Crystallex International Corporation v. Bolivarian Republic of Venezuela

Filing 1180

MEMORANDUM ORDER re: D.I. 1138 MOTION to Disqualify; D.I. 1177 MOTION for Leave to File Excess Pages and File a Separate Reply. Signed by Judge Leonard P. Stark on 5/31/2024. (mpb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CRYSTALLEX INTERNATIONAL CORP.,
Plaintiff,
v.

Misc. No. 17-151-LPS

BOLIVARIAN REPUBLIC OF VENEZUELA,
Defendant.
MEMORANDUM ORDER
Pending before the Court is the Venezuela Parties’1 renewed motion to disqualify the
Special Master (D.I. 1138) (“Motion” or “Mot.”). For all of the many reasons stated below, the
Motion is denied.
The Motion Is Untimely
Motions for disqualification “must be brought at the earliest possible moment after
obtaining knowledge of facts demonstrating the basis for such a claim.” Omega Eng’g, Inc. v.
Omega S.A., 432 F.3d 437, 448 (2d Cir. 2005) (internal quotation marks omitted); see also In re
Kensington Int’l Ltd., 368 F.3d 289, 312 (3d Cir. 2004) (“[T]he Courts of Appeals cases that have
addressed the issue have concluded that parties seeking disqualification under [28 U.S.C.]
§ 455(a) should do so in a timely manner.”). The timeliness requirement serves two purposes: “a
prompt application affords the district judge an opportunity to assess the merits of the application
before taking any further steps that may be inappropriate for the judge to take” and “avoids the

1

Capitalized terms, unless otherwise defined, have the same meaning as in the Sale Procedures
Order (“SPO”). (D.I. 481)

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risk that a party is holding back a recusal application as a fall-back position in the event of
adverse rulings on pending matters.” In re Int’l Bus. Machs. Corp., 45 F.3d 641, 643 (2d Cir.
1995).
In March 2023, the Court denied the Venezuela Parties’ initial motion to disqualify the
Special Master (see D.I. 538; D.I. 542 at 103-21; D.I. 544), a motion that had been filed on
January 20, 2023 (see D.I. 509; D.I. 511), a week after the January 12, 2023 meeting (“January
2023 meeting”) between the Special Master and the U.S. government that is also the focus of this
pending Motion. Among the multiple bases for denying the initial motion to disqualify was that
it was untimely. (See D.I. 544 at 2-5) As the pending “renewed” Motion to disqualify is based
on objections to the same January 2023 meeting as the initial motion (Mot. at 11), and the initial
motion was denied as untimely, it follows as a matter of logic that the renewed Motion – which
was filed 15 months after the untimely initial motion – is also untimely.
The time for the Venezuela Parties to object to the Special Master’s ex parte
communications with the U.S. government – which are expressly contemplated by the SPO as a
crucial component of the Court’s long-running efforts to maximize value for the Venezuela
Parties – had come and gone well before January 2023. (See, e.g., D.I. 544 at 3) (“Here the
motion is untimely because the grounds for it were known to the moving parties for at least many
months prior to the filing of their motion. . . . [A]ll the parties have known since approximately
May of 2021 that the special master had engaged OFAC counsel and was in ex parte
communication with OFAC.”) No amount of “new” evidence showing in further detail how the
Special Master complied with his obligations at the January 2023 meeting can “turn back time”
and make an effort to disqualify him based on these actions anything other than untimely. (See,
e.g., D.I. 1149 at 2) (Crystallex arguing “the discovery of new evidence that supposedly supports

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an argument that was untimely a year ago does not make the same argument timely today.”)
The Motion Is Predicated On Waived Grounds
In connection with denying the initial motion to disqualify, the Court found that “the
Venezuela [P]arties’ long-time acquiescence in the special master’s ex parte engagement with
OFAC, which was materially similar to what he had done repeatedly before, . . . also constitutes
a waiver of their right to seek disqualification of the special master based on [the January 2023]
meeting.” (D.I. 544 at 8) The Court continues to find that the essentially identical bases for the
Venezuela Parties’ renewed Motion are waived, even in light of the purported “new” evidence of
the Special Master’s actual “Presentation” (see D.I. 1138 Ex. B) at the January 2023 meeting.
The Venezuela Parties contend that they “never acquiesced to the kind of advocacy
revealed in the Presentation, which was neither disclosed to [them] nor contemplated by this
Court’s prior Orders.” (Mot. at 11) The Court disagrees. Instead, as Crystallex observes:
In May 2021 the Special Master informed the parties that he began
engaging in ex parte communications and meetings with OFAC.
D.I. 285, at 2. Then, in August 2021, the Special Master informed
the parties that he had met with U.S. government representatives
multiple times during the summer of 2021, had “consistently,
unambiguously, and proactively solicited their input,” and would
“continue to take a proactive approach with respect to engagement
with the United States Government regarding the OFAC decisionmaking process and obtaining assurances for Potential Bidders that
they can participate in the sale process,” including “explicit
guidance or authorization from OFAC with respect to a potential
Sale Transaction.” D.I. 348, ¶¶ 4, 39-41, 67 (emphasis added).
The Special Master also stated in a chart summarizing his proposed
sale procedures that he intended to share information with the
Executive Branch that “is reasonably necessary or desirable in
connection with the issuance of any regulatory approval or is
reasonably necessary or desirable in connection with
implementation of the Sale Procedures and any Sale Transaction,
including any guidance or license from OFAC.” Id. at 67
(emphasis added).
(D.I. 1149 at 4-5)

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In the Sale Procedures Order, the Court expressly required that the Special Master “solicit
and attempt to gain clarity or guidance” on OFAC’s “support for (or non-opposition to)” the
marketing process, and “authorized” the Special Master to “proactively engage with
representatives from the Executive Branch . . . and to take all steps or actions reasonably in
furtherance of the issuance of OFAC guidance and/or authorization.” (D.I. 481 at ¶¶ 3, 4)
(emphasis added) The Court is not at all persuaded by the Venezuela Parties’ assertion (see Mot.
at 12) that one can see in the Presentation something “materially dissimilar” in the Special
Master’s January 2023 interactions with the Executive Branch as compared to his earlier such
interactions.
While the Venezuela Parties had objected in August 2021 to the Special Master’s ex parte
engagement with OFAC, stating that “federal courts do not advocate to the Government on
behalf of particular parties or for particular outcomes in regulatory determinations affecting those
parties” (D.I. 354 at 21), they did not at any time prior to the January 12, 2023 meeting contend
that the Special Master’s engagement with the U.S. government or his purported “advoca[cy]”
created a basis for his disqualification (see id. at 16-18). Thus, just as the Court found in
denying the initial motion to disqualify (see D.I. 544 at 8), the Court again concludes that the
Venezuela Parties have waived their right to seek disqualification of the Special Master on the
grounds asserted in the renewed Motion.
The Motion Does Not Meet Requirements For Reconsideration
As the Venezuela Parties do and must acknowledge, they already moved once before to
disqualify the Special Master based on his participation in the January 2023 meeting. (See, e.g.,
Mot. at 1; see also D.I. 509) That motion was unsuccessful. (See D.I. 538; D.I. 542 at 103-21;
D.I. 544) Their renewed Motion may fairly be viewed as a motion for reconsideration of the

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Court’s earlier denial. But it is not a meritorious motion for reconsideration.
The only conceivable grounds on which the Venezuela Parties could be asking the Court
to reconsider its denial of the initial motion for disqualification is the purported discovery of
“new” evidence, i.e., the Presentation. See Max’s Seafood Cafe ex rel. Lou-Ann, Inc. v.
Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (“The purpose of a motion for reconsideration . . . is
to correct manifest errors of law or fact or to present newly discovered evidence.”) (internal
quotation marks omitted). Merely “advanc[ing] the same arguments” previously made “is not a
proper basis for reconsideration.” Lazaridis v. Wehmer, 591 F.3d 666, 669 (3d Cir. 2010).
The Venezuela Parties characterize the Presentation as “direct evidence” of improper
advocacy by the Special Master in the form of “previously unavailable documents generated by
the Special Master for that [January 2023] meeting and produced by the Government pursuant to
Freedom of Information Act [‘FOIA’] litigation.” (Mot. at 2) Because the Court does not see
anything “new” in the Presentation, compared to what the Special Master had already described
as having occurred at the January 2023 Meeting, and because (again) there is nothing “materially
dissimilar” between the Special Master’s January 2023 interaction with the Executive Branch
and his earlier such interactions, the Presentation is not truly “new” in the sense required for a
meritorious motion for reconsideration.
The Motion Improperly Incorporates By Reference
In asserting the bases for their Motion, the Venezuela Parties vaguely refer the Court to
unspecified discussions “at length” in their earlier filings, “which they re-incorporate here.”
(Mot. at 10) They go on to cite no fewer than four full-length briefs. (Id. (“See D.I. 509, D.I.
515, D.I. 524, D.I. 533”); see also D.I. 1175 at 6 n.5 (Venezuela Parties suggesting Court need
only review “portions” of its earlier filings, which evidently total “eight pages,” though failing

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even to identify those pages for the Court)) This is a violation of this Court’s Local Rules, see D.
Del. LR 7.1.3(a)(4), including rules governing page limits for briefs. See, e.g., Wise v. Biowish
Techs., Inc, 2019 WL 4344273, at *6 (D. Del. Sept. 12, 2019) (“Defendants cannot evade the
page limits set forth in Del. Local Rule 7.1.3[(a)](4) by incorporating by reference arguments
made in prior briefs.”); Idenix Pharms. LLC v. Gilead Scis., Inc., 2018 WL 922125, at *1 n.2 (D.
Del. Feb. 16, 2018). It is improper for the Venezuela Parties to expect the Court to track down
the earlier filings, figure out for itself the supposedly relevant pages in four earlier briefs – which
were written at an earlier time, based on a different record, with no awareness of or accounting
for the Court’s subsequent rulings – and somehow divine what the Venezuela Parties might now
be arguing.
The Venezuela Parties’ Motivations For Pressing The Motion Are Suspect
The Court is not unmindful of the fact that the Venezuela Parties’ latest effort to
disqualify the Special Master was filed at a moment of particular sensitivity in the sale process.
Final binding bids for the PDVH Shares to be sold are due on June 11, 2024 – less than two
weeks from today – and the sale hearing is scheduled for July 15, 2024. (See D.I. 1134) These
dates were just seven and twelve weeks away when the Venezuela Parties filed their Motion. As
the Venezuela Parties undoubtedly know, this would be a most inopportune time for the Court,
and the sale process, to lose the individual overseeing the entire, complex sale process (an
individual who, it should not be forgotten, was the nominee of the Venezuela Parties themselves).
The Court shares the suspicions expressed by the Special Master and several creditors as
to the Venezuela Parties’ motivations for filing such a meritless motion at such a precarious time.
(See, e.g., D.I. 1150 at 1-2 (Special Master: “Having been involved in this matter for more than
three years, it is clear to the Special Master that the Venezuela Parties have attempted and will

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attempt to delay, hinder, and prevent their creditors from receiving payment on their judgments at
every possible turn.”); D.I. 1149 at 13 (Crystallex: “Their attempt to resurrect an argument that
was untimely and waived a year ago is a transparent, last-ditch ploy to scuttle the sale process
just before the close of bidding.”); D.I. 1148 at 1 (ConocoPhillips: “The Renewed DQ Motion is
yet one more attempt in a long line of litigation gambits with which the Venezuela Parties have
sought to frustrate the legitimate efforts of creditors to get paid on their judgments.”); D.I. 1152
at 2 (Six Creditors: “The Motion is simply another attempt by the Venezuela Parties to delay the
satisfaction of outstanding judgments entered against Venezuela.”))
The Venezuela Parties appear to defend the last-minute nature of their filing on delays
they encountered in FOIA litigation. (See, e.g., Mot. at 4-6) This explanation is somewhat
confounding. To the Court’s recollection, the Venezuela Parties did not ever ask this Court
whether it would order the Special Master to provide them with the materials prepared for the
January 2023 meeting, including the Presentation.2 Nor does the Court recall ever receiving a
complaint from the Venezuela Parties about the Special Master’s non-production. Had the
Venezuela Parties genuinely wanted to obtain the materials shortly after the January 2023
meeting, it is difficult to fathom why they would not have at least asked this Court to order this
Court’s Special Master to produce them.3

2

Neither the declarations filed in connection with the initial motion to disqualify (see, e.g., D.I.
516, 525) nor those filed in connection with the renewed Motion (see, e.g., D.I. 1139, 1176)
mention any request by the Venezuela Parties to this Court for production of the materials
prepared by the Special Master for the January 2023 meeting.
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As best as the undersigned Judge can recall, the first time he ever heard of the existence of the
FOIA requests and related litigation was in one of the regular, ex parte (and known-to-theparties) update calls with the Special Master, held on March 29, 2024. (See also D.I. 1150 Ex. C
at 31) (March 20, 2024 email from counsel for Special Master to undisclosed recipient stating he
intends to raise FOIA requests with Judge Stark in upcoming meeting)
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The Court found that the initial disqualification motion had “at least a substantial element
of being tactical and designed with at least a partial goal of further delaying these proceedings.”
(D.I. 544 at 7) In the Court’s view, the renewed Motion, filed 15 months later, suffers from the
same defects. See generally United States v. Microsoft Corp., 253 F.3d 34, 108 (D.C. Cir. 2001)
(“Disqualification is never taken lightly. In the wrong hands, a disqualification motion is a
procedural weapon to harass opponents and delay proceedings.”).
The Motion Lacks Merit
Although the Motion could be denied on one or more of the grounds already noted, the
Court will now address the merits, which are also lacking.
Legal Standards
Disqualification under 28 U.S.C. § 455 is required when “a reasonable person, with
knowledge of all the facts, would conclude that the judge’s impartiality might reasonably be
questioned.” In re Kensington Int’l Ltd., 353 F.3d 211, 220 (3d Cir. 2003) (internal quotation
marks omitted). The requirements of § 455 also apply to special masters. See, e.g., Paycom
Payroll, LLC v. Richison, 758 F.3d 1198, 1208 (10th Cir. 2014); Guardian Pipeline, L.L.C. v.
950.80 Acres of Land, 525 F.3d 554, 556 (7th Cir. 2008); see also Fed. R. Civ. P. 53(a)(2) (“A
master must not have a relationship to the parties, attorneys, action, or court that would require
disqualification of a judge under 28 U.S.C. § 455, unless the parties, with the court’s approval,
consent to the appointment after the master discloses any potential grounds for
disqualification.”). But disqualification is not easy to obtain: a movant must overcome “a
presumption of honesty and integrity in those serving as adjudicators.” Withrow v. Larkin, 421
U.S. 35, 47 (1975). “Because a judge is presumed to be impartial, a party seeking recusal bears
the substantial burden of proving otherwise.” United States v. Roads, 97 F.4th 1133, 1136 (8th

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Cir. 2024); see also Yosd v. Mukasey, 514 F.3d 74, 78 (1st Cir. 2008).
The Venezuela Parties Fail To Show The Special Master Engaged In “Advocacy”
The Venezuela Parties renew their Motion to disqualify the Special Master “based on his
improper advocacy to the United States Government in a January 12, 2023 meeting.” (Mot. at 1)
They complain that the Special Master advised the U.S. government that “US sanctions against
PDVSA have stalled efforts by Crystallex and other creditors to pursue their rights” and that he
requested that “OFAC provide authorization of the Special Master sale process in the form of a
General License or broad specific license.” (Mot. at 6 (internal quotation marks omitted); see
also id. at 9) They contend that “[t]he newly discovered evidence of the Special Master’s
advocacy to the Government at the least gives rise to appearance-of-partiality and separation-ofpowers concerns that require his disqualification under 28 U.S.C. § 455, Rule 52(a)(2), and/or
the Due Process Clause of the Fifth Amendment.” (Mot. at 10)
The Special Master’s Presentation at the January 2023 meeting contains no improper
advocacy. The Court agrees with the Special Master’s description of the Presentation as
demonstrating he “acknowledged the existing factual situation, and identified options that OFAC
could take regarding the Sale Transaction, which was his court-ordered mandate.” (D.I. 1150 at
9-10) The Court does not find in the Presentation the link the Venezuela Parties purport to see in
it (see Mot. at 6) between the Special Master’s factual observation that “US sanctions against
PDVSA have stalled efforts by Crystallex and other creditors to pursue their rights in satisfaction
of their claims” (D.I. 1138 Ex. B at 17) and his request that OFAC “[i]ssue a general license
authorizing all aspects of the sale” (id. at 10), which are separated by seven pages in the
Presentation. The Special Master was pointing out to the Executive Branch several options
available to those policymakers that would aid the Special Master in fulfilling his Court-ordered

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responsibilities, should the Executive Branch itself decide it wished to do so. This is not
improper advocacy. Instead, as ConocoPhillips observes, “[t]o the extent the [Special Master’s]
PowerPoint could be interpreted as expressing a view, it simply stated the obvious – that the
success of the sale process would be substantially enhanced by guidance from OFAC that a sale
would be allowed to close.” (D.I. 1148 at 7)
The Venezuela Parties have failed to articulate any cognizable separation of powers claim
or identify any violation of their due process rights. As Crystallex correctly states, “Venezuela
has no ‘right’ to defy the final and binding judgments of our federal courts.” (D.I. 1149 at 15) It
follows, as Crystallex adds, that “[t]here was absolutely nothing improper in the Special Master’s
request that the Executive Branch authorize a sale process that this Court ordered to enforce a
final and binding federal-court judgment.” (Id.) Additionally, as ConocoPhillips puts it, since
“[t]he Venezuela Parties have no legally cognizable right to continue to evade their creditors,”
they have “no reasonable expectation that either the Court or the Special Master would be
‘impartial’ with respect to whether or not judgments are paid.” (D.I. 1148 at 1) Thus, as the
Court stated in denying the initial motion to disqualify, there is “nothing improper or anything a
reasonable person would think improper in the special master assisting the Court in its efforts to
enforce judgments that have been entered and affirmed.” (D.I. 544 at 8)
The Venezuela Parties Fail To Show The Special Master Created An Appearance Of Partiality
In a post-judgment context, acting under the directive given to him by this Court, there is
nothing wrong with the Special Master working to enable the sale process. His assigned task –
the entire raison d’être for his participation in this litigation – is to assist the Court in enforcing
Crystallex’s judgment. Just as “opinions formed by the judge on the basis of facts introduced or
events occurring in the course of the current proceedings, or of prior proceedings, do not

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constitute a basis for a bias or partiality motion unless they display a deep-seated favoritism or
antagonism that would make fair judgment impossible,” Liteky v. United States, 510 U.S. 540,
555 (1994), the Special Master is not required to be neutral between the options of effectuating
the task given to him – enforcing an affirmed judgment of the federal courts – and failing in
those duties. (See also D.I. 1150 at 11) (Special Master: “There is nothing ‘[]partial about a
judicial officer’s duty to carry out ‘a “full” Sales Process that benefits Crystallex and other
creditors’ against a judgment debtor.”)
As Crystallex accurately points out: “The essence of the Venezuela Parties’ objection is
that the Special Master asked the Executive Branch to authorize the sale process. But the Special
Master’s pursuit of such authorization has been open, transparent, and authorized by this Court
for years.” (D.I. 1149 at 10) “By asking the Executive Branch to permit the sale process to go
forward, the Special Master was ‘advocating’ only for this Court’s process in fulfilling the Third
Circuit’s mandate to enforce Crystallex’s judgment.” (Id. at 3) In short, the Special Master’s
conduct is entirely consistent with his role in carrying out the sale process to effectuate the
judgment against the Venezuela Parties. See generally United States v. Ciavarella, 716 F.3d 705,
719 (3d Cir. 2013) (“[A]ssessments relevant to the case, whether they are correct or not, . . . do
not demonstrate bias.”).
The Venezuela Parties Fail To Show The Special Master Deviated From His Mandate
The Sale Procedures Order expressly authorizes ex parte meetings between the Special
Master and the federal government. (See D.I. 481 at ¶ 3 (SPO directing Special Master to
“[w]ithin a period of six (6) months . . . solicit and attempt to gain clarity or guidance from
[OFAC] of its support for (or non-opposition to), the launch of the Marketing Process by the
Special Master, the validity of the Marketing Process, and any additional feedback or guidance

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that the Special Master believes will more likely result in a value-maximizing Sale
Transaction”) (emphasis added); id. ¶ 4 (“authoriz[ing]” Special Master to “proactively engage
with representatives from the Executive Branch . . . and to take all steps or actions reasonably in
furtherance of the issuance of OFAC guidance and/or authorization”) (emphasis added); D.I.
544 at 4 (Court noting it gave “express direction” that such meetings occur)) Moreover, as the
Court stated in denying the Venezuela Parties’ last-minute request to attend the January 2023
meeting, the Court understood the Special Master would, at that meeting, “‘advocate’ . . . for the
enforcement of the Court’s orders, consistent with his previous efforts, and as the Court
expressly contemplated and authorized him to do in aid of allowing the Court to fulfill its judicial
duties.” (D.I. 506 at 2 n.2) The Special Master’s participation in the January 2023 meeting,
including his Presentation, is well within the confines of the Court’s mandate to him.
It is worth emphasizing that the entire complex endeavor of creating and implementing
the Sale Procedures Order, drafted by the Special Master (with extensive input and objections
from the Sale Process Parties) and carried out on a day-to-day basis by him, is the result of the
Court’s extensive and strenuous efforts to conduct a process that is most likely to maximize the
value of the PDVH Shares to the benefit of the Venezuela Parties. As noted by Crystallex, “this
Court ordered that bidding could proceed even without express [OFAC] authorization, and the
purpose of engaging with the Executive Branch was to obtain assurances that would comfort
bidders and increase sale value – a purpose that benefits Venezuela as much as it benefits
creditors.” (D.I. 1149 at 3) While Delaware law directs that the Court pursue a valuemaximizing transaction, there is more than one way to do so, and undoubtedly there were options
available to the Court that were far, far less solicitous of the interests of the Venezuela Parties.
The Court has needed, and will continue to need, the experience and efforts of the Special Master

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(and his advisors) to carry out the elaborate process it has adopted.
“Any Outcome Where Crystallex Is Not Paid Means That Venezuela
Has Avoided Its Obligations”
This litigation has now stretched to nearly seven years. It was preceded by over five
years of arbitration. The Venezuela Parties have had innumerable opportunities to litigate every
conceivable challenge to this Court’s approach – and they have often done so. Additional
chances to object, in particular to the Court’s evaluation of the ultimate recommendation of the
Special Master as to whether to approve a sales transaction, lie immediately ahead. The
Venezuela Parties additionally may avail themselves of access to OFAC, and perhaps other
policymakers, in their ongoing efforts to prevent the Court from carrying out its judicial
responsibilities.
In the meantime, however, the Court will proceed with implementing the Sale Procedures
Order. In doing so, this Court is acting under a directive from the United States Court of Appeals
for the Third Circuit. As far back as 2019, the Third Circuit told the world – and, from a more
parochial perspective, instructed this Court – that “[a]ny outcome where Crystallex is not paid
means that Venezuela has avoided its obligations.” Crystallex Int’l Corp. v. Bolivarian
Republic of Venezuela, 932 F.3d 126, 149 (3d Cir. 2019) (emphasis added). This Court, then, is
compelled, by its role in the judicial hierarchy, to take all reasonable and lawful steps to avoid an
outcome in which Venezuela succeeds in not living up to its obligations to pay its debts. The
appointment and actions of the Special Master are indispensable components of this Court’s
efforts. The Venezuela Parties will not upend them with frivolous motions.

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Accordingly, IT IS HEREBY ORDERED that the Venezuela Parties’ Motion (D.I.
1138) is DENIED.
IT IS FURTHER ORDERED that PDVH and CITGO’s motion for leave to extend page
limits and file a separate reply (D.I. 1177) is GRANTED.

________________________________
HONORABLE LEONARD P. STARK
UNITED STATES DISTRICT COURT

May 31, 2024
Wilmington, Delaware

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