Brodsky.
Argentina vs. holdouts Moody’s minimiza impacto de litigio con buitres y recuerda que el canje fue unilateral y coercitivo
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Global bankers warn about the risk of pardoning ArgentinaEl Cronista
April 5, 2013
By Veronica Dalto
Awaiting the respond to payment proposal that Argentina filing in New York court to the vulture funds, similar to the last swap, the bank banks of the world reacted with concern over the possibility that the decisions that are taken in the Argentine case end up “condoning the unilateral actions” of the country, and for the implications that could have for the international sovereign debt market, weakening creditor rights in the future and the legal certainties that sustain them.
This is how they see it in the monitoring of the capital markets from the Institute of International Finance (IIF), the global association of the biggest financial entities of the world, where they are also analyzing the Cyprus bailout.
The IIF didn’t fail to place the Argentine case in the “correct historical context.” This is that “Argentina finds itself in this complicated situation by its own behavior, evidenced by more than a decade of unilateral treatment of its creditors.” “Since the private sector creditors and investors don’t have the luxury of waiting forever, many (but not all including thousands of small investors) have been obliged to accept the swap that Argentina offered in 2005 and 2010.”
A portion of the holdouts now have until April 22 to take the Argentine offer or not as payment for their claim of US$1.3 billion. Then the court could delay a couple of months to issue its sentence, which the IIF already predicts will be a rejection towards Argentina.
The entity, which coordinated the interests of the big banks in the rescue of Greece, pointed out that the Argentine case had “fortunately” been a “rare case” among the other 11 recent debt restructurings, where the sovereign debtor could negotiate with private creditors an agreement that was “mutually acceptable upon an opportune and orderly basis.”
For IIF, the current debate over improving the framework of sovereign debt restructurings, in legal terms or clarifying the meaning of pari passu in bond contracts, “should be done carefully to not condone the unilateral actions by a sovereign debtor and weaken the rights of subsequent creditors, especially the right to demand reparations in court.”
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“If it does that, it could put on the front burner the essentially inapplicable character of assets before a sovereign debtor, raising uncertainty, risk and costs in the sovereign debt markets to the detriment of allthe participants in the global financial markets,” he added.
According to the IIF, the negative experience of Argentina and the positive ones for the rest of the countries “should serve to be an incentive both for the sovereign debtor as well as private creditors to believe in voluntary negotiation and good faith.”
For now, the Argentine case is pure uncertainty: if the country will appeal a negative sentence or if it could “dodge” a technical default by changing the jurisdiction of bonds under New York law. Somethingthe IIF doesn’t think would be easy.
Banqueros globales advierten sobre el riesgo de perdonar a la Argentina
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United States Court of Appeals for the Second Circuit NML CAPITAL, LTD., AURELIUS CAPITAL MASTER, LTD., ACP MASTER, LTD., BLUE
ANGEL CAPITAL I LLC,
(caption continued on inside cover) Plaintiffs-Appellees,
-v.-
REPUBLIC OF ARGENTINA, Defendant-Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
AMICUS CURIAE BRIEF OF DUANE MORRIS INDIVIDUAL PLAINTIFFS GIANFRANCO AGOSTINI, ALFREDO PELLI AND GRAZIELLA BERCHI,
MILENA AMPALLA (continued on inside cover)
Anthony J. Costantini Rudolph J. Di Massa, Jr. Suzan Jo Mary C. Pennisi Duane Morris LLP 1540 Broadway New York, New York 10036 Tel: (212) 692-1000 Counsel for Duane Morris Individual Plaintiffs
NML Capital Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012) ........... 1, 4-6
NML Capital Ltd. v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 903, at 1 (2d Cir. Mar. 1, 2013) ........................................................................... 1
NML Capital Ltd. v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 935 (2d Cir. Mar. 29, 2013) .................................................................................. 2
This Court has already held that the Republic violated the pari passu
clause of the 1994 FAA when it made payments to the Exchange Bondholders,
and when it passed the Lock Law (legislation which remains in force). NML
Capital Ltd. v. Republic of Argentina, 699 F.3d 246, 259-260 (2d Cir. 2012).
The only question is the determination of the appropriate scope of the remedy
available for the Republic’s violation.
Given the Republic’s recalcitrant attitude, one may wonder why the
Republic wastes this Court’s time by submitting a proposal that purportedly
mirrors the offers previously rejected by the holdouts. One may also wonder
why the Republic continues to avail itself of the protections of our courts, all the
while publicly stating that: it has no intention of complying with orders of the
Court with which it disagrees; and as recently as March 31, 2013, reiterating its
disdain for our courts by restating its intention to pay Exchange Bondholders
“no matter what[.]”1
In its post-argument Order of March 1, this Court directed the Republic to
“submit in writing to the court the precise terms of any alternative payment 1 See Declaration of Suzan Jo, dated April 22, 2013 (hereinafter “Jo
Decl.”), Ex. B (Katia Porzecanski, New York-for-Buenos Aires Swap Theory Spreads: Argentina Credit, BLOOMBERG NEWS, Apr. 03, 2013, available at http://www.bloomberg.com/news/print/2013-04-03/new-york-for-buenos-aires-swap-theory-spreads-argentina-credit.html).
formula and schedule to which it is prepared to commit.” See NML Capital Ltd.
v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 903, at 1 (2d Cir. Mar.
1, 2013). Specifically, the Court directed the Republic to indicate:
(1) how and when it proposes to make current those debt obligations on the original bonds that have gone unpaid over the last 11 years; (2) the rate at which it proposes to repay debt obligations on the original bonds going forward; and (3) what assurances, if any, it can provide that the official government action necessary to implement its proposal will be taken, and the timetable for such action.
Id. at 2.
THE REPUBLIC’S “PROPOSAL” FAILS TO ADDRESS THE COURT’S QUESTIONS AND DOES NOTHING TO MAKE HOLDOUT
BONDHOLDER’S WHOLE
The Court was very specific on the first piece of information it wanted:
“how and when [the Republic] proposes to make current those debt obligations
on the original bonds that have gone unpaid over the last 11 years.” Id. at 2.
In its proposal, the Republic simply ignores this part of the Court’s
directive: it says that it will pay nothing on account of interest that accrued
during the first two years (2001-2003) after the Republic’s default. See NML
Capital Ltd. v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 935 (2d
Cir. Mar. 29, 2013). As to the remaining years, the Republic states that it will
not “make current those debt obligations on the original bonds that have gone
unpaid over the last 11 years.” Id. at 1, 3-4 (emphasis added). Instead, the
Republic says it will pay interest to the holdouts at rates specified in the
Exchange Bonds, not the original Bonds. Id.
The Republic’s proposal sets forth two “Options” for the holdout
bondholders: the “Par Option” and the “Discount Option.” Id. at 2-4. To further
dilute the attractiveness of its proposal, the Republic limits the Par Option to
$50,000 per series, despite its recognition that “[T]he Par option is designed for
individual bondholders . . . .”2 Id. at 3. Moreover, this Par Option offer is
limited to paying interest only for the period during which the current holder
actually held the bonds: this additional limitation allows the Republic to (a)
“self-forgive” its obligation to pay some accrued payment, and (b) ignore the
Court’s directive that the Republic explain how interest would be paid on the
original bonds. In short, the Republic has ignored this Court’s March 1 Order
by taking the position that it will only make a lump-sum payment of a small
fraction of indebtedness accumulated during eleven years of unilaterally-
2 Individual bondholders who have more than $50,000 in “Eligible
Amount” (a category including many retirees) would be forced to take the “Discount Option,” further reducing the lump-sum cash payments made available to the holdouts. As a consequence, the $50,000 limitation would deprive many retirees of a significant cash payment they badly need.
imposed non-payment.3 This deficiency is reason enough to reject the
Republic’s Proposal.
The Republic explains that its proposal, with respect to the past due
payments, matches the amounts paid to the Exchange Bondholders. Id. at 4-5,
7-8, 11, 13, 15. Since it purports to treat all bondholders equally, the Republic
reasons that the pari passu requirement will be fulfilled.
Given not only the Republic’s violations of the pari passu clause, but also
its dogged long-term defiance of the courts of the United States, there is no
reason why any retroactive remedy should be limited by terms to which the
Exchange Bondholders have agreed. Retroactively, the only sensible resolution
is a lump-sum payment of all interest and principal that has accrued and become
due and payable in eleven years to all the current holders of the holdout bonds
(hereinafter, the “Accrued Payment Component”). Such a payment would be
directed in the form of an order for specific performance, which this Court has
3 The scope of the Republic’s proposal is limited to the plaintiffs in this
action (who are a sub-set of the holdouts). This Court specifically directed that the Proposal address all the holdout bonds, and this directive was ignored as well.
endorsed as the appropriate remedial device. NML Capital Ltd., 699 F.3d at
261-262.4
After ignoring the Court’s first directive, Argentina then proceeds to
ignore the Court’s second directive. The Court directed the Republic to specify
“the rate at which it proposes to repay debt obligations on the original bonds
going forward.” See NML Capital Ltd., Dkt. # 903, at 2. This Court’s
acceptance of Argentina’s proposal would do nothing more than cancel the
original bonds and force the Exchange bonds on all the holdouts, who would be
effectively subjected to a judicial cram-down. This portion of the Republic’s
proposal ignores the fact that this Court specifically recognized the right of
individual holders to reject the Republic’s penny-ante exchange offers.5
4 The Republic may fear that a voluntary payment exceeding the amount
paid to the Exchange Bondholders would trigger other litigation by the Exchange Bondholders. An involuntary payment ordered by the courts would not.
5 Argentina’s flagrant disregard of U.S. courts has not gone unnoticed. The Institute of International Finance (IIF), which is comprised of the major banks of the world, has remarked that “Argentina finds itself in this complicated situation by its own behavior, evidenced by more than a decade of unilateral treatment of its creditors.” See Jo Decl., Ex. C (Mariana Shaalo, Argentina vs. Holdouts: Moody’s Minimizes Impact of Litigation with Vultures and Recalls that the Swap was Unilateral and Coercive, AMERICAN TASK FORCE ARGENTINA, Apr. 10, 2013, available at http://www.atfa.org/argentina-vs-holdouts-moodys-minimizes-impact-of-litigation-with-vultures-and-recalls-that-the-swap-was-unilateral-and-coercive/). The IIF also commented that the determination of the remedy
With respect to the Accrued Payment Component, the Republic should be
ordered that immediately. With respect to the future component, the Proposal is
not responsive to the Court’s request, and should be rejected.
On this Court’s final question, “what assurances, if any, [the Republic]
can provide that the official government action necessary to implement its
proposal will be taken, and the timetable for such action,” (NML Capital Ltd.,
Dkt. # 903, at 2) the Republic devotes a three-sentence paragraph in which it
mouths principles of democratic government (NML Capital Ltd., Dkt. # 935, at
2). The Republic appears to be avoiding a direct answer here as well, and its
virtual disregard of the “timetable” requirement is remarkable. The holdouts,
and this Court, are entitled to a much more considered response after eleven
years of contentious litigation and outright evasion by the Republic.
THE COURT SHOULD REJECT THE REPUBLIC’S PROPOSAL
In short, the Republic has ignored, avoided, or evaded each one of this
Court’s requirements. There is no real choice but to reject the Proposal. The
question is the extent, if any, that the district court’s order should be modified.
“should be done carefully to not condone the unilateral actions by a sovereign debtor and weaken the rights of subsequent creditors, especially the right to demand reparations in court.” See Jo Decl., Ex. D (Veronica Dalto, Global Bankers Warn About The Risk of Pardoning Argentina, AMERICAN TASK FORCE ARGENTINA, Apr. 5, 2013, available at http://www.atfa.org/global-bankers-warn-about-the-risk-of-pardoning-argentina/).
Anthony J. Costantini E-mail: [email protected] Rudolph J. Di Massa, Jr. Email: [email protected] Suzan Jo E-mail: [email protected] Mary C. Pennisi Email: [email protected] 1540 Broadway New York, NY 10036-4086 Telephone: +1 212 692 1000 Fax: +1 212 692 1020 Attorneys for Duane Morris Plaintiffs