White Beech SNC, LLC v. Petroleos De Venezuela, S.A.

Background

White Beech SNC, LLC brought this action against Petróleos de Venezuela, S.A. (PDVSA), the issuer of a senior guaranteed note, and PDVSA Petróleo, S.A., the guarantor. The complaint sought to enforce a note and guarantee for $25,001,065.96, plus interest. The note was originally issued to SNC-Lavalin International Co. Inc., which assigned its interest to White Beech. The agreement provided for a 6.5% interest rate, increasing to 8.5% after a payment default, and stated that the guarantor would be jointly and severally liable for payment.

White Beech alleged that the defendants failed to make a required payment on January 4, 2018. After written notice of default and the passage of the five-day period described in the agreement, SNC-Lavalin declared the unpaid principal and accrued interest immediately due. White Beech filed this action on May 9, 2018.

Judge Paul Gardephe stayed the case on February 6, 2019, after Executive Order 13850 resulted in OFAC designating PDVSA as a specially designated national. The order blocked certain PDVSA property and prohibited United States persons from receiving funds from PDVSA and its subsidiary. Discovery had already closed, and the parties had been discussing settlement when the stay halted further activity.

Motion to Lift the Stay

After the case was reassigned to Judge Jeannette A. Vargas, the parties disagreed about whether the stay should continue. White Beech requested that the case proceed to summary judgment. The defendants requested that the stay remain in place, citing the recent inauguration of President Donald J. Trump and a desire for greater clarity about the Executive Branch’s foreign policy toward Venezuela.

The court applied five factors used to decide whether continuing a stay serves efficient judicial administration and avoids unfair prejudice: the plaintiff’s interest in proceeding, the defendants’ interests and burden, the court’s interests, the interests of nonparties, and the public interest.

Court’s Analysis

The court held that the first factor favored lifting the stay because the original reason for the stay—the Executive Order and related sanctions concerns—no longer justified keeping the case suspended. The court relied on an Office of Foreign Assets Control clarification stating that a license was not required to initiate or continue United States legal proceedings against a person designated or blocked under the Venezuela sanctions regulations, or for a United States court to hear such a case.

The court also concluded that an indefinite stay would unfairly prejudice White Beech because the case had already been delayed for years. The defendants had not supplied legal authority explaining why the stay should continue. The court found that the second factor also favored lifting the stay because comparable cases had been allowed to proceed and lifting the stay did not appear to impose a substantial burden on the defendants. The remaining factors were either neutral or favored lifting the stay.

Disposition

The court GRANTED White Beech’s Motion to Lift the Stay. It directed the Clerk of Court to terminate the stay and terminate the motion at ECF No. 43. The parties were ordered to submit, within one week, a letter proposing a briefing schedule for White Beech’s summary-judgment motion. The opinion did not decide whether White Beech was entitled to recover under the note or guarantee.