PETROBRAS AMERICA, INCORPORATED v. SAMSUNG HEAVY INDUSTRIES COMPANY, LIMITED
No. 20-20338
United States Court of Appeals for the Fifth Circuit
August 11, 2021
Aрpeal from the United States District Court for the Southern District of Texas USDC No. 4:19-CV-1410
Before ELROD, WILLETT, and ENGELHARDT, Circuit Judges.
Petrobras appeals the Rule 12(b)(6) dismissal of its fraud claims, arguing that Samsung did not establish that Petrobras‘s claims are barred by the applicable statute of limitations. Because the pleadings do not establish as a matter of law that Petrobras had actual or constructive notice of its injury before March 2015, dismissal at the pleading stage was improper. Therefore, we REVERSE and REMAND.
I.
Petrobras America, Inc. is the American subsidiary of a Brazilian oil and gas producer. It alleges that Samsung Heavy Industries, a Korean shipbuilding comрany, secretly bribed Petrobras executives to finalize a drilling-services contract between Petrobras and Pride Global Limited—the lynchpin to Samsung‘s own construction contract with Pride.
In 2007, Samsung entered into a construction contract with Pride Global Limited.1 The contract contained an optiоn for Samsung to build a deep-sea drillship if Pride secured a drilling-services contract with another company. Hamylton Padilha Jr., an independent consultant retained by Pride, initiated negotiations between Pride and Petrobras to secure the drilling-services contract that would trigger the Samsung-Pride construсtion option. Nestor Cuñat Cerveró and Renato de Souza Duque, Petrobras executives, represented Petrobras in these negotiations.
Employees of the Petrobras International Division, headed by Cerveró, objected that there was no need for drilling services from another drillship. To ovеrcome this hurdle, Padilha contacted a Samsung executive in Houston, Texas to arrange a bribe. Samsung arranged to pay $10 million to Cerveró and Duque and $10 million to Padilha as a commission. To fund the bribes, Samsung increased the labor and material costs charged to Pride for what later would becоme the “DS-5.” Pride passed these costs to Petrobras by modifying its drilling-services contract proposal to reflect a $20 million cost increase.
Cerveró accepted this proposal on behalf of Petrobras. In December of 2007, the Samsung-Pride contract for the construction of the DS-5 wаs signed. In January
After the construction of the DS-5 was complete in 2011, Petrobras had no work for the vessel. Petrobras therefore assigned the drilling-services contract to two other companies to mitigate losses. In 2015, Petrobras decided to put the DS-5 on permanent standby.
In March 2015, Petrobras began an internal audit to review the contracting procedures for the DS-5 and three other drillships.2 The audit team discovered that a broker and Padilha visited with Cerveró during the DS-5 negotiations. The team concluded that the DS-5 contract‘s terms were unfavorable to Petrobras and based on inaccurate forecasts. Lastly, they recommended that Petrobras inform prosecutors of the audit‘s findings. The audit report was released May 18, 2015.
In October 2015, Brazilian prosecutors unsealed a plea agreement that Padilha had entered into in July 2015. In the plea agreement, Padilha revealed the details of the DS-5 bribery scheme. Three months later, Petrobras notified Pride that they were cancelling the DS-5 drilling-services contract as a product of fraud.
Meanwhile in 2014, news broke of “Operation Carwash,”3 a widespread investigation into corruption throughout Brazil. Operation Carwash included a separate bribery scheme—which is not the subject of this case—in which Samsung contracted directly with Petrobras to construct two other ships. According to a Reuters article, Samsung bribed Petrobras‘s Cerveró to finalize a contract between Petrobras and Samsung for the construction of the Vitória 10,000 and the Petrobras 10,000. See Caroline Stauffer, Another Former Petrobras Executive Charged in Brazil Scandal, Reuters (Dec. 15, 2014). A Washington Post article reported that Petrobras‘s Duque was arrested in March 2014 for his actions in Operation Carwash. See Dom Phillips, “Operation Carwash” in Brazil Causes Normally Staid Business Meeting to Go off Script, Wash. Post (Nov. 17, 2014). Petrobras noted the Vitória 10,000 and Petrobras 10,000 bribery sсheme, as well as related criminal charges against its executives Duque and Cerveró, in a May 2015 filing with the Securities and Exchange Commission. Neither the newspaper articles nor the SEC filing mentioned the DS-5.
On March 5, 2019, Petrobras filed a complaint in Texas state court against Samsung for its role in the bribery that led to the Petrobras-Pride contract for the DS-5‘s drilling services. The complaint alleged that Samsung engaged in both common-law fraud under Texas state law and racketeering under the Racketeer Influenced and Corrupt Organizations Act (RICO),
Samsung removed the case to federal court and moved to dismiss under
II.
We review ordеrs on 12(b)(6) motions to dismiss for failure to state a claim de novo. Life Partners Creditors’ Tr. v. Cowley (In re Life Partners Holdings, Inc.), 926 F.3d 103, 116 (5th Cir. 2019). We accept all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff. Arnold v. Williams, 979 F.3d 262, 265 n.1, 266 (5th Cir. 2020). We consider all “documents incorporated into the complaint by reference, аnd matters of which a court may take judicial notice.” Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322 (2007). Rule 12(b)(6) dismissal under a statute of limitation is proper only when the complaint makes plain that the claim is time-barred and raises no basis for tolling. Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003).
III.
Petrobras argues that the district court erred in its determination that Petrobras was on notice in 2014 of thе facts that gave rise to its RICO claims. The statute of limitations is four years for both Texas fraud claims and civil RICO claims.
In Petrobras‘s view, it did not and could not have discovered its injury until May of 2015, when it completed an intеrnal audit of the drilling services contract for DS-5. Samsung disagrees, arguing that Petrobras knew as far back as 2007, and certainly no later than 2014, that it had been injured. Because a “statute of limitations is an affirmative defense for which the [defendant] has the burden of proof,” we will address Samsung‘s proposed dates of notice in turn. Trinity Marine Prods., Inc. v. United States, 812 F.3d 481, 486 (5th Cir. 2016); accord
A.
In asserting that Petrobras had notice in 2007, Samsung argues that Cerveró‘s and Duque‘s knowledge of the bribes is imputed to Petrobras. According to Petrobras, only Cerveró and Duque knew about the DS-5 bribes; no other officials at Petrobras knew that Petrobras had been defrauded in the DS-5 contract. Samsung sаys this is enough because Petrobras is charged with the knowledge of its officers. See Askanase v. Fatjo, 130 F.3d 657, 666 (5th Cir. 1997).5
An officer‘s knowledge will not be imputed to his employer if he “was acting adversely to the [employer] and entirely for his own or another‘s purpose.” Id. Taking the complaint‘s factual allegations as true, Cerveró and Duque acted in their own interests by accepting $10 million in bribes and in Samsung‘s interest “by causing Petrobras to hire a drillship it did not need.” Thus, Cerveró and Duque are clearly adverse agents of Petrobras. Their knowledge cannot be imputed to Petrobras. See id.
On appeal, Samsung presents another basis for dismissal that the district court did not rely on in its order: Petrobras‘s injury lies in being stuck with the unfavorable terms of the DS-5 contract despite not having enough work for the vessel; Petrobras officials knew as early as 2007 that it might not need the DS-5; thus Petrobras knew about its injury as far back as 2007.
In its reply, Petrobras attacks this argument on two fronts. First, Petrobras contests the assertion that it knew from the start that there would not be enough work for the DS-5. Second, Petrobras objects to Samsung‘s characterization of its injury as a lack of work for the DS-5.
On the first front, Petrobras contests the inferences drawn from Samsung‘s evidence. Samsung relies primarily on internal Petrobras e-mails from 2007,6 in which the Petrobras International Division “discussed and agreed that there was no need for a third drillship.” Petrobras, however, says that those e-mails and related documents also included projections and drilling plans that would support the need for the DS-5.
Regardless of whеther Petrobras or Samsung is correct in its reading of these e-mails and documents, they do not conclusively
On the second front, Petrobras contends that Samsung mischaracterizes Petrobras‘s injury. In Samsung‘s view, Petrobras was injured by the “unfavorable terms” in the DS-5 contract, which it ultimately did not need. In its reply brief, Petrobras characterizes the injury as “a wholly unnecessary contract that was procured through Samsung‘s fraud.”
Frаud is the key to Petrobras‘s injury. An unfavorable contract alone is not a legally cognizable injury. A contract procured through fraud is. See Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, 607 F.3d 1029, 1032-33 (5th Cir. 2010) (citing Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001)); Nat‘l Enters., Inc. v. Mellon Fin. Servs. Corp. No. 7, 847 F.2d 251, 254 (5th Cir. 1988) (determining that simple non-payment under a contract, without more, does not amount to “a cognizable injury” under RICO). Petrobras‘s complaint clearly allegеs an injury of fraud. We hold that Samsung “has not met its burden of conclusively establishing that” Petrobras knew or should have known about its injury as far back as 2007. Trinity Marine, 812 F.3d at 490.
B.
In support of its argument that Petrobras knew of its injury no later than 2014, Samsung presented to the district court two newspaper articles and Petrobras‘s 2014 Form 20-F Annual Report, filеd in 2015 with the U.S. Securities and Exchange Commission. The district court took judicial notice of these documents. We review a district court‘s decision whether to take judicial notice for abuse of discretion. See Taylor v. Charter Med. Corp., 162 F.3d 827, 829 (5th Cir. 1998).
Under
The SEC filings, however, may be properly judicially noticed to the extent that they are “considered only for the purpose of determining what statements the documents contain, not to prove the truth of the documents’ contents.” Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1018 (5th Cir. 1996). Petrobras itself prepared the SEC filings, so they are relevant to Petrobras‘s knowledge of the statements in the documents. Assuming that the district court considered the documents only as evidence of what Petrobras knew or should hаve known at the time, it did not abuse its discretion. See id.
Regardless of whether it was proper to consider these documents, they do not conclusively establish that the statute of limitations began running prior to March 5, 2015. The SEC filing and news articles do not mention Pride or DS-5 at all. Pride—not Samsung—entered into the DS-5 cоntract with Petrobras. Samsung‘s involvement was “camouflaged.” The Samsung-Petrobras
Because of the nаture of the DS-5 bribery scheme, a reasonable person may not have thought to inquire into the Pride drilling-services contract after Cerveró was criminally charged in connection with the Vitória 10,000 and Petrobras 10,000 fraud. See Jensen, 841 F.2d at 607. Nor can it be said as a matter of law that a reasonably diligent investigation at the time, without the benefit of a full аudit or the details of Padilha‘s plea agreement, would have uncovered the basis for Petrobras‘s fraud claim.
In short, Samsung‘s arguments at best raise fact questions not suitable for disposition under Rule 12(b)(6). See Acad. of Allergy & Asthma in Primary Care v. Quest Diagnostics, Inc., 998 F.3d 190, 200 (5th Cir. 2021) (reversing 12(b)(6) dismissal on statute-of-limitations grounds because Defendants failed to conclusively establish that Plaintiffs should have discovered their injury through a diligent inquiry); cf. Abdul-Alim Amin v. Universal Life Ins. Co. of Memphis, 706 F.2d 638, 640 (5th Cir. 1983) (“While a statute-of-limitations defense may be raised in a motion to dismiss under Fed. R. Civ. P. 12(b)(6), such a motion should not be granted unless ‘it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.‘” (quoting Mann v. Adams Realty Co., 556 F.2d 288, 293 (5th Cir. 1977))).
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Samsung hаs not conclusively established at the 12(b)(6) stage that Petrobras‘s RICO and Texas fraud claims accrued before March 5, 2015. Accordingly, we REVERSE and REMAND for proceedings consistent with this opinion.