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Crystallex International Corp. v. PDV Holding Inc.

United States District Court, D. Delaware

December 12, 2019

CRYSTALLEX INTERNATIONAL CORP., Plaintiff,
v.
PDV HOLDING INC., Defendant. CONOCOPHILLIPS PETROZUATA B.V., et al., Plaintiffs,
v.
PETROLEOS DE VENEZUELA S.A., et al., Defendants. CRYSTALLEX INTERNATIONAL CORP., Plaintiff,
v.
PDV HOLDING INC., Defendant. CONOCOPHILLIPS PETROZUATA B.V., et al., Plaintiffs,
v.
PETROLEOS DE VENEZUELA S.A., et al., Defendants. CRYSTALLEX INTERNATIONAL CORPORATION, Plaintiff,
v.
BOLIVARIAN REPUBLIC OF VENEZUELA, Defendant. SAINT-GOBAIN PERFORMANCE PLASTICS EUROPE, Plaintiff,
v.
BOLIVARIAN REPUBLIC OF VENEZUELA, et al., Defendants. OI EUROPEAN GROUP B.V., Plaintiff,
v.
BOLIVARIAN REPUBLIC OF VENEZUELA, et al., Defendants. OI EUROPEAN GROUP B.V., Plaintiff,
v.
BOLIVARIAN REPUBLIC OF VENEZUELA, Defendant.

          MEMORANDUM ORDER

          HONORABLE LEONARD P. STARK UNITED STATES DISTRICT JUDGE

         All of the numerous above-captioned actions relate to efforts to collect debts owed or allegedly owed by the Republic of Venezuela (“Venezuela” or “the Republic”). The case that has progressed furthest is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-mc-151 (“Crystallex Asset Proceeding”).[1] In the Crystallex Asset Proceeding, the Court issued an opinion in August 2018 holding that Crystallex had met its burden to prove that Petróleos de Venezuela S.A. (“PDVSA”) is the alter ego of the Republic. See Crystallex Asset Proceeding, 333 F.Supp.3d 380, 412, 414 (“Crystallex Aug. 9 Op.”). The Court further held that the Republic's and PDVSA's jurisdictional immunities and immunities from attachment under the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1602 et seq., do not defeat Crystallex's claims. See Id. at 414-21. Subsequently, in another opinion, the Court granted Crystallex's motion for writ of attachment. See Crystallex Asset Proceeding, 2018 WL 4026738 (D. Del. Aug. 23, 2018) (“Crystallex Aug. 23 Op.”). The United States Marshals Service has served the writ. (See D.I. 96)

         The Republic and PDVSA filed an interlocutory appeal in the Court of Appeals for the Third Circuit. (See D.I. 80) On November 23, 2018, while the appeal was being briefed, the Third Circuit stayed proceedings in this Court. (D.I. 129) (“[I]t is further ORDERED that all proceedings in the District Court are hereby stayed pending the merits panel's disposition of the petition for writ of mandamus and the consolidated appeals . . .”) A week later, this Court issued its own stay order, staying proceedings in the Crystallex Asset Proceeding and in other actions[2]“until . . . the Third Circuit's disposition of the petition for writ of mandamus and the consolidated appeals.” (D.I. 132)

         On July 29, 2019, the Third Circuit issued an opinion affirming this Court. See Crystallex Int'l Corp. v. Bolivarian Republic of Venezuela, 932 F.3d 126 (3d Cir. 2019) (“Crystallex App. Op.”).[3] On September 30, 2019, while the Republic and PDVSA's requests for rehearing were pending, the Third Circuit (without explanation) lifted its stay of this Court's proceedings. (See D.I. 136)

         On October 11, 2019, this Court received a joint status report in the Crystallex Asset Proceeding. (See D.I. 139) Other status reports were thereafter provided in other actions. (See Crystallex I D.I. 115; Crystallex II D.I. 69; ConocoPhillips I D.I. 67; ConocoPhillips II D.I. 63) On November 13, 2019, the Court convened a consolidated, in-court status conference in all of the above-captioned actions to receive further input on how it should proceed. (See Crystallex I D.I. 118) (“Tr.”) Then, on November 21, 2019, the Third Circuit denied the requests for rehearing.

         Having reviewed all of the pertinent filings in all of these cases, and having carefully considered the comments provided at the November 13 status conference, IT IS HEREBY ORDERED that:

         1. The Crystallex Asset Proceeding is STAYED until the conclusion of proceedings in the Supreme Court (i.e., the latest of (if applicable) the expiration of the time to file a petition for a writ of certiorari (“cert. petition”), denial of such a petition, or conclusion of proceedings following grant of such petition) or further order of this or any other Court lifting the stay. The Court's decision to stay is WITHOUT PREJUDICE to Crystallex's opportunity to file a motion to lift the stay.

         Federal Rule of Civil Procedure 62(c), which governs requests for a stay pending appeal, requires a court faced with a situation like the one before the Court to consider “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Hilton v. Braunskill, 481 U.S. 770, 776 (1987); see also Republic of Philippines v. Westinghouse Elec. Corp., 949 F.2d 653, 658 (3d Cir. 1991) (applying Hilton factors and granting motion to stay). Applying this standard, the Court has determined that a stay until conclusion of proceedings in the Supreme Court is the best exercise of its discretion. While the Court cannot say that the Republic or PDVSA (both of which have indicated they will be filing a cert. petition (see D.I. 139 at 7) have made a strong showing they are likely to succeed on the merits, the Court does believe there is a greater-than-usual likelihood that their petition will be granted. (See generally Tr. at 25-27) (counsel for Republic discussing reasons Supreme Court may grant petition, including purported Circuit split and sensitive issues of international relations) More importantly, for reasons further explained below, the Court is persuaded that the Republic and PDVSA could be irreparably injured in the absence of a stay, yet a stay will not substantially injure the other parties (particularly Crystallex and other creditors) interested in the proceeding.[4] The Court also finds that the public interest (including the public's interest in furthering the expressed foreign policy of the United States, as determined by the Executive Branch) strongly supports a stay.

         Additionally, the following considerations (in no particular order) have factored into the Court's conclusion that its proceedings should be halted at this time:

A. Crystallex's lack of a license from the Office of Foreign Assets Control (“OFAC”) and its failure to this point even to seek one.[5]
B. The uncertainty created by further proceedings, which could diminish the value of the Petróleos de Venezuela Holding (“PDVH”) shares to be sold, as potential buyers cannot know with any confidence that a purchase and transfer of the shares can be consummated.[6]
C. The change in the regime of U.S. sanctions imposed on Venezuela and recent amendment of OFAC's policies and guidance.[7]
D. The change in the Boards of Directors at PDVSA, PDVH, CITGO Holding, Inc., and CITGO Petroleum Corp. (“CITGO”), and possible consequent changes in the relationship of PDVSA to the Republic.[8]
E. The change in the U.S.-recognized government of Venezuela.[9]
F. Issues of international affairs and United States foreign policy, which are within the purview of the Executive Branch.[10]
G. The Court's concern not to create a “run on the bank, ” that is, an influx of creditors to the Court, with negative consequences for the Republic, for U.S. policy (which favors an orderly transition of power in the Republic and a coordinated restructuring of its debts), and, potentially, this Court.[11]
H. The humanitarian crisis in Venezuela, which has been described (by the Republic's own attorneys) as the worst on the planet other than in Syria.[12]

         The Court recognizes that many (if not all) of these same considerations were recently presented to the Third Circuit, which nonetheless decided just two months ago to lift the stay it had imposed on this Court's proceedings. (See Tr. at 43) (Crystallex: “[E]very argument that you heard about the difficulties in Venezuela, about the sanctions, were all presented to the Third Circuit . . . [i]n opposition to our motion to lift the identical stay . . . . [Yet] the Third Circuit lifted [its] stay.”) The Court of Appeals did not explain the reasoning for its stay decision. Nor did it, in this Court's view, dictate that this Court must now move forward, particularly when the Supreme Court is going to have an opportunity to review the Third Circuit's merits opinion, if it chooses to do so.

         The Court also recognizes that, as the Third Circuit has pronounced, “Venezuela owes Crystallex from a judgment that has been affirmed in our courts. Any outcome where Crystallex is not paid means that Venezuela has avoided its obligations.” Crystallex App. Op. at 149. Today's decision is not intended to permit Venezuela to accomplish such a result. Venezuela recognizes that it must pay what it owes. (See, e.g., Tr. at 31) (counsel for Republic stressing that Guaidó government intends to engage in voluntary restructuring of all its debts) Instead, today's decision reflects the Court's attempt to carefully balance the many competing interests in a dynamic and internationally sensitive set of circumstances. Should Crystallex believe the Court's assessment is incorrect or an abuse of discretion, it can move to lift the stay - or seek to appeal this order.

         The Republic has asked for a longer stay than the Court is granting. It seeks a stay “until somebody shows up with a license from OFAC saying that they're permitted to go forward.” (Tr. at 29; see also D.I. 150 at 4 (arguing that cases should be stayed “until those parties [i.e., creditors] obtain a specific license from OFAC to proceed”))[13] Today's stay lasts only until the completion of Supreme Court proceedings (subject to any further order of this or any other Court lifting the stay). The longer stay preferred by the Republic might be much longer indeed; it might even last forever, if Crystallex's speculation is correct that OFAC will not issue a license until a winning bidder has been identified (which cannot happen if this Court refuses to proceed with a sale until after a license is obtained).[14] A stay any longer than the one the Court is entering today is not, at this time, warranted.

         Given the Court's reasoning, it follows that now is not the appropriate time to require the Republic to answer the writ or for the Court to engage in the likely complicated and time-consuming effort to delineate the process for conducting a sale of the attached assets, both of which Crystallex requests be done expeditiously. (See D.I. 139 at 4-6; see also generally Id. at 15 (CITGO observing that “[a] sale of privately-held stock of the magnitude at issue in this case is unprecedented”)) Nor is now the appropriate time to litigate a motion to quash the writ or for reconsideration under Federal Rule of Civil Procedure 60(b), as the Republic and PDVSA suggest could also be done at this point. (See Id. at 14) Instead, the legal issues presented by the Republic and PDVSA's appeal from this Court's August 2018 opinion should first receive their final determination with completion of the Supreme Court proceedings, however and whenever they end.

         In the meantime, should Crystallex (or any other party, including any other creditor in the actions being stayed by this Order) believe it can persuade the Court that additional steps toward an eventual execution should be taken, it may so move. In the absence of receiving and granting such a motion, this Court will await the conclusion of the Supreme Court process.

         2. Further in the Crystallex Asset Proceeding, (a) Rosneft Trading S.A.'s motion to intervene (D.I. 100) is GRANTED; (b) CITGO's motion to intervene (D.I. 101) is GRANTED; (c) the Bondholders'[15] motion to intervene (D.I. 103) is GRANTED; and (d) PDVH's motion to extend its obligation to file a verified answer (D.I. 109) is GRANTED. After the stay is lifted, the parties should advise the Court as to their positions as to when an answer should be required.

         Federal Rule of Civil Procedure 24(a)(2) provides:

On timely motion, the court must permit anyone to intervene who . . . claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

         The Third Circuit has articulated four elements that must be established to permit intervention pursuant to Rule 24(a)(2): “(1) the application for intervention is timely; (2) the applicant has a sufficient interest in the litigation; (3) the interest may be affected or impaired, as a practical matter by the disposition of the action; and (4) the interest is not adequately represented by an existing party in the litigation.” United States v. Terr. of V.I., 748 F.3d 514, 519 (3d Cir. 2014). “[T]he polestar for evaluating a claim for intervention is always whether the proposed intervenor's interest is direct or remote.” Kleissler v. U.S. Forest Serv., 157 F.3d 964, 972 (3d Cir. 1998). The Third Circuit's approach favors “pragmatism” and “elasticity” over “rigid rules” or “narrow approach[es];” it further “favors intervention over subsequent collateral attacks.” Id. at 970-71.

         Each of the requirements is met by each of the proposed intervenors. The applications for intervention were timely, as they were consistent with the timing set out in the Court's August 23, 2018 Order. (D.I. 95 at 2) Each of the creditors (Rosneft and the Bondholders) has a sufficient interest to protect (i.e., an interest in collecting money owed to them by the Republic) that may be affected or impaired by the disposition of this action (if Crystallex collects $1.2 billion from the sale of PDVH shares, those ...


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