Lovati v. Petroleos De Venezuela, S.A.

Background

The plaintiffs brought a breach-of-contract case alleging that Petróleos de Venezuela, S.A. (PDVSA) failed to make payments due on notes they owned. PDVSA moved for letters of request and letters rogatory—formal requests for assistance in obtaining evidence from entities outside the United States—from eight non-party financial institutions in seven countries.

PDVSA sought information concerning ownership and authorization records for the notes, payments made or attempted under the notes, and whether banking policies connected to U.S. sanctions caused attempted payments to be rejected. PDVSA said the information was relevant to its affirmative defenses, including lack of standing or authorization to sue, impossibility, payment, release, waiver, ratification, and preclusion based on the notes.

Parties’ Arguments

The plaintiffs argued that the discovery was untimely because PDVSA had not previously identified the eight institutions or sought permission to serve these requests during earlier motion practice. They also argued that the discovery was irrelevant because the court had previously found that they adequately alleged standing and because, in their view, the sanctions did not apply to debt issued before August 2017. The plaintiffs asked the court to impose strict time limits if it granted the motion.

PDVSA responded that it filed the motion only 11 days after the scheduling order was entered and that the requested information could still support its defenses concerning authorization, standing, impossibility, and payment.

Court’s Analysis

The court applied Federal Rule of Civil Procedure 26’s discovery principles. It explained that a party seeking letters rogatory or letters of request must make a reasonable showing that the evidence may be material or may lead to material evidence. The burden is not heavy, and once that showing is made, the opposing party generally must show a good reason not to issue the requests.

The court found the requests relevant to PDVSA’s defense that the plaintiffs had not obtained the registered holder’s authorization to enforce the notes. Although an earlier ruling had found that the plaintiffs adequately alleged constitutional standing and recognized that they were beneficial owners, the court stated that whether the plaintiffs had authorization from the registered holder had not yet been decided. The court therefore allowed discovery concerning that issue.

The court also held that PDVSA’s impossibility defense was not barred as a matter of law at that stage. Whether the sanctions applied to the relevant payment obligations required a fact-specific examination of the agreements and any later alterations, rather than a decision based solely on when the notes were issued. The court further stated that PDVSA’s results in other cases and its asserted lack of access to its own records did not conclusively prevent it from developing the defense through third-party evidence.

The court rejected the plaintiffs’ timeliness objection. The parties’ discovery conference occurred on January 31, 2022, the scheduling order was entered on February 4, 2022, and PDVSA filed its motion on February 15, 2022. Because the motion was filed less than two weeks after discovery formally began and more than four months before the fact-discovery deadline, the court concluded that the request was not too late.

Disposition

The motion was granted. The court did not impose the plaintiffs’ requested strict deadlines because no application to extend the discovery schedule was pending; it described that request as premature. The court directed PDVSA to avoid repetition and undue delay, revise the proposed requests as necessary to prevent duplication of requests made in other proceedings, and clarify that it sought only information not already being produced. PDVSA was ordered to file updated letters for signature within seven days, and the clerk was directed to close and mark Docket No. 80 as granted.