Petroleos De Venezuela S.A. v. MUFG Union Bank, N.A.
- Katherine Failla
- 1:19-cv-10023
- U.S. District Court · Southern District of New York
- 7
In Petroleos De Venezuela S.A. v. MUFG Union Bank, N.A., Judge Failla granted PDV Holding’s motion to pause enforcement of parts of the judgment during appeal.
PDV Holding, Inc. received a stay of enforcement without posting a bond or additional security. MUFG Union Bank, N.A., GLAS Americas LLC, the Trustee and Collateral Agent, specified holders or owners of the 2020 Notes, and other parties claiming interests in the Notes or the Pledged Shares were barred from taking the covered enforcement actions during the stay.
What happened
In Petroleos De Venezuela S.A. v. MUFG Union Bank, N.A., PDV Holding asked the court to pause enforcement of parts of a judgment that authorized the sale of its majority stake in CITGO while its appeal was pending.
PDV Holding relied mainly on a federal rule allowing a stay when a party provides a bond or other security. The defendants opposed the request and argued that the pledge agreement allowed immediate foreclosure and sale of the collateral.
Judge Katherine Polk Failla granted PDV Holding’s motion. She ruled that the pledge agreement itself provided adequate security, so PDV Holding did not need to post a bond or additional security, and she barred enforcement of the covered judgment provisions and related rights under the pledge agreement during the appeal.
The detailed version
- Petroleos De Venezuela S.A. v. MUFG Union Bank, N.A. · No. 1:19-cv-10023
- Katherine Failla
- Dec. 29, 2020
Background
PDV Holding, Inc. ("PDVH") moved for a partial stay, meaning a temporary pause, of enforcement of the Court’s December 1, 2020 Final Judgment while Plaintiffs’ appeal was pending in the United States Court of Appeals for the Second Circuit. The Final Judgment authorized enforcement steps concerning the Pledge Agreement and the sale of PDVH’s majority stake in CITGO, referred to as the Pledged Shares. The opinion also states that the Final Judgment awarded Defendants approximately $1.924 billion in monetary damages.
The defendants opposed the motion. The Court recognized their position that the Indenture and Pledge Agreement contemplated immediate nonjudicial foreclosure and an eventual sale of the collateral after an Event of Default. The Court concluded that allowing those actions during the appeal could effectively make the appeal meaningless.
Rules and Analysis
PDVH relied primarily on Rule 62(b) of the Federal Rules of Civil Procedure, which allows a party to obtain a stay after judgment by providing a bond or other security. It alternatively relied on Rule 62(f), which can incorporate certain state-law rights to a stay without a bond.
The Court rejected PDVH’s Rule 62(f) argument. It concluded that the New York-law provision cited by PDVH did not apply because the relevant portions of the Final Judgment did not direct a party to perform an act and were not executory.
The Court granted relief under Rule 62(b). It held that the Pledge Agreement was sufficient "other security" because it ensured that the Pledged Shares would remain in their current form during the appeal. After considering the relevant factors, the Court found that no additional security was necessary. The Court also stated that it could use its equitable powers to preserve the existing situation while an appeal was pending.
Order and Effect
The Court granted PDVH’s motion. From December 29, 2020, through issuance of a mandate resolving the appeal, enforcement of all portions of the Final Judgment concerning the Pledge Agreement was stayed. The stayed provisions included the judgment for the Trustee and Collateral Agent on their Third and Fifth Counterclaims; declarations that the Pledge Agreement was valid and enforceable and that the Trustee and Collateral Agent could exercise its default remedies and sell the collateral; and provisions allowing recovery of additional amounts or enforcement of the Pledge Agreement.
PDVH was not required to post a bond or additional security. During the stay, the defendants, certain persons acting with them who received notice, owners or holders of the 2020 Notes or interests in them, and other parties claiming interests in the Notes or security interests in the Pledged Shares were barred from enforcing the stayed portions of the Final Judgment. MUFG Union Bank, N.A., GLAS Americas LLC, and the specified interested parties were also barred from enforcing the Pledge Agreement or exercising claimed default remedies, including attempting to sell the collateral. The order remained in effect until final disposition of the appeal, unless superseded by another order of this Court or a higher court.
Read the full 7-page opinion on CourtListener, the free public archive maintained by the Free Law Project.