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Seijas v. Republic of Argentina

United States District Court, S.D. New York

April 27, 2017

SILVIA SEIJAS, et al., Plaintiffs,
v.
THE REPUBLIC OF ARGENTINA, Defendant. SILVIA SEIJAS, et al., Plaintiffs,
v.
THE REPUBLIC OF ARGENTINA, Defendant. CESAR RAUL CASTRO, Plaintiff,
v.
THE REPUBLIC OF ARGENTINA, Defendant. HICKORY SECURITIES LTD., Plaintiff,
v.
THE REPUBLIC OF ARGENTINA, Defendant. ELIZABETH ANDREA AZZA, et al., Plaintiffs,
v.
THE REPUBLIC OF ARGENTINA, Defendant. ELIZABETH ANDREA AZZA, et al., Plaintiffs,
v.
THE REPUBLIC OF ARGENTINA, Defendant. EDUARDO PURICELLI, Plaintiff,
v.
THE REPUBLIC OF ARGENTINA, Defendant. RUBEN DANIEL CHORNY, Plaintiff,
v.
THE REPUBLIC OF ARGENTINA, Defendant. HENRY H. BRECHER, et al., Plaintiffs,
v.
THE REPUBLIC OF ARGENTINA, Defendant.

          OPINION & ORDER

          Thomas P. Griesa United States District Judge.

         This opinion considers the settlements reached in nine class action cases against the Republic of Argentina (the “Republic”) arising out of the Republic's 2001 default on bonds it issued. The lead plaintiffs bring these actions against the Republic on behalf of themselves and other continuous holders of interests[1]in particular bonds issued by the Republic.[2]

         Lead plaintiffs in these long-standing cases petition the court for final approval of the negotiated settlements. The attorneys representing the classes also seek attorneys' fees awards and reimbursement of expenses. Additionally, the named plaintiff in Brecher requests an award of $5, 000.

         The court preliminarily approved the proposed settlements in Brecher and in the Seijas cases[3] in May 2016. Pursuant to the settlements, class members have submitted proof of claim forms demonstrating their interests in the Class Bonds. The settlements will result in class funds comprised of 150% of the outstanding principal of class members' bonds. The class funds will amount to approximately $23, 164, 249 for the Seijas classes[4] and approximately $3, 049, 440 for the Brecher class.[5] The terms of the settlements reached in Brecher and in the Seijas cases are identical, varying only in the number and value of claims submitted.

         After full consideration of the settlements, the court now grants the petitions for final approval of the settlements in the above-captioned cases. In this opinion the court sets forth the basis for that approval, awards attorneys' fees and expenses, and denies the petition for an incentive award for the named plaintiff in Brecher.

         BACKGROUND

         The allegations in these cases are tied to bonds issued by the Republic. After the Republic suffered an economic crisis, the Argentine government declared a moratorium on payment of its sovereign debts on December 24, 2001 and stopped making scheduled payments on its bonds, triggering defaults on the Seijas and Brecher Class Bonds. Beginning in 2002, bondholders, including the plaintiffs in Brecher and in the Seijas cases, filed lawsuits in this court.

         The Republic invited bondholders to exchange their defaulted bonds for newly issued bonds worth 25% to 29% of the original bonds' value in 2005 and again in 2010 (the “Exchange Offers”). While a number of bondholders participated in the Exchange Offers, the named plaintiffs and class members in these cases did not.

         I. Litigation

         The Seijas cases were filed between January and March 2004. Brecher was filed on December 19, 2006. Plaintiffs in these actions seek to enforce payment and other rights with respect to the Seijas and Brecher Class Bonds.

         Pursuant to Federal Rule of Civil Procedure 23(b)(3), the court certified the Seijas classes in 2005, and the Brecher class in 2009. In all nine cases, the court adopted a class definition that limited members to continuous holders-all holders of Class Bonds who purchased or otherwise acquired interests in the Class Bonds prior to the date the cases were filed, and who will continue to hold those interests until the final judgments. The classes exclude (1) bondholders who participated in either of the Exchange Offers; (2) bondholders who, for any reason, fail to hold interests in the Class Bonds through the date of judgment and settlement of the class action; (3) bondholders who initiated separate proceedings to recover damages, whether in court or through any other dispute resolution mechanism, including arbitration; (4) the Republic; and (5) bondholders who filed a written notice requesting exclusion. The class definition was designed to prevent the classes from being too fluid. See H.W. Urban GmbH v. Republic of Argentina, No. 02 Civ. 5699, 2004 WL 307293, at *3 (S.D.N.Y. Feb. 17, 2004) (adopting the continuous holder definition in another class action brought by bondholders against the Republic).

         Notice of the pendency of the Seijas cases was published and disseminated in 2007. The formal opt-out period ran through 2008. A number of potential class members opted out of the Seijas cases during the initial opt-out period. Notice of the pendency of the Brecher class action was disseminated in August 2011. Those holding interests in the Brecher Class Bond had a formal opportunity to opt out during a 90-day period ending on October 31, 2011. No holders of interests in the Brecher Class Bond requested exclusion from the class.

         In addition to the formal procedure, potential class members had several other opportunities to opt out by (i) filing a separate lawsuit or claim in arbitration, (ii) accepting one of the Exchange Offers, or (iii) selling their interests in the Seijas or Brecher Class Bonds at any time during the litigation.

         These nine class action cases have been pending for over a decade. Plaintiffs in the Seijas cases have conducted multiple rounds of discovery in connection with class certification, and made numerous attempts to collect on judgments against the Republic. Plaintiffs in all classes have moved for summary judgment and prepared for evidentiary hearings to determine the value of the damages sustained by class members. Moreover, the litigation has involved arguments before the Second Circuit.

         For many years, the Republic refused to negotiate with holders of interests in the defaulted bonds and engaged in an “unprecedented, systematic scheme” to make payments on external indebtedness other than the defaulted bonds. See, e.g., Order, NML Capital Ltd. v. Republic of Argentina, No. 08-cv-6978 (S.D.N.Y. Feb. 23, 2012). As part of that scheme, the Republic enacted Law 26, 017-the “Lock Law”-which prohibited the Republic from “conducting any type of in-court, out-of-court or private settlement” with bondholders who could have participated in the Exchange Offers. Then, in 2009, the Republic enacted Law 26, 547, which prohibited the Republic from giving any bondholders who had filed lawsuits more favorable treatment than that offered to those who did not do so. In 2016, both laws were repealed under President Macri's administration.

         In February 2016, the Republic formally published a proposal (the “Propuesta”) to outstanding holders of interests in certain defaulted bonds, including the Class Bonds. See Propuesta, 5 de Febrero de 2016. The Propuesta set forth a “Standard Offer, ” which is open to all holders of interests in certain defaulted bonds and provides for a cash payment equal to the original principal of the bond plus 50% of that principal, classified as interest.

         II. Settlement

         Since assuming office, President Macri has made a concerted effort to resolve this outstanding litigation. Due to the diligent efforts of President Macri's administration, class counsel, and Special Master Daniel A. Pollack, Esq., the parties in these class actions reached proposed settlements in May 2016.

         The terms of the settlements in Brecher and the Seijas cases are identical. Pursuant to the settlements, class members were required to submit proof of claim forms to class counsel, who then submitted the forms to the Republic by November 15, 2016.[6] Under the settlements, class members will tender their qualifying Class Bonds to the Republic, and the Republic will pay 150% of the principal amount of the tendered Class Bonds into class funds. The Republic has also agreed to cover $40, 000 of the expenses for settlement notice in the Seijas cases and $25, 000 of the expenses for settlement notice in Brecher.

         The court preliminarily approved the proposed settlements in Brecher and the Seijas cases on May 27, 2016. At that time, the court also directed the parties to begin the notice process. The approved notice included a description of the settlement terms, an explanation of the claims procedure, the mechanism for submitting claims, and a warning that class members would be bound by the terms of the settlement.

         Gilardi & Co. LLC (“Gilardi”) served as the administrator charged with distribution of notice of the settlements and collection of claims. Gilardi distributed notice in accordance with the plans approved in the court's May 27, 2016 Order. In the Seijas cases, Gilardi mailed 6, 247 claims packages to potential class members and nominal holders.[7] Gilardi mailed 3, 192 claims packages to potential Brecher class members and nominal holders. Gilardi established a toll-free telephone number and websites dedicated to all nine cases to further facilitate the notice and claims process. Notice was also published by the Depository Trust Company.

         In the Seijas cases, class members have submitted 122 accepted claims, for a total of $15, 442, 833 in principal to date.[8] A settlement fund based on those claims would amount to approximately $23, 164, 249. In Brecher, class members submitted 61 valid claims to date. The principal for the Brecher claims is €1, 853, 200, which would result in a class fund of approximately $3, 049, 440.[9]

         Class members' participation in the claims process has been significant. There have been no objections to the proposed settlement in Brecher. Only seven Seijas class members filed objections, representing less than 6% of the Seijas classes.[10]

         III. Attorneys' Fees and Expenses

         A. Seijas Cases

         The Seijas classes were originally represented by Saul Roffe, who worked for Sirota & Sirota (“Sirota”) at the time, and Gillermo Gleizer. When the court certified the classes in August 2005, Gleizer and Roffe were appointed as class counsel. In November 2006, Proskauer Rose LLP (“Proskauer”) was added as co-lead class counsel. In 2007, Sirota ceased operations, but Roffe continued to represent the Seijas classes.[11] In February 2010, Gleizer joined the law firm of Diaz, Reus & Targ, LLP (“Diaz Reus”), and in April 2010, Diaz Reus was substituted for Gleizer as class counsel. Gleizer subsequently left Diaz Reus, and ceased all involvement in the Seijas cases in July 2010. Proskauer, Roffe, and Diaz Reus are currently listed as class counsel of record in the Seijas cases (“Class Counsel of Record”).

         Class Counsel of Record submitted a request for expenses, seeking reimbursement of $914, 513. Proskauer incurred $536, 904.62 in expenses, Diaz Reus incurred $230, 610.58, and Roffe and Sirota incurred $146, 998.60. Gleizer is not seeking reimbursement for expenses.

         Two separate requests for attorneys' fees have been submitted in the Seijas cases. First, Class Counsel of Record submitted a joint request for an attorneys' fees award of 33.3% of the class fund, to be calculated after the deduction of expenses. Proskauer, Roffe, and Diaz Reus submitted records reflecting the hours worked by each firm and the resulting lodestar for each firm. Proskauer reported 6, 714 hours of work, with a resulting lodestar of $3, 595, 250. Roffe states that he and Sirota billed 7, 925 hours of work, with a resulting lodestar of $3, 767, 847.50.[12] Diaz Reus reported 7, 947.2 hours of work, with a resulting lodestar of $4, 426, 182. The combined lodestar for Seijas Class Counsel of Record is just under $11.8 million.

         Second, Gleizer has filed submissions supporting the request for a 33.3% attorneys' fees award, but requesting that he be awarded 25% of that fee, plus a percentage of the remaining fee award “based on the proportionate hours expended.” Gleizer has not submitted supporting records, but states that he billed 1, 673.75 hours at a rate of $850 per hour, with a resulting lodestar of $1, 422, 687.50.

         Seijas Class Counsel of Record maintain that Gleizer is not entitled to any fees. On November 10, 2016, the court issued an order instructing the attorneys who submitted attorneys' fees requests to conduct good faith negotiations to resolve the issue of Gleizer's entitlement to attorneys' fees in these cases. To the court's dismay, the attorneys have been unable to come to a resolution or submit an agreed-upon proposal.

         The court is in receipt of objections to the requests for attorneys' fees in the Seijas cases from Miguel Flitt, Javier Casas Scardino, and Omar Santos Palermo.[13]

         B. Brecher

         The Brecher class is represented by Hagens Berman. Hagens Berman requests an attorneys' fees award of 30% of the whole class fund. Based on the estimated $3, 049, 440 class fund, an attorneys' fees award of 30% would amount to approximately $914, 832. Hagens Berman has submitted a detailed account of the hours worked and rates charged by its attorneys, which result in a lodestar of $1, 206, 222. Hagens Berman also seeks reimbursement for expenses amounting to $37, 540.40.

         IV. Fairness Hearing

         On November 10, 2016, the court held a fairness hearing. Class Counsel of Record in the Seijas cases, Gleizer, class counsel in Brecher, and counsel for the Republic appeared at the hearing. Objecting class member Ira Sohn also appeared. The court reserved decision.

         DISCUSSION

         I. Approval of the Settlement

         Pursuant to Federal Rule of Civil Procedure 23(e), any settlement in a class action requires court approval. Before approving a class action settlement, the court must “carefully scrutinize the settlement to ensure its fairness, adequacy and reasonableness.” D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001). The court must determine that the settlement is procedurally and ...


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