106 F.4th 263
2d Cir.2024Background
- Petróleos de Venezuela S.A. (PDVSA), a Venezuelan state-owned oil company, issued $9.15 billion in notes due 2017, later offering to exchange them for secured 2020 Notes, backed by a 50.1% equity interest in CITGO Holding, Inc.
- During the exchange offer in 2016, Venezuela faced political conflict: the president claimed emergency powers, while the opposition-controlled National Assembly passed resolutions rejecting the Exchange Offer and asserting its approval was constitutionally required.
- Despite these resolutions, the exchange was completed; later, the National Assembly declared the 2020 Notes violated the Venezuelan Constitution, while both the U.S. and Assembly recognized Juan Guaidó as Interim President after disputed Venezuelan elections.
- PDVSA defaulted on the 2020 Notes in October 2019, prompting the issuer and related entities to sue creditors (MUFG Union Bank and GLAS Americas) in the Southern District of New York for declarations of invalidity.
- The district court ruled for the creditors, holding that New York law governed the validity of the instruments, rendering Venezuelan constitutional requirements irrelevant.
- On appeal, the Second Circuit certified the choice-of-law question to the New York Court of Appeals, which held that Venezuelan, not New York, law governs the validity of these instruments under UCC § 8-110.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What law governs the validity of the 2020 Notes and related instruments? | Venezuelan law applies; approval by the National Assembly required | New York law applies due to choice-of-law provisions in the documents | Venezuelan law governs validity under UCC § 8-110 |
| Effect of Venezuelan National Assembly resolutions on the notes' validity | Resolutions render the instruments void under the Venezuelan Constitution | Resolutions irrelevant; default governed by New York law | Remanded to district court to assess under Venezuelan law |
| Applicability of the act-of-state doctrine to legislative acts | Doctrine requires U.S. courts to honor Venezuelan legislative acts | Doctrine does not require enforcing foreign legislative resolutions here | Not decided; premature at this stage, left for district court |
| Whether district court should have applied New York law to determine note validity | No; district court erred by excluding Venezuelan law requirements | Yes; district court correctly followed New York choice-of-law | District court erred, judgment vacated and remanded |
Key Cases Cited
- Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) (explains act-of-state doctrine, requiring courts to respect valid acts of foreign governments)
- W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., Int'l, 493 U.S. 400 (1990) (act-of-state doctrine applies only where an official foreign act’s validity determines the outcome)
- Curley v. AMR Corp., 153 F.3d 5 (2d Cir. 1998) (appellate courts may find and apply foreign law)
- Celestin v. Caribbean Air Mail, Inc., 30 F.4th 133 (2d Cir. 2022) (confirms the merits core of the act-of-state doctrine)