The memo prompted NML to ask Judge Griesa to enter this proposed order, which the judge has taken under advisement. The most relevant bits (1) instruct Argentina to file a translated copy of the Cleary memo with the court, (2) forbid the country to carry out its alleged plan to evade the ratable payment order, and (3) require the country to turn over to the plaintiffs any communications or information relating to any plan to evade the ratable payment order. In some respects, part (3) is the most interesting.

Leaked Memos and Litigation Leverage (Argentina Version)

posted by Mark Weidemaier

There has been some recent excitement over a leaked memo penned by Argentina's lawyers at Cleary Gottlieb. (Registration required for the first two links.) The memorandum supposedly advises Argentina to defy the US courts, if the Supreme Court turns down its appeals, by creating a mechanism to pay exchange bondholders outside the United States. So interpreted, the memorandum comes dangerously close to violating the "no workaround" injunction now in place, which forbids Argentina and its agents to take steps to evade the court's "ratable payment" injunction. Because Argentina and its lawyers have repeatedly said that the country has no plans to violate the ratable payment injunction, the Cleary memo also might be viewed as evidence of a fraud upon the court. This is how NML characterizes it. I have elected not to post the Cleary memo here and will just say that Argentina disputes this characterization. Interested readers can easily find links to the memo on-line, including in the news reports linked above. The parties' lawyers also attended a brief hearing on Friday before Judge Griesa, and the hearing transcript succinctly covers their arguments.

The memo prompted NML to ask Judge Griesa to enter this proposed order, which the judge has taken under advisement. The most relevant bits (1) instruct Argentina to file a translated copy of the Cleary memo with the court, (2) forbid the country to carry out its alleged plan to evade the ratable payment order, and (3) require the country to turn over to the plaintiffs any communications or information relating to any plan to evade the ratable payment order. In some respects, part (3) is the most interesting.

As Anna Gelpern and I have written, the ratable payment injunction works primarily by threatening third parties with contempt if they help Argentina evade the injunction. To make that threat credible, NML needs to know - the sooner the better - what Argentina plans and what financial and other intermediaries will be involved. The no workaround injunction already requires Argentina to disclose this information, but Argentina's lawyers have insisted that the country has nothing to disclose, and the court has not allowed NML to press the issue. Now things may change. It wouldn't surprise me if Judge Griesa allowed NML to more aggressively investigate whether Argentina has made any plans to evade the ratable payment injunction. We might even see litigation over whether Argentina must now disclose a wider range of communications with Cleary, including communications related to the country's plans if it loses before the Supreme Court. Although these would ordinarily be privileged, NML seems prepared to argue that Argentina's (alleged) fraud upon the court eliminates any privilege it might claim.

I doubt any of this will have a direct impact on the pending petition for certiorari. But we should know in the next few days how Judge Griesa will respond, and we may be in for some interesting times after that. Stay tuned.

June 3, 2014 at 9:19 AM in Sovereign Debt