Lovati v. Bolivarian Republic of Venezuela

Background

Rudi Lovati and Alessandro Lucibello Piani owned bonds issued by the Bolivarian Republic of Venezuela. The bonds were issued under two fiscal agency agreements: the 2001 agreement covered bonds maturing in 2023 with a 9% annual coupon rate, and the 1997 agreement covered bonds maturing in 2027 with a 9.25% annual coupon rate. The bonds required Venezuela to make interest payments on fixed schedules until maturity.

The bondholders alleged, and submitted evidence showing, that Venezuela had not made required interest payments beginning in 2017. They gave written notice of the alleged defaults to Venezuela’s fiscal agents and to Venezuela. The actions asserted four breach-of-contract claims involving the 2023 and 2027 bonds. Sergio Lovati and Alessandra Sarago Lovati were dismissed from the actions after transferring their bond holdings to Rudi Lovati.

Motions and Applicable Standard

The bondholders moved for summary judgment under Federal Rule of Civil Procedure 56. Summary judgment is entered when the evidence shows that there is no genuine dispute about a fact that could affect the result and that the moving party is entitled to judgment under the law. Although Venezuela did not oppose the motion, the court independently reviewed whether the bondholders were entitled to judgment as a matter of law. The opinion also states that Venezuela waived sovereign immunity under the bonds and consented to the court’s jurisdiction.

The court granted Venezuela’s motion to file a sur-reply because the bondholders raised new issues in their reply brief.

Liability

The court held that the bondholders were entitled to summary judgment on their breach-of-contract claims. Applying New York law, the court explained that a breach-of-contract claim requires a contract, a breach by the other party, and resulting damages. The undisputed evidence showed that the bondholders held the bonds, that the bonds required scheduled coupon payments, that Venezuela failed to make the required payments, and that the bondholders suffered damages. The court therefore found Venezuela liable for breach of contract.

Damages

The court found that the bondholders could recover $150,484,258.40 in damages, including prejudgment interest, calculated as of December 31, 2022. It also awarded $15,022.21 per day until final judgment was entered. The damages calculation was based on the parties’ agreed computation described in Venezuela’s response papers.

Requests Not Decided at That Time

Venezuela asked the court to include language in the final judgment restricting the bondholders’ ability to transfer their interests in the bonds without court approval. The bondholders consented to including that language, but neither side had submitted a proposed judgment. The court allowed the parties to submit one for consideration.

The bondholders also asked for a declaration concerning the calculation of damages for future defaults under the bonds. The court declined to address that request at that time because it was raised for the first time in reply papers, was not included as a claim in the complaint, and went beyond the scope of the summary-judgment motion. The court stated that the bondholders could raise further issues within the scope of a proposed judgment through a new motion if necessary.

The court likewise declined to consider the bondholders’ request for attorney’s fees at that time. That request was first raised in the reply, did not seek a specific amount, and lacked supporting affidavits or other evidence.

Disposition

Judge Andrew L. Carter, Jr. granted the bondholders’ motion for summary judgment. He directed the bondholders to file a proposed judgment by March 14, 2023, allowed Venezuela to object by letter motion by March 17, 2023, and allowed the bondholders to reply by March 21, 2023. The clerk was directed to docket the opinion and order in both related cases and terminate the specified pending motions.