Petersen Energia Inversora, S.A.U. v. Argentine Republic

Background

Petersen Energía Inversora, S.A.U. and Petersen Energía, S.A.U. (together, Petersen), and Eton Park Capital Management, L.P., Eton Park Master Fund, Ltd., and Eton Park Fund, L.P. (together, Eton Park) brought separate actions against the Argentine Republic and YPF S.A. The plaintiffs previously owned stakes in YPF. After the court’s summary-judgment and reconsideration decisions, the Republic sought permission to call Horacio Diez as a fact witness at trial.

The parties’ positions

The plaintiffs argued that Diez should be barred because the Republic had never identified him as a witness, produced documents from him during the relevant period, identified him as a relevant records custodian, or presented him for a deposition. They argued that allowing him to testify so close to trial would leave them without a meaningful opportunity to prepare, particularly because the Republic had not produced documents from him.

The Republic acknowledged that Diez had not been disclosed but argued that the court should allow his testimony because the financial stakes were substantial and the focus of the case had changed after the court’s summary-judgment and reconsideration decisions. The Republic offered to make Diez available for a deposition before trial and asserted that the plaintiffs had received documents related to his proposed testimony.

Legal standard

The court applied four factors used to decide whether to preclude, or bar, testimony from an undisclosed witness: the explanation for the failure to disclose the witness, the importance of the proposed testimony, the prejudice to the opposing party, and the possibility of a continuance. The court stated that bad faith was not required and that neglect causing delay could be enough to justify preclusion.

Court’s analysis

On the first factor, Judge Preska found the Republic’s explanation unpersuasive. The date on which the Republic controlled more than 49 percent of YPF’s shares had been a material issue throughout the case. The Republic’s earlier filings and expert submissions showed that it had recognized the importance of dates between April 16 and May 7, 2012, to the question of when it exercised control over YPF or YPF shares.

On the second factor, the court found that Diez’s proposed testimony was, even assuming it was relevant, at most nominally useful. The Republic described the testimony as providing Diez’s contemporaneous understanding of legal issues and context from his experiences during the relevant events.

On the third factor, the court found substantial prejudice to the plaintiffs. A deposition before trial could require further discovery, including additional questioning of other witnesses and supplemental document production, and could delay the trial. The court was not persuaded that existing documents mentioning Diez or files from his employer eliminated the need for additional production.

On the fourth factor, the court found that a continuance was not a reasonable possibility because the case had been pending for more than eight years. The court also rejected the Republic’s argument that barring the only live fact witness it offered in a trial involving substantial damages was unfair. The Republic had not listed Diez in its initial disclosures or at any later point before discovery closed, and the court concluded that the Republic could not change its litigation strategy at the plaintiffs’ expense.

Disposition

Judge Preska concluded that the relevant factors required preclusion of Mr. Diez’s testimony. The order therefore barred the Argentine Republic from calling Horacio Diez as a fact witness at trial. The opinion does not state that the underlying actions were dismissed or otherwise finally resolved by this order.