Supreme Court Update: Republic of Argentina v. NML Capital, LTD (12-842) and Scialabba v. Cuellar de Osario (12-930)

June 18, 2014 Supreme Court Update

Greetings, Court fans!

Argentina is 1 and 0 at the World Cup thus far, but it's now gone 0 for 2 at One First Street. Regular readers will recall that, in March, the Court affirmed a district court decision confirming a $187 million arbitration award against La Albiceleste in BG Group PLC v. Republic of Argentina (2014). The Court delivered another blow on Monday in Republic of Argentina v. NML Capital, LTD (12-842), holding that the Foreign Sovereign Immunities Act does not limit the scope of discovery available to a judgment creditor (that would be NML) in a federal postjudgment execution proceeding against the foreign sovereign. This Update will also cover Scialabba v. Cuellar de Osario (No. 12-930), on the appropriate treatment of an alien child who "ages out" while still in line for a visa.

But first, back to Argentina, and its 2001 default on its external debt. Argentina later restructured most of the debt, but a few creditors, including NML, refused to go along. NML brought eleven actions against Argentina in the Southern District of New York to collect on about $2.5 billion of debt and prevailed in every one. Because NML has been unable to collect on its judgments, it has attempted to execute them against Argentina's property around the world. (Famously, NML managed to seize an Argentine naval vessel off the coast of Ghana in 2012, before the UN International Tribunal of the Law of the Sea ordered it released.) In 2010, NML served a subpoena on Bank of America seeking information on how Argentina moves its assets through New York and around the world, so it could identify when and where its assets might be subject to attachment and execution. Argentina moved to quash, arguing in relevant part that extraterritorial asset discovery offended Argentina's sovereign immunity. The District Court and the Second Circuit disagreed, holding that, because the subpoena was aimed at a third-party bank, and not Argentina itself, and because it involved discovery, not attachment, of sovereign property, Argentina's sovereign immunity was not infringed.

The Supreme Court agreed, 7-1, with Justice Scalia writing for the majority and Justice Ginsburg in dissent. (Justice Sotomayor recused herself because she is the holder of a significant amount of Argentine debt. Or because she was involved in earlier Second Circuit litigation; she didn't say.) According to Justice Scalia, the case turned on what the FSIA—which was enacted in 1976 for the express purpose of providing a comprehensive set of legal standards for immunity claim—says, or rather doesn't say, about postjudgment discovery. As Scalia pointed out, the text of the statute confers only two kinds of immunity. The first and most significant is immunity from the jurisdiction of U.S. courts, but that was of no use to Argentina as it expressly waived jurisdictional immunity in its bond indenture agreement. The second kind, which Scalia dubbed "execution immunity," protects foreign states' property in the United States from attachment and execution. "That is the last of the Act's immunity-granting sections," Scalia caustically observed. "There is no third provision forbidding or limiting discovery in aid of execution of a foreign-sovereign judgment debtor's assets." The FSIA may well preclude NML from attaching Argentina's property (a question for the District Court at a later time), but "the reason for these subpoenas is that NML does not yet know what property Argentina has and where it is, let alone whether it is executable under the relevant [foreign] jurisdiction's law." (Hint to NML: Lionel Messi is in Brazil right now.) Addressing Argentina's and the Solicitor General's concerns about the effect of its ruling on international relations, Justice Scalia retorted that "these apprehensions are better directed to the branch of government with authority to amend the Act—which, as it happens, is the same branch that forced our retirement from the immunity-by-factor-balancing business nearly 40 years ago."

Justice Ginsburg dissented. She agreed that the FSIA did not preclude NML from propounding any discovery as to Argentina's assets, but felt that NML should have to show that its requests were likely to lead to information about property attachable under the FSIA—that is, "property used here or abroad ‘in connection with . . . commercial activities."

Meanwhile, the Court dealt another body blow to Argentina on Monday by denying cert in yet another sovereign debt case from the Second Circuit ordering that it pay $1.4 billion to its creditors. At least it's doing better in the Cup than at the Court.

Now, we turn from soccer and sovereign debt to immigration and agency deference.

Leave it to the notoriously byzantine Immigration and Nationality Act (INA) to make bedfellows out of Justices Kagan, Kennedy, Ginsburg, Roberts, and Scalia on one bunk and Alito, Sotomayor, Thomas, and Breyer on the other. That was the split in Scialabba v. Cuellar de Osario (No. 12-930), where a bare majority of the Court accorded Chevron deference to the Board of Immigration Appeals' interpretation of a provision of the INA that addresses what happens when an alien child who is in line for a visa "ages out" and becomes an adult before the application is adjudicated. But the split on the rationale was even more fractured.

Justice Kagan announced the decision of the Court and filed an opinion joined by Justices Kennedy and Ginsburg. As she explained, under the INA, citizens and lawful permanent residents (LPRs) of the U.S. can petition for certain family members to obtain visas. These family members are known as "principal beneficiaries." Congress has defined five categories of relatives that are eligible for visa petitions, which Justice Kagan set out in a page she encouraged readers to "[d]og-ear . . . for easy reference": F1 (unmarried adult children of U.S. citizens); F2A (spouses and unmarried minor children of LPRs); F2B (unmarried adult children of LPRs); F3 (married children of U.S. citizens); and F4 (brothers and sisters of U.S. citizens). Once a principal beneficiary becomes eligible to apply for a visa, that person's spouse and minor child (known as "derivative beneficiaries") can, too. The problem is, it can take years for a principal beneficiary to become eligible, and during that time a minor child can reach 21 years of age and "age out" of eligibility for a derivative visa. Congress tried to address this problem with the Child Status Protection Act, INA § 1153(h)(3), which provides that if an alien child ages out during the pendency of the original application, "the alien's petition shall automatically be converted to the appropriate category and the alien shall retain the original priority date issued upon receipt of the original petition." The purpose of § 1153(h)(3) is to allow the aged out child to become eligible for a visa at the same time (based on the same "priority date" of the original filing) he would have if he was under 21. Seems simple. But by referring to "automatic conversion," Congress introduced some ambiguity into the statute, at least according to the Board of Immigration Appeals, and the plurality here.

In the unique parlance of the INA, "automatic conversion" requires that a beneficiary have a qualifying relationship with the original sponsor, such that his petition can be automatically plucked from derivative status to principal status without a new sponsor being inserted. Therefore, only certain alien children—i.e., those with a preexisting qualifying relationship with the original sponsor—can have their petitions automatically converted and retain their priority date. In the plurality's view, the two clauses of § 1153(h)(3) were therefore in conflict, or "janus faced," as Justice Kagan put it. The first clause seems to apply to any child who ages out during the pendency of a petition, but the second seems to provide a remedy only to certain categories of alien children. Faced with this ambiguity, the plurality applied Chevron deference to the determination of the Board of Immigration Appeals. Indeed, as Justice Kagan concluded, "[t]his is the kind of case Chevron was built for." Here, the BIA concluded that only those petitions that can be seamlessly converted from one family preference category to another without the need for a new sponsor are entitled to automatic conversion. In the plurality's view, it was reasonable for the BIA, faced with an internally inconsistent statute, to choose to apply one clause over the other. That reasonable determination was entitled to deference by the courts.

The Chief, joined by Justice Scalia, agreed with the result, but didn't believe there was any conflict between the two clauses to begin with. The first clause merely states a condition (i.e., aging out), but "does not grant anything to anyone." It's the second clause that is the operative clause of the statute, and it sets forth a benefit that only certain categories of beneficiaries are entitled to. There's nothing inconsistent or ambiguous about that, and the Chief was concerned that the plurality opinion could be taken to mean that an agency has discretion to choose between two conflicting clauses in a statute. "Direct conflict is no ambiguity, and the resolution of such a conflict is not statutory construction but legislative choice. Chevron is not a license for an agency to repair a statue that does not make sense." (Roberts and Scalia did believe § 1153(h)(3) was ambiguous with respect to which category of beneficiaries could benefit from the remedial clause, but agreed that the BIA's resolution of that ambiguity was reasonable.)

Justice Sotomayor dissented, joined by Justice Breyer and, with the exception of a footnote, Justice Thomas. (We told you this case made for strange bedfellows.) This crew took a view diametrically opposed to the Roberts/Scalia tandem—namely, that the first clause of § 1153(h)(3) is "dispositive" and it entitles all children who age out to relief. Sotomayor faulted the majority for placing so much stock in the BIA's interpretation of "automatic conversion," arguing that the key function of § 1153(h)(3) is to preserve the alien's priority date (and therefore his spot in line); even if an alien cannot get automatic conversion, that doesn't mean he shouldn't qualify to have keep his priority date while a new petition is filed. Justice Alito penned a solo dissent. Although he was unwilling to say that every child who aged out during the pendency of an immigration petition could benefit from § 1153(h)(3), he believed that each of the children in this case should. In Alito's view, once the principal beneficiary became an LPR, there was an "appropriate category" for the derivative beneficiary to benefit from, namely as unmarried adult child of an LPR. At that point, the plain language of the statute required that the priority date be preserved.

We're about as confident that our summary has cleared this all up for you as we are that this 3-2-3-1 split decision will provide all the clarity required for our overburdened immigration officers to correctly apply § 1153(h)(3)!

That's it for now, but you'll be seeing us in your inbox again soon!

Kim, Jenny & Tadhg