Tuesday, June 17, 2014

Supreme Court Allows Subpoenas on Banks With Argentina's Accounts

In the continuing worldwide drama over Argentina's 2001 debt default, Argentina loses another round.  Republic of Argentina v. NML Capital, Ltd., No. 12-842 (U.S. June 16, 2014).  Its creditor, NML Capital, which Argentina owes about $2.5 billion, has pursued postjudgment execution on Argentina's property since 2003.  In 2010, NML subpoenaed two nonparty banks, Bank of America and an Argentinian bank with a branch in New York City.  The subpoenas sought documents relating to accounts maintained by Argentina. 

Argentina and BoA moved to quash the BoA subpoena (the Argentinian bank just didn't comply), and NML moved to compel.  The district court granted the motion to compel, and the Second Circuit affirmed.

The Supreme Court also affirmed, rejecting Argentina's argument that the Foreign Sovereign Immunities Act prohibited discovery of Argentina's extraterritorial assets.  Before its discussion of the FSIA, the Court discussed a Federal Rule of Civil Procedure -- Rule 69 -- that is rarely, if ever, mentioned in first-year civil procedure casebooks.  (Hint, hint, casebook authors!)  The Court noted that "[t]he rules governing discovery in postjudgment execution proceedings are quite permissive," citing Rule 69(a)(2), which allows a judgment creditor to take discovery "from any person -- including the judgment debtor -- as provided in the rules or by the procedure of the state where the court is located."  The Court assumed without deciding that "in a run-of-the-mill execution proceeding [one where the judgment debtor is not a foreign state] . . . the district court would have been within its discretion to order the discovery from third-party banks about the judgment debtor's assets located outside the United States."

The question was thus whether the FSIA required a different result when the judgment debtor was, in fact, a foreign state.  The FSIA, passed in 1976, confers two kinds of immunity on foreign states, jurisdictional (which Argentina waived) and execution immunity, which immunizes property in the United States of a foreign state from attachment and execution, with some exceptions.  

"There is no third provision forbidding or limiting disocvery in aid of execution of a foreign-sovereign judgment debtor's assets," notes Justice Scalia for the majority.  "[T]he reason for these subpoenas is that NML does not yet know what property Argentina has and where it is, let alone whether it is executable under the relevant jurisiction's law."   The Court also dismissed concerns about international relations, suggesting that such an argument was better addressed to Congress.

Justice Ginsburg dissented.  Justice Sotomayor took no part.      

   

http://lawprofessors.typepad.com/civpro/2014/06/supreme-court-allows-subpoenas-on-banks-with-argentinas-accounts-.html

Discovery, Federal Rules of Civil Procedure, International/Comparative Law, Recent Decisions, Supreme Court Cases | Permalink

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