NML Capital, Ltd. v. Republic of Argentina
2012 U.S. App. LEXIS 22281
| 2d Cir. | 2012Background
- Argentina appeals from permanent injunctions enforcing Equal Treatment Provision of FAA bonds after 2001 default.
- District Court held Argentina violated pari passu by ranking FAA bonds below Exchange Bonds and ordered ratable payments concurrent with Exchange Bond payments.
- Pari Passu Clause has two sentences: no formal subordination and no priority given to other debt; both protect FAA creditors.
- Argentina conducted 2005 and 2010 exchanges, enacted Lock Law and suspension, continuing payments to Exchange Bondholders while withholding FAA payments.
- Injunctions extended to payment processes and intermediaries; district court remanded for clarity on the ratable formula and third-party applicability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does pari passu prohibit ranking FAA below exchange bonds? | NML argues de facto subordination breached equal treatment. | Argentina contends only legal subordination matters; FAA permits prioritizing structured debt. | Yes, pari passu breached; FAA prevented discrimination against FAA. |
| Are the injunctions consistent with FSIA and reach of assets? | Injunctions valid despite FSIA; assets are subject to equitable relief. | FSIA prohibits attachment/injunctions on immune property and intermediary banks. | Injunctions do not violate FSIA; not attachments or reach immune property. |
| Is ratable payment the appropriate remedy for breach? | Specific performance is warranted; monetary damages inadequate due to enforcement difficulties. | Acceleration or damages should suffice; ratable remedy uncertain. | Remedy of ratable payments affirmed; district court to clarify operation. |
| Do laches or equitable defenses bar relief? | Delay did not justify denial; plaintiffs pursued relief when able. | Plaintiffs slept on rights during restructurings. | La ches defense rejected; equitable relief appropriate. |
| Should the injunctions apply to third-party intermediaries and payment mechanisms? | Intermediaries bound by injunctions to enforce ratable payments. | Intermediaries may not be reached; U.C.C. constraints. | Remand for precise scope of third-party application and payment formula. |
Key Cases Cited
- Arch Ins. Co. v. Precision Stone, Inc., 584 F.3d 33 (2d Cir. 2009) (bond contract interpretation; simple contract questions)
- EM Ltd. v. Republic of Argentina, 382 F.3d 373 (2d Cir. 2004) (sovereign contract interpretation; pari passu context)
- Leasco Corp. v. Taussig, 473 F.2d 777 (2d Cir. 1972) (equitable relief and contract remedies)
- Guinness-Harp Corp. v. Jos. Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980) (balance of equities and public interest in injunctions)
- Nemer Jeep-Eagle, Inc. v. Jeep-Eagle Sales Corp., 992 F.2d 430 (2d Cir. 1993) (specific performance standards and equitable relief)
- Vacold LLC v. Cerami, 545 F.3d 114 (2d Cir. 2008) (remedies in contract and court authority)
- S&S Machinery Co. v. Masinexportimport, 706 F.2d 411 (2d Cir. 1983) (FSIA limitations on injunctions against assets)
- United States v. Jacobson, 15 F.3d 19 (2d Cir. 1994) (remand for procedural clarifications in injunctive relief)