OI European Grp. B.V. v. Bolivarian Republic of Venezuela

663 F.Supp.3d 406

OI EUROPEAN GROUP B.V., Plaintiff, v. BOLIVARIAN REPUBLIC OF VENEZUELA, Defendant.

Northrop Grumman Ship Systems, Inc., Plaintiff, v. The Ministry of Defense of the Republic of Venezuela, Defendant.

ACL1 Investments Ltd., ACL2 Investments Ltd., and LDO (Cayman) XVIII Ltd., Plaintiff, v. Bolivarian Republic of Venezuela, Defendant.

Rusoro Mining Limited, Plaintiff, v. Bolivarian Republic of Venezuela, Defendant.

Misc. No. 19-290-LPS

Misc. No. 20-257-LPS

Misc. No. 21-46-LPS

Misc. No. 21-481-LPS

United States District Court, D. Delaware

Filed March 23, 2023

Jody Barillare, MORGAN, LEWIS & BOCKIUS LLP, Wilmington, DE, Jonathan M. Albano, Christopher L. Carter, P. Sabin Willett, MORGAN, LEWIS & BOCKIUS LLP, Boston, MA, Edward H. Davis, Jr., Fernando J. Menendez, Cristina Vicens Beard, SEQUOR LAW, P.A., Miami, FL, Attorneys for OI European Group B.V.

Laura Davis Jones, Peter James Keane, PACHULSKI, STANG, ZIEHL & JONES, LLP, Wilmington, DE, Alexander A. Yanos, Carlos Ramos-Mrosovsky, Rajat Rana, Robert H. Poole, II, ALSTON & BIRD LLP, New York, NY, Attorneys for Northrop Grumman Ship Systems, Inc.

Marie McManus Degnan, ASHBY & GEDDES, Wilmington, DE, Joshua S. Bolian, Keane A. Barger, RILEY WARNOCK & JACOBSON, PLC, Nashville, TN, Attorneys for ACL1 Investments Ltd., ACL2 Investments Ltd., and LDO (Cayman) XVIII Ltd.

R. Craig Martin, DLA PIPER LLP, Wilmington, DE, James E. Berger, Charlene C. Sun, Joshua S. Wan, Katherine A. Ibarra, Tamara Hilmi, Charlotte M. Westbrook, DLA PIPER LLP, New York, NY, Attorneys for Rusoro Mining Ltd.

A. Thompson Bayliss and Stephen C. Childs, ABRAMS & BAYLISS LLP, Wilmington, DE, Sergio J. Galvis, Joseph E. Neuhaus, James L. Bromley, SULLIVAN & CROMWELL LLP, New York, NY, Angela N. Ellis, SULLIVAN & CROMWELL LLP, Washington, DC, Attorneys for Bolivarian Republic of Venezuela

Samuel Taylor Hirzel, II, Jamie Lynne Brown, Aaron M. Nelson, HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, DE, Joseph D. Pizzurro, Kevin A. Meehan, Juan O. Perla, CURTIS, MALLET-PREVOST, COLT & MOSLE LLP, New York, NY, Attorneys for Petróleos de Venezuela, S.A.

OPINION

STARK, United States Circuit Judge:

INTRODUCTION

The Court has before it multiple judgment creditors of the Bolivarian Republic of Venezuela ("Venezuela" or "Republic") who are seeking to collect on their judgments through property Venezuela holds in this District. Specifically, Venezuela is the 100% owner of Petróleos de Venezuela, S.A. ("PDVSA"), which in turn owns 100% of PDV Holding, Inc. ("PDVH"), which itself owns 100% of CITGO Holding, Inc., which in turn owns CITGO Petroleum Corp. ("CITGO").

In this Opinion, the Court addresses motions for a writ of attachment fieri facias filed by four judgment creditors of Venezuela. OI European Group B.V. ("OIEG") and Northrop Grumman Ship Systems, Inc. (now known as Huntington Ingalls Inc.) ("Huntington") filed motions that are fully briefed and opposed by one or more of Venezuela, PDVSA, PDVH, and/or CITGO (collectively, hereinafter the "Venezuela Parties").¹ The Court conducted an evidentiary hearing in connection with OIEG's and Huntington's motions, via remote videoconferencing technology, on April 30, 2021. (See Misc. No. 19-290 ("OIEG Action") D.I. 92; Misc. No. 20-257 ("Huntington Action") D.I. 47; see also OIEG Action D.I. 92 (April 30, 2021 hearing transcript))

The Court is also addressing similar motions filed by two additional judgment creditors: ACL1 Investments Ltd., ACL2 Investments Ltd., and LDO (Cayman) XVIII Ltd. (collectively, "ACL") and Rusoro Mining Ltd. ("Rusoro"). ACL's and Rusoro's motions are opposed by PDVSA and are fully briefed.²

To prevail on their motions, the creditors must prove that, at the pertinent time, PDVSA was and/or is the alter ego of Venezuela. The Court granted a similar motion in August 2018. See Crystallex Int'l Corp. v. Bolivarian Republic of Venez., 333 F. Supp. 3d 380, 412 (D. Del. 2018) ("Crystallex I"), aff'd, 932 F.3d 126 (3d Cir. 2019) ("Crystallex II"). In a (still-pending) case filed by Crystallex International, Inc. ("Crystallex"), the Court found that as of August 2018 PDVSA was the alter ego of Venezuela, and issued and served a writ of attachment on PDVSA's shares of PDVH. After that date, developments in Venezuela and the United States complicated the situation. In particular, U.S. sanctions on transactions involving Venezuelan property were expanded and the U.S. government recognized Juan Guaidó, the leader of the Republic's National Assembly, as the legitimate head of the Venezuelan government, instead of Nicolás Maduro, who holds the title of President of the Republic.

OIEG and Huntington come to this Court with overlapping but distinct theories as to how PDVSA remains Venezuela's alter ego. OIEG emphasizes the Guaidó government's ("Guaidó Government") direction and control over PDVSA's operations in the United States. As an alternative, OIEG argues that the Maduro regime's ("Maduro Regime") control on the ground in Venezuela, including its control over PDVSA's operations there, is an independent and adequate basis for deeming PDVSA the Republic's alter ego. For its part, Huntington also focuses on the Guaidó government, but also addresses the situation on the ground in Venezuela. Creditors ACL and Rusoro similarly rely on both the actions of the Maduro Regime and the Guaidó Government.

Having considered the evidence and arguments, and for the reasons set out in this Opinion, the Court has decided to grant the motions. The moving parties have proven, by a preponderance of the evidence, that PDVSA has been and is the alter ego of Venezuela, at all pertinent times, including from August 2018 through at least October 13, 2022. The record before the Court establishes that the Guaidó Government exercises direction and control over PDVSA in the United States while the Maduro Regime exercises direction and control over PDVSA inside Venezuela. Accordingly, the Court will grant the motions and confer with the parties as to the next steps it should take.

This Opinion proceeds as follows. First, the Court makes findings of fact based on the extensive record created by the parties, principally at and in connection with the April 2021 hearing. These include findings about the relationship between the recognized Guaidó Government and PDVSA in the U.S. and the relationship between the non-recognized Maduro Regime and PDVSA inside Venezuela. The bulk of these findings are entered only with respect to OIEG and Huntington, the creditors who participated in the April 2021 hearing and who expressly agreed that evidence admitted in either of these actions would be part of the record in both actions. After setting out the Court's findings, the Court applies alter-ego law and concludes that the moving parties have proven that PDVSA is the alter ego of Venezuela, both in the U.S. and in Venezuela, at all pertinent times. The Court also separately addresses the motions of ACL and Rusoro, based on the records made in these creditors' respective actions. Finally, the Court addresses various legal arguments the Venezuela Parties make in opposition to the Court's conclusions, determining that none has merit.

I. The Evidentiary Record

1. OIEG moved into evidence Exhibits 1-148 of the joint exhibit list submitted by OIEG (OIEG Action D.I. 87) and Huntington (Huntington Action D.I. 42). (See, e.g., Huntington Action D.I. 47 ("April 2021 Tr.") at 152-53)

2. Without objection (see id. at 42-45), the Court admitted all of this evidence. (See April 2021 Tr. 42-45, at 152-53)

3. The Court recognizes that certain of the admitted evidence is hearsay and it has factored that characteristic into the probative weight it has given such evidence.

4. The record in the Huntington Action and the OIEG Action are identical.

5. The record in the ACL Action differs from the joint record created in the OIEG and Huntington Actions and differs from that created in the Rusoro Action.

6. The record in the Rusoro Action differs from the joint record created in the Huntington and OIEG Actions and differs from that created in the ACL Action. Also, the Court did not address the Rusoro Action in its March 2, 2022 opinion (see OIEG Action D.I. 109) and that opinion was not docketed in the Rusoro Action. Because many of the issues disputed by Rusoro and the Venezuela Parties are materially identical (including the arguments made by both sides) to those addressed by the Court in its March 2, 2022 opinion — which considered the OIEG, Huntington, and ACL Actions — and because the Court's view on these common issues has not changed, the Court hereby adopts and incorporates by reference its March 2, 2022 Opinion (i.e., OIEG Action D.I. 109) and particularly its conclusions as to ripeness and the impact of U.S. sanctions on these ongoing proceedings (see id. at 9-18).

7. Unless otherwise noted, the Court's findings of fact pertain to all four creditors' actions.

8. The Court makes additional findings of fact in the ACL Action in Discussion Parts III & VI and makes additional findings of fact in the Rusoro Action in Discussion Parts IV & VII.

II. Background

A. Venezuela And Its State-Run Oil Company

9. Venezuela is home to the "largest proven oil reserves in the world." Jiménez v. Palacios, 250 A.3d 814, 822 (Del. Ch. 2019).³

10. "[T]he Venezuelan constitution ... endows the [Republic] with significant control over PDVSA and the oil industry in the country." Crystallex II, 932 F.3d at 147.

11. PDVSA was formed as the state oil concern in 1975, pursuant to Venezuela's Nationalization Law. (OIEG Action D.I. 50 (February 19, 2021 Declaration of Christopher L. Carter) ("Second Carter Decl.") Exs. 4, 5, 11 ¶ 12; ACL Action D.I. 4-7 (November 22, 2021 Declaration of Keane A. Barger) ("Barger Decl.") Ex. 48 ¶¶ 8-14; Rusoro Action D.I. 3 (Feb. 9, 2022 Declaration of Charlene C. Sun) ("Sun Decl.") Exs. 8, 9, 10 ¶¶ 8-14)

12. PDVSA's incorporation in 1975 was as a sociedad anónima intended to have its...