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United States District Court, Southern District of New York

May 12, 2003


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


On November 20, 2002 plaintiffs filed a motion seeking an order that this action can be maintained as a class action under Fed.R.Civ.P. 23. Defendant, The Republic of Argentina, opposes the motion. Also, on January 10, 2003 the Republic filed a motion seeking to stay this proceeding and to dismiss certain claims for lack of subject matter jurisdiction.

The class action motion is denied. The motion to stay the proceedings and to dismiss certain claims is denied, with leave to renew, as described hereafter.

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.

The complaint in the present case defines the proposed class as all persons who held or hold the Republic's bonds, "of the issuances" listed on Exhibit A to the complaint, where interest and/or principal have not been paid in accordance with the terms of the bonds. When plaintiffs refer to "issuances," this apparently refers to various series of bonds. Exhibit A to the complaint lists 30 series of bonds — 2 series of U.S. dollar bonds, 1 series of Spanish peseta bonds, 15 series of Deutsche mark bonds, and 12 series of euro bonds. However, Exhibit A to the notice of the class action motion lists 68 series of bonds — 9 series of U.S. dollar bonds, 1 series of Spanish peseta bonds, 25 series of Deutsche mark bonds, 31 series of euro bonds, 1 series of Swiss franc bonds, and 1 series of Austrian schilling bonds.

The complaint alleges that the plaintiff Urban entities own certain U.S. dollar bonds, a peseta bond and certain Deutsche mark and euro bonds. In each case the particular series is specified. Plaintiff Englesberger is alleged in the complaint to own "Republic of Argentina 8 3/4% bonds." The Republic, in one of its briefs, asserts that Englesberger owns an 8.5% Deutsche mark bond.

Judging from the list attached to the notice of motion, the class would consist of the holders of 68 series of Argentine bonds, payable in six different currencies. Plaintiffs state that the proposed class would consist of "thousands or tens of thousands of bondholders." It is said that billions of dollars worth of bonds were issued to members of the class. The complaint alleges breach of contract in failing to make required payments and what is said to have been breached are "various Fiscal Agency Agreements and other documents setting forth terms and conditions of various bonds." Thus, the action is based on a variety of contractual documents thus generally described.

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 in this case is not a reasonably manageable class action. The allegations in the present action provide somewhat more information than in the companion case, Applestein v. The Republic of Argentina (02 Civ. 4124), in which an opinion is being filed today denying class action treatment. In that case the various series of bonds are not listed, whereas in the present case they are. But the present case involves its own serious problems. The class, consisting of the holders of 68 series, would be massive, perhaps involving tens of thousands of persons, as plaintiffs themselves state. The bonds were issued under a thus far undefined number and variety of contractual documents. Although all the details are not available, it is certain, based on the presentation of the Republic, that different types of bonds are to be governed by the laws of different nations. Finally, the size of the proposed class appears to have more than doubled between the time of the complaint and the class action motion. There is no indication of any logical reason why a particular grouping of bond holders defines a class. There is no showing as to why, in terms of an identity or concurrence of interests, the claims should consist of the holders of 30 series of bonds or the holders of 68 series of bonds or the holders of some still larger aggregation of bonds.

The court concludes that the proposed class is too large, too diverse, and too vaguely defined to be the basis for a manageable class action. In this connection, 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 does not meet those 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.

The Republic's motion to stay the proceedings and to dismiss certain claims is denied, with leave to renew in the event that the individual plaintiffs amend their complaint.



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