The most notorious deadbeat in the U.S. courts made an historic concession this week.
In a May 27 response brief at the U.S. Supreme Court, Argentina said that, contrary to the accusations of its hedge fund foes, it will comply with directives from the 2nd U.S. Circuit Court of Appeals to pay renegade sovereign debtholders if the Supreme Court refuses to hear its appeal. That pledge marks a big departure from the outright defiance Argentina showed last year at the 2nd Circuit, when its lawyers informed the court that the government “would not voluntarily obey” a U.S. court order it disagreed with. Even after the appeals court ruling — which upheld an injunction that bars Argentina from making payments to holders of its restructured debt before it pays more than $1 billion it owes to the hedge fund holdouts — the Argentine government vowed that it would never negotiate with the rapacious hedge funds. Argentina now seems to be reconsidering that vow, both outside of the courts, as Reuters reported Thursday, and within the U.S. litigation, as the May 27 filing indicates.
In the new brief, Argentina’s lawyers — Paul Clement of Bancroft, who is counsel of record and a recent addition to Argentina’s team, and the country’s longtime advisers Jonathan Blackman and Carmine Boccuzzi from Cleary Gottlieb Steen & Hamilton — repeated their arguments that the Supreme Court should grant certiorari and ask New York’s highest state court to interpret the pari passu, or “equal footing,” provision in Argentina’s sovereign debt contracts. Argentina also suggested that this case is of such overwhelming importance to foreign sovereigns and to foreign debt markets that the Supreme Court might want to invite the views of the U.S. government, which (as I noted in March) didn’t file an amicus brief supporting Argentina’s cert petition.
One of the hedge funds holding judgments against Argentina, Aurelius, anticipated that suggestion in its brief opposing Supreme Court review; Aurelius’s counsel of record, Roy Englert of Robbins, Russell, Englert, Orseck, Untereiner & Sauber said that the justices shouldn’t give Argentina the tactical victory of delay when they’re already familiar with the U.S. government’s arguments from briefing in the lower courts and in other Supreme Court litigation over Argentina’s debt. Both Aurelius and Argentine creditor NML Capital, which is represented by Gibson, Dunn & Crutcher, asserted that there’s no reason for the Supreme Court to hear a dispute over the interpretation of a New York contract in a case that presents no split in the federal circuits on any matter of U.S. law.
Those were, of course, predictable responses. A bigger surprise was a May 5 amicus brief from six former federal judges who voiced outright the sentiment that surely motivated the 2nd Circuit. The former judges — Alfred Lechner of New Jersey district court, Michael McConnell of the 10th Circuit, Paul Cassell of Utah, Michael Chertoff of the 3rd Circuit, Mark Filip of Chicago and Michael Mukasey of Manhattan — said that Argentina has repeatedly demonstrated its refusal to be bound by the judgments of U.S. courts, so it doesn’t deserve the Supreme Court’s attention.