Lindsayca USA, Inc. v. Petroleos De Venezuela, S.A.

UNITED STATES DISTRICT COURT August 22, 2022

SOUTHERN DISTRICT OF TEXAS Nathan Ochsner, Clerk

HOUSTON DIVISION

LINDSAYCA USA, INC., §

§

Plaintiff. §

§

VS. § CIVIL ACTION NO. 4:21-cv-00037

§

PETROLEOS DE VENEZUELA, S.A., §

ET AL., §

§

Defendants. §

MEMORANDUM AND RECOMMENDATION

Pending before me is Plaintiff’s Motion for Default Judgment Pursuant to

Article 15 of the Hague Convention. Dkt. 38. After reviewing the record and

applicable law, I recommend that Plaintiff’s motion be GRANTED and that a

default judgment be entered against Defendants Petroleos de Venezuela, S.A.

(“PDVSA”) and Bariven, S.A. (“Bariven”).

BACKGROUND

In January 2021, Plaintiff Lindsayca USA, Inc. (“Lindsayca”) filed this

lawsuit against PDVSA, Bariven, and PDVSA Services, Inc. (“PDVSA Services”),

asserting causes of action for breach of contract and quantum meruit. Lindsayca is

a Texas corporation that supplies goods and services around the world to the oil,

gas, petrochemical, and power industries. PDVSA and Bariven are entities existing

under the laws of Venezuela, both wholly owned by the Venezuelan government.

PDVSA Services is a Delaware corporation.

In its First Amended Complaint for Damages, the live pleading in this case,

Lindsayca alleges that in 2013 and 2014, PDVSA, through its international

purchasing agents, Bariven and PDVSA Services,1 placed nine separate purchase

orders reflected in six separate invoices. Although Lindsayca allegedly delivered

the oilfield equipment and services ordered by PDVSA in a timely fashion, no

payments have been made to date on the outstanding invoices. Lindsayca contends

that a total principal amount of $7,794,454.03, plus interest, remains due and

owing.

Because PDVSA and Bariven are located in Venezuela, Lindsayca hired a

process server to effectuate service abroad. The process server undertook efforts to

properly serve PDVSA and Bariven under the Hague Convention. See Convention

on the Service Abroad of Judicial and Extrajudicial Documents in Civil and

Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361. To begin, the process server

obtained copies of various court documents—including the Original Complaint for

Damages (with exhibits), summonses, Order for Conference and Disclosure of

Interested Parties, and Joint Discovery/Case Management Plan—and had those

documents translated into Spanish. On April 10, 2021, those documents (in both

English and Spanish) were transmitted by delivery to Venezuela’s Central

Authority to be served on PDVSA and Bariven.

After Lindsayca filed its First Amended Complaint for Damages, the process

server took steps to ensure that the new pleading was properly served in

accordance with the Hague Convention. These efforts included having the First

Amended Complaint for Damages (with attachment), summonses, Order for

Conference and Disclosure of Interested Parties, and Joint Discovery/Case

Management Plan translated into Spanish. On October 6, 2021, the process server

forwarded these documents (in both English and Spanish) to Venezuela’s Central

Authority for service on PDVSA and Bariven.

1 On June 27, 2022, Lindsayca asked this Court to voluntarily dismiss its claims against

PDVSA Services. See Dkt. 40. The claims were dismissed without prejudice that same day.

See Dkt. 41.

According to Lindsayca’s process server, she has made several requests to

the Central Authority for Venezuela for a status update on service, but no response

has been received to date. In a declaration submitted with the Motion for Default

Judgment, the process server noted that “Venezuela is no longer complying with

its obligations to the Hague Service Convention . . . . Given that all attempts in the

past 3 years to serve via the Hague Service Convention in Venezuela have resulted

in no response after a service request is submitted, it is reasonable to assume that

[service on PDVSA and Bariven] will not be returned in a reasonable time.” Dkt.

38 at 11–12.

Lindsayca has now moved for entry of a default judgment against PDVSA

and Bariven under Article 15 of the Hague Convention.

DISCUSSION

Federal Rule of Civil Procedure 55 governs the two steps in the default

judgment process: (1) the entry of default by the clerk; and (2) the subsequent entry

of a default judgment. See FED. R. CIV. P. 55. “An entry of default is what the clerk

enters when the default is established by affidavit or otherwise.” N.Y. Life Ins. Co.

v. Brown, 84 F.3d 137, 141 (5th Cir. 1996) (emphasis omitted) (citing FED. R. CIV.

P. 55(a)). Once a default has been entered, and upon a party’s motion, a court may

enter “a judgment based on such default. This is a default judgment.” Id. (emphasis

omitted). See FED. R. CIV. P. 55(b).

A. ENTRY OF DEFAULT

To determine whether Lindsayca is entitled to an entry of default, I must

ascertain whether Lindsayca properly effected service on PDVSA and Bariven. That

inquiry requires me to explore the contours of a federal statute and a multilateral

treaty.

1. Foreign Sovereign Immunities Act

Because Defendants are wholly owned by the Venezuelan Government, they

are each considered an “agency or instrumentality” of Venezuela and, therefore, a

“foreign state” within the meaning of the Foreign Sovereign Immunities Act

(“FSIA”).2 28 U.S.C. § 1603(a), (b). The FSIA is the sole source of jurisdiction over

a foreign state in our courts. See Argentine Republic v. Amerada Hess Shipping

Corp., 488 U.S. 428, 435–38 (1989). Section 1608(b) of the FSIA also “provides

the exclusive means by which service of process may be effected on an agency or

instrumentality of a foreign state.” Matter of Arbitration Between Trans Chem.

Ltd. and China Nat’l Mach. Import & Export Corp., 978 F. Supp. 266, 299 (S.D.

Tex. 1997). Section 1608(b) provides that service shall be made upon an

instrumentality of a foreign state in one of three ways:

(1) by delivery of a copy of the summons and complaint in accordance

with any special arrangement for service between the plaintiff and the

agency or instrumentality; or

(2) if no special arrangement exists, by delivery of a copy of the

summons and complaint either to an officer, a managing or general

agent, or to any other agent authorized by appointment or by law to

receive service of process in the United States; or in accordance

with an applicable international convention on service of

judicial documents; or

(3) if service cannot be made under paragraphs (1) or (2), and if

reasonably calculated to give actual notice, by delivery of a copy of the

summons and complaint, together with a translation of each into the

official language of the foreign state—

(A) as directed by an authority of the foreign state or political

subdivision in response to a letter rogatory or request or

(B) by any form of mail requiring a signed receipt, to be

addressed and dispatched by the clerk of the court to the agency

or instrumentality to be served, or

2 The FSIA defines a “foreign state” as “a political subdivision of a foreign state or an

agency or instrumentality of a foreign state.” 28 U.S.C. § 1603(a). The FSIA further

defines an “agency or instrumentality of a foreign state” as “any entity . . . which is a

separate legal person, corporate or otherwise, and . . . which is an organ of a foreign state

or political subdivision thereof, or a majority of whose shares or other ownership interest

is owned by a foreign state or political subdivision thereof, and . . . which is [not] a citizen

of a State of the United States.” Id. § 1603(b).

(C) as directed by order of the court consistent with the law of

the place where service is to be made.

28 U.S.C. § 1608(b) (emphasis added). The methods of service in § 1608(b) are

listed in order of preference, “such that a plaintiff must attempt the methods of

service in the order they are laid out in the statute.” Magness v. Russian Fed’n, 247

F.3d 609, 613 (5th Cir. 2001).

Section 1608(b)(1) is inapplicable here because there is no “special

arrangement for service” between the parties. 28 U.S.C. § 1608(b)(1). The next

available means of service is “by delivery of a copy of the summons and complaint

. . . in accordance with an applicable international convention.” Id. § 1608(b)(2).

The United States and Venezuela are both signatories to one such convention: the

Hague Convention. See A.T.N. Indus., Inc. v. Gross, No. 4:14-CV-02743, 2016 WL

362309, at *4 (S.D. Tex. Jan. 29, 2016). I thus need to look at how service can be

accomplished in accordance with the Hague Convention.

2. The Hague Convention

The Hague Convention “is a multilateral treaty . . . . intended to provide a

simpler way to serve process abroad, to assure that defendants sued in foreign

jurisdictions would receive actual and timely notice of suit, and to facilitate proof

of service abroad.” Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694,

698 (1988). It serves as “the exclusive means of valid service” for entities in

countries that are signatories to it. Id. at 706.

One district court perfectly summed up the process outlined in the Hague

Convention for the service of process abroad:

The Hague Service Convention requires each signatory state to

establish a central authority to receive requests for service of

documents from other countries. Once a central authority receives a

request in the proper form, it must serve the documents by a method

prescribed by the internal law of the receiving state or by a method

designated by the requester and compatible with that law. The central

authority then returns a certificate of service that conforms to a

specified model prescribed in the Convention. The certificate of

service states the method, the place and date of service, and the person

to whom the document was delivered. The Hague Convention

preempts all state and federal service rules in those countries that

signed the treaty.

Eddo v. Xuzhou Senya Plywood Co., Ltd., No. Co8-5429RJB, 2009 WL 10676381,

at *1 (W.D. Wash. Jan. 30, 2009) (cleaned up).

The evidence before me conclusively establishes that the Venezuelan Central

Authority did not, as required by the Hague Convention, return a certificate of

service confirming the service of the documents upon PDVSA and Bariven. See

Hague Convention, art. 6. When no certificate of service or delivery has been

received, Article 15 of the Hague Convention provides that each contracting state

shall be free to declare that a court can enter a default judgment so long as three

conditions are met:3

(a) the document was transmitted by one of the methods provided for

in [the Hague] Convention,

(b) a period of time of not less than six months, considered adequate

by the judge in the particular case, has elapsed since the date of the

transmission of the document, [and]

(c) no certificate of any kind has been received, even though every

reasonable effort has been made to obtain it through the competent

authorities of the State addressed.

Id. art. 15, ¶ 2.

Each of these conditions is satisfied here. First, Lindsayca’s process server

“transmitted [service] by one of the methods provided for in [the Hague]

Convention” by forwarding the requisite documents to the Venezuelan Central

Authority, the entity designated under the Hague Convention to effectuate service

3 The United States is one of the signatory countries that has declared that a judge may

“give judgment even if no certificate of service or delivery has been received, if all the

conditions specified in subdivisions (a), (b) and (c) of the second paragraph of Article 15

are fulfilled.” Isaac Indus., Inc. v. Petroquimica de Venezuela, S.A., No. 19-23113-CIV,

2022 WL 820376, at *5 (S.D. Fla. Mar. 1, 2022) (quotation omitted).

of process in Venezuela.4 Id. art. 15(a), ¶ 2. Second, a period exceeding six months

has passed since delivery of the First Amended Complaint and associated

documents to the Venezuelan Central Authority on October 6, 2021. See id. art.

15(b), ¶ 2. Third, no certificate of service has been received from the Venezuelan

Central Authority despite Lindsayca making “every reasonable effort” to obtain it.

Id. art. 15(c), ¶ 2. Indeed, Lindsayca’s process server made several requests to the

Venezuelan Central Authority seeking an update on the status of service on PDVSA

and Bariven but received no response. Given that Venezuela “has not returned any

status requests or certificates of service in more than 2 years,” I am not sure what

else Lindsayca could do to obtain the certificate of service from the Venezuelan

Central Authority. Dkt. 38 at 12.

***

Because Lindsayca has met the requirements of Article 15, I find that entry

of default against PDVSA and Bariven is appropriate.

B. ENTRY OF A DEFAULT JUDGMENT

I now must determine whether a default judgment should be entered against

PDVSA and Bariven. Even when a defendant has been properly served and is

technically in default, a plaintiff is not entitled to a default judgment as a matter of

right. See Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001). That’s because

“[d]efault judgments are a drastic remedy, not favored by the Federal Rules and

4 I am aware that the D.C. Circuit recently held that mere delivery of the required

documents to Venezuela’s Central Authority is insufficient to effectuate service of process

under the Hague Convention. See Saint-Gobain Performance Plastics Eur. v. Bolivarian

Republic of Venez., 23 F.4th 1036, 1041–42 (D.C. Cir. 2022). In that case, which is not

binding on this Court, the D.C. Circuit held that a plaintiff could not bypass available

methods of service by simply delivering the documents to the Central Authority. See id. I

respectfully disagree with the D.C. Circuit’s holding. In my view, when, as here, a foreign

defendant is the state, service of papers on the Central Authority, an arm of the state,

equates to service on the state itself. The Fifth Circuit has endorsed my position, holding

that a plaintiff properly served Mexico under the Hague Convention upon delivering

papers to Mexico’s Central Authority, given it was “certainly not [plaintiff’s] fault that the

Mexican authorities did not return a formal Certificate.” Box v. Dall. Mexican Consulate

Gen., 487 F. App’x 880, 886 (5th Cir. 2012) (cleaned up).

resorted to by courts only in extreme situations.” Sun Bank of Ocala v. Pelican

Homestead & Sav. Ass’n, 874 F.2d 274, 276 (5th Cir. 1989) (footnote omitted).

To determine whether to enter a default judgment, the Fifth Circuit requires

district courts to examine: (1) whether material issues of fact exist; (2) whether

there has been substantial prejudice; (3) whether the grounds for default are

clearly established; (4) whether the default was caused by a good faith mistake or

excusable neglect; (5) the harshness of a default judgment; and (6) whether the

Court would consider itself obligated to set aside a default on the defendant’s

motion. See Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998).

Applying these six factors here, I conclude that a default judgment against

PDVSA and Bariven is appropriate. First, there are no material issues of fact.

Because PDVSA and Bariven have failed to answer the lawsuit, they are deemed to

have admitted the allegations against them set forth in the Complaint. See FED. R.

CIV. P. 8(b)(6) (“An allegation . . . is admitted if a responsive pleading is required

and the allegation is not denied.”). Second, there is no prejudice against PDVSA

and Bariven. As discussed, they were properly served under the Hague Convention

and failed to respond to the lawsuit. Third, the grounds for default are clearly

established. Fourth, I am unaware of any good-faith mistake or excusable neglect

that militates against default. Fifth, I do not find a default judgment to be harsh

when PDVSA and Bariven have not even bothered to respond to the lawsuit. Sixth,

I am aware of no facts that would cause me to set aside the default judgment should

it be challenged at a later date.

Although PDVSA and Bariven are deemed to have admitted the allegations

in the First Amended Complaint for Damages as a result of their default, I must

still review the pleadings to determine whether there is “a sufficient basis in the

pleadings for the judgment [to be] entered.” Nishimatsu Constr. Co. v. Houston

Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). “When considering whether such

a basis is presented, a court accepts as true the complaint’s well-pleaded factual

allegations—except regarding damages—and must determine whether those

pleaded facts state a claim upon which relief may be granted.” Shaw v. Galo Equip.

& Constr., LLC, No. 5-19-CV-00859-DAE, 2020 WL 3118928, at *2 (W.D. Tex.

June 12, 2020).

Lindsayca is entitled to a default judgment on its breach-of-contract claim

because the facts alleged in the First Amended Complaint for Damages state a

claim upon which relief may be granted.5 Under Texas law, there are four essential

elements to a breach-of-contract claim: “(1) the existence of a valid contract; (2)

performance or tendered performance by the plaintiff; (3) breach of the contract

by the defendant; and (4) damages sustained by the plaintiff as a result of the

breach.” Mullins v. TestAmerica, Inc., 564 F.3d 386, 418 (5th Cir. 2009) (cleaned

up).

The allegations set out in the operative complaint state a breach-of-contract

claim upon which relief may be granted. Specifically, the First Amended Complaint

for Damages alleges that: (1) Lindsayca entered into valid and binding purchase

orders with PDVSA and Bariven, enforceable in accordance with their terms; (2)

Lindsayca performed its contractual obligations by timely providing oilfield

equipment and services to PDVSA and Bariven; (3) PDVSA and Bariven have failed

to pay for the oilfield equipment and services as required by the parties’

agreements; and (4) Lindsayca has sustained damages as a result of PDVSA’s and

Bariven’s breach of contract. See Dkt. 29 at 8–11. Given these well-pleaded factual

allegations, a default judgment is entirely appropriate.

5 Lindsayca also alleges a quantum meruit cause of action. Quantum meruit is an

equitable theory of recovery based on an implied agreement “to pay for beneficial services

rendered and knowingly accepted.” Vortt Expl. Co. v. Chevron U.S.A., Inc., 787 S.W.2d

942, 944 (Tex. 1990) (quotation omitted). Texas law provides that “[r]ecovery on an

express contract and on quantum meruit are inconsistent.” Woodard v. Sw. States, Inc.,

384 S.W.2d 674, 675 (Tex. 1964). “Where there exists a valid express contract covering

the subject matter, there can be no implied contract.” Id. For this reason, I conclude that

Lindsayca is not entitled to a default judgment on its quantum meruit claim.

C. AMOUNT OF DAMAGES

Having found that a default judgment should be entered in favor of

Lindsayca and against PDVSA and Bariven, I must next determine the appropriate

amount of damages. See Pope v. United States, 323 U.S. 1, 12 (1944) (after granting

default judgment, it is the district court’s duty “to fix the amount which the plaintiff

is lawfully entitled to recover and to give judgment accordingly”).

A district court possesses “wide latitude” in determining whether an

evidentiary hearing should be conducted when awarding damages after a default

judgment. James v. Frame, 6 F.3d 307, 310 (5th Cir. 1993). When the amount

sought can be “computed with certainty by reference to the pleadings and

supporting documents,” an evidentiary hearing would serve no useful purpose. Id.

at 311 (quotation omitted). That is precisely the situation here. Because I can

calculate the amount of damages with certainty by reviewing the pleadings and

supporting documents on file, there is simply no need to “jump through the hoop

of an evidentiary hearing.” Id.

The First Amended Complaint for Damages specifically alleges: “The

Purchase Orders created duties between all the parties. Lindsayca agreed to sell

the equipment and services to Defendants. In exchange for the products,

Defendants had a duty to pay Lindsayca a total sum of $7,794,454.03 dollars.”

Dkt. 29 at 11. The lawsuit also alleges that PDVSA and Bariven “have made no

payments . . . and all balances reflected therein remain past due and outstanding.”

Id. By defaulting, PDVSA and Bariven admitted these well-pleaded allegations of

fact. These admitted allegations are sufficient to allow recovery of $7,794,454.03

in breach-of-contract damages upon default.

CONCLUSION

For the reasons explained above, I recommend that Plaintiff’s Motion for

Entry of Default Judgment be GRANTED and that (1) the clerk enter a default,

and (2) the District Judge enter a default judgment in favor of Lindsayca and

against PDVSA and Bariven, jointly and severally, in the amount of $7,794,454.03.

Post-judgment interest should accrue at the statutory rate on the date judgment is

entered.

The Clerk shall provide copies of this Memorandum and Recommendation

to the respective parties who have 14 days from the receipt to file written objections

pursuant to Federal Rule of Civil Procedure 72(b) and General Order 2002–13.

Failure to file written objections within the time period mentioned shall bar an

aggrieved party from attacking the factual findings and legal conclusions on

appeal.

SIGNED this 22nd day of August, 2022.

______________________________

ANDREW M. EDISON

UNITED STATES MAGISTRATE JUDGE