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144385

Brecherv.RepublicofArgentina

UNITEDSTATESCOURTOFAPPEALS
FORTHESECONDCIRCUIT
______________

AugustTerm,2015

(Argued:August21,2015Decided:September16,2015)

DocketNo.144385
____________

HENRYH.BRECHER,
individuallyandonbehalfofallotherssimilarlysituated,

PlaintiffAppellee,

v.

REPUBLICOFARGENTINA,

DefendantAppellant.

______________

Before:
CALABRESI,RAGGI,ANDWESLEY,CircuitJudges.

______________

AppellanttheRepublicofArgentinaappealsfromanorderenteredon
August29,2014,intheUnitedStatesDistrictCourtfortheSouthernDistrictof
NewYork(Griesa,J.),modifyingtheclassdefinition.OnNovember25,2014,a
panelofthisCourtgrantedpermissiontoappealpursuanttoFederalRuleof

CivilProcedure23(f).AppellantarguesthattheDistrictCourtsnewclass
definitionviolatestherequirementsofascertainabilitycontainedinRule23ofthe
FederalRulesofCivilProcedure.Weagreeandholdthattheclassdefinitions
referencetoobjectivecriteriaisinsufficienttoestablishanidentifiableand
administrativelyfeasibleclass.WethereforeVACATEandREMANDthecase
foranevidentiaryhearingondamages.

CARMINED.BOCCUZZI(JonathanI.Blackman,DanielJ.
Northrop,JacobH.Johnston,onthebrief),Cleary
GottliebSteen&HamiltonLLP,NewYork,NY,for
DefendantAppellant.

JASONA.ZWEIG(SteveW.Berman,onthebrief),Hagens
BermanSobolShapiroLLP,NewYork,NY,forPlaintiff
Appellee.
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WESLEY,CircuitJudge:
DefiningthepreciseclasstowhichArgentinaowesdamagesforitsrefusal
tomeetitsbondpaymentobligationsandcalculatingthosedamageshave
proventobeexasperatingtasks.Inthis,thefourthtimethisCourthasaddressed
themethodsbywhichdamagesmustbecalculatedandthemannerinwhichthe
classisdefinedinthiscaseandseveralsimilarmatters,seeSeijasv.Republicof
Argentina(SeijasI),606F.3d53(2dCir.2010);HickorySec.Ltd.v.Republicof
Argentina(SeijasII),493F.Appx156(2dCir.2012)(summaryorder);Puricelliv.
RepublicofArgentina(SeijasIII),No.142104cv(L),2015WL4716474(2dCir.Aug.

10,2015),weagainmustvacatetheDistrictCourtsorderandremandforspecific
proceedings.
Bynow,thefactualbackgroundofthesecasesisalltoofamiliar.After
Argentinadefaultedonbetween$80and$100billionofsovereigndebtin2001,
seeSeijasI,606F.3dat55,numerousbondholders,includingAppelleehereand
thoseintherelatedSeijascases,filedsuit.InAppelleessuit,theDistrictCourt
enteredanorderonMay29,2009,thatcertifiedaclassunderacontinuousholder
requirement,i.e.,theclasscontainedonlythoseindividualswho,likeAppellee,
possessedbeneficialinterestsinaparticularbondseriesissuedbytheRepublic
ofArgentinafromthedateofthecomplaintDecember19,2006throughthe
dateoffinaljudgmentintheDistrictCourt.Cf.SeijasI,606F.3dat56(same
requirementinclassdefinition).
AfterthisCourtheldinSeijasIandIIthattheDistrictCourtsmethodof
calculatingdamageswasinflatedandremandedwithinstructionstoconductan
evidentiaryhearing,seeSeijasI,606F.3dat5859;SeijasII,493F.Appxat160,
theAppelleeinthiscaseofferedtheDistrictCourtanalternativesolutiontoits
difficultiesinassessingdamagessimplymodifyingtheclassdefinitionby
removingthecontinuousholderrequirementandexpandingtheclasstoall

holdersofbeneficialinterestsintherelevantbondserieswithoutlimitationasto
timeheld.TheDistrictCourtgrantedthemotion,Argentinapromptlysought
leavetoappealunderRule23(f)oftheFederalRulesofCivilProcedure,andon
November25,2014,apanelofthisCourtgrantedleavetoappeal.

DISCUSSION
Wereviewadistrictcourtsclasscertificationrulingsforabuseof
discretion,butwereviewdenovoitsconclusionsoflawinformingthatdecision.
InrePub.OfferingsSecs.Litig.,471F.3d24,32(2dCir.2006).TheDistrictCourt
belowneitherarticulatedastandardforascertainabilityofitsnewclassnormade
anyspecificfindingundersuchastandard.Absentthatanalysis,wemust
determinewhethertheDistrictCourtsultimatedecisiontomodifytheclass
restsonanerroroflaw...[or]cannotbelocatedwithintherangeof
permissibledecisions.Parkerv.TimeWarnerEntmtCo.,331F.3d13,18(2dCir.
2003)(internalquotationmarksomitted).TheDistrictCourtsdecisionrests
uponanerroroflawastoascertainability;theresultingclassdefinitioncannotbe
locatedwithintherangeofpermissibleoptions.
LikeoursisterCircuits,wehaverecognizedanimpliedrequirementof
ascertainabilityinRule23oftheFederalRulesofCivilProcedure.InrePub.

OfferingsSecs.Litig.,471F.3dat30;accord,e.g.,Marcusv.BMWofN.Am.,LLC,687
F.3d583,59293(3dCir.2012);DeBremaeckerv.Short,433F.2d733,734(5thCir.
1970).Whilewehavenotedthisrequirementisdistinctfrompredominance,see
InrePub.OfferingsSecs.Litig.,471F.3dat45,wehavenotfurtherdefinedits
content.Wehereclarifythatthetouchstoneofascertainabilityiswhetherthe
classissufficientlydefinitesothatitisadministrativelyfeasibleforthecourtto
determinewhetheraparticularindividualisamember.7ACHARLESALAN
WRIGHT&ARTHURR.MILLERETAL.,FEDERALPRACTICE&PROCEDURE1760(3d
ed.1998);seealsoWeinerv.SnappleBeverageCorp.,No.07Civ.8742(DLC),2010
WL3119452,at*12(S.D.N.Y.Aug.5,2010)(aclassmustbereadilyidentifiable,
suchthatthecourtcandeterminewhoisintheclassand,thus,boundbythe
ruling(internalquotationmarksomitted)).Aclassisascertainablewhen
definedbyobjectivecriteriathatareadministrativelyfeasibleandwhen
identifyingitsmemberswouldnotrequireaminihearingonthemeritsofeach
case.Charronv.PinnacleGrp.N.Y.LLC,269F.R.D.221,229(S.D.N.Y.2010)
(citationsandinternalquotationmarksomitted).
Onappeal,Appelleearguesthataclassdefinedbyreferencetoobjective
criteria...isallthatisrequiredtosatisfyascertainability.AppelleeBr.at19.

Wearenotpersuaded.Whileobjectivecriteriamaybenecessarytodefinean
ascertainableclass,itcannotbethecasethatanyobjectivecriterionwilldo.1A
classdefinedasthosewearingblueshirts,whileobjective,couldhardlybe
calledsufficientlydefiniteandreadilyidentifiable;ithasnolimitationontimeor
context,andtheeverchangingcompositionofthemembershipwouldmake
determiningtheidentityofthosewearingblueshirtsimpossible.Inshort,the
useofobjectivecriteriacannotalonedetermineascertainabilitywhenthose
criteria,takentogether,donotestablishthedefiniteboundariesofareadily
identifiableclass.2
Thiscasepresentsjustsuchacircumstancewhereanobjectivestandard
owningabeneficialinterestinabondseriesisinsufficientlydefinitetoallow

EvenAppelleesprincipalsourcesforthisstandardusetherequirementincontextto
observethatsubjectivecriteriaareinappropriateand,thus,anycriteriausedindefining
aclassneedtobeobjective.AppelleeBr.at20(citingFearsv.WilhelminaModel
Agency,Inc.,No.02Civ.4911HB,2003WL21659373,at*2(S.D.N.Y.July15,2003);Inre
MethylTertiaryButylEther(MBTE)Prods.Liab.Litig.,209F.R.D.323,337(S.D.N.Y.2002);
MANUALFORCOMPLEXLITIGATION(FOURTH)21.222,at270(2004)).Thisapproach
accordswithourpriordiscussionsofobjectivecriteria.SeeInreInitialPub.Offerings
Secs.Litig.,471F.3dat4445.
1

Ofcourse,identifiabledoesnotmeanidentified;ascertainabilitydoesnotrequire
acompletelistofclassmembersatthecertificationstage.See1MCLAUGHLINONCLASS
ACTIONS4:2(11thed.2014)(Theclassneednotbesofinelydescribed,however,that
everypotentialmembercanbespecificallyidentifiedatthecommencementofthe
action;itissufficientthatthegeneralparametersofmembershiparedeterminableatthe
outset.).
2

readyidentificationoftheclassorthepersonswhowillbeboundbythe
judgment.SeeWeiner,2010WL3119452,at*12.Thesecondarymarketfor
Argentinebondsisactiveandhascontinuedtradingafterthecommencementof
thisandotherlawsuits.SeeNMLCapitalLtd.v.RepublicofArgentina,699F.3d
246,251(2dCir.2012);SeijasII,493F.Appxat160.Thenatureofthebeneficial
interestitselfandthedifficultyofestablishingaparticularinterestsprovenance
maketheobjectivecriterionusedhere,withoutmore,inadequate.SeeBakalarv.
Vavra,237F.R.D59,6566(S.D.N.Y.2006)(necessityofindividualizedinquiries
intoprovenanceofartworkmadeclassinsufficientlyprecise,objectiveand
presentlyascertainable(internalquotationmarksomitted)).
Appelleearguesthattheclasshereiscomparabletothosecasesinvolving
giftcards,whicharefullytransferableinstruments.However,giftcardsare
qualitativelydifferent:Forexample,theyexistinaphysicalformandpossessa
uniqueserialnumber.Bycontrast,anindividualholdingabeneficialinterestin
Argentinasbondseriespossessesarighttothebenefitofthebondbutdoesnot
holdthephysicalbonditself.Thus,tradingonthesecondarymarketchanges
onlytowhomthebenefitenures.Further,allbondsfromthesameserieshave
thesametradingnumberidentifier(calledaCUSIP/ISIN),makingitpractically

impossibletotracepurchasesandsalesofaparticularbeneficialinterest.Thus,
whenitbecomesnecessarytodeterminewhoholdsbondsthatoptedinto(orout
of)theclass,itwillbenearlyimpossibletodistinguishbetweenthemoncetraded
onthesecondarymarket.SeeEbinv.KangadisFoodInc.,297F.R.D.561,567
(S.D.N.Y.2014)(observingthatascertainabilityrequirementprevent[s]the
certificationofaclasswhosemembershipistrulyindeterminable(internal
quotationmarksomitted)).
Ahypotheticalillustratesthisproblem.TwobondholdersAandBeach
holdbeneficialinterestsin$50,000ofbonds.Aoptsoutoftheclass,whileBopts
in.BothAandBthenselltheirinterestsonthesecondarymarkettoathird
party,C.Cnowholdsabeneficialinterestin$100,000ofbonds,halfinsidethe
classandhalfoutsidetheclass.IfCthensellsabeneficialinterestin$25,000of
bondstoafourthparty,D,neitherthepurchasernorthecourtcanascertain
whetherDsbeneficialinterestfallsinsideoroutsideoftheclass.3Evenifthere
wereamethodbywhichthebeneficialinterestscouldbetraced,determining
classmembershipwouldrequirethekindofindividualizedminihearingsthat

Thishypotheticalwasposedbythepanelatoralargument;counselforAppelleewas
unabletoofferamethodbywhichtheDistrictCourtwouldbeabletomakethis
determination.
3

runcontrarytotheprincipleofascertainability.SeeCharron,269F.R.D.at229;
Bakalar,237F.R.D.at6466.Thefeaturesofthebondsinthiscasethusmakethe
modifiedclassinsufficientlydefiniteasamatteroflaw.Althoughtheclassas
originallydefinedbytheDistrictCourtmayhavepresenteddifficultquestionsof
calculatingdamages,itdidnotsufferfromalackofascertainability.TheDistrict
Courterredinattemptingtoaddressthosequestionsbyintroducingan
ascertainabilitydefectintotheclassdefinition.
Thereremainsthequestionofdeterminingdamagesonremand.Given
thatAppelleehereisidenticallysituatedtotheSeijasplaintiffsandthisCourthas
alreadyaddressedtherequirementsfordeterminingdamagesinthosecases,we
concludethattheDistrictCourtshouldapplythesameprocessdictatedbySeijas
IIforcalculatingtheappropriatedamages:
Specifically, it shall: (1) consider evidence with respect
to the volume of bonds purchased in the secondary
marketafterthestartoftheclassperiodsthatwerenot
tendered in the debt exchange offers or are currently
heldbyoptoutpartiesorlitigantsinotherproceedings;
(2) make findings as to a reasonably accurate, non
speculative estimate of that volume based on the
evidence provided by the parties; (3) account for such
volumeinanysubsequentdamagecalculationsuchthat
an aggregate damage award would roughly reflect
the loss to each class,seeSeijas I,606 F.3d at 5859;and
(4) if no reasonably accurate, nonspeculative estimate

can be made, then determine how to proceed with


awarding damages on an individual basis. Ultimately,
if an aggregate approach cannot produce a reasonable
approximationoftheactualloss,thedistrictcourtmust
adoptanindividualizedapproach.
493F.Appxat160;seealsoSeijasIII,2015WL4716474,at*4(repeating
instructions).Thehearingwillensurethatdamagesdonotenlarge[]plaintiffs
rightsbyallowingthemtoencumberpropertytowhichtheyhavenocolorable
claim.SeijasI,606F.3dat59.

CONCLUSION
BecauseweconcludetheDistrictCourtsorderviolatedtherequirementof
ascertainabilitycontainedinRule23,itisnotnecessaryforustoreachthe
remainingissuesraisedbyAppellant.Therefore,forthereasonsstatedabove,
theorderoftheDistrictCourtisVACATED,andthecaseisREMANDEDforan
evidentiaryhearingondamages.

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