Crystallex International Corp. 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.July 25, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CRYSTALLEX INTERNATIONAL CORP., Plaintiff, v. PETROLEOS DE VENEZUELA, S.A.; PDV HOLDING, INC.; and CITGO HOLDING, INC., f/k/a PDV America, Inc., Defendants. : : : : : : : : : : : : C.A. No. 15-cv-1082-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 Plaintiff’s 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. PROCTOR HEYMAN ENERIO LLP /s/ Samuel T. Hirzel, II OF COUNSEL: Joseph D. Pizzurro Peter J. Behmke 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 jmosse@curtis.com Dated: July 25, 2016 Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 SHirzel@proctorheyman.com Attorney for the Defendant Petróleos de Venezuela, S.A. Case 1:15-cv-01082-LPS Document 28 Filed 07/25/16 Page 1 of 1 PageID #: 781 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CRYSTALLEX INTERNATIONAL CORP., Plaintiff, v. PETROLEOS DE VENEZUELA, S.A.; PDV HOLDING, INC.; and CITGO HOLDING, INC., f/k/a PDV America, Inc., Defendants. : : : : : : : : : : : : C.A. No. 15-cv-1082-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 ________, 2016, 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. ____________________________________ District Court Judge Case 1:15-cv-01082-LPS Document 28-1 Filed 07/25/16 Page 1 of 1 PageID #: 782 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CRYSTALLEX INTERNATIONAL CORP., Plaintiff, v. PETROLEOS DE VENEZUELA, S.A.; PDV HOLDING, INC.; and CITGO HOLDING, INC., f/k/a PDV America, Inc., Defendants. : : : : : : : : : : : : C.A. No. 15-cv-1082-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 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 jmosse@curtis.com July 25, 2016 PROCTOR HEYMAN ENERIO LLP Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 SHirzel@proctorheyman.com Attorney for the Defendant Petróleos de Venezuela, S.A. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 1 of 26 PageID #: 783 i TABLE OF CONTENTS NATURE AND STAGE OF PROCEEDINGS ...............................................................................1 SUMMARY OF ARGUMENT .......................................................................................................2 STATEMENT OF FACTS ..............................................................................................................5 I. Allegations in the Complaint ...................................................................................5 II. The CITGO Defendants’ Motion to Dismiss ...........................................................6 ARGUMENT ...................................................................................................................................7 I. The Complaint Should be Dismissed for Lack of Subject Matter Jurisdiction ...............................................................................................................7 A. Plaintiff’s Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the First Clause of the Commercial Activity Exception .....................................................................................................8 B. Plaintiff’s Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the Second Clause of the Commercial Activity Exception ...................................................................................................12 C. Plaintiff’s Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the Third Clause of the Commercial Activity Exception ...................................................................................................14 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 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 2 of 26 PageID #: 784 ii TABLE OF AUTHORITIES Cases Page(s) Alejandre v. Telefonica Larga Distancia, de Puerto Rico, Inc., 183 F.3d 1277 (11th Cir. 1999) ................................................................................................ 11 Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (1989) .............................................................................................................. 7, 19 Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528 (5th Cir. 1992) .................................................................................................... 11 Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120 (2d Cir. 2009) ..................................................................................................... 18 Computer People, Inc. v. Best Int’l Grp., Inc., No. CIV. A. 16648, 1999 WL 288119 (Del. Ch. Apr. 27, 1999) ............................................. 12 Davis v. Wells Fargo, No. 15-2658, 2016 U.S. App. LEXIS 10030 (3d Cir. May 27, 2016) ........................................ 5 De Letelier v. Republic of Chile, 748 F.2d 790 (2d Cir. 1984) ..................................................................................................... 11 Doe v. Holy See, 557 F.3d 1066 (9th Cir. 2009) .................................................................................................. 11 Evans v. Petroleos Mexicanos (PEMEX), No. 05-20434, 2006 U.S. App. LEXIS 9266 (5th Cir. 2006) ..................................................... 9 Export-Import Bank of the Republic of China v. Grenada, 768 F.3d 75 (2d Cir. 2014) ....................................................................................................... 17 Ezeiruaku v. Bull, 617 F. App’x 179 (3d Cir. 2015) ................................................................................................ 7 Federal Ins. Co. v. Richard I. Rubin & Co., Inc., 12 F.3d 1270 (3d Cir. 1993) .............................................................................................. passim First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) ............................................................................................................ 10, 11 General Elec. Capital Corp. v. Grossman, 991 F.2d 1376 (8th Cir. 1993) .................................................................................................. 10 Gerding v. Republic of France, 943 F.2d 521 (4th Cir. 1991) ...................................................................................................... 9 Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 3 of 26 PageID #: 785 iii Gibbons v. Republic of Ireland, 532 F. Supp. 668 (D.D.C. 1982) ............................................................................................... 11 Hester Int’l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170 (5th Cir. 1989) .................................................................................................... 11 Kensington Int’l, Ltd. v. Itoua, 505 F.3d 147 (2d Cir. 2007) .............................................................................................. passim Mar. Int’l Nominees Establishment v. Republic of Guinea, 693 F.2d 1094 (D.C. Cir. 1982) ................................................................................................ 10 Michaelson v. Farmer (In re Appleseed’s Intermediate Holdings, LLC), 470 B.R. 289 (D. Del. 2012) ..................................................................................................... 13 Naartex Consulting Corp. v. Watt, 722 F.2d 779 (D.C. Cir. 1983) .................................................................................................. 12 OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390 (2015) ................................................................................................................ 11 Odhiambo v. Republic of Kenya, 764 F.3d 31 (D.C. Cir. 2014) .............................................................................................. 10, 13 Odyssey Marine Expl., Inc. v. Unidentified Shipwrecked Vessel, 657 F.3d 1159 (11th Cir. 2011) ................................................................................................ 19 Petruska v. Gannon Univ., 462 F.3d 294 (3d Cir. 2006) ....................................................................................................... 5 Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) ............................................................................................................ 14, 16 Robinson v. Gov’t of Malaysia, 269 F.3d 133 (2d Cir. 2001) ..................................................................................................... 10 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 Sachs v. Republic of Austria, 737 F.3d 584 (9th Cir. 2013) .................................................................................................... 11 Saudi Arabia v. Nelson, 507 U.S. 349 (1993) .................................................................................................................... 7 Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 4 of 26 PageID #: 786 iv Simon v. Republic of Hungary, 812 F.3d 127 (D.C. Cir. 2016) .................................................................................................... 9 Stephens v. Nat’l Distillers & Chem. Corp., 69 F.3d 1226 (2d Cir. 1995), amended (Jan. 11, 1996) ............................................................ 19 Texas Trading & Mill. Corp. v. Fed. Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981) ............................................................................................... 14, 17 Transamerica Leasing, Inc. v. La Republica de Venezuela, 200 F.3d 843 (D.C. Cir. 2000) .................................................................................................. 11 U.S. Fid. & Guar. Co. v. Braspetro Oil Servs., Co., 199 F.3d 94 (2d Cir. 1999) ....................................................................................................... 11 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 Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511 (D.C. Cir. 1988) .................................................................................................. 9 Statutes 28 U.S.C. § 1330(b) ...................................................................................................................... 17 28 U.S.C. § 1603(a) ........................................................................................................................ 7 28 U.S.C. § 1603(b) ........................................................................................................................ 5 28 U.S.C. § 1603(e) ........................................................................................................................ 8 28 U.S.C. § 1604 ............................................................................................................................. 7 28 U.S.C. § 1605(a)(2) ........................................................................................................... passim 28 U.S.C. § 1608(d) ........................................................................................................................ 1 28 U.S.C. § 1609 ........................................................................................................................... 18 28 U.S.C. § 1610(d) ............................................................................................................ 4, 18, 19 6 Del. C. § 1304(a)(1) ............................................................................................................. 13, 17 6 Del. C. § 1307(a)(1) ............................................................................................................. 17, 18 Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 5 of 26 PageID #: 787 v Rules Fed. R. Civ. P. 12(b)(1)............................................................................................................. 1, 20 Fed. R. Civ. P. 12(b)(2)....................................................................................................... 1, 17, 20 Fed. R. Civ. P. 12(b)(6).......................................................................................................... passim Other Authorities H.R. Rep. No. 94-1487 (1976) ................................................................................................ 13, 18 Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 6 of 26 PageID #: 788 Defendant Petróleos de Venezuela, S.A. (“PDVSA”) respectfully submits this memorandum of law in support of its motion to dismiss the Complaint filed by Crystallex International Corp. (“Crystallex” or “Plaintiff”) 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.1 NATURE AND STAGE OF PROCEEDINGS This case arises out of a dispute that has no connection to the United States and no connection to PDVSA. In 2011, Plaintiff, a Canadian corporation, commenced an international arbitration against the Bolivarian Republic of Venezuela (“Venezuela”), alleging violations of a bilateral investment treaty between Canada and Venezuela in connection with Plaintiff’s mining activities in Venezuela. Prior to obtaining an arbitral award, Plaintiff preemptively commenced this lawsuit, asserting claims under the Delaware Uniform Fraudulent Transfer Act (“DUFTA”), 6 Del. C. § 1301, et seq., and for common law civil conspiracy against PDVSA and its direct and indirect U.S. subsidiaries, PDV Holding, Inc. (“PDVH”) and CITGO Holding, Inc. (“CITGO Holding”; PDVH and CITGO Holding together, the “CITGO Defendants”). Neither PDVSA nor the CITGO Defendants were parties to the arbitration between Plaintiff and Venezuela. PDVSA is the national oil company of Venezuela and an undisputed “agency or instrumentality of a foreign state” under the FSIA. In the Complaint, Plaintiff asks the Court to abrogate PDVSA’s jurisdictional immunity but fails to allege that PDVSA engaged in any activity, commercial or otherwise, that would permit the Court to exercise jurisdiction over PDVSA. Instead, the Complaint asserts, in conclusory fashion, that PDVSA, as Venezuela’s 1 PDVSA received notice of the Complaint in this action on May 24, 2016, pursuant to the Hague Convention. In accordance with 28 U.S.C. § 1608(d), PDVSA moves to dismiss the Complaint within 60 days of being served. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 7 of 26 PageID #: 789 2 putative alter ego, “orchestrated” and “directed” a series of debt offerings and financial transactions engaged in by the CITGO Defendants in 2015 that allegedly converted some portion of the value of CITGO Petroleum Corporation (“CITGO”) to cash and then removed those funds from the United States to Venezuela in order to hinder Plaintiff’s ability to collect on its anticipated arbitral award against Venezuela.2 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 upon which relief can be granted. 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 the courts of the United States, and Plaintiff cannot establish that any of the three clauses of the “commercial activity” exception to immunity applies. 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, commercial or otherwise, in the United States. The second clause applies only if a plaintiff’s action is “based . . . upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere.” Id. The Complaint fails to establish this exception for several reasons: (i) the Complaint does not allege that PDVSA performed any act in the United States; (ii) the acts within the United States must be non-commercial, and all of the acts alleged in the Complaint 2 The Complaint was filed on November 23, 2015. Plaintiff received an arbitral award against Venezuela on April 4, 2016, and, on April 7, 2016, filed a petition against Venezuela for confirmation of the award with the United States District Court for the District of Columbia. PDVSA has not been named as a defendant in that action. On July 5, 2016, Venezuela filed a motion to vacate the award. To date, the award has not been confirmed and Plaintiff does not have a judgment against Venezuela. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 8 of 26 PageID #: 790 3 (such as the bond offering and dividend payments) are commercial; and (iii) while the acts alleged to have occurred within the United States must be sufficient in and of themselves to form the basis for the cause of action, the necessary intent for Plaintiff’s DUFTA claim was allegedly formed in Venezuela. 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. For an “effect” to be “direct,” it must follow as an immediate consequence of the foreign state’s actions, and where, as here, the plaintiff is a corporation, plaintiff must have suffered a direct financial loss in the United States for the “direct effect” requirement to be satisfied. Even accepting as true Plaintiff’s allegations that the allegedly fraudulent transfers will hinder its ability to collect on an anticipated judgment on an arbitral award against Venezuela, these allegations fail to establish that Plaintiff suffered a direct financial loss in the United States. The award creates no obligation even on Venezuela, and therefore certainly no obligation on PDVSA, to pay Plaintiff in the United States. And Plaintiff, as a Canadian corporation, by definition could not have suffered any injury in the United States. Therefore, interference with the award did not cause a “direct effect” in the United States. Moreover, transfers that occur prior to the issuance of an arbitral award cannot be said to have had the immediate or “direct effect” of interfering with an award that did not yet exist. 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. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 9 of 26 PageID #: 791 4 3. The Complaint should be dismissed for failure to state a claim upon which relief can be granted. The Complaint asks the Court to rule that the transfers of what is alleged to be Venezuela’s property violated DUFTA and, on that basis, either avoid the transfers by directing the return of the transferred funds to the United States or enter a money judgment against the defendants. Neither relief is available. Once property of a foreign state is no longer in the United States, a U.S. court lacks the power to order the return of that property to the United States. Thus, Plaintiff cannot obtain “avoidance” of the alleged transfers. Nor can the provisions of DUFTA be the basis of a claim for a money judgment against the defendants. The property of a foreign state is absolutely immune from any restraints in advance of a judgment against the foreign state, even if the transfer is to frustrate a party’s ability to collect on a judgment, unless the foreign state has explicitly waived such immunity pursuant to Section 1610(d) of the FSIA. Plaintiff cannot substitute DUFTA for the FSIA’s explicit waiver provision as a remedy for transfer of a foreign state’s assets alleged to have been done to frustrate satisfaction of a future judgment. In the face of that clear conflict, the FSIA preempts DUFTA. Because the Court cannot grant the requested relief, the Complaint should 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 pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted (see D.I. 9) are incorporated by reference into PDVSA’s motion to dismiss. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 10 of 26 PageID #: 792 5 STATEMENT OF FACTS3 I. Allegations in the Complaint Crystallex is a Canadian corporation with its principal place of business in Canada. (Compl. ¶ 10.) PDVSA is a Venezuelan company with its principal place of business in Venezuela and is wholly-owned by Venezuela. (Id. ¶¶ 7, 11.) As such, PDVSA is an “agency or instrumentality of a foreign state” under the FSIA, 28 U.S.C. § 1603(b). (Id. ¶ 15.) Defendant PDVH is a Delaware corporation with its principal place of business in Texas. (Id. ¶ 12.) It is a wholly-owned subsidiary of PDVSA. (Id.) Defendant CITGO Holding is a Delaware corporation with its principal place of business in Texas. (Id. ¶ 13.) It is a wholly-owned subsidiary of PDVH and an indirect subsidiary of PDVSA. (Id.) In 2011, Crystallex commenced arbitral proceedings against Venezuela pursuant to the Agreement between the Government of Canada and the Government of Venezuela for the Promotion and Protection of Investments before the World Bank’s International Centre for Settlement of Investment Disputes. (Id. ¶¶ 4, 45.) The arbitration concerned Plaintiff’s mining activities in Venezuela. (Id. ¶¶ 2, 23.) None of the defendants in this case were parties to that arbitration, and none had anything to do with the subject matter of that arbitration. On November 23, 2015, Plaintiff filed the Complaint. At that time, it had not yet received an arbitral award against Venezuela. Nevertheless, Plaintiff alleged that it was an “existing and future creditor” of Venezuela and that it brought “this action to stop Defendants’ ongoing efforts to hinder and delay Crystallex’s ability to recover the billions of dollars owed to 3 A “facial challenge” to subject matter jurisdiction, such as that raised in this motion to dismiss, does not “disput[e] the facts alleged in the complaint, . . . [but] requires the court to ‘consider the allegations of the complaint as true.’” Davis v. Wells Fargo, No. 15-2658, 2016 U.S. App. LEXIS 10030, at *25 (3d Cir. May 27, 2016) (quoting Petruska v. Gannon Univ., 462 F.3d 294, 302 n.3 (3d Cir. 2006)). Thus, for purposes of this memorandum of law, the allegations in the Complaint are accepted as true. However, nothing in this memorandum of law should be construed as an admission by PDVSA as to the truth or accuracy of any allegation in the Complaint, including, without limitation, the allegation that PDVSA is the alter ego of Venezuela. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 11 of 26 PageID #: 793 6 it by Venezuela.” (Id. ¶ 1.) According to the Complaint, Venezuela “kn[ew] that investors who obtained arbitration awards against [it] would go after its largest United States-based asset, CITGO” so it “devised a [] plan to move assets out of the United States.” (Id. ¶¶ 6-7.) The Complaint alleges that Venezuela “enlisted its alter ego PDVSA . . . to . . . orchestrat[e] a series of debt offerings and asset transfers among PDVSA and its subsidiaries PDVH and CITGO Holding that converted CITGO’s value to cash, then removing those funds from the United States and transferring them into PDVSA’s coffers in Venezuela.” (Id. ¶ 7.) Specifically, the Complaint alleges that CITGO Holding issued $2.8 billion in debt, which it then transferred as a dividend to PDVH, which then paid a dividend in the same amount to PDVSA. (Id. ¶¶ 8, 56-60.) Based upon these allegations, Plaintiff asserts claims against PDVSA, PDVH and CITGO Holding for fraudulent transfer under DUFTA and for civil conspiracy. Plaintiff asks the court to enter judgment directing the return of the $2.8 billion to the United States, awarding money damages against each defendant in the amount of Crystallex’s arbitral award should the $2.8 billion not be returned to the United States, and enjoining defendants from “further attempts to remove assets outside the United States.” (Id. ¶ 164, Prayer for Relief.) II. The CITGO Defendants’ Motion to Dismiss On February 3, 2016, the CITGO Defendants moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (D.I. 8-9.) They argue that the fraudulent transfer claim should be dismissed for failure to allege the necessary elements under DUFTA, namely, a “transfer” by the “debtor” of property belonging to that debtor. Because the $2.8 billion allegedly transferred by CITGO Holding to PDVH, and then from PDVH to PDVSA, were assets of CITGO Holding and PDVH, the CITGO Defendants argue that Plaintiff failed to allege an actionable transfer of property belonging to the debtor, Venezuela. Moreover, the CITGO Defendants contend that, even if the property at issue belonged to Venezuela, Plaintiff’s Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 12 of 26 PageID #: 794 7 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 Defendants also argue that Plaintiff’s claims are barred by the act of state doctrine, which precludes U.S. courts from inquiring into the validity of the public acts of a foreign sovereign. Finally, the CITGO Defendants move to dismiss Plaintiff’s civil conspiracy claim on the grounds that Delaware law does not recognize a cause of action for civil conspiracy based upon a fraudulent transfer and, even if it did, Plaintiff’s failure to state a fraudulent transfer claim is fatal to the civil conspiracy claim, which requires an underlying predicate tort. Oral argument on the CITGO Defendants’ motion to dismiss was held on July 12, 2016. 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, a “foreign state,” which is defined to include “an agency or instrumentality of the foreign state,” 28 U.S.C. § 1603(a), has “presumptive immunity from suits in federal courts, absent a demonstration by the plaintiff that the claim falls within a statutory exception to immunity.” Ezeiruaku v. Bull, 617 F. App’x 179, 181 (3d Cir. 2015) (citing 28 U.S.C. § 1604). Once a defendant makes a prima facie showing that it is a “foreign state,” “the burden shifts to the plaintiff to produce sufficient evidence demonstrating the application of one of the statutory exceptions to immunity.” Id. at 181 (citing to Federal Ins. Co. v. Richard I. Rubin & Co., Inc., 12 F.3d 1270, 1282 (3d Cir. 1993)). Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 13 of 26 PageID #: 795 8 Here, Plaintiff admits that PDVSA is an “agency or instrumentality of a foreign state” as defined in the FSIA. (Compl. ¶ 15.) Therefore, PDVSA is presumptively immune from the jurisdiction of this Court unless Plaintiff can carry its burden of establishing that a statutory exception to immunity applies. Plaintiff cannot do so. The Complaint asserts that subject matter jurisdiction exists under each of the three clauses of the FSIA’s so-called “commercial activity” exception to immunity, 28 U.S.C. § 1605(a)(2). (Id.). 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). For the reasons set forth below, none of the three clauses of the commercial activity exception to immunity applies. Accordingly, the Complaint should be dismissed for lack of subject matter jurisdiction. A. Plaintiff’s 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). Circuit courts generally agree that the FSIA’s “substantial contact requirement” “is stricter than that suggested by a minimum Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 14 of 26 PageID #: 796 9 contacts due process inquiry[.]” Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1513 (D.C. Cir. 1988); see also Gerding v. Republic of France, 943 F.2d 521, 527 (4th Cir. 1991). Thus, for the first clause of the commercial activity exception to apply, the foreign state “must have carried on commercial activity directly in the United States, or it must have carried on commercial activity with a substantial connection to the United States.” Federal Ins. Co., 12 F.3d at 1286 (emphasis added). The allegations in the Complaint fall far short of the FSIA’s requirements. Indeed, the Complaint fails to allege that PDVSA did anything in the United States, let alone plead the facts required to establish the sort of direct or substantial commercial activity that is required by the FSIA. The Complaint admits that PDVSA is a “foreign corporation” with its principal place of business in Venezuela and that “PDVSA does not purport to have a registered office or principal place of business within the United States.” (Compl. ¶ 11.) Yet, it asserts in conclusory fashion that PDVSA “orchestrated,” “directed” and “perpetrated” the allegedly fraudulent transfers and engaged in “commercial activity in the United States[.]” (Id. ¶¶ 7, 8, 15, 19.) There is not a single pleaded fact to explain what PDVSA allegedly did to “orchestrate,” “direct” or “perpetrate” the transfers, where such acts occurred, or what conduct allegedly constituted PDVSA’s “commercial activity in the United States.” Such conclusory assertions are entirely insufficient to sustain jurisdiction over PDVSA. See, e.g., Simon v. Republic of Hungary, 812 F.3d 127, 148 (D.C. Cir. 2016) (the jurisdictional inquiry under the FSIA “is similar to that of Rule 12(b)(6), under which [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice”) (citations and quotation marks omitted) (alteration in original); Evans v. Petroleos Mexicanos (PEMEX), No. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 15 of 26 PageID #: 797 10 05-20434, 2006 U.S. App. LEXIS 9266, at *6 (5th Cir. 2006) (“Generalized and conclusory allegations that the § 1605(a)(2) exceptions apply are not sufficient to establish a jurisdictional nexus.”); Robinson v. Gov’t of Malaysia, 269 F.3d 133, 146 (2d Cir. 2001) (“To sustain federal jurisdiction on generic allegations . . . absent an assertion or evidence of a factual predicate for such jurisdiction, would invite plaintiffs to circumvent the jurisdictional hurdle of the FSIA by inserting vague and conclusory allegations . . . in their complaints”).4 Because there is no pleaded factual basis upon which this Court could conclude that PDVSA engaged in commercial activity with a direct or substantial connection to the United States, the Complaint fails to establish that the first clause of the commercial activity exception applies. While the Complaint is unclear, any attempt by Crystallex to establish subject matter jurisdiction over PDVSA by imputing to it the alleged activities of the CITGO Defendants in the United States under a common-law conspiracy/agency theory must fail. A foreign state’s corporations are entitled to a presumption of separateness that can only be overcome where “a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created,” or where respecting the corporate form “would work fraud or injustice.” Federal Ins. Co., 12 F.3d at 1287 (3rd Cir. 1993) (emphasis added) (quoting First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 629- 4 Even where a complaint alleged that a foreign sovereign defendant had certain contacts with the United States, such as meetings and telephone calls, courts have deemed such contacts insufficient to satisfy the FSIA’s “substantial contact” requirement. See, e.g., 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”), cert. denied, No. 14-1206, 2016 WL 3461576 (U.S. June 27, 2016); General Elec. Capital Corp. v. Grossman, 991 F.2d 1376, 1383-84 (8th Cir. 1993) (even assuming exchange of “letters, faxes, and telephone calls in the United States,” as well as a meeting in Minnesota, constituted “acts” in the United States, such “acts” were not “significant” and did not satisfy FSIA’s requirements); Mar. Int’l Nominees Establishment v. Republic of Guinea, 693 F.2d 1094, 1109 (D.C. Cir. 1982) (two business meetings in the United States were not “more than ‘transitory’ and ‘insubstantial’ contact for purposes of the [FSIA]”). Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 16 of 26 PageID #: 798 11 30 (1983) (“Bancec”)). Although Bancec dealt with the attribution of substantive liability, “courts of appeals consistently have relied on this presumption when making an FSIA jurisdictional determination through the application of 28 U.S.C. § 1605(a)(2).” Federal Ins. Co., 12 F.3d at 1287; see also Doe v. Holy See, 557 F.3d 1066, 1078-79 (9th Cir. 2009); Transamerica Leasing, Inc. v. La Republica de Venezuela, 200 F.3d 843, 848 (D.C. Cir. 2000); U.S. Fid. & Guar. Co. v. Braspetro Oil Servs., Co., 199 F.3d 94, 98 (2d Cir. 1999); Alejandre v. Telefonica Larga Distancia, de Puerto Rico, Inc., 183 F.3d 1277, 1284 (11th Cir. 1999); Hester Int’l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170, 171 (5th Cir. 1989). Compared with the extensive allegations regarding the relationship between PDVSA and Venezuela, the Complaint lacks any allegation that the CITGO Defendants acted as the alter egos or agents of PDVSA as required by Bancec. And Crystallex cannot circumvent Bancec’s demanding standard simply by pleading a conspiracy to commit a tort. See De Letelier v. Republic of Chile, 748 F.2d 790, 793-95 (2d Cir. 1984) (allegations of a conspiracy to commit a tort without more were insufficient to attribute Chile’s liability to its national airline under Bancec). Outside the contours of Bancec, common-law agency principles only apply when deciding whether to impute the acts of entirely unrelated entities, as opposed to the acts of its corporate affiliates, to a foreign state. Sachs v. Republic of Austria, 737 F.3d 584, 594 (9th Cir. 2013), rev’d on other grounds sub nom., OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390 (2015); see also Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 534-35 (5th Cir. 1992); Gibbons v. Republic of Ireland, 532 F. Supp. 668, 672 n.4 (D.D.C. 1982) (“Legal rules of agency developed in a domestic context and involving nongovernmental parties have little relevance” to cases involving a foreign sovereign and its corporations). Indeed, while Delaware courts have Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 17 of 26 PageID #: 799 12 exercised personal jurisdiction over private litigants based on the acts of their co-conspirators in the state, research has not revealed any case in which a court relied solely on conspiracy allegations to assert subject matter jurisdiction over a foreign state based on the acts of its affiliated entities in the United States.5 B. Plaintiff’s 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). As an initial matter, this clause does not apply because, as described above, the Complaint fails to specifically allege any act of PDVSA in the United States. Moreover, the second clause of the commercial activity 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) (“Because the first clause permits jurisdiction based on ‘commercial’ acts in the United States, the second clause is generally understood to apply to noncommercial acts in the United States that relate to commercial acts abroad.”). Thus, where, as here, all of the activity alleged to have occurred in the United States is commercial in nature 5 In any event, Crystallex has failed to allege sufficient facts to satisfy Delaware’s five-part test for conspiracy jurisdiction. See Computer People, Inc. v. Best Int’l Grp., Inc., No. CIV. A. 16648, 1999 WL 288119, at *6 (Del. Ch. Apr. 27, 1999) (Jacobs, V.C.) (“The conspiracy theory of jurisdiction is narrowly and strictly construed; otherwise, that theory would become a facile way for a plaintiff to circumvent the minimum contacts requirement”). The Complaint merely claims that the defendants “agreed to encumber CITGO Holding with billions of dollars of debt” (Compl. ¶ 167), and that they “devised a scheme to extract billions of dollars out of Citgo” (Compl. ¶ 54), without any allegations of when, where and how the alleged conspiracy took place. See Computer People, 1999 WL 288119, at *6 n.15 (citing Naartex Consulting Corp. v. Watt, 722 F.2d 779, 787 (D.C. Cir. 1983) (“[b]ald speculations that defendants are alleged co-conspirators do not constitute the threshold showing needed to carry the burden of establishing personal jurisdiction”)), cert. denied, 467 U.S. 1210 (1984). Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 18 of 26 PageID #: 800 13 and the plaintiff “has not argued that any non-commercial acts performed by [the foreign sovereign] in the United States allegedly formed the basis of its complaint,” the second clause of the commercial activity exception is “inapplicable.” Kensington, 505 F.3d at 157. In addition, the legislative history of the FSIA reflects that the reference in the second clause of the commercial activity exception to acts “‘performed in the United States in connection with a commercial activity of the foreign state elsewhere’ is ‘limited to those acts’ ‘which in and of themselves are sufficient to form the basis of a cause of action.’” Odhiambo, 764 F.3d at 37-38 (quoting H.R. Rep. No. 94-1487, at 19 (1976)). In this case, a necessary element of Plaintiff’s cause of action for fraudulent transfer under DUFTA is that the debtor acted “with actual intent to hinder, delay or defraud any creditor of the debtor.” 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.”). Indeed, Plaintiff does not allege that, absent such intent, there was anything improper about the transactions that took place within the United States. Here, the only alleged debtor is Venezuela, and PDVSA as Venezuela’s putative alter ego. Venezuela’s intent would have been formed in Venezuela, not in the United States. Thus, the acts allegedly performed in the United States are not “in and of themselves [] sufficient to form the basis of a cause of action.” Odhiambo, 764 F.3d at 38.6 Accordingly, the second clause of the commercial activity exception does not apply. 6 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 the act in the United States was performed “in connection with a commercial activity of the foreign state elsewhere.” 28 U.S.C. § 1605(a)(2). While the Complaint acknowledges that PDVSA is the “national oil company” of Venezuela, Plaintiff makes no effort to link the allegedly fraudulent transfers to PDVSA’s petroleum operations or to any other commercial activity of PDVSA in Venezuela. See 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 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 19 of 26 PageID #: 801 14 C. Plaintiff’s Allegations Are Insufficient to Establish Subject Matter Jurisdiction under the Third Clause of the Commercial Activity Exception The third clause of Section 1605(a)(2) 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]n effect is direct if it follows as an immediate consequence of the defendant’s . . . activity.” Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 618 (1992) (citations and quotation marks omitted). When a plaintiff is a corporation, “the relevant inquiry under the direct effect clause . . . is whether the corporation has suffered a ‘direct’ financial loss” in the United States. Texas Trading & Mill. Corp. v. Fed. Republic of Nigeria, 647 F.2d 300, 312 (2d Cir. 1981). The Complaint alleges that Plaintiff suffered an injury as a result of the allegedly fraudulent transfers because the transfers hindered its ability in the United States to collect on its anticipated, but as yet non-existent, arbitral award against Venezuela. These allegations are insufficient to establish that Plaintiff suffered a direct financial loss in the United States. The Second Circuit’s decision in Kensington is instructive. In Kensington, plaintiff obtained a judgment from the federal district court for the Southern District of New York, which recognized the validity of an English judgment that plaintiff had obtained against the Republic of Congo (“Congo”). 505 F.3d at 158. 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’ Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 20 of 26 PageID #: 802 15 transactions to keep the oil revenue away from creditors[.]” Id. at 158. Plaintiff argued that this “scheme” caused a “direct effect” in the United States because it interfered with payment of plaintiff’s U.S. judgment against Congo. Id. According to plaintiff, “a judgment is essentially like a contract and the ‘place of performance’ of a judgment is the jurisdiction in which it is entered. Thus . . . SNPC has ‘breached’ a ‘contract’ requiring ‘performance’ in New York.” Id. at 158-59. The Second Circuit rejected this argument. It reasoned that, unlike a contract that requires 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. Additionally, plaintiff’s U.S. judgment was against Congo, not SNPC, and “placed no obligations or responsibilities on SNPC . . . to perform any act, let alone one in the United States.” Id. (emphasis in original). Finally, the Second Circuit 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 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 Circuit held that jurisdiction did not exist under the third clause of the commercial activity exception. Id. Here, to the extent that the allegedly fraudulent transfers had any “effect” at all in the United States, the “effect” was even more attenuated than that rejected by the Second Circuit in Kensington. At the time of the allegedly fraudulent transfers, Crystallex, a Canadian corporation, was engaged in an international arbitration against Venezuela involving activities that had nothing whatsoever to do with the United States. Crystallex had not yet even received an arbitral award against Venezuela, let alone a judgment. Crystallex still does not have a Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 21 of 26 PageID #: 803 16 judgment against Venezuela (much less PDVSA). As in Kensington, the Complaint does not explain how the allegedly fraudulent transfers “had the ‘direct effect’ of interfering with a judgment [and, here, an arbitral award] that did not yet exist.” 505 F.3d at 159. Moreover, alleged interference with an anticipated arbitral award, or anticipated judgment, does not have a “direct effect” in the United States, because neither Venezuela nor PDVSA has any obligation to pay the award or judgment in the United States. See id.; cf. Weltover, 504 U.S. at 619 (“Because New York was [] the place of performance for Argentina’s ultimate contractual obligations, the rescheduling of those obligations necessarily had a ‘direct effect’ in this country: Money that was supposed to have been delivered to New York bank was not forthcoming.”). Furthermore, Plaintiff, as a Canadian corporation, cannot have sustained any financial injury in the United States. If it suffered any financial injury, that injury was in Canada. See Kensington, 505 F.3d at 158 (“Kensington is a foreign corporation and thus any alleged injury it suffered occurred outside the United States.”).7 Thus, the third clause of the commercial activity exception does not apply. * * * * For the reasons set forth above, Plaintiff has not met its 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 subject matter jurisdiction has been established through the applicability of a 7 For the same reasons discussed with respect to the second clause, see supra note 6, 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 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 22 of 26 PageID #: 804 17 statutory exception to jurisdictional immunity and there is effective service of process. See 28 U.S.C. § 1330(b); Texas Trading, 647 F.2d at 308 (“subject matter jurisdiction plus service of process equals personal jurisdiction” under the FSIA). Thus, Plaintiff’s failure to plead facts sufficient to establish that an exception to immunity applies 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 Plaintiff’s fraudulent transfer claim against PDVSA must also be dismissed for failure to state a claim upon which relief can be granted.8 The Complaint asserts that PDVSA violated Section 1304(a)(1) of DUFTA, which provides that a “transfer made . . . by a debtor is fraudulent as to a creditor . . . if the debtor made the transfer . . . [w]ith actual intent to hinder, delay or defraud any creditor of the debtor[.]” 6 Del. C. § 1304(a)(1). For this alleged violation of DUFTA, Plaintiff seeks relief under Section 1307, “particularly, an order directing the return of the $2.8 billion removed from CITGO Holding and imposing a money judgment equal to that amount on PDVSA and PDVH should the funds not be returned.” (Compl. ¶ 164.) DUFTA permits a creditor to obtain “[a]voidance of the transfer . . . to the extent necessary to satisfy the creditor’s claim.” 6 Del. C. § 1307(a)(1). However, once a foreign state transfers its property outside of the United States, a U.S. court lacks the power 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) (holding that court lacked the authority to consider whether property of a foreign state that was once in the United States was subject to attachment, because the funds had been transferred outside of the United States rendering the issue “moot”); 8 This argument assumes that the property at issue was in fact property of Venezuela and thus, as alleged, PDVSA. However, as demonstrated in the CITGO Defendants’ motion to dismiss, incorporated herein by reference, as a matter of law, the property which was transferred pursuant to the transactions at issue was not property of Venezuela or even PDVSA, but rather was property of PDVH and CITGO Holding, neither of which is alleged to be a debtor of Crystallex. (D.I. 9 at pp. 8-9.) Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 23 of 26 PageID #: 805 18 see also Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120, 130 (2d Cir. 2009) (“the property that is subject to attachment and execution must be property in the United States of a foreign state”) (emphasis added) (citation and quotation marks omitted). Thus, Plaintiff cannot obtain “avoidance” of the alleged transfers under Section 1307(a)(1), because the Court has no power to order PDVSA to return the funds to the United States. Nor can Crystallex obtain a money judgment. The FSIA prohibits any prejudgment restraint on property of a foreign state unless the foreign state has expressly waived immunity from prejudgment attachment. See 28 U.S.C. §§ 1609, 1610(d); S&S Mach. Co. v. Masinexportimport, 706 F.2d 411, 416 (2d Cir. 1982) (“Foreign states . . . are immune from prejudgment attachment of their assets in the United States, unless the immunity is explicitly waived”). In fact, the legislative history of the FSIA makes clear that a foreign state can be precluded from removing or dissipating assets to frustrate a judgment only where there is an explicit wavier of prejudgment attachment pursuant to Section 1610(d).9 “This subsection provides, in cases where there has been an explicit waiver, a provisional remedy, for example, to prevent 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 (1976) (emphasis added). Furthermore, as set forth more fully in the motion of the CITGO Defendants, which is incorporated herein, because the FSIA provides a foreign state with absolute freedom to move or dispose of its property prior to judgment, DUFTA is preempted to the extent it purports to penalize by means of a money judgment, and thus restrain, the exercise of this freedom. (See D.I. 9 at pp. 11-15; D.I. 15 at pp. 5-7.) Here, all of the alleged transfers occurred prior to the entry of a judgment against Venezuela. Indeed, to date, Plaintiff still has not obtained a judgment against Venezuela (much less PDVSA). As a result, under the FSIA, PDVSA was free 9 There is no such explicit waiver in this case and Plaintiff has alleged none. Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 24 of 26 PageID #: 806 19 to transfer the $2.8 billion, property alleged to belong to Venezuela, without restraint, including out of the United States and into Venezuela. Crystallex cannot evade the FSIA’s explicit waiver provision in Section 1610(d) by using DUFTA as the means to prevent and redress a transfer of a foreign state’s assets alleged to have been done to frustrate satisfaction of a judgment. In light of this clear conflict between the FSIA and DUFTA, the provisions of DUFTA are preempted and cannot be the basis of a claim for a money judgment against any of the defendants. See Odyssey Marine Expl., Inc. v. Unidentified Shipwrecked Vessel, 657 F.3d 1159, 1179 (11th Cir. 2011); Stephens v. Nat’l Distillers & Chem. Corp., 69 F.3d 1226, 1232 (2d Cir. 1995), amended (Jan. 11, 1996); Amerada Hess, 488 U.S. at 508.10 Accordingly, Plaintiff has not stated a claim against PDVSA upon which relief can be granted and the Complaint should be dismissed. 10 Crystallex has also requested an injunction prospectively enjoining the Defendants from removing any property from the United States. (Compl. ¶¶ 9, 164, Prayer for Relief.) 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 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 25 of 26 PageID #: 807 20 CONCLUSION For the foregoing reasons, PDVSA respectfully requests that the Court grant its motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (2) and (6) and dismiss this action with prejudice. PROCTOR HEYMAN ENERIO LLP /s/ Samuel T. Hirzel OF COUNSEL: Joseph D. Pizzurro Peter J. Behmke 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 jmosse@curtis.com Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 SHirzel@proctorheyman.com Attorney for the Defendant Petróleos de Venezuela, S.A. Dated: July 25, 2016 Case 1:15-cv-01082-LPS Document 28-2 Filed 07/25/16 Page 26 of 26 PageID #: 808 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CRYSTALLEX INTERNATIONAL CORP., Plaintiff, v. PETROLEOS DE VENEZUELA, S.A.; PDV HOLDING, INC.; and CITGO HOLDING, INC., f/k/a PDV America, Inc., Defendants. : : : : : : : : : : : : C.A. No. 15-cv-1082-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. PROCTOR HEYMAN ENERIO LLP /s/ Samuel T. Hirzel, II OF COUNSEL: Joseph D. Pizzurro Peter J. Behmke 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 jmosse@curtis.com Dated: July 25, 2016 Samuel T. Hirzel, II (#4415) 300 Delaware Avenue, Suite 200 Wilmington, DE 19801 (302) 472-7300 SHirzel@proctorheyman.com Attorney for the Defendant Petróleos de Venezuela, S.A. Case 1:15-cv-01082-LPS Document 28-3 Filed 07/25/16 Page 1 of 1 PageID #: 809