United States: Don’t Cry For Me Argentine Bondholders: Argentina And Exchange Bondholders File Certiorari Petitions

On February 18, both Argentina and the Exchange Bondholders Group filed petitions for writs of certiorari with the Supreme Court, seeking review of the Second Circuit's rulings in the pari passu litigation. We discuss below the certiorari procedure, followed by comments on substantive arguments raised by Argentina and the Exchange Bondholders.

Our many prior comments on Argentina's pari passu litigation, as well as all of the material pleadings and decisions (including the two February 18 certiorari petitions), can be found on our Argentine Sovereign Debt webpage, at http://www.shearman.com/argentine-sovereign-debt.

Certiorari and the Procedural Schedule

A petition for a writ of certiorari is the means by which a party asks the Supreme Court to exercise its discretionary appellate function. The Supreme Court's Rules (at Rule 10) clearly set forth the standards that the Court applies in considering whether to grant cert:

Review on a writ of certiorari is not a matter of right, but of judicial discretion. A petition for a writ of certiorari will be granted only for compelling reasons. The following, although neither controlling nor fully measuring the Court's discretion, indicate the character of the reasons the Court considers:

a. a United States court of appeals has entered a decision in conflict with the decision of another United States court of appeals on the same important matter; ... or has so far departed from the accepted and usual course of judicial proceedings, or sanctioned such a departure by a lower court, as to call for an exercise of this Court's supervisory power;

b. ...

c. ...a United States court of appeals has decided an important question of federal law that has not been, but should be, settled by this Court, or has decided an important federal question in a way that conflicts with relevant decisions of this Court.

A petition for a writ of certiorari is rarely granted when the asserted error consists of erroneous factual findings or the misapplication of a properly stated rule of law.

Of significance with respect to the pending certiorari petitions are three points clearly reflected in Rule 10: the Supreme Court is available to resolve conflicts between different federal circuit courts on important matters; the Court's focus is limited to questions of federal law; and the Court "is not primarily concerned with the correction of errors in lower court decisions." See also Shapiro et al., Supreme Court Practice (10th ed.) at 278. The Court grant rate on cert petitions is around four percent.1

NML and the other plaintiffs in this case will file briefs in opposition to the certiorari petitions, which are currently due to be filed not later than March 24, although 30-day extensions are commonly requested and granted. Once briefs in opposition are filed, Argentina and the Exchange Bondholders Group can each file a reply brief. There is no fixed date for the filing of the reply, although it is generally filed within two weeks of the filing of the opposition briefs.

Amicus briefs are common in Supreme Court practice. (Approximately a dozen amicus briefs were filed in this case with the Second Circuit.) Amicus briefs will be due on March 24.

It is possible that the Supreme Court will rule on the two petitions prior to the Court's summer recess, which begins in late June. If the Court has not released its decision prior to that recess, the Court's decision will probably not be released earlier than late September. If certiorari were to be granted, the case would not be heard until the 2014-2015 term of the Court, which runs from October 2014 through June 2015.

We note that the Supreme Court will hold argument in a totally different appeal by Argentina, involving the issue of the permissible scope of discovery against a sovereign. (That case has Supreme Court Docket number 12-842.) The argument is to be heard on April 21. The pari passu issue and the particular Foreign Sovereign Immunity Act (FSIA) issue addressed in the Second Circuit's pari passu case decisions are not at issue in that other case, and will not be ruled on by the Court in its decision in that case.

Petition Filed by Argentina (Supreme Court Docket No. 13-990)

Argentina addresses two issues in its petition: (1) its contention that the pari passu clause was misconstrued by Judge Griesa in the Southern District and by the Second Circuit, and (2) its contention that the ratable payment injunction violates the provision of the FSIA (28 USC § 1609) that immunizes sovereign property from "attachment arrest and execution."

Pari Passu Clause

Argentina faces a fundamental obstacle in obtaining Supreme Court review of its challenge to the Second Circuit's decision on the construction of the pari passu clause: that issue is solely a matter of New York state law, and, as discussed above, the Supreme Court does not hear appeals on matters of state law. In an effort to work its way around that obstacle, Argentina asks the Supreme Court to grant its certiorari petition with respect to this issue, but then to certify to the New York Court of Appeals (New York's highest court) the issue of the proper construction of the pari passu clause.

(Certification is the process by which the court of one jurisdiction requests the courts of another jurisdiction to provide its views.)

In the absence of a compelling argument that the state law pari passu question merits Supreme Court review, or that the pari passu question is intertwined with the FSIA issue, Argentina's plea for "certiorari and certification" would appear to be very unlikely to succeed. Argentina does not advance such arguments. We expect that the Second Circuit's existing decision on pari passu will be the last word on this issue.

FSIA Issue

Argentina argues energetically that the ratable payment injunction issued by Judge Griesa and endorsed by the Second Circuit "flouts the FSIA" and "achieve[s] what the FSIA directly forbids: They coerce a foreign sovereign into satisfying a money debt with immune assets." See Argentina's certiorari petition at 23. Argentina does not seriously argue that there is a split among the circuits with respect to this particular issue; in fact, Argentina seems to argue that Circuit law is consistent. See Argentina's certiorari petition at 26. Rather, Argentina argues strenuously that the Second Circuit incorrectly applied Section 1609 and the cases that construe it. See Argentina's certiorari petition at 27 ("The panel rendered [§1609] toothless....").

As made clear in Supreme Court Rule 10, error alone is rarely a sufficient basis for a grant of certiorari. And in the absence of a clear circuit split, certiorari for Argentina will most likely depend on a determination by the Court – or, more specifically, four Justices, the number required to grant certiorari – that the Second Circuit "has decided an important question of federal law that has not been, but should be, settled by this Court." However, analysis of the Second Circuit opinion from which certiorari is sought can be seen as simply an application of the long-standing and widely endorsed principle of law that Section 1609's prohibition against "attachment arrest and execution" cannot be avoided by structuring and labeling the relevant order as an injunction. It is hard to argue that the Second Circuit set out a new rule of law or a novel construction of Section 1609. While the Court certainly has very broad discretion and has shown an affinity for hearing FSIA cases, a customary application of the standards set forth in Rule 10 suggests certiorari for Argentina remains a long shot.

Petition Filed by the Exchange Bondholders Group (Supreme Court Docket No. 13-991)

The Exchange Bondholders Group also filed a petition for certiorari, although in some respects it is more in the nature of an amicus brief. For example, the opening sentence of the Exchange Bondholders Group petition reads, "Petitioner supports the grant of certiorari that the Republic of Argentina is seeking in this same case." See Exchange Bondholders Group certiorari petition at i. That position is not surprising, in view of the fact that the Second Circuit determined (with one judge dissenting), as set forth in its decision of August 23, 2013, that the Exchange Bondholders Group had "no appellate standing." In the absence of standing, the Exchange Bondholders Group's petition is of course doomed.

The Exchange Bondholders Group advances three arguments for certiorari:

The Ratable Payment Injunction Is Coercive

The Exchange Bondholders Group first argues that the ratable payment injunction is an abusive exercise of the federal court's equitable powers, both as an inappropriate remedy for a simple breach of contract, and as an unprecedented use of the injunctive power "as leverage against the Republic." See Exchange Bondholders Group certiorari petition at 18-19 and 24. While this is probably the Exchange Bondholders Group's strongest argument, it would appear to fall short of the kind of "departure" provided for in Supreme Court Rule 10(a), quoted above, especially in light of the countervailing argument that the lower courts have wide discretion in fashioning equitable relief.

The Ratable Payment Injunction Violates the Fifth Amendment

The Exchange Bondholders Group also argue that their Constitutional rights under the Fifth Amendment are violated by the ratable payment injunction, because "the Injunctions impair, condition, and will ultimately extinguish the Exchange Bondholders' private right to bond payments in a targeted and deliberate effort to aid Respondents in collection of a purely private contract debt." See Exchange Bondholders Group's certiorari petition at 27. The Second Circuit rejected this argument on the basis that the injunction did not deprive holders of Exchange Bonds of any property.

The issue of whether judicial action can give rise to an unconstitutional taking is unsettled. However, given the standing and other issues facing the Exchange Bondholders Group, it seems unlikely that this case would be seen by the Court at an appropriate vehicle to resolve that complex issue.

The Exchange Bondholders Group Have Standing to Appeal

As mentioned above, the Second Circuit (with one judge dissenting) has already denied the Exchange Bondholders Group appellate standing. While such standing may be a point as to which there could be reasonable differences in view, given Argentina's undoubted standing and the Exchange Bondholders Group's secondary role, it would appear unlikely that the Court would grant certiorari to consider this issue, which is a gateway matter.

* * *

The next key event in this ongoing saga will be the filing of the plaintiffs' briefs in opposition to certiorari, which will have an important impact on the likelihood of Supreme Court review. Stay tuned.

Footnote

1 We discussed various statistics relevant to cert petitions, as well as the possibility that the Court may "call for the views of the Solicitor General," in previous notes. See "Don't Cry for Me Argentine Bondholders" Notes dated June 27, 2013 and August 27, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions