14-4221
D.C.A. Grantor Trust v. Republic of Argentina

                                UNITED STATES COURT OF APPEALS
                                    FOR THE SECOND CIRCUIT

                                            SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or
after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1
and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this
court, a party must cite either the Federal Appendix or an electronic database (with the notation
“summary order”). A party citing a summary order must serve a copy of it on any party not
represented by counsel.

         At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, at 40 Foley Square, in the City of New York, on
the 5th day of October, two thousand fifteen.

Present:    ROBERT A. KATZMANN,
                  Chief Judge,
            GERARD E. LYNCH,
                  Circuit Judge,
            JANET BOND ARTERTON,
                  District Judge.*
____________________________________________________________

D.C.A. GRANTOR TRUST, GIOVANNI CARLOTTA, RAIMONDO IALLONARDO,
VALERIO PIACENZA, MILENA AMPALLA, ANTONELLA BACCHIOCCHI, FILIPPO
BAGOLIN, GIANCARLO BARTOLOMEI CORSI, ANNELIESE GUNDA BECKER,
GIORGIO BENNATI, CARLA MORATA, ORSOLINA BERRA, EUGENIA RE, STEFANO
BISTAGNINO, FELICINA GAIOLI, ANDREA BONAZZI, LUCA VITALI, STEFANIA
BONPENSIERE, MARCELLO CALANCA, ELETTRA CASALINI, BRUNO CALMASINI,
TARCISIA DALBOSCO, ITALIA CAMATO, VINCENZO CARBONE, MARCO CAVALLI,
VALERIA TOSO, CARMELINA CENSI, GIAN FRANCESCO CERCATO, BARBARA
RICCHI, SILVANA CORATO, GIULIA GREGGIO, FRANCESCO CORSO, GIUSEPPINA
CORSO, LAURA COSCI, ALDO DAVID, ANTONIO DE FRANCESCO, FRANCESCO
FOGGIATO, RINALDO FRISINGHELLI, GRAZIELLA DACROCE, ANGIOLINO FUSATO,
GABRIELE FUSATO, ANNA STORCHI, MADDALENA GAIOLI, FRANCESCO MAURO
GHEZZI, MARIA LUIGIA CONTI, GIANFRANCO GUARINI, INNOVAMEDICA S.P.A.,
FKA MATIVA S.R.I., ANGELO LEONI, RACHELE BONTEMPI, CARMELO MAIO,
CLAUDIO MANGANO, MARITZA LENTI, ROMANO MARTON, MIRCO MASINA,
GUGLIELMINA MASSARA, MARTINO VERNA, ALESSANDRO MORATA, MARIA
RITA MORETTO, UGO LORENZI, BRUNO PAPPACODA, LUISELLA GUARDINCERRI,

*
 The Honorable Janet Bond Arterton, of the United States District Court for the District of Connecticut, sitting by
designation.


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ADRIANO ROSATO, SANTE STEFANI, ANGELINA SALMISTRARO, STUDIO LEGALE
BENNATI, RENATE TIELMAN, MANUELITO TOSO, MAURO TOSO, MARIO VICINI,
GIUSEPPINA CAPEZZERA, GRAZIELLA BONADIMAN, SALVATORE MELCHIONDA,
FRANCO PEZZE, TIZIANO SASSELLI, GIOVANNA FERRO, RENATA BOSCARIOL,
GIAMPAOLO MONTINO, MAURIZIO SERGI, SIMONA STACCIOLI, AUGUSTO
ARCANGELI DE FELICIS, ALBERTO COMPARE, MANUELA DE ROSA
KUNDERFRANCO, GIOVANNA CONNENA, ANTONELLA DE ROSA
KUNDERFRANCO, ADRIANA DELL'ERA, GIAN CARLO GANAPINI, LAURA ANNA
CAPURRO, FERNANDA ANGELA LOVERO, SABRINA PARODI, PAOLA ROSA, LICIA
STAMPFLI-ROSA, AGOSTINO CONSOLINI, CESARINO CONSOLINI, MARIO
GIACOMETTI, VERNA GUALANDI, HILDA RUPPRECHT, GIANFRANCO AGOSTINI,
SARA BARTOLOZZI, ROBERTO BERARDOCCO, CARLO BRETTI, SUSANNA BRETTI,
ANNA FERRI, GIOVANNI GIARDINA, VINCENZA SABATELLI, MARIA ROBBIATI,
ANGELO COTTONI, BRUNA MATTIOLI, ALLESSANDRA REGOLI, SILVIA REGOLI,
INES ROTA, VITO ZANCANER, MATTEO ZANICHELLI, GIOVANNI ZANICHELLI,
MASSIMO BETTONI, CARLA MARINI ARCANGELI DE FELICIS, CARIFIN S.A., DIEGO
CASTAGNA, EUFROSINA DE STEFANO, GRAZIANO ADAMI, MONICA
CROZZOLETTO, CELESTINO GOGLIA, PAOLO LISI, ELIDE MARGNELLI, AMATO
MORI, RUGGERO ROSSINI, ANTONIETTA GUISEPPINA BRIOSCHI, RAFFAELE
ROSSINI, SIMONETTA MONTANARI, CLAUDIO MORI, ALFREDO PELLI, GRAZIELLA
BERCHI, GIUSEPPE SILVIO ROSSINI, MARINELLA SCALVI, LAURA ROSSINI,
ADRIANO BETTINELLI, SERGIO LOVATI, ALBERTO BACIUCCO, OTELLO
BACIUCCO, EMANUELE BOTTI, GIOVANNI BOTTI, MARIA ZILIANI, CARLO
FARIOLI, PIER LUIGI LUCIBELLO PIANI, FRANCO TRENTIN, STEFANIA TRENTIN,
MARCO BORGRA, SERGIO BORGRA, DONATELLA FRAGONARA ZANOTTI,

                    Plaintiffs-Appellants,

PEDRO KALBERMANN,

                    Plaintiff,

                    -v-                                                    No. 14-4221-cv

REPUBLIC OF ARGENTINA,

           Defendant-Appellee,

ADMINISTRACION NACIONAL DE SEGURIDAD SOCIAL,

                    Defendant,

BANK OF NEW YORK MELLON, as Indenture Trustee,

                    Intervenor.†
†
    The Clerk of Court is respectfully directed to amend the caption as set forth above.


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For Plaintiffs-Appellants:             ANTHONY J. COSTANTINI (Susan Jo, on the brief), Duane
                                       Morris LLP, New York, N.Y.
For Defendant-Appellee:                CARMINE D. BOCCUZZI (Jonathan I. Blackman, Michael M.
                                       Brennan, Kristin A. Bresnahan, on the brief), Cleary
                                       Gottlieb Steen & Hamilton LLP, New York, NY.
For Intervenor:                        ERIC A. SCHAFFER (James C. Martin, on the brief), Reed
                                       Smith, LLP, New York, NY.
For Amici Curiae Euro Bondholders: Christopher J. Clark, Michael E. Bern, Lilia B. Vazova,
                                  Latham & Watkins, LLP, New York, NY.


        Appeal from the United States District Court for the Southern District of New York

(Griesa, J.).

        ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,

and DECREED that the order of the district court is hereby AFFIRMED. The plaintiffs-

appellants appeal from the district court’s October 27, 2014, order denying their motion for a

turnover order pursuant to New York’s Civil Practice Law and Rules § 5225(b). The appellants,

who are judgment creditors of the defendant-appellee Republic of Argentina (“the Republic”),

seek to compel the intervenor Bank of New York Mellon (“BNY”) to turn over funds in

satisfaction of the judgment debts owed by the Republic. The district court denied the motion

because, even assuming § 5225(b) applied to the assets in question, such turnover would be

barred by the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602-1611. We assume the

parties’ familiarity with the relevant facts, the procedural history of the case, and the issues

presented for review.

        Section 5225(b) creates a remedy for judgment creditors in situations where property of a

judgment debtor is in the possession or custody of a third party. See N. Mariana Islands v.

Canadian Imperial Bank of Commerce, 717 F.3d 266, 267 (2d Cir. 2013). To invoke § 5225(b), a

judgment creditor must show, inter alia, “either that the judgment debtor is ‘entitled to the


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possession of such property,’ or . . . that ‘the judgment creditor’s rights to the property are

superior’ to those of the party in whose possession it is.” Beauvais v. Allegiance Sec., Inc., 942

F.2d 838, 840 (2d Cir. 1991) (quoting § 5225(b)).

        The appellants cannot satisfy either of these alternatives. First, the judgment debtor—i.e.,

the Republic—is not “entitled to the possession” of the assets held by BNY. For this prong to be

met, the Republic must be able to retrieve the disputed assets back from BNY. See Swezey v.

Lynch, 926 N.Y.S.2d 415, 419 (App. Div. 2011), quoting Siegel, N.Y. Prac. § 488, at 826 [4th

ed.] (“The judgment creditor stands in the shoes of the judgment debtor, and if a given property,

asset, interest, or deposit is unavailable to the debtor, it is unavailable to the creditor.”). Here,

however, when the district court froze the assets at BNY to enforce a prior injunction, the district

court ordered BNY to “retain the Funds in its accounts . . . pending further Order of this Court”

and to “not make or allow any transfer of the Funds unless ordered by the Court.” J.A. 55. To

ensure that nothing would happen to the funds held by BNY, the district court expressly

prohibited the Republic from “tak[ing] . . . steps to interfere with BNY’s retention of the Funds

in accordance with the terms of this Order.” Id. Under these injunctions, the Republic is barred

from getting the funds back from BNY, and the Republic is therefore not “entitled to the

possession” of the funds within the meaning of § 5225(b).

        Second, the appellants’ rights to the property are not “superior” to the rights of BNY.

Appellants argue that they have a superior claim because they are owed more money, and have

been denied payment for longer, than the exchange bondholders for whose benefit BNY has the

money. But appellants cite no New York authority permitting courts to determine “superior”

rights to property based on subjective equitable assessments of the relative fairness of paying one

class of creditor or another. Rather, “superior” rights in property have been assessed by the New




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York courts based on legal interests in the property, as for example where the “fraudulent

conveyance provisions of the [New York] Debtor and Creditor Law” apply. Gelbard v. Esses,

465 N.Y.S.2d 264, 268 (App. Div. 1983). Here, however, the Republic’s transfer of funds to

BNY was not a fraudulent conveyance, because the Republic was attempting to pay other

creditors, for whom BNY acts as trustee. At most, then, the Republic’s transfer was a preference

among creditors. But under New York law, preferring one creditor over another is neither

actually nor constructively fraudulent. See In re Sharp Int’l Corp., 403 F.3d 43, 56 (2d Cir.

2005); HBE Leasing Corp. v. Frank, 48 F.3d 623, 634 (2d Cir. 1995). Nor do appellants claim

any other legal interest in the funds transferred to BNY, such as a security interest, let alone an

interest superior to that of BNY; they rely solely on their status as an unsecured general creditor

of the Republic. The appellants’ rights to the disputed property are therefore not superior to those

of BNY.

       In sum, because (1) the Republic is not entitled to possession of the property back from

BNY, and (2) the appellants’ rights to the property are not superior to the rights of BNY, the

statutory prerequisites of § 5225(b) are not met. We accordingly affirm the district court’s

decision to deny the motion under § 5225(b), albeit on alternative grounds. Because § 5225(b)

does not authorize turnover of the assets, we do not reach the question of whether such turnover

would be barred by the Foreign Sovereign Immunities Act.

       We have considered the appellants’ remaining arguments, and find them to be without

merit. Accordingly, for the foregoing reasons, the order of the district court is AFFIRMED.

                                               FOR THE COURT:
                                               CATHERINE O’HAGAN WOLFE, CLERK




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