NML Capital, Ltd. v. Republic of Argentina, No. 13-4054 (L) (2d Cir. Dec. 23, 2014) [click for opinion]
After the U.S. District Court for the Southern District of New York entered judgment against the Republic of Argentina ("Argentina"), Plaintiffs served post-judgment discovery demands on Argentina and non-party banks. The district court denied Argentina's motion to quash the post-judgment discovery demands and Argentina appealed the order to the Second Circuit Court of Appeals. In a summary order, the Second Circuit affirmed the district court's decision, repeatedly noting that "broad post-judgment discovery in aid of execution is the norm in federal and New York state courts."
The Second Circuit first acknowledged that a post-judgment discovery order is normally not immediately appealable because it is not a final order under 28 U.S.C. § 1291. However, the court may exercise review of otherwise non-final orders that present issues of sovereign immunity or treaty interpretation under the collateral order doctrine, as such orders conclusively resolve important issues that are separate from the merits and unreviewable from final judgment. In this case, the Second Circuit found it appropriate to exercise review of the district court's order because Argentina had invoked the Foreign Sovereign Immunities Act ("FSIA"), the Vienna Convention on Diplomatic Relations ("VCDR"), and the Vienna Convention on Consular Relations ("VCCR").
Argentina challenged the discovery demands on four grounds. First, it contended that the FSIA prohibits discovery of sovereign property that is potentially immune from attachment. The Second Circuit quickly dismissed that argument as one previously rejected by the U.S. Supreme Court.
Second, Argentina argued that the VCDR and VCCR treaties prohibit both attachment of diplomatic and consular property, and discovery of diplomatic and consular documents. As to diplomatic or consular property, the court found that Argentina's objections to attachment did not entitle it to withhold otherwise discoverable information about such property. As to diplomatic or consular documents that might be "inviolable," the court considered Argentina's objections on treaty grounds to be premature and entirely speculative as to whether any such documents would be responsive to the discovery requests. Instead, the court instructed Argentina to make any such objections in the form of specific assertions of privilege or inviolability. In the event that Plaintiffs contested any particularized objections, the court acknowledged that in camera review of Argentina's diplomatic or military documents might not be practicable, and instructed the district court to modify its normal procedures "in a way that is effective and respectful."
Third, Argentina opposed the discovery demands on the grounds that they reach military property that is immune from attachment under the FSIA and international law. As with Argentina's first argument, the Second Circuit held that potential immunity from attachment does not preclude discovery of that property, and further observed that discovery might even be necessary in order to litigate the issue of immunity.
Fourth, Argentina argued that the discovery demands were overbroad because some reached non-entities and individuals that were not alter egos of Argentina and thus could not be liable for Argentina's debts. The Second Circuit found that the district court considered this argument because it excluded certain discovery demands against a bank. The district court did not abuse its discretion in permitting discovery demands against the non-alter ego entities because such entities might still hold attachable assets of Argentina or possess information about Argentina's assets.
Although the Second Circuit rejected all of Argentina's challenges and affirmed the district court's order, it took care to stress that as a foreign state, Argentina is "entitled to a degree of grace and comity," especially with respect to its diplomatic and military affairs. The Second Circuit thus "urge[d] the district court to closely consider Argentina's sovereign interests in managing discovery, and to prioritize discovery of those documents that are unlikely to prove invasive of sovereign dignity."
Laura Zimmerman of the New York office contributed to this summary.