Dresser-Rand Co. v. PDVSA Petróleo, S.A.

No. 20-1990
Dresser-Rand Co. v. PDVSA Petróleo, S.A.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 9th day of July, two thousand twenty-one.
PRESENT:
SUSAN L. CARNEY,
RICHARD J. SULLIVAN,
JOSEPH F. BIANCO,
Circuit Judges.
_________________________________________
DRESSER-RAND COMPANY,
Plaintiff-Appellee,
v. No. 20-1990
PDVSA PETRÓLEO, S.A.,
Defendant-Appellant,
PETRÓLEOS DE VENEZUELA, S.A.,
Defendant.
_________________________________________
FOR DEFENDANT-APPELLANT: MATTHEW DUCHARME (Robin L. Muir,
Dennis H. Tracey, III, on the brief), Hogan
Lovells US LLP, New York, NY.
FOR PLAINTIFF-APPELLEE: KIM M. WATTERSON (Jordan W. Siev,
Geoffrey G. Young, on the brief), Reed
Smith LLP, Los Angeles, CA.
Appeal from a judgment of the United States District Court for the Southern District
of New York (Stanton, J.).
UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment entered on May 29, 2020 is
AFFIRMED.
The Dresser-Rand Company (“Dresser-Rand”) sues for the balance owed plus
interest due under a Note issued by Petróleos de Venezuela, S.A. (“PDVSA”) and
guaranteed by PDVSA Petróleo, S.A. (“Petróleo”) pursuant to a Note Agreement. In this
appeal, brought pursuant to a Federal Rule of Civil Procedure 54(b) certification, Defendant-
Appellant Petróleo seeks reversal of the District Court’s grant of partial final judgment
against it and in favor of Plaintiff-Appellee Dresser-Rand in the amount of approximately
$150 million. Dresser-Rand Co. v. Petróleos de Venezuela, S.A., 439 F. Supp. 3d 270 (S.D.N.Y.
2020). We review de novo the District Court’s partial summary judgment decision, SCR Joint
Venture L.P. v. Warshawsky, 559 F.3d 133, 137 (2d Cir. 2009), and apply New York law, as the
Note Agreement provides. On such review, we conclude that Petróleo unconditionally
waived in the Note Agreement any impossibility defense to the action for payment; we also
conclude that Petróleo failed to timely raise – and thus forfeited – its argument that its
breach of the Note Agreement is excused for reasons of public policy and the potential
illegality of making payments under the Note Agreement. The District Court therefore did
not err in entering judgment against Petróleo.
In the discussion below, we assume the parties’ familiarity with the underlying facts,
procedural history, and arguments on appeal, and refer to them only as necessary to explain
our decision to affirm.
1. The guarantee and broad waiver of defenses. Article VI of the Note Agreement governs
the Guarantee undertaken by Petróleo. In Section 6.01 of the Note Agreement, Petróleo
2
agrees “that it is jointly and severally liable” for payment and “absolutely, irrevocably and
unconditionally guarantee[d]” to the noteholder and related obligees “prompt payment when
due.” Joint App’x 53. Section 6.02 emphasizes that Petróleo guarantees payment rather than
collection of any amount owed. Section 6.03(a) underscores that “the obligations of the
Guarantor hereunder are unconditional and absolute and not subject to any reduction,
limitation, impairment or termination for any reason” except indefeasible cash payment in
full. Id. Section 6.03(b) reiterates that “[t]he obligations of Guarantor [Petróleo] hereunder
are not subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of any of the Guaranteed
Obligations or otherwise . . . .” Id. And Section 6.03(c) states that Petróleo’s obligations
under the Note Agreement “are not discharged or impaired or otherwise affected by . . . any
[ ] circumstance, act, omission or delay that might in any manner or to any extent vary the
risk of [Petróleo] or that would otherwise operate as a discharge of [Petróleo] as a matter of
law or equity.” Id. at 54.
Section 6.04 of the Note Agreement, titled “Defenses Waived,” further details
Petróleo’s unconditional obligation:
To the fullest extent permitted by applicable law, the Guarantor [Petróleo]
hereby waives any defense based on or arising out of any defense of the
Issuer [PDVSA] or the Guarantor [Petróleo] or the unenforceability of all or
any part of the Guaranteed Obligations from any cause, or the cessation from
any cause of the liability of [PDVSA] or [Petróleo], other than the
indefeasible payment in full in cash of the Guaranteed Obligations.
Id.
2. A belatedly asserted impossibility defense. On appeal, Petróleo insists that
notwithstanding the sweeping guarantees in Article VI of the Note Agreement, it did not
waive the defense of impossibility of performance. 1 Petróleo suggests that it is currently
1 Dresser-Rand argues that Petróleo is now foreclosed from asserting impossibility as a defense because
Petróleo waived that defense in the Note Agreement and did not challenge the enforceability of its defense
waiver with respect to impossibility before the District Court until its motion for reconsideration. We proceed
in our discretion to address the merits of Petróleo’s impossibility argument.
3
“impossible” to make Note payments as required because sanctions imposed by the United
States against the Venezuelan oil sector mandate that, absent a license from the U.S. Office
of Foreign Assets Control (“OFAC”), all of Petróleo’s “property and interests in property”
within the United States or within the “possession or control of any United States person”
will be “blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt
in.” Blocking Property of Additional Persons Contributing to the Situation in Venezuela,
83 Fed. Reg. 55243 (Nov. 1, 2018); see generally Dresser-Rand Co. v. PDVSA, 439 F. Supp. 3d at
274 (discussing the U.S. sanctions). Petróleo argues that these sanctions make compliance
with the Note Agreement impossible.
Controlling New York law suggests otherwise. As the New York Court of Appeals
has emphasized, a contractual guarantee stated by “plain terms, in broad, sweeping and
unequivocal language” may “foreclose[] any challenge to the enforceability and validity of the
documents which establish [a] defendant’s liability for payments arising under [an]
agreement, as well as to any other possible defense to [a defendant’s] liability.” Cooperatieve
Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro, 25 N.Y. 3d 485, 494 (2015). 2 In the past, we
have accordingly found a guarantor’s defenses waived “even without such a specific
representation” as to the particular defense whose waiver is at issue. Compagnie Financiere de
CIC et de L’Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 188 F.3d 31, 35
(2d Cir. 1999) (finding that general waiver language effected a waiver as to guarantor’s
specific defense that release of the primary obligor applied to guarantor as well). In view of
the plain, broad language of its guarantee and its waiver of defenses, and the established
enforceability of those provisions under New York law, we comfortably conclude that
Petróleo waived its impossibility defense.
3. Public policy and illegality. Petróleo argues in the alternative that the District Court
was required to deny enforcement of Petróleo’s obligations because of public policy
concerns and the potential illegality of making payment to Dresser-Rand. Petróleo points to
2 Unless otherwise noted, in quoting caselaw, this Order omits all alterations, citations, footnotes, and
internal quotation marks.
4
the clause in Section 6.04, quoted above, in which it waived its defenses, but limited the
waiver to “the fullest extent permitted by law.” This clause, Petróleo argues, shows that it
could not waive illegality of performance as a defense to liability for payment. In this
context, as with its more general impossibility defense, Petróleo contends that the U.S.
sanctions described above forbid Petróleo from making payments to Dresser-Rand absent a
license granted by OFAC. Petróleo urges that these circumstances should have precluded the
District Court from entering judgment against Petróleo on its guarantee under the Note
Agreement.
We do not consider Petróleo’s public policy and illegality argument today, since
Petróleo forfeited this argument by failing to raise it before the District Court in a timely
manner. Joint App’x 400-05. The argument was not fully briefed below, nor did the District
Court have an appropriate opportunity to consider it in the first instance. Because Petróleo
raised this argument for the first time in its motion for reconsideration, the District Court
treated that argument as forfeited and denied the motion for reconsideration in an order
consisting of a single sentence. Joint App’x 396. Having waited to mention the argument
until its motion for reconsideration of the summary judgment ruling against it, Petróleo is
not entitled to raise it here for plenary consideration. See Sompo Japan Ins. Co. of Am. v. Norfolk
S. Ry., 762 F.3d 165, 188 (2d Cir. 2014).
* * *
We have considered Petróleo’s remaining arguments and find in them no basis for
reversal. For the foregoing reasons, the judgment of the District Court is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
5