Cimontubo – Tubagens E Soldadura, LDA v. Petróleos de Venezuela, S.A., No. 20-cv-5382 (S.D.N.Y. Mar. 4, 2021) [click for opinion]

Plaintiff Cimontubo – Tubagens E Soldadura, LDA (“Cimontubo”), a Portuguese pipeline company, filed a motion for summary judgment against Venezuela’s national oil company alleging that Defendant Petróleos De Venezuela, S.A. (“PDVSA”) defaulted on a promissory note in the amount of $35,720,631.43, and that Defendant PDVSA Petróleo, S.A. (“Petróleo”), a subsidiary of PDVSA, defaulted on its obligations as Guarantor of that note.

Defendants filed a cross motion pursuant to Federal Rule of Civil Procedure 56(d), requesting that the court provide Defendants with a reasonable amount of time to conduct discovery. Defendants alleged that they did not have access to the requisite documents or personnel due to Nicolas Maduro’s seizure of control of the Venezuelan Government.

In December 2020, the court granted in part and denied in part Defendants’ request for leave to conduct discovery. The court permitted only limited discovery of two Portuguese banks regarding attempted wire transfers between the parties that were not honored by the banks, in order to ascertain whether the U.S. government’s imposition of sanctions against PDVSA rendered it impossible for Defendants to make payments on the promissory note.

In subsequently granting summary judgment to Plaintiff, the court held that, in an action on a promissory note, a plaintiff can make out a prima facie case for recovery by simply showing proof of a note and failure to make payment. Plaintiff met that burden. Similarly, in an action on a guaranty, a plaintiff can meet its prima facie burden by showing (1) the existence of a guaranty, (2) the underlying debt, and (3) the guarantor’s failure to perform under the guaranty. Plaintiff also met that burden.

The burden thus shifted to Defendants to raise a triable issue of fact in the form of a bona fide defense against the note. Defendants failed to do that, but requested additional time to seek additional discovery that could provide support for a defense of impossibility. The court rejected this request, noting that the only evidence Defendants had uncovered to date was inconsistent with an impossibility defense. Specifically, document production received from one of the banks contained an email stating that there had been no wire transfers received from PDVSA directed to Plaintiff that had been refused by the bank.

The court thus held that Defendants had failed to raise a genuine issue of material fact regarding whether U.S. sanctions made it impossible for Defendants to send payments to Plaintiff’s bank in Portugal, and awarded Plaintiffs damages of over $40 million, plus attorneys’ fees, costs, and pre-judgment and post-judgment interest.

Patricia Mathy of the Chicago office contributed to this summary.​

Source: Lexology