Chancery Court rules in favor of the board of directors of PDV Holding, Inc., CITGO Holding, Inc., and CITGO Petroleum Corporation.
Willkie recently obtained a victory on behalf of the board of directors of PDV Holding, Inc., CITGO Holding, Inc., and CITGO Petroleum Corporation (the “Citgo entities”), all of which are owned (directly or indirectly) by Petroleos de Venezuela, S.A. (“PDVSA”), Venezuela’s state-owned oil company. PDVSA, through its subsidiaries, owns Citgo Petroleum Corporation, one of the world’s largest petroleum refiners and a significant asset of the Venezuelan nation. Venezuela has experienced political and economic turmoil for a number of years, which came to a head earlier this year with the ousting of former President Nicholas Maduro by opposition leader and interim president Juan Guaidó. Upon his appointment by the Venezuelan National Assembly, the Executive Branch of the United States government recognized President Guaidó and his government as the legitimate Venezuelan government and supported the National Assembly’s efforts to take control of PDVSA’s U.S. subsidiaries through the passage of legislation and subsequent appointment of a board of directors for an “Administrative Board.” That board then appointed new directors to all of the U.S. subsidiaries, including Citgo. In an effort to fight back against the Guaidó government, the Maduro regime decided to challenge the legality of these appointments in U.S. court.
On June 26, the ousted directors who had been appointed by the Maduro regime filed an action in Delaware Chancery Court seeking a declaration that they are the legitimate boards of the Citgo entities. Willkie represented the Guaidó directors. The parties filed competing motions for judgment on the pleadings and engaged in several rounds of expedited briefing. On August 2, the Chancery Court ruled in favor of the Guaidó directors, finding that under the political question and act of state doctrines, the Delaware courts were bound by the U.S. President’s determination to recognize President Guaidó, and under the act of state doctrine, the Court was required to accept the Guaidó government’s appointments. On August 16, the Maduro directors informed the Court that they were not seeking to challenge the validity of the board consents appointing the Guaidó directors, thus resolving the case in favor of the Guaidó directors.
This case is a significant victory for the Citgo entities and the Guaidó government, including the government’s efforts to preserve Citgo and its assets in the United States for the benefit of the Venezuelan people. The Willkie team consisted of partners Michael Gottlieb, Martin Seidel and Tariq Mundiya, and associates Jonathan Waisnor and Samuel Hall.