April 15, 2019
from the United States District Court for the District of
Delaware (D.C. Civil Action No. 1-17-mc-00151) District
Judge: Honorable Leonard P. Stark
Petition for Writ of Mandamus from the United States District
Court for the District of Delaware (Related to D.C. Civil
Action No. 1-17-mc-00151)
Taylor Hirzel, II Heyman Enerio Gattuso & Hirzel Kevin A.
Meehan Julia Mosse Juan O. Perla Joseph D. Pizzurro (Argued)
Curtis Mallet-Prevost Colt & Mosle Counsel for
A. Estrada (Argued) Matthew S. Rozen Lucas C. Townsend Gibson
Dunn & Crutcher Rahim Moloo Jason W. Myatt Robert L.
Weigel Gibson Dunn & Crutcher Travis S. Hunter Jeffrey L.
Moyer Raymond J. DiCamillo Richards Layton & Finger
Counsel for Appellee
Whitney Debevoise, II Stephen K. Wirth Samuel F. Callahn
Arnold & Porter Kaye Scholer LLP Paul J. Fishman Arnold
& Porter Kaye Scholer LLP Kent A. Yalowitz (Argued)
Arnold & Porter Kaye Scholer LLP Counsel for
Intervenor-Appellant Bolivarian Republic of Venezuela
F. Davidoff (Argued) Sullivan & Cromwell LLP Sergio
Galvis Joseph E. Neuhaus Andrew G. Ditderich Sullivan &
Cromwell LLP Carl N. Kunz, III Lewis H. Lazarus Morris James
LLP Counsel for Amicus Appellants Blackrock Financial
Management Inc.; Contrarian Capital Management LLC
Before: AMBRO, GREENAWAY, JR., and SCIRICA, Circuit Judges
International Corp., a Canadian gold mining company, invested
hundreds of millions of dollars to develop gold deposits in
the Bolivarian Republic of Venezuela. In 2011, Venezuela
expropriated those deposits and transferred them to its
state-owned oil company, Petróleos de Venezuela, S.A.
("PDVSA"). To seek redress, Crystallex invoked a
bilateral investment treaty between Canada and Venezuela to
file for arbitration before the International Centre for
Settlement of Investment Disputes. The arbitration took place
in Washington, D.C., and Crystallex won; the arbitration
panel awarded it $1.2 billion plus interest for
Venezuela's expropriation of its investment. The United
States District Court for the District of Columbia confirmed
that award and issued a $1.4 billion federal judgment. Now
Crystallex is trying to collect.
to identify Venezuelan-held commercial assets in the United
States that it can lawfully seize, Crystallex went after
U.S.-based assets of PDVSA. Specifically, it sought to attach
PDVSA's shares in Petróleos de Venezuela Holding,
Inc. ("PDVH"), its wholly owned U.S. subsidiary.
PDVH is the holding company for CITGO Holding, Inc., which in
turn owns CITGO Petroleum Corp. ("CITGO"), a
Delaware Corporation headquartered in Texas (though best
known for the CITGO sign outside Fenway Park in Boston).
attachment suit is governed by the Foreign Sovereign
Immunities Act of 1976, 28 U.S.C. §§ 1602-1611 (the
"Sovereign Immunities Act"). Under federal common
law first recognized by the Supreme Court in First
National City Bank v. Banco Para El Comercio Exterior de
Cuba ("Bancec"), 462 U.S. 611 (1983),
a judgment creditor of a foreign sovereign may look to the
sovereign's instrumentality for satisfaction when it is
"so extensively controlled by its owner that a
relationship of principal and agent is created."
Id. at 629.
Bancec, the District Court, per Chief Judge Stark,
concluded that Venezuela's control over PDVSA was
sufficient to allow Crystallex to attach PDVSA's shares
of PDVH in satisfaction of its judgment against the country.
PDVSA and Venezuela, along with PDVSA's third-party
bondholders as amici (the "Bondholders"),
challenge this ruling.
and the Bondholders do not substantially contest the District
Court's finding that it extensively controlled PDVSA.
Rather, they raise various jurisdictional and equitable
objections to the attachment. Likewise, PDVSA primarily
contends that its tangential role in the dispute precludes
execution against its assets under Bancec
irrespective of the control Venezuela exerts over it.
affirm the District Court's order granting the writ of
attachment and remand for further proceedings consistent with
2002, Crystallex contracted with Corporación
Venezolana de Guayanaan, an organ of the Venezuelan
government, for the right to develop and extract exclusively
for 20 years the gold deposits at Las Cristinas, Venezuela.
See Crystallex Int'l Corp. v. Bolivarian Republic of
Venezuela ("D.C. Crystallex I "), 244
F.Supp.3d 100, 105-06 (D.D.C. 2017). The deposits are among
the world's largest. Per the contract, Crystallex spent
hundreds of millions of dollars developing the Las Cristinas
site. Id. at 106. It also performed various other
obligations under the contract. Id.
2011, Venezuela nationalized its gold mines and seized the
Las Cristinas works without providing compensation. As
Crystallex asserts and PDVSA does not dispute, Venezuela then
gave the mining rights at Las Cristinas to PDVSA for no
consideration, and PDVSA subsequently "sold to the
Venezuelan Central Bank 40% of its shares in the affiliate
that was created to exercise those mining rights." J.A.
that year, Crystallex filed for arbitration under a bilateral
investment treaty between Canada and Venezuela before the
International Centre for Settlement of Investment Disputes.
As noted earlier, the arbitration took place in Washington,
D.C., and Crystallex won an arbitration award of $1.2 billion
had its award. Now it had to collect.
Crystallex's collection efforts
Confirmation proceedings in the District of
filed an action to confirm its award in the U.S. District
Court for the District of Columbia. It properly served
Venezuela, who appeared to defend it. The Court confirmed the
award and entered a federal judgment in favor of Crystallex.
D.C. Crystallex I, 244 F.Supp.3d at 122-23. After
Venezuela failed to satisfy the judgment within 30 days, the
Court ruled that Crystallex could execute on it.
Crystallex Int'l Corp. v. Bolivarian Republic of
Venezuela, No. CV 16-0661 (RC), 2017 WL 6349729, at *1
(D.D.C. June 9, 2017). However, the Court expressly declined
to address whether Crystallex could attach assets held by
PDVSA and its subsidiaries. Id. at *2. Venezuela
appealed the ruling, and the D.C. Circuit affirmed it.
Crystallex Int'l Corp. v. Bolivarian Republic of
Venezuela, No. 17-7068, 2019 WL 668270, at *2
(D.C. Cir. Feb. 14, 2019).
Delaware Uniform Fraudulent Transfer Act proceedings
arbitration was pending and then after the award was
announced, Crystallex brought suits against CITGO, CITGO
Holding, PDVH, and PDVSA in the Delaware District Court.
See Crystallex Int' l Corp. v. PDV Holding, Inc.
(1:15-CV-1082); Crystallex Int'l Corp. v. PDV
Holding, Inc. (1:16-CV-1007). It claimed that Venezuela
refused to pay its arbitration award and "thwart[ed]
enforcement" by transferring its assets among several
entities-PDVSA, PDVH, and CITGO- allegedly in violation of
the Delaware Uniform Fraudulent Transfer Act, 6 Del. C.
§§ 1301-11. Crystallex Int'l Corp. v.
Petróleos de Venezuela, S.A., 879 F.3d 79, 82 (3d
Cir. 2018). The Court denied PDVH's motion to dismiss,
but we reversed and held that a transfer from a non-debtor
could not be a "fraudulent transfer" under the Act.
Id. at 81 ("While we do not condone the
debtor's and the transferor's actions, we must
conclude that Crystallex has failed to state a claim under
[the Act]."). That panel noted explicitly but reserved
judgment on the question now before us-whether PDVSA could be
liable for the arbitration award as an "alter ego"
of Venezuela. Id. at 84 n.7.
Proceedings in this appeal
the award-confirmation appeal was pending in the D.C.
Circuit, Crystallex followed up its judgment by filing an
attachment action against Venezuela in the Delaware District
Court. Under Federal Rule of Civil Procedure 69(a),
Crystallex attempted to attach PDVH shares owned by PDVSA.
That rule provides: "A money judgment is enforced by a
writ of execution, unless the court directs otherwise. The
procedure on execution-and in proceedings supplementary to
and in aid of judgment or execution-must accord with the
procedure of the state where the court is located," here
Delaware, "but a federal statute governs to the extent
it applies." Delaware law permits a judgment creditor to
obtain a writ of attachment (known by its Latin name,
fieri facias, or simply fi . fa.) over
various forms of property belonging to the debtor, including
its shares in a Delaware corporation. See 10 Del. C.
§ 5031; 8 Del. C. § 324(a).
not named in the attachment proceeding, PDVSA intervened in
the District Court. It moved to dismiss the proceeding on the
ground of sovereign immunity under the Sovereign Immunities
several rounds of briefing and hearings, the District Court
concluded that PDVSA was Venezuela's "alter
ego" under Bancec. Crystallex Int'l Corp. v.
Bolivarian Republic of Venezuela ("Del.
Crystallex "), 333 F.Supp.3d 380, 414 (D.
Del. 2018). The Court held (1) it had jurisdiction to order
attachment against PDVSA's U.S.-based commercial assets,
and (2) Crystallex could attach PDVSA's shares of PDVH to
satisfy the judgment against Venezuela. A follow-up order,
dated August 23, 2018, directed the Clerk to issue the writ
and have it served in furtherance of an execution through a
public sale of PDVH stock. PDVSA appealed both of these
orders (docketed in our Court as Nos. 18-2797 & 18-3124),
and also filed a petition for a writ of mandamus (No.
18-2889) to prevent completion of the sale during this
appeal. We consolidated all three appeals for oral argument
they were pending before us, Venezuela moved to intervene and
to stay these appeals for 120 days so that it could further
evaluate its legal position. By order dated March 20, 2019,
we granted Venezuela's motion to intervene and
participate in oral argument. We also permitted it to file
supplemental briefing. We did not rule on its motion to stay
but stated we would consider that motion at oral argument. At
that argument, Venezuela chose to forgo further pursuit of a
stay. Oral Arg. Tr. at 180:1-7 (Apr. 15, 2019).
Relationship between Venezuela and PDVSA
District Court's primary ruling was that PDVSA is
Venezuela's "alter ego" under Bancec.
Numerous facts are relevant to that determination, as
discussed in more detail below. In general, it is undisputed
the relationship between PDVSA and Venezuela has tightened
significantly since 2002, when then-President Hugo
Chávez fired roughly 40% of the PDVSA workforce for
protesting increased Venezuelan control over the company.
Since then PDVSA's presidents have generally been senior
members of the Venezuelan president's cabinet, including
members of the Venezuelan military. Venezuela has also passed
various laws that require PDVSA to fund both government
initiatives and discretionary government funds. Venezuela
controls PDVSA's domestic oil production, sales, and
pricing. It also requires that PDVSA supply Venezuela and its
strategic allies with oil at below-market rates.
The Bondholders' interests
relevant to this appeal are the various bonds that PDVSA has
issued over the past decade or so. Several holders of PDVSA
bonds due to mature in 2020 moved to intervene as
amici in this appeal. They include BlackRock
Financial Management, Inc. and Contrarian Capital Management,
LLC. Their bonds have an outstanding face value of
approximately $1.684 billion and are secured by a 50.1 %
collateral interest in PDVH's shares of Citgo Holding,
Inc. as security for the bonds. According to the Bondholders,
PDVSA has also issued roughly $25 billion in bonds to U.S.
and non-U.S. capital markets investors.
U.S. policy towards Venezuela and PDVSA
Nicolas Maduro became the President of Venezuela in 2013.
This year Juan Guaidó, Venezuelan's opposition
leader and president of the National Assembly, has made
efforts to oust Maduro and take control of the Venezuelan
government. The United States Government recognized
Guaidó as the rightful leader of Venezuela on January
days later, as part of a broader effort to convince the
Maduro regime to cede power, the Office of Foreign Assets
Control of the U.S. Department of the Treasury
("OFAC") imposed new sanctions against PDVSA by
adding it to the List of Specially Designated Nationals and
Blocked Persons. As discussed further below, the U.S.
Government has also promulgated several executive orders
limiting transfer of Venezuelan or PDVSA-controlled assets in
the United States.
Jurisdiction and standard of review
parties dispute whether the District Court had jurisdiction
to attach PDVSA's property to satisfy the judgment
against Venezuela. The Court held that it had both ancillary
jurisdiction to enforce the judgment and an independent basis
for jurisdiction per 28 U.S.C. § 1330 and 28 U.S.C.
§ 1605(a)(6) because PDVSA was Venezuela's alter
ego. Section 1330 grants federal-court jurisdiction over
"any nonjury civil action" against a foreign
sovereign, so long as the sovereign is properly served under
28 U.S.C. § 1608 and is not entitled to sovereign
immunity. See 28 U.S.C. § 1330(a)-(b). Under 28
U.S.C. § 1604, foreign sovereigns and their
instrumentalities are entitled to sovereign immunity in U.S.
courts except as provided in 28 U.S.C. §§
1605-1607. Section 1605(a)(6), the immunity exception applied
by the District Court in this case, provides an exception to
immunity for actions seeking to compel arbitration pursuant
to an agreement or to enforce arbitration awards that meet
jurisdiction to review the District Court's denial of
PDVSA's motion to dismiss as an immune sovereign and the
grant of Crystallex's motion for a writ of attachment
under Federal Rule of Civil Procedure 69. We have
jurisdiction to review the former under the collateral order
doctrine. See Fed. Ins. Co. v. Richard I. Rubin &
Co., 12 F.3d 1270, 1279-82 (3d Cir. 1993). Our jurisdiction
exists for the latter because it amounted to a final judgment
under 28 U.S.C. § 1291 by leaving the District Court
"nothing left to do but execute[.]" Bryan v.
Erie Cnty. Office of Children and Youth, 752 F.3d 316,
321 (3d Cir. 2014).
review questions of law de novo and findings of fact
for clear error, and we review de novo the ultimate
determination whether to treat PDVSA as Venezuela's alter
ego. See Clientron Corp. v. Devon IT, Inc., 894 F.3d
568, 575 (3d Cir. 2018).
parties raise a host of issues. We group them into three core
inquiries: (A) whether the Bancec "alter
ego" doctrine determines the District Court's
jurisdiction to attach PDVSA's assets (it does), (B) the
scope of the Bancec inquiry and whether its factors
are satisfied here (they are), and (C) whether PDVSA's