Case of the Day: EM Ltd. v. Republic of Argentina

The case of the day is EM Ltd. v. Republic of Argentina (2d Cir. 2012). This is yet another installment in NML Capital’s efforts to collect from Argentina on a judgment it obtained in New York following Argentina’s default on its sovereign debt.1 In today’s case, NML had served subpoenas on Bank of America and Banco de la Nación Argentina seeking information about Argentina’s assets. Argentina and Bank of America moved to quash the Bank of America subpoena, and both banks objected to the subpoenas, prompting NML to move to compel a response. Ultimately, NML negotiated a modification to the Bank of America subpoena and Bank of America began producing responsive documents. But BNA refused to negotiate, and the district court ordered BNA to comply. Argentina, but not the banks, appealed.

The issue on appeal was whether post-judgment discovery concerning Argentina’s assets violated Argentina’s sovereign immunity under the FSIA. Argentina has a good argument: as we saw in Rubin v. Iran, 637 F.3d 783 (7th Cir. 2011), cert. denied, 80 USLW 3240 (2012), the Seventh Circuit recently held that because a foreign state’s assets are presumptively immune from execution, a judgment creditor cannot take generalized asset discovery but has to identify particular assets. But the Second Circuit took a different view. It focused on the ordinarily broad entitlement to post-judgment discovery under FRCP 69, and it rejected the notion that third-party discovery implicated Argentina’s immunity in any way, because discovery has no legal effect on Argentina’s property and because the banks to which the subpoenas were directed are commercial entities that themselves have no entitlement to sovereign immunity.

Although the Supreme Court denied a petition for certiorari in the Seventh Circuit case, I think that in light of this circuit split a petition for certiorari in the Second Circuit case is likely and has a good chance of success.

  1. We previously saw NML’s unsuccessful effort to attach Argentina’s central bank’s deposits with the Federal Reserve Bank of New York, its efforts to attach bank accounts owned by Argentine embassies and missions in Europe, and its efforts to attach the bank account of an Argentine government agency.

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