Brecher v. Republic of Argentina
2015 U.S. App. LEXIS 20018
| 2d Cir. | 2015Background
- Argentina defaulted on a large tranche of sovereign bonds in 2001; numerous bondholders sued, including Brecher (the appellee).
- The District Court originally certified a class limited to continuous holders: beneficial owners from the complaint date through final judgment.
- After this Court’s prior rulings (Seijas I/II) requiring a more rigorous damages process, the District Court granted liability but reserved damages and contemplated an evidentiary hearing.
- Instead of a hearing, appellee sought—and the District Court granted—post-judgment modification of the class to drop the continuous-holder temporal limitation and include all holders of the bond series at any time.
- Argentina appealed under Rule 23(f); the Second Circuit reviewed the class modification for legal error and found the new class definition failed Rule 23’s implied ascertainability requirement.
- The Court vacated the modification and remanded for an evidentiary hearing on damages, directing the District Court to follow the Seijas II/III framework for estimating aggregate vs. individualized awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a class defined solely by ownership of beneficial interests in a bond series (without temporal limit) satisfies Rule 23 ascertainability | Objective criteria (ownership/CUSIP) suffice; any objective test is enough | Post-judgment expansion makes class membership indeterminable because secondary trading prevents tracing and fixes no class period | The modified class is not ascertainable; objective criteria alone are insufficient without a temporal boundary |
| Whether secondary-market trading defeats class identification | Class membership can be identified by objective markers despite trading | Active secondary market and identical series identifiers (CUSIP/ISIN) make provenance and allocation impossible, creating need for time limit | Secondary trading and identical identifiers render membership indeterminate absent a class period |
| Whether removing continuous-holder requirement after liability determination is permissible | Modification remedies damages-calculation problems and expands relief to all harmed holders | Post-liability expansion invites one-way intervention and violates Rule 23’s purposes by creating an indeterminate class | Court held post-judgment expansion introduced ascertainability defects and was erroneous |
| How damages should be determined on remand | Appellee preferred aggregate approach tied to broader class | Argentina urged careful accounting for secondary-market purchases and possible individualized awards | Court ordered Seijas II/III process: estimate post-class-period secondary-market volume; adjust aggregate damages; if no reliable aggregate estimate, award damages individually |
Key Cases Cited
- Seijas v. Republic of Argentina, 606 F.3d 53 (2d Cir. 2010) (addresses class definition and inflated aggregate damages methodology)
- Puricelli v. Republic of Argentina, 797 F.3d 213 (2d Cir. 2015) (reiterates instructions for damages calculation in Argentina bond cases)
- In re Initial Public Offerings Securities Litigation, 471 F.3d 24 (2d Cir. 2006) (discusses implied ascertainability requirement under Rule 23)
- NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012) (addresses active secondary trading of Argentine bonds)
- Marcus v. BMW of N. Am., LLC, 687 F.3d 583 (3d Cir. 2012) (recognizes objective-criteria limitation of ascertainability)
- Am. Pipe & Construction Co. v. Utah, 414 U.S. 538 (U.S. 1974) (discusses class-identification and the 1966 Rule 23 amendments)