Resources v. Carreno

HARVEST NATURAL RESOURCES, INC. Plaintiff, v. RAFAEL DARIO RAMIREZ CARRENO Defendant.

CIVIL ACTION NO. H-18-483

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

June 9, 2020

MEMORANDUM OPINION AND ORDER

This case plays out on an international stage. It involves age-old themes of corruption and political persecution, yet the central legal issue is seemingly dry. When may, and should, a court set aside a default judgment? The answer is that even if this court need not do so in this case, it should, and it does.

Rafael Dario Ramirez Carreno asks the court to set aside the February 2019 final default judgment and to dismiss the case for lack of personal jurisdiction, insufficient service of process, and because of a waiver of the claims against him. Based on careful consideration of the motion, the many responses and replies, the record, and the applicable law, the court holds that, although the attempt at service was in good-faith and adequate; the court has personal jurisdiction over Ramirez; and the waiver issue is too ambiguous to justify disturbing the default judgment, there is good cause to set aside the default judgment and resolve this billion dollar international corruption case on the merits.

Ramirez's motion to set aside the default judgment is granted, but his request to dismiss the case is denied. The reasons for these rulings are set out below.

I. Background: The Parties, People, and Issues

a. The Cast of Characters

The major players in this case are:

• Rafael Dario Ramirez Carreno ("Ramirez"): the former President of Petroleos de Venezuela S.A. and the Venezuelan Minister of Energy and Oil from 2004 to 2014. (Docket Entry No. 14 at ¶ 8). Harvest alleges that Ramirez, the defendant, participated in an international bribery scheme. His whereabouts are unknown and he claims to be in hiding from the current Venezuelan government.

• Petroleos de Venezuela S.A.: Venezuela's state-owned oil and gas company, which does business around the world, including in Texas. (Id.). Through its wholly owned subsidiary Corporacion Venezolana del Petroleo, Petroleos was a majority owner of the Venezuelan exploration and production company Petrodelta, S.A. (Id. at ¶ 18).

• Juan Jose Garcia Mendoza ("Garcia"): a consultant for oil and gas companies that do business in Venezuela. Garcia allegedly facilitated the bribery scheme in which Ramirez participated, and he allegedly acted on Ramirez's behalf. Garcia was a defendant in this case. He allegedly operated three Florida entities—Azure 406 LLC, Azure 904 LLC, and Selle LLC—"as conduits for illegal activity." (Id. at ¶¶ 7, 25-26).

• Harvest Natural Resources: a Houston-based, Delaware-incorporated "independent energy company [that] engaged in the development and production of oil and gas properties from 1989 until May 2017." (Id. at ¶¶ 3, 17). Through the subsidiaries described below, Harvest held a minority interest in Petrodelta. Harvest is the plaintiff.

• James Edmiston: Harvest's CEO. (Id. at ¶ 21).

• Keith Head: Harvest's former vice-president and general counsel, who prepared an affidavit in this case. (Docket Entry No. 65-1).

• HNR Energia B.V.: a Harvest wholly owned subsidiary. (Docket Entry No. 14 at ¶ 18).

• Harvest-Vinccler Dutch Holding B.V. ("Harvest Holding"): a Netherlands company in which HNR Energia held an 80% interest. Through its own subsidiaries, Harvest Holding held a 40% interest in Petrodelta. (Id. at ¶ 18).

• PT Pertamina: an Indonesian state-owned company that attempted to buy—through HNR Energia and HNR Energia's subsidiaries—Harvest's interests in Venezuela. (Id. at ¶ 19). The deal fell through in 2013. (Id. at ¶ 33).

• Petroandina Resources Corporation N.V.: a company that, with the involvement of its parent company, Pluspetrol Resources Corporation B.V., attempted to buy Harvest's interests in Venezuela. (Id. at ¶ 36). The second part of the deal fell through in late 2014 and officially ended on January 1, 2015, because it did not receive approval from the Venezuelan government. The first part of the deal did not require this approval. (Id. at ¶¶ 36-42).

• Javier Alfredo Iguacel: the vice-president of business development at Pluspetrol. He allegedly received a bribe demand from Garcia and conveyed it to Harvest CEO Edmiston. (Id. at ¶ 39).

• CT Energy Holding SRL: a Barbados Society with Restricted Liability that successfully bought Harvest's remaining Venezuelan interests in 2016. (Id. at ¶ 44).

b. Factual Background

In February 2018, Harvest sued Ramirez and others under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C §§ 1961, et seq., and bribery and antitrust statutes. (See Docket Entry Nos. 1, 14). Harvest's first amended complaint alleges that Petroleos de Venezuela and its executives, including Ramirez, "withheld final approval for Harvest to sell its Venezuelan energy assets to two different buyers in 2013 and 2014" as part of a "pay-to-play" scheme. (Docket Entry No. 14 at ¶ 1). Harvest alleges that Juan Jose Garcia Mendoza demanded bribes "at Ramirez's request," in exchange for approval of Harvest's proposed asset sales. (Id. at ¶¶ 25-26, 39). Harvest refused to pay the bribes. After two deals to sell its Venezuelan assets allegedly fell through, Harvest sold the last of those assets in 2016. Ramirez had left Petroleos de Venezuela at that point. (Id. at ¶¶ 19-49). Harvest alleges that it received over $470 million less than the price of its original deal and had to close its business entirely because of the loss Ramirez's bribe demands allegedly caused. (Id. at ¶¶ 1, 43-49, 76-116). Ramirez denies Harvest's claims.

The court entered default judgment against Ramirez in December 2018, finding that he was properly served under Rule 4(e) and that he had failed to answer, respond, or otherwise defend against the lawsuit within the Rule 12(a)(1)(A)(i) time limit. (Docket Entry No. 66). The court entered a corrected judgment at Harvest's request on February 13, 2019. (Docket Entry No. 68). On February 28, 2019, the court entered a final default judgment awarding treble damages of $1,416,118,657.98, postjudgment interest from the date of the judgment at a rate of 2.55% per year, and attorneys' fees and costs. (Docket Entry No. 71).

Ramirez filed the pending motion to set aside that judgment and dismiss the case in June 2019. (Docket Entry No. 72). Before requiring Harvest to respond, the court heard argument on, and allowed, targeted jurisdictional discovery. (Docket Entry Nos. 88, 98). Ramirez supplemented his motion in December 2019. (Docket Entry No. 106).

The parties dispute whether the default judgment is void under Federal Rule of Civil Procedure 60(b)(4) for lack of personal jurisdiction and insufficient service of process; whether the judgment should be set aside for good cause under Rule 60(b)(1); whether Harvest's 2016 share purchase agreement waived Harvest's claims against Ramirez and negates the basis in the pleadings for the default judgment; and whether the case should be dismissed under Rules 12(b)(2), 12(b)(5), and 12(c). The court considers the parties' arguments against the record and the applicable legal standards.

II. The Legal Standards

a. Default Judgment

"[A] 'party is not entitled to a default judgment as a matter of right.'" Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (per curiam) (quoting Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996)). "Defaults are 'generally disfavored.'" Koerner v. CMR Constr. & Roofing, L.L.C., 910F.3d 221, 225 (5th Cir. 2018) (quoting Mason & Hanger-Silas Mason Co. v. Metal Trades Council of Amarillo, Tex. & Vicinity, AFL-CIO, 726 F.2d 166, 168 (5th Cir. 1984)). The Fifth Circuit favors "resolving cases on their merits." Sindhi v. Raina, 905 F.3d 327, 331 (5th Cir. 2018) (citation omitted). "This policy, however is 'counterbalanced by considerations of social goals, justice[,] and expediency, a weighing process [that] lies largely within the domain of the trial judge's discretion.'" Rogers v. Hartford Life & Accident Ins. Co., 167 F.3d 933, 936 (5th Cir. 1999) (quoting Pelican Prod. Corp. v. Marino, 893 F.2d 1143, 1146 (10th Cir. 1990)). The court may enter default judgment "when the adversary process has been halted because of an essentially unresponsive party." Sun Bank of Ocala v. Pelican Homestead & Savings Ass'n, 874 F.2d 274, 276 (5th Cir. 1989) (quoting H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir. 1970)).

"A default judgment is unassailable on the merits but only so far as it is supported by well-pleaded allegations, assumed to be true." Nishimatsu Constr. Co., Ltd. v. Hous. Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). For a default judgment to stand, the complaint must satisfy Rule 8's requirements. See Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 497-98 (5th Cir. 2015). "On appeal, the defendant, although he may not challenge the sufficiency of the evidence, is entitled to contest the sufficiency of the complaint and its allegations to support the judgement." Nishimatsu, 515 F.2d at 1206.

i. Setting Aside a Default Judgment Under Rule 60(b)(1)

Rule 55(c) allows courts to set aside default judgments under Rule 60(b). FED. R. CIV. P. 55(c). "Rule 60(b), in turn, allows the trial court to 'correct obvious errors or injustices.'" Sontay v. Hin's Garden, No. H-13-3721, 2014 WL 6722507, at *1 (S.D. Tex. Nov. 26, 2014) (quoting Fackelman v. Bell, 564 F.2d 734, 736 (5th Cir. 1977)).

In determining whether there is good cause to set aside a default judgment under Rule 60(b)(1), district courts consider: (1) "whether the defendant willfully defaulted"; (2) "whether a meritorious defense is presented"; and (3) "whether setting aside the default judgment would prejudice the plaintiff." Scott v. Carpanzano, 556 F. App'x 288, 293 (5th Cir. 2014) (citing Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 119 (5th Cir. 2008)). "Of these factors, two can be determinative: a district...