Crystallex International Corp. v. Petroleos de Venezuela, S.A. et al
MEMORANDUM AND ORDER granting 41 REQUEST for Certification of Direct Appeal to the U.S. Court of Appeals for the Third Circuit filed by CITGO Holding, Inc., PDV Holding, Inc., Petroleos de Venezuela, S.A. The Court's 09/30/16 Order (D.I. 35 ) is AMENDED. Parties shall submit a Joint Status Report no later than January 4, 2017. Signed by Judge Leonard P. Stark on 12/27/16. (etg)
IN THE UNITED ST ATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CRYSTALLEX INTERNATIONAL CORP.,
Civil Action No. 15-1082-LPS
PETROLEOS DE VENEZUELA, S.A. and PDV
At Wilmington this 27th day of December, 2016:
Pending before the Court is defendant PDV Holding, Inc.'s ("PDVH") request for
certification of an interlocutory appeal pursuant to 28 U.S.C. § 1292(b). (D.I. 41) For the
reasons given below, IT IS HEREBY ORDERED that PDVH's motion (D.1. 41) is
Plaintiff Crystallex International Corporation ("Crystallex") filed its Complaint on
November 23, 2015. (D.I. 1) Crystallex alleges that defendant Petr6leos de Venezuela, S.A.
("PDVSA") is an alter ego of the Bolivarian Republic of Venezuela ("Venezuela"). The
Complaint accuses PDVSA of carrying out a scheme to monetize and repratriate Venezuelan
interests that had been held in the United States in order to evade potential arbitration creditors.
Crystallex seeks relief under Delaware's Uniform Fraudulent Transfer Act, 6 Del. C. § 1301 et
seq. ("DUFTA"). (See generally D.I. 1) In its Complaint, Crystallex also names as defendants
PDV Holdings, Inc. ("PDVH"), a Delaware corporation which is a wholly-owned direct
subsidiary of PDVSA, and CITGO Holdings, Inc. ("CITGO"), another Delaware corporation,
which is a wholly-owned direct subsidiary of PDVH as well as a wholly-owned indirect
subsidiary of PDVSA. (See id. at iii! 12-13)
On February 3, 2016, PDVH and CITGO (together the "CITGO Defendants")
moved to dismiss the Complaint. (D.I. 8) The CITGO Defendants contended that the Complaint
fails to state a DUFTA claim on which relief maybe granted and, even ifthat were not the case,
that Crystallex's DUFTA claim would be barred by the Foreign Sovereign Immunities Act, 28
U.S.C. § 1602 et seq. ("FSIA"). (See, e.g., D.I. 9, 15)
On September 30, 2016, the Court issued a Memorandum Opinion and Order on
the CITGO Defendants' motion to dismiss. (D.I. 34, 35) The Court held that the Complaint
adequately states a DUFTA claim as to PDVH and, further, that PDVH failed to show that the
FSIA bars the action in its entirety. (See D.I. 34 at 12, 18) With respect to CITGO, the Court
granted the motion to dismiss. (See id. at 20)
On October 28, 2016, PDVH filed a notice of appeal with respect to the Court's
FSIA holding. (See D.I. 40) In its appeal, PDVH cites Cohen v. Beneficial Industrial Loan
Corp., 337 U.S. 541 (1949), and contends that the Court's FSIA holding is immediately
appealable under the collateral order doctrine, without regard to whether the Court also certifies
the issue under§ 1292(b).
Also on October 28, 2016, PDVH filed a motion in this Court requesting that the
Court certify the FSIA issue, as well as its DUFTA holding, for interlocutory review pursuant to
28 U.S.C. § 1292(b). (D.I. 41) After the parties completed briefing (D.I. 42, 47, 52), the Court
heard oral argument on December 20, 2016.
Under § 1292(b), this Court has discretion to certify orders for interlocutory
review where "exceptional circumstances" merit a departure from the final judgment rule.
Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978) (internal quotation marks omitted). An
order that (i) addresses a "controlling question of law" as to which there is (ii) "substantial
ground for difference of opinion" may be certified under the statute if (iii) an immediate appeal
"may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b); see
also Katz v. Carte Blanche Corp., 496 F.2d 747, 754-55 (3d Cir.1974). Here, all three of these
criteria are satisfied with respect to both the FSIA and DUFTA issues; "exceptional
circumstances" are also present which further persuade the Court to exercise its discretion to
certify both issues for an interlocutory appeal.
Controlling Issue o.fLaw. A controlling question oflaw "must encompass at the
very least every order which, if erroneous, would be reversible error on final appeal." Id. at 755.
The Court's FSIA and DUFTA holdings each involved resolution of complex questions of
statutory interpretation (e.g., whether the FSIA's restrictions on prejudgment attachments apply
to fraudulent transfer claims seeking a final judgment on the merits and whether the Complaint
alleges a transfer "by" a debtor). The Court's conclusions regarding these purely legal issues
were dispositive and would require dismissal of the action if reversed on appeal.
Substantial Ground for Difference o.f Opinion. Crystallex' s creative and
apparently unprecedented fraudulent transfer theory required the Court to resolve novel questions
of law. In doing so, the Court had to choose between two sets of strong, well-supported, and
persuasive arguments. There are substantial grounds for a difference of opinion, notwithstanding
the novelty of the issues. The Court disagrees with Crystallex's suggestion that this criterion for
§ 1292(b) certification cannot be satisfied where there are no conflicting decisions issues by
courts previously grappling with the issue. (See D.I. 47 at 10-11) Even ifCrystallex is correct
that§ 1292(b) "was not intended as a vehicle to provide early review of difficult rulings in hard
cases," (Id. at 9-10 (quoting Transp. Workers Union ofAm., Local JOO, AFL-CIO v. NY City
Transit Auth., 358 F. Supp. 2d 347, 354 (S.D.N.Y. 2005)), here the Court's decision to certify is
not based solely on the difficulty of the rulings, but on the totality of pertinent factors. At
bottom, there are substantial grounds for difference of opinion with respect to this Court's
resolution of both the FSIA and DUFTA issues.
Material Advancement of the Ultimate Termination of the Litigation. Crystallex
contends that certification "will not materially advance the termination of this litigation," and
will "only result in substantial delay to Crystallex's detriment."· (D.I. 47 at 12) But that is only
even possibly true if Crystallex prevails on appeal. Additionally, the "delay" Crystallex fears is
not an automatic consequence of the Court's ruling, since it is not clear that discovery will be
stayed during the pendency of the appeal (an issue which is not presently before the Court) while
it is clear that Crystallex does not have a judgment in the United States at this time. Moreover,
the statute requires only the possibility that interlocutory review would materially advance the
litigation. See 28 U.S.C. § 1292(b) (providing that district judge should consider whether
"immediate appeal may materially advance" the litigation) (emphasis added). If the Third Circuit
agrees with PDVH and reverses one or both of this Court's holdings, this case would be
terminated upon remand. Additionally, because there are now several related cases in which one
or both of the identical issues are also presented (see C.A. Nos. 16-904-LPS, 16-1007-LPS),
those related matters may likewise be "materially advanced" by an interlocutory appeal.
Exceptional Circumstances. In addition to all three of the foregoing factors
supporting certification, several "exceptional circumstances" are present, each of which confirms
the appropriateness of certification. See Chase Bank USA, NA. v. Hess, 2011 WL 4459604, at
*2 (D. Del. Sept. 26, 2011). First, an interlocutory appeal is already pending in this case,
meaning that this case already (and indisputably) involves a departure from the final judgment
rule. In light of this reality, the choice this Court confronts is an interlocutory appeal directed to
just one of the two dispositive issues on which this Court has already ruled or an interlocutory
appeal directed to both. The latter option seems more efficient. Second, international comity is
implicated by this case and specifically by the issues this Court has already decided. One need
not accept the full scope of PDVH's foreboding prediction - that "the Court's opinion could do
real harm to the sovereignty interests that the FSIA is designed to protect" (D.I. 42 at 9) - in
order to recognize there is at least some risk of unintended international consequences, which
sets this case apart from the vast majority of others. Relatedly, PDVH insists that the Court's
opinion may unwarrantedly "chill the transfer of foreign-owned assets." (D.I. 42 at 8-9) ("If the
Court's ruling is not immediately appealed, banks or other entities currently holding foreignowned assets will hesitate before transferring those assets for fear of incurring potentially
massive liability under a state fraudulent transfer statute.") Even if PDVH's fear is mostly
unfounded, an interlocutory appeal holds the promise of eliminating any risk of such an
unintended consequence and doing so relatively quickly. Finally, enormous sums of money are
at stake in this case. The case is based on transfer of $2.8 billion of assets and Crystallex is
holding an arbitration award worth in excess of $1.3 billion. (See generally D.l. 18; see also
Crystal/ex Int'l Corp. v. Bolivarian Republic o.fVenezuela, C.A. No. 16-661-RC (D.D.C.) D.I. 1)
The Court therefore certifies the following questions for interlocutory review: 1
Whether the FSIA attachment immunity provisions,
28 U.S.C. §§ 1609-1611, preempt state fraudulent
transfer laws to the extent that they effectively
restrain immunized property of a foreign sovereign
debtor or impose liability on non-debtor transferors
for prejudgment transfers of immunized property.
Whether the phrase "by a debtor" in DUFTA, 6 Del.
C. § 1304(a)(l), applies to "non-debtor transferors"
deemed to be acting on the debtor's behalf, absent
allegations of alter ego or piercing the corporate
The Court's September 30, 2016 Order (D.I. 35) is AMENDED 2 to incorporate
the Court's analysis and conclusions above.
IT IS FURTHER ORDERED that the parties shall meet and confer and submit,
no later than January 4, 2017, a joint status report with their proposal(s) for whether and how
discovery should proceed in this matter during the pendency of PDVH's appeal.
HON. LEONARD P. STARK
UNITED STATES DISTRICT JUDGE
The questions as stated are those proposed by PDVH. (See D.I. 42 at 5, 9) Crystallex
did not offer a counterproposal or specific criticisms of PDVH's stated questions. The Court is
aware that regardless of whether and how particular questions are stated by this Court, the
September 30 Order may be reviewe<;i in its entirety by the Court of Appeals. See Abdullah v.
Am. Airlines, Inc., 181 F.3d 363, 366 (3d Cir. 1999).
Section 1292(b) provides that the grounds for certification of an "order not otherwise
appealable ... shall ... [be] state[ d] in writing in such order."
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