U.S. stays out of Argentina pari passu case at SCOTUS – for now

March 26, 2014

France, Brazil and Mexico told the U.S. Supreme Court this week that the 2nd Circuit Court of Appeals has endangered sovereign debt markets with its ruling last year against the Republic of Argentina. In amicus briefs supporting Argentina’s petition for Supreme Court review, the foreign sovereigns argue that the 2nd Circuit gravely misinterpreted the so-called “pari passu” (or equal footing) clause of Argentina’s sovereign debt contracts. By ruling that Argentina may not pay bondholders who exchanged defaulted bonds for restructured debt before it pays hedge fund creditors that refused to exchange their defaulted bonds, the amicus briefs argue, the 2nd Circuit has undermined international debt restructurings, permitting vulture investors to hold entire foreign economies hostage.

The United States made quite similar arguments, as you may recall, when Argentina’s pari passu case was before the 2nd Circuit. But there’s no filing from the Justice Department among the 10 new amicus briefs urging the Supreme Court to take Argentina’s appeal. Does that mean Argentina has lost its most influential friend in the U.S. court system?

It does not, but it does mean that the administration is waiting for an invitation from the Supreme Court justices before it takes a position in the Argentina pari passu case. And there’s at least some chance the invitation will never come.

It has become rare in recent years for the Justice Department, via the solicitor general, to file an amicus brief on a cert petition without the justices asking to hear the government’s position, said Thomas Goldstein of Goldstein & Russell (and Scotusblog). Unless a government employee is a party in the case, Goldstein told me in an email, the SG “almost never” opines on cert petitions without a specific invitation from the Supreme Court.

Goldstein’s interpretation suggests that we shouldn’t infer anything from the Justice Department’s absence from this week’s amicus briefing for Argentina. The solicitor general may simply be waiting for the justices to invite a brief expressing the views of the Justice Department, which is the typical procedure. In a different Supreme Court case between Argentina and the hedge funds that hold billions of dollars in judgments against it – this one involving the extent of discovery the hedge funds can conduct on Argentine assets they hope to seize to satisfy those judgments – the solicitor general didn’t opine on Argentina’s cert petition until the Supreme Court asked for a brief. The Justice Department ended up agreeing with Argentina that the justices should take the case, then filed a brief supporting Argentina on the merits when the court granted cert. (That case is scheduled for argument next month.)

But according to Richard Samp of the Washington Legal Foundation, there could be significance in the Justice Department’s decision to hold off on filing an uninvited brief for Argentina in the pari passu case. (I should note that Samp has supported the hedge funds in this litigation.) For one thing, Samp said, there’s precedent for the solicitor general to file uninvited amicus briefs supporting petitions for certiorari. At my request, he did some quick nonexhaustive research at the solicitor general’s website and found 10 such briefs, including one from 2011. (That petition was filed by Secret Service agents, so it falls within Goldstein’s exception for cases involving government employees.)

Moreover, Samp said, there’s a chance that the Supreme Court won’t ask for a brief from the Justice Department. There’s history to support that possibility. The pari passu case has already been before the justices once. Argentina filed an interlocutory petition for review after the 2nd Circuit first interpreted the equal footing clause, but before the appeals court enjoined Argentina from paying its current bondholder without paying off its hedge fund creditors. The solicitor general did not file an amicus brief supporting Argentina – and the Supreme Court denied cert without ever soliciting the Justice Department’s opinion.

“If you were the Solicitor General and you felt strongly that the Supreme Court should take this case,” Samp said, “you would not wait for an invitation.”

Gibson, Dunn & Crutcher, counsel of record for the hedge funds in the pari passu case, has until May 7 to file its brief opposing cert. It will be interesting to see if there’s any mention of the Justice Department’s silence. Argentina is represented by Paul Clement of Bancroft.


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