Conocophillips Petrozuata B.V. et al v. Petroleos DE Venezuela S.A. et al

MOTION to Dismiss for Lack of Jurisdiction Over the Subject Matter , MOTION to Dismiss for Lack of Jurisdiction Over the Person , MOTION to Dismiss for Failure to State a Claim -

D. Del.March 27, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CONOCOPHILLIPS PETROZUATA B.V., PHILLIPS PETROLEUM COMPANY VENEZUELA LIMITED, CONOCOPHILLIPS GULF OF PARIA B.V. AND CONOCOPHILLIPS HAMACA B.V., Plaintiffs, v. PETRÓLEOS DE VENEZUELA, S.A., PDV HOLDING, INC., CITGO HOLDING, INC., and CITGO PETROLEUM CORPORATION, Defendants. : : : : : : : : : : : : : : : : : C.A. No. 16-cv-904-LPS DEFENDANT PETROLEOS DE VENEZUELA, S.A.’S MOTION TO DISMISS PURSUANT TO FEDERAL RULES OF CIVIL PROCEDURE 12(B)(1), (2) AND (6) Pursuant to Federal Rules of Civil Procedure 12(b)(1), (2), and (6), Defendant Petróleos de Venezuela, S.A., by and through its undersigned counsel, moves to dismiss Plaintiffs’ Complaint in its entirety for Lack of Subject Matter Jurisdiction, Lack of Personal Jurisdiction and Failure to State a Claim (“Motion”). The grounds for this Motion are more fully set forth in the accompanying memorandum of law, which is filed contemporaneously herewith. Case 1:16-cv-00904-LPS Document 24 Filed 03/27/17 Page 1 of 2 PageID #: 297 2 HEYMAN ENERIO GATTUSO & HIRZEL LLP /s/ Samuel T. Hirzel OF COUNSEL: Joseph D. Pizzurro Peter J. Behmke Kevin A. Meehan Julia B. Mosse CURTIS, MALLET-PREVOST, COLT & MOSLE LLP 101 Park Avenue New York, NY 10178 (212) 696-6000 jpizzurro@curtis.com pbehmke@curtis.com kmeehan@curtis.com jmosse@curtis.com Dated: March 27, 2017 Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 shirzel@hegh.law Attorney for the Defendant Petróleos de Venezuela, S.A. Case 1:16-cv-00904-LPS Document 24 Filed 03/27/17 Page 2 of 2 PageID #: 298 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CONOCOPHILLIPS PETROZUATA B.V., PHILLIPS PETROLEUM COMPANY VENEZUELA LIMITED, CONOCOPHILLIPS GULF OF PARIA B.V. AND CONOCOPHILLIPS HAMACA B.V., Plaintiffs, v. PETRÓLEOS DE VENEZUELA, S.A., PDV HOLDING, INC., CITGO HOLDING, INC., and CITGO PETROLEUM CORPORATION, Defendants. : : : : : : : : : : : : : : : : : C.A. No. 16-cv-904-LPS ORDER GRANTING DEFENDANT PETROLEOS DE VENEZUELA, S.A.’S MOTION TO DISMISS PURSUANT TO FEDERAL RULES OF CIVIL PROCEDURE 12(B)(1), (2) AND (6) AND NOW, this _______ day of _____________ 2017, this Court having considered Defendant Petróleos de Venezuela, S.A.’s motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (2), and (6) (the “Motion”), and good cause having been shown, IT IS HEREBY ORDERED that the Motion is GRANTED. ___________________________________ United States District Judge Case 1:16-cv-00904-LPS Document 24-1 Filed 03/27/17 Page 1 of 1 PageID #: 299 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CONOCOPHILLIPS PETROZUATA B.V., PHILLIPS PETROLEUM COMPANY VENEZUELA LIMITED, CONOCOPHILLIPS GULF OF PARIA B.V. AND CONOCOPHILLIPS HAMACA B.V., Plaintiffs, v. PETRÓLEOS DE VENEZUELA, S.A., PDV HOLDING, INC., CITGO HOLDING, INC., and CITGO PETROLEUM CORPORATION, Defendants. : : : : : : : : : : : : : : : : : C.A. No. 16-cv-904-LPS MEMORANDUM OF LAW IN SUPPORT OF THE MOTION TO DISMISS OF DEFENDANT PETROLEOS DE VENEZUELA, S.A. OF COUNSEL: Joseph D. Pizzurro Peter J. Behmke Kevin A. Meehan Julia B. Mosse CURTIS, MALLET-PREVOST, COLT & MOSLE LLP 101 Park Avenue New York, NY 10178 (212) 696-6000 jpizzurro@curtis.com pbehmke@curtis.com kmeehan@curtis.com jmosse@curtis.com March 27, 2017 HEYMAN ENERIO GATTUSO & HIRZEL LLP Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 shirzel@hegh.law Attorney for the Defendant Petróleos de Venezuela, S.A. Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 1 of 26 PageID #: 300 i TABLE OF CONTENTS Page NATURE AND STAGE OF PROCEEDINGS ...............................................................................1 SUMMARY OF ARGUMENT .......................................................................................................2 STATEMENT OF FACTS ..............................................................................................................4 I. Allegations in the Complaint ...................................................................................4 II. The CITGO Defendants’ Motion to Dismiss ...........................................................7 ARGUMENT ...................................................................................................................................8 I. The Complaint Should be Dismissed for Lack of Subject Matter Jurisdiction ...............................................................................................................8 A. Plaintiffs’ Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the First Clause of the Commercial Activity Exception ...................................................................................................10 B. Plaintiffs’ Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the Second Clause of the Commercial Activity Exception ...................................................................................................12 C. Plaintiffs’ Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the Third Clause of the Commercial Activity Exception ...................................................................................................13 II. The Complaint Should Be Dismissed for Lack of Personal Jurisdiction ...............16 III. The Complaint Should Be Dismissed for Failure to State a Claim .......................17 CONCLUSION ..............................................................................................................................20 Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 2 of 26 PageID #: 301 ii TABLE OF AUTHORITIES Page Cases Antares Aircraft, L.P. v. Federal Republic of Nigeria, 999 F.2d 33 (2d Cir. 1993) ....................................................................................................... 16 Araya-Solorzano v. Gov’t of Republic of Nicaragua, 562 F. App’x 901 (11th Cir. 2014) ........................................................................................... 16 Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (1989) .................................................................................................................... 8 Aurelius Capital Partners, LP v. Republic of Argentina, No. 07-cv-11327, 2010 WL 768874 (S.D.N.Y. Mar. 5, 2010) ................................................. 19 Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120 (2d Cir. 2009) ..................................................................................................... 19 Bell Helicopter Textron Inc. v. Islamic Republic of Iran, 892 F. Supp. 2d 219 (D.D.C. 2012) .......................................................................................... 15 Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734 F.3d 1175 (D.C. Cir. 2013) ................................................................................................ 16 Butler v. Sukhoi Co., 579 F.3d 1307 (11th Cir. 2009) ............................................................................................ 9, 11 Crystallex Int'l Corp. v. Petróleos de Venezuela, S.A., No. CV 15-1082-LPS, 2016 WL 5724777 (D. Del. Sept. 30, 2016) ........................................ 19 Davis v. Wells Fargo, 824 F.3d 333 (3d Cir. 2016) ....................................................................................................... 9 Evans v. Petroleos Mexicanos (PEMEX), No. 05-20434, 2006 U.S. App. LEXIS 9266 (5th Cir. 2006) ................................................... 11 Export-Import Bank of the Republic of China v. Grenada, 768 F.3d 75 (2d Cir. 2014) ....................................................................................................... 19 Ezeiruaku v. Bull, 617 F. App’x 179 (3d Cir. 2015) ............................................................................................ 8, 9 Federal Ins. Co. v. Richard I. Rubin & Co., Inc., 12 F.3d 1270 (3d Cir. 1993) ................................................................................................. 9, 13 Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 3 of 26 PageID #: 302 iii General Elec. Capital Corp. v. Grossman, 991 F.2d 1376 (8th Cir. 1993) .................................................................................................. 11 Gerding v. Republic of France, 943 F.2d 521 (4th Cir. 1991) .................................................................................................... 11 Gregorian v. Izvestia, 871 F.2d 1515 (9th Cir. 1989) .................................................................................................. 16 Guirlando v. T.C. Ziraat Bankasi A.S., 602 F. 3d 69 (2d Cir. 2010) ...................................................................................................... 15 Kensington Int’l, Ltd. v. Itoua, 505 F.3d 147 (2d Cir. 2007) ................................................................................... 12, 14, 15, 16 Michaelson v. Farmer (In re Appleseed’s Intermediate Holdings, LLC), 470 B.R. 289 (D. Del. 2012) ..................................................................................................... 12 OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390 (2015) ................................................................................................................ 12 Odhiambo v. Republic of Kenya, 764 F.3d 31 (D.C. Cir. 2014) .............................................................................................. 11, 12 Peterson v. Islamic Republic of Iran, No. 13-CV-9195, 2015 WL 731221 (S.D.N.Y. Feb. 20, 2015) ................................................ 19 Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, 771 F.3d 980 (7th Cir. 2014) .................................................................................................... 17 Raji v. Bank Sepah-Iran, 495 N.Y.S.2d 576 (N.Y. Sup. Ct. 1985) .................................................................................. 18 Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) ...................................................................................................... 13, 14, 15 Robinson v. Gov’t of Malaysia, 269 F.3d 133 (2d Cir. 2001) ................................................................................................. 9, 11 Rubin v. The Islamic Republic of Iran, 637 F.3d 783 (7th Cir. 2011) .................................................................................................... 19 S&S Mach. Co. v. Masinexportimport, 706 F.2d 411 (2d Cir. 1982) ..................................................................................................... 18 Saudi Arabia v. Nelson, 507 U.S. 349 (1993) .................................................................................................................... 8 Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 4 of 26 PageID #: 303 iv Schoeps v. Bayern, 611 F. App’x 32 (2d Cir. 2015) ................................................................................................ 11 Stena Rederi AB v. Comision de Contratos del Comite Ejecutivo General del Sindicato Revolucionario de Trabajadores Petroleros de la Republica Mexicana, S.C., 923 F.2d 380 (5th Cir. 1991) .................................................................................................... 16 Stephens v. Nat’l Distillers & Chem. Corp., 69 F.3d 1226 (2d Cir. 1995) ............................................................................................... 17, 18 Terenkian v. Republic of Iraq, 694 F.3d 1122, 1132-33 (9th Cir. 2012) ...................................... 11 Thai Lao Lignite (Thailand) Co. v. Gov’t of Lao People’s Democratic Republic, No. 10-cv-5256, 2013 WL 1703873 (S.D.N.Y. Apr. 19, 2013) ............................................... 18 United World Trade, Inc. v. Mangyshlakneft Oil Prod. Ass’n, 33 F.3d 1232 (10th Cir. 1994) .................................................................................................. 15 Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480 (1983) .................................................................................................................... 8 Voest-Alpine Trading USA Corp. v. Bank of China, 142 F.3d 887 (5th Cir. 1998) .................................................................................................... 12 Walters v. Indus. & Commercial Bank of China, Ltd., 651 F.3d 280 (2d Cir. 2011) ..................................................................................................... 19 Waters v. People’s Republic of China, 672 F. Supp. 2d 573 (S.D.N.Y. 2009) ...................................................................................... 19 Westfield v. Federal Republic of Germany, 633 F.3d 409 (6th Cir. 2011) .............................................................................................. 13, 16 Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511 (D.C. Cir. 1988) ................................................................................................ 11 Federal Statutes 28 U.S.C. § 1330(a) ........................................................................................................................ 8 28 U.S.C. § 1330(b) ...................................................................................................................... 16 28 U.S.C. § 1602 ............................................................................................................................. 1 28 U.S.C. § 1603(b) ........................................................................................................................ 4 28 U.S.C. § 1603(e) .................................................................................................................. 2, 10 28 U.S.C. § 1604 ............................................................................................................................. 8 Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 5 of 26 PageID #: 304 v 28 U.S.C. § 1605 ............................................................................................................................. 9 28 U.S.C. § 1605(a)(1) .................................................................................................................... 9 28 U.S.C. § 1605(a)(2) ........................................................................................................... passim 28 U.S.C. § 1605(a)(3) .................................................................................................................. 10 28 U.S.C. § 1605(a)(6) .................................................................................................................. 10 28 U.S.C. § 1609 ............................................................................................................... 15, 17, 19 28 U.S.C. § 1610 ..................................................................................................................... 15, 19 28 U.S.C. § 1610(d) ................................................................................................................ 17, 18 State Statutes 6 Del. C. § 1301 .............................................................................................................................. 1 6 Del. C. § 1304(a)(1) ............................................................................................................. 12, 17 6 Del. C. § 1307(a) .................................................................................................................... 5, 19 6 Del. C. § 1308(b) ....................................................................................................................... 19 Federal Rules Fed. R. Civ. P. 12(b)(1)............................................................................................................... 1, 7 Fed. R. Civ. P. 12(b)(2)............................................................................................................. 1, 17 Fed. R. Civ. P. 12(b)(6)........................................................................................................... 1, 7, 8 Legislative History H.R. Rep. No. 94-1487, (1976), reprinted in 1976 U.S.C.C.A.N. 6604) ............................................................................... 13, 18 Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 6 of 26 PageID #: 305 Defendant Petróleos de Venezuela, S.A. (“PDVSA”) respectfully submits this memorandum of law in support of its motion to dismiss the Complaint filed by ConocoPhillips Petrozuata B.V., Phillips Petroleum Company Venezuela Limited, ConocoPhillips Gulf of Paria B.V. and ConocoPhillips Hamaca B.V. (collectively, “Plaintiffs”) pursuant to Rules 12(b)(1), (2) and (6) of the Federal Rules of Civil Procedure for lack of subject matter and personal jurisdiction under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602, et seq. (“FSIA”), and for failure to state a claim upon which relief can be granted. NATURE AND STAGE OF PROCEEDINGS This case arises out of a purely foreign dispute that has no connection to the United States. Plaintiffs are a group of foreign corporations that operated in the Venezuelan oil industry. Plaintiffs have initiated a series of international arbitrations against PDVSA and the Bolivarian Republic of Venezuela (the “Republic”), which is not a party to this action. Those arbitrations are still pending and no arbitral awards have been rendered against PDVSA or the Republic. Nevertheless, Plaintiffs preemptively commenced this lawsuit alleging that PDVSA and its direct and indirect U.S. subsidiaries, PDV Holding, Inc. (“PDVH”), CITGO Petroleum Corporation (“CITGO Petroleum”) and CITGO Holding, Inc. (“CITGO Holding”) (collectively, the “CITGO Defendants”), violated the Delaware Uniform Fraudulent Transfer Act (“DUFTA”), 6 Del. C. § 1301, et seq., by engaging in transactions with the intention of frustrating Plaintiffs’ potential collection efforts on arbitral awards that might someday be rendered against PDVSA or the Republic. PDVSA is the national oil company of Venezuela and undisputedly a “foreign state” under the FSIA. PDVSA is therefore presumptively immune from the jurisdiction of this Court. And Plaintiffs fail to rebut that presumption. The Complaint does not identify any specific exception to foreign sovereign immunity that might apply in this case. Nor does the Complaint Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 7 of 26 PageID #: 306 2 allege any facts that, if proven, would establish any of the FSIA’s statutory exceptions to immunity. Indeed, there is no allegation that PDVSA engaged in any act, commercial or otherwise, that would permit this Court to exercise jurisdiction under the FSIA. At bottom, the Complaint alleges in conclusory fashion that the non-party Republic used PDVSA to orchestrate a series of transactions engaged in by the CITGO Defendants that purportedly repatriated assets from the United States to Venezuela with the alleged intent of hindering Plaintiffs’ potential future collection efforts on arbitral awards that do not yet exist. For the reasons set forth below, these allegations are wholly insufficient to strip PDVSA of its jurisdictional immunity or to state a claim against PDVSA. Accordingly, the Complaint should be dismissed. SUMMARY OF ARGUMENT 1. The Complaint should be dismissed for lack of subject matter jurisdiction. Under the FSIA, PDVSA is presumptively immune from the jurisdiction of this Court. Yet Plaintiffs fail to assert any specific exception to foreign sovereign immunity that they claim is applicable in this case. Nor do they allege any facts that, if proven, would establish any of the FSIA’s exceptions to immunity. For example, Plaintiffs do not allege any facts that would support the exercise of subject matter jurisdiction under any of the three clauses of the FSIA’s commercial activity exception. The first clause of the commercial activity exception applies only where the plaintiff’s action is “based upon a commercial activity carried on in the United States by the foreign state.” 28 U.S.C. § 1605(a)(2). The Complaint does not allege that PDVSA engaged in any act in the United States, much less any “commercial activity carried on in the United States,” which is defined as commercial activity having a substantial contact with the United States. See 28 U.S.C. § 1603(e). The second clause applies only if a plaintiff’s action is “based . . . upon an act performed Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 8 of 26 PageID #: 307 3 in the United States in connection with a commercial activity of the foreign state elsewhere.” 28 U.S.C. § 1605(a)(2). This exception is inapplicable because the Complaint does not allege that PDVSA performed any act in the United States, much less a non-commercial act that is in- and-of-itself sufficient to form the basis of the Plaintiffs’ action as required to establish the second clause. The third clause applies only if a plaintiff’s action is “based . . . upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.” Id. Even accepting as true Plaintiffs’ allegations that the allegedly fraudulent transfers might hinder their potential future efforts to collect on judgments that might be entered on arbitral awards that might be rendered against PDVSA or the Republic, those allegations describe, at most, a potential effect that is far too attenuated and remote to constitute a “direct effect in the United States.” Indeed, transfers that occur prior to the issuance of a judgment cannot be said to have had the immediate or “direct effect” of interfering with a judgment that did not yet exist. Moreover, the alleged interference with Plaintiffs’ potential future collection efforts is nothing more than a speculative financial harm, and it is well established that mere financial harm, even to an American plaintiff, is not sufficient to constitute a “direct effect in the United States.” Here, Plaintiffs are all foreign corporations and any financial harm they might incur would be suffered abroad. 2. The Complaint should be dismissed for lack of personal jurisdiction. To establish personal jurisdiction, the FSIA requires both that an exception to immunity apply and that proper service of process have been made. Because no exception to immunity applies, there is no personal jurisdiction over PDVSA. 3. The Complaint should be dismissed for failure to state a claim upon which relief Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 9 of 26 PageID #: 308 4 can be granted. Plaintiffs’ DUFTA claims are nothing more than a thinly veiled attempt to obtain security in advance of a judgment on potential arbitration awards. However, such a prejudgment restraint on a foreign state’s property is prohibited under the FSIA where, as here, the foreign state has not explicitly waived immunity from prejudgment attachment. Furthermore, the relief Plaintiffs’ seek – i.e. avoidance of the allegedly fraudulent transfers – is also precluded by the FSIA. Plaintiffs allege that property that would otherwise have been subject to execution in the United States was “repatriated” to Venezuela with the intent of frustrating Plaintiffs’ potential future collection efforts. But the FSIA is clear that a U.S. court is powerless to order the return of property of a foreign state that is located outside of the United States. Accordingly, Plaintiffs’ DUFTA claims are preempted by the FSIA and therefore must be dismissed. In addition to the arguments set forth above and described in more detail below, all of the arguments made by the CITGO Defendants in support of their motion to dismiss the Complaint are incorporated by reference into PDVSA’s motion to dismiss. STATEMENT OF FACTS I. Allegations in the Complaint PDVSA is the national oil company of Venezuela and is indisputably a “foreign state” under the FSIA. (D.I. 1 ¶ 24.) The CITGO Defendants are all Delaware corporations. (Id. at ¶¶ 21-23.) CITGO Petroleum is a wholly-owned subsidiary of CITGO Holding, which, in turn is a wholly-owned subsidiary of PDVH, which, in turn is a wholly-owned subsidiary of PDVSA. (Id.) Plaintiffs are a group of foreign corporations that operated in the Venezuelan oil industry. (Id. ¶¶ 1-2, 16-19.) Plaintiffs allege that their Venezuelan assets were expropriated by the Republic in 2007. (Id. ¶ 3.) Thereafter, Plaintiffs commenced an arbitration against the Republic under the auspices of the World Bank’s International Centre for Settlement of Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 10 of 26 PageID #: 309 5 Investment Disputes (“ICSID”) to adjudicate the legality of the alleged expropriation and to obtain compensation for the allegedly expropriated assets. (Id. ¶ 4.) Neither PDVSA nor the CITGO Defendants are parties to the ICSID arbitration. Seven years after the alleged expropriation, Plaintiffs commenced separate and distinct arbitrations against PDVSA and two of its subsidiaries under the auspices of the International Chamber of Commerce (“ICC”) seeking indemnification from PDVSA for the allegedly discriminatory taking of Plaintiffs’ Venezuelan assets. (Id. ¶ 5.) The CITGO Defendants are not parties to the ICC arbitrations. The ICSID and ICC arbitrations are still pending. Plaintiffs have not obtained any arbitral award against either PDVSA or the Republic. On October 6, 2016, Plaintiffs filed the Complaint (D.I. 1). Despite the fact that Plaintiffs have no arbitration award against PDVSA or the Republic, Plaintiffs allege that defendants have fraudulently transferred assets with an intent to frustrate, hinder or delay potential future collection efforts in the United States by the Plaintiffs – all foreign corporations. (D.I. 1 ¶¶ 1, 14.) According to the Complaint, the defendants were “[a]ware that CITGO was vulnerable to execution in the United States” and thus “developed a plan to convert CITGO assets … to cash, and then move that cash out of the United States to Venezuela, in order to shield it from creditors like Plaintiffs.” (Id. ¶ 36.) The Complaint identifies three transactions as part of this alleged plan to “repatriate” assets to Venezuela and asserts that the below transactions constitute actual or constructive fraudulent conveyances in violation of DUFTA, 6 Del. C. § 1307(a). (Id. ¶¶ 8, 10-13, 73-85.) First, Plaintiffs allege that CITGO Holding raised $2.8 billion through a bond offering to third party investors in February 2015. (D.I. 1 ¶ 47.) The Complaint states that the Republic “pledged CITGO Assets and equity as security” for these bonds. (Id.) Plaintiffs allege that Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 11 of 26 PageID #: 310 6 PDVH caused CITGO Holding to pay most of the proceeds from the bond offering to PDVH as a dividend and then PDVSA allegedly caused PDVH to pay the proceeds to PDVSA as a dividend. (Id. ¶ 48.) Plaintiffs further allege, upon information and belief, that PDVSA paid the proceeds to the Republic. (Id.) The Complaint states that the Republic used PDVSA to orchestrate the dividend transactions. (Id. ¶ 51.) There is no allegation that PDVSA performed any act in the United States in connection with the bond offering or the dividend transactions.1 Second, Plaintiffs allege that PDVSA caused “CITGO” to pay invoices for oil deliveries by British Petroleum Plc. (“BP”) to PDVSA. (Id. ¶ 56.) Plaintiffs further allege, upon information and belief, that “CITGO” has paid for other unidentified purchases by PDVSA. (Id. ¶ 57.) There is no allegation that PDVSA performed any act in the United States in connection with the alleged payments to BP or any other creditor. Third, Plaintiffs allege that PDVSA had existing bonds that were due to mature in 2017 (the “2017 Bonds”). (D.I. 1 ¶ 58.) According to the Complaint, PDVSA offered to issue new bonds, due to mature in 2020, to its existing bondholders in exchange for extinguishing the 2017 Bonds. (Id.) The Complaint makes clear that this bond swap was an arms-length transaction in which PDVSA modified the terms of the transaction in response to feedback from its bondholders. (Id. ¶ 13.) As consideration for the bond swap, PDVH allegedly pledged 50.1% of its shares of CITGO Holding as collateral for the new bonds. (Id. ¶ 59.) Plaintiffs assert that this transaction between PDVSA and its existing bondholders concerning its antecedent bond debt was intended frustrate judgment creditors of the Republic and PDVSA. (Id. ¶ 62.) However, Plaintiffs are not judgment creditors – they have not even obtained an arbitration award against the Republic or PDVSA. In any event, there is no allegation that PDVSA 1 Similar DUFTA claims concerning these dividend transactions have been asserted in another action pending before this Court: Crystallex Int’l Corp. v. Petroleos de Venezuela, S.A., No. 15-cv-1082-LPS (D. Del.). Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 12 of 26 PageID #: 311 7 performed any act in the United States in connection with the bond swap or PDVH’s pledge of collateral for the new bonds. Plaintiffs allege in conclusory fashion that the assets of the CITGO Defendants that were allegedly transferred, removed or encumbered through the above transactions would have otherwise been “subject to collection” on potential judgments that Plaintiffs might obtain in the future. (D.I. 1 ¶ 1.) However, there are no allegations to support the assertion that assets of the CITGO Defendants would be subject to execution to satisfy judgments against the Republic or PDVSA. While the Complaint does allege that PDVSA and the Republic are alter egos, there is no allegation that any of the CITGO Defendants is an alter ego of either the Republic or PDVSA. Plaintiffs ask this Court to enter judgment directing the return of any transferred assets to the United States, awarding money damages, avoiding any security interests granted to the non- party bondholders, and enjoining defendants “from further disposing of assets.” (Id. ¶ 84.) On October 6, 2016, Plaintiffs, through counsel, sent letters to the ICSID and ICC tribunals informing them of this action and stating that: “The plaintiffs are not, however, seeking any pre-award or pre-judgement [sic] relief from the Delaware court.” (D.I. 11-1, Ex. A and B.) II. The CITGO Defendants’ Motion to Dismiss On November 23, 2016, the CITGO Defendants moved to dismiss the Complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure (the “CITGO Motion”). (D.I. 10.) The CITGO Defendants argue that this case must be dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) because Plaintiffs’ claims are not ripe for adjudication. They argue that Plaintiffs, in their letters to the ICSID and ICC tribunals, expressly waived any pre-judgment or pre-arbitration-award relief in this action and therefore Plaintiffs cannot obtain any of the relief sought in their Complaint unless and until a final enforceable award is entered in Plaintiffs’ favor. Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 13 of 26 PageID #: 312 8 The CITGO Defendants also argue that the Complaint must be dismissed under Rule 12(b)(6) for failure to state a claim upon which relief may be granted. They argue that Plaintiffs’ fraudulent transfer claims should be dismissed for failure to allege the necessary elements under DUFTA, namely, a “transfer” by the “debtor” of property belonging to that debtor. The only transaction that arguably involved “property of a debtor” was PDVH’s transfer of a dividend to PDVSA, but that transaction was not made “by a debtor.” Indeed, none of the CITGO Defendants are “debtors” of Plaintiffs. Moreover, the CITGO Defendants contend that, even if the property at issue belonged to a “debtor,” Plaintiffs’ DUFTA claims would be preempted by the FSIA, which prohibits prejudgment restraints on the property of a foreign state and permits a foreign state to freely transfer its property, including removing such property from the United States, in advance of a judgment. The CITGO Motion has been fully briefed. ARGUMENT I. The Complaint Should be Dismissed for Lack of Subject Matter Jurisdiction The FSIA provides “the sole basis for obtaining jurisdiction over a foreign state in the courts of this country.” Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993) (quoting Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989)). Under the FSIA, foreign states are presumptively immune from suit in U.S. courts. See Ezeiruaku v. Bull, 617 F. App’x 179, 181 (3d Cir. 2015) (citing 28 U.S.C. § 1604). That presumption can be overcome only where the plaintiff establishes the substantive requirements for abrogating foreign sovereign immunity set forth in 28 U.S.C. §§ 1605-1607. See Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 493-94 (1983). Satisfying those substantive requirements is a prerequisite to the exercise of subject matter jurisdiction under 28 U.S.C. § 1330(a). Where there is no dispute that the defendant is a foreign state under the FSIA, the plaintiff has the burden of overcoming the presumption of immunity by producing sufficient evidence to demonstrate that one of the FSIA’s Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 14 of 26 PageID #: 313 9 statutory exceptions to immunity applies. See Ezeiruaku, 617 F. App’x at 181; Federal Ins. Co. v. Richard I. Rubin & Co., Inc., 12 F.3d 1270, 1282 (3d Cir. 1993). Here, it is undisputed that PDVSA is a foreign state under the FSIA and therefore presumptively immune from the jurisdiction of this Court. Plaintiffs have not, and cannot, meet their burden of rebutting PDVSA’s presumptive immunity.2 The Complaint is devoid of any jurisdictional allegations save for the vague and conclusory allegation that: “PDVSA is not entitled to immunity from subject-matter jurisdiction of this Court under 28 U.S.C. § 1605.” (D.I. 1 ¶ 24.) While Section 1605 provides certain exceptions to foreign sovereign immunity, the Complaint does not identify any specific exception that Plaintiffs claim is applicable here. And a plaintiff cannot establish subject matter jurisdiction under the FSIA where, as here, “the complaint makes the bald assertion that jurisdiction exists under § 1605” but “fails to specifically invoke any of the FSIA’s statutory exceptions.” Butler v. Sukhoi Co., 579 F.3d 1307, 1313 (11th Cir. 2009). Moreover, there are no allegations in the Complaint that would support subject matter jurisdiction under any of the exceptions enumerated in Section 1605. There are no allegations that PDVSA has waived its immunity under the FSIA’s waiver exception, 28 U.S.C. § 1605(a)(1). Although Plaintiffs allege that their property in Venezuela was expropriated by the non-party Republic, they do not (and cannot) assert any expropriation claims in this case. (D.I. 1 ¶ 28.) Rather, Plaintiffs initiated a series of ICSID and ICC arbitrations to litigate their claims concerning the alleged expropriation. (Id. ¶¶ 28-29.) Those arbitrations are still pending and no enforceable arbitral award has been issued by either ICSID or the ICC. (Id. ¶¶ 28-30.) Thus, 2 For purposes of this motion, PDVSA is asserting a facial challenge to FSIA jurisdiction. Thus, to overcome the presumption of immunity, Plaintiffs must demonstrate that their Complaint alleges facts that, if proven, are sufficient to establish a statutory exception to immunity. See Robinson v. Gov’t of Malaysia, 269 F.3d 133, 140 (2d Cir. 2001); see also Davis v. Wells Fargo, 824 F.3d 333, 346 (3d Cir. 2016). Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 15 of 26 PageID #: 314 10 neither the FSIA’s expropriation exception, 28 U.S.C. § 1605(a)(3),3 nor the arbitration exception, 28 U.S.C. § 1605(a)(6),4 apply. In addition, there are no allegations in the Complaint that would support the exercise of subject matter jurisdiction under any of the three clauses of the FSIA’s commercial activity exception to immunity, 28 U.S.C. § 1605(a)(2). That exception provides: A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case . . . (2) in which the action is based [i] upon a commercial activity carried on in the United States by the foreign state; or [ii] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [iii] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States. 28 U.S.C. § 1605(a)(2). The first two clauses of the commercial activity exception are inapplicable because, among other things, there is no allegation that PDVSA did anything in the United States. And the third clause is inapplicable because there is no allegation that any extraterritorial act by PDVSA had the requisite “direct effect in the United States.” Accordingly, the Complaint should be dismissed for lack of subject matter jurisdiction. A. Plaintiffs’ Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the First Clause of the Commercial Activity Exception The first clause of the commercial activity exception only applies where “the action is based upon a commercial activity carried on in the United States by the foreign state.” 28 U.S.C. § 1605(a)(2). The FSIA defines “commercial activity carried on in the United States by a foreign state” as “commercial activity carried on by such state and having substantial contact with the United States.” Id. § 1603(e) (emphasis added). The “substantial contact” requirement 3 Section 1605(a)(3) only applies in cases in which the plaintiff asserts “rights in property taken in violation of international law” and demonstrates the requisite jurisdictional nexus to the United States. 4 Section 1605(a)(6) only applies in cases to enforce an arbitration agreement or to confirm an arbitral award. Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 16 of 26 PageID #: 315 11 imposes a standard that “is stricter than that suggested by a minimum contacts due process inquiry[.]” See Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1513 (D.C. Cir. 1988). That requirement is not satisfied by showing that the foreign state engages in isolated or transitory contacts with the United States. See id. Moreover, it is not enough that the foreign state engage in some commercial activity having substantial contact with the United States. See General Elec. Capital Corp. v. Grossman, 991 F.2d 1376, 1383-84 (8th Cir. 1993). Rather, the plaintiff’s case must be “based upon” such commercial activity having “substantial contact with the United States.” See id.; see also Terenkian v. Republic of Iraq, 694 F.3d 1122, 1132-33 (9th Cir. 2012). Here, Plaintiffs fail to allege that PDVSA did anything in the United States, much less plead facts that would, if proven, establish the sort of substantial commercial activity in the United States that is demanded by the FSIA’s “substantial contact” requirement. In fact, the Complaint does not identify any specific act performed by PDVSA with respect to any of the alleged transactions. At most, the Complaint states that “Venezuela was using PDVSA to orchestrate the [dividend] transaction” in February 2015. (D.I. 1 ¶ 51.) However, there is not a single pleaded fact to explain what PDVSA allegedly did to “orchestrate” this transaction, where such acts occurred, or what alleged conduct would constitute PDVSA’s “commercial activity carried on in the United States.” Such conclusory assertions are entirely insufficient to sustain jurisdiction over PDVSA. See, e.g., Butler, 579 F.3d at 1313-14; Evans v. Petroleos Mexicanos (PEMEX), No. 05-20434, 2006 U.S. App. LEXIS 9266, at *6 (5th Cir. 2006) ; Robinson, 269 F.3d at 146.5 5 Even allegations that a foreign sovereign defendant had some contacts with the United States, such as meetings and telephone calls, are insufficient to satisfy the FSIA’s “substantial contact” requirement. See, e.g., Schoeps v. Bayern, 611 F. App’x 32, 34 (2d Cir. 2015) (preliminary negotiations in New York did not constitute a substantial contact with the United States); Odhiambo v. Republic of Kenya, 764 F.3d 31, 36 (D.C. Cir. 2014) (“our cases have held that mere business meetings in the United States do not suffice to create substantial contact with the United States”); Grossman, 991 F.2d at 1383-84 (“letters, faxes, and telephone calls in the United States,” as well as a meeting in Minnesota did not satisfy the substantial contact requirement). Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 17 of 26 PageID #: 316 12 In addition, Plaintiff cannot satisfy the “based upon” requirement of Section 1605(a)(2). An action is “based upon” a commercial activity carried on by the foreign state in the United States if that activity constitutes the “gravamen” of the plaintiff’s lawsuit. See OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390, 395-96 (2015). To determine the gravamen of the suit, courts must look to the foreign state’s allegedly wrongful conduct that injured the plaintiff. See id. Here, there is nothing inherently wrongful about the alleged transactions. Rather, Plaintiffs assert that the transactions are wrongful only because PDVSA allegedly intended them to hinder Plaintiffs’ potential future collection efforts.6 The Complaint makes clear that such wrongful intent was formed in Venezuela. Thus, the “gravamen” of Plaintiffs’ claims lies in Venezuela and therefore the first clause of Section 1605(a)(2) does not apply. B. Plaintiffs’ Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the Second Clause of the Commercial Activity Exception The second clause of the commercial activity exception applies if the action is “based . . . upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere.” 28 U.S.C. § 1605(a)(2). This exception “is generally understood to apply to non-commercial acts in the United States that relate to commercial acts abroad.” Kensington Int’l, Ltd. v. Itoua, 505 F.3d 147, 157 (2d Cir. 2007) (emphasis in original) (citations and quotation marks omitted); see also Voest-Alpine Trading USA Corp. v. Bank of China, 142 F.3d 887, 892 n.5 (5th Cir. 1998). In addition, the second clause only applies where the act performed in the United States in-and-of-itself sufficient to form the basis of the plaintiff’s cause of action. See Odhiambo, 764 F.3d at 37-38 (“[T]o the degree that the text leaves any ambiguity, the legislative history is ‘crystal clear’ that clause two’s reference to acts ‘performed 6 PDVSA and the Republic are the only alleged debtors and therefore only their intent is relevant for purposes of Plaintiffs’ DUFTA claims. See 6 Del. C. § 1304(a)(1); see also Michaelson v. Farmer (In re Appleseed’s Intermediate Holdings, LLC), 470 B.R. 289, 300 (D. Del. 2012) (“The only relevant intent is that of the debtor.”). Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 18 of 26 PageID #: 317 13 in the United States …’ is ‘limited to those’ acts ‘which in and of themselves are sufficient to form the basis of a cause of action.’” (quoting H.R. Rep. No. 94-1487, at 19 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6617-18)). Here, this clause does not apply because, as discussed above, there is no allegation in the Complaint that PDVSA performed any act in the United States, much less a non-commercial act that is in-and-of-itself sufficient to form the basis of Plaintiffs’ action.7 C. Plaintiffs’ Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the Third Clause of the Commercial Activity Exception The third clause (or so-called “direct effect” clause) of the FSIA’s commercial activity exception provides an exception to immunity where the action is “based . . . upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.” 28 U.S.C. § 1605(a)(2). That exception does not apply here because the conduct alleged in the Complaint did not cause a “direct effect” in the United States. A “direct effect” is one that follows as an immediate consequence of the foreign state’s extraterritorial act. Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 618 (1992). “When considering whether an action caused a direct effect in the United States [courts] are cognizant of the Act’s presumption that foreign sovereigns are immune, and wary of applying this requirement too loosely such that our courts become a haven for airing the world’s disputes.” Westfield v. Federal Republic of Germany, 633 F.3d 409, 414 (6th Cir. 2011). Thus, trivial, remote or attenuated effects in the United States are insufficient to satisfy the “direct effect” 7 In addition to the reasons stated above, the allegations in the Complaint fail to satisfy the second clause of the commercial activity exception because the Complaint does not allege that any act in the United States was performed “in connection with a commercial activity of the foreign state elsewhere.” See 28 U.S.C. § 1605(a)(2); see also Federal Ins. Co., 12 F.3d at 1291 (act performed “in connection with” a commercial activity of the foreign state requires a “causal link” between the act and the commercial activity). Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 19 of 26 PageID #: 318 14 clause. See Weltover, 504 U.S. at 618. Here, the Complaint does not identify any “direct effect in the United States.” At most, the Complaint alleges that the transactions at issue might interfere with Plaintiffs’ future efforts to collect on judgements that might be entered on arbitration awards that might be rendered against PDVSA or the Republic. Even assuming such potential interference constitutes an “effect” at all, such potential inference is far too remote, attenuated and speculative to constitute a “direct effect.” See Weltover, 504 U.S. at 618; see also Kensington, 505 F.3d at 157. The Second Circuit’s decision in Kensington is instructive. In Kensington, the plaintiff obtained a federal judgment in New York recognizing the validity of an English judgment that the plaintiff had obtained against the Republic of Congo (“Congo”). 505 F.3d at 158. The plaintiff then commenced a RICO action against SNPC, the state-run oil company of Congo, its director and a French bank, alleging that defendants “executed an elaborate scheme to thwart legitimate creditors from collecting on debts owed by Congo by ‘stealing’ oil and engaging in ‘straw men’ transactions to keep the oil revenue away from creditors[.]” Id. at 158. The plaintiff argued that this “scheme” caused a “direct effect” in the United States because it interfered with payment of the plaintiff’s New York judgment against Congo. Id. The Second Circuit rejected this argument, reasoning that, unlike a contract requiring performance in New York, a “judgment does not have a ‘place of performance.’ There is no requirement that repayment of this debt be made in New York. Payment could come from anywhere and take any form.” Id. at 159. The Second Circuit also observed that the alleged racketeering activity that formed the basis of the complaint against SNPC occurred prior to the issuance of the U.S. judgment and that the plaintiff failed to “explain how this scheme had the ‘direct effect’ of interfering with a judgment that did not yet exist.” Id. Thus, the Second Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 20 of 26 PageID #: 319 15 Circuit held that jurisdiction did not exist under the “direct effect” clause of the commercial activity exception. Id. Here, as in Kensington, the Complaint does not explain how the allegedly fraudulent transfers “had the ‘direct effect’ of interfering with a judgment [and, here, arbitral awards] that did not yet exist.” 505 F.3d at 159. To the extent that the allegedly fraudulent transfers had any “effect” at all in the United States, the “effect” was even more speculative, remote and attenuated than that rejected by the Second Circuit in Kensington. At the time of the allegedly fraudulent transfers, Plaintiffs, a group of foreign corporations, were engaged in international arbitrations against the Republic and PDVSA involving activities that had nothing whatsoever to do with the United States. Plaintiffs have not yet received an arbitral award against the Republic or PDVSA, let alone a U.S. judgment. Plaintiffs cannot, and have informed the ICC and ICSID that they will not, seek any prejudgment attachment in this case. See 28 U.S.C. §§ 1609-10. Whether the transfers will have any effect on Plaintiffs’ potential future collection efforts depends entirely upon intervening events and the conduct of intervening third parties. Thus, the possible interference with Plaintiffs’ potential collection efforts, “assuming it is not too speculative to be considered an effect at all,” lacks the requisite immediacy to constitute a “direct effect in the United States.” See Weltover, 504 U.S. at 618; see also Guirlando v. T.C. Ziraat Bankasi A.S., 602 F. 3d 69, 74-75 (2d Cir. 2010) (“[W]here the alleged effect depends crucially on variables independent of the conduct of the foreign state,” the “requisite immediacy [for a direct effect] is lacking.”); United World Trade, Inc. v. Mangyshlakneft Oil Prod. Ass’n, 33 F.3d 1232, 1238 (10th Cir. 1994) (plaintiff’s interaction with a third party was an “intervening factor” that prevented plaintiff’s loss from being the “immediate consequence” of defendant’s actions); Bell Helicopter Textron Inc. v. Islamic Republic of Iran, 892 F. Supp. 2d 219, 228 (D.D.C. 2012) Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 21 of 26 PageID #: 320 16 (“conduct that requires the participation of a series of actors and events before the harm can be felt, cannot constitute a direct effect”), aff’d, 734 F.3d 1175 (D.C. Cir. 2013). Furthermore, the alleged potential interference with Plaintiffs’ ability to collect in the United States on potential international arbitration awards is nothing more than a speculative financial harm. And it is well-established that a plaintiff’s “mere financial loss is insufficient to establish a direct effect in the United States.” Westfield, 633 F.3d at 417; see also Araya- Solorzano v. Gov’t of Republic of Nicaragua, 562 F. App’x 901, 904 (11th Cir. 2014); Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734 F.3d 1175, 1184 (D.C. Cir. 2013); Antares Aircraft, L.P. v. Federal Republic of Nigeria, 999 F.2d 33, 36 (2d Cir. 1993). And here Plaintiffs are all foreign corporations. (D.I. 1 ¶¶ 16-19.) Any financial harm to Plaintiffs was suffered abroad and therefore cannot constitute a “direct effect in the United States.” See Kensington, 505 F.3d at 158; Stena Rederi AB v. Comision de Contratos del Comite Ejecutivo General del Sindicato Revolucionario de Trabajadores Petroleros de la Republica Mexicana, S.C., 923 F.2d 380, 390 (5th Cir. 1991).8 * * * * For the reasons set forth above, Plaintiffs have not met their burden of establishing that one of the FSIA’s statutory exceptions to foreign sovereign immunity applies. Accordingly, the Complaint should be dismissed for lack of subject matter jurisdiction. II. The Complaint Should Be Dismissed for Lack of Personal Jurisdiction Under the FSIA, a court can only acquire personal jurisdiction over a “foreign state” defendant if an exception to foreign sovereign immunity has been established and there is effective service of process. See 28 U.S.C. § 1330(b). Thus, Plaintiffs’ failure to plead facts 8 For the same reasons discussed with respect to the second clause, see supra note 7, the allegations of the Complaint also fail to satisfy the third clause’s requirement that the act upon which the action is based be performed “in connection with a commercial activity of the foreign state” outside of the United States. 28 U.S.C. § 1605(a)(2). Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 22 of 26 PageID #: 321 17 sufficient to establish an exception to immunity also mandates dismissal of this action for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2).. III. The Complaint Should Be Dismissed for Failure to State a Claim Plaintiffs’ fraudulent transfer claims against PDVSA must also be dismissed for failure to state a claim upon which relief can be granted.9 The Complaint asserts that PDVSA violated Section 1304(a) of DUFTA by engaging in transactions designed to “repatriate” assets from the United States to Venezuela for purposes of frustrating Plaintiffs’ potential future collection efforts in the United States on judgments that do not yet exist. (D.I. 1 ¶ 36.) Such claims are preempted by the FSIA’s substantive provisions that afford foreign states, such as PDVSA, with the absolute freedom to transfer or dispose of its property prior to judgment and preclude any interference with a foreign state’s property abroad by a U.S. court. The FSIA explicitly provides that a foreign state’s property is presumptively immune from attachment, execution or restraint, 28 U.S.C. § 1609, and it preempts state law that purports to restrain a sovereign’s freedom to transfer or dispose of its assets. See Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, 771 F.3d 980, 984 (7th Cir. 2014) (FSIA preempted pre-judgment security requirements under state law); Stephens v. Nat’l Distillers & Chem. Corp., 69 F.3d 1226, 1232 (2d Cir. 1995) (same). Where, as here, no judgment has been entered against a foreign state, the FSIA prohibits U.S. courts from ordering any prejudgment restraint on any property of a foreign state unless the foreign state has expressly waived immunity from prejudgment attachment, 28 U.S.C. § 1610(d). Section 1610(d) “provides, in cases where there has been an explicit waiver, a provisional remedy, for example, to prevent 9 This argument assumes that the transferred property was in fact property of PDVSA or the Republic. However, as demonstrated in the CITGO Motion, incorporated herein by reference, as a matter of law, the property which was transferred pursuant to the transactions at issue was not property of PDVSA or the Republic, but rather was property of PDVH, CITGO Petroleum and CITGO Holding, none of which is alleged to be a debtor of Plaintiffs. (D.I. 10 at pp. 10-12.) Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 23 of 26 PageID #: 322 18 assets from being dissipated or removed from the jurisdiction in order to frustrate satisfaction of a judgment.” H.R. Rep. No. 94-1487, at 30 (emphasis added). In the absence of such explicit waiver, “foreign sovereign entities may, with impunity, remove assets from the jurisdiction.” Raji v. Bank Sepah-Iran, 495 N.Y.S.2d 576, 583 n.2 (N.Y. Sup. Ct. 1985). Moreover, the FSIA’s prohibition on prejudgment attachment applies “to remedies that are the functional equivalent of attachment.” Thai Lao Lignite (Thailand) Co. v. Gov’t of Lao People’s Democratic Republic, No. 10-cv-5256, 2013 WL 1703873, at *3 (S.D.N.Y. Apr. 19, 2013); see also Stephens, 69 F.3d at 1229 (prejudgment security requirement was indistinguishable from a prejudgment attachment for purposes of Section 1610(d)); S&S Mach. Co. v. Masinexportimport, 706 F.2d 411, 416 (2d Cir. 1982) (“We hold that courts in this context may not grant, by injunction, relief which they may not provide by attachment.”). Plaintiffs’ DUFTA claims are a transparent attempt to circumvent the FSIA’s prohibition on prejudgment attachment. In effect, Plaintiffs are asserting DUFTA claims as a prejudgment remedy with respect to their pending arbitration claims. But such relief is prohibited by the FSIA. Plaintiffs have no judgment against PDVSA and there is no allegation that PDVSA has explicitly waived immunity from prejudgment attachment. Thus, pursuant to the FSIA, PDVSA was and is free to transfer and dispose of its assets. Because Plaintiffs’ DUFTA claims seek to penalize PDVSA for exercising such freedom and restrain its property in advance of a judgment, those claims irreconcilably conflict with the FSIA and are therefore preempted.10 In addition, Plaintiffs’ DUFTA claims fail as a matter of law to the extent they seek an order directing PDVSA “to return any assets fraudulently transferred.” (D.I. 1 ¶ 87.) While 10 That Plaintiffs have not sought any relief in advance of obtaining a judgment in this case is irrelevant. The only relevant judgment is the potential judgment that Plaintiffs might seek if an arbitral award is rendered in their favor. Without a judgment enforcing an arbitral award, Plaintiffs would not be entitled to any relief, provisional or final, from this Court. Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 24 of 26 PageID #: 323 19 DUFTA permits a creditor to avoid a fraudulent transfer and seek the return of the transferred assets, 6 Del. C. § 1307(a)(1), the FSIA only permits a U.S. court to exercise jurisdiction over a foreign state’s “property in the United States.” See 28 U.S.C. § 1610; see also Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120, 130 (2d Cir. 2009). A foreign state’s property abroad is immune from the process of a U.S. court. See 28 U.S.C. §§ 1609-10; see also Waters v. People’s Republic of China, 672 F. Supp. 2d 573, 574 (S.D.N.Y. 2009). Once property has been transferred out of the United States, a U.S. court lacks the authority to direct the return of that property to the United States. See Export-Import Bank of the Republic of China v. Grenada, 768 F.3d 75, 85 (2d Cir. 2014); Peterson v. Islamic Republic of Iran, No. 13-CV- 9195, 2015 WL 731221, at *10 (S.D.N.Y. Feb. 20, 2015); Aurelius Capital Partners, LP v. Republic of Argentina, No. 07-cv-11327, 2010 WL 768874, at *4 (S.D.N.Y. Mar. 5, 2010) . Here, Plaintiffs assert that the allegedly fraudulent transfers removed assets from the United States. Because the property at issue is not in the United States, the FSIA precludes this Court from ordering PDVSA to return such property to the United States. Thus, even if Plaintiffs had a judgment, which they do not, they could not avoid the alleged transfers under Section 1307(a)(1). And because the alleged transfers are not “voidable,” Plaintiffs’ alternative claim for money damages is barred.11 See 6 Del. C. § 1308(b) (providing “judgment for the value of the asset transferred” is available “to the extent a transfer is voidable”); Crystallex Int'l Corp. v. Petróleos de Venezuela, S.A., No. CV 15-1082-LPS, 2016 WL 5724777, at *9 (D. Del. Sept. 30, 2016). Accordingly, Plaintiffs have not stated a claim against PDVSA upon which relief can be 11 Plaintiffs have also requested an injunction prospectively enjoining the Defendants “from further disposing of assets.” (D.I. 1 ¶ 87.) That relief is also precluded under the FSIA. See Walters v. Indus. & Commercial Bank of China, Ltd., 651 F.3d 280, 291 (2d Cir. 2011); Rubin v. The Islamic Republic of Iran, 637 F.3d 783, 800 (7th Cir. 2011). Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 25 of 26 PageID #: 324 20 granted and the Complaint should be dismissed. CONCLUSION For the foregoing reasons, PDVSA respectfully requests that the Court grant its motion to dismiss this action with prejudice. HEYMAN ENERIO GATTUSO & HIRZEL LLP /s/ Samuel T. Hirzel OF COUNSEL: Joseph D. Pizzurro Peter J. Behmke Kevin A. Meehan Julia B. Mosse CURTIS, MALLET-PREVOST, COLT & MOSLE LLP 101 Park Avenue New York, NY 10178 (212) 696-6000 jpizzurro@curtis.com pbehmke@curtis.com kmeehan@curtis.com jmosse@curtis.com Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 shirzel@hegh.law Attorney for the Defendant Petróleos de Venezuela, S.A. Dated: March 27, 2017 Case 1:16-cv-00904-LPS Document 24-2 Filed 03/27/17 Page 26 of 26 PageID #: 325 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CONOCOPHILLIPS PETROZUATA B.V., PHILLIPS PETROLEUM COMPANY VENEZUELA LIMITED, CONOCOPHILLIPS GULF OF PARIA B.V. AND CONOCOPHILLIPS HAMACA B.V., Plaintiffs, v. PETRÓLEOS DE VENEZUELA, S.A., PDV HOLDING, INC., CITGO HOLDING, INC., and CITGO PETROLEUM CORPORATION, Defendants. : : : : : : : : : : : : : : : : : C.A. No. 16-cv-904-LPS CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 7.1 of the Federal Rules of Civil Procedure, Petróleos de Venezuela, S.A., files this Corporate Disclosure Statement, and respectfully shows the following: PETROLEOS DE VENEZUELA, S.A., is wholly-owned by the Bolivarian Republic of Venezuela. HEYMAN ENERIO GATTUSO & HIRZEL LLP /s/ Samuel T. Hirzel OF COUNSEL: Joseph D. Pizzurro CURTIS, MALLET-PREVOST, COLT & MOSLE LLP 101 Park Avenue New York, NY 10178 (212) 696-6000 jpizzurro@curtis.com Dated: March 27, 2017 Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 shirzel@hegh.law Attorney for the Defendant Petróleos de Venezuela, S.A. Case 1:16-cv-00904-LPS Document 24-3 Filed 03/27/17 Page 1 of 1 PageID #: 326