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Petersen Energía Inversora S.A.U. v. Argentine Republic

United States Court of Appeals for the Second Circuit

June 15, 2017, Argued; July 10, 2018, Decided

Docket Nos. 16-3303-cv(L), 16-3304-cv(Con)

Opinion

 [*198]  Chin, Circuit Judge:

Defendants-appellants [**2]  the Argentine Republic ("Argentina") and YPF S.A. ("YPF") (together, "defendants") appeal an order of the United States District Court for the Southern District of New  [*199]  York (Preska, J.), denying defendants' motions to dismiss under (1) Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction on grounds of foreign sovereign immunity and (2) Federal Rule of Civil Procedure 12(b)(6) pursuant to the act of state doctrine. We affirm the district court's order insofar as it denied the motion to dismiss under the Foreign Sovereign Immunity Act and we dismiss defendants' appeal as to the act of state doctrine.

BACKGROUND

Unless otherwise noted, the facts herein are undisputed. They are drawn from the complaint and the documents submitted by the parties in reference to defendants' motions to dismiss.

I. YPF Becomes a Publicly Traded Company

YPF is a petroleum company that was wholly owned and operated by the Argentine government until 1993. That year, in accordance with broader efforts to reform its economy, Argentina decided to privatize the petrol firm through an initial public offering ("IPO") of nearly 100% of YPF's voting stock (the "shares").2 Argentina and YPF took a number of steps to entice investors to participate in the IPO and thereby ensure [**3]  its success, two of which are particularly relevant to this case. First, they arranged for YPF to offer shares in the United States as American Depository Receipts ("ADRs") listed on the New York Stock Exchange ("NYSE"). Second, they amended YPF's bylaws -- that is, the contract governing the relationship among YPF, Argentina (in its capacity as a shareholder), and other YPF shareholders. In particular, the bylaws were amended to incorporate protections for investors from (1) hostile takeovers and (2) attempts by Argentina to renationalize the company. These takeover protections form the basis of this breach of contract dispute, and so we describe them in some detail.

Section 7(d) of the amended bylaws prohibits (with certain exceptions inapplicable here) the direct or indirect acquisition of YPF shares if the acquisition results in the acquirer controlling 15% or more of the shares, unless the acquirer makes a tender offer for all of the outstanding shares in accordance with certain procedures and at a price determined by a formula in the bylaws. Among the prescribed procedures, section 7(f) requires that any such tender offer comply with the rules and regulations [**4]  imposed by the governments and stock exchanges where YPF's shares are listed. Because YPF's securities were to be listed on the NYSE, those conducting tender offers in accordance with these shareholder protection measures would be compelled by section 7(f) to comply with NYSE and Securities and Exchange Commission ("SEC") rules and regulations. Section 7(f)(iv) further obligates the acquirer to publish notice of its tender offer "in the business section of the major newspapers . . . in the City of New York, U.S.A. and any other city where the shares [of YPF]  [*200]  shall be listed." App. 340. Perhaps most importantly for purposes of this appeal, section 28(A) of the bylaws extends the tender offer requirement of sections 7(e) and 7(f) to:

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895 F.3d 194 *; 2018 U.S. App. LEXIS 18671 **

PETERSEN ENERGÍA INVERSORA S.A.U. AND PETERSEN ENERGÍA, S.A.U., Plaintiffs-Appellees, v. ARGENTINE REPUBLIC AND YPF S.A., Defendants-Appellants.1

Subsequent History: Later proceeding at Argentine Republic v. Petersen Energia Inversora S.A.U., 139 S. Ct. 861, 202 L. Ed. 2d 565, 2019 U.S. LEXIS 26 (U.S., Jan. 7, 2019)

Later proceeding at YPF S.A. v. Petersen Energia Inversora S.A.U., 139 S. Ct. 860, 202 L. Ed. 2d 565, 2019 U.S. LEXIS 378 (U.S., Jan. 7, 2019)

US Supreme Court certiorari denied by YPF S.A. v. Petersen Energia Inversora S.A.U., 2019 U.S. LEXIS 4233 (U.S., June 24, 2019)

US Supreme Court certiorari denied by Argentine Republic v. Energia, 2019 U.S. LEXIS 4309 (U.S., June 24, 2019)

Prior History:  [**1] ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.

Appeal from an order of the United States District Court for the Southern District of New York (Preska, J.), denying defendants-appellants' motion to dismiss under (1) Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction on grounds of foreign sovereign immunity and (2) Federal Rule of Civil Procedure 12(b)(6) pursuant to the act of state doctrine.

Petersen Energia Inversora, S.A.U. v. Argentine Republic, 2016 U.S. Dist. LEXIS 122244 (S.D.N.Y., Sept. 9, 2016)

Disposition: AFFIRMED IN PART AND DISMISSED IN PART.

CORE TERMS

expropriation, bylaws, shares, tender offer, sovereign, commercial activity, acquisition, district court, acquire, act-of-state, immunity, defendants', obligations, shareholder, ownership, stock, provisions, rights, act of state doctrine, direct effect, motion to dismiss, capital stock, foreign state, declaration, repudiation, breached, dividend, lawsuit, subject matter jurisdiction, powers

Governments, Public Improvements, Bridges & Roads, Real Property Law, Eminent Domain Proceedings, International Law, Foreign Sovereign Immunities Act, Exceptions, Expropriation, Eminent Domain Proceedings, Constitutional Limits & Rights, Elements, Public Use, Just Compensation, Business & Corporate Compliance, Dispute Resolution, Conflict of Law, Jurisdiction, Jurisdiction, Subject Matter Jurisdiction, Civil Procedure, Appeals, Standards of Review, Clearly Erroneous Review, Appellate Jurisdiction, Collateral Order Doctrine, De Novo Review, Sovereign Immunity, Burdens of Proof, Commercial Activities, Commercial Activities, Direct Effects, Evidence, Judicial Notice, Legislative Facts, Laws of Foreign States, Comity Doctrine, Business & Corporate Law, Corporations, Articles of Incorporation & Bylaws, Business & Corporate Law, Corporate Governance, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Act of State Doctrine, Final Judgment Rule, Interlocutory Orders, Judgments, Summary Judgment