Casa Express Corp v. Bolivarian Republic of Venezuela

Background

These related cases concern three series of Venezuelan bonds issued in 1998, 2001, and 2009. The 1998 and 2001 bonds matured on August 15, 2018, and the 2009 bonds matured on October 13, 2019. Venezuela failed to make required interest payments and failed to pay the principal when each series matured. Casa Express, Pharo Macro, and Pharo Gaia were beneficial owners of the bonds and were authorized by the registered holder to sue.

The bond agreements waived Venezuela’s sovereign immunity for claims arising from the bonds, consented to suit in the Southern District of New York, and provided that New York law would govern. Venezuela represented that Venezuela’s political and economic crisis prevented it from litigating or paying judgments and that it intended to seek a future restructuring of its financial obligations.

Motion to Stay

Venezuela asked the court to stay, or pause, the litigation until democratic rule was restored in Venezuela and the parties could attempt to negotiate a debt restructuring. The court considered the interests of the plaintiffs, Venezuela, the courts, nonparties, and the public, along with principles of international respect for foreign governmental acts and proceedings.

The court concluded that the requested stay would be indefinite because it depended on political developments, stabilization, and a future restructuring process with no definite end date. The delay would significantly prejudice the plaintiffs, would not use judicial resources efficiently while summary judgment was ready for decision, and would improperly put the plaintiffs’ rights on hold. The court also found that United States sanctions policy did not prevent litigation of existing claims, even though it could restrict later efforts to transfer or seize blocked Venezuelan property. The court held that the asserted international-law defenses and Venezuela’s inability to pay did not require postponing the determination of the parties’ rights.

The court therefore DENIED Venezuela’s motion for a stay.

Summary Judgment

The court held that the undisputed facts established the plaintiffs’ claims. Under the Foreign Sovereign Immunities Act, a foreign state is generally immune from suit but may expressly waive that immunity. The court found that Venezuela expressly waived immunity in the fiscal agency agreements, so the court had jurisdiction over the claims.

The court also found that the plaintiffs had contractual standing because they were beneficial owners authorized by the registered bondholder to sue. Venezuela had failed to make the payments required by each bond series, and it had not presented a defense to liability. Because a bond is a contract, the payment failures constituted breaches of contract under New York law.

The court therefore GRANTED the plaintiffs’ motion for summary judgment on their breach-of-contract claims.

Damages and Interest

The court accepted the undisputed damages calculations and awarded:

- Casa Express: $36,921,587.50; - Pharo Macro: $217,380,625; and - Pharo Gaia: $136,380,625.

The awards also included the value of additional unpaid post-maturity interest payments between the date of the summary-judgment motion and the date of judgment. Applying New York law, the court held that 9% prejudgment interest applied to each missed interest payment, running from when the payment was due until judgment. The court rejected Venezuela’s argument that federal jurisdiction under the Foreign Sovereign Immunities Act prevented application of New York law to prejudgment interest.

Requested Fraud-Prevention Restrictions and Further Proceedings

Venezuela asked the court to impose a mechanism preventing alleged errors or fraud if the plaintiffs transferred their beneficial interests in the bonds after obtaining judgment. The court declined to impose those restrictions because Venezuela cited no authority requiring them and gave no reason to believe the plaintiffs would engage in the proposed conduct.

The court ordered the plaintiffs to submit proposed judgments by October 7, 2020, and their attorney-fee motions by October 30, 2020. The order did not itself state that final judgments had already been entered.