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12-0105-cv(L),
for the

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12-0109-cv(con) 12-0111-cv(con) 12-0157-cv(con), 12-0158-cv(con), 12-0163-cv(con), 12-0164-cv(con), 12-0170-cv(con), 12-0176-cv(con), 12-0185-cv(con), 12-0189-cv(con), 12-0214-cv(con), 12-0909-cv(con), 12-0914-cv(con), 12-0916-cv(con), 12-0919-cv(con), 12-0920-cv(con), 12-0923-cv(con), 12-0924-cv(con), 12-0926-cv(con), 12-0939-cv(con), 12-0943-cv(con), 12-0951-cv(con), 12-0968-cv(con), 12-0971-cv(con), 12-4694-cv(con), 12-4829-cv(con), 12-4865-cv(con)

United States Court of Appeals Second Circuit
NML CAPITAL, LTD., AURELIUS CAPITAL MASTER, LTD., (For Continuation of Caption See Inside Cover)
_______________________________ ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

REPLY BRIEF FOR NON-PARTY APPELLANTS EXCHANGE BONDHOLDER GROUP
O’SHEA PARTNERS LLP 521 Fifth Avenue, 25th Floor New York, New York 10175 (212) 682-4426 – and – BOIES, SCHILLER & FLEXNER LLP 575 Lexington Avenue, 7th Floor New York, New York 10022 (212) 446-2300 Attorneys for Non-Party Appellants Exchange Bondholder Group

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ACP MASTER, LTD., BLUE ANGEL CAPITAL I LLC, AURELIUS OPPORTUNITIES FUND II, LLC, PABLO ALBERTO VARELA, LILA INES BURGUENO, MIRTA SUSANA DIEGUEZ, MARIA EVANGELINA CARBALLO, LEANDRO DANIEL POMILIO, SUSANA AQUERRETA, MARIA ELENA CORRAL, TERESA MUNOZ DE CORRAL, NORMA ELSA LAVORATO, CARMEN IRMA LAVORATO, CESAR RUBEN VAZQUEZ, NORMA HAYDEE GINES, MARTA AZUCENA VAZQUEZ, OLIFANT FUND, LTD., Plaintiffs-Appellees, – v. – THE REPUBLIC OF ARGENTINA, Defendant-Appellant, THE BANK OF NEW YORK MELLON, as Indenture Trustee, EXCHANGE BONDHOLDER GROUP, FINTECH ADVISORY INC., Non-Party Appellants, EURO BONDHOLDERS, ICE CANYON LLC, Intervenors.

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TABLE OF CONTENTS TABLE OF AUTHORITIES………………………………………………………..i TABLE OF CONTENTS ...........................................................................................1 TABLE OF AUTHORITIES .....................................................................................1 PRELIMINARY STATEMENT ...............................................................................1 ARGUMENT .............................................................................................................1 I. THE INJUNCTION UNLAWFULLY BURDENS THE EXCHANGE BONDHOLDERS’ PROPERTY RIGHTS. ....................................................1

II. THE INJUNCTION VIOLATES THE EBG’s FIFTH AMENDMENT RIGHTS. .............................................................................................................8 A. B. III. IV. A. B. C. D. E. The Injunction Violates Substantive Due Process. ..................................8 The Injunction Effects an Unlawful Taking. .........................................12

THE INJUNCTION MUST BE VACATED BECAUSE THE EBhs WERE NECESSARY PARTIES TO THE PROCEEDINGS BELOW. ...............15 THE district court violated the ebg’s procedural due process rights. ....18 The Injunction Does Not Merely “Affect” the EBG’s Rights. ..............18 The EBG Had No Opportunity to Respond to the February 23, 2012 Injunction Until After the October 26, 2012 Remand. ..........................19 Due Process Required an Evidentiary Hearing. ....................................20 The EBG Acted in a Timely Manner .....................................................23 The EBG Has Standing to File a Rule 60(b) Motion. ...........................23

V. THE EBG DID IN FACT OFFER AN ALTERNATIVE RATABLE PAYMENT FORMULA. ..................................................................................24

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TABLE OF AUTHORITIES Cases 49 WB, LLC v. Village of Haverstraw, No. 08 CV 5784 (VB), 2012 WL 336152 (S.D.N.Y. Feb. 2, 2012) ..........................9 Brace v. United States, 72 Fed. Cl. 337 (2006) .............................................................................................12 Brady v. Town of Colchester, 863 F.2d 205 (2d Cir. 1988).......................................................................................9 California Serv. Emps. Health & Welfare Tr. Fund v. Advance Bldg. Maint., 06-3078, 2007 WL 3232444 (N.D. Cal. Nov. 1, 2007) .............................................6 Chi., St. Paul, Minn. & Omaha Ry. Co. v. Holmberg, 282 U.S. 162 (1930) ..................................................................................................9 Chrysler Corp. v. Fedders Corp., 63 A.D.2d 567 (N.Y. App. Div. 1978) ......................................................................6 Crouse-Hinds Co. v. InterNorth, Inc., 634 F.2d 690 (2d Cir. 1980).............................................................................. 15, 16 Drywall Tapers and Pointers of Greater N.Y., Local 1974 v. Local 130 ofOperative Plasterers and Cement Masons Int’l Ass’n, 954 F.2d 69 (2d Cir. 1992) .............20 Elliott Assocs. L.P. v. Banco de la Nacion, General Docket No. 2000/QR/92 (Court of Appeals of Brussels 8th Chamber Sept. 26, 2000) .................................................................................................................5 Elliott Assocs., L.P. v. Banco de la Nacion and the Republic of Peru, 194 F.3d 363 (2d Cir. 1999).......................................................................................6 First Nat'l Bank of Hollywood v. Am. Foam Rubber Corp., 530 F.2d 450 (2d Cir. 1976).......................................................................................3 Haw. Hous. Auth. v. Midkiff, 467 U.S. 229 (1984) .................................................................................................14

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In re Lynch, 430 F.3d 600 (2d Cir. 2005).......................................................................................2 Kelo v. City of New London, 545 U.S. 469 (2005) ...................................................................................................9 Kensington Int’l Ltd. v. Republic of the Congo, [2003] EWCA Civ. 709 .............................................................................................5 LNC Invs. LLC v. Republic of Nicaragua, Folio 2000 No. 1061, R.K. 240/03 (Commercial Ct. of Brussels Sept. 11, 2003) ....5 Local 342 v. Huntington, 31 F.3d 1191 (2d Cir. 1994).......................................................................................8 Lochner v. New York, 198 U.S. 45 (1905) .....................................................................................................8 MasterCard Int’l Inc. v. Visa Int’l Serv. Ass’n, Inc., 471 F.3d 377 (2d Cir. 2006).................................................................. 11, 12, 17, 23 Matter of Arrow Carrier Corp., Civ. A. No. 93–2519, 1994 WL 411780 (D.N.J. June 6, 1994) ................................9 Mo. Pac. Ry. Co. v. Nebraska, 164 U.S. 403 (1896) ...................................................................................................9 Motorola Credit Corp. v. Uzan, 2003 WL 21373463 (S.D.N.Y. June 12, 2003) .......................................................20 Nemer Jeep-Eagle, Inc. v. Jeep-Eagle Sales Corp., 992 F.2d 430 (2d Cir. 1993).......................................................................................7 NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012).......................................................................... 2, 10, 17 Omnia Commercial Co. v. United States, 261 U.S. 502 (1923) .................................................................................................13

ii

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Palazzolo v. Rhode Island, 533 U.S. 606 (2001), WL 1742030..........................................................................15 PruneYard Shopping Center v. Robins, 447 U.S. 74 (1980) ...................................................................................................14 Quern v. Jordan, 440 U.S. 332 (1979) ...................................................................................................2 Red Mountain Fin., Inc. v. Democratic Republic of Congo, No. CV 00-0164 R (BQRx) (C.D. Cal. May 29, 2001) .............................................5 Reynolds v. Int’l Amateur Athletic Fed’n, 505 U.S. 1301 (1992) .................................................................................................3 Reynolds v. Int’l Amateur Athletic Fed’n, 841 F. Supp. 1444 (S.D. Ohio June 19, 1992) ...........................................................3 Robbins v. Lady Baltimore Foods, Inc., 678 F. Supp. 1323 (N.D. Ill. 1987) ............................................................................9 Robbins v. Lady Baltimore Foods, Inc., 868 F.2d 258 (7th Cir. 1989) .....................................................................................9 Rogers Mach. Co., Inc. v. City of Tigard, 538 U.S. 906 (2003) .................................................................................................15 Rumber v. District of Columbia, 487 F.3d 941 (D.C. Cir. 2007) .................................................................................14 Stop the Beach Renourishment, Inc. v. Fla. Dep’t of Envt’l Protection, 130 S. Ct. 2592 (2010) ........................................................................................ 9, 12 Thompson v. Consolidated Gas Utilities. Corp., 300 U.S. 55 (1937) .....................................................................................................8 Tick v. Cohen, 787 F.2d 1490 (11th Cir. 1986) ...............................................................................17

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Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245 (2d Cir. 1992).....................................................................................2 Williamson Cnty. Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172 (1985) .................................................................................................13 Yudell Tr. I et al. v. API Westchester Assocs., 227 A.D.2d 471 (N.Y. App. Div. 1996) ....................................................................6

Rules 22 A.L.R. Fed. 765 § 19...........................................................................................17 28 U.S.C. § 1330 ......................................................................................................16 28 U.S.C. § 1367(a) .................................................................................................16 Fed R. Civ. P. 19. .................................................................................. 11, 16, 23, 24 Fed. R. Civ. P. 19(a).................................................................................................17 Fed. R. Civ. P. 24. ....................................................................................................24 Fed. R. Civ. P. 60(b) ................................................................................................24 Fed. R. Civ. P. 60. ............................................................................................. 15, 24

iv

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PRELIMINARY STATEMENT1 Plaintiffs (and supporting amici, most notably the Washington Legal Foundation (“WLF”)) seek, but ultimately fail, to obscure the reality that the Injunction constitutes an unreasonable and unconstitutional deprivation of Exchange Bondholders’ (“EBH”) property rights. ARGUMENT I. THE INJUNCTION UNLAWFULLY BURDENS THE EXCHANGE BONDHOLDERS’ PROPERTY RIGHTS. Plaintiffs do not dispute that the Injunction rewrites the terms of the Exchange Bonds by converting an unconditional right to payment into a conditional right. EBGB, 20-21, 23 & n.13. Nor do they dispute that the

Injunction’s express purpose is to use the EBHs’ rights as leverage to enforce the rights of unrelated parties. Id. at 22-23. NML cites no case upholding such an extraordinary injunction, and ignores the EBG’s precedent in which injunctions were denied because they unreasonably burdened non-parties. See id. at 17-19. NML and WLF2 mischaracterize this Court’s prior ruling. NMLB, 30-31; Abbreviations and capitalized defined terms have the same meaning as in the EBG’s initial appellate brief (ECF No. 464) (“EBGB”). “EBGDCB” refers to EBG’s brief to the District Court (Nov. 16, 2012). “NMLB” refers to NML Plaintiffs’ (“NML”) opposition brief (ECF No. 821). “NMLDCB” refers to NML’s brief to the District Court (Nov. 13, 2012). “RB” refers to the Republic’s initial appellate brief (ECF No. 657). “WLFB” refers to Washington Legal Foundation’s (“WLF”) amicus brief (Jan. 11, 2012) (ECF No. 789). “EMLB” refers to EM Ltd.’s amicus brief (ECF No. 374).
1

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WLFB, 21-22. Although the Court quoted the district court’s finding that the Injunction does not violate the EBHs’ rights, see NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246, 256 (2d Cir. 2012), it did not affirm that conclusion. Rather, the Court remanded for clarification of the Injunction’s intended application to third-parties, after which the case returns to this Court under Jacobson to determine whether the clarified Injunction was reasonable. Id. at 26465. NML’s “law of the case” argument (NMLB 31) therefore fails; only ‘issues previously determined’ become the law of the case.” In re Lynch, 430 F.3d 600, 604 (2d Cir. 2005) (emphasis added) (quoting Quern v. Jordan, 440 U.S. 332, 348 n.18 (1979)).3

Although WLF purports to be an independent public interest organization (WLFB, 2), it has close ties to NML. It is unlikely that WLF independently chose to devote its entire amicus submission to a point-by-point response to the EBG brief. One clear connection between NML and WLF is American Task Force Argentina (“ATFA”). Elliott Associates, L.P., which controls NML, and Montreux Partners, another holdout that filed an amicus brief, are ATFA members. See “About Us,” ATFA website, http://www.atfa.org/about- us/. ATFA thus appears to be a lobbying arm of the holdouts. See Ianthe Jeanne Dugan, Argentine Lobby Mystifies “Members,” Wall Street Journal, Oct. 15, 2012, available at http://online.wsj.com/article/SB10000872396390444657804578050923796499176 .html. ATFA also has used WLF as “legal experts” in discussing the holdouts’ Argentine debt litigation. See, e.g., Press Release, Dec. 27, 2012, available at http://www.atfa.org/15237/. 3 In any event, “[t]he law of the case doctrine is admittedly discretionary and does not limit a court's power to reconsider its own decisions prior to final judgment.” Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992). It “need not be applied when no prejudice results from its omission.” First Nat'l Bank of Hollywood v. Am. Foam Rubber Corp., 530 F.2d 2

2

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NML contends that the Injunction does not prohibit the Republic from paying EBHs, and that any harm threatened emanates from the Republic. NMLB, 31. Not so. The Injunction does prohibit the Republic from paying EBHs, and further prohibits the Trustee from remitting payments to EBHs, unless a newlyimposed condition is satisfied – full payment of the Republic’s debt to Plaintiffs. SPE-1381-82; EBGB, 21-22. Plaintiffs in fact rationalized the Injunction on the premise that the Republic would not pay NML (EBGB, 24 n.14), and used the EBHs’ rights as a pawn to compel payment. Id., 20-23.4 Although NML dismisses the risk of default (NMLB, 32-33), WLF’s Chief Counsel recently stated that “the real concern of the [EBHs] is that Argentina will default and won’t pay them anything ... given Argentina’s history that’s a legitimate concern.” Transcript, ATFA Teleconference, Dec. 27, 2012, available at http://www.atfa.org/atfa-mediateleconf-erence-transcript-argentinas-pari-pass-

appeal/. Regardless, the propriety of the Injunction turns on legal principles, not 450, 453 n.3 (2d Cir. 1976). Here, NML had multiple opportunities to address the EBG’s arguments, and therefore suffers no prejudice from the Court considering them. 4 NML’s reference to Reynolds, 505 U.S. 1301 (NMLB, 32), is unavailing. Reynolds is a three-paragraph opinion by a single Justice heard in an emergent basis that cites no law. Third-party interests were not truly at risk because the district court found the third-party threat was not credible. See Reynolds v. Int’l Amateur Athletic Fed’n, 841 F. Supp. 1444, 1454-55 (S.D. Ohio June 19, 1992). The Reynolds injunction also was not purposely designed to threaten third-party rights. In any event, the Republic has not threatened the EBHs; its intent is to pay them. SPE-391. The Injunction, not the Republic, “threatens” the EBG. 3

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NML’s rose-colored, self-serving predictions of future events.5

Plaintiffs’

speculation ignores that the Republic can, by remitting Exchange Bond payments to the Trustee, both refuse to pay Plaintiffs and potentially avoid default (assuming the mere act of remitting those payments to the Trustee is deemed sufficient to satisfy the Republic’s obligations to the EBHs). In that instance, the EBHs will still be deprived of their property. NML insists that the Republic can pay them and the EBHs. NMLB, 57. As explained in Section IV.C infra, this is erroneous.

Plaintiffs attempt to minimize the inequality by claiming that EBHs “took their bonds subject to” the rights of the FAA bondholders. NMLB, 33. But that begs the question. The EBHs never agreed to an unprecedented Injunction that imposes an onerous condition on unconditional property rights to assist in the collection of Plaintiffs’ private contract judgment. NML’s reference to the 2005 Prospectus putting certain EBHs on notice that litigation might “interfere with payments” (NMLB, 33) is disingenuous. Not only

NML deems a default on the Exchange Bonds “irrational.” NMLB, 52. But there is ample evidence that the Republic does not always act on strict economic rationality. The Republic’s leaders evidence “irrational” defiance, apparently motivated by national pride, sovereignty, and politics. SPE-390-92; EBGB, 24 n.14; NMLDCB, 1-2. Accordingly, the Republic has been unable to access the international capital markets for twelve years due largely to its failure to pay Plaintiffs. See A-853, A-856, A-2227, SPE-395; see also Financial Times Beyondbrics Blog, “Argentina: one debt-pile down, many more to go,” Ian Mount, July 31, 2012, http://blogs.ft.com/beyond-brics/2012/07/31/argentina-one-debtpile-down-many-more-to-go/#axzz2JEHCHI1d. 4

5

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does the cited language not appear in the 2010 prospectus governing the EBHs’ rights (compare A-466 with A-991) but the removal of that warning from the 2010 prospectus is doubtless the result of intervening judicial decisions rejecting the type of injunctive relief Plaintiffs seek here.6 Indeed, NML’s contention that “every court” confronted with the issue has “ordered equitable relief comparable to the Injunction,” NMLB, 34, is patently false. Plaintiffs ignore Kensington Int’l Ltd. v. Republic of the Congo, [2003] EWCA Civ. 709,7 where the Court of Appeals of England and Wales refused to order Congo’s compliance with a pari passu clause. Kensington quoted approvingly the lower court’s finding that the rights of third parties should not be jeopardized: “I do not regard it as an

appropriate exercise of my discretion … to make an order compliance with which can only realistically be achieved by coercion of third parties.” Id. at 7. NML cites LCN v. Nicaragua, but LCN’s ex parte injunction was reversed on appeal for restraining third parties.8 See Patrick Wautelet, Vulture Funds, Creditors and

Disclosure of litigation risk in the 2005 prospectus is irrelevant in any event. Improper court orders are a risk in every litigation. Acknowledging that risk does not require bondholders to passively accede if it comes to pass. 7 Available at http://www.bailii.org/ew/cases/EWCA/Civ/2003/709.html. 8 The reversal in LCN post-dated (and thus effectively negated) Plaintiffs’ success in obtaining an ex parte order in the earlier Belgian case of Elliot Assocs. L.P. v. Banco de la Nacion. NMLB, 29. See Wautelet, supra, at 20-23. Plaintiffs also cite an order in Red Mountain. NMLB, 29. However, that order lacks any legal analysis (A-1369-72); pre-dates Kensington and LCN; does not expressly 5

6

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Sovereign Debtors: How to Find a Balance?, Sovereign Debtors & Creditors, March 2011, http://ssrn.com/abstract=1994425, at 20-23. It is irrelevant that EBG members litigated against the Republic before accepting the 2010 exchange offer. NMLB, 33. No EBH ever sought an

injunction of the sort entered here. Nor does the EBG contend that Plaintiffs are not entitled to payment. Its complaint is that the Injunction is an unlawful means of coercing payment. NML also attempts to portray one mention of Elliot v. Peru in an EBH’s press release as endorsing the Injunction. Id. In fact, that press release referenced Elliott Assocs., L.P. v. Republic of Peru, 194 F.3d 363 (2d Cir. 1999), where this Court rejected Peru’s champerty defense, an issue that has no bearing on the Injunction. Plaintiffs cite three cases outside the “equal treatment context” that they wrongly contend granted relief analogous to the Injunction. NMLB, 34. The court in Chrysler, 63 A.D. 2d 567, actually declined to enjoin payments to the innocent Class A shareholders. Id. at 568-69. California Service Employees, 2007 WL 3232444, an unpublished ERISA case, enjoined a company from making discretionary payments to its own officers and directors until non-discretionary payments were made to outsiders. Id. at *9. Yudell, 227 A.D.2d 471, enforced a

apply to third-parties; was not appealed; and the case ultimately settled, see No. 00-cv-00164-R(BQR) ECF No. 238, at 2 (C.D. Cal. June 10, 2002). 6

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plaintiff’s right of first refusal on a parcel of land where a third-party’s contract to buy the property had expired before the court’s order. Id. at 472. Thus, none of NML’s cases actually infringe third-party property rights.9 Contrary to NML’s position (NMLB, 35), the equities do not favor them. Plaintiffs took a calculated risk by rejecting the exchange offer, knowingly acquiring FAA Bonds at deeply distressed prices, and attempting to collect against a sovereign government fully aware that enforcement mechanisms were limited. EBGB, 26-27; A-465, A-705, A-707. NML has every right to pursue this

approach. What it cannot do is make innocent EBHs the insurers of its risky decisions.10

Plaintiffs also misguidedly claim that Nemer, 992 F.2d 430, supports their position. NMLB, 34-35. There, this Court found that harm to third-parties was not disproportionate where they could sell automobiles during a brief preliminary injunction. 992 F.2d at 436. In contrast, defendant’s potentially unlawful grant of dealerships to non-parties threatened plaintiff’s very existence. Id. No such circumstances are presented here, where the Injunction disproportionately jeopardizes payments on $50 billion of Exchange Bonds in favor of $428 million face amount of FAA bonds. EBGB, 14. Additionally, the third-party rights in Nemer were potentially illegal. The EBHs’ are not. Nor was the Nemer injunction intentionally structured to leverage the non-parties’ rights for the benefit of plaintiff. 10 Citing JA-850, NML claims that the EBHs urged the Republic to pass the Lock Law. NMLB, 35-36. JA-850 says nothing of the sort, and there is no evidence that any EBH attempted to convince the Republic to pass the law. For example, the Republic enacted the legislation to encourage participation in the 2005 exchange (A-924), in which EBH Gramercy refused to participate. The Lock Law had to be suspended to allow the 2010 exchange in which Gramercy did participate (A-925). 7

9

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II.

THE INJUNCTION VIOLATES THE EBG’S FIFTH AMENDMENT RIGHTS. A. The Injunction Violates Substantive Due Process.

NML’s primary response to the EBG’s substantive due process argument is to reference the Lochner line of cases. NMLB, 50. But the issue here is not a conflict between private contract rights and government efforts to regulate the economy or public welfare, health, and safety. It is the government’s inability to deliberately11 deprive its citizens of private property12 to assist the collection of a private debt owed to other citizens. Such action has never been held constitutional. EBGB, 30-31. Reliance on Local 342, 31 F.3d 1191, is misguided. NMLB, 50; WLFB, 16. That case held that government termination of a contract with a private citizen alone does not violate substantive due process. Id. at 1196. But more than “[s]imple state-law contract rights” are at issue here. Id. Substantive due process extends to rights firmly “‘rooted in the traditions and conscience of our people’”

The district court recognized that it lacked authority to prejudice EBHs’ rights. EBGB, 20-23. 12 The property right imperiled by the Injunction is not, as WLF contends, the right “to demand payment from Argentina” and sue in the event of nonpayment. WLFB, 14. It is the right to receive defined payments on certain dates without extra-contractual conditions. WLF also incorrectly claims that there is no restraint on property. WLFB, 14. The Injunction imposes a condition on the EBG’s right to receive bond payments that did not otherwise exist, EBGB, 20-21, 23, which the district court acknowledged was a restraint. Id. at 20. 8

11

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and “‘implicit in the concept of ordered liberty.’”

Id.

The concept that

government cannot use the property of some citizens to favor the private property interests of other citizens falls squarely within that test, as the Thompson, Holmberg, and Missouri Pacific cases demonstrate. EBGB, 31. NML’s sole response is to dismiss these authorities as outdated. NMLB, 51 n.11. The core principle of these cases is not a relic of a “bygone era.” Id. Rather, the Supreme Court has reaffirmed this “bedrock principle,” and cited Thompson and Missouri Pacific as good law as recently as 2005. See Kelo v. City of New London, 545 U.S. 469, 500 (2005).13 As Justice Kennedy recognized in Stop the Beach, “[t]he Due Process Clause, in both its substantive and procedural aspects, is a central limitation upon the exercise of judicial power. And this Court has long recognized that property regulations can be invalidated under the Due Process Clause.” 130 S. Ct. at 2614 (citing cases from, inter alia, 1930, 1928, and 1922). NML contends that Justice Kennedy’s opinion addresses only judicial actions that “eliminate” established
13

Modern courts frequently analyze government deprivations of private property rights for private benefit under the rubric of substantive due process. See, e.g., 49 WB, LLC v. Village of Haverstraw, 2012 WL 336152, *5-8 (S.D.N.Y. Feb. 2, 2012); In re Arrow Corp., 1994 WL 411780, *5 (D.N.J. June 6, 1994); Robbins v. Lady Baltimore Foods, Inc., 678 F. Supp. 1323, 1328 (N.D. Ill. 1987), rev’d on other grounds, 868 F.2d 258 (7th Cir. 1989). Likewise, this Court has recognized that arbitrary or irrational government action resulting in loss of property rights violates substantive due process. See, e.g., Brady v. Town of Colchester, 863 F.2d 205, 215-216 (2d Cir. 1988). 9

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property rights. NMLB, 50. But it ignores the plain statement that “the Due Process Clause [limits] the power of courts to eliminate or change established property rights.” 130 S. Ct. at 2614 (emphasis added). Here, the Injunction “change[d]” the EBG’s property rights by imposing a new condition on payment and by imperiling those rights in service of NML’s private collection efforts.14 Having convinced the district court and this Court that an action for damages against the Republic is an “inadequate” remedy, see 699 F.3d at 262, Plaintiffs now shamelessly argue that the EBG is protected by its right to sue if the Republic defaults. NMLB, 50-51; WLFB, 9. The EBHs accepted the exchange offer

because they did not want to chase a sovereign state for a debt with scant hope of collection. By rejecting two exchange offers, Plaintiffs embraced that risky

venture. EBGB, 26-27. If the Republic defaults on the Exchange Bonds, the EBHs will be in (at best) the same position as Plaintiffs were pre-Injunction. If the Republic pays and the funds are frozen pursuant to the Injunction, the EBHs will arguably have no suit against the Republic (which could argue that it has made the

NML further contends that Justice Kennedy’s opinion merely proscribes the abandonment of “settled principles.” NMLB at 51. Entering an injunction that deprives a citizen of property rights for the private benefit of another citizen, as noted above, does indeed abandon “settled principles.” Nor does the EBG contend that this Court’s October 26 opinion violates due process, id., because the Court did not rule on the Injunction’s validity as it pertains to third-party rights. 699 F.3d at 264-65. 10

14

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required bond payments) or the Trustee (which argues the Injunction would immunize it from liability. BNYM Br., 40-43 & n.10.15 WLF likens the Injunction to a scenario in which A collects a judgment from C, creating the collateral effect of leaving creditor B, another creditor of C, less able to recover. WLFB, 14-15. That analogy is inapt; the district court here ordered C not to pay B unless it also pays A, and deliberately designed the Injunction to imperil B’s rights in order to enforce A’s rights.16 Likewise, WLF’s citation to MasterCard Int’l Inc. v. Visa Int’l Serv. Ass’n, 471 F.3d 377 (2d Cir. 2006), fails because that decision holds only that the third-party in that particular case was not a “necessary party” under Rule 19. 471 F.3d at 389. MasterCard did not decide whether an injunction prejudicing the third-party’s rights was permissible, and any language therein bearing on that subject is dicta. Further, MasterCard involved “exclusive rights,” and thus the Court could not avoid depriving either Visa or MasterCard of that benefit. Id. at 380. Here, the Court can enforce the rights of all concerned by excising the provisions that jeopardize BNMY’s request is not ripe for adjudication in this proceeding. See Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967) (Article III’s ripeness requirement “prevent[s] the courts, through premature adjudication, from entangling themselves in abstract disagreements.”) 16 Contrary to WLF’s contention (WLFB, 9), the EBG does not argue that the Fifth Amendment is implicated by indirect effects of court decisions on property values. It is the EBG’s unqualified right to payment that is constitutionally protected – a right the Injunction makes conditional and uncertain, as evidenced by the diminished value of the bonds on the secondary market. EBGB, 16. 11
15

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the EBG’s payments. EBHs will retain their unconditional rights to payment, and Plaintiffs will retain their bonds, their right to payment, and all the lawful collection mechanisms available to them (including those alluded to by the district court (SPE-463, T18:5-14)). Finally, in the event that MasterCard obtained

specific performance, Visa retained a viable action for damages, id. at 381, while (as noted above) the EBG has no such remedy here. B. The Injunction Effects an Unlawful Taking.

Try as they might to circumvent Stop the Beach, 130 S. Ct. 2592, Plaintiffs cannot deny that four Supreme Court justices recognized a judicial takings doctrine, Id. at 2601-02, and two more agreed that judicial takings must be redressed under a due process analysis, id. at 2613-18.17 Judicial acts substantially burdening property rights thus are actionable.18 Plaintiffs also re-hash their argument that judicial takings are possible only when property rights are “eliminated” (NMLB, 52), which is incorrect as explained

The remaining Justices who participated did not dissent, but opined that it was unnecessary to decide whether to recognize a judicial takings doctrine. 130 S. Ct. at 2618-19. 18 Citing a 1930 Supreme Court case (Brinkerhoff-Faris, 281 U.S. 673) and a Federal Claims Court decision pre-dating Stop the Beach (Brace, 72 Fed. Cl. 337), Plaintiffs posit a “long line” of authority rejecting judicial takings claims. NMLB, 52. To the extent they in fact did so, those decisions are not good authority after Stop the Beach, but they are inapposite because Brinkerhoff-Faris does not address the Takings Clause, and Brace was ultimately decided on other grounds. 72 Fed. Cl. at 359. 12

17

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in Point II.A, supra. Further, judicial acts are indistinguishable from legislative and executive acts for purposes of Fifth and Fourteenth Amendment rights (EBGB, 32-33), and takings law routinely protects infringements on property short of outright “elimination” (id. at 34-35). NML claims that Omnia, 261 U.S. 502, and Huntleigh, 75 Fed. Cl. 642, hold that a taking does not occur when government action makes it less likely that a party will honor its agreements. NMLB, 52-53. Omnia found no taking where plaintiff contracted to buy steel, but did not receive performance because the government lawfully appropriated the seller’s entire production for military use. The Court explained that steel was taken -- not plaintiff’s contract -- and that the impact on plaintiff’s contract was incidental to the lawful government purpose. 261 U.S. 502, 510-11 (1923). Here, the Injunction directly and unlawfully

conscripts the EBHs’ contractual rights in order to coerce the Republic into paying a private party. The EBHs’ harm is direct, not “consequential,” and is the result of unlawful governmental action.19 Citing Williamson, 473 U.S. 172, Plaintiffs and WLF claim that the Tucker Act prohibits the EBG from raising its takings argument. NMLB, 48; WLFB, 17-

Huntleigh follows Omnia, holding that when the government lawfully regulated air travel by requiring all airport security screenings to be performed by the federal government, it did not “take” the contracts between airports and plaintiff’s private security firm. 75 Fed. Cl. at 545-46. 13

19

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18. Unlike Williamson, “just compensation” is not the issue here; rather, the Injunction’s taking of EBHs’ private property for private use is absolutely forbidden, whether or not “just compensation” is paid. Haw. Hous. Auth. v.

Midkiff, 467 U.S. 229, 241 (1984). The Tucker Act does not apply to such claims. See Rumber v. District of Columbia, 487 F.3d 941, 944 (D.C. Cir. 2007). WLF contends that the Injunction’s restrictions on EBHs’ property are insufficient to qualify as a “taking” under PruneYard, 447 U.S. 74. WLFB, 19. But the record contains ample evidence of a taking. EBGB, 20-23. The EBG’s

“investment-backed expectations” have been trampled; no one “expected” that a court would engraft a new, onerous condition on the EBHs’ contractual rights to payments. The economic impact on the EBHs is massive, imperiling payments on some $50 billion in Exchange Bonds. Id. at 24. Further, the expert testimony of Professor Stephen Choi20 demonstrates that the value of the Exchange Bonds has plummeted in direct response to the Injunction. Id. at 24-25. Finally, if there is insufficient evidence of a taking, it merely underscores the need for Rule 60 relief to develop a full factual record. Point IV, infra.21

The Kenneth Dam amicus brief is replete with erroneous statements concerning Professor Choi’s analysis. The EBG is prepared to submit a rebuttal at the Court’s request. Alternatively, Dam’s criticisms should be resolved in an evidentiary hearing on remand. 21 WLF’s positions in this case are glaringly inconsistent with positions it has taken in others. For example, while WLF questions here whether a judicial taking 14

20

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III.

THE INJUNCTION MUST BE VACATED EBHS WERE NECESSARY PARTIES TO THE BELOW.

BECAUSE THE PROCEEDINGS

NML incorrectly argues the EBG members were not necessary parties pursuant to the MasterCard case. NMLB, 56. In fact, joinder was required under Crouse-Hinds Co. v. InterNorth, Inc., 634 F.2d 690 (2d Cir. 1980). In

MasterCard, the defendant had granted Visa exclusive sponsorship rights, after giving MasterCard a right of first refusal for the same sponsorship rights. MasterCard sought to enjoin performance under the Visa contract. Id. at 381. Visa then sought to intervene – which would have destroyed diversity jurisdiction22 – on

violates the Constitution (WLFB, 17), it has argued elsewhere that the Takings Clause applies to the taking of all private property, whether through an adjudicative proceeding or a general legislative scheme. WLF Amicus Brief, Rogers Mach. Co., Inc. v. City of Tigard, 538 U.S. 906 (2003) (No. 02-750), 2002 WL 32133661. WLF has strenuously argued that judicial inquiries into “reasonable investment-backed expectations” should be abandoned as “uncertain, incoherent and unfair,” WLF Amicus Brief, Palazzolo v. Rhode Island, 533 U.S. 606 (2001), 2000 WL 1742030, but insists here that there is no taking because the EBG has not demonstrated their “reasonable investment-backed expectations” (WLFB at 19-20). And while WLF here claims that the EBG’s takings claim is premature for failure to seek a just compensation (id. at 17-18), it took a contradictory position in Phillip Morris, Inc. v. Reilly, 312 F.3d 24. (1st Cir. 2002). (WLF Amicus Brief, 2001 WL 36026170) and Wash. Legal Found. v. Texas Equal Access to Justice Found., 873 F. Supp. 1 (W.D. Tex. 1995). 22 This fact alone distinguishes MasterCard. There is no reason to consider whether EBG is an “indispensable” party under Rule 19(b) (as NML suggests, NMLB, 57 n.15), because joinder of EBG would not defeat diversity jurisdiction. See Associated Dry Goods Corp. v. Towers Fin. Corp., 920 F.2d 1121, 1124 (2d Cir. 1990). Jurisdiction exists here under 28 U.S.C. § 1330 because the Republic is a foreign state and the EBG may be joined pursuant to 28 U.S.C. § 1367(a). 15

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the basis that it was a necessary and indispensable party. The district court rejected this argument, and this Court affirmed. In doing so, this Court distinguished Crouse-Hinds, holding that a party is necessary when its contractual rights would otherwise be adjudicated in its absence. Id. at 700-701. In Crouse-Hinds, the plaintiff signed a merger agreement with non-party Belden after rejecting a tender offer from InterNorth. Id. at 692. InterNorth filed a counterclaim to enjoin the plaintiff from performing the merger agreement. Id. at 697. This Court dismissed InterNorth’s counterclaim because Belden was a necessary party that would preclude diversity jurisdiction. Id. at 698. It reasoned that “since Belden’s rights would clearly be prejudiced if the relief sought by InterNorth were to be granted, Belden’s presence is required.” Id. at 701(citations omitted). Crouse-Hinds controls here because Injunction specifically targets the nonparties’ contract. Indeed, the associated opinion identifies the Exchange Bonds fifteen times and enjoins “making any payment under the terms of the Exchange Bonds without . . . making a Ratable Payment to NML.” SPE-1382. The

Injunction targets the EBG directly, asserting a “need to ensure enforcement of the Injunctions’ requirement that payments are to be made on the Exchange Bonds only if appropriate payments are made concurrently or in advance to plaintiffs.” SPE-1368. It further blocks the Trustee from distributing to the EBG any money 16

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that the Republic may pay into trust. SPE-1382. The Injunction thus encumbers the EBG’s contractual rights and the EBG’s trust property.23 By contrast, in MasterCard, if MasterCard had rights of first refusal, then the defendant necessarily could not have given those rights to Visa. Visa’s

contract simply was not at issue, and Visa could sue the defendant if it failed to perform. 471 F.3d at 386-87. Unlike in Crouse-Hinds, where the absent nonparty’s “ability to protect [its] interests would be impaired because of [its] absence from the litigation,” the Court concluded that Visa’s rights “[would] not be impaired” if it was not joined. Id. MasterCard is inapposite because the district court here impaired the EBH’s contractual rights, not because the recognition of NML’s own contract rights required it (as in MasterCard), but to coerce the Republic to pay NML. Additionally, as shown in Point I, supra, unlike

MasterCard, the Injunction leaves the EBG without any effective legal recourse, resulting in “irreparable harm.” 699 F.3d at 262.

23

Under Rule 19(a), trust beneficiaries are necessary parties in actions burdening trust assets. See, e.g., 22 A.L.R. Fed. 765 § 19 (noting almost all courts have found an “absentee having an interest in or relationship to an estate or trust” to be a necessary party); Tick v. Cohen, 787 F.2d 1490, 1494 (11th Cir. 1986). Because NML asserts that if the Republic pays BNYM interest due on the Exchange Bonds, those funds must be paid over to Plaintiffs, NMLDCB at 12-15, the EBHs, as trust beneficiaries, are necessary parties. 17

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IV.

THE DISTRICT COURT VIOLATED THE EBG’S PROCEDURAL DUE PROCESS RIGHTS. A. The Injunction Does Not Merely “Affect” the EBG’s Rights.

NML argues that merely being “affected by a decision” does not implicate due process rights. NMLB, 53. As NML’s citations establish, however, there is a difference between litigation merely “affecting” a non-party and, as here, litigation specifically targeting a non-party’s “legal rights.” See Nat’l Ass’n of Chain Drug Stores v. New England Carpenters Health Benefits Fund, 582 F.3d 30, 42 (1st Cir. 2009) (“Impact and legal rights are not the same thing”; “a person cannot be deprived of his legal rights in a proceeding to which he is not a party.”); U.S. v Buck, 281 F.3d 1336, 1345 (10th Cir. 2002) (rejecting claims by non-party movants impacted by quiet title judgment only after analysis of whether their “legal rights” had been affected).24 Chain Drug Stores is particularly unhelpful to NML. There, non-party pharmacies contended that their due process rights were implicated by a proposed class action settlement of RICO claims against drug wholesalers that would reduce

NML selectively quotes the Patterson case for the proposition that “due process ‘obviously does not mean … that a court may never issue a judgment that, in practice, affects a nonparty’.” NMLB, 53. But as Patterson makes clear, “the court must consider the extent to which the judgment may ‘as a practical matter impair or impede [a non-party’s] ability to protect’ his interest in the subject matter.” Provident Tradesman Bank Trust Co. v. Patterson, 390 U.S. 102, 110 (1968) (footnotes omitted; emphasis added). 18

24

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the price charged by pharmacies for prescriptions. The court held that, although non-party pharmacies’ revenues would be impacted by a settlement reducing wholesale prices, their legal rights were not affected because they had “chosen by contract to key their reimbursements to figures published by the defendants.” Id. at 42. By contrast, here the district court imposed a new condition precedent on the EBG’s contract rights, thereby directly affecting legal rights. See also EBGB at 29-33. B. The EBG Had No Opportunity to Respond to the February 23, 2012 Injunction Until After the October 26, 2012 Remand.

NML argues the EBG received the process it was due because it had actual notice of the Injunction. NMLB, 53-54. NML’s argument is based on speculation, not evidence. General press coverage of court proceedings is not actual notice where, as here, a party’s legal rights are directly targeted by judicial action. See, e.g., In re Agriprocessors, Inc., 465 B.R. 822, 832-33 (Bankr. N.D. Iowa 2012) (creditor lacked actual notice of sale despite news reports of debtor’s bankruptcy proceedings); In re Rounds, 229 B.R. 758, 765 (Bankr. W.D. Ark. 1999) (“‘[A]dequate notice’ and ‘opportunity to participate’ includes providing interested, ‘known’ parties not only with generalized notice of the event in question, but also the specifics of it....”) (emphasis in original) (citing In re Hairopoulos, 118 F.3d 1240, 1244 (8th Cir. 1997)). Absent evidence that the EBG received actual notice before the February 23 Injunction, it was deprived of due 19

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process, rendering the Injunction void. EBGB at 37-39 (discussing Dial, Aztec and Metzger). C. Due Process Required an Evidentiary Hearing.

Contrary to NML’s argument (NMLB, 55), an evidentiary hearing was required because several factual issues relevant to the equities were never developed, particularly as to “application to third parties.” NML, 699 F.3d at 265.25 A court may forgo an evidentiary hearing only when “[t]he most significant factors [on which the injunction was based]…would have remained essentially unchanged by any additional evidence.” Drywall Tapers and Pointers of Greater N.Y., Local 1974 v. Local 130 of Operative Plasterers and Cement Masons Int’l Ass’n, 954 F.2d 69, 77 (2d Cir. 1992); see Motorola Credit Corp. v. Uzan, 2003 WL 21373463, at *2 (S.D.N.Y. June 12, 2003) (ordering evidentiary hearing after plaintiff made prima facie case for injunction to provide defendant opportunity to “complain[] of the hardships that it might suffer”).26

NML’s claim that one brief conference on November 9, 2012 satisfied the hearing requirement (NMLB, 55 n.13) is baseless. The conference was merely to “schedule proceedings,” SPE-448, and the district court gave EBG’s counsel virtually no opportunity to speak. SPE-446:12-13; SPE-449:25-SPE-450:6; SPE472:5-SPE-473:14; SPE-478:1-5. 26 EBG does not contend that due process requires giving a party “the briefing schedule of its choice.” NMLB, 55 n.13. The district court’s rush to judgment deprived the EBG of a reasonable time to prepare its argument in the absence of any exigency. See, e.g., In re Ctr. Wholesale, Inc., 759 F.2d 1440, 1448 (9th Cir. 1985) (one day’s notice insufficient). Scheduled payment obligations on the 20

25

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The EBG would have proffered evidence, inter alia, concerning the Republic’s ability to fully pay the holdouts and the EBHs; the practicality and legality of requiring intermediaries to withhold payments owed to EBHs; and whether NML had inequitably purchased credit default swaps that effectively bet that this litigation would prompt a second default and ensure that, no matter the outcome, NML would profit. EBGB at 38 n.21. Had the EBG and others received due process, the factual record before the district court would have been far different, providing further evidence that the Injunction is unsupportable. An evidentiary hearing would have exposed the fallacy in NML’s assertion that Argentina can afford to pay all exchange and FAA bondholders. NMLB, 57. The Record contains no credible evidence to support this. Euro Bondholder Br., 28 n.17 (“[A]lthough it has $43 billion of reserves, that number is actually closer to $19 billion after accounting for foreign denominated private sector loans, deposits, foreign lines of credit, and its 2013 budget law earmarking $8 billion for its debt.”); Prat-Gay Amicus Br., 8. Foreign exchange reserves are not, as the district court considered them, the sovereign equivalent of a bank account from which any withdrawal that does not result in a negative balance can be made. Puente Hnos. Amicus Br., 21; see also Daniel Altman, Writing’s on the Wall for Argentina,

Exchange Bonds continue for some 25 years; there was no need for an expedited briefing schedule. SPE-451 at 20-23. 21

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Foreign

Policy,

Oct.

15,

2012,

available

at

http://www.foreignpolicy.com/articles/2012/10/15/writing_s_on_the_wall_for_arg entina (“the central bank’s capacity to support the peso may finally be running out”).27

NML’s claim that the Republic can pay all bondholders ignores the fact that the Republic is liable to additional non-party holdout FAA bondholders under the pari passu clause, in addition to other financial obligations of the Republic, which far outstrip its available reserves. The brief of Non-party holdout bondholder EM, Ltd. makes clear that, if this Court upholds the Injunction, there will be a flood of follow-on claims from other holdouts seeking the same remedy. EM Br., 3. If that occurs, the Republic would face liability for an estimated $10 billion to holdout FAA bondholders not involved in this litigation (Katia Porzecanski, Singer Case Has $10 Billion in Copycat Claims, Bloomberg, Jan. 30, 2013; Mount, supra. In addition to those claims, there are other liabilities of approximately $10 billion to the Paris Club (Mount, supra); approximately $1 billion in outstanding ICSID and UNCITRAL arbitration awards and interest (see Awards, ICSID Case Nos. ARB/97/3; ARB/01/8; ARB/01/12; ARB/02/1; ARB/03/15; ARB/03/23; ARB/07/17, available at http://italaw.com; Nat’l Grid P.L.C. v. Republic of Argentina, No. 09-CV-00248(RBW), (D.D.C. Feb. 6, 2009), ECF No. 1-2); and $23.6 billion in pending ICSID arbitrations (see Republic of Argentina, Form 18K, Sept. 30, 2011, 190, http://www.sec.gov/Archives/edgar/data/914021/ 000090342311000486/roa-18k_0928.htm; Repsol files int’l complaint on Argentina YPF takeover, Reuters, Dec. 3, 2012, http://www.reuters.com/article/ 2012/12/03/argentina-repsolidUSL1E8N36H92012 1203). The Republic also owes approximately $5.5 billion to the World Bank. World Bank Finances, IBRD Statement of Loans – Latest Available Snapshot: Argentina, Nov. 30, 2012, available at http://finances.worldbank.org. Thus, Argentina’s outstanding obligations to creditors amount to approximately $26.5 billion, and potential obligations on likely claims (if the injunction is approved) of $23.6 billion, far outstripping its available central bank reserves of approximately $19 billion (Euro Bondholder Br., 28 n.17).

27

22

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D.

The EBG Acted in a Timely Manner

“[T]his Court has been exceedingly lenient in defining the term ‘reasonable time,’ with respect to voidness challenges. In fact, it has been oft-stated that, for all intents and purposes, a motion to vacate a default judgment as void ‘may be made at any time.’” “R” Best Produce, Inc. v. DiSapio, 540 F.3d 115, 123-24 (2d Cir. 2008). Since the EBG did not have proper notice of the February proceedings, the Injunction was effectively a default judgment as to the EBG. WLF’s reliance on MasterCard for its Rule 19 timeliness argument is meritless. WLFB at 23. MasterCard held that failure to join necessary parties under Rule 19 could be raised at any time, even sua sponte or on appeal. 471 F.3d at 382-83 (citing cases). Only as to a “second appeal,” id. at 384, of a Rule 24 motion to intervene, was Visa barred as untimely. Id. at 390-91. But the EBG asserted Rule 19 arguments in its Rule 60 motion, and did not move to intervene under Rule 24, so this portion of MasterCard is inapplicable.28 E. The EBG Has Standing to File a Rule 60(b) Motion.29

Moreover, as WLF has previously argued (WLF Amicus Br. dated Jun. 29, 2012 at 19-21), a party asserting laches must show prejudice. Plaintiffs suffered no harm from the timing of EBG’s appearance. There is no indication Plaintiffs would have acted differently had EBG been involved earlier. 29 Because the EBG’s appeal of the district court’s November 26 Orders (No. 12-4694, encompassing all issues relating to denial of Rule 60(b) motion) was consolidated with the instant appeal (Order, Dec. 13, 2012 (ECF No. 580)), the EBG can raise on appeal all the issues addressed in its opening brief. See Order 23

28

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Non-parties have standing where “the outcome of the proceedings has significant consequences” for their unrepresented interests, Federman v. Artzt, 2009 WL 2223492, *1 (2d Cir. 2009), and where movants are “sufficiently connected and identified with the…suit to entitle them to standing” Dunlop v. Pan World Airways, Inc., 672 F.2d 1044, 1051-52 (2d Cir. 1982) (emphasis added) (former employees permitted to move to modify stipulation of employer with government terminating age discrimination suit); see also Grace v. Bank Leumi Trust Co., 443 F.3d 180, 188 (2d Cir. 2006) (Rule 60(b)) (standing recognized where plaintiff settled with judgment-proof pro se defendant, intending to collect judgment from non-party); In re Lawrence, 293 F.3d 615, 627 n.11 (2d Cir. 2002) (collecting cases). Here, the Injunction alters the terms of the EBG’s contract by conditioning interest payments on the Republic’s full satisfaction of debts to Plaintiffs. The EBG’s rights are directly affected by (and specifically identified in) the Injunction, thereby establishing standing. V. THE EBG DID IN FACT OFFER AN ALTERNATIVE RATABLE PAYMENT FORMULA. As an initial matter, this court has not affirmed any interpretation of the lower court’s “ratable payment” formula, see NMLB, 19; it remanded for consideration of the Injunction’s impact on third-parties, including the ratable Nov. 28, 2012 (ECF No. 482) (granting EBG leave to appear as interested nonparties). WLF’s argument to the contrary, WLFB at 11-12, is frivolous. 24

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payment formula, after which this Court, under Jacobson, could assess the legality of the Injunction with knowledge of its precise terms. If NML were correct, the Court would simply have remanded with instructions to clarify the formula before putting the Injunction into effect. Plaintiffs also falsely contend (NMLB, 20-21) that the EBG has not offered alternative ratable payment formulas. In fact, the EBG submitted a very specific proposal to the district court, which it did not address. In addition to the its brief to the district court (EBGDCB, 20-21), Point I of the EBG’s opening brief is a direct challenge to the district court’s formula that requires full payment on the FAA bonds. To the extent NML contends that it is the EBG’s obligation to propose alternatives, it is mistaken. The Plaintiffs are at great pains in their brief to paint the EBG as allies of the Republic. That is wrong. The EBGs wish only to enjoy their contractual rights without being dragged into or used as a pawn in the dispute between Plaintiffs and the Republic. With respect to the proposal in the Republic’s brief to re-open the exchange, the EBG takes no position on it vis-a-vis Plaintiffs, and simply notes that there are other bondholders that may find the exchange offer attractive.30

30

EBG member Gramercy currently holds a claim against the Republic relating to certain defaulted FAA Brady Bonds. Assuming a handful of legal technicalities relating to the underlying collateral can be overcome, Gramercy would participate in the new exchange. The EBG is also aware that other financial 25

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Dated:

New York, New York February 1, 2013 Respectfully submitted, By: /s/ Sean F. O’Shea______________ O’SHEA PARTNERS LLP Sean F. O’Shea Michael E. Petrella Daniel M. Hibshoosh Amanda L. Devereux 521 Fifth Avenue, 25th Floor New York, New York 10175 (212) 682-4426 soshea@osheapartners.com BOIES, SCHILLER & FLEXNER LLP David Boies David A. Barrett Nicholas A. Gravante, Jr. Steven I. Froot 575 Lexington Avenue New York, New York 10022 (212) 446-2300 Attorneys for the Exchange Bondholder Group

institutions such as BNP Paribas, Grantham, Mayo Van Otterloo & Co LLC, and others who, collectively with Gramercy, hold (or manage entities that hold) FAA bonds representing approximately $500 million of judgments and claims against the Republic, would also be willing, subject to a review of the final terms, to participate in a re-opening of the 2005 exchange. 26

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CERTIFICATE OF COMPLIANCE I hereby certify that: 1. This brief complies with Fed. R. App. P. 32(a)(7)(B)(i) because it

contains 6,740 words. 2. This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionately spaced typeface using Microsoft Word in 14-point Times New Roman font. Dated: February 1, 2013 By: /s/ Sean F. O’Shea Sean F. O’Shea Michael E. Petrella Daniel M. Hibshoosh O’SHEA PARTNERS LLP 521 Fifth Avenue, 25th Floor New York, New York 10175 Tel.: (212) 682-4426 soshea@osheapartners.com BOIES, SCHILLER & FLEXNER LLP David Boies David A. Barrett Nicholas A. Gravante, Jr. Steven I. Froot 575 Lexington Avenue New York, NY 10022 Tel.: (212) 446-2300 Attorneys for the Exchange Bondholder Group

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STATE OF NEW YORK COUNTY OF NEW YORK

) ) )

ss.:

AFFIDAVIT OF CM/ECF SERVICE

I, Natasha S. Johnson, being duly sworn, depose and say that deponent is not a party to the action, is over 18 years of age. On February 1, 2013 deponent served the within: Reply Brief for Non-Party Appellant Exchange Bondholder
Group

upon:

SEE ATTACHED SERVICE LIST

via the CM/ECF Case Filing System. All counsel of record in this case are registered CM/ECF users. Filing and service were performed by direction of counsel.

Sworn to before me on February 1, 2013

___s/Maria Maisonet_____________ MARIA MAISONET Notary Public State of New York No. 01MA6204360 Qualified in Bronx County Commission Expires Apr. 20, 2013

s/Natasha S. Johnson

Job # 245810

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SERVICE LIST: Gibson, Dunn & Crutcher LLP 1050 Connecticut Avenue, NW Washington, DC 20036 (202) 955-8500 -andDechert LLP 1095 Avenue of the Americas New York, New York 10036 (212) 698-3500 Attorneys for Plaintiff-Appellee NML Capital, Ltd. Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP 1801 K Street, NW, Suite 411L Washington, DC 20006 (202) 775-4500 -andMenz Bonner Komar & Koenigsberg LLP 444 Madison Avenue, 39th Floor New York, New York 10022 (212) 233-2100 -andFriedman Kaplan Seiler & Adelman LLP Seven Times Square New York, New York 10036 (212) 833-1100 -andSimpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 (212) 455-2000 -andMoloLamken LLP 600 New Hampshire Avenue, NW Washington, DC 20037 (202) 556-2000

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-andPaul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019 (212) 373-3000 Attorneys for Plaintiffs-Appellees Aurelius Capital Master, Ltd., ACP Master, Ltd., Blue Angel Capital I LLC and Aurelius Opportunities Fund II, LLC Milberg LLP One Pennsylvania Plaza, 49th Floor New York, New York 10119 (212) 594-5300 Attorneys for Plaintiffs-Appellees Pablo Alberto Varela, Lila Ines Burgueno, Mirta Susana Dieguez, Maria Evangelina Carballo, Leandro Daniel Pomilio, Susana Aquerreta, Maria Elena Corral, Teresa Munoz De Corral, Teresa Munoz De Corral Norma Elsa Lavorato, Carmen Irma Lavorato, Cesar Ruben Vazquez, Norma Haydee Gines and Marta Azucena Vazquez Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, New York 10006 (212) 225-2000 Attorneys for Defendant-Appellant Goodwin Procter LLP Exchange Place 53 State Street Boston, Massachusetts 02109 (617) 570-1000 Attorneys for Plaintiff-Appellee Olifant Fund, Ltd. Reed Smith LLP Reed Smith Centre 225 Fifth Avenue Pittsburgh, Pennsylvania 15222 (412) 288-3131 Attorneys for Interested Non-Party Appellant The Bank of New York Mellon, as Indenture Trustee

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