The CITGO auction process is unfolding with intense battles, including the high-stakes conflict between Siemens Energy Inc. and PDV Holding Inc. The former seeks to satisfy a hefty court ruling in its favor, while the latter aims to evade a new legal action filed against it in U.S. courts.
This conflict between Siemens and PDVH is taking place in both state and federal courts in Texas, effectively on all fronts. Siemens Energy Inc. filed a lawsuit against PDVH Holding Inc. in the Texas Eleventh Division Commerce Court to enforce a ruling in its favor for USD 166,082,240.21, which was obtained against PDVH’s alter ego, Petróleos de Venezuela S.A.
Even though PDVSA was not included in the original lawsuit, the Venezuelan state oil company recently filed a petition to intervene in the case, a move aimed at dismissing the state court action. Siemens perceives this as an attack on its rights and has responded by asserting its claims.
Background
This case stems from a ruling issued on December 9, 2021, in the United States District Court for the Southern District of New York in favor of Siemens due to non-payment by PDVSA in a promissory note agreement.
In light of PDVSA’s refusal to pay, Siemens sued PDV Holding, Inc. on October 4, 2024, in the Eleventh District Commercial Court of Harris County, Texas. This action was initiated on the premise that PDVSA and PDVH are alter egos, thereby making the latter liable to the plaintiff for the full amount of the judgment.
Siemens alleges that curiously, PDVSA, which insists on the corporate separation from PDVH, took control of the case and, without consulting the plaintiff, filed a notice of removal claiming that the case is an action “against a foreign state” and, therefore, removable under 28 U.S.C. § 1441(d).
Withdrawal of Commercial Lawsuit in Texas
On January 14, 2025, Siemens Energy Inc. accused the U.S. District Court for the Southern District of Texas of irregularities regarding PDV Holding Inc.’s (PDVH) withdrawal of the case from the Texas Eleventh Division Commercial Court, identified by case number 24-BC11B-0010.
In the state court lawsuit, Siemens requested a declaration that PDVH and PDVSA are alter egos and, as a result, the former is liable to the plaintiff, necessitating a judgment against it for the owed amount, accumulated interest, post-judgment interest, reasonable attorney’s fees, and costs as permitted by law, along with any other legal or equitable relief to which the plaintiff is entitled.
In response to this lawsuit, PDVSA requested that the Texas Commercial Court dismiss the lawsuit and rule in favor of PDVSA, granting it any relief it may be entitled to.
Request for Jury Trial
Siemens requested a jury trial
On February 4, 2025, Siemens Energy Inc., through its attorneys, filed a request for a jury trial in the Southern District of Texas against PDV Holding Inc. and Petróleos de Venezuela, S.A., the respective defendant and intervenor.
The request was made in accordance with Federal Rules of Civil Procedure 38 and 81 of the United States.
Siemens’ Motion for Compensation
On February 11, 2025, Siemens Energy Inc. filed a motion in Texas court for the case to be returned to the Eleventh District Commercial Court of Harris County, Texas, where it was originally pending. It argues that the intervenor PDVSA improperly removed this lawsuit under 28 U.S.C. § 1441(d).
Siemens Energy claims it is entitled to recover its reasonable attorney fees and costs incurred due to PDVSA’s improper removal attempt. The plaintiff also requests any other legal or equitable relief to which it may be entitled.
The plaintiff alleges that PDVSA lacked justification for transferring the case to federal court, as the law requires it to demonstrate that federal jurisdiction exists and that the removal is appropriate. It argues that any ambiguity should be construed against removal because removal statutes must be interpreted strictly in favor of remand, as established by case law.
Siemens requests that the Texas District Court determine, based on the violation of a well-established Fifth Circuit precedent, whether the defendant had objective and reasonable grounds as well as legal basis for requesting removal.
The plaintiff contends that circuit law stipulates that when a plaintiff presents a case that cannot be removed in its initial petition, unintentional changes will not render the case removable, as they must be caused by the plaintiff’s voluntary action.
This means that circuit courts hold that a foreign state cannot intervene as a defendant in a state court proceeding. Therefore, since this lawsuit was brought by Siemens, PDVSA cannot intervene to remove the case from the state court to which it should return.
In this regard, Siemens requests the court award the plaintiff reasonable attorney fees and costs incurred as a result of PDVSA’s improper removal attempt.
Meanwhile, PDVSA argues that its strategic intervention in state court turned the lawsuit into an action against a foreign state. The plaintiff views this argument as a mere subterfuge that cannot supersede law and precedent.
Motion to Return the Case to State Court
On the same day, February 11, 2025, Siemens Energy Inc. also filed a motion to return the case to the Eleventh District Commercial Court of Harris County, Texas, because the intervenor PDVSA improperly removed it in violation of the law.
Siemens argues that circuit law is clear, establishing that when a plaintiff presents a case that cannot be removed in their initial petition, unintentional changes will not render it removable. For removal to proceed, it must be caused by the plaintiff’s voluntary act.
It reiterates that circuit courts maintain that, in such situations, a foreign state cannot intervene as a defendant in a state court proceeding, as there is no federal jurisdiction to merely create a basis for removal.
Finally, Siemens Energy requested the Southern District Court of Texas, Houston Division, to issue an order to return this action to the Eleventh District of Harris County, Texas, and grant reasonable attorney fees and costs incurred due to PDVSA’s improper attempt to remove the company.
PDVH’s Motion to Dismiss
On February 21, 2025, PDV Holding Inc. filed a motion to dismiss the lawsuit for failure to state a claim before the Texas Houston Division Court.
PDVH argues that Siemens Energy Inc. has failed to state a claim that the judgment debtor PDVSA and PDV Holding Inc. are alter egos, thus enforcing the judgment against PDVSA against PDVH or its assets.
PDVH notes that, due to existing uncertainty regarding whether there will be sufficient proceeds from the sale of PDV Holding shares—owner of CITGO Petroleum Corporation—to satisfy Siemens’ judgment against PDVSA, it now presents this alter ego action directly against PDVH to preempt preferential lienholders in the Crystallex proceedings in the District of Delaware.
The CITGO auction to satisfy over USD 20 billion in judgments issued by eighteen groups of creditors of Venezuela and/or PDVSA, including Siemens, would have motivated this direct action aiming to outpace preferential lienholders.
The defendant argues that it is telling that Siemens does not allege, nor can it, that PDVH had any involvement with the 2017 Promissory Note or that it was misled to believe that PDVH’s assets would be available to pay the debt or that PDVSA transferred assets to PDVH that should have gone to Siemens.
It believes that, for these reasons, the plaintiff’s unjust action to pierce PDVH’s corporate veil should be dismissed. First, because it cannot allege “fraud or similar injustice” concerning the corporate form, as required by Delaware law governing the alter ego claim.
PDVH cautions that it is not fraud that it paid excessive dividends to PDVSA in 2015, compromising its assets to back the oil company’s obligations to other creditors in 2016, as Siemens seeks to imply.
Second, PDVH indicates that Siemens does not assert any non-conclusory facts suggesting that PDVSA exerted exclusive control or domination over PDVH. The mere legal conclusions asserted in the petition are insufficient to raise an alter ego claim. Third, Siemens must demonstrate that piercing PDVH’s corporate veil would be equitable in light of the additional eight factors required by Delaware law.
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