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Second Circuit Affirms Dismissal Of Claims On Defaulted Argentina Bonds As Time-Barred
07/06/2022On June 22, 2022, the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims seeking recovery on defaulted bonds issued by the Republic of Argentina. Bainbridge Fund Ltd. v. Republic of Argentina, —F.4th—, 2022 WL 2231401 (2d Cir. 2022). Plaintiff held bonds issued by Argentina which went into default in 2001, but did not sue until 2016. The Court held that plaintiff’s claims were time-barred under New York’s six-year statute of limitations for breach-of-contract claims.
The Court first rejected plaintiff’s contention that New York’s twenty-year statute of limitations, which applies to certain bonds issued by “the state of New York or … any person, association or public or private corporation,” applied to bonds issued by foreign sovereigns like Argentina. Id. at *3 (citing N.Y. C.P.L.R. § 211(a)). While plaintiff argued that Argentina was a “person” within the meaning of this provision, the Court determined that the ordinary meaning of “person” did not include a State or government. Bainbridge, 2022 WL 2231401, at *3. The Court further observed that plaintiff’s proposed definition — “any being whom the law regards as capable of rights or duties” — would render superfluous the terms “state of New York,” “association,” and “public or private corporation.” Id. In addition, the Court rejected plaintiff’s argument that the word “person” should be given a broader meaning in accordance with how the word is used in procedural rules; to the contrary, the Court emphasized that the specific language of the statute and its legislative history confirmed that the statute applied “only to a limited group of bonds and served as a narrow exception to the generally applicable six-year limitations period.” Id. at *4.
The Court also rejected plaintiff’s alternative argument that Argentina’s listing of the bonds in certain quarterly reports constituted an “acknowledgment” of indebtedness sufficient to toll the statute of limitations under Section 17-101 of the New York General Obligations Law. While the Court noted that an acknowledgment of indebtedness may be treated as “a new promise to pay,” and thereby toll the statute of limitations under certain circumstances, it explained that the acknowledgment must be in writing and made under circumstances from which a promise to pay the debt “may be fairly implied.” Bainbridge, 2022 WL 2231401, at *4-5. The writing “must contain nothing inconsistent with an intention on the part of the debtor to pay,” and the implied promise must be “made to the creditor or someone acting for him, or if made to a third person must be calculated and intended to influence the action of the creditor.” Id. In this case, however, the Court concluded that the quarterly reports did not meet any of those requirements. The defaulted bonds had merely been listed under the category “Bonds Not Submitted to the Exchange.” Id. at *5. The Court determined that the “Exchange” referred to Argentina’s effort to restructure its debt by exchanging new bonds for old ones, and that Argentina had “repeatedly stated that it would not repay bonds not submitted to the exchange and that these bonds ‘may remain in default indefinitely.’” Id. (emphasis in original). Therefore, the Court concluded, listing the bonds in that category was inconsistent with an intent to pay them off and did not manifest an implied promise to pay. Id. Furthermore, the quarterly reports had not been issued directly to plaintiff or its agent, and plaintiff had failed to allege that the reports were “calculated and intended to influence its actions.” Id. Accordingly, the Court held plaintiff’s claims were time-barred.
