Guibelalde et al v. The Republic of Argentina

Filing 24

OPINION AND ORDER #105577: For the reasons given above, the court concludes that plaintiffs in these thirty-six actions have satisfied their burden for obtaining summary judgment. The motions for partial summary judgment are hereby granted. It is hereby declared, adjudged, and decreed that the Republic has violated, and continues to violate, Paragraph (1)(c) of the 1994 Fiscal Agency Agreement. (Signed by Judge Thomas P. Griesa on 6/5/2015) (kl) Modified on 6/16/2015 (soh).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------NML CAPITAL, LTD.,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------NML CAPITAL, LTD.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------FFI FUND, LTD. and FYI LTD.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
-----------------------------------------------------

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14 Civ. 8601 (TPG)

14 Civ. 8988 (TPG)

14 Civ. 8630 (TPG)
(captions continue on following
pages)

OPINION AND ORDER

---------------------------------------------------PEREZ, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------AURELIUS CAPITAL PARTNERS, LP, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------BLUE ANGEL CAPITAL I LLC,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------EM LTD.,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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14 Civ. 8242 (TPG)

14 Civ. 8946 (TPG)

14 Civ. 8947 (TPG)

14 Civ. 8303 (TPG)

---------------------------------------------------LIGHTWATER CORP. LTD.,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------OLD CASTLE HOLDINGS, LTD.,
Plaintiff,
- against THE REPUBLIC OF ARGEN7258TINA,
Defendant.
---------------------------------------------------SETTIN,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------CAPITAL VENTURES INTERNATIONAL,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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14 Civ. 4092 (TPG)

14 Civ. 4091 (TPG)

14 Civ. 8739 (TPG)

14 Civ. 7258 (TPG)

---------------------------------------------------ADAMI, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------CAPITAL MARKETS FINANCIAL SERVICES
INC., et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------FOGLIA, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------PONS, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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14 Civ. 7739 (TPG)

15 Civ. 0710 (TPG)

14 Civ. 8243 (TPG)

13 Civ. 8887 (TPG)

---------------------------------------------------GUIBELALDE, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------DORRA, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------BELOQUI, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------TORTUS CAPITAL MASTER FUND, LP,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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11 Civ. 4908 (TPG)

14 Civ. 10141 (TPG)

14 Civ. 5963 (TPG)

14 Civ. 1109 (TPG)

---------------------------------------------------TORTUS CAPITAL MASTER FUND, LP,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------TRINITY INVESTMENTS LIMITED,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------MONTREUX PARTNERS, L.P.,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------LOS ANGELES CAPITAL,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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14 Civ. 3127 (TPG)

14 Civ. 10016 (TPG)

14 Civ. 7171 (TPG)

14 Civ. 7169 (TPG)

---------------------------------------------------CORDOBA CAPITAL,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------WILTON CAPITAL,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------MCHA HOLDINGS, LLC,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------MCHA HOLDINGS, LLC,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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14 Civ. 7164 (TPG)

14 Civ. 7166 (TPG)

14 Civ. 7637 (TPG)

14 Civ. 10064 (TPG)

---------------------------------------------------ANDRAREX LTD.,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------CLARIDAE, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------ARAG-A LIMITED, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------ATTESTOR MASTER VALUE FUND LP,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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14 Civ. 9093 (TPG)

14 Civ. 10201 (TPG)

14 Civ. 9855 (TPG)

14 Civ. 5849 (TPG)

---------------------------------------------------ANGULO, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------LAMBERTINI, et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------HONERO FUND I, LLC,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
---------------------------------------------------TRINITY INVESTMENTS LIMITED,
Plaintiff,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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15 Civ. 1470 (TPG)

15 Civ. 1471 (TPG)

15 Civ. 01553 (TPG)

15 Civ. 1588 (TPG)

---------------------------------------------------BANCA ARNER S.A., et al.,
Plaintiffs,
- against THE REPUBLIC OF ARGENTINA,
Defendant.
----------------------------------------------------

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15 Civ. 1508 (TPG)

Plaintiffs in these thirty-six actions hold defaulted bonds issued by
defendant, the Republic of Argentina. Plaintiffs move for partial summary
judgment, asking the court to rule that the Republic violated and continues to
violate the pari passu clause of the underlying bond agreement. For the following
reasons, the court grants plaintiffs’ motions for partial summary judgment.
Facts
In 1994, the Republic began issuing bonds pursuant to a Fiscal Agency
Agreement (“FAA”). The FAA contains a provision, the pari passu clause, which
reads:
The Securities will constitute (except as provided in Section 11
below) direct, unconditional, unsecured and unsubordinated
obligations of the Republic and shall at all times rank pari passu
and without any preference among themselves. The payment
obligations of the Republic under the Securities shall at all times
rank at least equally with all its other present and future unsecured
and unsubordinated External Indebtedness (as defined in this
Agreement).”
FAA ¶ 1(c). The FAA also contained provisions whereby, in the event litigation
arose regarding the bonds, the Republic consented to the jurisdiction of any state
or federal court in New York City. Id. ¶¶ 22–23.

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Plaintiffs hold bonds issued by the Republic pursuant to the FAA. Until
2001, the Republic made regular payments on the FAA bonds. That year,
however, the Republic experienced an economic crisis and defaulted on its public
debts, including the FAA bonds. Each year since 2002, the Republic has passed
legislation prohibiting payment on the FAA bonds. As a result, many FAA
bondholders began filing actions against the Republic in this court.
1. The 2005 and 2010 Exchange Offers
In 2005, the Republic issued an exchange offer (the “2005 Exchange”)
inviting creditors, including FAA bondholders, to exchange their old bonds for
newly issued bonds worth 25% to 29% of the original bonds’ value. The Republic
took certain steps to encourage participation in the 2005 Exchange Offer, and to
discourage “holdouts” from pursuing better terms. First, the Republic enacted
Law 26,017 (the “Lock Law”), prohibiting settlement with those who declined the
exchange. See Law 26,017 art. 4. Second, the Republic included in the 2005
Exchange Offer a Rights Upon Future Offers (“RUFO”) clause. See 2005
Prospectus Supplement at S-18. The RUFO clause guaranteed that if the
Republic were to reach agreement with the holdouts, it would have to offer the
same terms to those who had accepted the 2005 Exchange Offer. Id. In all, an
estimated 72% to 76% of the Republic’s creditors accepted the 2005 Exchange
Offer.
In 2010, the Republic made another exchange offer (the “2010 Exchange”).
In order to conduct the 2010 Exchange, the Republic enacted Law 26,547,
temporarily suspending the Lock Law. See Law 26,547 art. 1. Law 26,547 made

11

it illegal for the Republic to offer to new exchangers equal or better terms than
what was offered in 2005. Id. art. 3. Moreover, Law 26,547 prohibited the
Executive from offering holdouts who had sued the Republic terms more
favorable than those who did not sue the Republic. Id. art. 5.
In all, an estimated 93% of the Republic’s creditors accepted the 2005 and
2010 exchange offers. After each exchange, the Republic made regular payments
on the Exchange Bonds. However, the Republic continued in its refusal to pay
on the FAA bonds.
2. The Lead Plaintiffs and the Pari Passu Injunction
As discussed, upon the Republic’s refusal to honor their bonds, many of
the FAA bondholders filed actions against the Republic in this court. Some of
these bondholders obtained money judgments from this court, i.e., judgments
that the Republic owes them principal and interest on their FAA bonds. See, e.g.,
Judgment, Old Castle Holdings, Ltd. v. Republic of Argentina, No. 02-CV-3808
(Mar. 27, 2003). However, these bondholders found it impossible to collect on
their money judgments.
In 2010, a group of plaintiffs led by NML Capital, Ltd. (the “Lead Plaintiffs”)
filed motions seeking a different kind of judgment. These plaintiffs, by motion for
partial summary judgment, asked the court to declare that the Republic had
violated a portion of the pari passu clause, the “Equal Treatment Provision,” by
“creating a class of creditors who are guaranteed payment while formally
condemning NML to a lower rank that is barred from receiving any payment at
all.” See Mem. L. Supp. Mot. Part. Summary J. at 2, NML Ltd. v. Republic of

12

Argentina, No. 08-CV-6978 (Oct. 20, 2010). After extensive briefing, the court
agreed with the Lead Plaintiffs and adjudged that the Republic had violated the
pari passu clause of the FAA when it “lowered the rank of NML’s bonds . . . [and]
when it made payments currently due under the Exchange Bonds[] while
persisting in its refusal to satisfy its payment obligations currently due under
NML’s Bonds.” Order 4–5, NML Ltd. v. Republic of Argentina, No. 08-CV-6978
(Dec. 7, 2011).
On February 23, 2012, the court fashioned an injunction to enforce its
judgment that the Republic had violated the pari passu clause. See Order, NML
Ltd. v. Republic of Argentina, No. 08-CV-6978 (Feb. 23, 2012). The Court of
Appeals for the Second Circuit affirmed the injunction, but remanded it to this
court “to clarify precisely how it intends this injunction to operate.” NML Capital,
Ltd. v. Republic of Argentina, 699 F.3d 246, 255 (2d Cir. 2012). On remand, the
court issued an order clarifying that:
a. Whenever the Republic pays any amount due under terms of the
bonds or other obligations issued pursuant to the Republic’s 2005
or 2010 Exchange Offers, or any subsequent exchange of or
substitution for the 2005 and 2010 Exchange Offers that may occur
in the future (collectively, the “Exchange Bonds”), the Republic shall
concurrently or in advance make a “Ratable Payment” to NML.
b. Such “Ratable Payment” that the Republic is ORDERED to make
to NML shall be an amount equal to the “Payment Percentage” (as
defined below) multiplied by the total amount currently due to NML
in respect of the bonds at issue in these cases (08 Civ. 6978, 09 Civ.
1707, and 09 Civ. 1708), including pre-judgment interest (the “NML
Bonds”).
Order at ¶ 2 (a)–(b), NML Ltd. v. Republic of Argentina, No. 08-CV-6978 (Nov. 21,
2012). This order has become known as “the Amended Injunction.”

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The Republic appealed the Amended Injunction to the Court of Appeals.
The Second Circuit affirmed the Amended Injunction in its entirety. NML Capital,
Ltd. v. Republic of Argentina, 727 F.3d 230, 248 (2d Cir. 2013). Nonetheless, it
stayed the Amended Injunction to allow the Republic to file a petition for a writ
of certiorari. Id. The Republic filed its petition, and the Supreme Court denied it
on June 16, 2014. Republic of Argentina v. NML Capital, Ltd., 134 S. Ct. 2819
(2014). Soon thereafter, the Court of Appeals lifted the stay of the Amended
Injunction.
3. The Republic’s Post-Injunction Conduct
Less than a month after the Court of Appeals affirmed the Amended
Injunction, the Republic passed Law 26,886, reopening the exchanges but again
prohibiting those who wished to participate from receiving terms more favorable
than had already been offered. See Law 26,886 art. 2. Moreover, the Republic
continued to forbid settlement with the holdouts who had filed lawsuits unless
those holdouts accepted the same terms given in 2005 and 2010. Id. art 4.
The day after the Supreme Court denied the Republic’s petition for a writ
of certiorari, the Republic announced a plan to pay on the Exchange Bonds
without making a payment to the FAA bondholders. See Statement of the
Minister of the Economy at 4 (June 17, 2014) (“We are initiating steps to initiate
a debt exchange that would permit us to pay in Argentina under Argentine law.”).
Six days later, the Republic attempted to make a payment of $832 million on the
Exchange Bonds without making a ratable payment to the Lead Plaintiffs. Cohen
Decl. ¶ 29. It has attempted to make two additional payments since then. Id. ¶¶

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41–42.
On September 11, 2014, the Republic enacted legislation with the stated
purpose of paying on the Exchange Bonds without observing this court’s
judgments in the Lead Cases. See Law 26,984 art. 2. The legislation purports to
appoint an Argentine entity as trustee of the Exchange Bonds, id. art 3, and to
establish a process for Exchange Bondholders to swap their Exchange Bonds for
securities governed by French Law. Id. art. 7. Law 26,984 also declares this
court’s orders as “illegitimate and illegal obstruction” of the payment process on
the Exchange Bonds. Id. art 2.
4. The “Me Too” Plaintiffs and the Instant Motions for Partial Summary
Judgment
As discussed, in 2011 the Lead Plaintiffs obtained judgments from this
court that the Republic violated the pari passu clause of the FAA when it lowered
the rank of their FAA bonds. Plaintiffs in the instant thirty-six cases now seek a
similar ruling. Plaintiffs in nineteen of these cases 1 already have money
judgments against the Republic (collectively, the “Post Money Judgment
Plaintiffs.”) Plaintiffs in the remaining sixteen cases 2 do not have money
judgments (collectively, the “Pre-Judgment Plaintiffs”).
Together, plaintiffs in all of the instant cases now move for partial
summary judgment, asking the court to rule that the Republic violated and
The nineteen Post Money Judgment cases are: 11-CV-4908; 14-CV-4091; 14-CV-4092; 14-CV7164; 14-CV-7166; 14-CV-7169; 14-CV-7171; 14-CV-7258; 14-CV-7739; 14-CV-8242; 14-CV8303; 14-CV-8601; 14-CV-8630; 14-CV-8946; 14-CV-8947; 14-CV-9093; 15-CV-00710; 15-CV01470; and 15-CV-1508.
2 The sixteen Pre-Judgment cases are: 13-CV-8887; 14-CV-10016; 14-CV-10064; 14-CV-10141;
14-CV-10201; 14-CV-1109; 14-CV-3127; 14-CV-5849; 14-CV-5963; 14-CV-7637; 14-CV-8243;
14-CV-8988; 14-CV-9855; 15-CV-1471; 15-CV-1553; and 15-CV-1588.
1

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continues to violate the pari passu clause of the FAA. The court heard oral
argument on the motions on May 29, 2015.
Discussion
The standard for summary judgment is well settled. The court may grant
summary judgment only where the movant shows that “there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Cartrett, 477 U.S.
317, 322 (1986).
The Republic raises three arguments in opposition to plaintiffs’ motions
for partial summary judgment: (1) the Post Money Judgment Plaintiffs’ claims
are barred by the doctrines of res judicata and merger; (2) the Pre-Judgment
Plaintiffs have not adequately demonstrated that they own the bond interests
they purport to hold; and (3) the Republic has not breached the pari passu clause
of the FAA.
1. Whether the Doctrines of Res Judicata and Merger Bar the Post
Money Judgment Plaintiffs’ Pari Passu Claim.
The Republic argues that the doctrines of res judicata and merger require
the court to deny the pari passu claim in the nineteen cases where plaintiffs have
already obtained money judgments.
The doctrine of res judicata “provides that a final judgment on the merits
of an action precludes the parties from relitigating issues that were or could have
been raised in that action.” Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co.,
600 F.3d 190, 195 (2d Cir. 2010) (internal marks omitted). Res judicata will

16

preclude successive claims if the earlier decision was: “(1) a final judgment on
the merits, (2) by a court of competent jurisdiction, (3) in a case involving the
same parties or their privies, and (4) involving the same cause of action.” In re
Teltronics Servs., Inc., 762 F.2d 185, 190 (2d Cir. 1985). A cause of action is the
same if it stems from the same or connected transactions, the same proof is
needed to support it as in the prior suit, and if the facts essential to the second
were present in the first. Curtis v. Citibank, N.A., 226 F.3d 133, 139 (2d Cir.
2000); N.L.R.B. v. United Technologies Corp., 706 F.2d 1254, 1260 (2d Cir. 1983).
The doctrine of merger provides that “a debt created by contract merges
with a judgment entered on that contract, so that the contract debt is
extinguished and only the judgment debt survives.” Westinghouse Credit Corp.
v. D'Urso, 371 F.3d 96, 102 (2d Cir. 2004). The “merger” of the contract debt with
the judgment debt does not extinguish the underlying contract itself. See Exp.Imp. Bank of the Republic of China v. Grenada, No. 13 CIV. 1450 HB, 2013 WL
4414875, at *3 (S.D.N.Y. Aug. 19, 2013). This would inappropriately “weaken
rights or destroy identities which the prevailing party had in his original cause.”
Jay's Stores, Inc. v. Ann Lewis Shops, Inc., 15 N.Y.2d 141, 147 (1965). Rather
than extinguish the contract, merger merely extinguishes the claim that was
adjudicated from that contract, and replaces that claim with the final judgment.
See Orix Credit Alliance, Inc. v. Horten, 965 F. Supp. 481, 485 (S.D.N.Y. 1997).
Merger, then, is functionally similar to the doctrine of claim preclusion,
which itself is a component of res judicata. Migra v. Warren City Sch. Dist. Bd. of
Educ., 465 U.S. 75, 77 n.1 (1984). Thus, courts have become increasingly wary

17

of using the terminology of “merger,” favoring instead the language of res
judicata. See NML Capital, Ltd. v. Banco Cent. de la Republica Argentina, 652 F.3d
172, 185 (2d Cir. 2011) (noting that merger and bar are “the terminology of the
common law that federal courts have supposedly retired.”). Consequently, this
court will apply the doctrine of res judicata in determining whether plaintiffs’
claims are precluded.
This is exactly the approach employed in Export-Import Bank of the
Republic of China v. Grenada. In 2006, the Export-Import Bank obtained a $21.6
million judgment against Grenada for its default on four loans. Exp.-Imp. Bank
of the Republic of China v. Grenada, No. 13-CV-1450 (HB), 2013 WL 4414875, at
*1 (S.D.N.Y. Aug. 19, 2013). Six years later, the Export-Import Bank filed a new
action against Grenada, alleging breach of the pari passu clause of the loan
agreements. Id. Granada argued that principles of res judicata and merger barred
the second action. Id. Judge Baer of this court disagreed, and upon applying res
judicata principles, held that the second action was not precluded because its
factual basis, the conduct establishing violation of the pari passu clause,
involved a “different set of wrongs” not litigated in the first action. Id. at *2–3.
Just as in Export-Import Bank, the instant pari passu claim is not
precluded because it is different from, and involves a different set of wrongs,
than what was adjudicated previously. Between 2002 and 2011, the Post Money
Judgment plaintiffs filed actions against the Republic for its failure to pay
principal and interest on their FAA bonds. See, e.g., Complaint ¶¶ 1, 4–7,
Drawrah Limited, et al., v. The Republic of Argentina, No. 09-CV-8299 (Sep. 30,

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2009). The court awarded these plaintiffs judgments of principal and interest on
those bonds. See, e.g., Judgment, Drawrah Limited, et al., v. The Republic of
Argentina, No. 09-CV-8299 (Feb. 24, 2011). These plaintiffs have now filed new
actions asserting that the Republic breached the pari passu clause of the FAA
by ranking their securities below the securities of the Exchange Bondholders.
See, e.g., Complaint ¶¶ 3–4, Perez, et al., v. Republic of Argentina, No. 14-CV8242 (Oct. 15, 2014).
The claim for failure to pay principal and interest is fundamentally
different from the pari passu claim. The Republic’s failure to pay principal and
interest violates the FAA because the FAA requires the payment of principal and
interest. See FAA ¶ 12(a). The sole “wrong” committed in this regard, and the
sole matter litigated to final judgment, was the failure to pay principal and
interest.
The claim for failure to honor the pari passu clause involves a wholly
different set of wrongs. The pari passu clause of the FAA, more specifically the
equal treatment provision, provides that the “The payment obligations of the
Republic under the Securities shall at all times rank at least equally with all its
other

present

and

future

unsecured

and

unsubordinated

External

Indebtedness.” FAA ¶ 1(c). The Republic violates this provision not simply by its
refusal to pay plaintiffs, but by its creation of and payment on a superior class
of securities and by subordinating its obligation to plaintiffs.
The Republic argues that preclusion applies because the facts giving rise
to the pari passu claim occurred before the money judgments were awarded, and

19

thus the claim should have been asserted in the previous actions. See Mem. L.
Opp. at 18–19. The Republic notes that the passage of the “Lock Law,” which
prohibits settlement with the holdouts, was passed in 2005, and suggests that
this event gave plaintiffs sufficient basis to bring the pari passu claim earlier. Id.
Notwithstanding the fact that a significant number of these plaintiffs filed their
first actions before 2005, 3 the Lock Law was simply one early example of an
ongoing series of events giving rise to plaintiffs’ pari passu claim.
First, the Republic passed the Lock Law and conducted the 2005 and 2010
Exchanges. Each year since then, the Republic has reauthorized a moratorium
on payments on the FAA bonds. At the same time, the Republic has made scores
of payments to the Exchange Bondholders. In 2011 and 2012, the court
construed the pari passu clause in the Lead Cases. In 2013, the Republic passed
Law 26,886 reopening the exchanges but again prohibiting repayment on the
plaintiffs' bonds. In June of 2014, the Supreme Court denied the Republic’s
petition for a writ of certiorari in the Lead Cases. Then, between 2014 and 2015,
the Republic made three illegal transfers to financial entities with the intention
of paying on the Exchange Bonds without making a ratable payment to the Lead
Plaintiffs. It also passed Law 26,984, offering to pay Exchange Bondholders
under French law and purporting to replace the indenture trustee of the
Exchange Bonds.
This lengthy and ongoing series of events is what provides the factual basis

See, e.g., 02-CV-3808; 02-CV-4124; 03-CV-8120; 04-CV-7056; 04-CV-6594; 04-CV-2710; 04CV-3314; 04-CV-6137; 04-CV-7504; and 04-CV-1077.

3

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for the instant pari passu claim. This pattern of activity, as a whole, was not
known and could not have been known to these plaintiffs when they filed their
first actions. Simply put, it is the Republic’s ongoing conduct that, in the
language of res judicata, is essential to the instant pari passu claim. Because
this essential conduct occurred, and continues to occur, long after the first
actions were filed, res judicata does not apply.
The court rejects the Republic’s res judicata and merger arguments
because the Post Money Judgment Plaintiff’s pari passu claim is fundamentally
different from, and involves a wholly different set of wrongs, than the claim for
payment of interest and principal. Moreover, the factual basis for the new claim,
i.e. the Republic’s conduct in subordinating its payment obligation to plaintiffs,
is ongoing. Thus, the court concludes that the pari passu claim is different from
what was previously litigated, and not precluded by principles of res judicata or
merger.
2. Whether The Pre-Judgment Plaintiffs Have Submitted Adequate Proof
of Ownership of Their Bonds.
The Republic argues that some of the Pre-Judgment Plaintiffs have failed
to provide sufficient evidence of their ownership interest in the FAA bonds,
meriting denial of summary judgment.
Proof of bond ownership has been a recurring issue in the long-history of
these cases. Generally speaking, a party may establish a fact by citing to
declarations or affidavits evidencing that fact. See Fed. R. Civ. P. 56(c)(1). But
this court has consistently required more before granting summary judgment. It

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has required some documentary proof of current ownership of the bonds. See,
e.g., Colella v. Republic of Argentina, No. 04 CIV. 2710 (TPG), 2006 WL 399449,
at *3 (S.D.N.Y. Feb. 21, 2006). In most cases, the court has been satisfied where
the plaintiff supplements its sworn declarations with a recent account statement
from the bank holding the bonds. Mazzini v. Republic of Argentina, No. 03-CV8120(TPG), 2005 WL 743090, at *4 (S.D.N.Y. Mar. 31, 2005), aff'd, 282 F. App'x
907 (2d Cir. 2008).
In the instant cases, many of the Pre-Judgment Plaintiffs had initially
relied on declarations as evidence of their ownership of the bonds. However, in
response to the Republic’s opposition papers, all of these plaintiffs have now
submitted account statements to the court. See, e.g., Reply Mem. at 29
(“Although it is not required, Plaintiff now attaches additional evidence of
ownership.”) The court has reviewed these plaintiffs’ declarations and account
statements and concludes that they are sufficient to prove plaintiffs’ ownership
of interests in the FAA bonds. See Table 1.
Table 1: Evidence of Ownership in Pre-Judgment “Me Too” Cases
Case #
Plaintiff
Status
Evidence of Ownership of Interest
13CV8887
Pons
prejudgment Hauk and Aufhause Act. St. & sworn
declaration
14CV10016 Trinity
prejudgment Wilmington Trust Acct. Statement &
sworn declaration
14CV10064 MCHA
prejudgment Morgan Stanley Acct. Statement &
Hldgs
sworn declaration
14CV10141 Dorra
prejudgment Sabadell Acct. Statement & sworn
declaration
14CV10201 Claridae
prejudgment Morgan Stanley Acct. Statement &
sworn declaration
14CV1109
Tortus II
prejudgment Goldman Sachs Acct. Statement &
sworn declaration (indicating that
some of the bonds have been sold,

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14CV3127

Tortus I

prejudgment

14CV5849

Attestor

prejudgment

14CV5963

Beloqui

prejudgment

14CV7637

prejudgment

14CV8243

MCHA
Hldgs
Foglia

14CV8988

NML

prejudgment

14CV9855

ARAG

prejudgment

15CV1471

Lambertini

prejudgment

15CV1553

Honero

prejudgment

15CV1588

Trinity

prejudgment

prejudgment

but that ownership continues on the
remaining bonds)
Goldman Sachs Acct. Statement &
sworn declaration (indicating that
some of the bonds have been sold,
but that ownership continues on the
remaining bonds)
Deutsche Bank Acct. Statement &
sworn declaration
Citibank Acct. Statement & sworn
declaration
Morgan Stanley Acct. Statement &
sworn declaration
Citibank Acct. Statement & sworn
declaration
JP Morgan Acct. Statement & sworn
declaration
Daily Portfolio Appraisal & sworn
declaration
Caja de Valores Acct Statement &
sworn declaration
Daily Portfolio Appraisal & sworn
declaration
Wilmington Trust Acct. Statement &
sworn declaration

3. Whether the Republic Has Breached the Pari Passu Clause of the FAA.
The Republic argues that it has not breached the pari passu clause of the
FAA. The pari passu clause provides that:
The Securities will constitute (except as provided in Section 11
below) direct, unconditional, unsecured and unsubordinated
obligations of the Republic and shall at all times rank pari passu
and without any preference among themselves. The payment
obligations of the Republic under the Securities shall at all times
rank at least equally with all its other present and future unsecured
and unsubordinated External Indebtedness (as defined in this
Agreement).
FAA ¶ 1(c). The Republic argues that this clause “prohibits only a creditor’s
involuntary legal subordination of debt that is subject to the clause to certain of

23

the creditor’s other indebtedness,” and that it does not apply where a creditor
“elected voluntarily not to participate” in a debt restructuring. Mem. L. Opp. at
33–34.
This argument is unavailing. The Second Circuit interpreted this clause in
its opinion of October 26, 2012. See NML Capital, Ltd. v. Republic of Argentina,
699 F.3d 246, 259 (2d Cir. 2012). The court explained that the first sentence of
the pari passu clause “prohibits Argentina, as bond issuer, from formally
subordinating the bonds by issuing superior debt.” Id. The second sentence
“prohibits Argentina, as bond payor, from paying on other bonds without paying
on the FAA Bonds.” Id.
The Republic argues that Court of Appeals’ construction of the pari passu
clause “runs contrary to New York Law and market understanding” and is
“unsupported by [the] plain language” thereof. See Mem. L. Opp. Mots. Summary
J. at 33–34. But this merely attempts to relitigate issues long decided. The Court
of Appeals has construed the meaning of the pari passu clause, and this court
cannot, nor would it, upset that interpretation. The court need merely determine
whether plaintiffs have proven that the Republic breached the pari passu clause,
as it has been construed, in the instant cases.
Between 2005 and 2014, the Republic made regular and uninterrupted
payments to one class of its creditors, the Exchange Bondholders, without
paying the FAA bondholders. The Republic passed at least four discrete pieces
of legislation to avoid paying on the FAA bonds. See Law 26,017, Law 26,547,
Law 26,886, and Law 26,984. And, each year since 2002, the Republic has

24

included in its budget a moratorium prohibiting payment on the FAA bonds.
Furthermore, from 2014 through 2015, after the Amended Injunction in the Lead
Cases took effect, the Republic made three illegal transfers to financial
intermediaries in an attempt to pay on the Exchange Bonds without also paying
on the FAA bonds. Finally, the Republic has attempted to remove the indenture
trustee of the Exchange Bonds and to replace it with an Argentine entity in an
attempt to continue making payments on the Exchange Bonds without making
payments on the FAA bonds.
This long course of conduct makes clear that the Republic no longer
considers the FAA bonds “direct, unconditional, unsecured and unsubordinated
obligations of the Republic.” FAA ¶1(c). By issuing the Exchange Bonds and
passing legislation prohibiting payment on the FAA bonds, the Republic has
created a superior class of debt to that held by plaintiffs. By making payments
on this superior class of debt, the Republic has violated its promise to rank
plaintiffs’ bonds equally with its later-issued external indebtedness. Thus, the
court holds, in light of the Republic’s entire and continuing course of conduct,
that it has breached the pari passu clause of the FAA.

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Conclusion
For the reasons given above, the court concludes that plaintiffs in these
thirty-six actions have satisfied their burden for obtaining summary judgment.
The motions for partial summary judgment are hereby granted.
It is hereby declared, adjudged, and decreed that the Republic has

violated, and continues to violate, Paragraph (1)(c) of the 1994 Fiscal Agency
Agreement.
SO ORDERED.
Dated: New York, New York
June 5, 2015

United States District Judge

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