Special Focus: Rule 65(d)(2)(C) – What Does “In Active Concert and Participation” Mean?

Special Focus: Rule 65(d)(2)(C) – What Does “In Active Concert and Participation” Mean? 
Rule 65(d)(2) of the Federal Rules of Civil Procedure provides that an injunction is binding on both the parties to a
proceeding and on “other persons who are in active concert or participation” with the parties. Judge Griesa, in his
opinion of November 21, wrote that “[i]t is probably true that these parties [participants in the payment process] are not
all agents of Argentina, but they surely are ‘in active concert or participation’ with Argentina in processing the
payments from Argentina to the exchange bondholders.” The outcome of the pending appeal could well turn on whether
the Second Circuit accepts Judge Griesa’s understanding of “active concert and participation.” There is little helpful
Second Circuit precedent as to the limits of Rule 65, as both sides have tacitly acknowledged in their reliance on decisions
from other circuits. The Second Circuit panel that will hear this appeal accordingly retains considerable discretion in
approaching this issue.
Many of the prior decisions that have addressed Rule 65 have treated the phrase “active concert and participation” as
analogous to “aiding and abetting,” language that Judge Griesa himself used in the Injunction. (See November 21
Injunction at paragraph 2(e). In briefest summary, “aiding and abetting” occurs when, despite actual knowledge of its
unlawful nature, a party assists in the commission of an unlawful act.) However, the courts often require that such
assistance be “substantial” – a qualification emphasized by BNY Mellon. BNY Mellon also emphasizes that the
US Supreme Court has said that the scope of an injunction “must be limited to confederates or associates of the
defendant,” which, it says, it is not.
The plaintiffs have countered that the concept of “active concert and participation” is more expansive than that of aiding
and abetting, noting that the Second Circuit “has never held that the panoply of aiding-and-abetting standards applies
to Rule 65.” (Aurelius Brief at 22.) Plaintiffs are correct that “active concert and participation” is not synonymous with
aiding and abetting. Courts have also viewed this concept in terms of “privity,” a term used to describe a tight alignment
of interests; privity may exist between one corporation and its successor, for example, or between a franchisor and its

franchisees. In consequence, privity, like aiding and abetting, may suggest a closer relationship between two parties than
one finds in the relationship between an issuer and an indenture trustee.
The plaintiffs’ basic argument – that no one is free to willfully assist in the violation of a court order – is undeniably
compelling, as is the unstated argument that their victory may be Pyrrhic if Argentina is enjoined but BNY Mellon is not.
But so too are arguments for respecting limits on judicial power, particularly as to non-parties who are just “doing their
jobs” (as Argentina puts it). In the absence of decisive precedent, the question of how best to reconcile these competing
concerns will weigh heavily on the Second Circuit’s reading of Rule 65(d)(2)(C). (For those interested in exploring this 
issue further, see Aurelius’ brief at pages 15 to 21, Argentina’s reply brief at 14 to 19, and BNY Mellon’s reply brief at 8 to 
24, all of which are available on our Argentine Sovereign Debt webpage.)

http://www.shearman.com/files/upload/Don%E2%80%99t-Cry-for-Me-Argentine-Bondholders-Second-Circuit-Briefing-Concludes-LIT-020813.pdf