952 F.3d 410
2d Cir.2020Background
- Plaintiffs purchased Argentina 1994 bonds and, in Nov. 2001, enrolled them in Argentina’s Tax Credit Program, depositing the bonds into trust and receiving Custody Certificates (CCs) for principal and Tax Credit Certificates (CCFs) for interest.
- Plaintiffs redeemed all CCFs for tax credits as interest payments came due; the bonds later matured but Argentina refused to pay the principal.
- Plaintiffs sued in SDNY for unpaid principal and post‑maturity interest and sought injunctive relief enforcing the pari passu clause.
- The district court dismissed the complaint, holding (1) under Argentine trust law Plaintiffs no longer “owned” the bonds and thus could not invoke the bonds’ contractual waivers of sovereign immunity, and (2) abstention was warranted under adjudicative international comity because of a pending Argentine amparo proceeding.
- The Second Circuit held the dispositive question is whether Plaintiffs retain the right to sue to enforce the bonds (not abstract “ownership”), and remanded for the district court to determine that issue under Argentine law pursuant to Fed. R. Civ. P. 44.1.
- The Second Circuit vacated dismissal of the damages claim, rejected the comity‑based abstention, and affirmed dismissal of the pari passu injunctive claim as insufficiently pleaded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plaintiffs retained the right to sue to enforce the bonds after depositing them into the Tax Credit Program trusts | Plaintiffs argued deposit into trust did not extinguish their right to sue for unpaid principal; the operative question is who may enforce the bonds, not abstract ownership | Argentina argued trust exchange transferred ownership/rights to the trustee/CCs, so Plaintiffs lost the contractual waiver enabling suit in U.S. courts | Remanded: court must determine under Argentine law (and the trust documents) whether Plaintiffs may sue to enforce the bonds; appellate court declined to decide Argentine law in first instance and sent it back under Rule 44.1 procedures |
| Whether the appellate court should decide Argentine law now or remand under Rule 44.1 | Plaintiffs favored remand so district court can take fact‑like evidence and interpret foreign trust law | Argentina urged affirmance based on its submissions (including Argentine AG declaration) | Remand: Rule 44.1 permits either approach, but district court is better situated to develop record and independently determine Argentine law using Rule 44.1’s flexible procedures |
| Whether dismissal was appropriate on adjudicative international comity (abstention) grounds due to parallel Argentine amparo proceeding | Plaintiffs contended U.S. courts should retain jurisdiction; parallel foreign proceeding did not warrant abstention here | Argentina argued comity favored abstention given importance of the Tax Credit Program and pending Argentine litigation | Reversed: comity‑based abstention requires exceptional circumstances; district court’s reasons (importance of program/foreign interest) are not by themselves sufficient; dismissal for comity was abuse of discretion |
| Whether pari passu injunction claim should survive | Plaintiffs sought injunction under pari passu clause for selective payment | Argentina denied conduct met pari passu violation standard | Affirmed dismissal: plaintiffs failed to plead Argentina as a “uniquely recalcitrant debtor” or allege facts sufficient to show a pari passu violation; leave to amend/new action if new facts arise |
Key Cases Cited
- Curley v. AMR Corp., 153 F.3d 5 (2d Cir. 1998) (appellate court may decide foreign law in first instance but often remands for district court fact‑like development)
- Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co. Ltd., 138 S. Ct. 1865 (2018) (discussing Rule 44.1’s change to determining foreign law)
- Royal & Sun Alliance Ins. Co. of Canada v. Century Int’l Arms, Inc., 466 F.3d 88 (2d Cir. 2006) (adjudicative comity/abstention reserved for exceptional circumstances)
- Leopard Marine & Trading, Ltd. v. Easy St. Ltd., 896 F.3d 174 (2d Cir. 2018) (parallel foreign proceedings generally tolerated; comity requires clear justification)