The opinion of the court was delivered by: THOMAS GRIESA, Senior District Judge
This is a motion for class action certification. Defendant, the
Republic of Argentina, opposes the motion. The motion is granted.
This is the second motion to obtain approval for class action
treatment. In the first motion there were additional plaintiffs, and they
sought to represent holders of 68 series of Argentine bonds payable in
six different currencies. The motion was denied in an opinion dated May
12, 2003. The court held that the proposed class was too large, too
diverse, and too vaguely defined for there to be a manageable class
It should also be noted that in another action, Applestein v. The
Republic of Argentina (02 Civ. 4124), class action treatment was
denied in an opinion also dated May 12, 2003. Among other things the
complaint in that action did not sufficiently define how many series of bonds were to
be involved in the action.
The New Class Action Motion in the Urban Case
The Amended Class Action Complaint names one plaintiff as the proposed
class representative. This plaintiff is a German company, owned by Horst
Urban, a German businessman. Plaintiff is the owner of bonds from two
Republic of Argentina bonds, issued January 30,
1997, due January 30, 2017, bearing interest at 11
3/8% per year;
Republic of Argentina bonds, issued April 7, 1999,
due April 7, 2017, bearing interest at 11 3/4% per
Plaintiff owns $1,000,000 worth of bonds of the first series and
$145,000 worth of bonds of the second series.
Attached to the complaint are the prospectuses for the two series of
bonds. The prospectus for the first series shows that it involves bonds
in the face amount of U.S. $2,000,000,000. The prospectus for the second
series shows that it involves bonds in the face amount of U.S.
The complaint defines the proposed class as all persons who, on or before July 22, 2002 (the date on which the action was filed), purchased
bonds in either series and who hold the bonds continuously through the
date of "any judgment as to liability" in the action. The complaint
asserts that the members of the class are so numerous that joinder of all
members is impracticable, although the exact number of class members is
unknown to plaintiff at the present time.
There are allegations about the December 2001 moratorium on bond
obligations declared by the Republic. There are also allegations
regarding consent to service of process in New York City, the
applicability of the laws of the State of New York, and the waiver of
sovereign immunity, all of which allegations are based on the October
19, 1994 Fiscal Agency Agreement attached to the complaint.
The Republic opposes the new class action motion, as it did the earlier
motion in this case and the motion in Applestein. The Republic urges that
class action treatment should still be denied, despite the narrowing of
the proposed class to holders of bonds in only two series of U.S. dollar
bonds. The Republic expresses concern that once class action treatment is
granted in one action, there will be a "run" on proposals for class
actions, which at least would eventually be unmanageable. The Republic points out that there is a
total of 140 series of Argentine bonds. The Republic urges that the only
really effective way to resolve a sovereign debt crisis, such as the one
presented here, is through voluntary debt restructuring. The Republic
contends that to the extent bond litigation is expanded from suits by
individual bondholders (some of which are pending in this court) into one
or more class actions, this will serve as a disincentive to participating
in the debt restructuring effort and will interfere with that effort.
Aside from these broad objections, the Republic raises certain matters
of detail about the manageability of the proposed class action, including
what it believes to be the lack of any proper way to give notice to class
All these issues merit serious consideration. In addition, it has
occurred to the court, as discussed with counsel at the hearing on the
motion, that while narrowing the class definition may be necessary for
management purposes, there is some anomaly in granting class action
treatment to a small fraction of the universe of those who are suffering
defaults on their Argentine bonds. Having weighed these various considerations, the court has determined
that plaintiff in this case has proposed a class action which complies
with the applicable law, and that it would be improper to deny plaintiff
and the proposed class the benefit of that law.
The court has before it certain actions in which individual bondholders
are asserting their legal rights. These actions are being processed, as
they must be under the law. In the view of the court, there is no basis
for ruling that a properly defined class action should not be ...