In the Supreme Court of the United States

Transcription

1 NO In the Supreme Court of the United States THE REPUBLIC OF ARGENTINA, Petitioner, v. NML CAPITAL, LTD., Respondent. On Writ of Certiorari to the United States Court of Appeals for the Second Circuit REPLY BRIEF FOR PETITIONER April 14, 2014 JONATHAN I. BLACKMAN Counsel of Record CARMINE D. BOCCUZZI, JR. DANIEL J. NORTHROP MICHAEL M. BRENNAN CLEARY GOTTLIEB STEEN & HAMILTON LLP One Liberty Plaza New York, New York (212) Attorneys for Petitioner The Republic of Argentina Becker Gallagher Cincinnati, OH Washington, D.C

2 i TABLE OF CONTENTS TABLE OF AUTHORITIES... ii REPLY BRIEF FOR PETITIONER... 1 ARGUMENT... 3 A. Nothing in the FSIA Permits Post-Judgment Discovery Unbounded by the Statute s Substantive Enforcement Immunity... 4 B. The Principles of Sovereign Immunity Codified in the FSIA Confirm That NML s Subpoenas Are Impermissible C. The Text of Rule 69 Provides Further Support That the FSIA Limits Post-Judgment Discovery Against Foreign States D. The Republic s Contractual Waiver of Sovereign Immunity Does Not Expand the Scope of Permissible Execution and Hence Discovery in Aid of Execution CONCLUSION... 23

3 ii TABLE OF AUTHORITIES CASES Af-Cap, Inc. v. Chevron Overseas (Congo) Ltd., 475 F.3d 1080 (9th Cir. 2007)... 21, 22, 23 Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (1989)... 8, 18 Astoria Fed. Sav. & Loan Ass n v. Solimino, 501 U.S. 104 (1991)... 5 Autotech Techs. LP v. Integral Research & Dev. Corp., 499 F.3d 737 (7th Cir. 2007) C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 532 U.S. 411 (2001) Duncan v. Walker, 533 U.S. 167 (2001) First City, Texas-Houston, N.A. v. Rafidain Bank, 281 F.3d 48 (2d Cir. 2002) Flota Maritima Browing de Cuba, Sociadad Anonima v. Motor Vessel Ciudad de la Habana, 335 F.2d 619 (4th Cir. 1964) FW/PBS, Inc. v. City of Dallas, 493 U.S. 215 (1990) Gary W. v. State of La., 441 F. Supp (E.D. La. 1977)... 19

4 iii Jimenez v. Quarterman, 555 U.S. 113 (2009) Lozano v. Montoya Alvarez, 134 S. Ct (2014)... 5 Milner v. Dep t of the Navy, 131 S. Ct (2011)... 4 Monessen Sw. Ry. Co. v. Morgan, 486 U.S. 330 (1988)... 5 NML Capital, Ltd. v. Spaceport Sys. Int l., L.P., 788 F. Supp. 2d 1111 (C.D. Cal. 2011) Peterson v. Islamic Republic of Iran, 627 F.3d 1117 (9th Cir. 2010) Republic of Philippines v. Pimentel, 553 U.S. 851 (2008)... 8, 9, 16 Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468 (9th Cir. 1992)... 8 Samantar v. Yousuf, 560 U.S. 305 (2010) Scheck v. Republic of Argentina, No. 10 Civ (S.D.N.Y. Sep. 25, 2013) Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116 (1812) Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Ct. for the S. Dist. of Iowa, 482 U.S. 522 (1987)... 7 Texas Trading & Milling Corp. v. Nigeria, 647 F.2d 300 (2d Cir. 1981)... 15

5 iv United States v. Svoboda, 347 F.3d 471 (2d Cir. 2003) Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480 (1983)... passim Walters v. Indus. & Commercial Bank of China, Ltd., 651 F.3d 280 (2d Cir. 2011) RULES AND STATUTES 28 U.S.C , U.S.C. 1603(d) U.S.C U.S.C (g)(1) U.S.C. 1605A U.S.C U.S.C U.S.C. 1610(a)... 13, 14, U.S.C. 1610(f) U.S.C. 1610(g)... 2, 6 28 U.S.C U.S.C. 2072(b) Fed. R. Civ. P. 26(b) Fed. R. Civ. P. 69(a) Fed. R. Civ. P. 69(a)(1)... 19

6 v Fed. R. Civ. P. 69(a)(2) Fed. R. Civ. P Advisory Committee Note to Subdivision (a) OTHER AUTHORITIES ABA Report No. 3, Section of International Law, 101 Annu. Rep. A.B.A (1976)... 6 H.R. Rep (1976)... 6, 18

7 1 REPLY BRIEF FOR PETITIONER As NML makes clear, to affirm the decision below, this Court must hold that supplemental proceedings for discovery in aid of execution against a foreign sovereign are utterly divorced from the presumption of immunity and strict limits that the FSIA imposes on execution itself. That counterintuitive position is wholly incompatible with the text, structure, history, and underlying principles of the FSIA, which provides the sole basis for U.S. courts to exercise authority over foreign states and their property. Discovery cannot be in aid of execution under Rule 69 or relevant under Rule 26 when the FSIA prohibits enforcement based on the information sought. It is particularly inappropriate to permit discovery to be unbounded by the substance of the FSIA, where these general discovery limitations are overlaid with the fundamental concern for comity and reciprocity that motivated the FSIA and pervades the law of foreign sovereign immunity. NML s arguments to the contrary largely rely on the FSIA s silence on post-judgment discovery, which according to NML demonstrates Congress s intent for discovery in aid of execution to be unconstrained by the FSIA s enforcement immunities, and thus allowed even where the targeted property is categorically immune. But as this Court has recognized in analogous situations such as in Section 1983 actions, where immunity presumptively applies, no express Congressional statement about discovery is necessary: it is the nature of immunity itself that requires courts to limit any related discovery. NML concedes as much when it acknowledges despite the FSIA s silence on

8 2 the issue that the FSIA s jurisdictional immunity provisions limit jurisdictional discovery against foreign sovereigns. Resp. Br. 43. Silence on discovery in aid of execution is no more persuasive, when execution immunity is intentionally far broader, and the scope of discovery plausibly related to any potentially executable assets correspondingly narrower. NML charges the Republic with bad faith for nonpayment of judgments. Resp. Br. 39. But in establishing the FSIA s two-part immunity scheme where sovereigns are afforded broader immunity from execution than from suit Congress necessarily contemplated situations where U.S. judgments remain unpaid. NML s argument is thus an attack on Congress s basic scheme. The breadth of discovery in aid of execution against a foreign state does not depend upon a plaintiff s or district judge s views of whether a state is good or bad. Any contrary rule would undermine one of Congress s primary goals in enacting the FSIA: to provide uniformity in the treatment of foreign sovereigns in U.S. courts. There is no FSIA exception where a sovereign (in the eyes of an unhappy creditor) allegedly has the capacity to pay, nor do the FSIA s immunities wane as the time a judgment remains unsatisfied grows. 1 The uncontradicted fact is that the Republic was forced by a financial catastrophe to default on its debt, 1 When Congress wanted to permit broader execution remedies against a particular type of state those designated by the Executive as sponsors of terrorism it did so. See 28 U.S.C. 1605A, 1610(f) and (g) (Stat. App. 16a 19a).

9 3 and restructured that debt on terms that 92 percent of its creditors accepted far more than would suffice to bind all creditors under any bankruptcy regime, including that of the United States. Because there is no bankruptcy regime for insolvent states, holdouts like NML are free to litigate to collect more, but foreign states cannot fairly be expected to prefer them to the creditors who restructured. 2 Holdouts difficulty in enforcing judgments because of Congress s decision to broadly immunize sovereign property from enforcement does not warrant misreading the FSIA for their benefit. ARGUMENT Even where foreign states are subject to jurisdiction for liability purposes, the FSIA makes all foreign-state property presumptively immune from judgment execution, and then provides narrow exceptions to that immunity. 28 U.S.C (Stat. App. 13a 20a). These exceptions define the limits of judicial power in the execution context. Nothing in the text suggests an unspoken intent nonetheless to authorize unbounded discovery of all property of a foreign state, regardless of its immunity from execution under the FSIA, including property: (i) located outside the United States; (ii) not used for a commercial activity; (iii) belonging to a state s military and diplomatic core; (iv) belonging to a state s current and deceased former Presidents; or (v) belonging to foreign-state agencies or instrumentalities entitled under Section 1603 to their 2 Nor is there anything beyond a hearsay newspaper article to suggest that the Republic ever sought to evade any judgment against it. Resp. Br. 11, 48.

10 4 own immunities and presumptively separate from the state. Reading the FSIA to authorize such a worldwide forensic examination of a foreign state s property, as the Second Circuit did, is the statutory construction with no basis or referent in [the statute s] language. Resp. Br. 2 (quoting Milner v. Dep t of the Navy, 131 S. Ct. 1259, 1267 (2011)). A. Nothing in the FSIA Permits Post- Judgment Discovery Unbounded by the Statute s Substantive Enforcement Immunity 1. As NML does not contest, prior to the FSIA s enactment, no U.S. court ever ordered post-judgment discovery in aid of executing a judgment against a foreign state in the United States or abroad. See Pet. Br. 27; U.S. Br. 22 & n.10. At that time, foreignsovereign property enjoyed virtually absolute immunity. Pet. Br ; U.S. Br. 2 3, 22. Thus, when the FSIA was enacted, discovery in aid of execution tracked the substantive immunity of foreignstate property in U.S. courts: there was no execution, hence no discovery in aid of it occurred. Nothing in the FSIA s text, structure, or legislative history suggests that Congress intended for the FSIA to depart from that commonsense approach by silently permitting post-judgment discovery wholly divorced from the new statute s execution immunity. Congress is understood to legislate against a background of common-law... principles, and when a statute covers an issue previously governed by the common law, we interpret with the presumption that Congress intended to retain the substance of the common law. Samantar v. Yousuf, 560 U.S. 305, 320

11 5 n.13 (2010) (quoting Astoria Fed. Sav. & Loan Ass n v. Solimino, 501 U.S. 104, 108 (1991)); accord Lozano v. Montoya Alvarez, 134 S. Ct. 1224, 1232 (2014); see also Monessen Sw. Ry. Co. v. Morgan, 486 U.S. 330, 337 (1988) ( historical context provided sufficiently clear indication that award of pre-judgment interest not permitted, as Congress s intent to alter common law cannot be inferred sub silentio). This case is therefore not like Samantar, Resp. Br , where the question was whether the FSIA, besides indisputably codifying the previous common law of foreign state immunity (with stated modifications, such as for the first time permitting even limited execution), also should be read to cover immunity claims of foreign officials. The FSIA clearly does cover all issues of foreign state immunity, and the question is whether, in providing narrow exceptions to otherwise absolute immunity from execution when enacting Sections 1609 through 1611, Congress somehow meant to grant carte blanche for discovery far in excess of those exceptions. It would take more than silence to infer such a result. In dealing with traditionally sensitive areas, like the comity and reciprocity concerns that go to the heart of the FSIA s immunity regime, the Court has recognized the need for a clear statement, which assures that the legislature has in fact faced, and intended to bring into issue, these critical matters. Solimino, 501 U.S. at 109 (internal quotation marks omitted); see also Pet. Br Silence on these matters is wholly inadequate to impute to Congress the unlikely intent to authorize U.S. courts to act as a clearinghouse for information... that might lead to attachments or executions anywhere in the world, Pet. App. 31, in the same breath as it enacted strict limits

12 6 on the scope of execution, attachment, and all supplementary procedures in aid of execution. That the FSIA speaks about discovery in one instance in Section 1605(g)(1), Resp. Br. 27, has no bearing on NML s theory that silence means Congress otherwise intended to permit discovery in aid of execution without regard to the statute s substantive limits on execution. Section 1605(g) was enacted 20 years after the Act and does not deal with discovery directed to a foreign state at all, much less discovery concerning its presumptively immune property, but to a stay of otherwise available merits discovery directed to the United States in cases based on terrorism under Section 1605A, where such discovery would significantly interfere with a criminal investigation or prosecution, or a national security operation related to the cause of action. Stat. App. 7a. Equally meritless is NML s attempt to infer such an intent from Congress s inclusion of special service rules on foreign states in Section 1608, supposedly in place of service under Federal Rule of Civil Procedure 4. Resp. Br. 27. Rule 4(j)(1) deals with service on a foreign state by referring to Section 1608 because, before the FSIA, there was no mechanism in the Federal Rules for such service, and the principal means of obtaining personal jurisdiction was by prejudgment attachment, which FSIA Section 1610(d)(2) abolished as a means of obtaining jurisdiction. See ABA Report No. 3, Section of International Law, 101 Annu. Rep. A.B.A. 1091, 1093 (1976); H.R. Rep at 8 (1976) ( House Report ) ( [T]his bill would for the first time in U.S. law, provide a statutory procedure for making service upon, and obtaining in personam jurisdiction

13 7 over, a foreign state. ). By filling a gap in pre-fsia law by enacting a service provision in Section 1608, Congress hardly expressed an intent to allow Rule 69 discovery in aid of execution to be unconstrained by the substantive limits on execution in Sections 1609 through Indeed, Rule 69 already stated that any federal statute governs to the extent it applies. Resp. Br ; see also Point C, infra. 2. NML is on equally weak ground in suggesting that all federal law must contain a plain statement of a pre-emptive intent to displace the Federal Rules. Resp. Br. 41 (citing Société Nationale Industrielle Aérospatiale v. U.S. Dist. Ct. for the S. Dist. of Iowa, 482 U.S. 522, 539 (1987)); see also id. at 4, 27, 37. The Federal Rules, not least because of the relevance required under Rule 26, support the conclusion that the FSIA s broad immunities from execution constrain the scope of discovery in aid of execution against a foreign sovereign. Moreover, NML overreads Aérospatiale, where this Court held only that the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters a treaty that provides procedures for parties in signatory states, including the United States, to obtain evidence located abroad was intended as a permissive supplement to the Federal Rules discovery procedures rather than a pre-emptive replacement of them, because no preemptive intent had been stated in the Convention. Aérospatiale, 482 U.S. at 536, 538. The Court expressed concern that finding preemption would cause the Hague Convention s more limited procedures to replace completely the broad discovery powers that the common-law courts in the United States previously exercised, id. at 536, but that is hardly the case with

14 8 discovery in aid of execution on foreign-state property, which did not exist at all under pre-fsia common law. Other than the fact that it reflects the Court s continuing concerns regarding comity issues, Aérospatiale has no relevance to the issue of whether a statute that sharply limits execution on foreign-state property for reasons of comity and reciprocity should nonetheless be interpreted to have nothing to do with discovery in aid of execution, or instead be read, as all but one courts of appeals have done, to limit discovery to what can be plausibly executed upon under those limits NML s argument that the Federal Rules are an independent basis for judicial authority over foreign states and therefore do not need to be read consistently with the FSIA is meritless. The FSIA is the exclusive basis of U.S. court power in civil litigation against foreign states, Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439 (1989), and the language of Rule 69 subjects its execution procedures to applicable federal statutes. Moreover, NML s position is in sharp tension with Republic of Philippines v. Pimentel, 553 U.S. 851 (2008). In Pimentel, the Court considered whether an interpleader action could continue under Rule 19(b) after the Philippines a potential claimant to the interpleaded res also claimed by judgment creditors of 3 That the Ninth Circuit in Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1471, 1474 (9th Cir. 1992), affirmed discovery of assets worldwide against a state commercial instrumentality without explanation in a case concerning deference to foreign secrecy laws, and not the scope of the FSIA, is thin support for disregarding this limitation. Resp. Br. 31.

15 9 the former Philippine President had been dismissed on sovereign immunity grounds. Notwithstanding that the FSIA makes no mention of Rule 19 or joinder of parties, the Court, noting that [g]iving full effect to sovereign immunity promotes the comity interests that have contributed to the development of the immunity doctrine, held that the [c]omity and dignity interests of the Philippines outweighed the interests of respondents in collecting on their judgment, and ordered the outright dismissal of the interpleader action, even though the suit could have proceeded in its absence without directly violating the immunity from suit codified in Section Id. at , 869, 872. It did so, as Congress instructed courts to do, by applying the principles in the FSIA, 28 U.S.C (Stat. App. 1a), to a situation that the text does not directly address. A fortiori, these principles must be applied to discovery in aid of execution, when execution itself is expressly limited by the text, and discovery in aid of that execution under Rule 69 cannot logically be invoked when, by definition, it cannot furnish aid to something the statute does not allow. 4. NML s distinction between execution remedies directed to property, which are limited by Sections 1609 through 1611, and discovery in aid of execution, which is directed in personam at the state or others with information about immune property, proves far too much. Resp. Br Many execution remedies operate in personam, such as turnover under New York law and assignment under California law, but the courts of appeals agree that these remedies, which are clearly in aid of execution and would otherwise permit enforcement on property outside the United States, are necessarily limited by the FSIA to

16 10 executable property in the United States. E.g., Walters v. Indus. & Commercial Bank of China, Ltd., 651 F.3d 280, 297 (2d Cir. 2011) (affirming denial of turnover petition as violative of Section 1610(a)); Peterson v. Islamic Republic of Iran, 627 F.3d 1117, 1131 (9th Cir. 2010) (same with regard to assignment). Absent such a rule, the FSIA s execution limits literally would be rendered meaningless. 4 Since the existence of in personam jurisdiction under Sections 1604 and 1605 cannot transcend the distinct execution limits in Sections 1609 through 1611, it likewise cannot be a basis for discovery that reaches beyond those limits in aid of execution. Sections 1604 and 1605 do not expressly limit discovery either, and yet NML accepts the rule of every court of appeals to address the issue that discovery to determine whether an exception to immunity from suit applies must be ordered circumspectly and only to verify facts crucial to an immunity determination. Resp. Br. 43; see also Pet. Br Given the far narrower limits of power to execute under Sections 1609 through 1611, it would be anomalous to ascribe to Congress, from the same silence, an intent to allow limitless discovery in aid of execution, simply because a court has in personam jurisdiction to adjudicate liability under Sections 1604 and NML is wrong that foreign-state property outside the United States is not immune, NML Br. 46; see also Pet. Br. 6, 37; U.S. Br , but in any event does not dispute that U.S. courts may not execute on such property, and acknowledged as much to the Second Circuit, Dkt. Entry 120, at

17 11 5. NML notes the Court s observation in Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116, 136 (1812), that [t]he jurisdiction of the nation within its own territory is necessarily exclusive and absolute. Resp. Br. 42. But that seminal decision went on to announce as a matter of federal common law the virtually absolute immunity of foreign states in U.S. Courts. Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 486 (1983). And after the State Department adopted the restrictive theory of sovereign immunity in 1952, the Department, and U.S. courts following its guidance, continued to recognize that foreign-state property was absolutely immune from execution. Pet. Br ; U.S. Br Of course, Congress was always free to modify the rules, which it did in the FSIA, but its partial lowering of the previous barrier to any execution is hardly convincing evidence that it intended to ignore for purposes of discovery in aid of execution the barriers it retained. 6. NML s and its amici s efforts to ascribe to Congress various rationales for permitting discovery in aid of execution unconstrained by the FSIA s limited bounds of execution and proceedings in aid of execution 5 NML implies, Resp. Br n.5, that sovereign property was not absolutely immune prior to the FSIA by citing a single decision, Flota Maritima Browning de Cuba, Sociadad Anonima v. Motor Vessel Ciudad de la Habana, 335 F.2d 619 (4th Cir. 1964). Flota Maritima was a factually unique case where the United States declined to file a suggestion of immunity and Cuba had waited three years to claim immunity after entering an appearance. It was also wrongly decided on the facts, as the court of appeals dissent described. See id. at Regardless, a single outlier does not alter the pre-fsia common law that the Court, the Executive, and Congress have all recognized.

18 12 are unconvincing. While NML would like to read into the statute a Congressional intent to help creditors enforce judgments in foreign jurisdictions, the wellsettled procedure for creditors to obtain such enforcement would be to sue in those jurisdictions to obtain recognition of a U.S. judgment, and then those courts can use their powers to assure enforcement of the judgment under their own procedures and immunity laws. Autotech Techs. LP v. Integral Research & Dev. Corp., 499 F.3d 737, (7th Cir. 2007). 6 The sweeping decision below ignores this established procedure, and is calculated to enmesh U.S. courts in discovery applications brought by creditors around the globe to obtain boundless extraterritorial discovery against foreign states from non-u.s. sources in disputes having nothing to do with this country. For example, a German creditor, after obtaining recognition in the United States of German judgments against the Republic, was granted worldwide discovery of an even greater breadth than that at issue here, including discovery of assets located in Germany. See Order, Scheck v. Republic of Argentina, No. 10 Civ (S.D.N.Y. Sep. 25, 2013). 6 NML intimates that an execution proceeding concerning property in the United States that it filed on March 25, 2014 (one day before submitting its merits brief) was based on the discovery ordered below. Resp. Br. 45 n.7. But this hardly explains why NML needs discovery of the Republic s immune property outside the United States. Although NML does not disclose this, it pursued execution on related property in the United States of the same Argentine instrumentality in 2011, which the court rejected as barred by FSIA Section NML Capital, Ltd. v. Spaceport Sys. Int l., L.P., 788 F. Supp. 2d 1111, 1127 (C.D. Cal. 2011).

19 13 As this Court recognized in its first FSIA case, Congress protected against th[e] danger that U.S. courts would become international courts of claims for foreign plaintiffs suing foreign states by enacting substantive provisions requiring some form of substantial contact with the United States, Verlinden, 461 U.S. at 490, including limiting judgment enforcement to property in the United States... used for a commercial activity in the United States. 28 U.S.C. 1610(a) (Stat App. 13a 14a). The lower courts extraterritorial worldwide clearinghouse theory flies in the face of this limit Finally, the former Legal Advisors of the State Department who are NML s amici themselves acknowledge that the FSIA must be read to prohibit categorically discovery in aid of execution on diplomatic and military property (and central bank reserves, absent an explicit central bank immunity waiver), because that property is categorically immune from execution in the first place. See Competitive Enterprise Br This distinction, while it walks 7 NML is wrong that the Order below somehow does not act extraterritorially because personal jurisdiction exists over Argentina and the non-party banks, Resp. Br : the Order explicitly requires the production of information from outside the United States concerning property outside the United States in purported aid of non-existent foreign proceedings that NML speculates might be brought. That NML, a foreign plaintiff, has a U.S. judgment does not change the analysis. 8 Contrary to NML s assertion, Resp. Br. 47, the Republic did not waive any objections to discovery concerning diplomatic and military property or to the subpoenas expansive definition of Argentina. See Dkt. Entry 308, at 7 12 (subpoena improper

20 14 back from the most egregious aspect of the decision below and is welcome to that extent, is unconvincing: all property of a foreign state, except property in the United States... used for a commercial activity in the United States, is equally categorically immune from execution under Section 1610(a). Stat App. 13a 14a. The same logic that concludes that one type of categorically immune property should be immune from discovery in aid of execution just as it is immune from execution itself applies with equal force to all immune property and all discovery in aid of execution on that property. B. The Principles of Sovereign Immunity Codified in the FSIA Confirm That NML s Subpoenas Are Impermissible NML does not contest that foreign sovereign immunity is premised on the principles of comity and respect for foreign states, protecting foreign states from the burdens and intrusions of litigating in U.S. courts, and protecting the reciprocal interests of the United States abroad. Interpreting the FSIA to permit blanket discovery of all assets that Argentina possesses all over the world, Resp. Br , including military and diplomatic property, and property for which NML has made no showing of commercial use, as well as the property of dozens of because it does not exclude diplomatic accounts or military property and because it includes separate entities and officials); Dkt. Entry 400, at 5 6 (same).

21 15 separate entities and high public officials that NML has not even tried to equate with the Republic, significantly harms these interests. 9 In a statute properly described as a marvel of compression, Texas Trading & Milling Corp. v. Nigeria, 647 F.2d 300, 306 (2d Cir. 1981), Congress did not, and could not, spell out every application of sovereign immunity in the text of the FSIA. See, e.g., 28 U.S.C. 1603(d) (Stat. App. 2a) (leaving to courts determination of what qualifies as commercial activity by defining as regular course of commercial conduct or a particular commercial transaction or act ); id (Stat. App. 3a 8a) (not addressing, for example, whether courts have discretion to decline to exercise jurisdiction under forum non conveniens doctrine or whether Act of State doctrine is preserved). Congress therefore specifically instructed courts that the principles underlying the statute must inform the resolution of all claims of sovereign immunity. See id (Stat. App. 1a). NML tries in a footnote to explain away this statutory direction by claiming that because Section 1602 states that courts should look to the principles 9 NML is not helped by arguing that concerns about the sensitivity of such information constitute a claim of privilege and not a claim of immunity. Resp. Br. 52. Whether the information may be privileged does not answer the logically and legally antecedent question of whether it is discoverable in the first instance, absent any showing that it relates to assets amenable to execution under the FSIA. See also Fed. R. Civ. P. 26(b), 69(a)(2) (Stat. App. 21a). Nor is NML helped by the fact that it addressed its subpoenas to non-parties, Resp. Br. 52, as improper discovery is not cured by changing the party from whom it is demanded.

22 16 set forth in the Act, Congress meant only that courts should follow the statute. Resp. Br. 34 n.2. Such a construction would render as surplusage not only the term principles, but the sentence and section in which it is found. See Duncan v. Walker, 533 U.S. 167, 174 (2001) ( It is our duty to give effect, if possible, to every clause and word of a statute. ). Congress does not need to enact a statutory provision telling courts to follow the statute; that is the law. See, e.g., Jimenez v. Quarterman, 555 U.S. 113, 118 (2009). By mandating that claims of sovereign immunity be decided in conformity with the principles set forth in the Act, Congress instructed that when claims of sovereign immunity are not expressly resolved by the FSIA s text, principles of sovereign immunity that undergird the statute should inform the Court s analysis. The Court has regularly relied on the comity principles on which foreign sovereign immunity is grounded. See, e.g., Pimentel, 553 U.S. at 866 ( [c]omity and dignity interests of Philippines required dismissal of interpleader action in which Philippines no longer a party, even if plaintiffs would have more difficulty recovering their judgment); Verlinden, 461 U.S. at 486 ( foreign sovereign immunity is a matter of grace and comity ). These comity and dignity interests, not to mention the reciprocity interests of the United States, are manifestly flouted by permitting discovery on diplomatic and military property, as well as by a worldwide forensic examination that cannot possibly lead to execution within the narrow limits of foreignstate property upon which Congress authorized U.S. courts to execute.

23 17 To be sure, Congress was concerned to give creditors some limited ability to enforce judgments against foreign states. Resp. Br. 3, 35. But it drew the line on that ability quite clearly in Sections 1609 through Discovery unconstrained by these limits infringes the comity and immunity principles in the FSIA, without aiding the only execution that Congress permits. C. The Text of Rule 69 Provides Further Support That the FSIA Limits Post- Judgment Discovery Against Foreign States Rule 69 does not permit U.S. courts to order postjudgment discovery into assets that the FSIA itself immunizes from execution. Rule 69, which provides the general federal procedure for execution, states that a statute, like the FSIA, governs to the extent it applies, and requires post-judgment discovery to be in aid of the judgment or execution. Fed. R. Civ. P. 69(a) (Stat. App. 20a 21a). The FSIA s sharp limits on execution of a judgment thus correspondingly limit the scope of discovery under Rule NML is incorrect to assert that the FSIA does not apply to discovery conducted pursuant to Rule 69 because Rule 69(a)(2), which provides for discovery in supplemental execution proceedings, does not state that a federal statute governs to the extent it applies as Rule 69(a)(1) does. Resp. Br. 50. At the time the FSIA was enacted, the substance of Rules 69(a)(1) and 69(a)(2) were collapsed into a single Rule 69(a). Id. at Further, the supplemental proceedings involving discovery in aid of execution contemplated in Rule 69(a)(2) are plainly proceedings

24 18 supplementary to and in aid of judgment or execution addressed in Rule 69(a)(1). In any event, the Rules Enabling Act dictates that the Federal Rules shall not abridge, enlarge or modify any substantive right. 28 U.S.C. 2072(b). Thus, even without Rule 69 s express direction that applicable federal statutes control, the FSIA and other federal statutes necessarily apply to post-judgment discovery, as to other supplemental proceedings (albeit, unlike other such proceedings, under what is now Rule 69(a)(2) a creditor can invoke state or federal discovery devices for this purpose). Discovery proceedings in aid of execution are also a type of Rule 69 supplementary proceeding that the House Report states is encompassed by the term attachment in aid of execution in Section 1610 of the FSIA. Resp. Br As the Second Circuit itself recognized, post-judgment discovery is not a freestanding power; a court s power to order discovery to enforce its judgment necessarily derives from its power to conduct supplementary proceedings. Pet. App. 16 (emphasis added); see also Pet. Br. 52. And in the case of civil litigation against foreign states, pre- or post-judgment, the FSIA is the sole source of such power and defines its scope. Amerada Hess, 488 U.S. at NML again relies on an isolated statement in the House Report that [t]he bill does not attempt to deal with questions of discovery. Resp. Br. 25. But this statement was made in a discussion of Section 1606, which addresses liability, not enforcement. House Report at 23. And the very next sentence states that [e]xisting law appears to be adequate in this area. Id. The existing law, as relevant here, was that discovery concerning foreign-state assets had never exceeded execution immunity and that Rule 69 permitted only discovery in aid of execution.

25 19 2. NML suggests that the FSIA does not govern execution proceedings within the meaning of Rule 69 because it provides immunities that exempt property from execution, rather than a procedure for enforcing a judgment. Resp. Br. 50. Not so. The Advisory Committee Notes accompanying the Rule s adoption in 1937 specify that numerous statutes of the United States on exemption from execution expressly apply under Rule 69, Note to Subdivision (a) Fed. R. Civ. P. 69, notwithstanding that these statutes likewise do not provide methods of execution. Accord Gary W. v. State of La., 441 F. Supp. 1121, 1126 (E.D. La. 1977) ( [I]f a federal statute is applicable, federal statutory exemptions govern execution practice. ). NML s claim that Rule 69 s reference to otherwise governing federal statutes deals with only procedure and not the substance of execution governed by those statutes is not what the Rule says or means. 3. Finally, NML overstates the legal support for its claim that discovery [i]n aid of the judgment or execution against a private defendant under Rule 69 includes discovery of assets in a foreign jurisdiction for the purpose of foreign execution. Resp. Br The Court has never endorsed this reading, and the plain language and structure of Rule 69 indicates that it authorizes discovery in aid of a writ of execution issued by a U.S. court under Rule 69(a)(1). See Stat. App. 20a 21a; see also Clearing House Br While the decisions in NML s cases could be justified as permitting discovery that could lead to Rule 69 execution on private persons property using in personam remedies such as turnover, see supra at 9 10, they cannot justify worldwide discovery of foreign-state property, because the FSIA limits such

26 20 execution to property used for a commercial activity in the United States. D. The Republic s Contractual Waiver of Sovereign Immunity Does Not Expand the Scope of Permissible Execution and Hence Discovery in Aid of Execution NML s assertion that the Republic s waiver of immunity in its bond documentation authorizes the discovery ordered below is doubly misplaced. Resp. Br As an initial matter, NML failed to raise this argument in the district court, and the Second Circuit thus properly did not address it after NML belatedly raised the issue for the first time on appeal. Consistent with this Court s practice, the Court should decline to consider this forfeited argument, as it was neither pressed nor passed upon below. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 224 (1990). NML s contention that it properly raised the argument in a footnote in its district court reply brief fails. Resp. Br. 54 n.10. First, arguments raised only in footnotes are not preserved for appeal in the Second Circuit. United States v. Svoboda, 347 F.3d 471, 480 (2d Cir. 2003). Second, the footnote that NML cites does not even reference the Republic s waiver under the bonds. Dkt. Entry 412, at 4 n.2. Rather, it consists solely of a citation to First City, Texas-Houston, N.A. v. Rafidain Bank, 281 F.3d 48 (2d Cir. 2002), a case that NML argues authorizes the discovery ordered below without a waiver. NML also references another district court footnote where it does quote language from the Republic s waiver. Dkt. Entry 384, at 15 n.6. However, NML invoked the Republic s waiver there only to

27 21 support its argument that the waiver might permit NML in Belgium to attach Republic property under Belgian law (a proposition rejected by the Belgian court, Pet. Br. 13 n.10). Id. at In neither footnote, nor anywhere else before the district court, did NML suggest the Republic s contractual waiver supported the discovery of immune property under the FSIA. In any event, NML s waiver argument is meritless. Every court to have addressed NML s position has rejected it. See Pet. Br. 19 n.15; see also Af-Cap, Inc. v. Chevron Overseas (Congo) Ltd., 475 F.3d 1080, 1087 (9th Cir. 2007). This consistent line of authority holds that, as the statute s plain language states, even where a sovereign has broadly waived execution immunity in its bond documentation or in some other way, its assets are still immune from execution and attachment in aid of execution in U.S. courts unless they are both located in the United States and being used for a commercial activity here. See 28 U.S.C. 1610(a) (Stat App. 13a 14a) ( The property in the United States of a foreign state... used for a commercial activity in the United States, shall not be immune... if: (1) the foreign state has waived its immunity from attachment in aid of execution or from execution (emphasis added)). Waiver or not, the FSIA provides the sole comprehensive scheme for enforcing judgments against a foreign state, Verlinden, 461 U.S. at 493, 496, and so

28 22 the FSIA s attachment and execution immunities necessarily define the scope of permissible discovery under the FSIA. 11 The Ninth Circuit s decision in Af-Cap, which involved an immunity waiver nearly identical to the one at issue here, is particularly apposite. There, the Congo s waiver provided: To the extent that the [Congo] may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed) the [Congo] agrees not to claim and waives such immunity to the fullest extent permitted by the laws of that jurisdiction. Af-Cap, 475 F.3d at 1087 (citation omitted). The Ninth Circuit rejected the plaintiff s claim that the Congo s waiver was sufficient to render the property at issue attachable, and stated that it agree[d] with the Fifth Circuit that the waiver [of 1609 immunity] merely triggers the exception to the immunity from execution that would otherwise be in effect.... Rather than end our inquiry, [defendant s] waiver requires that we turn to the second requirement at issue in this case: 11 NML s reliance on C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 532 U.S. 411 (2001), is misplaced. Resp. Br Principles of tribal immunity have no bearing on either common law immunity of foreign states pre-fsia or, as regards the effect of waiver, the clear structure and language of the FSIA.

29 23 whether the property was used for a commercial activity in the United States. Id. (internal citation omitted). The court then noted, notwithstanding the Congo s broad waiver of immunity, that the postjudgment FSIA discovery procedures defined the appropriate scope of discovery. Id. at That analysis is compelled by the language and structure of Sections 1609 and 1610(a). CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted, JONATHAN I. BLACKMAN Counsel of Record CARMINE D. BOCCUZZI, JR. DANIEL J. NORTHROP MICHAEL M. BRENNAN CLEARY GOTTLIEB STEEN & HAMILTON LLP One Liberty Plaza New York, New York (212) jblackman@cgsh.com Attorneys for Petitioner The Republic of Argentina April 14, 2014