Vous êtes sur la page 1sur 24

DM3\3030320.

13
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ALLEN APPLESTEIN, et al.,
Plaintiffs,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 02-CV-04124 (TPG)


[Caption continued on following page]

PLAINTIFFS REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF
MOTION FOR TURNOVER ORDER AGAINST BANK OF NEW YORK MELLON












DUANE MORRIS LLP
Anthony J. Costantini
Rudolph J. DiMassa
Suzan Jo
Kevin P. Potere
1540 Broadway
New York, New York 10036
Telephone: 212-692-1000
Facsimile: 212-692-1020

Attorneys for Plaintiffs

Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 1 of 24



DM3\3030320.13
APPLESTEIN,
Plaintiff,
-against-
ARGENTINA REPUBLIC, et al.,
Defendants.
Civil Action No. 02-CV-01773 (TPG)
FRANCESCHI, et al.,
Plaintiffs,
-against-
REP. OF ARGENTINA,
Defendant.
Civil Action No. 03-CV-04693 (TPG)
APPLESTEIN,
Plaintiff,
-against-
THE PROVINCE OF BUENOS AIRES,
Defendant.
Civil Action No. 03-CV-06268 (TPG)
MAZZINI, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 03-CV-08120 (TPG)
MORATA, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 04-CV-03314 (TPG)
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 2 of 24



DM3\3030320.13
MODES, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA, et al.
Defendants.
Civil Action No. 04-CV-06137 (TPG)
MARIA FAUSTA CILLI, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 04-CV-06594 (TPG)
ROSA, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 04-CV-07504 (TPG)
CONSOLINI, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-00177 (TPG)
FERRI, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-02943 (TPG)
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 3 of 24



DM3\3030320.13
RIGUEIRO, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-03089 (TPG)
BETTONI, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-04299 (TPG)
FEDECOSTANTE, et al.,
Plaintiffs,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-04466 (TPG)
LISI, et al.,
Plaintiffs,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-06002 (TPG)
ROSSINI, et al.,
Plaintiffs,
-against-
REPUBLIC OF ARGENTINA, et al.
Defendants.
Civil Action No. 05-CV-06200 (TPG)
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 4 of 24



DM3\3030320.13
KLEIN, et al.,
Plaintiffs,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-06599 (TPG)
LOVATI,
Plaintiff,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-08195 (TPG)
BOTTI, et al.,
Plaintiffs,
-against-
THE REPUBLIC OF ARGENTINA, et al.,
Defendants.
Civil Action No. 05-CV-08687 (TPG)
PASQUALI,
Plaintiff,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 05-CV-10636 (TPG)
BEYER, et al.,
Plaintiffs,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 07-CV-00098 (TPG)
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 5 of 24



DM3\3030320.13
BORGRA, et al.,
Plaintiffs,
-against-
REPUBLIC OF ARGENTINA,
Defendant.
Civil Action No. 07-CV-05807 (TPG)


Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 6 of 24


DM3\3030320.13
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT .....................................................................................................1
ARGUMENT ...................................................................................................................................5
I. TURNOVER IS MANDATED UNDER NEW YORK LAW ............................................5
A. Plaintiffs Need Not Show That The Republic Has A Property Interest
Under CPLR 5225(b) ........................................................................................... 5
B. Disclaimers Aside, The Republic Has An Interest In The Funds Held By
BNY Mellon............................................................................................................ 6
C. Plaintiffs Have A Superior Interest In The Funds .................................................. 8
II. ENGLISH LAW, COMITY, AND THE FSIA ARE ALL INAPPLICABLE ..................10
A. English Law Does Not Apply And This Court Is The Proper Forum .................. 10
B. Principles Of Comity Do Not Apply .................................................................... 12
C. The FSIA Does Not Apply ................................................................................... 14
CONCLUSION ..............................................................................................................................15


Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 7 of 24


ii
DM3\3030320.13

TABLE OF AUTHORITIES
Cases
Abraham Zion Corp. v. Lebow,
761 F.2d 93 (2d Cir. 1985).......................................................................................................11
Aurelius v. Republic of Argentina,
2010 WL 2925072 (S.D.N.Y. July 23, 2010) .................................................................... 14-15
Ayyash v. Koleilat,
38 Misc.3d 916, 957 N.Y.S.2d 574 (N.Y. Sup. Ct. 2012) .......................................................13
Capital Ventures Intern. v. Republic of Argentina,
443 F.3d 214 (2d Cir. 2006)...................................................................................................2, 8
Capital Ventures Intern. v. Republic of Argentina,
652 F.3d 266 (2d Cir. 2011)...................................................................................................2, 8
Gucci Am., Inc. v. Weixing Li,
No. 11-3934-cv, 2014 WL 4629049 (2d Cir. Sept. 17, 2014) .................................................13
Hanrahan v. Albany Cnty. Prob. Dept,
119 A.D. 334, 336, 508 N.Y.S.2d 283, 284
(3d Dept 1986) ..........................................................................................................................8
Hotel 71 Mezz Lender, LLC v. Rosenblatt,
64 A.D.3d 431, 883 N.Y.S.2d 30 (1st Dept 2009) ............................................................... 5-6
Indosuez Intl Fin., B.V. v. Natl Reserve Bank,
304 A.D.2d 429, 758 N.Y.S.2d 308 (1st Dept 2003) .............................................................11
Intl Customs Associates, Inc. v. Ford Motor Co.,
893 F. Supp. 1251 (S.D.N.Y. 1995) .........................................................................................11
Koehler v. Bank of Bermuda Ltd.,
12 N.Y.3d 533, 883 N.Y.S2d 763, 911 N.E.2d 825 (N.Y. 2009) ...................................... 12-13
Motorola Credit Corp. v. Uzan,
388 F.3d 39 (2d Cir. 2004).......................................................................................................13
NML Capital, Ltd. v. Republic of Argentina,
699 F.3d 246 (2d Cir. 2012)....................................................................................................12


Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 8 of 24


iii
DM3\3030320.13
Outdoor Partners LLC v. Rabbit Hole Interactive Corp.,
No. 13 Civ. 1797(KBF), 2013 WL 6503525 (S.D.N.Y. Dec. 9, 2013) ...................................11
Republic of Argentina v. NML Capital, Ltd.,
134 S.Ct. 2250 (2014) ........................................................................................................ 14-15
Roby v. Corp. of Lloyds,
996 F.2d 1353 (2d Cir. 1993)...................................................................................................11
Siemens and Halske GmbH v. Gres,
32 A.D.2d 624, 299 N.Y.S.2d 908 (1st Dept 1969) .................................................................6
Walters v. Indus. & Com. Bank of China Ltd.,
651 F.3d 280 (2d Cir. 2011).....................................................................................................14
Statutes
28 U.S.C. 1602 ............................................................................................................................15
28 U.S.C. 1609 ............................................................................................................................14
Other Authorities
CPLR 5225(b) .............................................................................................................. 2-3, 5-6, 10
Fed. R. Civ. P. 69 ..................................................................................................................... 10-11
Restatement (Third) of Foreign Relations Law 403 ...................................................................13
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 9 of 24


1
DM3\3030320.13
Plaintiffs respectfully submit this Reply Memorandum of Law in further support of their
motion for an Order directing the Bank of New York Mellon (BNY Mellon) to turnover funds
illegally transferred to it by the Republic of Argentina (the Republic), or at least so much as is
sufficient to satisfy Plaintiffs judgments plus post-judgment interest.
PRELIMINARY STATEMENT
The funds at issue are $539 Million which the Republic transmitted to BNY Mellon in
what this Court has held to be an illegal attempt to pay Exchange Bondholders in disobedience
of this Courts pari passu Orders, which direct that holdover bondholders receive a ratable
payment before Exchange Bondholders receive any further payment on their bonds. BNY
Mellon, recognizing the illegality of the Republics action, did not pay out the funds to the
Exchange Bondholders as contemplated in the Indenture Agreements because the terms of the
Agreements had effectively been superseded by this Courts pari passu injunction, which
prohibited such a payment unless the ratable payment condition was met.
Both this Court and the pari passu plaintiffs recognized that the transfer of funds was
void and that the funds therefore remained the property of the Republic. Both urged that the
funds be returned to the Republic. BNY Mellon, citing various difficulties, has declined to do
so, and continues to hold the funds in what amounts to a court-sanctioned constructive trust since
the express trust under which prior funds had been distributed had been effectively superseded
by this Courts Orders and the Republics disregard.
1
Pointedly, BNY Mellon also said that it
would return the funds to the Republic if the Republic requested and if the Court directed it to do
so, thus implicitly recognizing the funds as property of the Republic.

1
The August 6 Order merely directed BNY Mellon to hold the funds until further Order of the
Court. See Decl. of Christopher Clark, 1:02-cv-04124-TPG (Dkt. 142-3) Exh. 4 at 2. The
Order did not mention the Indenture, except to relieve BNY Mellon of liability under the
Indenture or otherwise. Id. at 4.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 10 of 24


2
DM3\3030320.13
The plaintiffs herein, who are almost entirely individual Italian citizens who purchased
the Republics bonds at face value as a safe investment for their retirement, seek a turnover of
these funds, which rightfully should have been paid to them and not to Exchange Bondholders
whose rights are created by 2005 and 2010 exchanges which this Court (with the Second
Circuits affirmance) has held to be illegal acts violative of the rights of the holdover
bondholders. None of the plaintiffs are vultures.
In opposition to the turnover, briefs have been submitted by BNY Mellon, the Republic,
and a segment of the Exchange Bondholders (i.e., owners of Exchange Bonds denominated in
Euros). A common thread of all three briefs is that the funds in question are not property of the
Republic and therefore cannot be the subject of a turnover proceeding. This argument betrays a
fundamental misunderstanding of CPLR 5225(b) the plaintiffs need only prove that the
Republic transferred the funds to BNY Mellon and that these rights of the holdover bondholders
are superior to the rights of the transferee (i.e. BNY Mellon).
Moreover, the argument has no factual mooring. The illegal payment should be
considered void ab initio, as this Court and the pari passu plaintiffs (and, implicitly, BNY
Mellon) recognized. Thus the funds were never truly alienated by the Republic. Even if the case
were otherwise, the superseded Indenture Agreement makes clear that the Republic has a
reversionary interest in any funds not paid out to the Exchange Bondholders. Clearly such a
reversionary interest is a property interest, as has been previously held with respect to the Brady
Bonds. See Capital Ventures Intern. v. Republic of Argentina, 443 F.3d 214, 220 fn.4 (2d Cir.
2006); Capital Ventures Intern. v. Republic of Argentina, 652 F.3d 266, 270 (2d Cir. 2011).
Needless to say, the Exchange Bondholders have not received the most recent payment, because
the payment has been judicially enjoined; thus, the funds are subject to reversion, the Republics
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 11 of 24


3
DM3\3030320.13
disclaimers notwithstanding.
Perhaps anticipating that the property argument must fail, both BNY Mellon and the Euro
Exchange Bondholders argue that they have a greater right than holdover judgment creditor
bondholders.
2
The 5225(b) transferee, BNY Mellon, has at most a peripheral right to the funds
a right to a claim for expenses that these holdover bondholders are willing to recognize but
which pales in comparison to the holdover bondholders claims.
3
Assuming that the non-
transferee Exchange Bondholders have standing to make a 5225(b) transferee argument, this
Court, again with an affirmance, has held that whatever right the Exchange Bondholders have is
contingent upon the holdover bondholders receiving a ratable payment. This ruling is a per se
recognition that the holdover bondholders have the greater right. Indeed, the fact that whatever
rights the Exchange Bondholders have were created by illegal actions undertaken by the
Republic in 2005 and 2010 underlines this rather obvious conclusion, as should the nine years of
ill-begotten benefits received by the Exchange Bondholders to the detriment of the holdovers.
At this point, BNY Mellon withdraws from the fray, but the Euro Exchange Bondholders
curiously argue that their superseded Trust Indenture Agreement is governed by English law and
that the forum selection under the Agreement is England. This argument does not cover the
Exchange Bondholders who have U.S.-denominated bonds. More importantly, it loses sight of
some fundamental concepts. First, the Trust Indenture Agreement has been effectively
superseded by the Order of this Court and the Republics defiant actions. Further, the holdover
bondholders have rights created under U.S. law, they have judgments entered in U.S. Courts, and

2
BNY Mellon states that the NML plaintiffs made no claim against the funds. (BNY Mellon Br.
at 5). Suffice it to say that, unlike the NML plaintiffs, the turnover plaintiffs are judgment
creditors.
3
To the extent that BNY Mellon is concerned about potential liability, this concern can and
should be addressed, see infra p. 9 fn.7, since BNY Mellon has acted in a responsible manner.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 12 of 24


4
DM3\3030320.13
their pari passu rights have been recognized under U.S. law. They are seeking to bring a post-
judgment remedial proceeding pursuant to U.S. law to enforce their U.S. judgments against
persons over whom this Court has jurisdiction. The fact that the Republic agreed, in 2005 and
2010, by means of exchanges that are fundamentally violative of the pari passu clause, to apply
English law to contractual questions arising subsequently between the Trustee and the Euro
Exchange Bondholders is irrelevant to the rights of the third-party holdover judgment creditors
against a sovereign which thrice breached its contracts with them in 2001, 2005 and 2010.
For its part, the Republic first makes the argument that comity requires that this Court ask
the closed courts of the Republic for permission to apply this Courts post-judgment remedies.
This unprecedented argument (which confuses post-judgment remedies and which would
effectively eliminate multi-jurisdictional turnovers) is the first cousin of the recent extraterritorial
discovery argument unsuccessfully advanced by the Republic in the Supreme Court. This
argument also loses sight of the fact that this Court has personal jurisdiction over both the
Republic and the custodian. This personal jurisdiction is a basis for any order requiring either to
comply with any order enforcing this Courts judgments, wherever the whereabouts of the assets
at issue. It also loses sight of the fact that the Republic has made broad waivers of sovereign
immunity, particularly with respect to post-judgment remedies. Notably, no one even suggests
that any particular law of the Republic would be violated by BNY Mellons compliance with this
Courts turnover order, and any such law would fly in the face of the Republics explicit waivers.
Indeed, unlike Citibank, BNY Mellon has been silent on this point. Any comity analysis would
favor the interest of the United States in enforcing its judgments in circumstances where
sovereign immunity is waived over whatever vague concerns the Republic, which has ignored
international comity, is trying to raise.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 13 of 24


5
DM3\3030320.13
The Republics last gasp is the argument that the Foreign Sovereign Immunities Action
(the FSIA) prohibits a turnover order if the assets in question are located abroad. This would
be news to Justice Scalia, who recently stated, in an opinion in this matter, which was joined by
six other Justices, that the FSIA does not apply to assets held outside the country. Whether
seven Justices were correct, it is difficult to square this particular argument with the broad
language of the Republics waivers, which includes a waiver of post-judgment remedies that
singles out the FSIA. Whether the funds are presumed to be located in the United States because
of the custodians presence, or held to be located in the Republic where the actual account is
situated, the simple fact remains that the Republic has completely waived any sovereign
immunity defense with respect to post-judgment remedies such as the turnover proceeding here.
ARGUMENT
I. TURNOVER IS MANDATED UNDER NEW YORK LAW
A. Plaintiffs Need Not Show That The Republic Has A Property Interest Under
CPLR 5225(b)
As noted above, all the turnover opponents argue that the plaintiffs must show that the
Republic has a property interest in the funds in order for this Court to effectuate a turnover. But
this is not a requirement of CPLR 5225(b), which simply states that a turnover is mandatory if
(i) the judgment debtor is the transferor of the funds in question; and (ii) the judgment creditors
rights are superior to those of the transferee:
Upon a special proceeding commenced by the judgment creditor .. against
a person who is the transferee of money or other personal property from
the judgment debtor, where it is shown that the judgment creditors
rights are superior to those of the transferee, the court shall require such
person to pay the money,.

See Hotel 71 Mezz Lender, LLC v. Rosenblatt, 64 A.D.3d 431, 431-32, 883 N.Y.S.2d 30, 30-
31 (1st Dept 2009); Siemens and Halske GmbH v. Gres, 32 A.D.2d 624, 624, 299 N.Y.S.2d 908,
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 14 of 24


6
DM3\3030320.13
910-11 (1st Dept 1969). Unquestionably, BNY Mellon is a transferee of funds transmitted by
the Republic. As seen below, its rights as transferee under an illegal agreement are inferior to
those of the judgment creditors.
B. Disclaimers Aside, The Republic Has An Interest In The Funds Held By
BNY Mellon.
Even if CPLR 5225(b) required that the Republic have a property interest, the evidence
establishes the existence of such an interest. First, the Court implicitly recognized the
Republics continued interest in the funds at the June 27 Hearing by stating that: I would think
that the money should simply be returned to the Republic, simple as that. They had no business
paying. That money should be returned. It should never have been paid, and it should be
returned. (Decl. of Evan K. Farber, Exh. E at 33:7-14, 1:02-cv-04124-TPG (Dkt. 140-2)).
4

Similarly, NML has argued that BNY should be ordered to return the Funds because that is the
best way to nullify[] this purported payment by the Republic in violation of the Amended
February 23 Orders. Opp. Br. dated July 18, 2014 at 6, 1:09-cv-08757-TPG (Dkt. 431) (quoting
June 27 Tr. at 25:14-15). Likewise, BNY Mellon itself recognized that the Republic retained an
interest in the funds when it sought an order requiring that the Funds will be returned to
Argentina only if BNY Mellon, as indenture trustee, receives (1) specific wiring instructions
from Argentina, and (2) assurances from the Court that the Trustee cannot be held liable for
returning the funds. See Memo. of Law in Support of Clarification, at 2, 1:09-cv-0170-TPG
(Dkt. 359). The Republic has similarly acknowledged a continued interest in the funds by
seeking to supplant BNY Mellon as Trustee and directing BNY Mellon to ignore the August 6

4
The Courts statement regarding the Republics ownership of the funds was incorporated by
reference in the Courts August 6 Order. See Decl. of Christopher Clark, Exh. 4 at 1, 1:02-cv-
04124-TPG (Dkt. 142-3). Contrary to BNY Mellons claims, the fact that the Court ultimately
ordered BNY Mellon to retain the funds for the time being reflected concerns raised by BNY
Mellon regarding alleged impracticalities and liabilities, not a determination by the Court that the
Republic no longer has any interest in the funds.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 15 of 24


7
DM3\3030320.13
Order and stand ready to assign, transfer and deliver, to the successor trustee to be appointed in
its place, all property and monies currently held by it, the instruction which led to a
citation of contempt by this Court on September 29. (Costantini Reply Decl. Exh. X). This
outrageous conduct was followed by transferring another $161 Million to a self-declared
Successor Trustee on September 30, supplanting BNY Mellon for obeying this Courts Order.
(Costantini Reply Decl. Exh. Y). The Court found these latter actions to be a specific attempt to
circumvent the Courts prior holdings that needed to be undone. See Oct. 3, 2014 Order, 1:08-
cv-06978-TPG (Dkt. 693). Such repeated assertions of control are utterly inconsistent with the
hollow disclaimers of the Republic.
Second, the terms of the Indenture should not govern the funds. The Indenture only
governs money properly deposited with BNY Mellon for the sole purpose of paying the
Exchange Bondholders. Yet, by issuing the Injunctions, this Court recognized that pari passu
language, such as that found in the 1994 FAA, barred the Republic from making such payments
under the Indenture without also making a ratable payment to the holdout bondholders. Thus,
this Courts Injunctions in effect supersede the terms of the Indenture. Despite understanding the
meaning of the Injunctions, the Republic chose to defy judicial authority and transmitted the
funds to BNY Mellon with the sole instruction that BNY Mellon make an interest payment to the
Exchange Bondholders in order to create the illusion that the Republic was not in default. To
now enforce the terms of the Indenture as if the funds were properly deposited in the first
instance would impermissibly legitimize the Republics recalcitrant behavior and unnecessarily
obfuscate the disposition of the funds. Instead, the Court should find that by transferring the
funds to BNY Mellon in violation of this Courts Orders, the Republic in effect created a
common law trust separate and apart from the Indenture.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 16 of 24


8
DM3\3030320.13
Third, even were the Court to find that the terms of the Indenture are applicable to the
funds, Section 11.3 and Section 11.4 (both uncited by any opposition) make clear that the
Republic retains a reversionary interest in any funds not paid to the Exchange Bondholders.
5

Section 11.3 of the Indenture states:
Repayment of Monies Held by Trustee Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to any Series
of Debt Securities, all monies then held by any trustee paying agent under
the provisions of this Indenture for such Series shall, upon written demand
of the Republic, be repaid to the Republic (provided all amounts have
been satisfied and discharged).

In addition, Section 11.4 of the Indenture dictates:
Return of Monies Held by Trustee. Any monies deposited with the
Trustee for the payment of the principal of or interest on any Debt
Security remaining unclaimed for ten years (in the case of principal) or
five years (in the case of interest) or, in either case, any shorter
prescription period provided by law after such principal or interest shall
have become due and payable shall be repaid to the Republic upon
written request without interest.

Thus, even the terms of the Indenture actually support the conclusion that the Republic maintains
an interest in the funds.
6

C. Plaintiffs Have A Superior Interest In The Funds
As set forth in their Moving Brief, Plaintiffs, as judgment creditors of the Republic, have
a substantial interest in the funds. The transferee, BNY Mellon, claims, however, that under the
terms of the superseded Indenture, its interest in the funds are superior to Plaintiffs because BNY

5
The holding in Hanrahan does not dictate, as the Euro Exchange Bondholders claim, that once
the Republic transferred money to BNY Mellon, it lost all right to the funds. See Hanrahan v.
Albany Cnty. Prob. Dept, 119 A.D. 334, 335, 508 N.Y.S.2d 283 (3d Dept 1986) (holding only
that money paid in restitution for criminal conviction was no longer property of debtor under
Penal Law and specifically pointing out that there was no reversionary interest). Contrast the
Capital Ventures cases cited above. See supra p. 2.
6
The bond instrument states that the Republics obligation to make payments of principal of
and interest on the Securities shall not have been satisfied until such payments are received by
the Holders of the Securities. See Decl. of Evan K. Farber, Exh. B at C-2, 1:02-cv-04124-TPG
(Dkt. 140-1) (emphasis added).
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 17 of 24


9
DM3\3030320.13
Mellon must turn to the funds for its fees.
7
Yet, as explained above, the terms of the Indenture
are wholly inapplicable to the funds because they were improperly deposited into BNY Mellons
account for the sole and illicit purpose of paying the Exchange Bondholders; thus BNY Mellons
rights were created by illegal agreements made years after the holdover contracts were
breached. Whether BNY Mellon should have refused to accept the funds, BNY Mellon is now
almost certainly collecting interest on the funds while they remain in its account. Regardless,
Plaintiffs are willing to waive any challenges to BNY Mellons fees, which could only
conceivably constitute a small portion of the funds.
The Euro Exchange Bondholders (who are not transferees and therefore lack standing)
similarly claim that the funds are held exclusively for their benefit pursuant to the Indenture.
Once again, as explained above, the terms of the Indenture are no longer applicable to the funds.
Furthermore, the Court has already held that the 2005 and 2010 Exchange Bonds are illegal to
the extent that they violate the pari passu clause of the 1994 FAA. This Courts affirmed rulings
naturally raise the question of whether the 2005 Indenture Agreement, and the 2010 Supplement,
have any continuing vitality, or whether they have been superseded or modified, together with
the Exchange Bondholders rights along with them. It would appear that the combination of this
Courts Orders and the Republics disobedience have created a constructive trust for the benefit
of all bondholders, with the Trustee beholden to the Orders of this Court.
As between bondholder groups, equitable considerations weigh heavily in favor of the
Italian Judgment Creditors over the Euro Exchange Bondholders. While the Euro Exchange

7
To the extent that BNY Mellon, which has acted in an exemplary manner, is concerned about
potential liability, it is difficult to believe that any judicial proceeding would find BNY Mellon to
be liable for the wrong of complying with a court order. In order to protect against the
possibility, plaintiffs would agree to the express inclusion of this protection in a manner similar
to this Courts August 6 Order, in case the Euro Exchange Bondholders repeat their travesty of a
lawsuit against BNY Mellon for its adherence to this Courts Orders.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 18 of 24


10
DM3\3030320.13
Bondholders complain that they may miss the most recent interest payment owed on their bonds
if the funds are subject to turnover, the Italian Judgment Creditors, original buyers at face value,
have not received any principal or interest payments on their bonds since 2001. By contrast, the
rights of the Exchange Bondholders were created by Exchanges held to be illegal because they
violated the rights of the holdover bondholders. Further, the Exchange Bondholders have
benefited to the tune of billions of dollars during the years the illegal agreements were allowed to
operate. A turnover would effectively (and belatedly) redirect payment from one group of
favored beneficiaries to another group of ignored beneficiaries, without voiding anyones claim
against the recalcitrant Republic. See supra p. 8 fn.6. Any other result would perpetuate the
Republics long-term practice of honoring some obligations while ignoring others.
II. ENGLISH LAW, COMITY, AND THE FSIA ARE ALL INAPPLICABLE
A. English Law Does Not Apply And This Court Is The Proper Forum
The Euro Exchange Bondholders argue that English law governs Plaintiffs turnover
motion and that English Courts are the proper forum for determining ownership of the funds.
The Euro Exchange Bondholders argument is flawed for several reasons.
First, the Euro Exchange Bondholders assume that the choice of law provision under the
Indenture is applicable to Plaintiffs turnover motion. It is not. Rather, Plaintiffs seek turnover
of the funds pursuant to their status as New York judgment creditors and the well-defined
procedures outlined under Fed. R. Civ. P. 69 and CPLR 5225(b). Plaintiffs are not seeking to
enforce a provision of the Indenture such that choice of law provisions would apply. Indeed, as
explained above, the Indenture is wholly inapplicable to the funds, whose ownership is a matter
of equitable, not contractual, concern.
8
Therefore, the Indenture, including any choice of law

8
Cases such as Roby and Indosuez, cited by the Euro Exchange Bondholders (Opp. Br. at 5), do
not have anything to do with judgment creditors seeking to enforce post-judgment rights. See
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 19 of 24


11
DM3\3030320.13
provisions therein, does not apply to Plaintiffs motion for turnover of the funds. A private
agreement cannot possibly cause a non-party to the agreement to lose its rights under the Federal
Rules of Civil Procedure. See Outdoor Partners LLC v. Rabbit Hole Interactive Corp., No. 13
Civ. 1797(KBF), 2013 WL 6503525, at *3 fn.4 (S.D.N.Y. Dec. 9, 2013) (forum selection clause
inapplicable to non-parties based on the well-settled principle that a contract cannot bind a non-
party); see also Intl Customs Associates, Inc. v. Ford Motor Co., 893 F. Supp. 1251, 1255
(S.D.N.Y. 1995); Abraham Zion Corp. v. Lebow, 761 F.2d 93, 103 (2d Cir. 1985).
Second, even if English law were applicable, the Euro Exchange Bondholders have failed
to show why English law would bring about a different outcome in terms of Plaintiffs turnover
motion. The English law relief upon by the Euro Exchange Bondholders assumes that which has
not transpired, namely that the funds were properly deposited in BNY Mellons account for the
Euro Bondholders in the first instance. (Euro Br. at 8). To the contrary, the funds were
deposited in direct violation of this Courts injunctions, which contributed to this Courts recent
contempt finding. The English law that the Euro Exchange Bondholders rely upon does not
address such an intricate factual scenario. Id. Therefore, the Euro Exchange Bondholders have
failed to meet their burden of showing that English law would dictate a different outcome.
Moreover, applying English law also runs contra to Rule 69, which directs federal courts to
follow the post-judgment remedies of the forum.
Third, this Court is clearly the proper forum to hear Plaintiffs turnover motion. As set
forth in the Moving Brief, this Court has retained jurisdiction in order to enforce its judgments.
Furthermore, both BNY Mellon and the Republic have submitted to this Courts jurisdiction.

Roby v. Corp. of Lloyds, 996 F.2d 1353, 1356 (2d Cir. 1993) (investors brought securities and
RICO action claims against insurance syndicates); Indosuez Intl Fin., B.V. v. Natl Reserve
Bank, 304 A.D.2d 429, 431, 758 N.Y.S.2d 308 (1st Dept 2003) (party to an agreement sought to
enforce choice of law provision).
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 20 of 24


12
DM3\3030320.13
Tellingly, the Euro Exchange Bondholders fail to cite any authority for their curious claim that
English courts are the only proper forum for this dispute, which involves this Court enforcing its
own judgments.
B. Principles Of Comity Do Not Apply
The Republic makes the incredible (and ironic) argument that Plaintiffs turnover motion
violates principles of international comity because Plaintiffs are allegedly seeking extraterritorial
execution on property without first seeking a judgment from an Argentinian court.
9
Yet, in
reality, Plaintiffs seek an order directing BNY Mellon, an entity over which this Court has
jurisdiction, to turnover funds transferred by the Republic a judgment debtor over which the
Court also has jurisdiction. This is the case of a U.S. court enforcing its own judgment, as it has
every right to do; it is not a request for a foreign court to enforce a U.S. judgment. Indeed, BNY
Mellon has never claimed to lack the ability to control the funds despite their alleged location
overseas (and has offered to move the funds to New York).
10
As such, under the clear holding in
Koehler wherein the New York Court of Appeals found that a New York court with
personal jurisdiction over a defendant may order him to turnover out-of-state property regardless
of whether the defendant is a judgment debtor or a garnishee this Court similarly possesses
the authority to order the turnover of the funds held by BNY Mellon. See Koehler v. Bank of
Bermuda Ltd., 12 N.Y.3d 533, 541, 883 N.Y.S2d 763, 769, 911 N.E.2d 825 (N.Y. 2009).
The cases upon which the Republic relies in support of the applicability of comity either
involve instances where the Court actually upheld a turnover order despite appeals to comity or

9
In a stunning display of lack of comity, Argentine courts are prohibited from hearing any case
seeking to enforce the judgments of this Court. See NML Capital, Ltd. v. Republic of Argentina,
699 F.3d 246, 254, 260, 262 (2d Cir. 2012).
10
See Decl. of Evan K. Farber, Exh. E at 32:16-22, 1:02-cv-04124-TPG (Dkt. 140-2).
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 21 of 24


13
DM3\3030320.13
where litigants sought to force foreign citizens to engage in activity proven to violate foreign
laws. See Motorola Credit Corp. v. Uzan, 388 F.3d 39, 60 (2d Cir. 2004) (affirming a turnover
order where, as here, the party deliberately courted legal impediments to the enforcement of a
federal courts orders); Ayyash v. Koleilat, 38 Misc.3d 916, 923, 957 N.Y.S.2d 574, 582-83
(N.Y. Sup. Ct. 2012) (addressing discovery sought from foreign banks in violation of foreign
law); Gucci Am., Inc. v. Weixing Li, No. 11-3934-cv, 2014 WL 4629049, at *13-15 (2d Cir. Sept.
17, 2014) (comity should be considered when compelling a foreign bank to seize assets held
abroad)
11
. Notably, the Republic fails to cite a single case barring this Court from granting
mandatory relief available to a New York judgment creditor, even if similar relief is not available
in another country. Nor does the Republic cite any specific Argentine law violated by the
turnover motion.
12

The Republic claims nonetheless that the Koehler decision is inapplicable because it did
not involve a sovereign nation, which is entitled to particular deference under principles of
comity. This argument is the first cousin of the extraterritorial discovery arguments
unsuccessfully advanced by the Republic in the United States Supreme Court. See Republic of
Argentina v. NML Capital, Ltd., 134 S.Ct. at 2257. Furthermore, this argument loses sight of the

11
The Gucci court cited Section 403 of the Restatement of Foreign Relations Law, which states
that a court should not exercise its authority when it is unreasonable to do so. See Gucci Am.,
Inc., 2014 WL 4629049, at *18 fn.20. Since the question here involves the enforcement of U.S.
judgments against persons over whom this court has jurisdiction, and who, in the case of the
Republic, have waived sovereign immunity, the exercise of jurisdiction cannot be said to be
unreasonable, particularly in light of the Republics contumacious conduct.
12
The Republic (which prohibits Argentine actions enforcing the judgments of this Court) cites a
law concerning the enforcement of foreign judgments in Argentina where the foreign court has
no personal jurisdiction over the custodian or the miscreant. (The Republic Br. at 7). This Court
has jurisdiction over both and can order a turnover. The turnover remedy does not flatly
contradict[ ] Argentine law, as the Republic claims. Id. at 1. Rather, the Republic is doing its
very best to insulate itself from legitimate U.S. judgments while calling into question the fairness
of U.S. Courts. See Costantini Reply Decl. Exh. Z.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 22 of 24


14
DM3\3030320.13
fact that the Republic has made broad waivers of sovereign immunity, particularly with respect
to post-judgment remedies. The Republic consents generally . . . to the giving of any relief or
the issue of any process in connection with any Related Judgment Id. at 2253 fn.1 (2014)
(citing Fiscal Agency Agreement dated Oct. 19, 1994).
C. The FSIA Does Not Apply
The Republics last gasp for arguing that the Plaintiffs turnover motion must be denied is
that it would violate the FSIA because Plaintiffs have allegedly failed to argue that one of the
exceptions to the FSIA outlined in Section 1610 applies in the instant matter. Yet, the Republic
assumes, improperly, that the FSIA applies in the first instance. This is not the case. Rather, as
the Republic must be well aware, the United States Supreme Court recently held that the FSIA
does not apply to property held outside the United States. See NML Capital, Ltd., 134 S.Ct. at
2257 (the text of [28 U.S.C. 1609] immunizes only foreign-state property in the United
States); see also 28 U.S.C. 1609 (property in the United States of a foreign state shall be
immune from attachment arrest and execution). The Republic is all too quick to point out that
the funds are held outside the United States. See The Republic Br. at 9 ([T]he undisputed fact is
that the Funds are located outside the United States). Therefore, the FSIA is inapplicable to
the funds and Plaintiffs are not required to assert an exception under Section 1610.
13

If the Republic wants to talk about the FSIA, it should begin by reminding itself that the
express purposes of the Act are to promote the interests of justice and protect the rights of
litigants. 28 U.S.C. 1602. From there, the Republic should explain why its very broad waiver

13
The Republic cites Walters for the proposition that the FSIA applies to extraterritorial assets.
(Republic Br. at 1-2). The citation is curious because the Second Circuit did not address
extraterritorial assets since this aspect of the District Courts ruling was not appealed. See
Walters v. Indus. & Com. Bank of China Ltd., 651 F.3d 280, 297 (2d Cir. 2011). The Republic
also cited this Courts Aurelius decision, which was implicitly overruled by the Supreme Courts
most recent decision. Compare Aurelius v. Republic of Argentina, 2010 WL 2925072, at *2
(S.D.N.Y. July 23, 2010), and NML Capital, 134 S.Ct. at 2257.
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 23 of 24


15
DM3\3030320.13
of sovereign immunity
14
has no application here with respect to a normal post-judgment remedy.
To the extent the FSIA might apply, its protections have been waived.
CONCLUSION
Based on the forgoing, an order should be issued directing BNY Mellon to turnover to
Plaintiffs the $539 million, or so much of it as is sufficient to satisfy their judgments, plus post-
judgment interest.
Dated: New York, New York
October 9, 2014
DUANE MORRIS LLP

/s/ Anthony J. Costantini
Anthony J. Costantini
E-mail: ajcostantini@duanemorris.com
Rudolph J. DiMassa
Email: dimassa@duanemorris.com
Suzan Jo
E-mail: sjo@duanemorris.com
Kevin P. Potere
Email: kppotere@duanemorris.com
1540 Broadway
New York, NY 10036
Telephone: 212-692-1000
Facsimile: 212-692-1020

Attorneys for Plaintiffs

14
To the extent that [the Republic] or any of its revenues, assets or properties shall be entitled ...
to any immunity from suit ... from attachment prior to judgment ... from execution of a judgment
or from any other legal or judicial process or remedy, ... [the Republic] has irrevocably agreed
not to claim and has irrevocably waived such immunity to the fullest extent permitted by the
laws of such jurisdiction (and consents generally for the purposes of the [FSIA] to the giving of
any relief or the issue of any process in connection with any Related Proceeding or Related
Judgment). NML Capital, Ltd., 134 S.Ct. at 2253 fn.1 (emphasis added).
Case 1:02-cv-04124-TPG Document 150 Filed 10/09/14 Page 24 of 24

Vous aimerez peut-être aussi