Gibson, Dunn & Crutcher has been on a hot streak.
The firm secured a huge settlement for Cablevision on Oct. 21 in its high-profile spat with Dish Network, earning partner Orin Snyder recognition as Litigator of the Week for his relentless attacks on Dish’s credibility. Two days later we described how Theodore Boutrous Jr., who won Wal-Mart v. Dukes, is angling to strike another blow against class actions at the U.S. Supreme Court. On Oct. 30 New York-based partner Robert Weigel scored a total defense win for Artemis SA in a $4.3 billion case brought by California’s insurance commissioner. Did we mention that the firm was tapped by Goldman Sachs & Co. to seek a Supreme Court reversal in a closely watched securities case? Or that 15 leading tech companies picked Gibson Dunn to make their case as amici in a case challenging patent suit pile-ons in East Texas? Or that federal prosecutors relied on evidence that the firm dug up to indict Paul Ceglia, the man claiming a massive ownership stake in Facebook?
After all that, we admit that when Thursday rolled around we were reluctant to name another Gibson Dunn lawyer Litigator of the Week. We’re no cheerleaders for the firm; we were just as happy to report the big loss Gibson Dunn suffered for Apple Inc. last month. But we kept coming back to Theodore Olson, who won a ruling from the U.S. Court of Appeals for the Second Circuit on Oct. 26 that could force the Republic of Argentina to cough up some of the billions it owes to U.S. creditors.
The ruling is very big, very bad news for Argentina, because it upends a repayment plan the Republic devised after years of deliberation. To win the case, Olson had to overcome fierce objections not only from Argentina’s lawyers at Cleary Gottlieb Steen & Hamilton, but also from the U.S. Department of Justice.
After Argentina defaulted on more than $90 billion in sovereign debt in 2001, most of the Republic’s foreign creditors agreed to take about 30 cents on the dollar as part of massive debt restructuring. But a group of U.S. investors and vulture funds that invested billions in Argentine bonds decided to try their luck in U.S. district court in Manhattan. The funds, including Gibson Dunn client NML Capital Management, have won about $10 billion in final judgments.
The Republic has refused to recognize those judgments, however, and it’s been awfully adept at resisting efforts by investors to get the courts to enforce them. Meanwhile, Argentina has paid out billions to the creditors that agreed to restructure their debt. That repayment scheme has lead to some creative attempts by NML and others to seize Argentina property. NML and the affiliated investment fund EM Ltd. tried to seize $105 million Argentina’s central bank deposited at the New York Federal Reserve, but the Second Circuit ruled that the assets are shielded by the Foreign Sovereign Immunities Act. NML, which is owned by the billionaire hedge fund manager Paul Singer, recently resorted to commandeering a Argentine naval ship off the coast of Africa, sparking a minor international incident.
By late 2011, Argentina had already been ordered to pay various plaintiffs in New York $10 billion in final judgments. U.S. District Judge Thomas Griesa in Manhattan had also determined that the Republic owed another $1.3 billion in 12 suits that hadn’t produced final judgments. Rather than press for more awards that Argentina would inevitably ignore, lawyers for the remaining investors asked for an injunction to stop Argentina from making any more payments to holders of restructured debt until it began paying back the bondholder plaintiffs.
Griesa agreed, and in February he issued identical orders in all 12 cases. “You could hear the exasperation in Judge Griesa’s voice,” Olson told us when we caught up with him on Thursday. “The courts are getting very tired of Argentina ignoring its responsibilities.”
Griesa based his ruling on a so-called “pari passu” clause in the bond agreements (pari passu is Latin for “on equal footing”). Such clauses, which state that bondholders are entitled to equal treatment, are commonplace in sovereign debt instruments, but rarely give rise to an injunction like Griesa’s. “The case is huge in the world of sovereign debt, arguably the biggest that world has ever seen,” Reuters blogger Felix Salmon wrote in July.
After Argentina appealed, all of the plaintiffs picked Olson to argue on their behalf at the Second Circuit. He had his work cut out for him. According to Argentina’s lawyers, Griesa’s ruling would “plunge the Republic into a new financial and economic crisis” and “make impossible debt restructurings by Greece, Portugal, Ireland, Spain, and other states.” And the judge didn’t do himself any favors by candidly saying that he hoped his injunction would give the funds leverage to bring the Argentine bond litigation to an end.
