Pharo Gaia Fund, Ltd. v. Petroleos de Venezuela, S.A.
- Jed Rakoff
- 1:23-cv-10071
- U.S. District Court · Southern District of New York
- 10
In Pharo Gaia Fund v. Petroleos de Venezuela, Judge Rakoff entered default judgment for noteholders after PDVSA failed to respond, awarding damages and authorizing alternative service.
Pharo Gaia Fund, Ltd., Pharo Macro Fund, Ltd., and Pharo Trading Fund, Ltd. obtained default judgment against PDVSA for unpaid amounts under four series of notes. PDVSA was held liable for the specified damages, 9% prejudgment interest, and attorneys’ fees, and the plaintiffs were authorized to use alternative service by certified mail.
What happened
Pharo Gaia Fund, Ltd. v. Petroleos de Venezuela, S.A. involved three plaintiffs who held beneficial interests in four series of notes issued by PDVSA. The plaintiffs said PDVSA had failed to make required interest and principal payments and sought a judgment because PDVSA did not respond to the lawsuit.
The court found that the plaintiffs properly served PDVSA under the Foreign Sovereign Immunities Act, that PDVSA had waived sovereign immunity for suits concerning its obligations under the notes, and that PDVSA breached the contracts. The court granted the plaintiffs’ motion for default judgment and awarded specified principal and interest damages, plus 9% prejudgment interest and attorneys’ fees.
Judge Jed S. Rakoff also granted the plaintiffs’ request to serve the judgment, complaint, and summons by certified mail, with certified Spanish translations, at specified addresses for PDVSA and related recipients. The opinion does not state the final amounts of prejudgment interest or attorneys’ fees.
The detailed version
- Pharo Gaia Fund, Ltd. v. Petroleos de Venezuela, S.A. · No. 1:23-cv-10071
- Jed Rakoff
- Mar. 4, 2024
Background
Pharo Gaia Fund, Ltd., Pharo Macro Fund, Ltd., and Pharo Trading Fund, Ltd. held beneficial interests in four series of notes issued by Petroleos de Venezuela, S.A. (PDVSA). The plaintiffs moved for default judgment under Federal Rule of Civil Procedure 55, the Southern District of New York’s local rules, and the Foreign Sovereign Immunities Act (FSIA), which governs lawsuits against foreign states and their agencies or instrumentalities.
Service and Default
The court found that PDVSA is an agency or instrumentality of Venezuela and that the notes and related indentures created a special arrangement for serving legal papers. Those documents identified Corporation Service Company as the authorized agent for two note series and CT Corporation as the authorized agent for the other two. The plaintiffs served those entities after filing the complaint. Each entity later stated that it could not accept service for PDVSA or was not PDVSA’s registered agent.
The court nevertheless concluded that the plaintiffs complied with the contractual service arrangement and the FSIA because PDVSA had irrevocably appointed those agents and had not appointed successors in New York. PDVSA’s response was due no later than January 29, 2024, but PDVSA did not plead or otherwise defend the action. The clerk entered a certificate of default on February 21, 2024.
Sovereign Immunity and Liability
The FSIA generally protects foreign states and their instrumentalities from jurisdiction in U.S. courts, subject to statutory exceptions. The court found an applicable exception because PDVSA expressly waived sovereign immunity in the notes and indentures for suits concerning its obligations under those documents. The court therefore determined that it had jurisdiction over the plaintiffs’ suit.
The court also found that the noteholders of record had authorized the plaintiffs to bring the claims, giving the plaintiffs contractual standing. Applying New York law, the court concluded that the notes were valid contracts, the plaintiffs had performed their obligations, PDVSA had failed to make required payments, and the plaintiffs had suffered damages. The court held that PDVSA breached the notes.
The court found that PDVSA failed to make interest payments on the 6.00% 2024 Notes on dates from November 2017 through November 2023, and failed to make installment principal payments on those notes due in May 2022 and May 2023. It also found missed interest payments on the 6.00% 2026 Notes, the 5.375% 2027 Notes, and the 5.50% 2037 Notes on the dates listed in the opinion.
Damages
The court determined that PDVSA was liable for the following amounts, in addition to 9% prejudgment interest under New York Civil Practice Law and Rules § 5004 and attorneys’ fees:
- Pharo Gaia: $136,666,666.67 for missed principal installments and $79,950,000 for missed interest on the 6.00% 2024 Notes. - Pharo Macro: $23,445,133.33 for missed principal installments and $13,715,403 for missed interest on the 6.00% 2024 Notes. - Pharo Trading: $11,888,200 for missed principal installments and $6,954,597 for missed interest on the 6.00% 2024 Notes. - Pharo Trading: $4,485,000 for missed interest on the 6.00% 2026 Notes. - Pharo Macro: $1,074,666.75 for missed interest on the 5.375% 2027 Notes. - Pharo Trading: $537,833.25 for missed interest on the 5.375% 2027 Notes. - Pharo Macro: $2,640,000 for missed interest on the 5.50% 2037 Notes. - Pharo Trading: $1,320,000 for missed interest on the 5.50% 2037 Notes.
Alternative Service and Disposition
The court granted the plaintiffs’ request to use an alternative method of service under FSIA § 1608(b)(3). It authorized service of the default judgment, complaint, and summons, together with certified Spanish translations, by certified mail sent by the clerk to PDVSA at the address in the notes and indentures, to Horacio Francisco Medina Herrera at an address identified in his Foreign Agents Registration Act filings, and to PDVSA’s Ad Hoc Board at the address identified in those filings.
Judge Jed S. Rakoff granted the plaintiffs’ motion for default judgment. The opinion does not state the final amounts of prejudgment interest or attorneys’ fees.
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.