You are on page 1of 15

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 1 of 15 PageID #: 924

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

REPLY 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
Dated: September 2, 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 Petrleos de
Venezuela, S.A.

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 2 of 15 PageID #: 925

TABLE OF CONTENTS
INTRODUCTION ...............................................................................................................1
ARGUMENT .......................................................................................................................2
I.

The Court Lacks Subject Matter Jurisdiction over PDVSA ....................................2


A.

The First Clause of the Commercial Activity Exception Does Not Apply..2

B.

The Third Clause of the Commercial Activity Exception Does Not Apply 5

II.

There Is No Personal Jurisdiction ............................................................................7

III.

The Complaint Should Be Dismissed for Failure to State a Claim .........................7

CONCLUSION ..................................................................................................................11

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 3 of 15 PageID #: 926

TABLE OF AUTHORITIES

Cases

Page(s)

Argentine Republic v. Amerada Hess Shipping Corp.,


488 U.S. 428 (1989) ................................................................................................................ 8, 9
Aurelius Capital Partners, LP v. Republic of Argentina,
No. 07-cv-11327, 2010 WL 768874 (S.D.N.Y. Mar. 5, 2010) ................................................... 8
Corzo v. Banco Central de Reserva del Peru,
243 F.3d 519 (9th Cir. 2001) ...................................................................................................... 7
Cruise Connections Charter Mgmt. 1, LP v. Attorney Gen. of Canada,
600 F.3d 661 (D.C. Cir. 2010) ................................................................................................ 6, 7
Doe v. Holy See,
557 F.3d 1066 (9th Cir. 2009) ................................................................................................ 4, 5
Dussault v. Republic of Argentina,
No. 06-cv-13085 (S.D.N.Y. Oct. 27, 2014) ............................................................................ 7, 8
EM Ltd. v. Banco Cent. de la Republica Argentina,
800 F.3d 78 (2d Cir. 2015) ......................................................................................................... 4
Fed. Ins. Co. v. Richard I. Rubin & Co.,
12 F.3d 1270 (3d Cir. 1993) ............................................................................................... 3, 4, 9
First Natl City Bank v. Banco Para El Comercio Exterior de Cuba,
462 U.S. 611 (1983) .................................................................................................................... 4
Foremost-McKesson, Inc. v. Islamic Republic of Iran,
905 F.2d 438 (D.C. Cir. 1990) .................................................................................................... 4
Gen. Elec. Capital Corp. v. Grossman,
991 F.2d 1376 (8th Cir. 1993) .................................................................................................... 7
Hercaire Intl, Inc. v. Argentina,
821 F.2d 559 (11th Cir. 1987) .................................................................................................... 4
Hester Intl Corp. v. Fed. Republic of Nigeria,
879 F.2d 170 (5th Cir. 1989) ...................................................................................................... 4
In re Hechinger Inv. Co. of Del.,
327 B.R. 537, 551 (D. Del. 2005), affd sub nom. In re Hechinger Inv. Co. of Delaware, Inc.,
278 F. Appx 125 (3d Cir. 2008) ................................................................................................ 5
Janvey v. Libyan Inv. Auth.,
No. 11-CV-1177, 2015 WL 10459614 (N.D. Tex. May 12, 2015) ............................................ 6
Kenexa Brassring, Inc. v. Akken, Inc.,
2013 WL 3229741 (D. Del. June 25, 2013)................................................................................ 4

ii

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 4 of 15 PageID #: 927

Kensington Intl Ltd. v. Itoua,


505 F.3d 147 (2d Cir. 2007) .............................................................................................. passim
Marnavi S.p.A v. Keehan,
900 F. Supp. 2d 377 (D. Del. 2012) ............................................................................................ 3
Odyssey Marine Expl., Inc. v. Unidentified Shipwrecked Vessel,
657 F.3d 1159 (11th Cir. 2011) .................................................................................................. 8
Peterson v. Islamic Republic of Iran,
No. 13-CV-9195, 2015 WL 731221 (S.D.N.Y. Feb. 20, 2015).................................................. 7
Raji v. Bank Sepah-Iran,
495 N.Y.S.2d 576 (N.Y. Sup. Ct. 1985) ..................................................................................... 9
Republic of Argentina v. Weltover, Inc.,
504 U.S. 607 (1992) .................................................................................................................... 6
Stephens v. Natl Distillers & Chem. Corp.,
69 F.3d 1226 (2d Cir. 1995) ....................................................................................................... 8
Thai Lao Lignite (Thailand) Co. v. Govt of Lao Peoples Democratic Republic,
No. 10-cv-5256, 2013 WL 1703873 (S.D.N.Y. Apr. 19, 2013) ................................................. 7
Transamerica Leasing, Inc. v. La Republica de Venezuela,
200 F.3d 843 (D.C. Cir. 2000) .................................................................................................... 4
Verlinden B.V. v. Cent. Bank of Nigeria,
461 U.S. 480 (1983) ................................................................................................................ 8, 9
World Trade, Inc. v. Mangyshlakneft Oil Prod. Assn,
33 F.3d 1232 (10th Cir. 1994) .................................................................................................... 7
Zedan v. Kingdom of Saudi Arabia,
849 F.2d 1511 (D.C. Cir. 1988) .................................................................................................. 3
Statutes
28 U.S.C. 1605(a)(2) .................................................................................................................... 2
28 U.S.C. 1605(a)(6) .................................................................................................................... 6
28 U.S.C. 1610(d) ........................................................................................................................ 9
Rules
Fed. R. Civ. P. 12(b)(1)................................................................................................................. 11
Fed. R. Civ. P. 12(b)(2)................................................................................................................. 11
Fed. R. Civ. P. 12(b)(6)................................................................................................................. 11
Local R. 7.1.3(a)(7) ......................................................................................................................... 8

iii

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 5 of 15 PageID #: 928

INTRODUCTION
Defendant Petrleos de Venezuela, S.A. (PDVSA) demonstrated in its
Memorandum of Law in Support of its Motion to Dismiss (Moving Brief or D.I. 28-2) that
the Complaint should be dismissed because PDVSA, as an instrumentality of a foreign sovereign,
is entitled to jurisdictional immunity pursuant to the Foreign Sovereign Immunities Act (FSIA),
28 U.S.C. 1330, 1602 et seq., and the FSIA further precludes Crystallex from circumventing its
requirements with respect to prejudgment restraint on the property of foreign states and their
agencies and instrumentalities through the device of Delaware fraudulent transfer law
(DUFTA).1 Crystallexs Answering Brief in Opposition to the Motion to Dismiss (Opposition
Brief or D.I. 31) fails to rehabilitate the Complaint or justify this Court disregarding the
immunity afforded to PDVSA by Congress. In summary:
1.

Crystallex effectively acknowledges that the Complaint fails to allege a single fact

demonstrating that PDVSA took any action in the United States as required by the first clause of
the commercial activity exception of the FSIA. Crystallex ignores the numerous circuit court cases
cited by PDVSA holding such facts are required at the pleading stage, and does not cite a single
authority to the contrary.
2.

Crystallex does not argue that the second clause applies. It does argue that the third

clause applies, notwithstanding the Second Circuits explanation in Kensington International Ltd.
v. Itoua, 505 F.3d 147 (2d Cir. 2007), that an alleged transfer of assets intended to frustrate a U.S.
judgment does not have the requisite direct effect in the United States for that exception to apply.
Although this is the leading case on the issue, Crystallex relegates Kensington to a footnote and,
even then, its attempt to distinguish Kensington is contrary to well-established law.

Capitalized terms not defined herein have the same meanings as those in the Moving Brief.

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 6 of 15 PageID #: 929

3.

Finally, recognizing that the FSIA preempts any attempt by Crystallex to obtain

prejudgment relief in aid of its enforcement efforts against Venezuela, Crystallex now abandons
the premise of the Complaint and argues it is not seeking relief in connection with the judgment it
hopes to obtain against Venezuela, but is seeking an independent money judgment against
Venezuelas alleged alter ego PDVSA. This action is a transparent attempt to skirt the FSIAs
prohibition against prejudgment relief. Crystallexs improper use of state law for this purpose is
precluded by the FSIA.
ARGUMENT
I.

The Court Lacks Subject Matter Jurisdiction Over PDVSA


Crystallexs Complaint fails to allege that any of the three clauses of the FSIAs

commercial activity exception, 28 U.S.C. 1605(a)(2), applies in this case.


A.

The First Clause of the Commercial Activity Exception Does Not Apply
PDVSAs Moving Brief established that the first clause of the commercial activity

exception does not apply because the Complaint fails to allege any facts that demonstrate any
activity by PDVSA directly in the United States or having a substantial connection to the United
States. D.I. 28-2 at 8-12.
Crystallex does not dispute that the Complaint fails to identify any specific activity
of PDVSA in the United States. Instead, it claims [t]here is no such heightened pleading
requirement under the FSIA. D.I. 31 at 9. Crystallex does not cite a single legal authority to
support that statement, and it is flatly contradicted by numerous circuit court decisions, cited in
PDVSAs brief, holding that a plaintiff must allege specific facts to establish the foreign states
activities in the United States before the court may disregard the immunity afforded to foreign
sovereigns under the FSIA. See D.I. 28-2 at 9-10. Crystallex does not address these authorities,
and makes no attempt to meet the applicable pleading standard.

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 7 of 15 PageID #: 930

Unable to point to any factual allegation that situates PDVSAs conduct in the
United States, Crystallex asks that PDVSAs actions nonetheless be deemed to have taken place
in whole or in part in the U.S. because PDVSA indisputably owns and controls PDVH and
CITGO Holding, and the alleged transfers and dividend payment took place at PDVSAs
direction. D.I. 31 at 8-10. Those allegations are plainly insufficient. A defendants ownership
or control of, and the receipt of payments from, a Delaware corporation allegedly involved in the
fraudulent transfer do not even satisfy the more lenient minimum contacts test for personal
jurisdiction over a non-sovereign. Marnavi S.p.A v. Keehan, 900 F. Supp. 2d 377, 391 (D. Del.
2012). Such allegations certainly do not satisfy the FSIAs substantial contact requirement,
which is stricter than that suggested by a minimum contacts due process inquiry. Zedan v.
Kingdom of Saudi Arabia, 849 F.2d 1511, 1513 (D.C. Cir. 1988).
The Court is thus left to fill in the blanks as to what exactly PDVSA did to direct[]
its subsidiaries to engage in a series of transactions in the U.S. D.I. 31 at 11. The Complaint
does not even allege, for example, that PDVSA directed or controlled these transactions
through specific contacts in the United States, such as telephone calls and domestic meetings. But
even if it had, such allegations would not amount to substantial contact under the FSIA. D.I.
28-2 at 10 n.4.
Crystallex thus suggests the level of control allegedly exercised by PDVSA as
sole stockholder is sufficient to impute the activities of PDVSAs subsidiaries in the United
States to PDVSA. D.I. 31 at 10 & n.4. But the Third Circuit foreclosed that avenue in Federal
Insurance Co. v. Richard I. Rubin & Co., 12 F.3d 1270 (3d Cir. 1993). There, the court held that
imputing the acts of non-sovereign corporate affiliates to a foreign state under the commercial
activity exception is only allowed where the allegations of control are sufficient to overcome the

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 8 of 15 PageID #: 931

presumption of separateness set forth by the Supreme Court in First National City Bank v. Banco
Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) (Bancec). Fed. Ins., 12 F.3d at 1287.
And other circuit courts have consistently held that majority ownership and shareholder control
in the absence of factual allegations establishing day-to-day control is insufficient to overcome
Bancecs presumption at the jurisdictional stage. See, e.g., EM Ltd. v. Banco Cent. de la Republica
Argentina, 800 F.3d 78, 92-93 (2d Cir. 2015) (exercising control incidental to ownership, such as
relying on a wholly owned corporation for financing or appointing directors and officers who share
the sovereign shareholders goals, does not amount to the day-to-day control required under
Bancec); see also Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 440 (D.C.
Cir. 1990) (involvement by the state in the affairs of an agency or instrumentality is insufficient);
Hester Intl Corp. v. Fed. Republic of Nigeria, 879 F.2d 170, 181 (5th Cir. 1989) (100%
ownership and appointment of the Board of Directors insufficient); Hercaire Intl, Inc. v.
Argentina, 821 F.2d 559, 565 (11th Cir. 1987) (reversing district courts holding that Argentinas
100% ownership of Aerolineas stock was sufficient to overcome the presumption of separate
juridical existence and concluding there was no showing that Argentina exercises such extensive
control over Aerolineas as to warrant a finding of principal and agent) (emphasis added).
The cases cited by Crystallex are not to the contrary. Transamerica Leasing, Inc.
v. La Republica de Venezuela, 200 F.3d 843, 848 (D.C. Cir. 2000), confirmed that Bancecs agency
test applies here, and Kenexa Brassring, Inc. v. Akken, Inc., 2013 WL 3229741 (D. Del. June 25,
2013), did not involve subject matter jurisdiction over a sovereign.2 Crystallex cites no case in

Crystallexs claim that PDVSA did not cite any cases involving the attribution of the acts of non-sovereign
entities to their sovereign parent is also inaccurate. See Fed. Ins., 12 F.3d at 1286 (finding error in the
attribution of an affiliated Pennsylvania partnerships commercial activities to a foreign state
instrumentality for failure to satisfy Bancec); Doe v. Holy See, 557 F.3d 1066, 1079 (9th Cir. 2009) (we
conclude that it is appropriate to use the Bancec standard to determine whether Does allegations are
2

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 9 of 15 PageID #: 932

which the first clause of the commercial activity exception applied based on allegations such as
those in the Complaint. Its unsupported argument should be rejected.
B.

The Third Clause of the Commercial Activity Exception Does Not Apply
Because the Complaint fails to allege that PDVSA carried on any activity in the

United States within the meaning of the first clause, and Crystallex concedes the second clause
does not apply,3 Crystallex turns to the third clause of the commercial activity exception. That
clause also does not apply because Crystallex cannot show the alleged transfers had a direct
effect in the United States within the meaning of the FSIA.
Kensington holds that asset transfers made to frustrate a foreign companys ability
to enforce a judgment obtained in the United States does not satisfy the direct effect test, because
the judgment itself does not impose an obligation to pay in the United States; it can be paid in any
place from assets located anywhere. 505 F.3d at 159 (2d Cir. 2007); see also D.I. 28-2 at 15-16.
Crystallex has no answer to Kensington. It points out that Kensington involved enforcement of a
New York judgment as opposed to an international arbitral award, yet that distinction only further
demonstrates why there was no direct effect in this case. D.I. 31 at 12 n.6. If, as explained in
Kensington, a scheme to thwart legitimate creditors from collecting an existing judgment in the
United States cannot have a direct or immediate consequence in the United States, then a

sufficient to permit jurisdiction over the Holy See based on acts committed by its affiliated domestic
corporations.).
For the avoidance of doubt, Crystallexs argument that Venezuelas intent can be deemed to have been
formed in the United States for purposes of the second clause because the badges of fraud are actions
within the United States from which intent may be presumed is without merit. D.I. 31 at 11 n.5. DUFTAs
badges of fraud function as circumstantial evidence from which a debtors intent may be inferred. In re
Hechinger Inv. Co. of Del., 327 B.R. 537, 551 (D. Del. 2005), affd sub nom. In re Hechinger Inv. Co. of
Delaware, Inc., 278 F. Appx 125 (3d Cir. 2008). They have nothing to do with determining the place
where the intent was formed.
3

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 10 of 15 PageID #: 933

transaction allegedly designed to frustrate a potential arbitration award, which had not yet been
rendered much less reduced to a judgment in the United States, certainly cannot.4
Janvey v. Libyan Inv. Auth., No. 11-CV-1177, 2015 WL 10459614 (N.D. Tex. May
12, 2015), relied upon by Crystallex, does not speak to this issue at all. D.I. 31 at 11-12. Janvey
involved a multi-million dollar fraud that harmed investors who made investments in a Ponzi
scheme based in and operated out of Houston, Texas. 2015 WL 10459614 at *6. The court held
that there was a direct effect in the United States because the sovereigns foreign investments
helped to keep [the] scheme afloat. Id. Harm to investors that were defrauded in Houston,
Texas, is plainly a direct effect in the United States. Similarly, in Republic of Argentina v.
Weltover, Inc., 504 U.S. 607 (1992), the Court held there was a direct effect in the United States
because the place of payment for the breached contract was in New York. D.I. 31 at 11. Both of
these cases stand in stark contrast to the harm alleged in this case i.e., the alleged frustration of
a potential, future judgment in the United States which the Second Circuit squarely held in
Kensington does not satisfy the direct effect test because a judgment does not have a place of
performance.
Crystallex argues that, even if it suffered no injury in the United States, the direct
effect does not need to be on the plaintiff, citing Cruise Connections Charter Mgmt. 1, LP v.
Attorney Gen. of Canada, 600 F.3d 661 (D.C. Cir. 2010). In the first instance, that point is
irrelevant because Crystallex can point to no effect in the United States that is a direct effect.
Moreover, the plaintiff in Cruise Connections was a United States company, and the claimed direct

While Crystallexs brief is unclear on this point, any suggestion that the FSIAs arbitration exception, 28
U.S.C. 1605(a)(6), is relevant to the direct effect analysis is flat wrong. D.I. 31 at 12 & n.6. Section
1605(a)(6) provides an exception to sovereign immunity in an action to confirm an award, which of
course this is not. Indeed, Crystallex chose not to include PDVSA in its action to enforce its award which
it commenced against Venezuela in the District of Columbia.
4

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 11 of 15 PageID #: 934

effect was the cancellation of a contract that caused it to lose millions of dollars in revenue on
related subcontracts with other United States-based companies. 600 F.3d at 662, 664-65. There
was no question that the direct effect in that case was harm to the plaintiff in the United States.5
Only Kensington speaks directly to the question before this Court. Because a
judgment has no place of performance, acts allegedly taken to frustrate the enforcement of that
judgment in the United States cannot, as a matter of law, satisfy the direct effect test. The third
clause of the commercial activity exception is therefore not available in this case.
II.

There Is No Personal Jurisdiction


Crystallex does not dispute that its failure to establish subject matter jurisdiction

under the FSIA also mandates dismissal of the action for lack of personal jurisdiction. D.I. 31 at
13 n.7; see also D.I. 28-2 at 16-17.
III.

The Complaint Should Be Dismissed for Failure to State a Claim


PDVSAs Moving Brief established that courts lack the authority to order a foreign

sovereign or its instrumentality to return property to the United States. D.I. 28-2 at 17-18. The
courts have held that such an order is the functional equivalent of an attachment or arrest of the
property. See, e.g., Thai Lao Lignite (Thailand) Co. v. Govt of Lao Peoples Democratic
Republic, No. 10-cv-5256, 2013 WL 1703873, at *34 (S.D.N.Y. Apr. 19, 2013). And, because
the power of a U.S. court is limited to assets of a foreign state in the United States, it lacks the
authority to order the return of property outside the United States. Peterson v. Islamic Republic of
Iran, No. 13-CV-9195, 2015 WL 731221, at *10 (S.D.N.Y. Feb. 20, 2015); Dussault v. Republic

The majority of circuits to consider the issue all agree that, absent a direct effect on the plaintiff, an effect
on third parties does not constitute a direct effect in the United States. See, e.g., Gen. Elec. Capital Corp.
v. Grossman, 991 F.2d 1376, 1386 (8th Cir. 1993); Corzo v. Banco Central de Reserva del Peru, 243 F.3d
519, 525-26 (9th Cir. 2001); World Trade, Inc. v. Mangyshlakneft Oil Prod. Assn, 33 F.3d 1232, 1234-38
(10th Cir. 1994).

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 12 of 15 PageID #: 935

of Argentina, No. 06-cv-13085, slip op. at 6-7 (S.D.N.Y. Oct. 27, 2014) [a courtesy copy is
appended hereto as Exhibit A pursuant to Local Rule 7.1.3(a)(7)]; Aurelius Capital Partners, LP
v. Republic of Argentina, No. 07-cv-11327, 2010 WL 768874, at *4 (S.D.N.Y. Mar. 5, 2010).
While Crystallex makes a half-hearted attempt to avoid the law on this issue, it does not argue this
Court has the power to order the injunctive relief it requests, and it does not cite any case in which
a court ordered a foreign sovereign or its instrumentality to transfer assets to the United States.
Research has revealed none.
Crystallex therefore focuses instead on securing a money judgment against
PDVSA. D.I. 31 at 19. In so doing, Crystallex is attempting to evade the FSIAs substantive
provisions that afford PDVSA with the absolute freedom to transfer or dispose of its property prior
to judgment.
Crystallex begins with the incorrect premise that the FSIA does not preclude its
DUFTA claim because [t]he FSIA determines jurisdiction; it has no effect on substantive causes
of action. D.I. 31 at 14. However, the FSIA grants immunity with respect to a sovereigns
property, and expressly preempts state law that purports to restrain a sovereigns freedom to
transfer or dispose of its assets. Stephens v. Natl Distillers & Chem. Corp., 69 F.3d 1226, 1232
(2d Cir. 1995) (The FSIAs language . . . supports the interpretation that it means to preempt state
law.); see also Odyssey Marine Expl., Inc. v. Unidentified Shipwrecked Vessel, 657 F.3d 1159,
1179 (11th Cir. 2011) (preempting federal common law rules affecting a sovereigns property). In
addition to preempting state law expressly, the FSIA also does so implicitly in setting forth a
comprehensive set of legal standards, preempting other laws purporting to set forth different rules
for suits against foreign sovereigns. Stephens, 69 F.3d at 1227 (internal quotation marks omitted)
(citing Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 488 (1983) and Argentine Republic

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 13 of 15 PageID #: 936

v. Amerada Hess Shipping Corp., 488 U.S. 428, 437-38 (1989)); see also id. at 1232-33 (citing
Verlinden, 461 U.S. at 493 (Actions against foreign sovereigns in our courts raise sensitive issues
concerning the foreign relations of the United States, and the primacy of federal concerns is
evident.)).
Conflict preemption is also evident. The FSIA would not have allowed Crystallex
to obtain an order under DUFTA enjoining the CITGO Defendants from paying a dividend to
PDVSA while Crystallex sought a judgment against PDVSA asserting that the dividend payment
was a fraudulent transfer. Yet Crystallex is seeking to impose liability against PDVSA for doing
exactly what Congress determined is protected conduct under the FSIA. Crystallexs argument to
the contrary that Congress did not intend to provide such immunity to foreign sovereigns,
particularly when they own U.S. businesses has been repeatedly rejected. See, e.g., Fed. Ins., 12
F.3d at 127879, 1291 (the possibility a foreign state would be using the FSIA to avoid liability
as a defendant, while simultaneously reaping the benefits of U.S. law through its investment in
[U.S.] subsidiaries had no bearing on the application of the FSIA); Raji v. Bank Sepah-Iran, 495
N.Y.S.2d 576, 583 n.2 (N.Y. Sup. Ct. 1985) (foreign sovereign entities may, with impunity,
remove assets from the jurisdiction).6
Crystallex is therefore reduced to arguing that it does not seek a prejudgment
remedy, because the relevant judgment is the one it hopes to obtain in this action. D.I. 31 at 1617. But, in fact, the relevant judgment is not a potential judgment in this case. It is the judgment

Crystallexs assertion that the prohibition on prejudgment attachment was designed only to dispense with
in rem and quasi in rem jurisdiction in actions against foreign states is both irrelevant and wrong. It is
irrelevant because it has no bearing on the fact of the immunity conferred under the FSIA. And it is wrong
because the FSIA both confers immunity from prejudgment attachment in the absence of an explicit waiver
and provides that, where there is such a waiver, the attachment cannot be for jurisdictional purposes. 28
U.S.C. 1610(d). If Crystallex were correct, only the latter part of the provision would have been
necessary.
6

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 14 of 15 PageID #: 937

Crystallex seeks in the District of Columbia in its attempt to enforce its arbitral award against
Venezuela; a judgment it has not yet obtained and may never obtain.7 That is the entire predicate
for its DUFTA claim. Without that judgment, Crystallex can obtain no relief in this Court. The
FSIA prohibits any injunctive relief with respect to future transfers. D.I. 28-2 at 19 n.10. It
prevents this Court from ordering a return of the funds transferred out of the country. And there
is no basis for a money judgment because, in the absence of a judgment on its arbitral award,
Crystallex has suffered no damage.8
This action is a transparent attempt by Crystallex to circumvent the FSIAs
prohibition on prejudgment attachment through the guise of an action for fraudulent conveyance.
In effect, Crystallex is using this proceeding as a prejudgment remedy with respect to the pending
action to enforce the arbitral award. And it does so because it realizes that such a prejudgment
remedy, against either PDVSA or Venezuela, is not available in that action. Crystallex seeks two
bites at the apple. Its only permitted course of action is to seek its judgment on the award and
then, if successful, litigate the issue of whether Venezuela has any property available for execution
of that judgment, including whether property it alleges belongs to PDVSA is available to satisfy
that judgment based on some alter ego theory. But it cannot short-circuit that process through its
purported DUFTA claim.

Of course this assumes the validity of Crystallexs assertion that PDVSA is liable on such a judgment,
something Crystallex has studiously avoided arguing in its enforcement action in the district court of the
District of Columbia.
7

Research has revealed no case in which a plaintiff has successfully obtained a money judgment against a
debtor-transferor for a fraudulent conveyance in advance of obtaining a judgment on the underlying
obligation.

10

Case 1:15-cv-01082-LPS Document 32 Filed 09/02/16 Page 15 of 15 PageID #: 938

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
Samuel T. Hirzel, II (#4415)
300 Delaware Avenue, Suite 200
Wilmington, DE 19801
(302) 472-7300
SHirzel@proctorheyman.com
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

Attorney for the Defendant Petrleos de Venezuela,


S.A.

Dated: September 2, 2016

11