reply brief of exchange bondholders

7/29/2019 Reply Brief of Exchange Bondholders

1/37

12-0105-cv(L),12-0157-cv(con), 12-0158-cv(con), 12-0163-cv(con), 12-0164-cv(con), 12-0170-cv(con),12-0176-cv(con), 12-0185-cv(con), 12-0189-cv(con), 12-0214-cv(con), 12-0909-cv(con),12-0914-cv(con), 12-0916-cv(con), 12-0919-cv(con), 12-0920-cv(con), 12-0923-cv(con),12-0924-cv(con), 12-0926-cv(con), 12-0939-cv(con), 12-0943-cv(con), 12-0951-cv(con),12-0968-cv(con), 12-0971-cv(con), 12-4694-cv(con), 12-4829-cv(con), 12-4865-cv(con)

United States Court of Appealsfor the

Second Circuit

NML CAPITAL, LTD., AURELIUS CAPITAL MASTER, LTD.,

(For Continuation of Caption See Inside Cover)_______________________________

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

REPLY BRIEF FOR NON-PARTY APPELLANTS

EXCHANGE BONDHOLDER GROUP

OSHEA PARTNERS LLP

521 Fifth Avenue, 25th

Floor

New York, New York 10175(212) 682-4426

and

BOIES,SCHILLER&FLEXNERLLP

575 Lexington Avenue, 7th

FloorNew York, New York 10022

(212) 446-2300

Attorneys for Non-Party Appellants

Exchange Bondholder Group

12-0109-cv(con)12-0111-cv(con)

Case: 12-105 Document: 839 Page: 1 02/01/2013 835170 37


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ACP MASTER, LTD., BLUE ANGEL CAPITAL I LLC, AURELIUS

OPPORTUNITIES FUND II, LLC, PABLO ALBERTO VARELA, LILAINES BURGUENO, MIRTA SUSANA DIEGUEZ, MARIA EVANGELINA

CARBALLO, LEANDRO DANIEL POMILIO, SUSANA AQUERRETA,

MARIA ELENA CORRAL, TERESA MUNOZ DE CORRAL, NORMA

ELSA LAVORATO, CARMEN IRMA LAVORATO, CESAR RUBENVAZQUEZ,NORMA HAYDEE GINES, MARTA AZUCENA

VAZQUEZ, OLIFANT FUND, LTD.,

Plaintiffs-Appellees,

v.

THE REPUBLIC OF ARGENTINA,

Defendant-Appellant,

THE BANKOFNEW YORK MELLON, as Indenture Trustee,EXCHANGE BONDHOLDER GROUP, FINTECH ADVISORY INC.,

Non-Party Appellants,

EURO BONDHOLDERS, ICE CANYON LLC,

Intervenors.



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TABLE OF CONTENTS

TABLE OF AUTHORITIES..i

TABLE OF CONTENTS ........................................................................................... 1TABLE OF AUTHORITIES ..................................................................................... 1PRELIMINARY STATEMENT ............................................................................... 1ARGUMENT ............................................................................................................. 1I. THE INJUNCTION UNLAWFULLY BURDENS THE EXCHANGE

BONDHOLDERS PROPERTY RIGHTS. ....................................................1II. THE INJUNCTION VIOLATES THE EBGs FIFTH AMENDMENT

RIGHTS. .............................................................................................................8A. The Injunction Violates Substantive Due Process. ..................................8B. The Injunction Effects an Unlawful Taking. .........................................12

III. THE INJUNCTION MUST BE VACATED BECAUSE THE EBhs WERE

NECESSARY PARTIES TO THE PROCEEDINGS BELOW. ............... 15IV. THE district court violated the ebgs procedural due process rights. .... 18

A. The Injunction Does Not Merely Affect the EBGs Rights. ..............18B. The EBG Had No Opportunity to Respond to the February 23, 2012

Injunction Until After the October 26, 2012 Remand. .......................... 19C. Due Process Required an Evidentiary Hearing. .................................... 20D. The EBG Acted in a Timely Manner .....................................................23E. The EBG Has Standing to File a Rule 60(b) Motion. ...........................23

V. THE EBG DID IN FACT OFFER AN ALTERNATIVE RATABLEPAYMENT FORMULA. ..................................................................................24



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TABLE OF AUTHORITIES

Cases

49 WB, LLC v. Village of Haverstraw,

No. 08 CV 5784 (VB), 2012 WL 336152 (S.D.N.Y. Feb. 2, 2012) ..........................9

Brace v. United States,72 Fed. Cl. 337 (2006) .............................................................................................12

Brady v. Town of Colchester,863 F.2d 205 (2d Cir. 1988) .......................................................................................9

California Serv. Emps. Health & Welfare Tr. Fund v. Advance Bldg. Maint.,06-3078, 2007 WL 3232444 (N.D. Cal. Nov. 1, 2007) .............................................6

Chi., St. Paul, Minn. & Omaha Ry. Co. v. Holmberg,

282 U.S. 162 (1930) .................................................................................................. 9

Chrysler Corp. v. Fedders Corp.,

63 A.D.2d 567 (N.Y. App. Div. 1978) ...................................................................... 6

Crouse-Hinds Co. v. InterNorth, Inc.,634 F.2d 690 (2d Cir. 1980) .............................................................................. 15, 16

Drywall Tapers and Pointers of Greater N.Y., Local 1974 v. Local 130 ofOperative

Plasterers and Cement Masons Intl Assn, 954 F.2d 69 (2d Cir. 1992) .............20

Elliott Assocs. L.P. v. Banco de la Nacion,

General Docket No. 2000/QR/92 (Court of Appeals of Brussels 8th Chamber Sept.26, 2000) .................................................................................................................5

Elliott Assocs., L.P. v. Banco de la Nacion and the Republic of Peru,194 F.3d 363 (2d Cir. 1999) .......................................................................................6

First Nat'l Bank of Hollywood v. Am. Foam Rubber Corp.,530 F.2d 450 (2d Cir. 1976) .......................................................................................3

Haw. Hous. Auth. v. Midkiff,467 U.S. 229 (1984) ................................................................................................. 14



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ii

In re Lynch,430 F.3d 600 (2d Cir. 2005) .......................................................................................2

Kelo v. City of New London,545 U.S. 469 (2005) ...................................................................................................9

Kensington Intl Ltd. v. Republic of the Congo,[2003] EWCA Civ. 709 .............................................................................................5

LNC Invs. LLC v. Republic of Nicaragua,

Folio 2000 No. 1061, R.K. 240/03 (Commercial Ct. of Brussels Sept. 11, 2003) ....5

Local 342 v. Huntington,

31 F.3d 1191 (2d Cir. 1994) .......................................................................................8

Lochner v. New York,

198 U.S. 45 (1905) ..................................................................................................... 8

MasterCard Intl Inc. v. Visa Intl Serv. Assn, Inc.,471 F.3d 377 (2d Cir. 2006) .................................................................. 11, 12, 17, 23

Matter of Arrow Carrier Corp.,Civ. A. No. 932519, 1994 WL 411780 (D.N.J. June 6, 1994) ................................9

Mo. Pac. Ry. Co. v. Nebraska,

164 U.S. 403 (1896) ...................................................................................................9

Motorola Credit Corp. v. Uzan,2003 WL 21373463 (S.D.N.Y. June 12, 2003) .......................................................20

Nemer Jeep-Eagle, Inc. v. Jeep-Eagle Sales Corp.,992 F.2d 430 (2d Cir. 1993) .......................................................................................7

NML Capital, Ltd. v. Republic of Argentina,699 F.3d 246 (2d Cir. 2012) .......................................................................... 2, 10, 17

Omnia Commercial Co. v. United States,261 U.S. 502 (1923) ................................................................................................. 13



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iii

Palazzolo v. Rhode Island,533 U.S. 606 (2001), WL 1742030..........................................................................15

PruneYard Shopping Center v. Robins,

447 U.S. 74 (1980) ................................................................................................... 14

Quern v. Jordan,440 U.S. 332 (1979) ...................................................................................................2

Red Mountain Fin., Inc. v. Democratic Republic of Congo,

No. CV 00-0164 R (BQRx) (C.D. Cal. May 29, 2001) ............................................. 5

Reynolds v. Intl Amateur Athletic Fedn,

505 U.S. 1301 (1992) ................................................................................................. 3

Reynolds v. Intl Amateur Athletic Fedn,841 F. Supp. 1444 (S.D. Ohio June 19, 1992) ...........................................................3

Robbins v. Lady Baltimore Foods, Inc.,678 F. Supp. 1323 (N.D. Ill. 1987) ............................................................................9

Robbins v. Lady Baltimore Foods, Inc.,868 F.2d 258 (7th Cir. 1989) .....................................................................................9

Rogers Mach. Co., Inc. v. City of Tigard,538 U.S. 906 (2003) ................................................................................................. 15

Rumber v. District of Columbia,487 F.3d 941 (D.C. Cir. 2007) .................................................................................14

Stop the Beach Renourishment, Inc. v. Fla. Dept of Envtl Protection,130 S. Ct. 2592 (2010) ........................................................................................ 9, 12

Thompson v. Consolidated Gas Utilities. Corp.,300 U.S. 55 (1937) ..................................................................................................... 8

Tick v. Cohen,

787 F.2d 1490 (11th Cir. 1986) ...............................................................................17



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iv

Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd.,956 F.2d 1245 (2d Cir. 1992) ..................................................................................... 2

Williamson Cnty. Regl Planning Commn v. Hamilton Bank,

473 U.S. 172 (1985) ................................................................................................. 13

Yudell Tr. I et al. v. API Westchester Assocs.,

227 A.D.2d 471 (N.Y. App. Div. 1996) ....................................................................6

Rules

22 A.L.R. Fed. 765 19 ...........................................................................................17

28 U.S.C. 1330 ......................................................................................................16

28 U.S.C. 1367(a) ................................................................................................. 16

Fed R. Civ. P. 19. .................................................................................. 11, 16, 23, 24

Fed. R. Civ. P. 19(a)................................................................................................. 17

Fed. R. Civ. P. 24. ....................................................................................................24

Fed. R. Civ. P. 60(b) ................................................................................................ 24

Fed. R. Civ. P. 60. ............................................................................................. 15, 24



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PRELIMINARY STATEMENT1

Plaintiffs (and supporting amici, most notably the Washington Legal

Foundation (WLF)) seek, but ultimately fail, to obscure the reality that the

Injunction constitutes an unreasonable and unconstitutional deprivation of

Exchange Bondholders (EBH) property rights.

ARGUMENT

I. THE INJUNCTION UNLAWFULLY BURDENS THE EXCHANGE

BONDHOLDERS PROPERTY RIGHTS.

Plaintiffs do not dispute that the Injunction rewrites the terms of the

Exchange Bonds by converting an unconditional right to payment into a

conditional right. EBGB, 20-21, 23 & n.13. Nor do they dispute that the

Injunctions express purpose is to use the EBHs rights as leverage to enforce the

rights of unrelated parties. Id. at 22-23. NML cites no case upholding such an

extraordinary injunction, and ignores the EBGs precedent in which injunctions

were denied because they unreasonably burdened non-parties. See id. at 17-19.

NML and WLF2 mischaracterize this Courts prior ruling. NMLB, 30-31;

1 Abbreviations and capitalized defined terms have the same meaning as in theEBGs initial appellate brief (ECF No. 464) (EBGB). EBGDCB refers toEBGs brief to the District Court (Nov. 16, 2012). NMLB refers to NMLPlaintiffs (NML) opposition brief (ECF No. 821). NMLDCB refers to

NMLs brief to the District Court (Nov. 13, 2012). RB refers to the Republicsinitial appellate brief (ECF No. 657). WLFB refers to Washington LegalFoundations (WLF) amicus brief (Jan. 11, 2012) (ECF No. 789). EMLBrefers to EM Ltd.s amicus brief (ECF No. 374).



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2

WLFB, 21-22. Although the Court quoted the district courts finding that the

Injunction does not violate the EBHs rights,see NML Capital, Ltd. v. Republic of

Argentina, 699 F.3d 246, 256 (2d Cir. 2012), it did not affirm that conclusion.

Rather, the Court remanded for clarification of the Injunctions intended

application to third-parties, after which the case returns to this Court under

Jacobson to determine whether the clarified Injunction was reasonable. Id. at 264-

65. NMLs law of the case argument (NMLB 31) therefore fails; only issues

previously determinedbecome the law of the case. In re Lynch, 430 F.3d 600,

604 (2d Cir. 2005) (emphasis added) (quoting Quern v. Jordan, 440 U.S. 332, 348

n.18 (1979)).3

2 Although WLF purports to be an independent public interest organization(WLFB, 2), it has close ties to NML. It is unlikely that WLF independently chose

to devote its entire amicus submission to a point-by-point response to the EBGbrief. One clear connection between NML and WLF is American Task ForceArgentina (ATFA). Elliott Associates, L.P., which controls NML, and MontreuxPartners, another holdout that filed an amicus brief, are ATFA members. SeeAbout Us, ATFA website, http://www.atfa.org/about- us/. ATFA thus appears to

be a lobbying arm of the holdouts. See Ianthe Jeanne Dugan, Argentine LobbyMystifies Members, Wall Street Journal, Oct. 15, 2012, available athttp://online.wsj.com/article/SB10000872396390444657804578050923796499176.html. ATFA also has used WLF as legal experts in discussing the holdoutsArgentine debt litigation. See, e.g., Press Release, Dec. 27, 2012, available athttp://www.atfa.org/15237/.3 In any event, [t]he law of the case doctrine is admittedly discretionary anddoes not limit a court's power to reconsider its own decisions prior to final

judgment. Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255(2d Cir. 1992). It need not be applied when no prejudice results from itsomission. First Nat'l Bank of Hollywood v. Am. Foam Rubber Corp., 530 F.2d



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3

NML contends that the Injunction does not prohibit the Republic from

paying EBHs, and that any harm threatened emanates from the Republic. NMLB,

31. Not so. The Injunction does prohibit the Republic from paying EBHs, and

further prohibits the Trustee from remitting payments to EBHs, unless a newly-

imposed condition is satisfied full payment of the Republics debt to Plaintiffs.

SPE-1381-82; EBGB, 21-22. Plaintiffs in fact rationalized the Injunction on the

premise that the Republic would not pay NML (EBGB, 24 n.14), and used the

EBHs rights as a pawn to compel payment. Id., 20-23.4

Although NML dismisses the risk of default (NMLB, 32-33), WLFs Chief

Counsel recently stated that the real concern of the [EBHs] is that Argentina will

default and wont pay them anything ... given Argentinas history thats a

legitimate concern. Transcript, ATFA Teleconference, Dec. 27, 2012, available

at http://www.atfa.org/atfa-mediateleconf-erence-transcript-argentinas-pari-pass-

appeal/. Regardless, the propriety of the Injunction turns on legal principles, not

450, 453 n.3 (2d Cir. 1976). Here, NML had multiple opportunities to address theEBGs arguments, and therefore suffers no prejudice from the Court consideringthem.4 NMLs reference to Reynolds, 505 U.S. 1301 (NMLB, 32), is unavailing.

Reynolds is a three-paragraph opinion by a single Justice heard in an emergentbasis that cites no law. Third-party interests were not truly at risk because thedistrict court found the third-party threat was not credible. SeeReynolds v. Intl

Amateur Athletic Fedn, 841 F. Supp. 1444, 1454-55 (S.D. Ohio June 19, 1992).The Reynolds injunction also was not purposely designed to threaten third-partyrights. In any event, the Republic has not threatened the EBHs; its intent is to paythem. SPE-391. The Injunction, not the Republic, threatens the EBG.



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4

NMLs rose-colored, self-serving predictions of future events.5 Plaintiffs

speculation ignores that the Republic can, by remitting Exchange Bond payments

to the Trustee, both refuse to pay Plaintiffs andpotentially avoid default (assuming

the mere act of remitting those payments to the Trustee is deemed sufficient to

satisfy the Republics obligations to the EBHs). In that instance, the EBHs will still

be deprived of their property. NML insists that the Republic can pay them andthe

EBHs. NMLB, 57. As explained in Section IV.C infra, this is erroneous.

Plaintiffs attempt to minimize the inequality by claiming that EBHs took their

bonds subject to the rights of the FAA bondholders. NMLB, 33. But that begs

the question. The EBHs never agreed to an unprecedented Injunction that imposes

an onerous condition on unconditional property rights to assist in the collection of

Plaintiffs private contract judgment.

NMLs reference to the 2005 Prospectus putting certain EBHs on notice that

litigation might interfere with payments (NMLB, 33) is disingenuous. Not only

5 NML deems a default on the Exchange Bonds irrational. NMLB, 52. Butthere is ample evidence that the Republic does not always act on strict economicrationality. The Republics leaders evidence irrational defiance, apparentlymotivated by national pride, sovereignty, and politics. SPE-390-92; EBGB, 24n.14; NMLDCB, 1-2. Accordingly, the Republic has been unable to access theinternational capital markets for twelve years due largely to its failure to payPlaintiffs. See A-853, A-856, A-2227, SPE-395; see also Financial TimesBeyondbrics Blog, Argentina: one debt-pile down, many more to go, Ian Mount,July 31, 2012, http://blogs.ft.com/beyond-brics/2012/07/31/argentina-one-debt-

pile-down-many-more-to-go/#axzz2JEHCHI1d.



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5

does the cited language not appear in the 2010 prospectus governing the EBHs

rights (compare A-466 with A-991) but the removal of that warning from the 2010

prospectus is doubtless the result of intervening judicial decisions rejecting the

type of injunctive relief Plaintiffs seek here.6 Indeed, NMLs contention that

every court confronted with the issue has ordered equitable relief comparable to

the Injunction, NMLB, 34, is patently false. Plaintiffs ignore Kensington Intl

Ltd. v. Republic of the Congo, [2003] EWCA Civ. 709,7 where the Court of

Appeals of England and Wales refused to order Congos compliance with a pari

passu clause. Kensington quoted approvingly the lower courts finding that the

rights of third parties should not be jeopardized: I do not regard it as an

appropriate exercise of my discretion to make an order compliance with which

can only realistically be achieved by coercion of third parties. Id. at 7. NML

citesLCN v. Nicaragua, but LCNs ex parte injunction was reversed on appeal for

restraining third parties.8 See Patrick Wautelet, Vulture Funds, Creditors and

6 Disclosure of litigation risk in the 2005 prospectus is irrelevant in any event.Improper court orders are a risk in every litigation. Acknowledging that risk doesnot require bondholders to passively accede if it comes to pass.7 Available at http://www.bailii.org/ew/cases/EWCA/Civ/2003/709.html.8 The reversal in LCN post-dated (and thus effectively negated) Plaintiffssuccess in obtaining an ex parte order in the earlier Belgian case ofElliot Assocs.

L.P. v. Banco de la Nacion. NMLB, 29. See Wautelet,supra, at 20-23. Plaintiffsalso cite an order in Red Mountain. NMLB, 29. However, that order lacks anylegal analysis (A-1369-72); pre-dates Kensington and LCN; does not expressly



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6

Sovereign Debtors: How to Find a Balance?, Sovereign Debtors & Creditors,

March 2011, http://ssrn.com/abstract=1994425, at 20-23.

It is irrelevant that EBG members litigated against the Republic before

accepting the 2010 exchange offer. NMLB, 33. No EBH ever sought an

injunction of the sort entered here. Nor does the EBG contend that Plaintiffs are

not entitled to payment. Its complaint is that the Injunction is an unlawful means

of coercing payment. NML also attempts to portray one mention ofElliot v. Peru

in an EBHs press release as endorsing the Injunction. Id. In fact, that press

release referencedElliott Assocs., L.P. v. Republic of Peru, 194 F.3d 363 (2d Cir.

1999), where this Court rejected Perus champerty defense, an issue that has no

bearing on the Injunction.

Plaintiffs cite three cases outside the equal treatment context that they

wrongly contend granted relief analogous to the Injunction. NMLB, 34. The court

in Chrysler, 63 A.D. 2d 567, actually declined to enjoin payments to the innocent

Class A shareholders. Id. at 568-69. California Service Employees, 2007 WL

3232444, an unpublished ERISA case, enjoined a company from making

discretionary payments to its own officers and directors until non-discretionary

payments were made to outsiders. Id. at *9. Yudell, 227 A.D.2d 471, enforced a

apply to third-parties; was not appealed; and the case ultimately settled, see No.00-cv-00164-R(BQR) ECF No. 238, at 2 (C.D. Cal. June 10, 2002).



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7

plaintiffs right of first refusal on a parcel of land where a third-partys contract to

buy the property had expired before the courts order. Id. at 472. Thus, none of

NMLs cases actually infringe third-party property rights.9

Contrary to NMLs position (NMLB, 35), the equities do not favor them.

Plaintiffs took a calculated risk by rejecting the exchange offer, knowingly

acquiring FAA Bonds at deeply distressed prices, and attempting to collect against

a sovereign government fully aware that enforcement mechanisms were limited.

EBGB, 26-27; A-465, A-705, A-707. NML has every right to pursue this

approach. What it cannot do is make innocent EBHs the insurers of its risky

decisions.10

9 Plaintiffs also misguidedly claim that Nemer, 992 F.2d 430, supports theirposition. NMLB, 34-35. There, this Court found that harm to third-parties was not

disproportionate where they could sell automobiles during a briefpreliminaryinjunction. 992 F.2d at 436. In contrast, defendants potentially unlawful grant ofdealerships to non-parties threatened plaintiffs very existence. Id. No suchcircumstances are presented here, where the Injunction disproportionately

jeopardizes payments on $50 billion of Exchange Bonds in favor of $428 millionface amount of FAA bonds. EBGB, 14. Additionally, the third-party rights in

Nemerwere potentially illegal. The EBHs are not. Nor was theNemerinjunctionintentionally structured to leverage the non-parties rights for the benefit of

plaintiff.10 Citing JA-850, NML claims that the EBHs urged the Republic to pass theLock Law. NMLB, 35-36. JA-850 says nothing of the sort, and there is noevidence that any EBH attempted to convince the Republic to pass the law. Forexample, the Republic enacted the legislation to encourage participation in the2005 exchange (A-924), in which EBH Gramercy refused to participate. The LockLaw had to be suspended to allow the 2010 exchange in which Gramercy did

participate (A-925).



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8

II. THE INJUNCTION VIOLATES THE EBGS FIFTH AMENDMENT

RIGHTS.

A. The Injunction Violates Substantive Due Process.

NMLs primary response to the EBGs substantive due process argument is

to reference the Lochner line of cases. NMLB, 50. But the issue here is not a

conflict between private contract rights and government efforts to regulate the

economy or public welfare, health, and safety. It is the governments inability to

deliberately11 deprive its citizens of private property12 to assist the collection of a

private debt owed to other citizens. Such action has never been held constitutional.

EBGB, 30-31.

Reliance onLocal 342, 31 F.3d 1191, is misguided. NMLB, 50; WLFB, 16.

That case held that government termination of a contract with a private citizen

alone does not violate substantive due process. Id. at 1196. But more than

[s]imple state-law contract rights are at issue here. Id. Substantive due process

extends to rights firmly rooted in the traditions and conscience of our people

11 The district court recognized that it lacked authority to prejudice EBHsrights. EBGB, 20-23.12 The property right imperiled by the Injunction is not, as WLF contends, theright to demand payment from Argentina and sue in the event of nonpayment.WLFB, 14. It is the right to receive defined payments on certain dates withoutextra-contractual conditions. WLF also incorrectly claims that there is no restrainton property. WLFB, 14. The Injunction imposes a condition on the EBGs rightto receive bond payments that did not otherwise exist, EBGB, 20-21, 23, which thedistrict court acknowledged was a restraint. Id. at 20.



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9

and implicit in the concept of ordered liberty. Id. The concept that

government cannot use the property of some citizens to favor the private property

interests of other citizens falls squarely within that test, as the Thompson,

Holmberg, and Missouri Pacific cases demonstrate. EBGB, 31. NMLs sole

response is to dismiss these authorities as outdated. NMLB, 51 n.11. The core

principle of these cases is not a relic of a bygone era. Id. Rather, the Supreme

Court has reaffirmed this bedrock principle, and cited Thompson and Missouri

Pacific as good law as recently as 2005. See Kelo v.City of New London, 545 U.S.

469, 500 (2005).13

As Justice Kennedy recognized in Stop the Beach, [t]he Due Process

Clause, in both its substantive and procedural aspects, is a central limitation upon

the exercise of judicial power. And this Court has long recognized that property

regulations can be invalidated under the Due Process Clause. 130 S. Ct. at 2614

(citing cases from, inter alia, 1930, 1928, and 1922). NML contends that Justice

Kennedys opinion addresses only judicial actions that eliminate established

13 Modern courts frequently analyze government deprivations of privateproperty rights for private benefit under the rubric of substantive due process. See,e.g.,49 WB, LLC v. Village of Haverstraw, 2012 WL 336152, *5-8 (S.D.N.Y. Feb.2, 2012);In re Arrow Corp., 1994 WL 411780, *5 (D.N.J. June 6, 1994); Robbinsv. Lady Baltimore Foods, Inc., 678 F. Supp. 1323, 1328 (N.D. Ill. 1987), revd onother grounds, 868 F.2d 258 (7th Cir. 1989). Likewise, this Court has recognizedthat arbitrary or irrational government action resulting in loss of property rightsviolates substantive due process. See, e.g., Brady v. Town of Colchester, 863 F.2d205, 215-216 (2d Cir. 1988).



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10

property rights. NMLB, 50. But it ignores the plain statement that the Due

Process Clause [limits] the power of courts to eliminate or change established

property rights. 130 S. Ct. at 2614 (emphasis added). Here, the Injunction

change[d] the EBGs property rights by imposing a new condition on payment

and by imperiling those rights in service of NMLs private collection efforts.14

Having convinced the district court and this Court that an action for damages

against the Republic is an inadequate remedy, see 699 F.3d at 262, Plaintiffs

now shamelessly argue that the EBG is protected by its right to sue if the Republic

defaults. NMLB, 50-51; WLFB, 9. The EBHs accepted the exchange offer

because they did not want to chase a sovereign state for a debt with scant hope of

collection. By rejecting two exchange offers, Plaintiffs embraced that risky

venture. EBGB, 26-27. If the Republic defaults on the Exchange Bonds, the

EBHs will be in (at best) the same position as Plaintiffs were pre-Injunction. If the

Republic pays and the funds are frozen pursuant to the Injunction, the EBHs will

arguably have no suit against the Republic (which could argue that it has made the

14 NML further contends that Justice Kennedys opinion merely proscribes theabandonment of settled principles. NMLB at 51. Entering an injunction thatdeprives a citizen of property rights for the private benefit of another citizen, asnoted above, does indeed abandon settled principles. Nor does the EBG contendthat this Courts October 26 opinion violates due process, id., because the Courtdid not rule on the Injunctions validity as it pertains to third-party rights. 699 F.3dat 264-65.



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11

required bond payments) or the Trustee (which argues the Injunction would

immunize it from liability. BNYM Br., 40-43 & n.10.15

WLF likens the Injunction to a scenario in which A collects a judgment from

C, creating the collateral effect of leaving creditor B, another creditor of C, less

able to recover. WLFB, 14-15. That analogy is inapt; the district court here

ordered C not to pay B unless it also pays A, and deliberately designed the

Injunction to imperil Bs rights in order to enforce As rights.16 Likewise, WLFs

citation to MasterCard Intl Inc. v. Visa Intl Serv. Assn, 471 F.3d 377 (2d Cir.

2006), fails because that decision holds only that the third-party in that particular

case was not a necessary party under Rule 19. 471 F.3d at 389. MasterCarddid

not decide whether an injunction prejudicing the third-partys rights was

permissible, and any language therein bearing on that subject is dicta. Further,

MasterCard involved exclusive rights, and thus the Court could not avoid

depriving either Visa or MasterCard of that benefit. Id. at 380. Here, the Court

can enforce the rights of all concerned by excising the provisions that jeopardize

15 BNMYs request is not ripe for adjudication in this proceeding. See AbbottLabs. v. Gardner, 387 U.S. 136, 148 (1967) (Article IIIs ripeness requirementprevent[s] the courts, through premature adjudication, from entangling themselvesin abstract disagreements.)16 Contrary to WLFs contention (WLFB, 9), the EBG does not argue that theFifth Amendment is implicated by indirect effects of court decisions on propertyvalues. It is the EBGs unqualified right to payment that is constitutionally

protected a right the Injunction makes conditional and uncertain, as evidenced bythe diminished value of the bonds on the secondary market. EBGB, 16.



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12

the EBGs payments. EBHs will retain their unconditional rights to payment, and

Plaintiffs will retain their bonds, their right to payment, and all the lawful

collection mechanisms available to them (including those alluded to by the district

court (SPE-463, T18:5-14)). Finally, in the event that MasterCard obtained

specific performance, Visa retained a viable action for damages, id. at 381, while

(as noted above) the EBG has no such remedy here.

B. The Injunction Effects an Unlawful Taking.

Try as they might to circumvent Stop the Beach, 130 S. Ct. 2592, Plaintiffs

cannot deny that four Supreme Court justices recognized a judicial takings

doctrine, Id. at 2601-02, and two more agreed that judicial takings must be

redressed under a due process analysis, id. at 2613-18.17 Judicial acts substantially

burdening property rights thus are actionable.18

Plaintiffs also re-hash their argument that judicial takings are possible only

when property rights are eliminated (NMLB, 52), which is incorrect as explained

17 The remaining Justices who participated did not dissent, but opined that itwas unnecessary to decide whether to recognize a judicial takings doctrine. 130 S.Ct. at 2618-19.18 Citing a 1930 Supreme Court case (Brinkerhoff-Faris, 281 U.S. 673) and aFederal Claims Court decision pre-dating Stop the Beach (Brace, 72 Fed. Cl. 337),Plaintiffs posit a long line of authority rejecting judicial takings claims. NMLB,52. To the extent they in fact did so, those decisions are not good authority afterStop the Beach, but they are inapposite becauseBrinkerhoff-Faris does not addressthe Takings Clause, and Brace was ultimately decided on other grounds. 72 Fed.Cl. at 359.



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13

in Point II.A, supra. Further, judicial acts are indistinguishable from legislative

and executive acts for purposes of Fifth and Fourteenth Amendment rights (EBGB,

32-33), and takings law routinely protects infringements on property short of

outright elimination (id. at 34-35).

NML claims that Omnia, 261 U.S. 502, andHuntleigh, 75 Fed. Cl. 642, hold

that a taking does not occur when government action makes it less likely that a

party will honor its agreements. NMLB, 52-53. Omnia found no taking where

plaintiff contracted to buy steel, but did not receive performance because the

government lawfully appropriated the sellers entire production for military use.

The Court explained that steel was taken -- not plaintiffs contract -- and that the

impact on plaintiffs contract was incidental to the lawful government purpose.

261 U.S. 502, 510-11 (1923). Here, the Injunction directly and unlawfully

conscripts the EBHs contractual rights in order to coerce the Republic into paying

a private party. The EBHs harm is direct, not consequential, and is the result of

unlawful governmental action.19

Citing Williamson, 473 U.S. 172, Plaintiffs and WLF claim that the Tucker

Act prohibits the EBG from raising its takings argument. NMLB, 48; WLFB, 17-

19 Huntleigh follows Omnia, holding that when the government lawfullyregulated air travel by requiring all airport security screenings to be performed bythe federal government, it did not take the contracts between airports and

plaintiffs private security firm. 75 Fed. Cl. at 545-46.



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14

18. Unlike Williamson, just compensation is not the issue here; rather, the

Injunctions taking of EBHs private property for private use is absolutely

forbidden, whether or not just compensation is paid. Haw. Hous. Auth. v.

Midkiff, 467 U.S. 229, 241 (1984). The Tucker Act does not apply to such claims.

See Rumber v. District of Columbia, 487 F.3d 941, 944 (D.C. Cir. 2007).

WLF contends that the Injunctions restrictions on EBHs property are

insufficient to qualify as a taking underPruneYard, 447 U.S. 74. WLFB, 19.

But the record contains ample evidence of a taking. EBGB, 20-23. The EBGs

investment-backed expectations have been trampled; no one expected that a

court would engraft a new, onerous condition on the EBHs contractual rights to

payments. The economic impact on the EBHs is massive, imperiling payments on

some $50 billion in Exchange Bonds. Id. at 24. Further, the expert testimony of

Professor Stephen Choi20 demonstrates that the value of the Exchange Bonds has

plummeted in direct response to the Injunction. Id. at 24-25. Finally, if there is

insufficient evidence of a taking, it merely underscores the need for Rule 60 relief

to develop a full factual record. Point IV, infra.21

20 The Kenneth Dam amicus brief is replete with erroneous statementsconcerning Professor Chois analysis. The EBG is prepared to submit a rebuttal atthe Courts request. Alternatively, Dams criticisms should be resolved in anevidentiary hearing on remand.21 WLFs positions in this case are glaringly inconsistent with positions it hastaken in others. For example, while WLF questions here whether a judicial taking



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15

III. THE INJUNCTION MUST BE VACATED BECAUSE THE

EBHS WERE NECESSARY PARTIES TO THE PROCEEDINGS

BELOW.

NML incorrectly argues the EBG members were not necessary parties

pursuant to theMasterCardcase. NMLB, 56. In fact, joinder was required under

Crouse-Hinds Co. v. InterNorth, Inc., 634 F.2d 690 (2d Cir. 1980). In

MasterCard, the defendant had granted Visa exclusive sponsorship rights, after

giving MasterCard a right of first refusal for the same sponsorship rights.

MasterCard sought to enjoin performance under the Visa contract. Id. at 381. Visa

then sought to intervene which would have destroyed diversity jurisdiction22

on

violates the Constitution (WLFB, 17), it has argued elsewhere that the TakingsClause applies to the taking of all private property, whether through anadjudicative proceeding or a general legislative scheme. WLF Amicus Brief,

Rogers Mach. Co., Inc. v. City of Tigard, 538 U.S. 906 (2003) (No. 02-750), 2002

WL 32133661. WLF has strenuously argued that judicial inquiries intoreasonable investment-backed expectations should be abandoned as uncertain,incoherent and unfair, WLF Amicus Brief, Palazzolo v. Rhode Island, 533 U.S.606 (2001), 2000 WL 1742030, but insists here that there is no taking because theEBG has not demonstrated their reasonable investment-backed expectations(WLFB at 19-20). And while WLF here claims that the EBGs takings claim is

premature for failure to seek a just compensation (id. at 17-18), it took acontradictory position inPhillip Morris, Inc. v. Reilly, 312 F.3d 24. (1st Cir. 2002).(WLFAmicus Brief, 2001 WL 36026170) and Wash. Legal Found.v. Texas Equal

Access to Justice Found., 873 F. Supp. 1 (W.D. Tex. 1995).22 This fact alone distinguishes MasterCard. There is no reason to considerwhether EBG is an indispensable party under Rule 19(b) (as NML suggests,

NMLB, 57 n.15), because joinder of EBG would not defeat diversity jurisdiction.SeeAssociated Dry Goods Corp. v. Towers Fin. Corp., 920 F.2d 1121, 1124 (2dCir. 1990). Jurisdiction exists here under 28 U.S.C. 1330 because the Republic isa foreign state and the EBG may be joined pursuant to 28 U.S.C. 1367(a).



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the basis that it was a necessary and indispensable party. The district court rejected

this argument, and this Court affirmed.

In doing so, this Court distinguished Crouse-Hinds, holding that a party is

necessary when its contractual rights would otherwise be adjudicated in its

absence. Id. at 700-701. In Crouse-Hinds, the plaintiff signed a merger agreement

with non-party Belden after rejecting a tender offer from InterNorth. Id. at 692.

InterNorth filed a counterclaim to enjoin the plaintiff from performing the merger

agreement. Id. at 697. This Court dismissed InterNorths counterclaim because

Belden was a necessary party that would preclude diversity jurisdiction. Id. at 698.

It reasoned that since Beldens rights would clearly be prejudiced if the relief

sought by InterNorth were to be granted, Beldens presence is required. Id. at

701(citations omitted).

Crouse-Hinds controls here because Injunction specifically targets the non-

parties contract. Indeed, the associated opinion identifies the Exchange Bonds

fifteen times and enjoins making any payment under the terms of the Exchange

Bonds without . . . making a Ratable Payment to NML. SPE-1382. The

Injunction targets the EBG directly, asserting a need to ensure enforcement of the

Injunctions requirement that payments are to be made on the Exchange Bonds

only if appropriate payments are made concurrently or in advance to plaintiffs.

SPE-1368. It further blocks the Trustee from distributing to the EBG any money



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17

that the Republic may pay into trust. SPE-1382. The Injunction thus encumbers

the EBGs contractual rights and the EBGs trustproperty.23

By contrast, in MasterCard, if MasterCard had rights of first refusal, then

the defendant necessarily could not have given those rights to Visa. Visas

contract simply was not at issue, and Visa could sue the defendant if it failed to

perform. 471 F.3d at 386-87. Unlike in Crouse-Hinds, where the absent non-

partys ability to protect [its] interests would be impaired because of[its] absence

from the litigation, the Court concluded that Visas rights [would] not be

impaired if it was not joined. Id. MasterCardis inapposite because the district

court here impaired the EBHs contractual rights, not because the recognition of

NMLs own contract rights required it (as in MasterCard), but to coerce the

Republic to pay NML. Additionally, as shown in Point I, supra, unlike

MasterCard, the Injunction leaves the EBG without any effective legal recourse,

resulting in irreparable harm. 699 F.3d at 262.

23Under Rule 19(a), trust beneficiaries are necessary parties in actions

burdening trust assets. See, e.g., 22 A.L.R. Fed. 765 19 (noting almost all courtshave found an absentee having an interest in or relationship to an estate or trustto be a necessary party); Tick v. Cohen, 787 F.2d 1490, 1494 (11th Cir. 1986).Because NML asserts that if the Republic pays BNYM interest due on theExchange Bonds, those funds must be paid over to Plaintiffs, NMLDCB at 12-15,the EBHs, as trust beneficiaries, are necessary parties.



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18

IV. THE DISTRICT COURT VIOLATED THE EBGS PROCEDURAL

DUE PROCESS RIGHTS.

A. The Injunction Does Not Merely Affect the EBGs Rights.

NML argues that merely being affected by a decision does not implicate

due process rights. NMLB, 53. As NMLs citations establish, however, there is a

difference between litigation merely affecting a non-party and, as here, litigation

specifically targeting a non-partys legal rights. See Natl Assn of Chain Drug

Stores v. New England Carpenters Health Benefits Fund, 582 F.3d 30, 42 (1st Cir.

2009) (Impact and legal rights are not the same thing; a person cannot be

deprived of his legal rights in a proceeding to which he is not a party.); U.S. v

Buck, 281 F.3d 1336, 1345 (10th Cir. 2002) (rejecting claims by non-party

movants impacted by quiet title judgment only after analysis of whether their

legal rights had been affected).24

Chain Drug Stores is particularly unhelpful to NML. There, non-party

pharmacies contended that their due process rights were implicated by a proposed

class action settlement of RICO claims against drug wholesalers that would reduce

24 NML selectively quotes the Patterson case for the proposition that dueprocess obviously does not mean that a court may never issue a judgment that,in practice, affects a nonparty. NMLB, 53. But asPatterson makes clear, thecourt mustconsider the extent to which the judgment may as a practical matterimpair or impede [a non-partys] ability to protect his interest in the subjectmatter. Provident Tradesman Bank Trust Co. v. Patterson, 390 U.S. 102, 110(1968) (footnotes omitted; emphasis added).



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the price charged by pharmacies for prescriptions. The court held that, although

non-party pharmacies revenues would be impacted by a settlement reducing

wholesale prices, theirlegal rights were not affected because they had chosen by

contract to key their reimbursements to figures published by the defendants. Id. at

42. By contrast, here the district court imposed a new condition precedent on the

EBGs contract rights, thereby directly affecting legal rights. See also EBGB at

29-33.

B. The EBG Had No Opportunity to Respond to the February 23,2012 Injunction Until After the October 26, 2012 Remand.

NML argues the EBG received the process it was due because it had actual

notice of the Injunction. NMLB, 53-54. NMLs argument is based on speculation,

not evidence. General press coverage of court proceedings is not actual notice

where, as here, a partys legal rights are directly targeted by judicial action. See,

e.g., In re Agriprocessors, Inc., 465 B.R. 822, 832-33 (Bankr. N.D. Iowa 2012)

(creditor lacked actual notice of sale despite news reports of debtors bankruptcy

proceedings); In re Rounds, 229 B.R. 758, 765 (Bankr. W.D. Ark. 1999)

([A]dequate notice and opportunity to participate includes providing

interested, known parties not only with generalized notice of the event in

question, but also the specifics of it....) (emphasis in original) (citing In re

Hairopoulos, 118 F.3d 1240, 1244 (8th Cir. 1997)). Absent evidence that the EBG

received actual notice before the February 23 Injunction, it was deprived of due



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process, rendering the Injunction void. EBGB at 37-39 (discussingDial,Aztec and

Metzger).

C. Due Process Required an Evidentiary Hearing.

Contrary to NMLs argument (NMLB, 55), an evidentiary hearing was

required because several factual issues relevant to the equities were never

developed, particularly as to application to third parties. NML, 699 F.3d at

265.25 A court may forgo an evidentiary hearing only when [t]he most significant

factors [on which the injunction was based]would have remained essentially

unchanged by any additional evidence. Drywall Tapers and Pointers of Greater

N.Y., Local 1974 v. Local 130 of Operative Plasterers and Cement Masons Intl

Assn, 954 F.2d 69, 77 (2d Cir. 1992); see Motorola Credit Corp. v. Uzan, 2003

WL 21373463, at *2 (S.D.N.Y. June 12, 2003) (ordering evidentiary hearing after

plaintiff made prima facie case for injunction to provide defendant opportunity to

complain[] of the hardships that it might suffer).26

25 NMLs claim that one brief conference on November 9, 2012 satisfied thehearing requirement (NMLB, 55 n.13) is baseless. The conference was merely toschedule proceedings, SPE-448, and the district court gave EBGs counselvirtually no opportunity to speak. SPE-446:12-13; SPE-449:25-SPE-450:6; SPE-472:5-SPE-473:14; SPE-478:1-5.26 EBG does not contend that due process requires giving a party the briefingschedule of its choice. NMLB, 55 n.13. The district courts rush to judgmentdeprived the EBG of a reasonable time to prepare its argument in the absence ofany exigency. See, e.g., In re Ctr. Wholesale, Inc., 759 F.2d 1440, 1448 (9th Cir.1985) (one days notice insufficient). Scheduled payment obligations on the



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21

The EBG would have proffered evidence, inter alia, concerning the

Republics ability to fully pay the holdouts and the EBHs; the practicality and

legality of requiring intermediaries to withhold payments owed to EBHs; and

whether NML had inequitably purchased credit default swaps that effectively bet

that this litigation would prompt a second default and ensure that, no matter the

outcome, NML would profit. EBGB at 38 n.21. Had the EBG and others received

due process, the factual record before the district court would have been far

different, providing further evidence that the Injunction is unsupportable.

An evidentiary hearing would have exposed the fallacy in NMLs assertion

that Argentina can afford to pay allexchange and FAA bondholders. NMLB, 57.

The Record contains no credible evidence to support this. Euro Bondholder Br.,

28 n.17 ([A]lthough it has $43 billion of reserves, that number is actually closer to

$19 billion after accounting for foreign denominated private sector loans, deposits,

foreign lines of credit, and its 2013 budget law earmarking $8 billion for its

debt.); Prat-GayAmicus Br., 8. Foreign exchange reserves are not, as the district

court considered them, the sovereign equivalent of a bank account from which any

withdrawal that does not result in a negative balance can be made. Puente Hnos.

Amicus Br., 21; see also Daniel Altman, Writings on the Wall for Argentina,

Exchange Bonds continue for some 25 years; there was no need for an expeditedbriefing schedule. SPE-451 at 20-23.



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22

Foreign Policy, Oct. 15, 2012, available at

http://www.foreignpolicy.com/articles/2012/10/15/writing_s_on_the_wall_for_arg

entina (the central banks capacity to support the peso may finally be running

out).27

27NMLs claim that the Republic can pay all bondholders ignores the fact that

the Republic is liable to additional non-party holdout FAA bondholders under thepari passu clause, in addition to other financial obligations of the Republic, whichfar outstrip its available reserves. The brief of Non-party holdout bondholder EM,Ltd. makes clear that, if this Court upholds the Injunction, there will be a flood offollow-on claims from other holdouts seeking the same remedy.EM Br., 3. If thatoccurs, the Republic would face liability for an estimated $10 billion to holdoutFAA bondholders not involved in this litigation (Katia Porzecanski, Singer CaseHas $10 Billion in Copycat Claims, Bloomberg, Jan. 30, 2013; Mount, supra. Inaddition to those claims, there are other liabilities of approximately $10 billion tothe Paris Club (Mount,supra);approximately $1 billion in outstanding ICSID andUNCITRAL arbitration awards and interest (see Awards, ICSID Case Nos.

ARB/97/3; ARB/01/8; ARB/01/12; ARB/02/1; ARB/03/15; ARB/03/23;ARB/07/17, available at http://italaw.com; Natl Grid P.L.C. v. Republic of

Argentina, No. 09-CV-00248(RBW), (D.D.C. Feb. 6, 2009), ECF No. 1-2); and$23.6 billion in pending ICSID arbitrations(see Republic of Argentina, Form 18-K, Sept. 30, 2011, 190, http://www.sec.gov/Archives/edgar/data/914021/000090342311000486/roa-18k_0928.htm; Repsol files intl complaint on

Argentina YPF takeover, Reuters, Dec. 3, 2012, http://www.reuters.com/article/2012/12/03/argentina-repsolidUSL1E8N36H92012 1203). The Republic alsoowes approximately $5.5 billion to the World Bank. World Bank Finances, IBRDStatement of Loans Latest Available Snapshot: Argentina, Nov. 30, 2012,available at http://finances.worldbank.org. Thus, Argentinas outstandingobligations to creditors amount to approximately $26.5 billion, and potentialobligations on likely claims (if the injunction is approved) of $23.6 billion, faroutstripping its available central bank reserves of approximately $19 billion (EuroBondholder Br., 28 n.17).



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23

D. The EBG Acted in a Timely Manner

[T]his Court has been exceedingly lenient in defining the term reasonable

time, with respect to voidness challenges. In fact, it has been oft-stated that, for

all intents and purposes, a motion to vacate a default judgment as void may be

made at any time. R Best Produce, Inc. v. DiSapio, 540 F.3d 115, 123-24 (2d

Cir. 2008). Since the EBG did not have proper notice of the February proceedings,

the Injunction was effectively a default judgment as to the EBG.

WLFs reliance on MasterCard for its Rule 19 timeliness argument is

meritless. WLFB at 23. MasterCard held that failure to join necessary parties

under Rule 19 could be raised at any time, even sua sponte or on appeal. 471 F.3d

at 382-83 (citing cases). Only as to a second appeal, id. at 384, of a Rule 24

motion to intervene, was Visa barred as untimely. Id. at 390-91. But the EBG

asserted Rule 19 arguments in its Rule 60 motion, and did not move to intervene

under Rule 24, so this portion ofMasterCardis inapplicable.28

E. The EBG Has Standing to File a Rule 60(b) Motion.29

28 Moreover, as WLF has previously argued (WLF Amicus Br. dated Jun. 29,2012 at 19-21), a party asserting laches must show prejudice. Plaintiffs suffered noharm from the timing of EBGs appearance. There is no indication Plaintiffswould have acted differently had EBG been involved earlier.29 Because the EBGs appeal of the district courts November 26 Orders (No.12-4694, encompassing all issues relating to denial of Rule 60(b) motion) wasconsolidated with the instant appeal (Order, Dec. 13, 2012 (ECF No. 580)), theEBG can raise on appeal all the issues addressed in its opening brief. See Order



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24

Non-parties have standing where the outcome of the proceedings has

significant consequences for their unrepresented interests, Federman v. Artzt,

2009 WL 2223492, *1 (2d Cir. 2009), and where movants are sufficiently

connected and identified with thesuitto entitle them to standing Dunlop v. Pan

World Airways, Inc., 672 F.2d 1044, 1051-52 (2d Cir. 1982) (emphasis added)

(former employees permitted to move to modify stipulation of employer with

government terminating age discrimination suit); see also Grace v. Bank Leumi

Trust Co., 443 F.3d 180, 188 (2d Cir. 2006) (Rule 60(b)) (standing recognized

where plaintiff settled with judgment-proofpro se defendant, intending to collect

judgment from non-party);In re Lawrence, 293 F.3d 615, 627 n.11 (2d Cir. 2002)

(collecting cases). Here, the Injunction alters the terms of the EBGs contract by

conditioning interest payments on the Republics full satisfaction of debts to

Plaintiffs. The EBGs rights are directly affected by (and specifically identified in)

the Injunction, thereby establishing standing.

V. THE EBG DID IN FACT OFFER AN ALTERNATIVE RATABLE

PAYMENT FORMULA.

As an initial matter, this court has not affirmed any interpretation of the

lower courts ratable payment formula, see NMLB, 19; it remanded for

consideration of the Injunctions impact on third-parties, including the ratable

Nov. 28, 2012 (ECF No. 482) (granting EBG leave to appear as interested non-parties). WLFs argument to the contrary, WLFB at 11-12, is frivolous.



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payment formula, after which this Court, underJacobson, could assess the legality

of the Injunction with knowledge of its precise terms. If NML were correct, the

Court would simply have remanded with instructions to clarify the formula before

putting the Injunction into effect.

Plaintiffs also falsely contend (NMLB, 20-21) that the EBG has not offered

alternative ratable payment formulas. In fact, the EBG submitted a very specific

proposal to the district court, which it did not address. In addition to the its brief to

the district court (EBGDCB, 20-21), Point I of the EBGs opening brief is a direct

challenge to the district courts formula that requires full payment on the FAA

bonds. To the extent NML contends that it is the EBGs obligation to propose

alternatives, it is mistaken.

The Plaintiffs are at great pains in their brief to paint the EBG as allies of the

Republic. That is wrong. The EBGs wish only to enjoy their contractual rights

without being dragged into or used as a pawn in the dispute between Plaintiffs and

the Republic. With respect to the proposal in the Republics brief to re-open the

exchange, the EBG takes no position on it vis-a-vis Plaintiffs, and simply notes that

there are other bondholders that may find the exchange offer attractive.30

30 EBG member Gramercy currently holds a claim against the Republicrelating to certain defaulted FAA Brady Bonds. Assuming a handful of legaltechnicalities relating to the underlying collateral can be overcome, Gramercywould participate in the new exchange. The EBG is also aware that other financial



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26

Dated: New York, New YorkFebruary 1, 2013

Respectfully submitted,

By: /s/ Sean F. OShea______________

OSHEA PARTNERS LLP

Sean F. OSheaMichael E. PetrellaDaniel M. HibshooshAmanda L. Devereux521 Fifth Avenue, 25th Floor

New York, New York 10175(212) [email protected]


David BoiesDavid A. Barrett

Nicholas A. Gravante, Jr.Steven I. Froot

575 Lexington AvenueNew York, New York 10022(212) 446-2300

Attorneys for the

Exchange Bondholder Group

institutions such as BNP Paribas, Grantham, Mayo Van Otterloo & Co LLC, andothers who, collectively with Gramercy, hold (or manage entities that hold) FAA

bonds representing approximately $500 million of judgments and claims againstthe Republic, would also be willing, subject to a review of the final terms, to

participate in a re-opening of the 2005 exchange.



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CERTIFICATE OF COMPLIANCE

I hereby certify that:

1. This brief complies with Fed. R. App. P. 32(a)(7)(B)(i) because it

contains 6,740 words.

2. This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this

brief has been prepared in a proportionately spaced typeface using Microsoft Word

in 14-point Times New Roman font.

Dated: February 1, 2013

By: /s/ Sean F. OShea

Sean F. OShea

Michael E. Petrella

Daniel M. Hibshoosh

OSHEA PARTNERS LLP

521 Fifth Avenue, 25th Floor

New York, New York 10175

Tel.: (212) [email protected]


David Boies

David A. Barrett

Nicholas A. Gravante, Jr.

Steven I. Froot

575 Lexington Avenue

New York, NY 10022Tel.: (212) 446-2300

Attorneys for the Exchange

Bondholder Group



35/37

STATE OF NEW YORK

COUNTY OF NEW YORK

)

)

)

ss.: AFFIDAVIT OF

CM/ECF SERVICE

I, Natasha S. Johnson, being duly sworn, depose and say that deponent is not a

party to the action, is over 18 years of age.

On February 1, 2013

deponent served the within: Reply Brief for Non-Party Appellant Exchange BondholderGroup

upon:

SEE ATTACHED SERVICE LIST

via the CM/ECF Case Filing System. All counsel of record in this case are registered

CM/ECF users. Filing and service were performed by direction of counsel.

Sworn to before me on February 1, 2013

___s/Maria Maisonet_____________ s/Natasha S. Johnson

MARIA MAISONET

Notary Public State of New York

No. 01MA6204360

Qualified in Bronx County

Commission Expires Apr. 20, 2013 Job # 245810



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SERVICE LIST:

Gibson, Dunn & Crutcher LLP

1050 Connecticut Avenue, NW

Washington, DC 20036

(202) 955-8500

-and-

Dechert LLP

1095 Avenue of the Americas


(212) 698-3500

Attorneys for Plaintiff-Appellee NML Capital, Ltd.

Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP1801 K Street, NW, Suite 411L


(202) 775-4500

-and-

Menz Bonner Komar & Koenigsberg LLP

444 Madison Avenue, 39th

Floor


(212) 233-2100

-and-

Friedman Kaplan Seiler & Adelman LLP

Seven Times Square


(212) 833-1100

-and-

Simpson Thacher & Bartlett LLP

425 Lexington Avenue


(212) 455-2000

-and-

MoloLamken LLP

600 New Hampshire Avenue, NW


(202) 556-2000



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-and-

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas


(212) 373-3000

Attorneys for Plaintiffs-Appellees Aurelius Capital Master, Ltd.,

ACP Master, Ltd., Blue Angel Capital I LLC and Aurelius

Opportunities Fund II, LLC

Milberg LLP

One Pennsylvania Plaza, 49th

Floor


(212) 594-5300

Attorneys for Plaintiffs-Appellees Pablo Alberto Varela,

Lila Ines Burgueno, Mirta Susana Dieguez, Maria Evangelina Carballo,

Leandro Daniel Pomilio, Susana Aquerreta, Maria Elena Corral,

Teresa Munoz De Corral, Teresa Munoz De Corral Norma Elsa Lavorato,

Carmen Irma Lavorato, Cesar Ruben Vazquez, Norma Haydee Gines and

Marta Azucena Vazquez

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza


(212) 225-2000

Attorneys for Defendant-Appellant

Goodwin Procter LLP

Exchange Place53 State Street

Boston, Massachusetts 02109

(617) 570-1000

Attorneys for Plaintiff-Appellee Olifant Fund, Ltd.

Reed Smith LLP

Reed Smith Centre

225 Fifth Avenue

Pittsburgh, Pennsylvania 15222

(412) 288-3131

Attorneys for Interested Non-Party Appellant The Bank of

New York Mellon, as Indenture Trustee


reply brief of exchange bondholders

Documents