The Republic of Argentina obtained a partial dismissal in a breach-of-contract lawsuit involving its GDP-linked securities. On September 29, Judge Loretta Preska of the Southern District of New York dismissed all claims brought by nine hedge funds, while allowing a narrowed set of claims brought by the Trustee of the securities to move forward. This ruling eliminated at least $1 billion in potential damages under the plaintiffs’ own estimates.
The litigation involves securities that the Republic issued in 2005 and 2010 in debt restructurings. The securities provided for contingent payments to be made when various triggers were met, including that Argentina’s GDP grew by 3 percent or more in a given year. In 2014, the method for estimating Argentina’s GDP changed, and no payment was due for any year after 2014 based on the published GDP figures. Nine hedge funds, which are individual holders under the securities, and the Trustee claimed they were owed a payment for at least some of these years.
Judge Preska dismissed all claims brought by individual holders, citing her ruling in a related case—litigated by the same S&C team and upheld in July on appeal by the Second Circuit—that individual holders’ claims are barred by the securities’ “No-Action Clause” when investors do not satisfy its delineated prerequisites to bringing suit. Judge Preska also dismissed all claims brought by the Trustee for 2014-2016 as time-barred under the securities’ prescription clause. While breach of contract claims brought by the Trustee for the remaining years can proceed, the district court dismissed the Trustee’s bad faith and prevention claims for failure to state a claim.
The S&C team representing the Republic includes partners Robert Giuffra Jr., Sergio Galvis, Amanda Davidoff and Tom White, special counsel Elizabeth Rose, and associates Arturo Carlos Schultz and Stephanie Kelly.