Plaintiff,
Deféndants.
/
R EPO RT A ND R EC O M M EN D ATIO N
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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ED.E.485,6644.Forthereasonsstatedbelow,thetmdersignedrespectfullyrecommendsthatthe
MotionforSanctions(D.E.430qbeGRANTED.
FA CTU AL A ND PR O CED UR AL BAC K G R O U N D
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
;
PDVSA oo cials not to collect monies due PDV SA,to pay inflated prices for products and
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
investigateandpuzsueclaimsagainstDefendantsandothers.''LlJ=at4.
TheAm ended Cpmplaintconsistsofnineteen cotmts:
2
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Cotm tX CivilConspiracy.
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
U.S.C.j2510.
CotmtXIX Violation oftheFloddaUniform TradeSecretsAct,CH.688.
1d.at27-58.
authorizing the engagem entofUnited States 1aw fsrms and hw estigatorsto furtherùw estigate,
3
Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 4 of 23
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
settlement,post-suitsettlement,orjudgment,toPDVSA.''Id.
On April16,2018,pursuantto Defendants'JointRequestEb.E.193j,theundersigned
entered a Scheduling Order prescribing a procedure and schedule for the parties to conduct
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
Venezuelan law. See Notice of Issues to be Addressed Dudng April 25, 2018 Telephorlic
4
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THE COURT: PDV SA, when will you know if PDVSA is available for
deposition and wherethatdeposition would takeplace?
SeeTranscdptof4/23/2018Hearing ED.E.314at58-591.
As to MT.Pedroza's availability for deposition,PlaintiY s counselm ade the follow ing
representations:
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 .
.
5
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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.
TI.
IE COURT:So,within 48 hoursyou willbe ableto say whetherhesaysyea or
nay?
NIR.BOIES:Y es.
J.
IJ.at61,64-65.Thelmdersignedthen orderedthepartiestomeetandconferon,interalia,the
availability of PDVSA 'S corporate representative and M z.Pedroza for deposition by April27, .
2018.SeeFirstDiscoveryOrder(D.E.278at3j.
Ata Continued TelephonicDiscovery Conference on April30,2018,Plaintiffs cotmsel
6
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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)
representativesoftheTrustandPDVSA,respectively'
,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
..E.369j,at
wllich thefollowing exchangeocc= ed:
TT-
IE COURT:A11right.And there is som e indication thatthe two thatwe have,
appazently,agreementon,whichisEMr.Pedroza)and'
the30(b)(6)representative
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
weretoldtoday,1beliyve,'
byplaiiltiffthatsheisriotavailableorwillinqtotravel
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
30(b)(6)shouldbe,ptlrsuanttothedefaultrule,madeavailablefordepositionin
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.
Pedroza).
THE COURT:IsM s.Cabeza willing to travelsometim ebefore M ay 28th or she
doesn'twanttotravelatall?
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
Houston,Texas.
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.
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.
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.
8
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followingrepresentation:
DefendantsdeclinedduetoVenezuela'srestlictionsonforeigndepositions;btingingDr.Calkza
to anothercotmtry forthe deposition;orfm ding som eone else who could be educated as aRule
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
depositionofPDVSA'SRule30(b)(6)representative.Id.
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
k
9
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Capinello,datedM ay27,2018(D.E.430-1at7-84.
On M ay 29,2018, the tmdersigned held a hearing at which the following exchange
occurred:
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.
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:Y es.
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
Case 1:18-cv-20818-DPG Document 670 Entered on FLSD Docket 02/11/2019 Page 13 of 23
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)
representative.
SeeTranscriptof6/7/2018HearingED.E.423at12j.
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
13
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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
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
thelitigationoftheM otionforSanctions.SeeOrderED.E.6374.
On Januat'y 24,2019,Defendantsfled their Subm ission in Connection with January 25,
depositionsandthelitigauonot-theMotionfbrjvaions,including:approximately$130,630by
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
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
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
following:
(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
(11thCir.1993).
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Rule37(b)furtherprovidesthatGtgiqnsteadoforirladditiontotheordersabove,thecourt
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)
coppe
'
.
nsating the courtand otherparties forthe added expense caused by the abusive conduct;
2)compellingdiscoveryi'3)deteningothersf'
rom engagingin similarconduct;and4)penalizing
theguiltyparty orattorney.''Bobroffv.Univ.ofM inm i,No.15-22695-C1V,2016 W L 6433095,
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)
whethertheviolationwassubstantiallyjustified.3
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.
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W ith regard to M .
1..Pedroza,based on Plnintiff's representation atthe Apdl 30,2018
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
DiscoveryOrder(D.E.370atjq.Thus,thetmdersignedfindsthattheTrust'sfailtlretoproduce
PD V SA 'S corporate representative w as in direct violation of the Second and Tllird D iscovery
Orders.
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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,
her deposition.W e are going to request that it be m oved from the 7th to the 8th,but she
The Trust contends that even though it stipulated to the production of these w itnesses
were m ade enfbrceable by their incorporation into the tmdersigned's discovery orders, the
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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
ordersbased on the paTties'agreernent. S'ee Bum erItin: Com .v.M aieed,805 F.Supp.994,
adoubleaspectboth asacontractandasacourtorder.'')(citationsomitted).
The Tnzst further m aintains that these depositions were imm aterial to the issue of
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
prohibition against conducting depositions in its territory outside the ambit of the Hague
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
DiscoveryOrder(D.E.507j.
Notwithstanding Plaintiff's attemptsto offeralternatives,the factremainsthatthe Trust
From its inception, the Trust sought to recover damages for Defendants' alleged
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
No,YourHonor,justlikethedefendants
wouldn'twantto take ourdepoàitionsby written questions,we don'twantto take ourdepositionsofthem
bywrittenquestions.''SeeTranscriptof5/23/2018Hearing X .E.395at574.
20
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Jè
'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''
to bdng the lawsuit,there is notlling tmfair about im posing on them the cost of ptzrchasing
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
V enezuelan official who allegedly m ade the Trust legal.lm der V enezuelan law. See Trust
Agreement(D.E.430-1at35,47,49j.However,theTnlsthadtheblzrdenofprpvingthatitheld
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.
Therefore, the Trust's discovery violations Fere not substantially justified,and Rule 37(b)
sanctionsarewarranted.
RE CO M M EO A TIO N
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
A
RESPECTFULLY SUBW TTED inMimni,FloridathisS dayofFebruary,2019.
.. z;
A LICIA M .O TA ZO - Y ES
U NITED STA TES M A GISTM TE JU D GE