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September 10, 1997


The opinion of the court was delivered by: CHIN


 In the 1980's, a number of countries -- including the defendant Republic of Panama ("Panama") -- encountered serious difficulties in servicing their foreign debt. As a consequence, and because of growing concern over the continued stability of the international financial system, United States Treasury Secretary Nicholas Brady announced a plan (the "Brady Plan") in 1989 encouraging bank creditors to reduce the debt obligations of lesser developed countries by restructuring old debt and providing new loans.

 Panama took advantage of the Brady Plan and restructured much of its external debt in 1995 pursuant to what became known as the "1995 Financing Plan." The restructured debt included balances due under loan agreements entered into with certain banks and financial institutions in 1978 for $ 300 million (the "1978 Agreement") and in 1982 for $ 225 million (the "1982 Agreement").

 At issue in the instant case is a portion of the 1982 debt. In late 1995, two of the banks that had participated in the 1982 loan, Citibank, N.A. ("Citibank") and Swiss Bank Corporation ("Swiss Bank") (together, "the Banks"), assigned their interest in $ 12,242,018.21 of the debt to plaintiff Elliott Associates, L.P. ("Elliott") for approximately $ 8 million. After the assignments, Panama (through its Agent) made some interest payments to Elliott, but the payments eventually stopped. For its part, Elliott refused to restructure its debt in accordance with the 1995 Financing Plan, even though all the other creditors under the 1982 Agreement agreed to do so.

 Instead, on July 15, 1996, Elliott commenced this breach of contract action, seeking judgment against Panama for the amounts due under the 1982 Agreement. Panama responded by asserting a counterclaim against Elliott for tortious interference with Panama's contractual relations with the Banks.

 Before the Court is Elliott's motion for summary judgment, both for judgment on its breach of contract claim and for dismissal of Panama's counterclaim for tortious interference with contract. Elliott's motion is premised in part on its contention that Panama is collaterally estopped by the decision of Justice Gammerman in Elliott Assocs., L.P. v. Republic of Panama, No. 603615/96 (N.Y. Sup. Ct. May 16, 1997), a case virtually identical to this one, except that it involved the 1978 Agreement. After Panama defaulted on that loan as well, Elliott purchased some portion thereof from certain of the participating banks. Justice Gammerman granted summary judgment in favor of Elliott and entered judgment against Panama in the amount of $ 31,441,197. He also dismissed Panama's counterclaim.

 Panama contends that summary judgment must be denied because the assignments of the loans to Elliott were improper under the terms of the 1982 Agreement and the 1995 Financing Plan. It also argues that because Elliott purchased the loans with the sole or primary intent to sue, the assignments are void under New York's anti-champerty law.

 Although I conclude that the doctrine of collateral estoppel does not bar Panama from asserting its defenses in this case, I also conclude that the defenses must be rejected as a matter of law. The assignments to Elliott were permitted by the agreements in question, and the assignments -- arms-length trades of foreign debt -- were not champertous. Accordingly, Elliott's motion for summary judgment is granted.


 A. The Agreements

 Section 14.08 of the 1982 Agreement provides that the Agreement can be "amended, modified or waived" upon the written consent of "the Borrower, the Agent and the Majority Lenders." (Mendez Aff., Ex. A, at 40). Section 1.01 defines "the Majority Lenders" as those "Lenders" who "at any time on or prior to the Commitment Termination Date . . . have more than 50% of the aggregate amount of the Commitments and, at any time thereafter, Lenders who at such time hold 50% of the aggregate unpaid principal amount of the Loans." (Id. at 6). According to Panama, these conditions were met when Panama and Citibank, Swiss Bank, and other participating banks entered into the 1995 Financing Plan.

 In general, the 1995 Financing Plan sets forth the terms of Panama's debt restructuring, including the exchange of principal for new bonds and new arrangements for interest payments. To maintain an orderly process pending its implementation, the Plan also included "Interim Measures," by which each creditor holding debt eligible for restructuring agreed not to "recognize or record any assignment of Eligible Principal or Eligible Interest made after the Final Trading Date" of October 20, 1995. (Mendez Aff., Ex. B, Part V, at V-4). Panama was particularly concerned with establishing a "Final Trading Date" so that it would have a firm date by which it would know which creditors had committed to the Plan. The settlement of such assignments made before the Final Trading Date was to be completed on or before November 10, 1995. (Id., Ex. B, Annex B, at B-5).

 The 1995 Financing Plan also required that all creditors participating in the debt restructuring submit a Commitment Letter to Panama no later than November 14, 1995, agreeing: (1) not to assign any debt eligible for restructuring after October 20, 1995; (2) to complete the settlement of all such assignments on or before November 10, 1995; and (3) not to assign any such debt after signing the Commitment Letter except to an assignee who (a) completed the settlement of the assignment on or before November 10, 1995 and (b) agreed (i) to assume the obligations under the Commitment Letter and (ii) to submit a Commitment Letter on or before November 14, 1995. (Mendez Aff. Ex. B, Annex B, at B-5). The Commitment Letter also required that each Lender consent to the Interim Measures described in Part V of the Financing Plan.

 According to Panama, after receiving Commitment Letters from "institutions holding more than 50 percent of the then-outstanding amounts under the 1982 Agreement," the 1982 Agreement was amended and modified retroactively to prohibit any assignments after October 20, 1995. (Def. Mem. at 8). It is undisputed that Citibank and Swiss Bank each submitted a Commitment Letter to Panama on November 14, 1995. (Mendez Aff., Ex. D). In fact, Panama alleges that it received Commitment Letters from all of the other banks that held interests in the 1982 Agreement debt. (Def. Mem. at 8). Thus, the 1982 Agreement was amended to include the terms of the 1995 Financing Plan.

 B. Procedural History

 Elliott originally brought two suits in state court on July 15, 1996, one involving the 1978 Agreement and the other -- the instant case -- involving the 1982 Agreement. Panama removed both cases to this Court pursuant to 28 U.S.C. § 1441(d). Elliott moved to remand the action involving the 1978 Agreement. I granted that motion, holding that an amendment to the 1978 Agreement, which eliminated Panama's right to remove any state court action to federal court, did not apply to that case because the amendment was made after the suit was brought. Elliott Assocs., L.P. v. Republic of Panama, 1996 U.S. Dist. LEXIS 11973, No. 96 Civ. 5295, 1996 WL 474173 (S.D.N.Y. Aug. 21, 1996). The instant case had been commenced after the amendment was made and thus Elliott did not seek remand of this case.

 In the remanded state court action, Elliott raised issues similar to those in this suit, alleging breach of contract and seeking approximately $ 30 million from Panama due under the 1978 Agreement. Elliott Assocs., L.P. v. Republic of Panama, No. 603615/96 (N.Y. Sup. Ct. May 16, 1997). As in this case, Panama asserted a number of affirmative defenses as well as a counterclaim for tortious interference with its contractual relationships with the assignor banks. The principal defenses were: (1) the purported assignments to Elliott were void because they took effect after the Final Trading Date of October 20, 1995; (2) Elliott was not a proper assignee under the 1982 Agreement because assignments were only permitted to banks or financial institutions, and Elliott, according to Panama, was neither a bank nor a financial institution; and (3) Elliott acquired its purported interest in the 1978 Agreement in violation of New York's law against champerty. Elliott then moved for summary judgment, both with respect to its breach of contract claim as well as Panama's counterclaim.

 On May 16, 1997, Justice Gammerman dismissed the counterclaim, holding that Panama had not alleged sufficient facts to substantiate a claim for tortious interference. Justice Gammerman also granted Elliott's motion for summary judgment on its breach of contract claim, holding, among other things, that (1) there was no basis to void the assignments to Elliott and (2) there was insufficient evidence to establish that Elliott acquired its interest in the 1978 Agreement in violation of New York's champerty law. Elliott Assocs., No. 603615/96, at 4-8, 10-12.


 A. Collateral Estoppel

 Elliott argues that Panama is collaterally estopped from asserting the champerty defense and its tortious interference with contract counterclaim because Panama has already had a full and fair opportunity to litigate these issues ...

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