Legnaro v. the Republic of Argentina

Full title: MORENO LEGNARO et al., Plaintiffs, v. THE REPUBLIC OF ARGENTINA and THE…

Court: United States District Court, S.D. New York

Date published: Aug 22, 2006

05 Civ. 178 (TPG) (S.D.N.Y. Aug. 22, 2006)

Opinion

05 Civ. 178 (TPG).

August 22, 2006

OPINION

THOMAS GRIESA, Senior District Judge

Plaintiffs are the beneficial owners of certain bond indebtedness issued by defendants The Republic of Argentina and The Province of Buenos Aires (hereinafter referred to jointly as the "Republic"). The Republic defaulted on such indebtedness in December 2001 during a profound fiscal crisis. Plaintiffs are suing to recover amounts due to them as a result of the default and have moved for summary judgment. Plaintiffs also move to strike the Republic's discovery requests.

The motions are granted.

FACTS

The bond indebtedness at issue is governed by one of three agreements: (1) a Fiscal Agency Agreement dated October 19, 1994 (the "1994 FAA"), (2) a Fiscal Agency Agreement dated December 10, 1993 (the "1993 FAA"), and (3) an Indenture dated July 8, 1998 (the "1998 Indenture"). The 1994 FAA is the same agreement that governed the bond indebtedness on which this court granted summary judgment to the plaintiffs in Lightwater Corporation Ltd. v. Republic of Argentina, No. 02 Civ. 3804, 2003 WL 1878420 (S.D.N.Y. Apr. 14, 2003). Section 22 of the 1994 FAA, Section 20 of the 1993 FAA and Section 113(c) of the Indenture all state that the Republic waives sovereign immunity and consents to jurisdiction in any state or federal court in the borough of Manhattan in the City of New York. All three agreements provide that the Republic's obligations on the bonds are unconditional and that failure to make any payment 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. Paragraph 12 of the 1994 FAA provides for acceleration of principal if there is a failure to pay interest or a moratorium. If either of these events occurs,

each holder of Securities and such Series may by such notice in writing declare the principal amount of Securities of such Series held by it to be due and payable immediately. . . .

The 1993 FAA contains similar language.

The 1998 Indenture permits acceleration of principal only by holders of at least 25% in aggregate of the outstanding principal amount of the bonds under each agreement.

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, 2003 WL 1878420, at *2;Applestein v. Republic of Argentina, No. 02 Civ. 1773, 2003 WL 1990206, at *1 (S.D.N.Y. Apr. 29, 2003). On December 3, 2004 and January 10, 2005, plaintiffs sent notices to Bankers Trust Company, the Fiscal Agent of The Republic of Argentina, declaring the principal amounts of the debt securities governed by the 1994 FAA and 1993 FAA held by each plaintiff to be immediately due and payable.

The bonds that are the subject of this action are listed hereafter. Also listed are the amounts of the beneficial interests owned by each plaintiff.¹

1 The court notes the distinction between bonds and beneficial interests. In some previous opinions, the court has simply referred to the plaintiffs as owners of "bonds," when in fact plaintiffs are technically owners of "beneficial interests in bonds." The Republic actually issues "a bond" to a depository. The depository, in some form, issues "participations" to brokers, who sell "beneficial interests" to purchasers. These beneficial interests are identified by reference to the underlying bond (CUSIP or ISIN number or both; date of issuance and maturity; rate of interest) and the principal amount of the beneficial interest. This distinction is discussed more fully in Million Air Corp. v. Republic of Argentina, No. 04 Civ. 1048, 2005 U.S. Dist. LEXIS 23904 (S.D.N.Y. Oct. 17, 2005).

The following tables contain the necessary identifying information regarding each plaintiff's beneficial interests in bonds. Table 1. Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered:

Giordano Allievi and Gabriella Toscano U.S. $ 10,000.00 CUSIP No. 040114AN0; ISIN No. US040114AN02 September 10, 1996. September 10, 2006. 11% On or about September 12, 2001. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from UniCredit Xelion Banca dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 2. Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Giordano Allievi and Gabriella Toscano U.S. $ 15,000.00 CUSIP No. 040114AH3; ISIN No. US040114AH34 December 20, 1993. December 20, 2003. 8.375% On or about September 12, 2001. Notice sent December 3, 2004. FAA dated December 10, 1993. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from UniCredit Xelion Banca dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 3. Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Giordano Allievi and Gabriella Toscano U.S. $ 15,000.00 CUSIP No. 040114FC9; ISIN No. US040114FC91 None given. March 15, 2010. 11.375% On or about July 2004. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from UniCredit Xelion Banca dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 4. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Pier Luigi Catto : U.S. $ 276,000.00 CUSIP No. 040114BE9; ISIN No. US040114BE93 April 7, 1999. April 7, 2009 11.75% On or about March 19, 2004. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Banca Agricole dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 5. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Davide Ciallella : U.S. $ 24,000.00 CUSIP No. 040114FC9; ISIN No. US040114 FC91 None given. March 15, 2010. 11.375% On or about June 25, 2004. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Banco di Brescia dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 6. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Bramante Dal Toe and Lucia Vettoretti : U.S. $ 80,000.00 CUSIP No. 040114GD6; ISIN No. US040114GD65 None given. February 21, 2012 12.375% On or about April 27, 2004. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Banca Intesa dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 7. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Bramante Dal Toe and Lucia Vettoretti : U.S. $ 60,000.00 CUSIP No. 040114AH3; ISIN No. US040114AH34 December 20, 1993. December 20, 2003. 8.375% Between December 21 and December 28, 2001. Notice sent December 3, 2004. FAA dated December 10, 1993. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Banca Intesa dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 8. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Mario Dal Toe : U.S. $ 30,000.00 CUSIP No. 040114ABE9; ISIN No. US040114BE93 April 7, 1999. April 7, 2009 11.75% On or about April 28, 2004. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from UniCredit Banca dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 9. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Ada Dal Trozzo : U.S. $ 83,000.00 CUSIP No. 040114FC9; ISIN No. USO40114FC91 None given. March 15, 2010. 11.375% Between June 25 and July 1, 2004. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Banco di Brescia dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 10. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Moreno Legnaro : U.S. $ 3,000.00 CUSIP No. 040114ANO; ISIN No. US040114AN02 September 10, 1996. September 10, 2006. 11 % On or about November 7, 2003. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Certificate from Banca Intesa dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 11. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Moreno Legnaro : U.S. $ 8,000.00 CUSIP No. 040114GD6; ISIN No. US040114GD65 None given. February 21, 2012 12.375 % On or about November 7, 2003. Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Certificate from Banca Intesa dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 12. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Aldo Naj Oleari and Maria Ida Modena : U.S. $ 100,000.00 CUSIP No. 040114FC9; ISIN No. US040114FC91 None given. March 15, 2010. 11.375 % On or about February 7, 2001 Notice sent December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Meliorbanca dated September 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 13. Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Victor Sacilotto EURO 25,000.00 ISIN No. XS0124395129 Not provided. February 24, 2003. 10.375 % On or about February 26, 2001. None given. Indenture dated July 8, 1998. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Custodial letter and account statement from De Simoni Piaggio Sociedad de Bolsa S.A. dated (Account Statements; November 14, 2005 and October 31, 2005, Letters; Notarized respectively. Statements, etc.) Table 14. Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Ambrogio Stucchi, Giuseppe Stucchi and Maria Luisa Stucchi U.S. $ 50,000.00 CUSIP No. 040114BE9; ISIN No. US040114BE93 April 7, 1999. April 7, 2009. 11.75 % On or about November 5, 2003. Notice sent on December 3, 2004. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Credito Argitiano S.p.A. dated October 30, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 15. Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Luis Garcia Tobio and Antonia Mirian Maciel U.S. $ 33,000.00 CUSIP No. 040114AR1; ISIN No. US040114AR16 January 30, 1997. January 30, 2017. 11.375 % Between May 29, 2000 and July 19, 2000 and on or about October 11, 2001. Notice sent on January 10, 2005. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Caja de Valores dated November 8, 2005. (Account Statements; Letters; Notarized Statements, etc.) Table 16. Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Luis Garcia Tobio and Antonia Mirian Maciel : U.S. $ 33,000.00 CUSIP No. 040114AV2; ISIN No. US040114AV28 None given. September 19, 2027 9.75 % On or about May 29, 2000. Notice sent on January 10, 2005. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Caja de Valores dated November 8, 2005. (Account Statements; Letters; Notarized Statements, etc.)

DISCUSSION

This Court has already granted summary judgment in other cases to plaintiffs seeking to collect on the Republic's defaulted bonds issued under the 1994 FAA, the 1993 FAA and the 1998 Indenture. This has occurred in Lightwater, supra, Applestein, supra, Mazzini v. Republic of Argentina, No. 03 Civ. 8120, 2005 U.S. Dist. LEXIS 5692 (S.D.N.Y. Mar. 31, 2005), and other cases. Only certain specific issues need to be discussed in connection with the present motion.

Standing and Proof of Ownership

In the two opinions in Fontana v. Republic of Argentina, 415 F.3d 238 (2d Cir. 2005), and Applestein v. Province of Buenos Aires, 415 F.3d 242 (2d Cir. 2005), the Second Circuit has held that an owner of a beneficial interest, such as plaintiffs here, must receive authorization from the registered holder of the bond before it may sue, but that such authorization may be granted subsequent to the filing of a lawsuit. Alternatively, the Republic may waive the authorization requirement.

The Republic has agreed to waive objections based on lack of authorization where the court makes a finding of current ownership. See Transcript, March 28, 2006, Cilli v. Republic of Argentina (04 Civ. 6594).

Here, plaintiffs have adequately demonstrated through their account statements that owned the beneficial interests as of various dates in September and October 2005. There is no evidence of any change of ownership thereafter.

CONCLUSION

The motion to strike defendants' discovery requests is granted.

The motions for summary judgment are granted. Judgment will be entered for the principal amount of the bonds plus accrued interest. With respect to the bonds issued under the 1998 Indenture, judgment will be entered for any payments on those bonds that are due and unpaid as of the time of judgment.

The parties shall consult with one another concerning the form of the judgment and the amounts of interest that should be awarded in the judgment. If the parties are able to reach agreement on those subjects, they shall jointly submit an agreed proposed judgment to the court. If the Republic and any plaintiff are unable to reach agreement on those subjects, that plaintiff shall submit a proposed judgment to the court, and the Republic shall submit any objections to that plaintiff's proposed judgment within five business days thereafter. The court will then resolve any remaining disagreements.

SO ORDERED.