Cimontubo - Tubagens E Soldadura, LDA v. Petroleos De Venezuela, S.A.

Background

Cimontubo, a private limited-liability company organized under Portuguese law, held a promissory note executed by Petroleos de Venezuela, S.A. (PDVSA) for $35,720,631.43. The note required principal and interest payments through December 22, 2019 and provided for 8.5% default interest on overdue amounts. The note agreement was governed by New York law.

PDVSA Petroleo, S.A., a subsidiary of PDVSA organized under Venezuelan law, guaranteed the obligations. The guarantee made PDVSA Petroleo jointly and individually responsible for the guaranteed obligations, including collection costs and attorneys’ fees.

PDVSA made four interest payments, the last on January 18, 2018. Cimontubo stated that it received no further payments. Cimontubo sent several default and acceleration notices in November and December 2019, but the defendants did not cure the nonpayment. Cimontubo asserted that $38,330,317.15 was due under the note and note agreement, plus $1,803,100.12 in default interest.

Procedural History and Discovery Request

Cimontubo originally filed a motion for summary judgment in lieu of a complaint in New York state court under New York Civil Practice Law and Rules § 3213. The defendants removed the case to the Southern District of New York. After removal, the court treated the motion as one under Federal Rule of Civil Procedure 56.

The defendants filed a motion under Rule 56(d), which permits a party to seek time for discovery needed to respond to summary judgment. They argued that the Nicolas Maduro government had taken control of Venezuelan government entities from the Juan Guaidó government, which the United States recognized, and that they therefore lacked access to documents and personnel. They sought evidence from Portuguese banks to determine whether U.S. sanctions or restrictions on transferring PDVSA funds through the United States made payment impossible.

The court previously granted in part and denied in part the defendants’ request for discovery, allowing discovery from Banco Espírito Santo and Banco BIC concerning attempted wire transfers that were not honored. Banco BIC later produced an email stating that it had found no transfers from PDVSA to Cimontubo that had been analyzed and refused. The opinion states that the defendants did not provide an update about any further discovery from Novo Banco as of the decision date.

Summary-Judgment Ruling

Summary judgment is appropriate when there is no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law. Under New York law, a plaintiff seeking payment on a promissory note generally must show the note and the failure to pay. A plaintiff suing a guarantor must show the guarantee, the underlying debt, and the guarantor’s failure to perform. The defendant must then present a genuine factual dispute supported by a valid defense.

Judge George B. Daniels held that Cimontubo met this initial burden. The plaintiff established the note agreement, promissory note, and PDVSA Petroleo’s guarantee. The defendants did not challenge the validity of those documents or their obligations. The court also found that Cimontubo sufficiently showed PDVSA’s failure to pay and PDVSA Petroleo’s failure to perform its guarantee obligations.

The defendants argued that payment was impossible because of U.S. government restrictions on transferring PDVSA funds through the United States. The court found that the defendants had not produced evidence creating a genuine factual dispute about impossibility. The evidence obtained from Banco BIC was inconsistent with that defense because the bank found no rejected transfers from PDVSA to Cimontubo. The court therefore granted Cimontubo’s motion for summary judgment.

Damages, Fees, and Interest

The court held that New York law entitled Cimontubo to pre-judgment interest on the contract damages and that federal law made post-judgment interest mandatory. In the conclusion, the court awarded Cimontubo $40,133,417.27 in damages, attorneys’ fees, costs, and pre- and post-judgment interest against PDVSA and PDVSA Petroleo jointly and severally. The court referred the determination of attorneys’ fees, costs, and interest to Magistrate Judge Gabriel W. Gorenstein for an inquest.