Thursday, September 17, 2015

US appeals court hands Argentina another win

Judges ‘exasperated’ by Griesa’s decisions as they rebuke him for the fourth time

NEW YORK — A US appeals court yesterday rebuked US District Judge Thomas Griesa for the fourth time, in a decision overseeing litigation stemming from Argentina’s long-standing conflict with the minority of bondholders who sued it over its debt restructuring process.

“Exasperated” by Griesa’s hard-to-follow decisions, the court threw out his expansion of one class action of bondholders suing the country, in another small victory for Argentina against so-called “me-too” bondholders who are seeking to get the same benefits as the “vulture” funds that obtained a ruling ordering full payment plus interests and penalties.

By a 3-0 vote, the 2nd US Circuit Court of Appeals in New York said Griesa erred in enlarging a euro-denominated bond class action to cover investors who held the bonds at any time, not just for a continuous defined period.

The appeals court ordered Griesa to make specific findings as to which bondholders are entitled to damages and for how much money, or else to consider awarding damages individually. Circuit Judge Richard Wesley said the decision marked the fourth time the appeals court reviewed, and rejected, Griesa’s methods of calculating damages or defining bondholder classes.

He said the latest expansion would have made it too difficult to determine who belonged in the class because the bonds are traded frequently, and because some investors may decide to “opt out,” or not join, any class action. “Defining the precise class to which Argentina owes damages for its refusal to meet its bond payment obligations and calculating those damages have proven to be exasperating tasks,” Wesley wrote.

Those wearing blue shirts

According to the appeals court, the judge again went too far by letting some bondholders demand payment without proving how much they are entitled to be paid because the criteria he asked for was too vague and unstable. The decision issued by a three-judge panel said Griesa was making it too easy for some plaintiffs by creating a class including bondholders who were not the original purchasers of the bonds.

“While objective criteria may be necessary to define an ascertainable class, it cannot be the case that any objective criterion will do,” Wesley wrote. “A class defined as ‘those wearing blue shirts,’ while objective, could hardly be called sufficiently definite and readily identifiable; it has no limitation on time or context, and the ever-changing composition of the membership would make determining the identity of those wearing blue shirts impossible.” Plaintiffs led by Henry Brecher were seeking damages of about 68 million euros (US$77 million) in the eurobond case yesterday.

“We’re very pleased with the court’s ruling,” Carmine Boccuzzi, a lawyer for Argentina, said in an interview. “The 2nd Circuit makes clear that plaintiffs cannot use the class mechanism to avoid their obligation to prove actual damages.”

Jason Zweig, a lawyer for the bondholders, was not immediately available for comment.

Central decision stands

The appeals court, however, has steadily backed Griesa’s central decision: penalyzing Argentina for not reaching a deal with the seven percent of bondholders by blocking all repayments to the remaining 93 percent. Yesterday’s reversal is part of litigation by holders of Argentine debt seeking full repayment after the country’s roughly US$100 billion default at the end of 2001.

Following Griesa’s ruling blocking all financial entities from processing Argentine payments to the 93 percent of restructured debt holders, US debt agencies said the country had now incurred in “selective default.” Argentina has not complied with Griesa’s orders for a settlement, arguing it would be unfair and destabilizing for the country’s finances, and the funds have tried to seize Argentine assets around the world as a response. Last month, Griesa ruled the plaintiffs can pursue Argentine assets in the US, except for military and diplomatic property.

— Herald with AP, Reuters