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May 12, 2003


The opinion of the court was delivered by: Thomas P. Griesa, United States District Judge.


On November 6, 2002 plaintiffs filed a motion seeking an order that this action can be maintained as a class action under Fed.R.Civ.P. 23. Subsequent to the filing of the class action motion, plaintiff Allan Applestein withdrew as a proposed class representative, leaving plaintiff Pedro Kalbermann as the sole proposed representative.

The class action motion is denied.

Knowledge will be assumed regarding Argentina's debt crisis and its cessation of payments due on its very large bond indebtedness. This has led to certain lawsuits in this court by individual bond holders, and two actions denominated as class actions, one of which is the subject of this opinion.

In the complaint in the present action the proposed class is defined as all persons, other than citizens of Argentina, who, as of December 23, 2001, held bonds issued by Argentina pursuant to the Fiscal Agency Agreement of October 19, 1994. The proposed class would also include persons who have acquired such bonds since December 23, 2001. It is said that this class consists of thousands of bond holders around the world holding billions of dollars of bonds.

One of the factors to be considered in determining whether a class action should be allowed is "the difficulties likely to be encountered in the management of a class action." Fed.R.Civ.P. 23(b)(3)(D).

The court believes that what is proposed is not a reasonably manageable class action. The Fiscal Agency Agreement, which is referred to in the complaint, is between defendant and the former Bankers Trust Company. It provides the framework for issuing certain types of Argentine bonds. The agreement contemplates that the bonds are to be issued in various series to be determined. As to what has actually happened under the agreement, the complaint in this action provides virtually no information. The complaint does not indicate how many series have been issued, times of issuance, the amount of the bonds in each series or the total amount of bonds in all series issued. The complaint does not offer any indication of the numbers of holders in the various series or in all series combined. And, most importantly, the complaint does not seek to define the class as anything less than all persons holding any bonds of any series issued under the 1994 Agreement, so long as they held the bonds on December 23, 2001 or purchased them thereafter.

The court is most concerned about the idea of having such an amorphous, ill-defined class, particularly without any indication of the size of the proposed class. The court has in mind that an important channel for attempting to resolve the Argentine debt problem will undoubtedly be the effort to negotiate a debt restructuring plan. Judging from past national debt crises, these negotiations will be carried on largely, if not entirely, by debt holders who do not choose to engage in litigation. To the extent that other debt holders, whether few or many, wish to pursue litigation, the litigation should be well defined and its participants should be reasonably identifiable. One reason for this is that those involved in the debt restructuring process should have a clear idea of who has chosen litigation and thus may not be candidates for participation in a voluntary restructuring plan.

The court has suggested in the hearings thus far held that it might be desirable to have the class consist of persons who "opt in," if class action treatment is permitted. The plaintiffs in the proposed class actions oppose this, as contrary to Rule 23, and they are probably correct. See e.g., Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812-14 (1985). Because of the likelihood that a class action here, if permitted, would pertain to a class of all persons who would not "opt-out," it is highly important that the boundaries of the class should be finite and well defined. The proposed class in the present case is a very long distance from meeting these criteria.

For these reasons, the motion seeking an order that this action may be maintained as a class action is denied. The court expresses no view on the various other issues and arguments raised in the submissions of the parties on the motion.

The individual plaintiffs should notify the court by May 26, 2003 as to whether they will seek to amend their complaint to limit it to their individual claims.



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