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Crystallex International Corp. v. Petroleos De Venezuela, S.A.

United States District Court, D. Delaware

May 1, 2017


          Raymond J. DiCamillo, Jeffrey L. Moyer, and Travis S. Hunter, RICHARDS, LAYTON & FINGER, P.A, Wilmington, DE

          Robert L. Weigel, Jason W. Myatt, and Rahim Moloo, GIBSON, DUNN & CRUTCHER LLP, New York, NY Attorneys for Plaintiff Crystallex International Corp.

          Samuel T. Hirzel, II, PROCTOR HEYMAN ENERIO LLP, Wilmington, DE

          Joseph D. Pizzurro, Peter J. Behmke, and Julia B. Mosse, CURTIS, MALLET-PREVOST, COLT & MOSLE LLP, New York, NY Attorneys for Defendant Petroleos de Venezuela, S.A.


          STARK, U.S. District Judge

         I. BACKGROUND

         This case stems from allegations that the Bolivarian Republic of Venezuela ("Venezuela") unlawfully expropriated certain mining rights and investments belonging to a Canadian company, Plaintiff Crystallex International Corporation ("Crystallex"). According to Crystallex, Venezuela then orchestrated a scheme to monetize its American assets and pulled the proceeds out of the United States, with the goal of evading potential arbitration creditors, including Crystallex. (See generally D.I. 1)

         Defendant Petroleos de Venezuela, S.A. ("PDVSA") is Venezuela's state-owned oil company and, undisputedly, an "agency or instrumentality" of Venezuela. (See D.I. 1 at 18-33 (alleging that PDVSA is Venezuela's alter ego); D.I. 28-2 at 1; D.I. 31 at 13 n.7) PDVSA directly and indirectly owns Defendant PDV Holding, Inc. ("PDVH") and CITGO Holding, Inc. ("CITGO Holding" and, together with PDVH, the "Delaware Subsidiaries"), both of which are Delaware corporations. Crystallex alleges that PDVSA instructed CITGO Holding to issue $2.8 billion in debt and pay the proceeds to its parent company, PDVH, as a dividend. Then, according to Crystallex, PDVH transferred this sum further up the ladder and out of the U.S. by issuing a dividend in the same amount to its own parent, PDVSA. It is alleged that the transactions effecting this repatriation of funds to Venezuela (the "Transfer(s)") "had no legitimate purpose" but, instead, were "designed deliberately to hinder and delay Venezuela's creditors." (D.I. 1 ¶ 55)

         On November 23, 2015, Crystallex filed a complaint (D.I. 1) ("Complaint") asserting claims based on the Delaware Uniform Fraudulent Transfer Act, 6 Del. C. § 1301 et seq. ("DUFTA").[1] By its Complaint, Crystallex seeks a judgment ordering the return to the United States of $2.8 billion in Transfer proceeds, or alternatively an award of money damages against the defendants, as well as an injunction against further transfers of remaining funds or assets out of the United States. In April, 2016, the tribunal arbitrating the dispute between Crystallex and Venezuela awarded Crystallex more than $1.4 billion. (See D.I. 31 at 1) On March 25, 2017, the United States District Court for the District of Columbia confirmed the Crystallex arbitration award in an amount in excess of $ 1.2 billion. (See D .1. 61 -1)

         Meanwhile, PDVSA's co-defendants, PDVH and CITGO Holding, moved to dismiss the Complaint for failure to state a claim. (D.I. 8) On September 30, 2016, the Court issued a memorandum opinion and order dismissing CITGO Holding, but not PDVH, from the case. (See D.I. 34, 35) An interlocutory appeal from the Court's order on the Delaware Subsidiaries' motion to dismiss is presently pending in the United States Court of Appeals for the Third Circuit. (See D.I. 40, 58)

         The Court now turns to PDVSA's separate motion to dismiss under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq. ("FSIA" or "Act"), and Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6). (See D.I. 28) The parties fully briefed PDVSA's motion (see D.I. 28-2, 31, 32), and the Court heard oral argument on December 20, 2016 (see D.I. 57 ("Tr.")). For the reasons stated below, the Court will grant PDVSA's motion.


         A. Subject Matter Jurisdiction

         Rule 12(b)(1) "authorizes dismissal of a complaint for lack of jurisdiction over the subject matter, or if the plaintiff lacks standing to bring his claim." Samsung Elec. Co., Ltd. v. ON Semiconductor Corp., 541 F.Supp.2d 645, 648 (D. Del. 2008). A motion to dismiss for lack of subject matter jurisdiction may present either a facial attack or a factual attack. See CNA v. United States, 535 F.3d 132, 139 (3d Cir. 2008); Fed.R.Civ.P. 12(b)(1). A facial attack "concerns an alleged pleading deficiency, " while a factual attack concerns the "failure of a plaintiffs claim to comport factually with the jurisdictional prerequisites." CNA, 535 F.3d at 139 (internal quotation marks and brackets omitted).

         Here, PDVSA brings a facial challenge to the Court's subject matter jurisdiction. (See D.I. 28-2 at 5 n.3) PDVSA has not introduced extrinsic evidence, and the parties' briefs and arguments reflect disagreement over "the legal sufficiency of the plaintiff s jurisdictional allegations." Rong v. Liaoning Province Gov't, 452 F.3d 883, 888 (D.C. Cir. 2006) (internal quotation marks omitted). Therefore, the Court will "take the plaintiffs factual allegations as true and determine whether they bring the case within any of the [FSIA's] exceptions." Id. (internal quotation marks omitted); see also Petruska v. Gannon Univ., 462 F.3d 294, 302 n.3 (3d Cir. 2006) ("When considering a facial attack, the Court must consider the allegations of the complaint as true, and in that respect such a Rule 12(b)(1) motion is similar to a Rule 12(b)(6) motion.") (internal quotation marks omitted).

         B. Personal Jurisdiction

         Rule 12(b)(2) directs the Court to dismiss a case when it lacks personal jurisdiction over the defendant. On a motion to dismiss for lack of personal jurisdiction, "the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004). Pursuant to the FSIA, prerequisites for personal jurisdiction over a foreign sovereign or its agencies or instrumentalities are that there be subject matter jurisdiction and service of process. See 28 U.S.C. § 1330.

         C. Failure to State a Claim

         Evaluating a motion to dismiss under Rule 12(b)(6) requires the Court to accept as true all material allegations of a complaint. See Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997) (internal quotation marks omitted). Thus, the Court may grant such a motion to dismiss only if, after "accepting all well pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, [the] plaintiff is not entitled to relief." Id.


         A. Subject Matter Jurisdiction

         1. PDVSA is presumptively immune under the FSIA

         The FSIA provides the sole means for "obtaining jurisdiction over a foreign state in the courts of this country." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989). However, foreign states and their agents and instrumentalities are "presumptively immune from the jurisdiction of United States courts unless one of the Act's express exceptions to sovereign immunity applies." OBB Personenverkehr AG v. Sachs, 136 S.Ct. 390, 394 (2015) (internal quotation marks omitted). While the "ultimate burden of proving immunity from suit" belongs to the foreign state or its agency or instrumentality, a plaintiff suing such a defendant must "establish that one of the exceptions to immunity applie[s]." Fed. Ins. Co. v. Richard I. Rubin & Co., 12 F.3d 1270, 1285 (3d Cir. 1993). That is, once a defendant makes a prima facie showing that it is a "foreign state, " or an "agency or instrumentality" of a foreign state, "the burden shifts to the plaintiff to produce sufficient evidence demonstrating the application of one of the statutory exceptions to immunity." Ezeiruaku v. Bull, 617 F.App'x 179, 181 (3d Cir. 2015) (citing Fed. Ins., 12 F.3d at 1282).

         Here, Crystallex alleges that PDVSA is an "agency or instrumentality" of Venezuela, which PDVSA does not deny. (See D.I. 1 ¶ 15 (quoting 28 U.S.C. § 1603(b)); D.I. 28-2 at 1) It is undisputed, therefore, that the FSIA is applicable. It is further undisputed that PDVSA is presumptively immune from suit. What is disputed is whether Crystallex has met its ...

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