DRFP L.L.C. v. República Bolivariana De Venezuela
706 F. App'x 269
| 6th Cir. | 2017Background
- Skye (DRFP L.L.C.) bought two promissory notes in 2004 for ~$2 million that purportedly had $50 million face value each and stated they were guaranteed by Venezuela (ICC-322 series). Notes appeared to mature in 1991.
- Venezuela refused payment, alleging the notes were forged; prior Venezuelan authorities had published warnings and the Ministry of Finance disavowed ICC-322 Bandrago notes; Gruppo Triad’s principal had prior convictions for trading false Bandrago notes.
- In October 2003 Venezuela’s Attorney General (AG) issued an opinion endorsing Bandrago notes’ validity; she withdrew that opinion in December 2003 after discovering irregularities.
- Skye sued Venezuela in U.S. federal court. After lengthy litigation and a 23-day bench trial, the district court found the Notes fraudulent and rejected Skye’s alternative theories: (1) that the October 2003 AG Opinion was binding under Venezuelan law, and (2) equitable estoppel based on Skye’s reliance on that opinion.
- On appeal Skye did not contest the fraud finding and limited its challenge to the district court’s rejections of the two alternative theories; the Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether U.S. courts had jurisdiction under the FSIA commercial-activity exception | Skye: jurisdiction valid because Venezuela’s refusal to pay caused a direct effect in the U.S.; alternative theories could establish Venezuela assumed debt | Venezuela: Notes were forged so no commercial act (issuance) occurred; renewed immunity follows | Court: Jurisdiction exists because the suit is based on Venezuela’s alleged assumption/refusal of debt, which is commercial in nature and could be shown via alternate theories (AG opinion or estoppel) |
| Whether the October 2003 AG Opinion was binding under Venezuelan law (thus creating a private right to enforce) | Skye: the October 2003 opinion was a binding Article 56 OLAG administrative act and should bind Venezuela; district court should not defer to Venezuelan Supreme Court without a comity analysis | Venezuela: Venezuelan Supreme Court held the October opinion was not a binding Article 56 administrative act; AG opinion was advisory and not preclusive | Court: Affirmed district court — AG opinion was not a binding OLAG Article 56 administrative act; district court properly interpreted Venezuelan law and permissibly credited the Venezuelan Supreme Court’s interpretation rather than applying a separate ‘‘comity’’ enforcement analysis |
| Whether equitable estoppel (Ohio law) bars Venezuela from denying validity of the Notes because Skye relied on the October 2003 AG Opinion | Skye: reasonably relied on AG opinion; Venezuela should be estopped from recanting and escaping monetary obligation, citing limited Ohio authority | Venezuela: estoppel unavailable because application would uphold or perpetuate fraud; reliance was not reasonable given abundant indicia of forgery | Court: Affirmed district court — estoppel cannot be used to enforce a fraud; even assuming doctrine available, Skye’s reliance was unreasonable and estoppel cannot uphold a crime or fraud |
| Whether the district court erred by not performing a ‘‘comity analysis’’ before crediting Venezuelan authorities’ interpretation of Venezuelan law | Skye: district court should have scrutinized the Venezuelan Supreme Court decision for bias, lack of notice, or corruption before crediting it | Venezuela: federal courts may consider foreign decisions and defer to a foreign nation’s highest courts when interpreting that nation’s law | Court: No error — comity enforcement analysis (for recognizing foreign judgments) was inapplicable; district court properly used Rule 44.1 sources and reasonably credited Venezuela’s Supreme Court interpretation of its law |
Key Cases Cited
- República Bolivariana de Venez. v. DRFP L.L.C., 622 F.3d 513 (6th Cir. 2010) (prior appellate decision in this litigation addressing FSIA commercial-activity question)
- Republic of Argentina v. Weltover, 504 U.S. 607 (U.S. 1992) (issuance/assumption of debt by a state is commercial under FSIA)
- Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (U.S. 1983) (commercial-activity exception framework)
- Mortimer Offshore Servs., Ltd. v. Fed. Republic of Germ., 615 F.3d 97 (2d Cir. 2010) (state assumption of bond liability via statute is commercial activity)
- Adler v. Fed. Republic of Nigeria, 107 F.3d 720 (9th Cir. 1997) (an act noncommercial in form may still fall within §1605(a)(2) if made in connection with commercial activity)
- Hilton v. Guyot, 159 U.S. 113 (U.S. 1895) (deference to foreign courts’ interpretation of their own law and comity principles)