United States Court of Appeals, District of Columbia Circuit
April 30, 2018
Remand from the Supreme Court of the United States
Catherine E. Stetson argued the cause for the
appellants/cross-appellees. With her on the briefs were
William L. Monts, III, Mitchell P. Reich, Bruce D. Oakley,
Joseph D. Pizzurro, Robert B. García, Kevin A. Meehan,
and Juan O. Perla.
Catherine M.A. Carroll argued the cause for
appellees/cross-appellant. With her on the briefs were David
W. Ogden and David W. Bowker.
K. Liu, U.S. Attorney, and Douglas N. Letter, Sharon Swingle,
and Lewis S. Yelin, Attorneys, U.S. Department of Justice,
were on the brief for amicus curiae United States of America.
Before: Garland, Chief Judge, Tatel, Circuit Judge, and
Sentelle, Senior Circuit Judge.
Venezuela and two of its agencies seized all assets of an
American drilling company's Venezuelan subsidiary, both
parent and subsidiary sued in federal court. In a prior
opinion, we held that, notwithstanding the defendants'
efforts to invoke sovereign immunity, both companies'
suits could go forward because each company had, consistent
with the then-governing circuit standard, made a
"non-frivolous" claim that its case fell into a
statutory immunity exception that permits suit against
foreign-state defendants in certain cases involving takings
that violate international law. Helmerich & Payne
International Drilling Co. v. Bolivarian Republic of
Venezuela (Helmerich II), 784 F.3d 804, 814,
816 (D.C. Cir. 2015) (quoting Agudas Chasidei Chabad of
United States v. Russian Federation, 528 F.3d 934, 941
(D.C. Cir. 2008)). The Supreme Court, however, overturned
this circuit's "nonfrivolous-argument standard"
and vacated our prior judgment. Bolivarian Republic of
Venezuela v. Helmerich & Payne International Drilling
Co. (Helmerich III), 137 S.Ct. 1312, 1324
(2017). Tasked now on remand with determining whether either
company has alleged facts that are sufficient, if true, to
establish that it has in fact suffered a taking in
violation of international law, we conclude that only the
American parent-and not its Venezuelan subsidiary-has done
so. We therefore affirm the district court's dismissal of
the subsidiary's claims, as well as its denial of the
defendants' motions to dismiss the parent's claims.
parties agree that we are to resolve the issues presented
here "solely on the basis of the allegations in the
complaint." Joint Stipulation and Motion to Establish a
Briefing Schedule for the Adjudication of Defendants'
Motions to Dismiss at 2, Helmerich & Payne
International Drilling Co. v. Bolivarian Republic of
Venezuela (Helmerich I), 971 F.Supp.2d 49
(D.D.C. 2013) (No. 11-cv-1735) ("Stipulation"), ECF
No. 34. We therefore draw our factual recitation from the
complaint's allegations, assuming their truth and
construing them in the light most favorable to the plaintiff
companies. See Helmerich II, 784 F.3d at 811.
in the late 1990s, Venezuelan company Helmerich & Payne
de Venezuela, C.A. (H&P-V), a wholly owned subsidiary of
Oklahoma-based Helmerich & Payne International Drilling
Co. (H&P-IDC), began providing exclusive oil- and
gas-drilling services to Venezuelan state-owned entities,
including Petróleos de Venezuela, S.A., and PDVSA
Petróleo, S.A. (collectively, PDVSA), that own and
manage Venezuela's oil reserves. Compl. ¶ 2. In
order to overcome Venezuela's "difficult geological
conditions," H&P-V acquired "some of the
largest, most powerful, and deepest-drilling, land-based
drilling rigs available," id. ¶ 21, and
developed "a substantial infrastructure needed to
maintain, repair, operate, and transport [its] drilling
equipment," id. ¶ 25.
companies' relationship with PDVSA soured after
Venezuela's then-President Hugo Chávez replaced
much of PDVSA's workforce in the wake of a 2002-03
strike. Id. ¶ 28. From then on, PDVSA
"refused to make timely payments" under its
drilling contracts, id. ¶ 29, and by June 2009,
PDVSA had racked up over $113 million in debt to H&P-V,
id. ¶ 51. Consequently, when the contracts
began expiring in early 2009, H&P-V "made clear to
[PDVSA] that it would not enter into new contracts or restart
drilling operations unless [PDVSA] paid a substantial amount
of [its] outstanding debt." Id. ¶ 52.
Despite these warnings, PDVSA stopped all payments to
H&P-V in May 2010, with somewhere near $32 million in
debt remaining. Id. ¶ 56.
deteriorated further the following month. In mid-June 2010,
seeking "to force H&P-V to negotiate new contract
terms immediately" and to forgive PDVSA's
outstanding debt, id. ¶ 63, PDVSA employees,
acting with assistance from the Venezuelan National Guard and
at the behest of the Venezuelan government, blockaded eleven
of H&P-V's drilling sites, id. ¶¶
59-61, 65. According to contemporaneous PDVSA press releases,
the Venezuelan government had in effect
"nationalized" these drilling operations.
Id. ¶ 65.
made the nationalization official soon thereafter. The
Venezuelan National Assembly began by "declar[ing] that
the taking of all eleven of [H&P-V's] oil drilling
rigs and associated property would be of 'public benefit
and good.'" Id. ¶ 67. Taking up the
Assembly's recommendation, then-President Chávez
issued an "Expropriation Decree," which authorized
the "forcible taking" of H&P-V's assets and
declared that the "expropriated property [would] become
the unencumbered and unlimited property of [PDVSA]."
Id. ¶ 68. The complaint alleges that
Venezuela's actions were driven, at least in part, by
animus against H&P-V due to its "U.S.
ownership." Id. ¶ 97.
after the decree, PDVSA filed two eminent domain suits in
Venezuelan court to effectuate the expropriations.
Id. ¶¶ 72-73. Neither proceeding, however,
has progressed beyond the earliest stages, leaving H&P-V
and H&P-IDC without compensation. Id.
¶¶ 86-87. In the meantime, PDVSA "ha[s] been
operating H&P-V's Venezuelan business as a going
concern-employing not only the [company's] real and
personal property but also [its] drilling rig managers,
drilling rig workers, and other professionals who were
trained by, and formerly worked for, H&P-V."
Id. ¶ 76. According to the complaint,
"[t]he seizure constituted a taking of the entirety of
[H&P-V and H&P-IDC's] Venezuelan business
operations." Id. ¶ 75. In other words,
Venezuela and PDVSA "took the entire business, which
they now operate as a state-owned commercial
enterprise," thus leaving H&P-V "[s]tripped of
all its productive assets," id. ¶ 81, and
without "any significant tangible property or . . . any
commercial operations in Venezuela," id. ¶
2011, H&P-V and H&P-IDC (collectively, H&P) sued
PDVSA and Venezuela in the United States District Court for
the District of Columbia, claiming as relevant here that the
expropriation of H&P's "business and
assets" without compensation violated international law.
Id. ¶ 181. Venezuela and PDVSA moved to dismiss
for lack of jurisdiction under the Foreign Sovereign
Immunities Act of 1976, 28 U.S.C. §§ 1330,
1602-1611, which provides that a foreign state, including
"agenc[ies] or instrumentalit[ies]" like PDVSA,
id. § 1603(a), "shall be immune from the
jurisdiction of the courts of the United States" unless
a statutory exception applies, id. § 1604. In
response, H&P maintained that the alleged takings fit
within one such exception, the "expropriation
exception," which authorizes jurisdiction over a foreign
state where "rights in property taken in violation of
international law are in issue" and where-a matter not
presently at issue-that property is sufficiently connected to
commercial activity inside the United States. Id.
streamline resolution of this jurisdictional issue, the
parties agreed to seek the district court's initial
decision on several threshold matters on the basis of the
complaint alone. Stipulation at 3. The parties asked the
court to determine, first, whether H&P-V is "a
national of Venezuela under international law" for
purposes of the expropriation exception and, second, whether
H&P-IDC has prudential standing to assert an
expropriation claim. Id.
on its resolution of these threshold questions, the district
court dismissed H&P-V's expropriation claim but held
that H&P-IDC's could proceed. See Helmerich
I, 971 F.Supp.2d at 73. As for the
Venezuelan-incorporated H&P-V, the court concluded that
it is "considered a national of Venezuela under
international law," id. at 61, and so failed to
satisfy the expropriation exception's requirements
because a state's seizure of its own national's
property is not typically a "violation of international
law," 28 U.S.C. § 1605(a)(3). As for the
U.S.-incorporated H&P-IDC, the district court
acknowledged that a corporate parent generally lacks
prudential standing to enforce the rights of its subsidiary,
see Helmerich I, 971 F.Supp.2d at 70, but found that
rule inapplicable because H&P-IDC sought "to enforce
[its] own individual rights,"
id. at 71 (emphasis added). According to the
complaint, Venezuela had "deprived H&P-IDC,
individually, of its essential and unique rights as sole
shareholder of H&P-V by dismantling its voting power,
destroying its ownership, and frustrating its control over
the company." Id. at 73. Because
"[i]nternational custom" protects such ownership
rights, id. at 73 n.11, the district court concluded
that H&P-IDC's claim falls within the expropriation
exception as long as it satisfies the exception's
appeal, we ruled that both companies' claims
could proceed. See Helmerich II, 784 F.3d at 808.
Emphasizing that circuit precedent established a
"forgiving standard," id. at 813, under
which we would "grant a motion to dismiss on the grounds
that the plaintiff has failed to plead a 'taking in
violation of international law' . . . only if
the claims [were] 'wholly insubstantial or frivolous,
'" id. at 812 (quoting Chabad, 528
F.3d at 943), we found that both companies' expropriation
claims cleared this "exceptionally low bar,"
H&P-V, we acknowledged that, "generally, a foreign
sovereign's expropriation of its own national's
property does not violate international law,"
id., but we went on to observe that H&P-V
alleged "that Venezuela ha[d] unreasonably discriminated
against it on the basis of its sole shareholder's
nationality, thus implicating an exception" that the
Second Circuit had announced in Banco Nacional de Cuba v.
Sabbatino, 307 F.2d 845 (2d Cir. 1962), rev'd on
other grounds 84 S.Ct. 923 (1964). Helmerich
II, 784 F.3d at 812. Although characterizing
Sabbatino as "[d]ated and uncited," we
observed that it "remains good law" in the Second
Circuit and found "[no] decision from any circuit that
so completely forecloses H&P-V's discriminatory
takings theory as to 'inescapably render the
claim frivolous' and 'completely devoid of
merit.'" Id. at 813 (emphases and
alteration in original) (quoting Hagans v. Lavine,
415 U.S. 528, 538 (1974)).
H&P-IDC, we observed that, under United States law,
"corporate ownership aside, shareholders may have rights
in corporate property . . . 'by virtue of their exclusive
beneficial ownership, control, and possession of the
properties and businesses allegedly seized.'"
Id. at 815 (quoting Ramirez de Arellano v.
Weinberger, 745 F.2d 1500, 1516 (D.C. Cir. 1984) (en
banc), vacated 471 U.S. 1113 (1985)). Because
H&P-IDC arguably "had property rights in [its]
corporation's assets," id., and because the
expropriation of those assets arguably violated international
law, we concluded that H&P-IDC had satisfied our
circuit's standard by "put[ting] its rights in
property in issue in a non-frivolous way." Id.
at 816 (quoting Chabad, 528 F.3d at 941).
Supreme Court vacated and remanded. Helmerich III,
137 S.Ct. at 1324. Rejecting the line of circuit precedent
establishing the permissive standard this court had employed,
the Supreme Court held that "a party's nonfrivolous,
but ultimately incorrect, argument that property was taken in
violation of international law is insufficient to confer
jurisdiction" under the expropriation exception.
Id. at 1316. It therefore remanded for this court to
consider whether H&P's "factual allegations . .
. make out a legally valid claim"-and not merely a
non-frivolous one-"that a certain kind of right is ...