Deals & Suits

Corporate Counsel

02-01-2013

BP Asset Sales

BP p.l.c. has been on a selling spree. In October the company struck a deal to sell its 50 percent stake in TNK–BP, Russia's third-largest oil company, to OAO Rosneft Oil Company. BP will receive $12.3 billion in cash and an 18.5 percent stake in Rosneft worth about $14 billion. The parties hope to close the deal within six months. Rosneft will buy the rest of TNK–BP from Alpha Access Renova, or AAR, the consortium of Russian billionaires that owns the other half of the company.

BP also agreed last year to five different U.S. asset sales of $1 billion or more that could net the troubled oil company up to $12.755 billion, money that will help defray costs associated with the Deepwater Horizon oil spill in 2010. BP announced within weeks of the disaster that it planned to sell up to $38 billion in assets. It began by selling $7 billion in oil and gas assets in Texas, New Mexico, Canada, and Egypt to Apache Corporation [Deals & Suits, October 2010] and has since sold properties all over the world.

The most recent flurry of sales started with the $1.2 billion sale of properties located in the Hugoton Basin in Kansas to Linn Energy LLC, a deal announced on February 25 and closed the next month. Linn also agreed on June 25 to pay BP $1.03 billion for natural gas fields in Wyoming, a deal that closed in July.

BP then struck a deal to sell its Carson, California, refinery, along with the facility's inventory of oil and 800 Arco-branded gas stations in Southern California, Nevada, and Arizona, to Tesoro Corporation for $2.475 billion on August 13. The parties hope to close before the middle of 2013.

On September 10 Plains Exploration & Production Company announced that it had agreed to pay BP $5.55 billion for oil and gas assets in the Gulf of Mexico. Plains will also pay Royal Dutch Shell plc $560 million for a 50 percent stake in the Holstein oil fields, the rest of which the buyer will purchase from BP. The parties expect to close by the end of the year.

BP also struck a deal on October 8 to sell its Texas City, Texas, refinery and related assets to Marathon Petroleum Corporation for $598 million in cash and as much as $700 million more over the next six years, depending on the refinery's profitability. Marathon will also pay $1.2 billion for the refinery's current hydrocarbon inventory. The parties hope to close the deal early in 2013. Regulators must approve the sales of the refineries and Plains's proposed acquisition of the Gulf of Mexico assets.

For buyer OAO Rosneft Oil Company (Moscow)

Cleary Gottlieb Steen & Hamilton:

Corporate: Daniel Braverman, Russell Pollack, and associates Gabriele Antonazzo and Marie-Hélène Farrelly. Antitrust: Antoine Winckler. Russian law: Murat Akuyev and asso­ciates Yulia Savitskaya and Mikhail Suvorov. (Braverman, Antonazzo, and Farrelly are in London; Pollack is in Paris; Winckler is in Brussels; Akuyev, Savitskaya, and Suvorov are in Moscow.)

For buyer Plains Exploration & Production Company (Houston)

In-House:

General counsel John Wombwell and assistant general counsel Carolyn Bertrand.

Latham & Watkins:

Michael Darden, Jeffrey Muñoz, and associates Christopher Bennett, Dane Johnson, Stephen Szalkowski, and Wesley Thoman. (All are in Houston.) Latham represented the company last year on its $450 million sale of a 20 percent stake in its Gulf of Mexico assets to EIG Global Energy Partners LLC and in 2010 on the sale of its shallow-water properties in the Gulf of Mexico to McMoran Exploration Co. for $818 million. Darden, who helped launch Latham's Houston office when he joined from Baker Botts two years ago, previously advised Plains on matters involving offshore assets. Michael Dillard, who came to Latham from Akin Gump Strauss Hauer & Feld, represented the company on its 2002 IPO and numerous other securities law matters.

For buyer Marathon Petroleum Corporation (Findlay, Ohio)

In-House:

Group counsel Michael Barnett, senior attorney Bruce Lazar, senior counsel Kristi Clark, general attorney Timothy Berry, and attorney John Staler. Environmental: assistant general counsel Virginia King and attorney Sherry Hesselbein.

Jones Day:

Energy: Dickson Chin, Kenneth Driver, Gerald "Jerry" Farano, William "Fritz" Henze III, Jeffrey Schlegel, and Charles "Chuck" Wehland. Real estate: Michelle Brown, Susan Cox, and David Lowery. Intellectual property: Joseph Beauchamp. Antitrust: Peter Love, Fiona Schaeffer, and Tom Smith. Tax: Todd Wallace. Labor and employment: Brian Easley and Mark Temple. Restructuring: Thomas Howley. M&A: Peter Izanec. Banking: Robert Graves. Litigation: Scott Cowan. Health care: John Bibby Jr. (Chin, Henze, and Schaeffer are in New York; Driver, Farano, Love, and Smith are in Washington, D.C.; Schlegel, Beauchamp, Temple, Howley, and Cowan are in Houston; Wehland, Easley, Graves, and Bibby are in Chicago; Brown, Cox, Lowery, and Wallace are in Dallas; Izanec is in Cleveland.)

Frost Brown Todd:

Environmental: Kevin McMurray, Steven Wesloh, and associate Thaddeus Driscoll. (All are in Cincinnati.)

For buyer Tesoro Corporation (San Antonio)

In-House:

General counsel Charles "Chuck" Parrish, lead deal lawyer and antitrust counsel P. Scott Rammell, real estate counsel Brooks Meltzer, intellectual property counsel Stoney Vining, information technology counsel Cliff Barr, marketing counsel Arseni Grokhovski, logistics counsel Barron Dowling, and calciner and cogeneration counsel Charles Magee.

Pillsbury Winthrop Shaw Pittman:

Corporate: Patrick Devine and Bruce McDiarmid. Finance: Michael Hindus, Robert James, Robert Spjut, and associates Alicia McKnight and Brian Scaccia. Global sourcing: Michael Murphy. Executive compensation and benefits: Christine Richardson. Employment and labor: Paula Weber. Environmental: Michael Barr, David Farabee, Jerry Ross, counsel Brad Raffle, and associate Julia Miller. Real estate: Laura Hannusch and Glenn Snyder. Intellectual property: Richard Zaitlen. (All are in San Francisco except for Los Angeles–based Barr and Zaitlen and Houston-based Ross, Raffle, Miller, and Hannusch.)

Bingham McCutchen:

Environmental: Colleen Doyle and counsel Diana Martin. (Both are in Los Angeles.)

Cooley:

Antitrust: Jackie Grise, Marc Schildkraut, and associates Megan Browdie, David Burns, Sharon Connaughton, and Tanisha James. (All are in Washington, D.C.)

Cox Smith:

Real estate: Rodrigo Figueroa, C. Michael Montgomery, John Stewart, and associates Jeffrey Bizon, Alan Gretzinger, and Caroleene Hardee. Intellectual property: Derrick Pizarro. Corporate: Jeffrey Gifford. (All are in San Antonio.)

McGuireWoods:

Corporate: Charles Cavallo III, Craig Culbertson, Donald Ensing, and associates Bryan Bylica, Salina Canoy, Joshua Ciccone, Angelique Dousis, Samuel Esan, and Stephanie Zabela. Real estate: Lisa Atty, Thomas Becket, John Visconsi, Joan Wolff, counsel Michael Brooks, and attorney Brandon Barker. (All the corporate lawyers are in Chicago except for Houston-based Cavallo and Dousis, and Pittsburgh-based Ciccone. All the real estate lawyers are in Los Angeles.)

For buyer Linn Energy LLC (Houston)

In-House:

Senior counsel Holly Anderson.

Baker Botts:

Tax: Michael Bresson and senior associate James Chenoweth. State tax: Matthew Larsen, Renn Neilson, and associate Jacob Bitter. Antitrust: Paul Cuomo and associate Vishal Mehta. (Bresson, Chenoweth, and Neilson are in Houston; Larsen and Bitter are in Dallas; Cuomo and Mehta are in Washington, D.C.) Linn largely handled the deal in-house. Bresson and Baker Botts partner Kelly Rose are advising Linn on the issuance of stock in LinnCo LLC.

For seller BP p.l.c. (London)

In-House:

Group general counsel Rupert Bondy, deputy company secretary Jens Bertelsen, assistant general counsel–dispute resolution Joanne Cross, managing counsel–Russia and Kazakhstan Eugene Nikulin, senior counsel–antitrust Michael Sosso, senior counsel–M&A Jane Hammond and Lisa Harville, and counsel–M&A Emily Leung. Not all lawyers worked on all deals.

Linklaters:

Litigation: Michael Bennett. Corporate: Stephen Griffin, Jeremy Parr, and Sarah Wiggins. (All are in London.) Linklaters advised on the deal with Rosneft and has represented BP for many years on its investments in Russia.

Gardere Wynne Sewell:

Corporate: Jerry DeVault, Douglas Eyberg, Charles Meacham, Frank Putman, Timothy Spear, and asso­ciates Khurram Jiwani, Austin Ke, Jennifer Smith, and Eunice Song. (All are in Houston except for Dallas-based Ke and Austin-based Smith.) Eyberg and Spear led a team that advised on the sale of the Deepwater Gulf of Mexico assets. Spear was the lead lawyer on the sale of the Hugoton assets in Kansas, Eyberg on the sale of the Wyoming assets. Eyberg also led a team that advised BP on the $3.1 billion sale of fields in the Permian Basin to Apache Corporation in 2010.

Kirkland & Ellis:

Energy: Karen Sheffler, Michael Woods, and associates Matthew Mauney and Jason Whiteley. Antitrust: Ian Conner, Ellen Jakovic, Bilal Sayyed, and associates Nina Frant and Joseph Nord. Real estate: John Caruso. (All are in Washington, D.C., except for Chicago-based Caruso.) Kirkland advised on the sale of the Texas City refinery. Kirkland represents BP in many of the lawsuits related to the Deepwater Horizon oil spill.

Greensfelder, Hemker & Gale:

Litigation: John Petite and asso­ciates Daniel Garner and Abby Risner. Real estate: Chalegne O'Brien. (All are in St. Louis.) The firm represented BP on franchising issues and the sale of retail assets in the Texas City refinery deal.

Vinson & Elkins:

M&A: Christopher Collins. Environmental: Carol Dinkins. Real estate: Sanford "Sandy" Weiner. (All are in Houston.) V&E advised on the sale of the Texas City refinery.

DLA Piper:

Corporate: Gregory Dahlgren and Carlos Solé III. Franchise law: Dennis Wieczorek. Real estate: Caryn Englander and Paul Shadle. Environmental: Matthew Covington. Intellectual property: Jason Levin. (All are in Chicago except for Houston-based Solé and San Francisco–based Covington.)

Arnold & Porter:

Antitrust: Deborah Feinstein, senior counsel Ronald Redcay, and associate Michael B. Bernstein. (Feinstein and Bernstein are in Washington, D.C.; Redcay is in Los Angeles.)

For seller AAR

In-House:

At Access Industries: general counsel Alejandro Moreno. At Renova Management AG: head of foreign litigation Evgenia Loewe and director of strategic projects Maksim Goldman.

Skadden, Arps, Slate, Meagher & Flom:

Corporate: Michal Berkner, Linda Davies, Dmitri Kovalenko, and Scott Simpson. Litigation and international arbitration: David Kavanagh and counsel David Edwards. Antitrust: Ingrid Vandenborre. (All are in London except for Moscow-based Davies and Kovalenko and Brussels-based Vandenborre.) AAR is a joint venture among Alfa Group Consortium, Access Industries, and Renova Group. Skadden represented Access Industries portfolio company Basell Polyolefins in its $19 billion purchase of Lyondell Chemical Co. in 2007.

Weil, Gotshal & Manges:

Corporate: Marco Compagnoni, Peter King, senior associate Simon Lyell, and associate Alexander Hasek. Tax: Oliver Walker. (All are in London.)

Akin Gump Strauss Hauer & Feld: Corporate: Steven Blakeley and Ilya Rybalkin. (Blakeley is in London. Rybalkin is in Moscow.)

—David Marcus

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Disney
Lucasfilm

George Lucas capped one of the great careers in American cinema on October 30 by agreeing to sell his production company Lucasfilm Ltd. to Walt Disney Company for $4 billion, about half of which will be in cash and half in Disney stock. The 68-year-old Lucas made his name as a filmmaker with the 1973 movie American Graffiti, but he made his fortune with the Star Wars movies, the first of which came out in 1977. That portfolio of six films motivated Disney CEO Robert Iger to acquire Lucasfilm, which had been owned entirely by its founder.

Disney has done well with its purchases of Pixar Animation Studios [Deals & Suits, May 2006] and Marvel Entertainment Inc. [Deals & Suits, December 2009], and Iger saw a similar opportunity in Lucasfilm, which is scheduled to release a new Star Wars movie in 2015. Kathleen Kennedy, the current cochairman of Lucasfilm along with Lucas, will become the company's president after its sale to Disney, while Lucas himself will stay on as a creative consultant. Disney and Lucas hope to close the deal within a few months pending regulatory approvals.

For acquiror Walt Disney Company (Burbank, California)

In-House:

Corporate/M&A: associate general counsel James Kapenstein. Intellectual property: deputy general counsel Susanne Wilson, assistant general counsel Charles Steinberg, principal counsel Catherine Bridge, and chief counsel–consumer products Michael Horn. Studio legal: chief counsel Steven Bardwil and assistant chief counsel Bill Neuschaefer. Employment and benefits: associate general counsel Shawna Swanson and assistant general counsel Barbara Kellams. Real estate: associate general counsel Anthony Basalari. Litigation: deputy general counsel Edward Nowak.

Skadden, Arps, Slate, Meagher & Flom:

M&A: Howard Ellin, Brian McCarthy, and counsel Timothy Fesenmyer and Andrew Garelick. Intellectual property and technology: Anthony Dreyer, Stuart Levi, and counsel Andrew Woodard and Elaine Ziff. Tax: Kenneth Betts. Executive compensation and benefits: Joseph Yaffe. Antitrust: John Nannes. E.U. and international competition: Frederic Depoortere and counsel Nikolaos Peristerakis. Labor and employment: Karen Corman and counsel Lisa D'Avolio. Environmental: counsel Stacy Kray. (All are in New York except for the following: McCarthy, Garelick, Betts, and Corman are in Los Angeles; Yaffe and Kray are in Palo Alto; Nannes is in Washington, D.C.; Depoortere and Peristerakis are in Brussels.) McCarthy represented Disney on its $7.4 billion purchase of Pixar in 2006.

For target Lucasfilm Ltd. (San Francisco)

In-House:

General counsel David Anderman, director of business affairs Christine Talarides, and head of business development Jennifer Seibly.

Latham & Watkins:

Corporate: Tad Freese, Christopher "Kit" Kaufman, Jamie Leigh, and associates Charlotte Chang, Abtin Jalali, and Chad Rolston. Intellectual property: Anthony Klein and associates Lee Baker, Heather Bromfield, Isabel Chon, and Kathleen Cui. Real estate: David Shapiro and associate Jeffrey Anderson. Employee benefits and executive compensation: associates James Metz and Ashley Wagner. Tax: David Raab and associate Matthew Dewitz. Employment law: Linda Inscoe. Environmental: Karl Karg. Antitrust: Joshua Holian, Susanne Zuehl­ke, counsel Sydney Smith, and associate Tomas Nilsson. (All are in Menlo Park, California, except for the following: Shapiro, Anderson, and Karg are in Chicago; Raab and Dewitz are in New York; Inscoe and Holian are in San Francisco; Zuehlke and Nilsson are in Brussels; Smith is in Washington, D.C.)

—D.M.

* * * * * *

Leucadia
Jefferies

Leucadia National Corporation began building a stake in Jefferies Group Inc. in April 2008, and on November 12 the holding company struck a deal to finish the job by agreeing to pay $2.6 billion in stock for the 71 percent of the investment bank that it doesn't already own. Leucadia will offer 0.81 of its shares per Jefferies share, consideration worth $17.66. The deal came at a 24 percent premium to the target's closing price on November 9, the last trading day before the deal was announced. The parties hope to close the deal in the first quarter of 2013, pending approvals from regulators and both sets of shareholders.

For acquiror Leucadia National Corporation (New York)

Weil, Gotshal & Manges:

M&A: Andrea Bernstein, Matthew Gilroy, and associates Allison Donovan, Jamie Lurie, and Michael Ray. Tax: Mark Hoenig, Chayim Neubort, and associate Mark Dundon. (Dundon is in Dallas; the others are in New York.)

For Leucadia's board of directors

Proskauer Rose:

Corporate: Martin Bienenstock, Lorenzo Borgogni, and associates Yoon Suk Choo, Mina Farbood, and Daniel Forman. Employee benefits and executive compensation: Andrea Rattner. Tax: Martin Hamilton and Stuart Rosow. Litigation: associate Michael Richter. (All are in New York.) Bienenstock is a former Weil partner. In 2001 he represented a joint venture between Leucadia and Berkshire Hathaway that acquired Finova Group Inc., a distressed lender.

For target Jefferies Group Inc. (New York)

In-House:

General counsel Michael Sharp and associate general counsel Roland Kelly.

Morgan, Lewis & Bockius:

Corporate: R. Alec Dawson, Sheryl Orr, and Robert Robison. Securities: Stephen Farrell. Tax: Kenneth Kail. Finance: Richard Petretti. (All are in New York.) Lloyd Feller, senior securities counsel at Morgan Lewis, was Jefferies's general counsel from 2002 to 2011, when he rejoined the firm.

For transaction committee of Jefferies board

Wachtell, Lipton, Rosen & Katz:

Corporate: Edward Herlihy, David Shapiro, and associate Marshall Shaffer. Executive compensation and benefits: Jeannemarie O'Brien and associate Adam Kaminsky. Finance: associates Emily Johnson and Gregory Pessin. Tax: Joshua Holmes and Jodi Schwartz. (All are in New York.)

—D.M.

* * * * * *

Virnetx v. Apple

On November 6, a federal jury in Tyler, Texas, ordered Apple Inc. to pay $368 million for infringing four patents owned by a small software company called VirnetX Inc. The patents relate to virtual private network (VPN) technology.

VirnetX first sued Apple in 2010, alleging that Apple infringed two patents that protect the automatic creation of secured communication channels between mobile devices. Apple was accused of infringing the patents with its popular FaceTime feature in iPhones and iPads, as well as with an earlier technology in Apple computers known as VPN On Demand that VirnetX asserted was a blatant copy of VirnetX's software. Apple denied that it infringed the VirnetX patents, and contended that the patents were invalid because they were anticipated by a Japanese technical article. Trial got under way on October 29. VirnetX's expert pegged damages at $708 million.

The complaint also targeted three other tech companies that make VPN software: Cisco Systems Inc., Aastra Technologies Limited, and NEC Corporation. Aastra and NEC settled before trial for undisclosed sums; VirnetX's claims against Cisco were severed and are scheduled for trial in March. At press time the judge was scheduled to hear VirnetX's motion on a permanent injunction December 20.

The two companies may be battling for a while yet. On November 7 VirnetX brought a fresh case alleging that two new Apple products, the iPad Mini and the iPhone 5, infringe the same patents.

For plaintiff VirnetX Inc. (Zephyr Cove, Nevada)

McKool Smith:

Bradley Caldwell, Douglas Cawley, Rosemary Snider, counsel Ramzi Khazen, and associates Jason Cassady, J. Austin Curry, Ryan Hargrave, Daniel Pearson, and Mitchell Sibley. (They are in Dallas, except for Khazen, who is in Austin.)

Parker, Bunt & Ainsworth:

Robert "Chris" Bunt and Robert Parker. (They are in Tyler, Texas.)

For Apple Inc. (Cupertino, California)

Williams, Morgan & Amerson:

Danny Williams. (He is in Houston.)

Desmarais LLP:

John Desmarais. (He is in New York.) Desmarais, who represents Cisco, appeared for Apple shortly before trial and argued Apple's invalidity case.

Albritton Law Firm:

Eric Albritton. (He is in Longview, Texas.)

—Jan Wolfe, with Tom Coster

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USA v. Reserve Management Company et al.

After a monthlong trial, a federal jury in Manhattan cleared investing pioneer Bruce Bent and his son Bruce Bent II of securities fraud on November 12. But the jury found that the son was liable for negligence, and two entities that the Bents controlled were liable for securities fraud.

In 2009 the Securities and Exchange Commission brought a civil complaint against the Bents and the two entities, Reserve Management Company and Reserve Primary Fund, alleging that they misled investors about the health of their flagship $62 billion money market fund. Lehman Brothers's collapse wiped out $785 million of the fund's assets, and it "broke the buck"—i.e., fell below the sacred $1 per share mark—on September 16, 2008, the day after Lehman declared bankruptcy. Shareholders got spooked and started to redeem their shares en masse. The SEC claimed that the Bents, attempting to preserve their own reputation and that of their fund, made false statements on September 15 and 16 about the fund's liquidity and their intention to support the $1 share value.

In September, U.S. District Judge Paul Gardephe ruled that the defendants could argue at trial that they relied on advice from Reserve Management's then outside counsel Willkie Farr & Gallagher when they allegedly misled investors about the fund's risks.

Jurors rejected all six charges against Bent Sr., who is credited with launching the first money market fund in 1970.

For plaintiff the United States of America

In-House:

At the SEC: trial attorneys Michael Birnbaum, Nancy Brown, and Alexander Janghorbani.

For defendants Reserve Management Company (New York) et al.

Duane Morris:

Eric Breslin, John Dellaportas, Fran Jacobs, and associates Justin D'Elia, Kathrine Gehring, Luke McLoughlin, Mary Pennisi, and Sean Zabaneh. (Breslin is in Newark; McLouglin and Zabaneh are in Philadelphia; the rest are in New York.)

—J.W., with T.C.

* * * * * *

Voom HD v. Echostar

On October 21 Dish Network Corporation agreed to pay $700 million to Cablevision Systems Corporation and its onetime subsidiary AMC Networks Inc., resolving a four-year-old dispute in which a now-defunct Cablevision unit called Voom HD Holdings claimed damages of $2.4 billion against Dish's affiliate EchoStar Corporation.

Under the terms of the deal, Dish resumed airing blockbuster AMC programs such as Mad Men and The Walking Dead that it dropped from its cable lineup last summer, and was expected to resume airing Sundance, IFC, and other AMC channels.

The case was sparked by EchoStar's decision to stop carrying Voom HD, a group of channels launched by Cable­vision devoted to high-definition programming. Voom sued in New York trial court in Manhattan in 2008, alleging that EchoStar (now Dish) breached a 15-year contract to offer its subscribers the Voom service. Voom is now part of AMC, which Cablevision spun off last year. Both Cablevision and AMC are held by the Charles Dolan family.

The AMC channels got caught in the middle of the dispute after Dish dumped them from its subscription offerings last summer. AMC claimed that the decision by Dish, which accounts for about 13 percent of AMC's subscriber base, was retaliatory and a ploy to gain negotiating leverage in the Voom litigation. Dish denied that its decision had anything to do with the breach-of-contract case, saying that it had dropped the channels because they didn't generate the kind of ratings that would justify the increased licensing fees sought by AMC.

The trial in late September was marked by drama fit for television. AMC accused Dish of withholding evidence. Dish argued that the documents in question were protected by attorney-client privilege, but Justice Richard Lowe III ordered them to be produced. On October 17 the judge ordered a Dish executive to leave the courtroom after determining that she shouldn't have been observing the trial; he also directed that her computer be seized. Settlement negotiations began soon after.

Under the agreement, $80 million of the settlement will go toward Dish's purchase of Cablevision's wireless spectrum licenses.

For plaintiff Voom HD Holdings LLC (Jericho, New York) et al.

In-House:

At Cablevision Systems Corporation: general counsel David Ellen and senior vice president and associate general counsel Alexander Shapiro. At AMC Networks Inc.: general counsel Jamie Gallagher and senior vice president–corporate legal Cliff Bail.

Gibson, Dunn & Crutcher:

David Debold, Thomas Dupree Jr., Chris Dusseault, Orin Snyder, counsel Avi Weitzman, and asso­ciate Alma Asay. (Asay has left the firm; Debold and Dupree are in Washington, D.C.; Dusseault is in Los Angeles; and the rest are in New York.)

For defendant Dish Network Corporation f/k/a/ Echostar Satellite L.L.C. (Englewood, Colorado)

In-House:

At Dish Network Corporation: senior vice president and general counsel R. Stanton Dodge and vice president and associate general counsel Lawrence Katzib.

Morrison & Foerster:

James Bennett, Charles "Chet" Kerr, J. Alexander Lawrence, Mark McPherson, Linda Shostack, Ronald White, and associates Ree­ma Abdelhamid, Robert Baehr, Kiersten Fletcher, Adam Heintz, Wendy Ray, and Benjamin Smiley. (Bennett and Shostack are in San Francisco; Ray is in Los Angeles; the rest are in New York.)

—Lisa Shuchman, with T.C.

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NML Capital v. Republic of Argentina

The Republic of Argentina defaulted on an estimated $80 billion in debt in 2001. In a pair of restructurings in 2005 and 2010, it persuaded more than 90 percent of its bondholders to surrender their claims in exchange for new bonds worth about 35 cents on the dollar. But on October 26, a panel of the U.S. Court of Appeals for the Second Circuit affirmed a groundbreaking injunction that upends that repayment scheme. The ruling could result in long-awaited payments by Argentina to a group of holdout hedge fund creditors, who refused to exchange their original bonds.

The ruling comes in a case brought in 2011 by several hedge funds, including Elliott Associates's NML Capital Management, Aurelius Capital Master Ltd., and Olifant Fund Ltd., among others. The appellate panel upheld a permanent injunction ordering Argentina to repay the funds before it makes any more repayments to holders of restructured debt. In a setback for Argentina, the court held that the Republic breached its contractual obligations by giving priority to creditors who accepted the haircut and exchanged their bonds.

The holdout funds instead brought a series of breach of contract suits against Argentina in U.S. district court in Manhattan. Collectively, the funds have secured final judgments against the country worth more than $6 billion. (Argentina at press time still refused to recognize them.)

In February 2012 U.S. District Judge Thomas Griesa, indicating that hedge funds are owed roughly $1.3 billion, entered a series of injunctions barring the country from making payments to holders of restructured debt until it first repays the plaintiffs.

The defense argued that Griesa's injunction is based on a misreading of the so-called pari passu clause in the Argentine bonds, which states that bondholders are entitled to "equal treatment." The U.S. Department of Justice sided with Argentina, writing in an amicus brief that Griesa's approach allows a single creditor to thwart an internationally supported restructuring plan.

The Second Circuit has now dismissed those arguments, ruling that Griesa's reading of the clause was not in error. The court also wrote that Argentina can afford the judgments. On November 21 Judge Griesa issued a trio of sweeping orders on remand as to the scope, timing, and targets of enforcement. On November 28 the Second Circuit stayed those orders pending appeal.

For plaintiff-Appellee NML Capital Management (Cayman Islands)

Dechert:

Robert Cohen, Dennis Hranitzky, and associate Eric Kirsch. (They are in New York.)

Gibson, Dunn & Crutcher:

Matthew McGill, Jason Mendro, Theodore Olson, and associate Misha Tseytlin. (They are in Washington, D.C.) Olson argued the appeal.

Quinn Emanuel Urquhart & Sullivan:

Kevin Reed. (He is in New York.)

For plaintiff-appellee Aurelius Capital Master LTD. (New York) et al.

Friedman Kaplan Seiler & Adelman:

Edward Friedman and Daniel Rapport. (They are in New York.)

For plaintiff-appellee Olifant Fund Ltd. (Boston)

Goodwin Procter:

Robert Carroll. (He is in Boston.)

For plaintiff-appellee Pablo Alberto Varela et al.

Milberg LLP:

Michael Spencer and associate Gary Snitow. (They are in New York.)

For defendant the Republic of Argentina

Cleary Gottlieb Steen & Hamilton:

Jonathan Blackman, Carmine Boccuzzi Jr., and asso­ciates Michael Brennan, Ezequiel Sanchez Herrera, Sara Sanchez, and Mona Williams. (They are in New York.)

—J.W., with Michael D. Goldhaber