Martinez v. the Republic of Argentina

Full title: CARLOS ALBERTO MARTINEZ, et al., Plaintiff, v. THE REPUBLIC OF ARGENTINA…

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

Date published: Aug 22, 2006

05 Civ. 2521 (TPG) (S.D.N.Y. Aug. 22, 2006)

Opinion

05 Civ. 2521 (TPG).

August 22, 2006

OPINION

THOMAS GRIESA, Senior District Judge

Plaintiffs are the beneficial owners of certain bond indebtedness issued by defendant The Republic of Argentina. 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 two agreements: (1) a Fiscal Agency Agreement dated October 19, 1994 (the "1994 FAA") and (2) a Floating Rate and Bond Exchange Agreement dated December 6, 1992 (the "FRB Agreement"). 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 and Section 6.07 of the FRB Agreement 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. Both 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 FRB Agreement 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 February 24, 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 held by plaintiffs 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 plaintiffs.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 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: : Luigi Giacomazzi and Luciana Pedrolli U.S. $ 280,000.00 CUSIP No. 040114FC9; ISIN No. US040114 FC91 None given. March 15, 2010. 11.375% On or about July 19, 2001. February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Banca del Garda dated March 29, 2006. (Account Statements; Letters; Notarized Statements, etc.)

Table 2.

Plaintiff 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: : Kazimierz Kornas U.S. $ 100,000.00 CUSIP No. 040114GA2; ISIN No. US040114GA27 None given. June 15, 2015 11.75% Between March 12, 2001 and October 4, 2001. February 24, 2005. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Merrill Lynch dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 3.

Plaintiff 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: : Carlos Alberto Martinez and Monica Cristina Barbero U.S. $ 31,000.00 CUSIP No. 040114AR1; ISIN No. US040114AR16 January 30, 1997. January 30, 2017 11.375% On or about November 22, 1999 and May 12, 2000. February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Caja de Valores dated November 30, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 4.

Plaintiff 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: Carlos Alberto Martinez and Monica Cristina Barbero U.S. $ 11,000.00 CUSIP No. 040114GA2; ISIN No. US040114GA27 None given. June 15, 2015 11.75% On or about June 26, 2000. February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Caja de Valores dated November 30, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 5.

Plaintiff 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: Ramon Miguel, Nora Raquel Lopez and Gabriel Miguel U.S. $ 48,000.00 CUSIP No. 040114AV2; ISIN No. US040114AV28 September 19, 1997. September 19, 2027 9.75% On or about December 30, 2003. February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Caja de Valores dated November 23, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 6.

Plaintiff 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: Lercar S.A. U.S. $ 150,000.00 CUSIP No. 040114AR1; ISIN No. US040114AR16 January 30, 1997. January 30, 2017 11.375% On or about May 1, 2001. February 24, 2005. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Bank Leumi USA dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 7.

Plaintiff 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: : Lercar S.A. U.S. $ 100,000.00 CUSIP No. 040114AV2; ISIN No. US040114AV28 September 19, 1997. September 19, 2027 9.75% On or about June 11, 2001. February 24, 2005. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Bank Leumi USA dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 8.

Plaintiff 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: : Lercar S.A. U.S. $ 100,000.00 ($56,000.00 remaining owed) CUSIP No. PO4981CE7; ISIN No. XS0043120236 Not provided. March 29, 2005. Floating Interest Rate. On or about May 1, 2001. N/A. FRB Agreement dated December 6, 1992. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Bank Leumi USA dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 9.

Plaintiff 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: Agostino Scocchera U.S. $ 60,000.00 CUSIP No. 040114GD6; ISIN No. US040114GD65 None given. February 21, 2012 12.375% On or about March 4, 2004. February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Banca Popolare di Lanciano e Sulmona dated November 22, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 10.

Plaintiff 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: Marcelo Spiller and Romina Maria Buscaglia U.S. $ 150,000.00 ($84,000.00 remaining owed) CUSIP No. P04981CE7; ISIN No. XS0043120236 Not provided. March 29, 2049. Floating Interest Rate. On or about April 27, 2001. N/A. FRB Agreement dated December 6, 1992. (FAA; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Global Wealth Management dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 11.

Plaintiff 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: Marcos Vanni, Ana Antonia Cabrera, and Terenciano de Jesus Cabrera. U.S. $ 1,055,000.00 CUSIP No. 040114AR1; ISIN No. US040114AR16 January 30, 1997. January 30, 2017 11.375 % On or about April 21, 2001 and October 31, 2001. Notice sent February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Smith Barney Citigroup dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 12.

Plaintiff 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: Marcos Vanni, Ana Antonia Cabrera, and Terenciano de Jesus Cabrera. U.S. $ 280,000.00 CUSIP No. 040114BE9; ISIN No. US040114BE93 April 7, 1999. April 7, 2009 11.75 % On or about June 13, 2001. Notice sent February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Smith Barney Citigroup dated October 31, 2005. (Account Statements; Letters; Notarized Statements, etc.)

Table 13.

Plaintiff 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: : Sidney Sutter. U.S. $ 90,000.00 CUSIP No. 040114AN0; ISIN No. US040114AN02 September 10, 1996. September 10, 2006. 11% On or about October 1998 ($50,000)/not provided ($40,000) Notice sent February 24, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Monarch Financial dated December 31, 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 and the FRB Agreement. This has occurred in Lightwater, 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 plaintiff 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 they owned the beneficial interests as of various dates in 2005. There is no evidence of any change of ownership thereafter.

CONCLUSION

The motion to strike defendant's discovery requests is granted.

Plaintiffs' motions for summary judgment are granted. Judgment will be entered for the principal amount of the bonds issued under the 1994 FAA plus accrued interest. With respect to the bonds issued under the FRB Agreement, 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 parties are unable to reach agreement on those subjects, plaintiff shall submit a proposed judgment to the court, and the Republic shall submit any objections to a plaintiff's proposed judgment within five business days thereafter. The court will then resolve any remaining disagreements.

SO ORDERED.