Opinion
No. 05 Civ. 4085 (TPG).
May 17, 2006
OPINION
Plaintiff is the beneficial owner 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. Plaintiff is suing to recover amounts due to it as a result of the default and has moved for partial summary judgment. Plaintiff also moves for costs and attorneys' fees.
The motion for summary is granted. The motion for costs and attorneys' fees is denied.
Summary Judgment FACTS
The bond indebtedness at issue on this motion is governed by a Fiscal Agency Agreement dated October 19, 1994 (the "1994 FAA"). 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 states 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. The 1994 FAA provides 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 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. . . .
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 April 22, 2005, plaintiff sent a notice to Bankers Trust Company, the Fiscal Agent of The Republic of Argentina, declaring the principal amounts of the debt securities held by 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 plaintiff.
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 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:
: Capital Ventures International U.S. $ 1,000,000.00 CUSIP No. 040114ANO; ISIN No. US04114AN02 October 9, 1996. October 9, 2006. 11 % March 18, 2005. April 22, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Merrill Lynch International dated July 7, 2005. (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: : Capital Ventures International U.S. $ 26,000,000.00 CUSIP No. 040114AR1; ISIN No. US040114AR16 January 30, 1997. January 30, 2017. 11.375 % Between February 15, 2005 and March 30, 2005. April 22, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Merrill Lynch International dated July 7, 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: : Capital Ventures International U.S. $ 500,000.00 CUSIP No. 040114AZ3; ISIN No. US04114AZ32 June 4, 1998. December 4, 2005. 11 % February 15, 2005. April 22, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Merrill Lynch International dated July 7, 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: : Capital Ventures International U.S. $ 2,000,000.00 CUSIP No. 040114BE9; ISIN No. US040114BE93 April 7, 1999. April 7, 2009. 11.75 % February 16, 2005. April 22, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Certification from Merrill Lynch International dated July 7, 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 October 19, 1994 FAA. This has occurred inLightwater, supra, 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, plaintiff has adequately demonstrated through its account statements that owned the beneficial interests as of July 7, 2005. There is no evidence of any change of ownership thereafter.
Costs and Attorneys' Fees
Plaintiff has also moved for costs and fees associated with litigating the issue of plaintiff's ownership of beneficial interests. Plaintiff sought to avoid burdening the court with that issue and gave the Republic an offer of proof of ownership. The Republic rejected plaintiff's offer of proof because it found plaintiff's proof — internally-created trade tickets — to be unreliable.Plaintiff argues that an award of costs and fees is appropriate because the Republic acted unreasonably and in bad faith when it rejected plaintiff's proof of ownership. The court disagrees. The Republic has the right to demand the same level of proof that the court has required in adjudicating summary judgment motions regarding Argentine bonds. The court has generally required account statements and/or certifications from brokers and banks to make a finding of current ownership of beneficial interests. It was not unreasonable for the Republic to request similar proof.
CONCLUSION
Plaintiff's motion for costs and attorneys' fees is denied.
Plaintiff's motion for partial summary judgment is granted. Judgment will be entered for the principal amount of the above-listed bonds plus accrued interest.
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 unable 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 plaintiff's proposed judgment within five business days thereafter. The court will then resolve any remaining disagreements.
SO ORDERED.