Red Tree Invs. v. Petroleos de Venez., S.A.
| Docket Number | 19-cv-2519 (PKC),19-cv-2523 (PKC) |
| Decision Date | 22 December 2021 |
| Parties | RED TREE INVESTMENTS, LLC, Plaintiff, v. PETROLEOS DE VENEZUELA, S.A. and PDVSA PETROLEO, S.A., Defendants |
| Court | U.S. District Court — Southern District of New York |
These two actions seek to recover monies alleged to be due and owing to plaintiff Red Tree Investments, LLC (“Red Tree”) by Petroleos de Venezuela, S.A. (“PDVSA”) under the terms of two note agreements and notes issued thereunder and a credit agreement. Red Tree sues PDVSA Petroleo, S.A (“Petroleo”) as the guarantor of PDVSA's payment obligations. PDVSA and Petroleo are instrumentalities of the Venezuelan government. Red Tree has moved for summary judgment against both defendants in both actions. The principal basis for opposing summary judgment is that sanctions on Venezuelan-related activities and persons coupled with the risk-adversity of the banking community rendered it impossible or highly impracticable for PDVSA to pay what it owed.
For reasons that will be explained, the Court concludes that PDVSA is in default on lawful obligations owed to Red Tree and, accepting the facts in a light most favorable to PDVSA it has failed to come forward with facts if believed that would entitle them to judgment. Petroleo has failed to come forward with facts, if believed, that would amount to a defense under the guaranty. Red Tree's motions will be granted.
General Electric Capital Corporation (“GECC”) was the initial noteholder-or lender-under a 2015 Note Agreement with defendants, and GE Capital EFS Financing Inc. (“GECEFSF”) was the initial noteholder under the 2016 Note Agreement with defendants (collectively “GECC” and “GECEFSF” are referred to as the “GE Entities”). PDVSA was the issuer and Petroleo was the guarantor under notes issued pursuant to the two agreements. The original principal balance under the three notes issued pursuant to the 2015 Note Agreement and 2016 Note Agreement was approximately $450 million. On January 25, 2019 the notes were assigned to Red Tree. The total amount owed to Red Tree under the three notes is approximately $63.5 million plus unpaid interest.
GECEFSF as lender, also entered into a Credit Agreement with PDVSA as borrower, and Petroleo, as guarantor (the “2016 Credit Agreement”) in which GECEFSF agreed to extend loans to PDVSA in an aggregate principal amount not to exceed $96.9 million. The rights under the Credit agreement were assigned to Red Tree on January 25, 2019. Red Tree claims to be owed $65 million in principal plus interest under the Credit Agreement.
These actions were commenced in New York state court through the device of motions for summary judgment in lieu of complaint, a procedure permitted under NY CPLR § 3213. Defendants removed the actions to federal court.[1] Defendants asserted basis for subject matter jurisdiction was that they were actions against a “foreign state, ” asserting that each defendant is an “instrumentality” of the Bolivarian Republic of Venezuela.
28 U.S.C. §§ 1332(a)(4) & 1603. Alternatively, defendants invoked diversity of citizenship as a basis for subject matter jurisdiction. 28 U.S.C. § 1332(a)(2).
Shortly after removal, defendants moved to stay the actions for 120 days because of political instability in Venezuela. At the time of the motions the United States had recognized the government of Juan Guaido as Interim President of Venezuela but, according to defendants, the new government lacked full access to personnel and documents. On May 19, 2019, the judge to whom the cases were then assigned granted a 120-day stay. As a practical matter, the stay remained in place until January 14, 2020 when the judge rejected defendants' motions to further extend the stay.
Defendants applied to the Court to defer their opposition to the summary judgment motions to enable them to obtain discovery. Red Tree, with the cooperation of the GE Entities, voluntarily produced responsive documents, totaling over 13, 000 pages. The Court issued an Order on June 1, 2021, acknowledging that certain of defendants' original requests had become moot, but allowing defendants an additional month to seek documents. In early June 2021, the period was extended to July 8, 2021. The date for completion of domestic discovery was again extended to July 15, 2021 and foreign discovery to August 16, 2021.
Two years and four months following defendants' removal of the actions to this Court, defendants filed their oppositions to the motions. Briefing was completed on August 30, 2021 and the actions were reassigned to the undersigned on December 10, 2021.
Following removal from state court, the Federal Rules of Civil Procedure apply. Rule 81(c)(1), Fed.R.Civ.P. Thus, Red Tree's pre-removal motions for summary judgment in lieu of complaint, NY CPLR §3213, are properly considered under Rule 56, Fed.R.Civ.P. See, e.g., Beaufort Cap. Partners LLC v. Oxysure Sys., Inc., No. 16-cv-5176, 2017 WL 913791, at *2 (S.D.N.Y. Mar. 7, 2017) (Oetken, J.) (collecting cases).
Under Rule 56(d), Fed. R. Civ. P., “[i]f a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time . . . to take discovery; or (3) issue any other appropriate order.” The Court's ruling on an application under Rule 56(d) is reviewed under an abuse of discretion standard. See, e.g., Moccia v. Saul, 820 Fed.Appx. 69, 70 (2d Cir. 2020).
Summary judgment “shall” be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Rule 56(a), Fed.R.Civ.P. A fact is material if it “might affect the outcome of the suit under the governing law . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A dispute regarding a material fact is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.' ” Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000) (quoting Anderson, 477 U.S. at 248). On a motion for summary judgment, the court must “construe the facts in the light most favorable to the non-moving party” and “resolve all ambiguities and draw all reasonable inferences against the movant.” Delaney v. Bank of Am. Corp., 766 F.3d 163, 167 (2d Cir. 2014) (internal quotation marks omitted).
It is the initial burden of the movant to come forward with evidence sufficient to entitle the movant to relief in its favor as a matter of law. Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004). If the moving party meets its burden, “the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment.” Simsbury-Avon Pres. Soc'y LLC v. Metacon Gun Club, Inc., 575 F.3d 199, 204 (2d Cir. 2009). In raising a triable issue of fact, the non-movant carries only “a limited burden of production, ” but nevertheless “must ‘demonstrate more than some metaphysical doubt as to the material facts,' and come forward with ‘specific facts showing that there is a genuine issue for trial.' ” Powell v. Nat'l Bd. of Med. Exam'rs, 364 F.3d 79, 84 (2d Cir. 2004) (quoting Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067, 1072 (2d Cir. 1993)). A court “may grant summary judgment only when no reasonable trier of fact could find in favor of the nonmoving party.” Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir. 1995) (internal quotation marks omitted). Simsbury-Avon Pres. Soc'y, 575 F.3d at 204 (internal citations omitted).
Under New York law, [2] to recover on a note or other debt instrument “a plaintiff must show the existence of a promissory note executed by the defendant containing an unequivocal and unconditional obligation to repay and the failure of the defendant to pay in accordance with the note's terms.” Zyskind v. FaceCake Mktg Techs., Inc., 101 A.D.3d 550, 551 (1st Dep't 2012). “Once the plaintiff submits evidence establishing these elements, the burden shifts to the defendant to submit evidence establishing the existence of a triable issue with respect to a bona fide defense.” Id.; see Camofi Master LDC v. Coll. P'ship, Inc., 452 F.Supp.2d 462, 470 (S.D.N.Y. 2006) (Chin, J.). To recover on a guaranty, the plaintiff must come forward with evidence of “the existence of the guaranty, the underlying debt and the guarantor's failure to perform under the guaranty. . . .” Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro, 25 N.Y.3d 485, 492 (2015); Sarfati v. Palazzolo, 142 A.D.3d 877, 877 (1st Dep't 2016); see also UMB Bank N.A. v. Bluestone Coke, LLC, No. 20-cv-2043, 2020 WL 6712307 at *4 (S.D.N.Y. 2020) (Liman, J.).
In the Note Agreement Action, Red Tree came forward with an attorney's affidavit placing into the record on the motion the 2015 Note Agreement, the 2016 Note Agreement, the notes, the assignments from the GE Entities to Red Tree and notices to PDVSA of the assignments.
Red Tree presented an affidavit of a Managing Director of GE Capital attesting to the 2015 Note Agreement, the relationship between GE Capital and GECEFSF, the maturation of the notes under the 2015 Note Agreement, and the assignment of the notes to Red Tree. He attests that,...
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