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Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 1 of 23


CASE NO.1:18:CW -20818-èAR ES/OTAZO-M W S





THIS CAUSE cam e before the Courtupon Defendants Trafiglzra Trading,LLC,Lukoil

Pan A m edcas LLC,ColonialO i1Industdes,Inc.,Colonial Group,Inc.,PaulRosado,G lencore

Ltd.,Glencore Energy UK Ltd.,Gustavo Gabaldon,Sergio de laVega,VitolInc.,VitolEnergy

(Bennuda)Ltd.,Antonio M ar aoui,BAC FloddaBank,FranciscoM orillo,LeonardoBaquero,

Helsinge Holdings,LLC,Helsinge,Inc.,Helsinge Ltd.,Dnniel'
Lutz,Luis Liendo,John Ryan,

andLuisAlvarez's(collectively çr efendants'')M otion,by Orderto Show Cause,forSanctions

and Other Relief AgainstPlaintiff PDVSA US Litigation Tnzst (Glplaintiff''orthe lt-
thereafter, çtM otion for Sanctions''), fîled on June 14, 2018 ED.E. 4304,
. and Defendant
Thesem atterswererefen'edto thetmdersigned by theHonorableDarrin P.Gayles,United States

District Judge,puzsuant to Title 28, United States Code, Section 636 (D.E. 220j. The
undersigned held Show Cause H eatings on this m atter on July 6,2018 and January 25, 2019'

1 PDVSA is the V enezuelan state-owned energy company Petroleos de Venezuela, S.A . See Aril.
Compl.(D.E.12atQ . '
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The Tnlst commenced this action on M arch 3,2018 (D.E. The Trustfiled an
Amended ComplaintonM arch5,2018(D.E.1Q .Initsamendedpleadlg,theTrtzstallegesthat
Defendants engaged in a conspiracy to:tf x prices,dg bids,and elimiùate competition in the

purchase and sale ofcnldeoiland hydrocarbon productsby PDVSA;misappropdate PDVSA

proprietary data and intellectuAlproperty;and systematically loot PDVSA by causing com zpt

PDVSA oo cials not to collect monies due PDV SA,to pay inflated prices for products and

servicesacquired by PDVSA,to acceptartificially 1ow prices forproducts sold by PDVSA,to

overlook the failtlre to deliverproducts and servicespaid for by PDVSA,and to fraudulently

concealwhatwasowedtoPDVSA.''SeeAm.Compl.(D.E.12 at2-35.
J.n the section ofthe Am ended Complaintentitled lGparties,''the Tnzstalleges:Giplaintiff.

PDV SA US Litigation Trust is a trust established pm suant to the law s of New Yörk to

TheAm ended Cpmplaintconsistsofnineteen cotmts:

Cotmt1 PDVSA Sales of Hydiocarbon Products- Violations of Section 1ofthe

Sherman Act.

Cotm t11 PDV SA Ptlrchases of LightCnlde Products- Violations of Section Iof

the Sherm an A ct.
- g;.
Cotm tI1I PDVSA SalesofHydrocarbonProducts- ViolationsofSection2@)ofthe ..
Robinson-patm an A ct. ..

CotmtIV PDVSA PurchasesöfLightCnldeProducts- ViolationsofSection2(c)of

theRobinson-patman Act.

CotmtV ViolationsoftheFloddaDeceptiveand UnfairTradePracticesAct.

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CotmtVI Violations ofthe U.S.kacketeer lnfluenced and CorruptOrgnnizations

CötmtVlI Violations of the U.S.Racketeer Influenced and Com zpt Practices A ct
CotmtVIII Violationsofthe CivilRemediesforCriminalPracticesAct.

Cotm tIX Fraud.

Cotm tX CivilConspiracy.

Cotm tM Aiding alld AbettingBreach ofFiduciary Duty.

Cotm tM 1 Aiding and AbettingFraud.

CountM 11 PDVSA PurchasesofLightCrudeProducts- Breach ofContract.

Colm tX IV PD V SA SalesofH ydroèarbon Products- Breach ofContract.

CotmtXV UnjustEmichment.
Cotmt> 1 ViolationoftheComputerFraudandAbuseAct,18U.S.C.j1030.
ColmtXVII ViolationoftheStoredCommllnicationsAct,18U.S.C.j2701.
CotmtX V111 Violation ofthe W ire and Eleckonic Commlmications Interception and
Interception of Oral Commlmications Act (Federal W iretap Act), 18
CotmtXIX Violation oftheFloddaUniform TradeSecretsAct,CH.688.


In itsPrayerforRelief,the Tnzstseeks variousforms ofdnm ages,interest,costs,fees,

and injllnctiverelief.JZ at58-59. According tothePDVSA U.S.Litigation TrustAgzeement

l-rtzst Agreemenf') (D.E. 430-1 at 35-534, Defendants' purported m isconduct
(hereafter, çG-
lçcaused and continues to cause vast dnm ages to PD V SA and the People of V enezuelai''

therefore,çEin orderto obtain compensation forPDVSA and thepeople ofVenezuela,PDVSA is

authorizing the engagem entofUnited States 1aw fsrms and hw estigatorsto furtherùw estigate,

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commence one ormore civilactions (the çW ssigned Actions''),and prosecute the Assigned
Actionsto conclusion.'' Id.at35. TheTnzstAp eem entfurtherstates?thatPDVSA entered into

itûito ensttre the engagem ent of legalcotmseland the investigators ...and to provide forthe

orderly and consensualdisG bution ofthe ProceedsoftheAssigned Actions,whetherby pre-suit

On April16,2018,pursuantto Defendants'JointRequestEb.E.193j,theundersigned
entered a Scheduling Order prescribing a procedure and schedule for the parties to conduct

discoveryon theissue oftheTrust'sstandingto bling thisaction. See Scheduling Order(D.E.

253j.TheSchedulingOrderstatedthateach sidewouldtakenomorethanfotlrfactdepositions
astotheissueofstanding andthatthesedepèsitionswereto becompletedby M ay4,2018.Ld..

On April 24, 2018, Defendants informed the Court that for two of the fotlr fact

depositions to which they were entitled,they intended to depose a cop orate representative of

PDVSA alld Reinaldo Mtmoz Pedzoza(GGM r.Pedroza'),theProclzradorGeneralofVenezuela,

who, as GtGeneral Atlorney,'' pup ortedly Gtduly authotized'' the Trust Agreem ent tmder

Venezuelan law. See Notice of Issues to be Addressed Dudng April 25, 2018 Telephorlic

Discovery Conference ED.E.276 at6q;TrustAgreement(D.E.430-1at47,492. Onthatsame

date,Defendantsnoticed the deposition ofPDVSA'S cop orate representative,to be conducted

onMay 3,2018.SeeNoticeofDepositionofPDVSA ED.E.277-12.

The tm dersigned held a Telephonic D iscovery H enring on Apdl 25, 2018, at w hich

depositionsofPDVSA'Scop oraterepresentativeand M r.Pedroza were discussed (D.E.2791.

Asto the availability of PDVSA'S cop orate representative for deposition,Plaintiff s cotm sel

inform ed the tm dersigned asfollow s:

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THE COURT: PDV SA, when will you know if PDVSA is available for
deposition and wherethatdeposition would takeplace?

M R.BOIES:1willknow thatwithin the sam e48hottrsthatIwillknow aboutthe

docllm ents and m aybe sooner.I may lcnow thatas eady as the end of the day
based on asmlming the conversation (with PDVSA'S GeneralColmselq that's
scheduled to go fozw ard actually goes forwm'd. Iwillknow thatwithin the 48
hotlrsthatweconferred to before. !

THE COURT:Okay.Then whatisthe position on ifPDVSA doesnotvoltmtarily

offerits cop orate representative for deposition on the service of a subpoena on
PDVSA? Isityotzrcontention thatyou (don'tjhave authority to acceptsuch a
subpoena? Itisyour contention tilatsuch a deposition has to take place in
Venezuela? Give us some idea ofwhàtthe disputes are so Ican give you som e

M R.BOIES:Stlre.IfPDVSA would notproduce one voltmtarily,Iwillask for

theirpermission to acceptselwicéofasubpoenagn theirbehalf.Ibelievethatthey
willwantthatdepositiontotakejlaceinVenezuelabecausethat'swherethey are
located and that'swhere a11ofthehigh officialsofthe Governmentare.Now,we
have talked about the possibility of having a deposition taken by video

THE COURT:Itsotmdsto me likethat'sthe only viableway todo it.

M R. BOIES: I think you are right, Yotlr H onor, but I w ill know about the
subpoena issue and whether they will do it voltmtarily,which I nm going to
strongly urgethem to do- Iw illknow thatwithin thenext48holzrs.

THE COURT:Allright.So asto thatentity,then,lwillagain allow you the 48-

hotlrtim eperiod to m eetand conferand itsolm dsto m e thatitm ightbe a good
idea to cizcle back on M onday to see ifyou have resolved these issuesorifyou
need my fdrtherassistance,butlet'skeep thatirlm irld asapossibility.

SeeTranscdptof4/23/2018Hearing ED.E.314at58-591.
As to MT.Pedroza's availability for deposition,PlaintiY s counselm ade the follow ing


M R.BOIES:In Venezuela there are two people who divide the responsibiliiies
thatare llnited in theAtlorney Generalofthe United States,and thisindividualis
one ofthose tw o people.He is a high governm entoftk ial.W e do notcontrolhim .

Iam ilotstzre,really,whatrelevantfactualirlform ation they are going to have on

standing,butIhavem ettllisperson and Ithinlchemightvery wellbeprepared to

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make himself available for a deposition,butthatis a decision thathe and the

Venezuelagovernm entwould m ake.Icould notcontrolthat....

THE COURT:M r.Boies,whatisyom plan?Aze you going to pick up thephone

andcall(NIr.Pedrozajandaskhim doyou wanttoappearfordepositionandifhe
saysno,that'sthe end ofit?How arewe goingto handlethis?
$ '
M R.BOIES:Ithink Iwould write him just- my Spnnish isnotgreatand lzis
English is not great so Ijthink that I would write lnim so that there is no
mistmderstanding and make the requestfor llim to appear for deposition.Ifhe
declines,Idon'ttllink thereisapracticalsolution becauseldon'ttlzink thatV is
subjecttoprocessintheUnitedStates.Andeven ifitwouldbeappropriatetodo
so with aperson ofllisposition in aforeign sovereign governm ent-

THE COURT:A1lright.W ithin thenext48 hom s,Inm assllm iqg when you said
you writellim,you send him an e-mailbecauseofsnailmail.

M R..BOIES:lwillwtitehim Eajletterthatlwille-mailtohim.
IE COURT:So,within 48 hoursyou willbe ableto say whetherhesaysyea or


IJ.at61,64-65.Thelmdersignedthen orderedthepartiestomeetandconferon,interalia,the
availability of PDVSA 'S corporate representative and M z.Pedroza for deposition by April27, .

Ata Continued TelephonicDiscovery Conference on April30,2018,Plaintiffs cotmsel

m ade the following represehtation regarding the depositions of PDVSA 'S'corporate

representative and M r.Pedroza:

M R..BOIES:Underthe scheduling order,each sidewasgiven the opporttmity to

take fotlrdepositions.The defendants gave us a listofwitnessesin the orderin
w hich they w ould like them to be m ade available.W e have been able to arrange
to make available the tkst three witnesses that they requested,whichf'is the
30(b)(6) deposition of the Tnzst, a 30(b)(6) deposition of PDVSA and a
deposition ofthe Procurador Generalor GeneralAttorney ofVenezuela,EM r.
Pedrozaq ....So,whatwe have agreed to do isto produce the frstthree,to
com inue to work on producing one ofthe nextrequested priority deponents,butif
thatfails,to produce A lgnm ex.

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See Transcript of 4/30/2018 Hearing ED.E.357 at 12-134. The tmdersigned incoporated

PlaintiY s agreem ent to produce the.PDV SA cop orate representative al:d M .
r.Pedroza in a

Contem poranetm s discovery Order. See Second Discovery Order(D.E.355 at2)(ir efendants

have identified and Plaintiff has agreed to produce for deposition: the 30(b)(6)

,andReinaldo M unoz PedToza.''l.The
deadline to complete a11fact depositions on the issue ofthe Tnlst's standing was extended to

May22,2018.SeeSupplementalandAmendedSchedulingOrderD .E.3l6at2).
On M ay 8,2018,thelmdersigned held aFollow-up TelephonicHenring gD
wllich thefollowing exchangeocc= ed:

IE COURT:A11right.And there is som e indication thatthe two thatwe have,
of PDVSA whose nnm e appears to be Hilda Cabeza,those two can'ttraveland
are potavailable and there is some indication thatyou al1wantto extend that
deadline....So,let's sortofsidetrack ourselvesinto (Mr.Pedrozaqand M s.
Cabeza arld theiravailabilitiesand when theirdepositionswilltalceplace.

MR.ENCINOSA:YotzrHonor,EMz.Pedrozaqwehavebeen toldbyplaintiffcan
be available fordeposition in the United States.They said N ew York.W e may
have to agreeto New York even though the obligation should beto produce him
in the forum ,during the week of M ay 28th and the defendants are generally in
agreement to slightly extend the schedule to accommobate that deposition
occurring dlzring the week ofM ay 28th. W ith respectto M s.Cabeza,although
initially we are told she mightalso be in New York or in the Uriited States,we
to the United States for deposition and could only be made avallable for
deposition according to the defendant by video conference during the week of
M ay 21st.The defendants' position with respect to that is that the PDVSA
thefonzm here in M inm i.W e m'e fme to do ittheweek ofM ay 21st.W earefine
to extend it outto the week of M ay 28th as we m'
e willing to do itto (M r.
THE COURT:IsM s.Cabeza willing to travelsometim ebefore M ay 28th or she

M R..BOIES:YourHonor,tliisisDavid Boies.W e havenotbeen ableto gether

to agree to travel,and contrary'to W hatdefendantkeeps saying,I don'tthink that
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there is any obligation on the partofthe Trustto compelpeople who itdoes not
controlto cometotheUrlited States.W ehaveconvinced (M r.Pedrozajto come
to theUnited States.W etried to convinceDr.Cabeza,but,Imean,for example,
in term s of the fonlm ,we are tnking the deposition of Tro gura.Tratigura is
producingtheir30(b)(6)deponentnotin theforum .They areproducing them in

THE UOURT:Hang on justone secönd.M s.Cabeza is the representative of

PDVSA who technically isnotaparty.It'stheLitigation Tnzstwho istheparties.
Iknow there are a1lthose issues.So,Iam notgoing to requkethatshe travelto
theUnited States.She isnotaparty.Sheisawitness.So,whatdo you wantto do
with her? Do you wantto take hervideo deposition by M ay 21stordo you want
to hold outhopethatshe willtravelto the U .S.and extend hér deadline to M ay
28t10 It'sup tcsyou.

M R.ENCW OSA:Yotlr Honor,for the sake of clarity and for the record,the
argument we are m alcing is based on the case law we cited regarding the
assignm entofclaim sand thatthe assignorstandsin the shoesforfullrespectof
discovery ofthe assignee.

THE COURT:Right,andthecasesyou cited to m ehave to dowith production of

discoverable inform ation and docllm ents.I did not see any case there talldng
about depositions or location of deposition or anything along those lines.So,
that'sm y nzling.W hatdo you w antto do? D o you w antto take herby M ay 21st?
Do you wantto extendhertim eto the28th to seeifshechangeshermind?

M R.EN CINOSA:YourHonor,totheextentthatshechangeshermind,wewould
be willing to extend it to the 28th and to the fact Yotlr Honor requires the
deposition to proceed by video conference ifshe isnotwilling to travelherejwe
can do itthe week ofthe 21st.So,if YourHonorwantsto leave itopen in the
orderforherto changeherm ind,wewillbehappy to dothat.

THE COURT:All'rièht.Iwillleaveitopen for(Mz.PedrozaqandM s.Cabeza,their

depositionsto betaken by M ay 28th....

M R.BOIES:Yotlr Honor,this is David Boies.W e willwork with defendants.

W ith this guidance from the Court,Ithink wecan work with defendantsto com e
up with specific datesthatare convenientforeverybody.

See Transcriptof 5/8/2018 Headng (D.E.373 at 33-364. The tmdersigned then nlled that
Defendants could depose klr.Pedroza and Hilda Cabeza (çGDr.Cabeza'') as PDVSA'S Rule
30(b)(6)representativeand extendedthedeadlineto completeal1factdepositionsontheissueof
standingtotheweekofM ay28,2018.SeeThirdDiscoveryOrder(D.E.370at3j.

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The tmdersigned held a hearing on M ay 23,2018,atwhich Plaintiffscotmselmade the


THE COURT:Okay.M r.Boies,when isthedeposition ofEMr.Pedrozajtaking

place and where?

M R..BOIES:It is talcing place,YotlrHonor,on M ay 30th in New York,and I

think thepartieshaveagreed to that.

See Transcriptof5/23/2018 Hearing L

D .E.395 at28q. Plaintiffscotmselalso stated thatDr.
Cabeza wasavailable fora deposition to betaken by video conferencein V enezuela,butthatshe

wastmableto travelto theUrlited Statesforpoliticalreasons. J.

IJZ.at29,34. Counselfurther
stated thatthey would try to accom modate Defendants'requestto depose PDVSA 'S corporate

representative by either having the deposition by video conference in Venezuela, which

to anothercotmtry forthe deposition;orfm ding som eone else who could be educated as aRule

30(b)(6)witnessto testify atadeposition in theUnited States. 1d.at39-40. Thetmdersigned

incop orated the parties'agreement regarding M r.Pedroza into a contemporaneous discovery

order. SeeFourth DiscoveryOrder(D.E.390at3q(iGW ith regardtothependingdepositionson

Plaintiffsstanding,thedeposition ofM r.Reinaldo M lm oz Pedrozaisscheduled to takeplace on

M ay30,2018i.
nNew York.'').Thetmdersignedalsoprescribed adeadlineofM ay25,2018,for
the partiés to file ajoint#notice disclosing the deponent's identity,date and location for the
On M ay 25,2018,the Tnlstfiled itsNoticeto the Courtwith Regard to Depositions,in

which it stated thatthe parties had advised each otherthatthe deposition ofPD V SA 'S cop orate

representative would take place on Jtme 2018 in M adrid, Spain (D.E. 3984. Email

correspondencebetween the parties showed thatPlaintiY s counselhad identified Dr.Cabeza as

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the corporate representative who would appear atthatdeposition. See Em ailCorrespondence

(D.E.399-4at2). However,M r.Pedroza'sdeposition,which had been scheduled to takex

in New York on M ay 30,2018,wascancelledbecauselithePresidentofVenezuelahad restricted .

travelofgovem mentofficialsoutsidethe cotmtry.'' SeeEm ailsf'

rom Plaintiffscounsel,George

Capinello,datedM ay27,2018(D.E.430-1at7-84.
On M ay 29,2018, the tmdersigned held a hearing at which the following exchange

NIR . BOFES:At the afterm ath of the elections down in Venezuela and other (
politicalevents,people'weretold,lligh officialsin Venezuela were told thatthey
couldnottraveltotheUnited States,which becauseweweregoing to have(M r.
Pedroza)travelto the United States and have a deposition taken,presented a
problem and thatdeposition willnot go forward tom orrow.Originally,w e were
told and w e intbrm ed counselthatitm ightnotbe possible forD r.Cabeza to leave
the country either.W e have,in consultation with both IM r.Pedroza) and
other governm entofficials and D r.Cabeza,confirm ed thatshew illbe able to
travelto Spain for her deposition.W e are going to request that it be m oved
from the7th tothe8th,butshewillbeabletobedeposed.W ithrespectto(M r.
Pedrozajthatisadepositionthatwehavenotyetbeen abletofijlzreouthow we
can take otherthan by the Hague Convention,wllich isobviously avery lengthy,
lengthy process.So,we have --Ithink it's fairto say thatwe have three ofthe
fotlr depositions gelled, but the fourth one cnm e tmgelled as a result of the
politicalsituation in Venezuela.

THE COURT:A11right.Ishisproblem thathe cnnnotleaveVenezuelabecause of

theelectionsorcanhetraveltoSpainlikeDr.Cabezadid andjustnott'
U .S.?

M R.BOIES:Right now he is not able to traveloutside of Venezuela.W e are

trying any way thatwe can to fm d a way to havea deposition taken.W e continue
to believe,contrary to thebeliefofdefendants,thatdeposition by videotape can
betaken in Venezuela,butwe aretryingto see ifthereisa way thatwecan getart
exception for(M r.Pedrozajforthiscase.W ehave notsucceeded in doing that.
W 8wereflrstizlfonned ofthis,Ithink,on Fdday orSaturday afterthe elections.

THF,COURT:Now,wasn't the Procm ador General the one who said in his
opinion thatdepositionsbyvideo could betaken in Venezuela?
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M R. BOIES:Yes. So, I think, you know, a realpossibility would be, if the

defendants w ere prepared to do this, to have his deposition taken by video in

NIR.BIRENBOIM :Ithink defendantswould stillhavean issue,YolzrHonor.The

basisforourposition,and I'm notgoing to reargue it,butit'snotbecause itwas
said in the State Departm entbulletin.It'sbecauseVenezuelaisa signatory to the
Hague Convention and there is a section of the Hague Convention for the
voltmtary tnking ofdepositionsthatanation can eithersign onto ornotsign onto,
and Venezuela declined to do that;therefore,the depositions musttake place in
Venezuela tmder the regulaz Hague accord,which M. r.Boies referred to.And
while,obviously,we have notlooked at anything the Proclzrador Generalm ay
provide on tllis,atleastfrom ourperspective dghtnow,the,nation ofVenezuela
hassigned on to certain partsofthe HagueConvention and ithasnotsigned on to
others.W hatithasnotsigned onto isthevoltmtary tnking ofdepositions.So,tmtil
Venezuelachangesitsstatuswith theHague,Ithizlk olzrposition isclear.

TI-IE COURT:W ell,it'sup to you,obviously,butthepointlwasm nking is,this

isthegentleman who opinesthatitcallbedone alzd itwould behisdeposition that
would be taken.So,l don't know who would complain.I don'tlcnow if your
concern is the plaintiffs would then tllrn around and say the deposition is not
adm issible in proceedhgshere.Idon'tknow ifyou areconcem ed thatsomebody
would com e and, you know, interrupt the deposition and say you are doing
som ethingillegaland,therefore,youknow ,itcnnnotgo forward anymore.Idon't
know whatyourconcernsare.Inm justsaying thatin termsof,you know,this
being thepersonwho saysitcarrbedone andtllisbeinghisdeposition,itmightbe
som ething thatyou m ightconsider asto whetheritis feasible to getitdone by
video.Butifyou can't,and ifyou don'twantto,Ican'tforceyou.Obviously,it's
yotlr call.

M R.BIRENBOIM :YourHonor,with a11duerespect,itisnotourcall.Itisillegal

forcounselto take avoltmtary deposition in Venezuela,even with theperm ission
ofthedeponent.That'sotlrréading ofthe law .So,ldon'tcôncu' rin theview that
this is just up to us.There are many simations where colmsel could take
depositionsin violation ofthelawsofthecountryjustby getting someoneonthe
phone and tnking a deposition butthat's notthe way we typically operate.The
second pointIw ould make,YolzrHonor,isone needsto step back and remem ber
thattlzisisthe plaintiffin the case who is notapparently able to produce whatl
thirlk everyone agrees,including M r.Boies,who referred to EMr.Pedrozaqover
and over and overagain asa centralperson on the issue ofthistnzstagreem ent.
Tllisisplaintiffsbmden toproduceacentTalwitnessin ajudsdictionwherethe
deposition could betaken.Ifthatcan'tbe done,then itcan'tbedone,and wewill
argue whatflowsf' rom that.Butwecertainly don'texpectto see any declarations
fw m thatperson orany evidence from thatperson orany expertsrelying on that
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THE COURT:Itmderstand,and you'rem nking you. rrecord thatin yourview itis

illegal--notwithstandingtheProcuradorGeneral'söpinion,itwould be illegalfor
you to take deposition by video in V enezuela. Y ou have m ade that position
perfectly cleaz.W e also lcnow thatatthispointin tim ehe cannottzaveloutside of
M r.Boiesisalluding to.So,the question ishow long --and Ithink whatyou are
sortofhinting on is form eto givethem a deadline arld say,produce him by this
deadlineornotproducehim .I11,111111that'swhere you'aregoing.

M R.BIRENBOIM :Ithink,YourHonor,thatis correct,thatllnlessthisschedule

thatheisableto leaveand go toM addd ortheUnited States,ornot.That'sit.

THE COURT:How long do you need to figurethatoutM r.Boies?

M R..BOIES:YourHonor,Iwish Icould give you areally defnitive answ er,butI

think thatDr.Cabeza's deposition,if we take her on the 8th - if we cnnnot
producetheProcurador General,Ithirlk the 8th isaFriday.Ifwe cnnnotproduce
her by the following M onday,Ithink we will have to say we cnnnot produce
them .

THE COU RT:By the 11th then?

M R .BOIES:Y es.

THE COURT:A1lright.There isthe deadline,by Jtme 11th.Produce them by

then orstatethatyou cnnnot.

SeeTranscriptof5/29/20.18Headng (D.E.408at46-52j(emphasisadded). On M ay 30,2018,

the undelsir ed issued the Fifth Discovery Order,which stated:ttW ith regard to the pending
depösitionson theissue ofPlaintiff'àstanding,those depositionsmustbe completedby June 11,

2018.'5SeeFifthDiscoveryOrderED.E.404 at4)(emphasisinodginal).
On Jtme 7,2018,the Honorable Andrea M .Sim onton,United States M agistrate Judge,

presided over an emergehcy telephonic headng due to the tmdersijned'j absence f'
rom the
Southern DistrictofFlodda. See Order(D.E.422 at 1q. Atthe telephonic hearing,Plaintiff
advised thatthedeposition ofDr.Cabeza asPDVSA'Scop oraterepresentative,which had been

scheduled for Friday, Jtm e 8,2018 in M addd, Spain E&was cancelled because the President of
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Venezuelaprecluded Dr.Cabeza from leaking Venezuela forthe deposition.'' L4.. PlaintiY s

cotm selexplained:

M R.CARPW ELLO:W ewere advised very late in the evening two daysago that
the President of the Republic had directed M s. Cabeza not to attend the
deposition.W ewere--w ehad madeplansto attend.W ehadm >detzavelpl> s,as
I'm stlrem any ofthe defendantsdid.W ehad reservedthelocation and hotels,and
we were surpzised by thatdevelopm ent.W e have --we obviously do notcontrol
PDVSA.And given the political sittzation in Venezuelw it's difscultfor us to
predicthow the republic w illrespond on any issue.But w e are trying -- w e are
w orking w ith the republic and m nking an attem pt to get that rem edied and to
arrangethedeposition andareconsideringaltematives,includinganother30(b)(6)

On Jtme 14, 2018,Deféndants filed the instant M otion for Sanctions ED.E.4304.
D efendantscontend thatthe Tnzstfailed to fully comply with thediscovery contemplated by the

SchedulingOrders.J-i Defendantssoughtassanctions:1)thedismissalofPlaintiffsclaims;2)
ilithe alternative,an orderprecluding Plaintifff'
rom claim ing thatPDVSA properly created the
Tnlstorproperly askigned claim sto the Trust,and/orâom offedng orrelying on any evidence

from PDVSA in attemptingtoproveitsstanding;and 3)an awardofattorneys'feejand costs.

J.#=. DefendantM aximiliano Povedajoined the M otion forSanctions on Jtme 15,2018 (D.E.
4341. On Jlme 28,2018,Plaintifffiled its Opppsition to Defendants'M otion for Sanctions
(hereafter,tlsanctionsResponse'')(D.E.4591.OnJtme29,2018,befendantsFranciscoM orillo,
Leonardo Baquero,Helsinge Holdings,LLC,Helsinge,Inc.,Helsinge Ltd.,DnnielLutz,Luis

Liendo,and M adaFernandaRoddguez filed aNoticeofFactsin SupportofDefendants'M otion

forSmwtions ED.E.4661. Defendantsfiled theirReply i!lFurtherSupportoftheirM otion for '

Sanctions (hereafter, ltsanctions lteply'') on July 5,2018 ED.E.4784. On July 10,2018,
DefendantstiledaNoticeofSupplementalAuthority ED.E.486j.

Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 14 of 23

On July 12,2018,Plaintifffiled aNotice ofDiscovery IssuesRequested to be Addressçd

in Advance ofHenring on M otion to Authenticate the Tnzst(hereafter,GûRule 31Notice'),in

wllich itrequested leaveto conductdçpositionsupon written questionspursuantto FederalRule

ofCivilProcedure31ofM r.Pedrozaandtwo otherwitnessesED.E.4872,

Response (hereafter,ûGll.
tlle 31Notice Respùnse'')on July 16,2018 (D.E.4974. On July 19,
2018,thetmdersign'ed issued the Eighth Discovery OrderdenyingPlaintiffsrequesttotakeRule

31 depositions'by written questions of its own witnesses who had not appeared for Rule 30

depositionsbyoralexamination ED.E.507j.
On July 19,2018,theundersigned also issued an Orderdefeningnlling on theSanctions

M otion pending a hearing on theissue ofPlaintiffsstK ding (hereafter,listanding HeaHng''),

which washeld on August2 and 3,2018. SeeOrder(D.E..508 at3q;PaperlessM inuteEntries
ED.E.555,5582. OnNovember5,2018,thetmdersignedissued aReportandRecommendation
(hereafter,lGstanding R&R'') recommending thatthe action be dismibsed for lack ofsubject
matterjudsdiction ED.E.6361.TheStandingR&R iscurrentlypendingbeforetheDistdctJudge.
Also on N ovember5,2018,the undersigned issued an Ordersetting a Show CauseHearing and

concludingthat,given the recom mended dism issal,the only reliefto beaddressed in the M otion

for Se ctions is Defendmlts' reqtlest for an award of éttorney's fees and costs,incttn'ed in

connection with thepreparation forthe cancelled depositiönsofDr.Cabeza and M r.Pedrozaand

thelitigationoftheM otionforSanctions.SeeOrderED.E.6374.
On Januat'y 24,2019,Defendantsfled their Subm ission in Connection with January 25,

2019Show CauseHearing(hereafter,ûçshow CauseSvbmission''),in which they statethatthey

have incurred substantial costs and attorneys' fees in cormection with the two cancelled

Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 15 of 23

Glencore Ltd., Glencore Energy UK Ltd., Gustavo Gabaldon, Sergio de la Vega, and Luis

Alvarez;approximately $50,000 by Helsinge,Inc.,Helsinge,Ltd.,Helsinge Holdings,LLC,.

Dnniel Lutz, and Luis Liendo;approxim ately $45,000 by Tratigura Trading LLC and Jose
Larocca;approxim ately $25,000 by Francisco M orillo and Leonardo Baquero;approximately

$14,000byVitolInc.,VitolEnergy (Bermuda)Ltd.,and AntonioM nnrraoui;and approximately

$12,000by ColonialGroup,Inc.,ColonialOi1Industries,Inc.,andPaulRosado (D.E.662 at3q.
PlaintifffiledaresponsetotheShow CauseSubmission onthatsnmeday (D.E.663)

D istrict courts have broad discretion to im pose appropriate sanctions for discovery

violationsunderRule37(b),which states:
Ifaparty ...failsto obey arlorderto pfovide orpermitdiscovery ...the court
wheretheaction ispendingmay issuefurtherjustorders. Theymay includethe

(i) directingthatthemattersembraced in theorderorotherdesignated facts

be taken as established for pup oses ofthe action,as the prevailing party
claim s;

(ii) prollibiting thedisobedientpérty from supporting oropposing designated

claim sordefenses,orfrom introducing designated mattersin evidence'

(iii) strikingpleadingsinwholeorinpart;
(iv) stayingfurtherproceedingsuntiltheorderisobeyed;
(v) dismissingtheactionorproceedinginwholeorinparq
(vi) rendezingadefaultjudgmentagainstthedisobedientparty;or
(vii) treatingascontemptofcourtthefaillzretoobeyanyorderexceptan oyder
to subm itto aphysicalormentalexnmination.
r '
Fed.R.Civ.P.37(b)(2)(A).Seealso,M alauteav.Suzuld M otorCo.*Ltd.,987F.2d 1536,1542
Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 16 of 23

mustorderthe disobedientparty,the attom ey advising thatparty,orboth to pay thereasonable

expenses,including attom ey's fees,caused by the failure,tmless the failtlre was substantially

justifiedorothercircumstancesmakean awardofexpensesunjust.''Fed.R.Civ.P.37(b)(2)(C).
A cotlrtmay impose sanctions tmder Rule 37(b) for a variety ofpurposes,including:EG1)
nsating the courtand otherparties forthe added expense caused by the abusive conduct;

rom engagingin similarconduct;and4)penalizing
theguiltyparty orattorney.''Bobroffv.Univ.ofM inm i,No.15-22695-C1V,2016 W L 6433095,

at*3 (S.D.Fla.Oct.31,2016)(citationsomitted). To avoidRule371)sanctions,theopposing

party mustprove thatitsdiscovery conductwas substantiallyjustifed,meaning thatitwasa
ççgenuine dispute,orifreasonable people could differasto the appropriatenessofthe contested

action-''Devaneyv.Cont'lAm.Ins.Co.,989F.2d 1154,1163 (11thCir.1993)(citingPiercev.


Defendantsseek sanctionspursuanttoRule371)forthelast-minutecancellationsofthe
depositions of M r. Pedroza and Dr.Cabeza, which they rgue violated the tmdersigned's

discovery orders dnd cauled Defendants to inctlr attorneys' fees and cösts estiinated to be in

CXCeSSOf$250,000.SeeMotionforSanctionsED.E.k30j;Show CauseSubmissionED.E.6622.2
Thus,the tmdersignedmustdeterminl 1)whethertheTnlstviolated a discovery order;and 2)

2As stated by the undersigned atthe January 25,2019 Show Cause H earing,Defendants mustcom ply
with Southern D istrictofFloridaLocalRule 7.3 in subntitting theirexactrequestforfeesand costs.
3Defendantsalso seek sanctions underRule 37(d)which provides forsanctionswhen a party failsto
attend its own deposition orrespond to discovery requests. SeeM otion forSancti
- onsD .E.430 at15q;
Fed.R.Civ.P.37(d).However,neitherPDVSA norM r.Pedrozaisapartyinthiscase.
Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 17 of 23

1. W hetherthe T rustV iolated a D iscoverv O rder

W ith regard to M .
1..Pedroza,based on Plnintiff's representation atthe Apdl 30,2018

ContinuedTelephonicDiscoveryConferencethasithad agreed toproducehim,theundersigned

incorporated that agreement into the Second Discovçry Order. See Transcdpt of 4/30/2018

HenringLD.E.357at12-13j;SecondDiscoveryOrderX .E.355at2).Asreflectedin theThird

Disçovery Order,by the M ay 8,2018 Follow-up Telephorlic Headng,Plaintiff had agreed to

produceM r.Pedroza in New York dudngtheweek ofM ay28,2018. SeeTranscriptof5/8/2018

Henring(D.E.373 at33-34j;TllirdDiscovery Order(D.E.,370at3).Plaintifftmequivocallytold

the tmdersigned on M ay 23,2018 thatM z.Pedroza's deposition was tnking place on M ay 30,

2018 in N ew York;hence,the Fourth Discovery Order incop orated thatrepresentation. See

Transcriptof 5/23/2018 Henring ED.E.395 at282;Fourth Discovery Order (D.E.390 at3q.

Therefore,the undersigned finds that the Trust's failure to produce M r.Pedroza, despite its

repeated represéntations thatitwould produce him ,was in violation ofthe Second,Third,and

Fourth Discovery Orders.

W ith regardto Dr.Cabeza,the tmdersigned incop orated Plaintiff sagreem entto produce

a cop orate representative of PDVSA into the Second Discovery Order. See Transcript of

4/30/2018Headng(D.E.357 at12-13J;'SecondDiscövéryOrder(D.E.355at2j.AttheM ay 8,
2018 Follow-up Telephorlic Hearing,Plaintiffidentised Dr.Cabeza as the PDV SA cop orate

represeùtative to be deposed;hence,in the Third Discovery Order the tmdersigned nzled that

Defendantscould deposr her. See Transcdptof5/8/2018 Henring (D.E.373 at33-362;Third


PD V SA 'S corporate representative w as in direct violation of the Second and Tllird D iscovery

Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 18 of 23

Regarding whether the Tnlst violated the Fifth Discovery Order,by M ay 25, 2018,

Plaintiff represented to cotmsel and the Court that Dr. Cabeza had been designated as the

PDVSA cop orate representative who would appearfordeposition on June 7,2018 in M adrid,

Spain. SeeNoticeto the Courtwith Regardto Depositions(D.E.3984;EmailCorrespondence

ED.E.399-4at2).PlaintiffreiteratedtllisrepresentationattheM ay29,2018henringatwllich its
colmseltmnmbiguously stated:it'
W'e have,in consultation with both EM r.Pedrozajand other
governm entoftk ials and Dr.Cabeza,confirm ed thatshewillbe able to travelto Spaip for

her deposition.W e are going to request that it be m oved from the 7th to the 8th,but she

willbeableto bedeposed-'' SeeTranscliptof5/29/2018 Headng ED.E.408at47)(emphasis

added). To supportits'argllmentthatitdid notviolateally courtorder,the Tnzstrelieson the
tmdersigned's statem ent dudng the'M ay 29,2018 headng that,by June 11,2018,the Trust
should produce Dr.Cabeza and M r.'Pedroza orstate thatitcould not. Ld-aat 52;Smwtions
Response (D.E.459 at21-232.PlaintiY srelianceismisplaced. Basedon theTrust'srepeated
arld unequivocalrepresentationsthatitwasvoltmtadly producing Dr.Cabeza and M r.Pedroza,

thetmdersigned was1ed to believethatthese were the only outstanding factwitnessdepositions

on the issue ofPlaintiffs standing and thatDr.Cabeza'sdeposition wasgoing forward on June

8, 2018. Cons:quently, the tmdetgigned explicitly set a fm al deadline to domplete those

depositionsby Jtme 11,2018. SeeFiflh Discovery Order (D.E.404 at4). Accordingly,the

Trust's faillzre to produce PDVSA'S cop orate representative by thatdate was also in violation

the Fifth D iscovery Order.

The Trust contends that even though it stipulated to the production of these w itnesses

multipletim esoverthe course ofseveraldiscovery hearingsand even though those stipulations

were m ade enfbrceable by their incorporation into the tmdersigned's discovery orders, the
Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 19 of 23

Trust'slast-m inute cancellation ofthese depositions should notbe deem ed a violation ofthose

discovery orders. The undersigned Iindsno merit in tM s contention since itwould nullify the

effectofthe undersigned'scarefulplanning ofstanding discovery and issuance ofthe discovery

ordersbased on the paTties'agreernent. S'ee Bum erItin: Com .v.M aieed,805 F.Supp.994,

1005 (S.D.Fla.1992)(GG1fthepartiessubmitsuch stipulation tothecourtand itis<So ordered

and approved'by thecourt,thenoncomplimlceby one ofthepartieswith such stipulation ...has

adoubleaspectboth asacontractandasacourtorder.'')(citationsomitted).
The Tnzst further m aintains that these depositions were imm aterial to the issue of

standing. SeeSanctionsResponse (D.E.459at11-14j. GiventhattheTnzst'sfailmetoproduce

thesewitnessescontdbutedto the tmdersigned concludingthattheTrustfailed to carzy itsburden

ofproving the admissibility bfthe TrustAgreementupon which itrelied to establish itsArticle

IlI standing and ofproving thatitholds a valid assigmnentfr6m PDVSA,the undersigned has

fotmdthatthedepositionswerematerial.SeeStandingR&R (D.E.636at18-19q.
TheTrustalso arguesthat,becauseitoffered Defendantstheopporttmity to depose these

witnesses by video or through written questions as altem atives to in-person 'depositions,

sandionsarenotwarranted. See SmwtionsResponse ED.E.459 at18-211. These altematives

wererejeded by Defendantsduring the discovery henriogs. Defendantsdeclinedto cônducta
video deposition in Venezuela and provided extensive briefing regarding V enezuela's

prohibition against conducting depositions in its territory outside the ambit of the Hague

Convention's process. See D efendants'N otice of Issues to be A ddressed D llring M ay 23,2018

TelephonicHenring (D.E 388 at12-134;SanctionsReply (D.E..

478 at.9-114. That,option.was
Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 20 of 23

notfeasiblein theagreedtim eânm econtemplated foraddresshlg the standing issue.4 Defendants

similarly rejectedPlaintiffsproposalofa deposition on written questions. SeeRule31Notice

Response (D.E 497 at7-9j.5 Approximately one month afterthe June 11,2018 deadline to
complete these depositions expired, Plaintiff attempted to cure its discovery desciencies by

seeldng leave to take depositions on written questions of its own wimesses,inciuding Mr.
Pedrozw and the tmdersigned denied thatrequest. See Rule 31 Notice (D.E.487j;Eighth
Notwithstanding Plaintiff's attemptsto offeralternatives,the factremainsthatthe Trust

tmnmbiguously agreed to produce Dr.Cabeza and M r.Pedroza for in-person depositions,and

those agreements were embodied in the tmdersigned's discovery orders. Therefore,Plaintiffs

failureto producethosewitnessesviolated those discovery orders.

II. W hether theV iolation w as Substantiallv Justified

From its inception, the Trust sought to recover damages for Defendants' alleged

znisconductagainstPDV SA,which itclnimed Gthascaused and continuesto cause vastdam ages

to PDVSA and thepeople ofVenezuela.'' SeeTrustApeement(D.E.430-1 at354. See also

Am. Compl. ED.E. 12j. PDVSA allegedly authorized this action çGin order to obtain
com pensation forPDVSA and the people öfVeùezuela,''and entered into theTnzstAgreem ent

ltto provide for the orderly and consensualdistzibution ofthe Proceeds to PDVSA.'' See

TrustAgreement(D.E.430-1at351.PDVSA,asthepurportedassignor,could notseektoreap
the benefhs of litigation without assllming the btlrden of'participating in discovery. See

4 Indeed, Plaintiff's counselacknowledged that seeking to conduct depositions pursuant to the Hague
Convention would be a lengthy procesl. See Transcript of 5/29/2018 Hearing L
. 'D.E.408 at 4724
Transcriptof7/6/2018Show CauseHearing (D.E.483at33-342.
5N otably,when Defendants proposed thatPlaintifftakethe depositions ofDefendan
'tsFrancisco M orillo
andLeonardoBaqueroby writtenquestions,Plaintiffstated:&1
wouldn'twantto take ourdepoàitionsby written questions,we don'twantto take ourdepositionsofthem
bywrittenquestions.''SeeTranscriptof5/23/2018Hearing X .E.395at574.

Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 21 of 23

'M oman Chase Bank v.W innick,228 F.R.D.505,507 (S.D.
N .Y.2005) omlding that an
assignee had theduty toproduce its assir or'sGtdoclzm ents,information,and witnesstestimony''

because Glthe assigneesaresuing in the shoes ofthe originallenders,having purchased theright

to bdng the lawsuit,there is notlling tmfair about im posing on them the cost of ptzrchasing

cooperation or otherwise complying with discovery obligations''); Bank of New York v.

M eddien BIAO Bn'
nk Tanzania Ltd., 171 F.R.D.135,149 (S.
D.N.Y.1997) (G7twould be
patently tmfairif(theassigneejwereableto continueto discoverrelevantinformation 9om Eits
adversary)wllile relegating (its adversat'
y)to seek information from gthe assignor)as a
party.''). LikewisejMr.Pedroza,astheVenezuelan governmentoftkialFhopurportedly tEduly
authorized''the TnzstAgreem ent,was arlessentialwitnesson the issue ofthe Tnzst's standing

whose appearance atdeposition was lmnmbiguously promised by Plaintiff'scotm sel,only to be

reneged upon atthelastminute.

The Trust azgues that even if its faillzre to produce Dr.Cabeza and M r.Pedroza did

violate a colzrt order, the circllm stances were beyond the Tnlst's çontrol. See Sanctions

Response ED.E.459 at14-172. In so doing,the Trustattemptsto conveniently distanceitself

from PDVSA,the entity poised to directly beneft from this action, and M .

V enezuelan official who allegedly m ade the Trust legal.lm der V enezuelan law. See Trust

a valid assignpentf'
rom PDVSA. See Spokeo.Inc:v.Robins,136 S.Ct.1540,1547 (2016) ,

(holding that the plaintiff, as the party invoking federaljllrisdiction,bears the burderi of
establishingtheelementsofstanding). Thus,Plaintiffwasobligated to producediscovery âom
PDVSA and theVenezuelan oftk ialwho allegedly authorized the Trtzstto supportitsposition.

JPM Or:= ChaseBnnk,228F.R.D.at507;Bnnk ofN ew York,171F.R.D.at149.

Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 22 of 23

As such,reasonable people could nqt differ as to the inappropriateness of the Tnzst's

lmilateral cancèllation of these Court-ordered depositions. Devanev, 989 F.2d at 1163.

Therefore, the Trust's discovery violations Fere not substantially justified,and Rule 37(b)



Based on the foregoing considerations, the tmdersigned RESPECTFULLY

RECOMM ENDS thatDefendants'M otion for Sanctions (D.E.4301be GRANTED and that
sanctionsbe imposed againsttheTrustpursuantto Rule 37(b).. To thatend,thelmdersigned
further RESPECTFULLY RECOM M ENDS that, should the Distlict Judge adopt the

tmdersigned'sRecomm endation,Defendantsbe required to subm itwithin 60 daysofthe Court's

Order a requestfortheir reasonable attorneys'fees and costsincurred in connection with their

preparation forthe cancelled depositions ofD r.Cabeza and M .

r.Pedzoza and the litigation' ofthe

M otion forSanctionsin accprdancewith LocalRule7.3.

Ptlrsuantto LocalM agistrate JudgeRule409,thepartieshave fourteen days9om the

date oftllisReportand Recommendation to filewritten objections,ifN y,with theHonorable
Danin P.Gayles.Failtlretotimely fileobjectionsshallbarthepartiesfrop attackingon appçal
the factualfindingscontained herein. See Rèsolution Tr.Cop .v.Hallrilark Builders.Inc.,996

F.2d 1144,1149 (11th Cir.1993). Further,Gtfailureto objectin accordancewith theprovisions

of(28U.S.C.Ij636(b)(1)waivestherighttochallçngeon appealthedistrictcourt'sorderbased
dlegalconclusions-''See11th Cir.R.3-1(I.O.P.-3).
Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 23 of 23

RESPECTFULLY SUBW TTED inMimni,FloridathisS dayofFebruary,2019.

.. z;

United StatesDistrictJudgeDsrrin P.Gayles

Cotm selofRecord