EM Ltd. v. Republic of Argentina, 695 F.3d 201 (2d Cir. 2012)

In December 2001, defendant Republic of Argentina (“Argentina”) defaulted on payment of its external debt.  Beginning in 2003, Plaintiff NML Capital, Ltd. (“NML”) filed eleven actions in the Southern District of New York to collect on its defaulted Argentinian bonds.  Because Argentina had agreed to a broad waiver of sovereign immunity in the bond indenture agreements, the district court found that it had jurisdiction, and entered five money judgments amounting to approximately $1.6 billion in favor of NML.  Further, it granted summary judgment to NML in the six remaining actions, in which NML’s claims amounted to more than $900 million.

Argentina’s failure to satisfy these judgments prompted NML to pursue discovery concerning Argentina’s property in order to execute the judgments.  Thus in 2010, NML served subpoenas on two non-party banks, the Bank of America (“BOA”) and the Banco de la Nación Argentina (“BNA”) “[i]n order to locate Argentina’s assets and accounts, learn how Argentina moves its assets through New York and around the world, and accurately identify the places and times when those assets might be subject to attachment and execution (whether under [U.S. law] or the law of foreign jurisdictions).”  The subpoena served on BOA sought, inter alia, documents relating to all BOA accounts maintained by or on behalf of Argentina without territorial limitation, including those sufficient to identify the opening and closing dates of Argentina’s accounts, current balances, and transaction histories from 2009 through the production date.  The subpoena served on BNA requested documents relating to any assets or accounts maintained at BNA by Argentina or for Argentina’s benefit, any debts owed by BNA to Argentina, and transfers into or out of Argentina’s accounts.

Argentina and BOA moved to quash the BOA subpoena, and NML moved to compel the compliance of both subpoenas.  On September 2, 2011, the district court denied the motion to quash and granted the motion to compel.  Argentina appealed the September 2, 2011 order (“Order”).

The Second Circuit affirmed the Order.  First, the court rejected Argentina’s challenge to its subject matter jurisdiction based on the claim that the Order was not a “final decision” under 28 U.S.C. § 1291, reasoning that the Order conclusively resolved a discovery issue, resolved an important issue that was completely separate from the merits, and would be unreviewable through a later appeal in the U.S. 

Second, the court held that the Order did not infringe on Argentina’s sovereign immunity because it involved discovery, not attachment, of sovereign property and was directed at third-party banks, BOA and BNA, and not at Argentina itself.  Noting that broad post-judgment discovery in aid of execution of a judgment was “the norm” in both federal and New York state courts, and that Rule 69 of the Federal Rules of Civil Procedure provides that “[i]n aid of the judgment or execution, the judgment creditor . . . may obtain discovery from any person—including the judgment debtor—as provided in these rules or by the procedure of the state where the court is located,” the court rejected Argentina’s claim that its property abroad was categorically immune from attachment under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq.  The court reasoned that the Order does not implicate Argentina’s immunity from attachment under the FSIA; rather, it simply mandated that BOA and BNA comply with subpoenas duces tecum.  The court, acknowledging that a U.S. district court may not have the power to attach property located abroad, reasoned that the district court's authority to order discovery to enforce its judgment derived not from its ultimate authority to attach property but from its power to conduct supplementary proceedings, involving persons indisputably within its jurisdiction to enforce valid judgments. 

The court highlighted two additional reasons for holding that the Order did not infringe on Argentina's sovereign immunity.  First, Argentina had expressly waived any claim to immunity in the bond agreements.  As Argentina did not dispute that the district court had subject matter jurisdiction and personal jurisdiction over it and that the judgments against it are valid and enforceable, it "cannot dispute that the district court ha[d] jurisdiction to order discovery designed to aid in enforcing those judgments."  Second, the subpoenas at issue were directed at BOA and BNA, two commercial banks that have no claim to sovereign immunity and whose compliance with the subpoenas would not cause Argentina any burden or expense.  Thus any concerns Argentina had regarding the release of sensitive financial information by the banks involved a claim of privilege, not immunity.