Willkie Secures Resounding Delaware Supreme Court Victory for Venezuela-Owned Citgo Petroleum

July 28, 2020

The court upheld a Chancery Court ruling affirming the validity of appointments to U.S.-based subsidiaries of the Venezuelan national oil company, PDVSA, following the appointment of directors to PDVSA Board by Interim President of Venezuela, Juan Guaidó.

On July 22, Willkie secured a swift and unanimous victory in the Delaware Supreme Court in Jimenez v. Palacios, on behalf of Citgo Petroleum and its U.S.-based holding companies, Citgo Holding, Inc. and PDV Holding, Inc, as well as for democracy in Venezuela. The court upheld a Chancery Court ruling affirming the validity of appointments to the U.S.-based subsidiaries of the Venezuelan national oil company, PDVSA, following the appointment of directors to the PDVSA Board by Interim President of Venezuela, Juan Guaidó. (The United States recognized Guaidó as the legitimate leader of Venezuela in January 2019).

Citgo and its affiliates are wholly owned by Venezuela through the state-owned oil company, Petróleos de Venezuela, S.A. (PDVSA). After the rigged Venezuelan presidential election in 2018 in which authoritarian leader, Nicolas Maduro, disqualified, exiled, and jailed many of the opposition leaders, the Venezuelan National Assembly, led by its president, Juan Guaidó, declared Maduro’s election illegitimate under the Venezuelan constitution and named Guaidó as Interim President until new democratic elections could be held.

The same day that Guaidó became the Interim President of Venezuela, the U.S. President, along with leaders from numerous other countries, formally recognized Guaidó and the National Assembly as the “only legitimate” government of Venezuela and declared the Maduro regime to be illegitimate. Shortly thereafter, the National Assembly passed a transition statute allowing for President Guaidó to appoint an Ad Hoc Board of PDVSA to manage the oil company’s overseas assets, and replace the old Maduro-appointed directors with new board members.

In June 2019, a slate of the ousted directors appointed by former President Maduro sued in the Delaware Court of Chancery seeking a judgment that they (not the Guaidó appointed board members) comprise the rightful boards of PDV Holding, Citgo Holding, and Citgo Petroleum. The Chancery Court denied the Maduro directors’ claims and ruled that under the political question doctrine and act of state doctrine, U.S. courts must accept as binding the U.S. President’s recognition of the Guaidó government and assume the validity of the Guaidó government’s appointments to the PDVSA Board. Following that opinion, Willkie also successfully sought emergency sanctions against the Maduro directors for their attempts to issue orders on behalf of Citgo authorizing the release of Citgo property to the Maduro-controlled PDVSA in Venezuela.

Soon after, the Maduro directors appealed the Chancery Court ruling to the Delaware Supreme Court, which held oral arguments several weeks ago. Willkie argued on behalf of the Appellees, the legitimate directors of CITGO, CITGO Holding, and PDV Holding. In an Order issued just two weeks after argument, the Delaware Supreme Court summarily affirmed the Chancery Court’s opinion recognizing Venezuelan opposition leader Juan Guaidó’s board appointees to PDVSA, as well as Citgo Petroleum and two other Delaware-chartered affiliates.

The Willkie team included partners Michael Gottlieb (who argued at the Delaware Supreme Court), Martin Seidel, and Tariq Mundiya, as well as associates Sam Hall, Nick Reddick, and Kat Higginbotham.