Crystallex Int'l Corp. v. Bolivarian Republic of Venez. Citgo Petroleum Corp.

• Decision Date: 18 January 2022
• Docket Number: No. 21-1277,No. 21-1276, No. 21-1289,21-1276
• Parties: CRYSTALLEX INTERNATIONAL CORPORATION v. BOLIVARIAN REPUBLIC OF VENEZUELA CITGO Petroleum Corporation ; PDV Holding, Inc. ; Petroleos De Venezuela, S.A., (Intervenors in D.C.) Citgo Petroleum Corporation and PDV Holding, Inc., Appellants in No. 21-1276 Petróleos De Venezuela, S.A., Appellant in No. 21-1277 Bolivarian Republic of Venezuela, Appellant in No. 21-1289
• Court: U.S. Court of Appeals — Third Circuit

24 F.4th 242

CRYSTALLEX INTERNATIONAL CORPORATION

v.BOLIVARIAN REPUBLIC OF VENEZUELA

CITGO Petroleum Corporation ; PDV Holding, Inc. ; Petroleos De Venezuela, S.A., (Intervenors in D.C.)

Citgo Petroleum Corporation and PDV Holding, Inc., Appellants in No. 21-1276

Petróleos De Venezuela, S.A., Appellant in No. 21-1277

Bolivarian Republic of Venezuela, Appellant in No. 21-1289

No. 21-1276

No. 21-1277

No. 21-1289

United States Court of Appeals, Third Circuit.

Argued: December 7, 2021

Filed: January 18, 2022

Nathan P. Eimer, Lisa S. Meyer, Gregory M. Schweizer, Eimer Stahl LLP, 224 South Michigan Avenue, Suite 1100, Chicago, IL 60604, Robert E. Dunn, Eimer Stahl LLP, 99 South Almaden Blvd., Suite 642, San Jose, CA 95113, Counsel for Intervenor-Appellants CITGO Petroleum Corporation and PDV Holding, Inc.

Joseph D. Pizzurro, Kevin A. Meehan, Julia Mosse, Juan O. Perla, Curtis Mallet-Prevost Colt & Mosle, 101 Park Avenue, 35th floor, New York, NY 10178, Counsel for Intervenor-Appellant Petróleos de Venezuela, S.A.

Donald B. Verrilli, Jr. [ARGUED], Brendan B. Gants, Elaine J. Goldenberg, Ginger D. Anders, Munger Tolles & Olson, 601 Massachusetts Avenue, N.W., Suite 500, Washington, D.C. 20001, Counsel for Defendant-Appellant Bolivarian Republic of Venezuela

Robert L. Weigel, Rahim Moloo, Jason W. Myatt, Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, NY 10166, Miguel A. Estrada [ARGUED], Lucas C. Townsend, Matthew S. Rozen, Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, N.W., Washington, D.C. 20036, Travis S. Hunter, Jeffrey L. Moye, Richards Layton & Finger, 920 North King Street, One Rodney Square, Wilmington, DE 19801, Counsel for Plaintiff-Appellee Crystallex International Corporation

Before: SHWARTZ, PORTER, and FISHER, Circuit Judges.

OPINION OF THE COURT

PORTER, Circuit Judge In these consolidated appeals, the Bolivarian Republic of Venezuela ("Venezuela") and other appellants ask us to intervene for a second time in ongoing execution proceedings against Venezuela. Our jurisdiction to hear the appeals turns on whether the District Court has reached a final decision. 28 U.S.C. § 1291. It has not, so we lack jurisdiction over these appeals.

I

A decade ago, Venezuela expropriated valuable mining rights owned by Crystallex International Corporation ("Crystallex"), a Canadian mining company. Crystallex Int'l Corp. v. Bolivarian Republic of Venezuela , 932 F.3d 126, 132 (3d Cir. 2019). After prevailing in an arbitration proceeding, Crystallex asked a federal district court to confirm the award and obtained a $1.4 billion judgment. Id. at 133. Crystallex has since been trying to collect. Id. at 133–35.

In the execution action before the District Court, Crystallex seeks to auction shares owned by Venezuela's state-owned energy company, Petróleos de Venezuela, S.A. ("PDVSA"), to satisfy its judgment against Venezuela. Id. at 134. At stake are PDVSA's shares in PDV Holding, Inc. ("PDVH"), a Delaware holding company that owns CITGO Petroleum Corporation ("CITGO"), a U.S. petroleum refiner. Id. at 132.¹ Venezuela and PDVSA oppose the auction, as a sale would end PDVSA's control over CITGO, one of PDVSA's most important assets in the United States.

A

In an earlier round of proceedings, Crystallex sought to seize PDVH's shares through a "writ of attachment" under Delaware law, as allowed by Federal Rule of Civil Procedure 69(a). Id. at 134. PDVSA intervened and resisted the attachment on grounds of sovereign immunity. Id.

The District Court rejected PDVSA's defenses after careful consideration. Crystallex Int'l Corp. v. Bolivarian Republic of Venezuela , 333 F. Supp. 3d 380, 406, 418 (D. Del. 2018), aff'd and remanded , 932 F.3d 126 (3d Cir. 2019). Among other things, the District Court held that it had ancillary jurisdiction to enforce the judgment against Venezuela in this execution proceeding, and that PDVSA could not assert its own sovereign immunity as a defense because PDVSA was Venezuela's alter ego under federal common law. Crystallex Int'l Corp. , 333 F. Supp. 3d at 399, 406. In other words, while PDVSA, not Venezuela, is the nominal owner of the PDVH shares, the District Court concluded that given Venezuela's history of extensive control over PDVSA, PDVSA is Venezuela for purposes of this suit. Id. at 393, 399. Some days later, the District Court issued the writ of attachment, ordering PDVH's registered agent to retain the stock until further order.

PDVSA appealed, and Venezuela intervened. Crystallex Int'l Corp. , 932 F.3d at 134. In that earlier appeal, we agreed with the District Court's reasoning, rejected all of PDVSA's immunity defenses, and affirmed the District Court's orders, including the writ of attachment. Id. at 151–52. The Supreme Court denied certiorari, and the case returned to District Court. Bolivarian Republic of Venezuela v. Crystallex Int'l Corp. , ––– U.S. ––––, 140 S. Ct. 2762, 206 L.Ed.2d 936 (2020).

B

While the case was pending on appeal, political conditions in Venezuela changed. In January 2019, following a fraudulent reelection bid a year earlier, Nicolás Maduro tried to install himself as President of Venezuela for a second term. The Venezuelan National Assembly, an elected body, invoked Venezuela's constitution and declared Juan Guaidó interim president. The United States recognized Juan Guaidó as the legitimate interim President of Venezuela, but Maduro still clings to power.

"[I]n light of the continued usurpation of power by Nicolas Maduro," then-President Trump broadened existing economic sanctions against Venezuela and blocked any transfer or dealing in PDVSA's property. Exec. Order No. 13,884, §§ 1, 6 (Aug. 5, 2019), 84 Fed. Reg. 38,843 (Aug. 7, 2019). Implementing this order, the Office of Foreign Assets Control ("OFAC"), an agency that administers U.S. economic sanctions, published the following rule:

[T]he entry into a settlement agreement or the enforcement of any lien, judgment, arbitral award, decree, or other order through execution, garnishment, or other judicial process purporting to transfer or otherwise alter or affect property or interests in property blocked pursuant to [regulation], is prohibited unless authorized pursuant to a specific license issued by OFAC.

84 Fed. Reg. 64,415, 64,417 (Nov. 22, 2019), codified at 31 C.F.R. § 591.407. OFAC's rule looms large in this case.

C

On remand, PDVSA, now joined by PDVH as the garnishee and CITGO as an intervenor, asked the District Court to quash the writ of attachment. In an argument that raised the District Court's sense of déjà vu, they sought to litigate the alter ego status of PDVSA once again, arguing this time that Delaware alter ego law controlled.² Delaware law requires showing fraud—not just extensive control—to seize the property of a non-debtor like PDVSA. See Crosse v. BCBSD, Inc. , 836 A.2d 492, 497 (Del. 2003) ("To state a ‘veil-piercing claim,’ the plaintiff must plead facts supporting an inference that the corporation, through its alter-ego, has created a sham entity designed to defraud investors and creditors."). And Crystallex, they argued, has not made that showing.

Crystallex, on the other hand, viewed the attachment's validity as a settled matter and moved for a contingent auction of PDVSA's shares pending a license from OFAC. Venezuela, PDVSA, and PDVH opposed, arguing that OFAC's regulations prohibit a contingent sale and urging the District Court to stay sale proceedings until Crystallex obtains an OFAC license.

D

On the eve of the District Court's hearing on the pending motions, the United States filed a statement of interest urging the District Court not to authorize a contingent sale of the shares. Elliot Abrams, the U.S. Special Representative for Venezuela at the time, filed a letter asserting that "immediate steps toward a conditional sale" of CITGO would damage the legitimacy of the Guaidó government. J.A. 309. Abrams explained that CITGO's "loss through a forced sale in a U.S. court would be a great political victory for the Maduro regime," as Maduro could blame the Guaidó government for the loss of PDVSA assets on U.S. soil. J.A. 309. This, Abrams said, would "greatly" harm U.S. foreign policy interests. J.A. 309.

The United States, through OFAC, separately argued that "U.S. sanctions involving Venezuela require a license for any sale of PDVH shares." J.A. 300. The United States noted that OFAC was then considering Crystallex's specific license application and asked the District Court to "refrain from authorizing an auction and sale of Venezuela's largest and most important foreign asset while Crystallex's licensing application is pending before OFAC." J.A. 304.³

At the hearing on the pending motions, the United States clarified its position in response to the District Court's questions. It assured the District Court that "the United States [w]asn't tak[ing] the position that [the District Court was] blocked from moving forward" and that "the Court can do whatever it wants." J.A. 523. It also clarified, though, that "Crystallex might well be in violation of OFAC regulations if it takes these proposed steps." J.A. 523.

E

On January 14, 2021, the District Court acted on the pending motions. The District Court refused to quash the attachment. In the District Court's view, it had already decided the alter ego issue and issued the attachment, and we had affirmed, so (1) issue preclusion prevented PDVSA and its subsidiaries from relitigating the validity of the attachment under Delaware law, and, in any event, (2) the state-law challenge was untimely because PDVSA and its subsidiaries had failed to preserve the issue after an adequate opportunity to do so. Crystallex Int'l Corp. v. Bolivarian Republic of Venezuela , No. 17-mc-151-LPS, 2021 WL 129803, at *8–11, *12–15 (D. Del. Jan. 14, 2021).

The District Court also granted Crystallex's motion in part. The District Court decided "to set up the sales procedures and then to follow them to the maximum extent that can be accomplished without a specific...