Clash of the Biglaw Titans: Ted Olson and David Boies Meet in Second Circuit Showdown
Earlier this week, Ted Olson and David Boies, along with lawyers from Cleary Gottlieb and Reed Smith, argued an appeal with billions of dollars at stake.
Presiding over the proceedings was Judge Rosemary Pooler, who joined the Second Circuit in 1998. The other two judges were Judge Barrington Parker, a 2001 appointee to the court, and Judge Reena Raggi, a 2002 appointee to the court (and a judicial hottie, and the mother of a SCOTUS clerk). Interestingly enough, all three members of the panel served as trial judges — in the Northern (Pooler), Southern (Parker), and Eastern (Raggi) Districts of New York — before being appointed to the Second Circuit.
The first lawyer to argue was Jonathan Blackman, a longtime partner at Cleary Gottlieb, on behalf of the Republic of Argentina. Blackman has done a lot of work for Argentina over the years, coming to the rescue of the frequently defaulting, deadbeat republic. The representative matters for Argentina listed in his bio have such parenthetical descriptions as “reversal of attachment of central bank reserves,” “reversal of attachment of Argentina pension fund assets,” and “declaring Argentina presidential airplane immune from execution.” If Argentina is a shopaholic with a credit card problem, then Blackman is one of her enablers. (I say “her” not because shopaholics are always women, but because Argentina’s president happens to be a woman — the divalicious Cristina Kirchner.)
Blackman urged the Second Circuit not to uphold the trial judge’s order requiring Argentina to pay $1.3 billion to the plaintiff hedge funds. He encountered tough sledding from the get-go, as noted by Bloomberg:
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Jonathan Blackman, the attorney for the South American nation, said yesterday that Argentina would default on its restructured debt if it’s forced by a three-judge appeals panel in New York to pay holders of the defaulted debt.
“So the answer is you will not obey any order but the one you propose?” U.S. Circuit Judge Reena Raggi asked Blackman during more than two hours of arguments.
“We would not voluntarily obey such an order,” Blackman said.
It was a strange construction, and Judge Raggi, a former prosecutor, pounced: “What does ‘voluntarily obey’ mean?” The crowd in the overflow room laughed.
But the strange wording reflected the strange situation Argentina finds itself in. The legislature there passed a “lock law” that prohibits the government from paying the original bondholders who refused to accept restructured debt (the “holdout bondholders” or the “vulture funds,” as those on Argentina’s side like to call them). So if the Second Circuit affirms the order of Judge Thomas Griesa requiring payment of $1.3 billion to the plaintiffs, Argentina’s legislature will have to repeal or revise the lock law. Otherwise, compliance with U.S. law would violate Argentine law.
Judge Raggi was by far the most aggressive questioner of Blackman, and her queries and comments reflected her frustration with Argentina. Here’s another exchange that generated titters:
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Blackman: …. and then we did default.
Raggi: But that does not inure to your benefit.
It was at times uncomfortable to watch Blackman’s argument, and some observers might have come away unimpressed by his performance. In my opinion, though, he did the best he could do given the hand he was dealt. He has a client that simply will not, or cannot (due to the lock law), comply with a federal judge’s order. That’s not going to sit well with federal judges, who like being obeyed, but there’s not really much that Blackman can do, given that his client is a sovereign state:
“We are representing a government, and governments will not be told to do things that fundamentally violate their principles,” Blackman said. He said that in this case, Argentina was no more likely to comply with an order from a U.S. court than the U.S. was likely to abide by an order issued by a court in Iran.
That Iran comparison didn’t go over well with Judge Raggi, who complained about Argentina’s “contumacious” behavior. I wonder how the Argentinean officials sitting at counsel table with Blackman, vice president Amado Boudou and economic minister Hernan Lorenzino, felt about Judge Raggi’s harsh words.
Now, one might argue that Blackman and his Cleary colleagues should get their client to act more reasonably. But that’s not so easy when your client is a sovereign state, with its own complex economic issues and domestic political intrigue.
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Here’s what a hedge fund manager who’s following the case (and who has some small exposure to the outcome) told me:
From what I hear from Argentina, Cleary has over and over tried to persuade Argentina that it is playing a losing hand, but Cristina K seems to think that things work in the U.S. the way they work in Argentina: namely, once Treasury weighed in (weakly, if you ask me) as amicus, that somehow “the fix was in” (which is how it would work in Argentina).
Alas, due to our pesky “separation of powers,” the fact that the U.S. Treasury Department supports Argentina in this matter won’t stop the Second Circuit from ruling against Argentina.
So what’s Argentina thinking? My friend the hedge fund manager had these thoughts:
[T]he Argentina strategy was interesting — seems like they’d clearly given up on winning on the merits of their arguments, so they were hoping to boost [the value of the restructured bonds] by confirming their premise that Argentina will not pay [on the defaulted bonds] if the order stands, and to dare the court to put itself in a position where it will be defied. Seems like something of a Hail Mary.
In fairness, it’s possible that Argentina might relent a bit. Earlier today, President Kirchner suggested a willingness to pay the original/holdout bondholders, although “not on better terms than the 93% who trusted and bet on Argentina,” i.e., the bondholders who accepted restructured bonds. But even if Argentina is willing to offer such a deal, it’s not clear that all the original bondholders would accept it, especially if they get a court order giving them everything they wanted to begin with.
After the judges finished torturing Jonathan Blackman of Cleary, James Martin of Reed Smith stepped up to argue on behalf of Bank of New York Mellon. BNY Mellon, the indenture trustee for the restructured bonds, objects to the order of Judge Griesa that prevents it from making payments to the Exchange Bondholders Group (EBG) unless Argentina can show that it has already made required payments to the original/holdout bondholders.
Martin argued that an injunction preventing his client, a third party to this litigation, from making payments to the EBG is improper and violates due process. The judges pushed back, arguing that third parties like BNY Mellon can be enjoined when they are acting “in active concert or participation” with an enjoined party. Once again, Judge Raggi was the toughest customer. (I jotted down in my reporter’s notebook, “RR is sassy and attractive. She is the rare federal judge who could also be a TV judge — a worthy successor to Judge Judy.”)
You could feel the excitement in the room when David Boies took the podium….
