Scheck et al v. The Republic of Argentina

Filing 35

OPINION #100739 re: #10 MOTION for Summary Judgment Notice of Motion filed by Dieter Scheck and Lydia Scheck. Plaintiffs' motion for summary judgment is granted. Plaintiffs are to submit a proposed judgment to the court. This opinion resolves document number 10 listed on the docket. (Signed by Judge Thomas P. Griesa on 9/1/2011) (ab) Modified on 9/2/2011 (ajc).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
LYDIA SCHECK AND DIETER SCHECK,
:
:
Plaintiffs,
:
:
- against :
:
:
THE REPUBLIC OF ARGENTINA,
:
:
Defendant.
:
:
:
:
-------------------------------------------x

10 Civ. 5167 (TPG)
OPINION

Plaintiffs Dieter Scheck and Lydia Scheck are two German
citizens—a husband and wife—who have obtained six money judgments
each against the Republic of Argentina in a German court, based on their
ownership of defaulted Republic-issued German bonds. In this action,
plaintiffs seek recognition and enforcement of these German judgments
pursuant to Article 53 of the New York Civil Practice Law and Rules.
Plaintiffs move for summary judgment. The Republic’s only
objection is that plaintiffs submit no proof as to awards of costs related
to their German judgments.
The motion is granted.
Facts
Plaintiffs state that they have held bearer bonds since the 1990s
issued by the Republic and governed by five offering circulars. Plaintiffs

have obtained judgments in German courts based on their ownership of
these German bonds.
The Republic waived its immunity from suit on these German
bonds in the offering circulars. The relevant language is essentially the
same in the varying offering circulars:
The Republic hereby irrevocably submits
to the non-exclusive jurisdiction of any German
court sitting in Frankfurt am Main and any
Federal court sitting in the City of Buenos Aires
as well as any appellate court of any thereof, in
any suit, action or proceeding against it arising
out of or relating to these Bonds. The Republic
hereby irrevocably waives—to the fullest extent it
may effectively do so—the defense of an
inconvenient forum to the maintenance of such
suit or action or such proceeding and any
present or future objection to such suit, action
or proceeding whether on the grounds of venue,
residence or domicile. The Republic agrees that
a final judgment in any such suit, action or
proceeding in the courts mentioned above shall
be conclusive and may be enforced in other
jurisdictions by suit on the judgment or any
other method provided by law.
To the extent that the Republic has or
hereafter may acquire any immunity (sovereign
or otherwise) from jurisdiction of any court or
from any legal process (whether through service
or notice, attachment prior to judgment,
attachment in aid of execution, execution or
otherwise), with respect to itself or its revenues,
assets or properties, the Republic hereby
irrevocably waives such immunity in respect of
its obligations under the Bonds to the extent it is
permitted to do so under applicable law.

2

See Offering Circulars for German Bonds issued at 7% interest due 2004,
§ 13; 8.5% interest due 2005, § 12; 9% interest due 2003, § 11; 10.25%
interest due 2003, § 11; 10.5% interest due 2002, § 11.
Pursuant to the offering circulars, failure to make any payments of
principal or interest for 30 days after the applicable payment date
constitutes an event of default. A declaration by the Republic of a
moratorium on the payment of principal or interest on its public external
indebtedness is an event of default as well. The offering circulars also
state that if either of these events occurs, “the holder of any Bond may . .
. declare such Bond to be immediately due and payable together with
accrued interest thereon.”
On December 24, 2001, the Republic declared a moratorium on
payments of principal and interest on the external debt of the Republic.
The court refers to its previous opinions for a description of the
circumstances of these defaults. Lightwater Corp. Ltd. v. Republic of
Argentina, No. 02 Civ. 3804, 2003 WL 1878420, at *2 (S.D.N.Y. Apr. 14,
2003); Applestein v. Province of Buenos Aires, No. 02 Civ. 1773, 2003 WL
1990206, at *1 (S.D.N.Y. Apr. 29, 2003). Plaintiffs notified the Republic
of an event of default, demanding payment on their bonds, as described
in the German court judgments.
German Court Proceedings 1

The court relies on the September 27, 2010 declaration of Ronald Frohne, a managing
partner of a German law firm, to describe the German judgments, as well as the
procedures for entering them. Plaintiffs also submitted affidavits and copies of the

1

3

Plaintiffs brought nine civil proceedings in Germany which resulted
in twelve judgments. The relevant German court proceedings began in
2003 and concluded in 2010.
The German judgments were rendered in a special form of civil law
proceeding based on documentary evidence only. In this type of a
proceeding, if the plaintiff is able to prove the facts its claim is based on
by means of documentary evidence, an enforceable judgment will be
issued in its favor. However, if the plaintiff succeeds, but the defendant
objects to the claim that is brought against it, the court must render the
judgment in the form of a conditional judgment. A conditional judgment
may be challenged by the defendant in an appeal to the Higher Regional
Court and in a subsequent proceeding in the District Court in which the
defendant may present all evidence available to it. If the plaintiff is
successful in this subsequent proceeding, a subsequent judgment is
rendered, which declares the conditional judgment unconditional and
transforms it into a regular final judgment. If the defendant is
successful, the conditional judgment is reversed. A final judgment
rendered by a subsequent proceeding can be appealed in the Federal
Supreme Court. A conditional judgment becomes final, conclusive, and
fully enforceable once it has been declared unconditional by the
subsequent judgment and all appeals against the subsequent judgment
have been exhausted. A “certificate of legal force” issued by the German
German judgments, which more fully set forth the timeline of the nine German
proceedings.

4

district court clerk confirms that the respective judgment is final,
conclusive and enforceable.
In the relevant German proceedings, plaintiffs successfully
obtained conditional judgments in all actions ordering the Republic to
pay a certain amount of money to plaintiffs in all cases filed, as stated in
the tables below. The Republic appealed each conditional judgment but
the appellate court rejected the appeals, with some slight modifications
to the judgments. Thus, the conditional judgments became final,
unconditional judgments. The Republic further appealed the judgment
in one of these actions in the Federal Supreme Court, but after that court
denied that appeal on September 25, 2007, the Republic did not
challenge the other judgments. The period for challenging the other
proceedings expired a month after the appellate court’s judgments were
entered and no further appeals are possible. Plaintiffs applied for
“certificates of legal force” for the conditional as well as the subsequent
judgments, which the German district court clerk granted by orders
dated July 30, 2010, August 11, 2010, August 12, 2010, and August 13,
2010. On this basis, plaintiffs assert that the judgments are final,
conclusive and enforceable under German law.
Table 1 and Table 2 below detail the judgments awarded by the
German courts to plaintiff Lydia Scheck and plaintiff Dieter Scheck,
respectively. Plaintiffs obtained six judgments each. In three cases,
plaintiffs appeared together but obtained separate judgments. In six
5

cases, plaintiffs appeared separately and obtained three judgments each,
or a total of six judgments in the separate cases. Plaintiffs were awarded
the amount of annual interest of the bearer bonds that remains unpaid.
The amount of interest outstanding is indicated in the tables by the
applicable interest rate and the date upon which it came due but
remained unpaid.
Plaintiffs were also awarded costs incurred by each German
proceeding. The table shows multiple cost awards for each case because
each German court—whether the District Court, Higher Regional Court
or the Federal Supreme Court—awarded costs with its decision. There is
also an annual interest rate on the costs awarded of 5% above base rate,
which is defined by section 247 of the German Civil Code. 2 The interest
runs from the date stated in the determination of costs by the German
District Court. In the cases where plaintiffs appeared together, both
plaintiffs, represented by the same counsel, jointly and severally obtained
the cost awards associated with these actions. In all other cases, costs
were awarded individually.
By way of example, in case 2-21 O 389/05 plaintiff Lydia Scheck
obtained a monetary award of €511,291.88 and plaintiff Dieter Scheck
obtained a monetary award of €2,556,459.40 in a conditional judgment
issued by the German District Court on March 12, 2007. Plaintiffs were
2

Section 247 of the German Civil Code states that the basic rate changes on January 1 and July 1 each year
by the percentage points by which the reference rate has risen or fallen since the last change in the basic
rate of interest. The reference rate is the rate of interest for the most recent main refinancing operation of
the European Central Bank before the first calendar day of the relevant six-month period.

6

each awarded 7% annual interest on those amounts since March 18,
2001. The Republic appealed these conditional judgments, and on
November 7, 2007 the Higher Regional Court rejected the Republic’s
appeal. In a subsequent proceeding on June 5, 2009, the German
District Court declared the conditional judgment of March 12, 2007
unconditional. On November 12, 2009, the Higher Regional Court
rejected the Republic’s appeal against the final, conditional judgment.
Each court held that the Republic must bear the costs of the litigation.
Thus, the German District Court awarded costs to plaintiffs jointly and
severally in the amounts of €58,831.19 for the March 12, 2007
judgment, with annual interest of 5% above base rate dating from April
16, 2007, and €36,097.65 for the June 5, 2009 and November 12, 2009
decisions, with annual interest of 5% above base rate dating from
November 17, 2009.

7

Table 1: Plaintiff Lydia Scheck
Case No.

Monetary
Award

Interest per
annum

Costs
awarded

2-21 O 294/02

€766,937.82

2-21 O 387/05

€832,127.53

2-21 O 389/05

€511,291.88

2-21 O 388/05
and 8U 147/07

€1,585,004.83

2-21 O 385/05
and 8U 147/07

€1,022,583.76

2-21 O 321/06

€3,256,929.28

8.5% thereon
since
02/23/02
8.5% on
€766,937.82
since
02/23/01
7% thereon
since
03/18/01
10.25%
thereon since
02/06/01
9% thereon
since
09/19/01
8.5% thereon
since
02/23/01

8

Costs
granted to

€34,738.73
€21,339.99
€8,878.07
€41,602.25
€24,602.25

Interest per
annum – 5%
above base
rate, pursuant
to § 247 of the
German Civil
Code – as of
the following
dates for each
costs awarded
3/2/06
3/3/07
1/11/10
4/16/07
1/11/10

€58,831.19
€36,097.65

4/16/07
11/17/09

Both
plaintiffs

€32,896.46
€21,128.47

5/18/07
11/12/09

Lydia
Scheck

€24,290.72
€15,630.67

5/18/07
11/12/09

Lydia
Scheck

€59,598.49
€16,375.07
€21,721.78

8/3/07
11/12/10
11/12/09

Lydia
Scheck

Both
plaintiffs
Both
plaintiffs

Table 2: Dieter Scheck
Case No.

Monetary
Award

Interest per
annum

Costs
awarded

2-21 O 294/02

€766,937.82

2-21 O 387/05

€1,215,596.44

2-21 O 389/05

€2,556,459.40

2-21 O 386/05

€1,227,100.51

2-21 O 320/06
and 8U 7/08

€1,538,988.56

2-21 O 322/06
and 8U 9/08

€1,329,358.89

8.5% thereon
since
02/23/02
8.5% on
€1,150,406.73
since
02/23/01
7% thereon
since
03/18/01
10.5% thereon
since
11/14/01
8.5% thereon
since
02/23/01
10.5% thereon
since
11/14/01

9

Costs
granted to:

€34,738.73
€21,339.99
€8,878.07
€41,602.25
€24,602.25

Interest per
annum – 5%
above base
rate, pursuant
to § 247 of
the German
Civil Code –
as of the
following
dates for each
costs awarded
3/2/06
3/3/07
1/11/10
4/16/07
1/11/10

€58,831.79
€36,097.65

4/16/07
11/17/09

Both
plaintiffs

€23,642.22
€10,012.18
€7,592.87
€32,102.87
€20,635.33

7/13/09
11/12/09
11/12/09
12/14/07
11/12/09

Dieter
Scheck

€28,321.99
€18,629.47

12/17/07
11/12/09

Dieter
Scheck

Both
plaintiffs
Both
plaintiffs

Dieter
Scheck

United States District Court Proceedings
On July 6, 2010 plaintiffs commenced the present action in the
Southern District of New York seeking recognition and enforcement of
the twelve German judgments. Plaintiffs allege that their German
judgments against the Republic are “final, conclusive and enforceable
where rendered,” making them enforceable in this jurisdiction pursuant
to the Uniform Foreign Country Money Judgments Recognition Act, N.Y.
C.P.L.R. § 5302.
On August 17, 2010, plaintiffs, by means of Process Service
Network LLC, sent a copy of the summons and complaint, and other
required forms, to the central authority designated by the Republic for
service of process pursuant to Article 2 of the Hague Service
Convention—the Argentine Ministry of Foreign Affairs.
On September 13, 2010, the Republic moved to dismiss the
complaint for lack of personal jurisdiction and insufficient service of
process. On September 27, 2010, plaintiffs moved for summary
judgment.
On October 7, 2010, the parties’ entered into a stipulation, which
was so ordered by the court, as follows: (1) the motion to dismiss is
denied as moot; (2) the complaint and motion for summary judgment are
held in abeyance pending the completion of service as required by the
Hague Service Convention; and (3) the Republic shall answer, move to
dismiss, or otherwise respond to the complaint and motion for summary
10

judgment on or before 60 days after the completion of service of the
complaint on the Republic.
On February 24, 2011, plaintiffs renewed their motion for
summary judgment, and argued that a default judgment against the
Republic should be entered.
On May 23, 2011, the court denied any entry of default judgment
against the Republic but concluded that there was proper service of
process. Pursuant to the stipulation of October 7, 2010, the court
directed the Republic to answer, move to dismiss, or otherwise respond
to the complaint and motion for summary judgment within 60 days from
the time of the court’s opinion.
Accordingly, the Republic answered the complaint and plaintiffs’
motion for summary judgment on July 22, 2011.
The Motion
Although the Republic raised numerous issues in the German
proceedings and initially in the United States District Court action, these
have all been resolved in plaintiffs’ favor and only a very finite issue is
raised by the Republic in response to plaintiffs’ current motion for
summary judgment. That issue requires only a brief discussion.
The Republic argues that plaintiffs did not submit proof as to
awards of costs related to their German judgments. However, plaintiffs
have supplemented their briefing with copies of the awards of costs.
Thus, plaintiffs have conclusively proven their awards of costs.
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Conclusion
Plaintiffs' motion for summary judgment is granted. Plaintiffs are
to submit a proposed judgment to the court.
This opinion resolves document number 10 listed on the docket.
SO ORDERED
Dated: New York, New York
September 1, 2011

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