Applestein v. Republic of Argentina, 02-Cv-04124 184 - Plaintiffs' Reply Memorandum of Law

8/10/2019 Applestein v. Republic of Argentina, 02-Cv-04124 184 - Plaintiffs' Reply Memorandum of Law

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UNITED STATES DISTRICT COURTSOUTHERN 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 LLPAnthony J. CostantiniRudolph J. DiMassaSuzan JoKevin P. Potere1540 BroadwayNew York, New York 10036Telephone: 212-692-1000Facsimile: 212-692-1020

Attorneys for Plaintiffs

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


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APPLESTEIN,

Plaintiff,-against-

ARGENTINA REPUBLIC, et al.,

Defendants.


FRANCESCHI, et al.,


REP. OF ARGENTINA,

Defendant.


APPLESTEIN,

Plaintiff,-against-

THE PROVINCE OF BUENOS AIRES,

Defendant.


MAZZINI, et al.,


THE REPUBLIC OF ARGENTINA,

Defendant.


MORATA, et al.,



Defendant.




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MODES, et al.,


THE REPUBLIC OF ARGENTINA, et al.

Defendants.


MARIA FAUSTA CILLI, et al.,



Defendant.


ROSA, et al.,



Defendant.


CONSOLINI, et al.,



Defendant.


FERRI, et al.,



Defendant.




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RIGUEIRO, et al.,



Defendant.


BETTONI, et al.,



Defendant.


FEDECOSTANTE, et al.,



Defendant.


LISI, et al.,



Defendant.


ROSSINI, et al.,


REPUBLIC OF ARGENTINA, et al.

Defendants.




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KLEIN, et al.,



Defendant.


LOVATI,

Plaintiff,-against-


Defendant.


BOTTI, et al.,


THE REPUBLIC OF ARGENTINA, et al.,

Defendants.


PASQUALI,

Plaintiff,-against-


Defendant.


BEYER, et al.,



Defendant.




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BORGRA, et al.,



Defendant.




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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 InterestUnder CPLR 5225(b) ........................................................................................... 5

B. Disclaimers Aside, The Republic Has An Interest In The Funds Held ByBNY 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



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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



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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



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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 illegalattempt 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.

1The August 6 Order merely directed BNY Mellon to hold the funds until further Order of theCourt. See Decl. of Christopher Clark, 1:02-cv-04124-TPG (Dkt. 142-3) Exh. 4 at 2. TheOrder did not mention the Indenture, except to relieve BNY Mellon of liability under theIndenture or otherwise. Id. at 4.



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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 notproperty 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 transferredthe funds to BNY Mellon and that these rights of the holdover bondholders

aresuperiorto 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



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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

contingentupon the holdover bondholders receiving a ratable payment. This ruling is aper 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

2BNY 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 judgmentcreditors.3 To the extent that BNY Mellon is concerned about potential liability, this concern can and

should be addressed,see infrap. 9 fn.7, since BNY Mellon has acted in a responsible manner.



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their pari passurights 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 thepari passuclause, 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,particularlywith 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.



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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 nota requirement of CPLR 5225(b), which simply states that a turnover is mandatoryif

(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 .. againsta person who is the transferee of money or other personal property fromthe judgment debtor, where it is shown that the judgment creditorsrights are superior to those of the transferee, the court shall require suchperson 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,



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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. SeeMemo. 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

4The Courts statement regarding the Republics ownership of the funds was incorporated byreference in the Courts August 6 Order. SeeDecl. 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 ultimatelyordered BNY Mellon to retain the funds for the time being reflected concerns raised by BNYMellon regarding alleged impracticalities and liabilities, nota determination by the Court that theRepublic no longer has any interest in the funds.



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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. SeeOct. 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 thatpari 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.



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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 withthe satisfaction and discharge of this Indenture with respect to any Seriesof Debt Securities, all monies then held by any trustee paying agent underthe provisions of this Indenture for such Series shall, upon written demandof the Republic, be repaid to the Republic (provided all amounts havebeen satisfied and discharged).

In addition, Section 11.4 of the Indenture dictates:

Return of Monies Held by Trustee. Any monies deposited with theTrustee for the payment of the principal of or interest on any DebtSecurity remaining unclaimed for ten years (in the case of principal) orfive years (in the case of interest) or, in either case, any shorterprescription period provided by law after such principal or interest shall

have become due and payable shall be repaid to the Republic uponwritten 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

5The holding inHanrahandoes not dictate, as the Euro Exchange Bondholders claim, that oncethe Republic transferred money to BNY Mellon, it lost all right to the funds. SeeHanrahan v.Albany Cnty. Prob. Dept, 119 A.D. 334, 335, 508 N.Y.S.2d 283 (3d Dept 1986) (holding onlythat money paid in restitution for criminal conviction was no longer property of debtor underPenal Law and specifically pointing out that there was no reversionary interest). Contrast theCapital Venturescases cited above. See suprap. 2.6The bond instrument states that the Republics obligation to make payments of principal ofand interest on the Securitiesshall not have been satisfieduntil such payments are received bythe Holders of the Securities. SeeDecl. of Evan K. Farber, Exh. B at C-2, 1:02-cv-04124-TPG(Dkt. 140-1) (emphasis added).



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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 thepari passuclause 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

7To the extent that BNY Mellon, which has acted in an exemplary manner, is concerned aboutpotential liability, it is difficult to believe that any judicial proceeding would find BNY Mellon tobe liable for the wrong of complying with a court order. In order to protect against thepossibility, plaintiffs would agree to the express inclusion of this protection in a manner similarto this Courts August 6 Order, in case the Euro Exchange Bondholders repeat their travesty of alawsuit against BNY Mellon for its adherence to this Courts Orders.



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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 anyprincipal or interest payments on their bondssince2001. 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

8Cases such asRobyandIndosuez, 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



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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 andRICO action claims against insurance syndicates); Indosuez Intl Fin., B.V. v. Natl ReserveBank, 304 A.D.2d 429, 431, 758 N.Y.S.2d 308 (1st Dept 2003) (party to an agreement sought toenforce choice of law provision).



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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 uphelda turnover order despite appeals to comity or

9In a stunning display of lack of comity, Argentine courts are prohibited from hearing any caseseeking to enforce the judgments of this Court. SeeNML Capital, Ltd. v. Republic of Argentina,699 F.3d 246, 254, 260, 262 (2d Cir. 2012).10SeeDecl. of Evan K. Farber, Exh. E at 32:16-22, 1:02-cv-04124-TPG (Dkt. 140-2).



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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) (affirminga 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 theKoehlerdecision 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

11The Guccicourt cited Section 403 of the Restatement of Foreign Relations Law, which statesthat 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 theRepublic, have waived sovereign immunity, the exercise of jurisdiction cannot be said to beunreasonable, particularly in light of the Republics contumacious conduct.12The Republic (which prohibits Argentine actions enforcing the judgments of this Court) cites alaw concerning the enforcement of foreign judgments in Argentina where the foreign court hasno personal jurisdiction over the custodian or the miscreant. (The Republic Br. at 7). This Courthas jurisdiction over both and can order a turnover. The turnover remedy does not flatlycontradict[ ] Argentine law, as the Republic claims. Id. at 1. Rather, the Republic is doing itsvery best to insulate itself from legitimate U.S. judgments while calling into question the fairnessof U.S. Courts. SeeCostantini Reply Decl. Exh. Z.



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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)

(citingFiscal 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 notapply 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 also28 U.S.C. 1609 (property in the United Statesof 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. SeeThe 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

13The Republic cites Waltersfor the proposition that the FSIA applies to extraterritorial assets.(Republic Br. at 1-2). The citation is curious because the Second Circuit did not addressextraterritorial assets since this aspect of the District Courts ruling was not appealed. SeeWalters v. Indus. & Com. Bank of China Ltd., 651 F.3d 280, 297 (2d Cir. 2011). The Republicalso cited this CourtsAureliusdecision, which was implicitly overruled by the Supreme Courtsmost recent decision. Compare Aurelius v. Republic of Argentina, 2010 WL 2925072, at *2(S.D.N.Y. July 23, 2010), andNML Capital, 134 S.Ct. at 2257.



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of sovereign immunity14has 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 YorkOctober 9, 2014

DUANE MORRIS LLP

/s/ Anthony J. CostantiniAnthony J. CostantiniE-mail: [email protected] J. DiMassaEmail: [email protected] JoE-mail: [email protected] P. PotereEmail: [email protected] BroadwayNew York, NY 10036Telephone: 212-692-1000Facsimile: 212-692-1020

Attorneys for Plaintiffs

14To 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 judgmentor from any other legal or judicial process or remedy, ... [the Republic] has irrevocably agreednot to claim and has irrevocably waived such immunity to the fullest extent permitted by thelaws of such jurisdiction (and consents generally for the purposes of the [FSIA] to the giving ofany 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).


Applestein v. Republic of Argentina, 02-Cv-04124 184 - Plaintiffs' Reply Memorandum of Law

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