The Year in Review: The Second Circuit Steps to the Plate

As I did last year, I am closing out 2012 with a couple of “year in review” posts. This gives me a chance to look back and see if I can spot themes in the past year in the wild and wonderful world of international judicial assistance.

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As a New Englander it gives me no pleasure to report that New York remains the center of gravity on many of the issues that are most of interest to Letters Blogatory. The US Court of Appeals for the Second Circuit has made several notable contributions to the law in the year now ending. Let’s take a look at some of that court’s more notable decisions in 2012. (This is not a complete list: you can do a search for “2d Cir.” in my search box to find some more).

  • Chevron v. Naranjo. The biggest case of the year, in my view, is the Naranjo decision. Judge Kaplan had entered a preliminary injunction enjoining the Lago Agrio plaintiffs from seeking to enforce the judgment against Chevron they had obtained in Ecuador anywhere in the world. This was plainly an unorthodox and highly controversial pre-judgment remedy. The Lago Agrio plaintiffs appealed, and in the Second Circuit they prevailed. I think this was the right outcome, but I don’t agree with the reasoning. The court held that under the UFMJRA, a court cannot grant a declaratory judgment declaring a foreign court money judgment unenforceable until the judgment creditor has sought recognition of the judgment. I see no real support for this view in either the UFMJRA or the Declaratory Judgment Act. Why wasn’t Chevron’s claim just a garden variety declaratory judgment claim? My preferred rationale is that since the Lago Agrio plaintiffs have pretty clearly disclaimed any intention of seeking recognition or enforcement of the judgment in New York, and maybe in the United States, there was not, in fact, a controversy sufficient to bring the case within the courts’ subject-matter jurisdiction. But since the Supreme Court denied Chevron’s petition for a writ of certiorari, we are stuck with the decision as it is.
  • Brandi-Dohrn v. IKB Deutsche Industriebank. 28 USC § 1782, the judicial assistance statute, requires that the evidence sought in the United States be sought “for use” in a foreign proceeding. It’s settled that the evidence need not be discoverable under the foreign law, but since the evidence must be for use in the foreign proceeding, does it have to be admissible in evidence under the foreign law? In Brandi-Dohrn, the Second Circuit said no. While there are arguments from the statutory text that support the court’s decision, I think the best basis for the decision was practical. As the court noted: “requiring a district court to apply the admissibility laws of the foreign jurisdiction would require interpretation and analysis of foreign law and such comparisons of that order can be fraught with danger.” Let foreign courts decide what is and is not admissible in their proceedings.
  • Detail of Argentina FlagArgentine Sovereign Debt Cases. The Second Circuit has issued a few rulings in cases related to Argentina’s default on its sovereign bonds, including a decision approving an attachment obtained by NML Capital and a decision rejecting the creditors’ claims that the Argentine national bank was an alter ego of the state to which they could look to satisfy the judgment. But the most significant decision by far was the blockbuster decision in NML Capital v. Republic of Argentina affirming Judge Griesa’s injunction requiring Argentina to make payments to the original debtholders whenever it makes payments to the holders of the reorganized debt, and imposing obligations on the intermediaries in New York that actually handle the mechanics of the transfers. The case construes the pari passu clause in Argentina’s trust indenture in a way that has dismayed the market, and it has struck fear into the hearts of banks and other payments system institutions. A petition for a rehearing en banc is pending. However, although Judge Griesa, reacting to intemperate statements of defiance by the Argentine government, lifted the stay that had been in place while the case was on appeal, the Second Circuit reinstated the stay shortly thereafter.

    In the next most interesting case, EM Ltd. v. Republic of Argentina, the courts set up an interesting circuit split with the Seventh Circuit. The issue is whether post-judgment discovery concerning Argentina’s assets violated Argentina’s sovereign immunity under the FSIA. The Second Circuit said no and allowed Argentina’s creditors to take generalized asset discovery under FRCP 69. This is at odds with Rubin v. Iran, 637 F.3d 783 (7th Cir. 2011), cert. denied, 80 USLW 3240 (2012). A petition for rehearing en banc was denied in October. I am betting on a petition for certiorari.

Congratulations to the Second Circuit for a good year of judicial assistance cases! Let’s hope some of the other circuits will be as active in the coming year.

Photo credit: Associated Press, Global Jet (license)

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2012), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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