Pravin Banker Associates, Ltd. v. Banco Popular del Peru
United States Court of Appeals for the Second Circuit
109 F.3d 850 (1997)
Banco Popular del Peru (Banco Popular) (defendant) was a state-owned bank operating in Peru (defendant). Banco Popular borrowed funds from Mellon Bank, N.A. Eventually, Banco Popular was unable to repay its debt owed to Mellon Bank and many other foreign creditors. Consequently, Mellon Bank and other lenders filed suit against Banco Popular to preserve their legal claims with respect to Banco Popular’s outstanding debts. In an effort to resolve Peru’s outstanding-debt obligations, Peru’s president made agreements with its creditors, including Mellon Bank, to stay all pending lawsuits while negotiations to resolve the unpaid foreign debts occurred. In 1990, Pravin Banker Associates, Limited (Pravin) (plaintiff) acquired some of Banco Popular’s debt to Mellon Bank. Pravin refused to participate in liquidation proceedings in Peru or negotiations pursuant to the International Monetary Fund’s Brady Plan, a plan for the resolution of foreign debt obligations. The participation of creditors in such negotiations was voluntary, and the debts remained enforceable throughout any negotiations under the plan. Instead of participating in liquidation proceedings or negotiations, Pravin sued Banco Popular and Peru for nonpayment of Banco Popular’s debt and filed a motion for summary judgment in United States district court. Banco Popular and Peru cross-moved to dismiss or stay the action. The district court granted a six-month stay so that the liquidation proceedings in Peru could be completed. After six months, Pravin renewed its summary-judgment motion, and Banco Popular and Peru renewed their cross-motions for dismissal or an indefinite stay of the action. The district court found that an indefinite stay would have prejudiced a clear interest of the United States, which was to ensure the enforceability of foreign debts owed to American lenders. Thus, extending comity, or deferring, to Peru’s debt-negotiation proceedings was inappropriate. Accordingly, the district court denied Banco Popular’s and Peru’s cross-motions and entered judgment in favor of Pravin, allowing enforcement of Banco Popular’s debt. Banco Popular and Peru appealed.
Rule of Law
Holding and Reasoning (Calabresi, J.)
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