Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca2-14-04385/USCOURTS-ca2-14-04385-0/pdf.json

Parties Involved:
Henry H. Brecher
Appellee
Republic of Argentina
Appellant

Document Text:

14‐4385

Brecher v. Republic of Argentina

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

______________                          

August Term, 2015

(Argued: August 21, 2015          Decided: September 16, 2015)

Docket No. 14‐4385

____________                          

HENRY H. BRECHER,  

individually and on behalf of all others similarly situated,

Plaintiff‐Appellee,

‐v.‐  

REPUBLIC OF ARGENTINA,

Defendant‐Appellant.

______________

Before:

CALABRESI, RAGGI, AND WESLEY, Circuit Judges.

______________

Appellant the Republic of Argentina appeals from an order entered on

August 29, 2014, in the United States District Court for the Southern District of

New York (Griesa, J.), modifying the class definition.  On November 25, 2014, a

panel of this Court granted permission to appeal pursuant to Federal Rule of

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Civil Procedure 23(f).  Appellant argues that the District Court’s new class

definition violates the requirements of ascertainability contained in Rule 23 of the

Federal Rules of Civil Procedure.  We agree and hold that the class definition’s

reference to objective criteria is insufficient to establish an identifiable and

administratively feasible class.  We therefore VACATE and REMAND the case

for an evidentiary hearing on damages.

                          

CARMINE D. BOCCUZZI (Jonathan I. Blackman, Daniel J.

Northrop, Jacob H. Johnston, on the brief), Cleary

Gottlieb Steen & Hamilton LLP, New York, NY, for

Defendant‐Appellant.  

JASON A. ZWEIG (Steve W. Berman, on the brief), Hagens

Berman Sobol Shapiro LLP, New York, NY, for Plaintiff‐

Appellee.

______________

WESLEY, Circuit Judge:

Defining the precise class to which Argentina owes damages for its refusal

to meet its bond payment obligations and calculating those damages have

proven to be exasperating tasks.  In this, the fourth time this Court has addressed

the methods by which damages must be calculated and the manner in which the

class is defined in this case and several similar matters, see Seijas v. Republic of

Argentina (Seijas I), 606 F.3d 53 (2d Cir. 2010); Hickory Sec. Ltd. v. Republic of

Argentina (Seijas II), 493 F. App’x 156 (2d Cir. 2012) (summary order); Puricelli v.

Republic of Argentina (Seijas III), No. 14‐2104‐cv(L), 2015 WL 4716474 (2d Cir. Aug.

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10, 2015), we again must vacate the District Court’s order and remand for specific

proceedings.

By now, the factual background of these cases is all too familiar.  After

Argentina defaulted on between $80 and $100 billion of sovereign debt in 2001,

see Seijas I, 606 F.3d at 55, numerous bondholders, including Appellee here and

those in the related Seijas cases, filed suit.  In Appellee’s suit, the District Court

entered an order on May 29, 2009, that certified a class under a continuous holder

requirement, i.e., the class contained only those individuals who, like Appellee,

possessed beneficial interests in a particular bond series issued by the Republic

of Argentina from the date of the complaint—December 19, 2006—through the

date of final judgment in the District Court.  Cf. Seijas I, 606 F.3d at 56 (same

requirement in class definition).   

After this Court held in Seijas I and II that the District Court’s method of

calculating damages was inflated and remanded with instructions to conduct an

evidentiary hearing, see Seijas I, 606 F.3d at 58–59; Seijas II, 493 F. App’x at 160,

the Appellee in this case offered the District Court an alternative solution to its

difficulties in assessing damages—simply modifying the class definition by

removing the continuous holder requirement and expanding the class to all

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holders of beneficial interests in the relevant bond series without limitation as to

time held.  The District Court granted the motion, Argentina promptly sought

leave to appeal under Rule 23(f) of the Federal Rules of Civil Procedure, and on

November 25, 2014, a panel of this Court granted leave to appeal.

DISCUSSION

We review a district court’s class certification rulings for abuse of

discretion, but we review de novo its conclusions of law informing that decision.  

In re Pub. Offerings Secs. Litig., 471 F.3d 24, 32 (2d Cir. 2006).  The District Court

below neither articulated a standard for ascertainability of its new class nor made

any specific finding under such a standard.  Absent that analysis, we must

determine whether the District Court’s ultimate decision to modify the class

“rests on an error of law . . . [or] cannot be located within the range of

permissible decisions.”  Parker v. Time Warner Entm’t Co., 331 F.3d 13, 18 (2d Cir.

2003) (internal quotation marks omitted).  The District Court’s decision rests

upon an error of law as to ascertainability; the resulting class definition cannot be

located within the range of permissible options.

Like our sister Circuits, we have recognized an “implied requirement of

ascertainability” in Rule 23 of the Federal Rules of Civil Procedure.  In re Pub.

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Offerings Secs. Litig., 471 F.3d at 30; accord, e.g., Marcus v. BMW of N. Am., LLC, 687

F.3d 583, 592–93 (3d Cir. 2012); DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir.

1970).  While we have noted this requirement is distinct from predominance, see

In re Pub. Offerings Secs. Litig., 471 F.3d at 45, we have not further defined its

content.  We here clarify that the touchstone of ascertainability is whether the

class is “sufficiently definite so that it is administratively feasible for the court to

determine whether a particular individual is a member.”  7A CHARLES ALAN

WRIGHT & ARTHUR R. MILLER ET AL., FEDERAL PRACTICE & PROCEDURE § 1760 (3d

ed. 1998); see also Weiner v. Snapple Beverage Corp., No. 07 Civ. 8742(DLC), 2010

WL 3119452, at *12 (S.D.N.Y. Aug. 5, 2010) (a class must be “readily identifiable,

such that the court can determine who is in the class and, thus, bound by the

ruling” (internal quotation marks omitted)).  “A class is ascertainable when

defined by objective criteria that are administratively feasible and when

identifying its members would not require a mini‐hearing on the merits of each

case.”  Charron v. Pinnacle Grp. N.Y. LLC, 269 F.R.D. 221, 229 (S.D.N.Y. 2010)

(citations and internal quotation marks omitted).  

On appeal, Appellee argues that a class defined by “reference to objective

criteria . . . is all that is required” to satisfy ascertainability.  Appellee Br. at 19.  

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We are not persuaded.  While objective criteria may be necessary to define an

ascertainable class, it cannot be the case that any objective criterion will do.1  A

class defined as “those wearing blue shirts,” while objective, could hardly be

called sufficiently definite and readily identifiable; it has no limitation on time or

context, and the ever‐changing composition of the membership would make

determining the identity of those wearing blue shirts impossible.  In short, the

use of objective criteria cannot alone determine ascertainability when those

criteria, taken together, do not establish the definite boundaries of a readily

identifiable class.2   

This case presents just such a circumstance where an objective standard—

owning a beneficial interest in a bond series—is insufficiently definite to allow

 

1 Even Appellee’s principal sources for this standard use the requirement in context to

observe that subjective criteria are inappropriate and, thus, any criteria used in defining

a class need to be “objective.”  Appellee Br. at 20 (citing Fears v. Wilhelmina Model

Agency, Inc., No. 02 Civ. 4911 HB, 2003 WL 21659373, at *2 (S.D.N.Y. July 15, 2003); In re

Methyl Tertiary Butyl Ether (MBTE) Prods. Liab. Litig., 209 F.R.D. 323, 337 (S.D.N.Y. 2002);

MANUAL FOR COMPLEX LITIGATION (FOURTH) § 21.222, at 270 (2004)).  This approach

accords with our prior discussions of objective criteria.  See In re Initial Pub. Offerings

Secs. Litig., 471 F.3d at 44–45.

2 Of course, “identifiable” does not mean “identified”; ascertainability does not require

a complete list of class members at the certification stage.  See 1 MCLAUGHLIN ON CLASS

ACTIONS § 4:2 (11th ed. 2014) (“The class need not be so finely described, however, that

every potential member can be specifically identified at the commencement of the

action; it is sufficient that the general parameters of membership are determinable at the

outset.”).

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ready identification of the class or the persons who will be bound by the

judgment.  See Weiner, 2010 WL 3119452, at *12.  The secondary market for

Argentine bonds is active and has continued trading after the commencement of

this and other lawsuits.  See NML Capital Ltd. v. Republic of Argentina, 699 F.3d

246, 251 (2d Cir. 2012); Seijas II, 493 F. App’x at 160.  The nature of the beneficial

interest itself and the difficulty of establishing a particular interest’s provenance

make the objective criterion used here, without more, inadequate.  See Bakalar v.

Vavra, 237 F.R.D 59, 65–66 (S.D.N.Y. 2006) (necessity of individualized inquiries

into provenance of artwork made class insufficiently “precise, objective and

presently ascertainable” (internal quotation marks omitted)).

Appellee argues that the class here is comparable to those cases involving

gift cards, which are fully transferable instruments.  However, gift cards are

qualitatively different:  For example, they exist in a physical form and possess a

unique serial number.  By contrast, an individual holding a beneficial interest in

Argentina’s bond series possesses a right to the benefit of the bond but does not

hold the physical bond itself.  Thus, trading on the secondary market changes

only to whom the benefit enures.  Further, all bonds from the same series have

the same trading number identifier (called a CUSIP/ISIN), making it practically

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impossible to trace purchases and sales of a particular beneficial interest.  Thus,

when it becomes necessary to determine who holds bonds that opted into (or out

of) the class, it will be nearly impossible to distinguish between them once traded

on the secondary market.  See Ebin v. Kangadis Food Inc., 297 F.R.D. 561, 567

(S.D.N.Y. 2014) (observing that ascertainability requirement “prevent[s] the

certification of a class whose membership is truly indeterminable” (internal

quotation marks omitted)).

A hypothetical illustrates this problem.  Two bondholders—A and B—each

hold beneficial interests in $50,000 of bonds.  A opts out of the class, while B opts

in.  Both A and B then sell their interests on the secondary market to a third

party, C.  C now holds a beneficial interest in $100,000 of bonds, half inside the

class and half outside the class.  If C then sells a beneficial interest in $25,000 of

bonds to a fourth party, D, neither the purchaser nor the court can ascertain

whether D’s beneficial interest falls inside or outside of the class.3  Even if there

were a method by which the beneficial interests could be traced, determining

class membership would require the kind of individualized mini‐hearings that

 

3 This hypothetical was posed by the panel at oral argument; counsel for Appellee was

unable to offer a method by which the District Court would be able to make this

determination.

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run contrary to the principle of ascertainability.  See Charron, 269 F.R.D. at 229;

Bakalar, 237 F.R.D. at 64–66.  The features of the bonds in this case thus make the

modified class insufficiently definite as a matter of law.  Although the class as

originally defined by the District Court may have presented difficult questions of

calculating damages, it did not suffer from a lack of ascertainability.  The District

Court erred in attempting to address those questions by introducing an

ascertainability defect into the class definition.

There remains the question of determining damages on remand.  Given

that Appellee here is identically situated to the Seijas plaintiffs and this Court has

already addressed the requirements for determining damages in those cases, we

conclude that the District Court should apply the same process dictated by Seijas

II for calculating the appropriate damages:

Specifically, it shall: (1) consider evidence with respect

to the volume of bonds purchased in the secondary

market after the start of the class periods that were not

tendered in the debt exchange offers or are currently

held by opt‐out parties or litigants in other proceedings;

(2) make findings as to a reasonably accurate, non‐

speculative estimate of that volume based on the

evidence provided by the parties; (3) account for such

volume in any subsequent damage calculation such that

an aggregate damage award would “roughly reflect”

the loss to each class, see Seijas I, 606 F.3d at 58–59; and

(4) if no reasonably accurate, non‐speculative estimate

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can be made, then determine how to proceed with

awarding damages on an individual basis.  Ultimately,

if an aggregate approach cannot produce a reasonable

approximation of the actual loss, the district court must

adopt an individualized approach.

493 F. App’x at 160; see also Seijas III, 2015 WL 4716474, at *4 (repeating

instructions).  The hearing will ensure that damages do not “enlarge[] plaintiffs’

rights by allowing them to encumber property to which they have no colorable

claim.”  Seijas I, 606 F.3d at 59.

CONCLUSION

Because we conclude the District Court’s order violated the requirement of

ascertainability contained in Rule 23, it is not necessary for us to reach the

remaining issues raised by Appellant.  Therefore, for the reasons stated above,

the order of the District Court is VACATED, and the case is REMANDED for an

evidentiary hearing on damages.

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