ATLANTA (CN) — A trust linked to Venezuela’s state-owned oil company does not have standing to sue major international energy firms over an alleged multibillion-dollar price-fixing and bid-rigging conspiracy, the 11th Circuit unanimously ruled Thursday.
The three-judge panel rejected arguments that PDVSA U.S. Litigation Trust, which was formed by Venezuelan oil company Petróleos de Venezuela, S.A. in 2017, could sue as an assignee of the company under a trust agreement.
During oral arguments in the case last May, famed litigator David Boies of Boies Schiller & Flexner told the panel that the creation of the trust was necessary because “everybody was concerned that the people who were engaged in the corruption would use their political influence to try to get one faction or another to kill this litigation.”
But the case against Russian energy corporation Lukoil and others could have easily gone another way if attorneys for the trust had tweaked their procedural arguments on appeal.
In an 18-page ruling, the Atlanta-based appeals court chose to uphold a Florida federal judge’s order dismissing the action despite its disagreement with some of the judge’s findings.
U.S. District Judge Darrin Gayles made two critical determinations in his 2019 order dismissing the case: that the trust did not properly authenticate the trust agreement and that the trust agreement was champertous and therefore void.
Champerty is a legal term for an unethical agreement which arises when a third party unrelated to litigation agrees to sue and pay the costs of litigation in exchange for a portion of any proceeds recovered.
Gayles ruled that PDVSA’s assignment of its claims to the trust was “of questionable authenticity and legality” and noted that the Venezuelan National Assembly has declared the trust agreement invalid and unconstitutional.
Writing on behalf of the panel Thursday, U.S. Circuit Judge Adalberto Jordan, a Barack Obama appointee, pointed out that the district court “may have erred procedurally in definitively resolving the question of champerty at the Rule 12(b)(1) stage because that question likely implicated the merits of the Litigation Trust’s claims.”
“This appeal might have come out differently had it been argued differently,” Jordan wrote.
Jordan noted that there was a “strong argument” that the district court should have used a specific standard to address whether the agreement was champertous. But the trust’s attorneys simply failed to raise any procedural objections on those grounds.
“In a case like this one—involving sophisticated litigants represented by able counsel—there is no reason to depart from the general principle of party presentation, and we decline to take up sua sponte the district court’s failure to apply the Rule 56 standard,” the ruling states.
The panel instead applied only a clear-error standard of review and found that the agreement was, in fact, champertous.
The ruling explains that the trust was created specifically to pursue the claims in the complaint. Only 34% of any recovery from litigation goes to PDVSA, the ruling states, with the rest of the money divided between the trust’s attorneys, investigator and financier.
A spokesperson for Boies Schiller & Flexner, which represents the trust, did not immediately respond to a request for comment Thursday.
Jordan was joined on the panel by Senior U.S. Circuit Judges R. Lanier Anderson III, a Jimmy Carter appointee, and Gerald Baird Tjoflat, a Gerald Ford appointee.
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