Caballero v. Fuerzas Armadas Revolucionarias de Columbia

ANTONIO CABALLERO, Plaintiff, v. FUERZAS ARMADAS REVOLUCIONARIAS DE COLUMBIA, et al., Defendants.

20-MC-40-LJV

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

May 11, 2021

DECISION & ORDER

INTRODUCTION

Motions to substitute counsel usually are simple matters. One lawyer wants out; one lawyer wants in; the court orders what they want. Not so here.

Two sets of lawyers claim to represent a single party. The party is owned by the Bolivarian Republic of Venezuela ("Venezuela"). Just as there are dueling leaders claiming to be the legitimate President of Venezuela, so there are dueling entities appointed by those leaders claiming to run the party. Each entity has retained different lawyers to represent the party in this Court. And this Court therefore is tasked with deciding which set of lawyers gets to do that.

PROCEDURAL HISTORY

The plaintiff, Antonio Caballero, is a judgment creditor of the Fuerzas Armadas Revolucionarias de Columbia ("FARC"). To satisfy his judgment against FARC, Caballero moved ex parte under section 201(a) of the Terrorism Risk Insurance Act of 2002 ("TRIA") for post-judgment execution on the blocked assets of alleged agencies or instrumentalities of FARC.¹ See Docket Items 10, 22. In connection with that request, Caballero sought a determination that Petróleos de Venezuela, S.A ("PDVSA"), Docket Item 10, and six of PDVSA's subsidiaries—(1) PDV Marina SA; (2) Aceites Y Solventes Venezolanos SA; (3) Petroanzoategui SA; (4) Venfleet Asphalt Ltd.; (5) Venfleet Products Ltd.; (6) Venfleet Ltd. (together, "the subsidiaries"), Docket Item 22—are agencies or instrumentalities of FARC.

This Court determined that PDVSA and the subsidiaries are agencies or instrumentalities of FARC and, because Caballero satisfied the other TRIA requirements, granted Caballero's motions for post-judgment execution. Docket Items 15, 33. On January 29, 2021, this Court entered a turnover judgment against the blocked assets of PDVSA. Docket Item 35.

Meanwhile, PDVSA and the subsidiaries—through PDVSA's general counsel in Caracas, Venezuela—retained attorneys Terrance P. Flynn and Marcos Daniel Jiménez ("Flynn and Jiménez") to represent their interests in this action. Represented by Flynn and Jiménez, PDVSA and the subsidiaries intervened to challenge the Court's agency-or-instrumentality determination as well as the validity of the turnover judgment.² See Docket Items 37, 39.

On March 26, 2021, White & Case LLP ("White & Case")—on behalf of the Ad Hoc Board of Directors of PDVSA ("Ad Hoc Board" or the "Board")—moved to substitute counsel and for a stay of the proceedings.³ Docket Item 58. On April 9, 2021, Flynn and Jiménez responded, Docket Item 65; on the same date, Caballero responded, Docket Item 66; and on April 16, 2021, White & Case replied, Docket Items 67, 68. On April 28, 2021, the Court heard oral argument and gave the parties time to file additional materials that they wished the Court to consider in deciding the motion. Docket Item 73. Two days later, Caballero, Docket Item 75; Flynn and Jiménez, Docket Item 77; and White & Case, Docket Item 76, filed supplemental briefing.

For the following reasons, the motion to substitute counsel is granted, but the motion for a stay is denied.

FACTUAL BACKGROUND

PDVSA is the national oil company of Venezuela, and the subsidiaries are wholly-owned subsidiaries of PDVSA. Docket Item 58-2 at 1.

In May 2018, Venezuela held presidential elections. Then-president Nicolás Maduro claimed victory, but the National Assembly of Venezuela ("National Assembly") declared Maduro's presidency illegitimate and declared Juan Guaidó the Interim President of Venezuela. Docket Item 58-2 at 3. The United States immediatelyrecognized Guaidó and the National Assembly (together, the "Interim Government") as the legitimate government of Venezuela. See Docket Item 58-4 (Statement of President Donald J. Trump Recognizing Venezuelan National Assembly President Juan Guaido as the Interim President of Venezuela (Jan. 23, 2019)). The current administration has reaffirmed that decision. See Press Briefing, Background Press Call by Senior Administration Officials on Venezuela, The White House (March 8, 2021), https://www.whitehouse.gov/briefing-room/press-briefings/2021/03/08/background-press-call-by-senior-administration-officials-on-venezuela/.

Maduro, however, continued to exert significant control over PDVSA. See Docket Item 66 at 10 n.4. On January 25, 2019, concerned with Maduro's "continued attempts to undermine the Interim [Government] of Venezuela[,] . . . the only legitimate branch of government duly elected by the Venezuelan people," the United States extended sanctions on members of the Maduro regime. See Exec. Order 13857, 84 F.R. 509 (2019). On January 28, 2019, the United States Department of Treasury's Office of Foreign Assets Control ("OFAC") designated PDVSA a Specially Designated National and blocked all PDVSA assets subject to United States jurisdiction. See Press Release, Treasury Sanctions Venezuela's State-Owned Oil Company Petroleos de Venezuela, S.A., U.S. Dep't of the Treasury (Jan. 28, 2019), https://home.treasury.gov/news/press-releases/sm594.⁴

On February 5, 2019, "the National Assembly enacted the Statute Governing the Transition to Democracy to Reestablish the Validity of the Constitution of the Bolivarian Republic of Venezuela" (the "Transition Statute"). Docket Item 58-2 at 3. Article 15.a. of the Transition Statute empowered Guaidó "to appoint ad hoc administrative boards of directors to assume the management and administration of state-owned companies," including PDVSA. Id. at 3-4.

On February 8, 2019, pursuant to Article 15.a., "the Interim Government appointed the Ad Hoc Board to govern PDVSA." Id. at 4. "[T]he National Assembly approved this action by resolution." Jiménez v. Palacios, 2019 WL 3526479, at *6 (Del. Ch. Aug. 2, 2019), aff'd, 237 A.3d 68 (Del. 2020); see also Impact Fluid Solutions LP aka Impact Fluid Solutions LLC v. Bariven SA, et al., Case No. 4:19-cv-00652, Docket Item 52-1 (S.D. Tex. May 4, 2020) (Resolution Authorizing the President in Charge of the Republic, Juan Gerardo Guaido Marquez, to Extend the Powers Granted and to Increase the Number of Members of the Ad-Hoc Management Board of Petroleos de Venezuela, S.A. (PDVSA), National Assembly of the Bolivarian Republic of Venezuela). The resolution gave the Ad Hoc Board the power to "exercise the legal representation of [PDVSA] and its subsidiaries." Bariven, Case No. 4:19-cv-00652, Docket Item 52-1 at4. It also barred Maduro appointees from exercising power over PDVSA and its affiliates. Id. at 5.

Venezuela's highest constitutional court, the Supreme Tribunal of Justice, Constitutional Court, found the Transition Statute unconstitutional and declared Guaidó's appointment of the Ad Hoc Board unlawful and a nullity. Docket Item 65 at 8 n.1; Docket Item 65-1.⁵

As for this case, Flynn and Jiménez were retained to represent PDVSA by its general counsel, part of the Maduro regime.⁶ Docket Item 77 at 2. White & Case was retained to represent PDVSA by the Ad Hoc Board, appointed by Guaidó. Docket Item 58-3. Both claim to be the legitimate attorneys for PDVSA and the subsidiaries, and both ask this Court to recognize them as such. Docket Items 58, 65.

LEGAL PRINCIPLES

I. POLITICAL QUESTION DOCTRINE

"The political question doctrine calls for a careful and delicate analysis into whether a 'matter has been committed by the Constitution to another branch of government or whether the action of that branch exceeds whatever authority has been committed.'" In re MTBE Prod. Liab. Litig., 438 F. Supp. 2d 291, 295 (S.D.N.Y. 2006) (quoting Baker v. Carr, 369 U.S. 186, 211 (1962)). "Political questions are those that 'lie beyond the competence and proper institutional role of the federal courts.'" D'Amico v. Waste Management of New York, LLC, 2019 WL 1332575, at *16 (W.D.N.Y. Mar. 25, 2019) (citing Belgrade v. Sidex Int'l Furniture Corp., 2 F. Supp. 2d 407, 415 (S.D.N.Y. 1998)). A political question arises when there is:

[1] a textually demonstrable constitutional commitment of the issue to a coordinate political department; [2] a lack of judicially discoverable and manageable standards for resolving it; [3] the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; [4] the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government; [5] an unusual need for unquestioning adherence to a political decision already made; or [6] the potentiality of embarrassment from multifarious pronouncements by various departments on one question.

Baker, 369 U.S. at 217.

Under the political question doctrine, the decision to recognize a foreign sovereign is exclusively a function of the Executive Branch and presents a non-justiciable political question. Oetjen v. Central Leather Co., 246 U.S. 297, 303 (1918). Indeed, "the Executive Branch's decision to recognize a foreign state 'conclusively binds' all domestic courts, such that they must accept that decision." Jiménez, 2019 WL 3526479, at 10 (emphasis added) (citing Oetjen, 246 U.S. at 302). This is so because"[a]s Chief Executive, the President of the United States is the sole organ of the federal government in the field of international relations, and thus holds the exclusive power of recognition of a foreign government." Id. at *9 (internal marks omitted) (citing United States v. Curtiss-Wright Exp. Corp., 299 U.S. 304, 320 (1936); Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 410 (1964)).

Moreover "a state derecognizes a governmental regime when it recognizes another regime as the legitimate government of that state." Nat'l Petrochemical Co. of Iran v. M/T Stolt Sheaf, 860 F.2d 551, 553 (2d Cir. 1988) (emphasis in original). Accordingly, "a regime not recognized as the government of a state[] is ordinarily denied access to courts in the...