Refineria di Korsou N.V. v. Petroleos De Venezuela S.A.

Background

Refineria di Korsou N.V. (RDK) sued Petroleos De Venezuela S.A. (PDVSA) in New York state court for alleged breach of a contract concerning PDVSA’s lease of RDK’s refinery facility in Curaçao. RDK alleged $51,285,172.46 in damages. PDVSA did not appear in the state-court case, and RDK obtained a default judgment.

PDVSA removed the case to the federal court under the Foreign Sovereign Immunities Act and moved to vacate the state-court default judgment and dismiss the complaint with prejudice. PDVSA argued that RDK had not properly served it and that the state court lacked subject-matter and personal jurisdiction.

Agreement and Jurisdiction

The parties’ dealings were governed by a utilities service agreement dated March 27, 1998. That agreement required the parties to execute a guaranty. The guaranty included a New York forum-selection clause and a New York choice-of-law clause, and it provided a method for serving process.

The guaranty referred to a utilities service agreement dated April 22, 1998, rather than the March 27, 1998 agreement. The court treated the discrepancy as a clerical error because neither party produced or asserted that an April 22 agreement existed. The court held that the March 27 agreement governed. It further held that PDVSA had waived sovereign immunity, agreed to a method of service, and subjected itself to litigation in New York under New York law. The court therefore concluded that the New York state court had subject-matter and personal jurisdiction over PDVSA.

Service of Process

The guaranty called for service by registered or certified mail to PDVSA’s address in Caracas, with service effective 30 days after mailing. The opinion states that compliance was impossible during the COVID-19 pandemic because postal carriers were not delivering registered or certified mail to Venezuela, and the delivery agent later found PDVSA’s offices vacant.

The New York state court authorized alternative service. RDK emailed the complaint and summons to PDVSA’s attorneys on two consecutive days, sent hard copies by Federal Express to attorneys representing PDVSA in its arbitrations with RDK, and called counsel to report the service efforts.

The court explained that the Foreign Sovereign Immunities Act allows service by mailing the summons and complaint to an officer, managing agent, or other legally authorized agent when the statute’s other service methods cannot be used. The court applied the substantial-compliance standard, under which service need not be perfect if the defendant received actual notice. It found that PDVSA had actual notice because, during a related arbitration, PDVSA sought an order preventing RDK from continuing the New York litigation.

Ruling

The court held that RDK properly served PDVSA and that the New York state court properly heard the case. It ruled that the state-court default judgment was valid. The court denied PDVSA’s motion to vacate the state-court judgment and dismiss the case with prejudice. It also stated that no other basis for relief under Rule 60 of the Federal Rules of Civil Procedure had been shown and that the default judgment in RDK’s favor could be enforced.

Classification Note

This is a procedural order because the court ruled on service, jurisdiction, and the validity of a default judgment rather than deciding whether PDVSA actually breached the contract.