Caballero v. Fuerzas Armadas Revolucionarias De Colom.
| Decision Date | 13 January 2022 |
| Docket Number | 3:20-cv-01939 (JAM) |
| Parties | Antonio CABALLERO, Plaintiff, v. FUERZAS ARMADAS REVOLUCIONARIAS DE COLOMBIA et al., Defendants. |
| Court | U.S. District Court — District of Connecticut |
Houston Putnam Lowry, Ford & Paulekas, LLP, Hartford, CT, Joseph I. Zumpano, Leon Patricios, Zumpano Patricios, P.A., Coral Gables, FL, for Plaintiff.
ORDER DENYING MOTION TO SUBSTITUTE COUNSEL
This transnational case involves an effort to collect more than $40 million from a brokerage account based in Greenwich, Connecticut. The brokerage account is owned by an oil company that is incorporated in El Salvador and whose majority shareholder is controlled by the government of Venezuela.
The current dispute has nothing to do with the merits of the case. Instead, it involves a procedural threshold issue of who has the right to appear as counsel to defend the oil company in these proceedings.
Two groups of lawyers claim the right to do so. The first group has already appeared and litigated in this action on behalf of the company. These lawyers claim they have the right to represent the company because they were retained by the company's management in accordance with the company's bylaws and the law of El Salvador where the company is based and incorporated.
The second group has filed a motion to substitute themselves as counsel for the company in this action. These lawyers say they have the right to represent the company because they were retained by the company's state-owned majority shareholder in Venezuela.
Who is right? Applying choice-of-law principles, I defer to the law of the company's state of incorporation in El Salvador and conclude that the company's management—rather than its majority shareholder from Venezuela—has the right to decide who shall represent the company in court proceedings. Although it is argued that the law of Venezuela must control under the doctrine, this doctrine does not apply extraterritorially to allow Venezuela to override the basic corporate law principles of El Salvador where the company is incorporated. Accordingly, I will deny the motion to substitute counsel.
The plaintiff in this action is Antonio Caballero. The primary defendant is the Fuerzas Armadas Revolucionarias de Colombia ("FARC"), an insurgent organization in Colombia that until very recently was designated by the United States government as a terrorist organization.1
According to Caballero, FARC tortured and killed his father who was a former United Nations ambassador and an outspoken critic of narco-trafficking in Colombia. Caballero sued FARC in the United States under a federal law—the Anti-Terrorism Act, 18 U.S.C. § 2333 —that authorizes civil lawsuit against terrorists, and he obtained a default judgment for more than $40 million of compensatory damages in the U.S. District Court for the Southern District of Florida.2
This action in the District of Connecticut began in October 2020 when Caballero registered his Florida judgment with this Court.3 On the basis of this judgment, Caballero then moved for a turnover order against a financial account that is held in the name of ALBA Petróleos de El Salvador S.E.M. de C.V. ("ALBA") by Interactive Brokers, LLC of Greenwich, Connecticut.4
Caballero sought the turnover order in accordance with a federal law known as the Terrorism Risk Insurance Act of 2002 ("TRIA"). This law allows a plaintiff who has obtained a judgment against a terrorist party to bring a post-judgment action against the assets of an agency or instrumentality of the terrorist party.5 According to Caballero, he may execute his Florida judgment against ALBA because it is an agency or instrumentality of FARC.6
Neither Interactive Brokers nor ALBA initially filed an objection to Caballero's turnover motion (and they claim they were not properly served or noticed). So the Court granted the unopposed motion in the amount of $41,734,153.93.7
Caballero then tried to compel Interactive Brokers to turnover the funds, but Interactive Brokers in turn filed a third-party interpleader complaint, citing the competing claims of Caballero and others to the funds in the ALBA account.8 In addition, ALBA moved to intervene in this action and to stay the turnover order, principally arguing that it had not been properly noticed and served by Caballero with his turnover motion and that it was not an agency or instrumentality of FARC.9
ALBA's motion to intervene was filed by local counsel and on behalf of an attorney from Florida named Marcos D. Jiménez.10 I scheduled oral argument on ALBA's motion to intervene, but continued the argument after a last-minute motion to substitute counsel was filed by different local counsel and the law firm of White & Case, LLP, who claimed they had the right to represent ALBA in this action.11 Because of this dispute about which counsel—the group of lawyers led by attorney Jiménez or the group of lawyers led by the law firm of White & Case—had authority to represent ALBA in this action, I advised the parties that I would need to rule as a threshold matter on the motion to substitute counsel before addressing ALBA's motion to intervene and other motions in this case.12 I instructed the competing counsel to file further submissions with respect to their asserted authority to represent ALBA and then heard argument on the motion to substitute.13 This ruling now follows.
Federal law recognizes the right of a party to retain counsel to act for federal court proceedings. See 28 U.S.C. § 1654. If a party is an artificial entity such as a corporation, federal law requires the appearance and assistance of licensed counsel. See Lattanzio v. COMTA , 481 F.3d 137, 139–140 (2d Cir. 2007) (per curiam ).14
Who has the right to represent ALBA? As best as I can tell, the answer to this question depends on who has the right to speak on behalf of ALBA and to decide who should represent ALBA in federal court proceedings. And this in turn depends on considering ALBA's corporate structure and ownership as well as the law that generally governs ALBA as a corporation.
ALBA is incorporated in El Salvador and therefore is generally governed by Salvadoran law.15 ALBA is 60% owned by PDV Caribe, S.A, which is 100% owned—directly or indirectly—by Venezuela's state-owned oil company: Petróleos de Venezuela, S.A. ("PDVSA").16 ALBA is 40% owned by ENEPASA, which is an inter-municipal nonprofit owned by 17 Salvadoran municipalities.17
Jiménez and White & Case present competing arguments for why they have the right to represent ALBA in this action. According to Jiménez, he was retained by ALBA's Legal Representative, Jaime Alberto Recinos Crespin, to serve as counsel for this action.18 Crespin is a Salvadoran national who is currently domiciled in El Salvador.19 In November 2018, Crespin was appointed by ENEPASA to ALBA's Board of Directors as Vice President and Legal Representative for a three-year term.20 The current appointment of ALBA's Board of Directors was registered in the Salvadoran Registry of Commerce in December 2018.21 The "delegation of the Legal Representation" of ALBA to the Vice President has been the company's practice since 2006.22
According to an affidavit filed on behalf of and signed by Crespin:
[ALBA] is governed by the laws of El Salvador. Its corporate structure and the powers of its Governing Bodies are an internal matter of the company, regulated by its Bylaws, in accordance with the Laws of El Salvador. No other legal system of any other country applies to regulate the corporate structure and/or operation of this company. Neither Venezuelan law, nor the law of any other country, applies to determine the manner in which [ALBA] chooses its authorities and particularly its Legal and Judicial Representatives.23
Crespin further states that he, "in his capacity as sole legal representative of [ALBA], according to the Bylaws of the company and the law of El Salvador, appointed [Jiménez] as the sole and exclusive attorney authorized to represent and defend the interests of [ALBA] before all courts in the United States of America where the interests of [ALBA] or any of its affiliates are at stake," specifically including this action.24
White & Case does not contest any of these facts. It does not dispute that ALBA is organized under the law of El Salvador or offer any evidence that Crespin was not actually appointed to ALBA's Board of Directors and as Vice President and Legal Representative. Nor does it point to any subsequent action taken by ALBA's Board of Directors or through changes to its bylaws to divest Crespin of the position of Legal Representative of ALBA. Indeed, one of White & Case's own filings reflects that Crespin served as ALBA's "Legal Representative" according to the Salvadoran Registry of Commerce as of May 17, 2021.25
Rather than challenge Crespin's authority under the law of El Salvador, White & Case says it does not matter. All that matters, according to White & Case, is the law of Venezuela, because ALBA is majority owned by PDVSA, a state-owned entity of the Venezuelan government.26
According to White & Case, it was retained by the Ad Hoc Board of Directors of PDVSA ("Ad Hoc Board"). The Ad Hoc Board was appointed by Venezuelan Interim President Juan Guaidó.27 In January 2019, the National Assembly of Venezuela declared Venezuelan president Nicolás Maduro to be illegitimate, and it declared Guaidó to be the Interim President of Venezuela.28
Most significantly, the United States recognizes the National Assembly and Interim President Guaidó (together, the "Interim Government") as the only legitimate government of Venezuela.29 Because the United States has recognized the government of Juan Guaidó rather than the government of Nicolás Maduro, I fully accept for purposes of this ruling that the interim government of Juan Guaidó has exclusive authority to speak on behalf of the government of...
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In re Alba Petroleos De El Sal. S.E.M. De C.
...on the "presumption that the law of a company's state of incorporation governs . . . issues involving the internal affairs of a corporation." Id. (cleaned up). The district court rejected &Case's argument that "the act of state doctrine require[d] [it] to defer to the law of Venezuela." Id.......