(CN) - The 2nd Circuit tossed a $2.24 billion damage award to tens of thousands of investors who held defaulted Argentine bonds, calling the amount "inflated" and telling a federal judge to calculate payouts that "more closely reflect the losses class members experienced."
A severe economic crisis in the 1990s caused Argentina to default on roughly $80 billion to $100 billion of sovereign debt in 2001. Investors filed eight class actions, though an exact damage amount was elusive, as investors bought at different times and through different markets.
Class counsel nonetheless urged the district court to award aggregate damages to the whole class based on expert testimony.
Argentina resisted this method of calculation, claiming it would lead to bloated, inaccurate judgments based on sparse information. It acknowledged that it owed investors money, but argued that judgments should be based on individualized proof of damages, not global estimates.
But it unable to convince U.S. District Judge Thomas Griesa, who said the judgments were based on "very good estimates" and awarded investors $2.24 billion.
The Manhattan-based federal appeals court found the awards "improper."
"The district court did not explain how it calculated the class-wide awards," Judge Barrington Parker wrote. "Nonetheless, it acknowledged, on the record, that its estimates were likely inflated."
The lower court justified the inflated judgments on the basis that Argentina would generally refuse to pay any judgment against it, so the investors were unlikely to see the money.
"However practical this approach might have been," Parker wrote, "we conclude that it was improper."
The court remanded in part, telling Judge Griesa to "consider alternative approaches that will set damages awards that more closely reflect the losses class members experienced."
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