June 23rd, 2015

A Trip South: Expropriation in Venezuela

Here in the U.S. and all Anglo-Western legal systems, condemnation or expropriation requires compensation. You can’t take people’s stuff without paying for it, even if you are the sovereign.

Not so much in other parts of our planet. For a fascinating look at the economic realities and impacts of outright seizure of property, take a look at the D.C. Circuit’s opinion in Helmerich & Payne Int. Drilling Co. v. Bolivarian Republic of Venezuela, No. 13-7169 (May 1, 2015).

Oil is the life-blood of the Venezuelan economy.

Oil is the life-blood of the Venezuelan economy.

 

 

 

 

 

 

 

 

 

Helmerich had operated oil and gas drilling operations in Venezuela (the only non-Middle East founding member of OPEC) for over 60 years, including leasing equipment through subsidiaries to the Venezuelan National petroleum company (PDVSA).  When one such Helmerich subsidiary began disassembling the drilling rigs leased to PDVSA  due to PDVSA’s falling nearly $63 million behind on lease payments for drilling equipment, Venezuela reacted as only a sovereign can.

 

Here to enforce the expropriation of your assets.

Here to enforce the expropriation of your assets.

 

The Foreign Sovereign Immunities Act generally protects foreign nations from suit in U.S. Courts except in certain circumstances. One such exception is forcible expropriation.

As with all Nationalistic Dictatorships, Venezuela couldn’t keep its mouth shut, issuing press releases such as statements by the president of the Venezuelan Committee on Energy and Mines:

criticiz[ing] opponents of the nationalization for acting “in accordance with the instructions of the [U.S.] Department of State” and trying to “subsidize the big business transnational corporations, so that they can promote what they know best to do, which is war . . . through the large military industry[] of the Empire and its allies.

and official National statements like:

[Venezuela] emphatically reject[s] statements made by spokesmen of the American empire—traced [sic] in our country by means of the oligarchy.

Id.

A few weeks after the blockade, the Venezuelan National Assembly issued a statement making the seizure pretty clear. In a comically titled “Bill of Agreement” the government proclaimed

[Helmerich’s] property to be “of public benefit and good” and recommending that then-President Hugo Chavez promulgate a Decree of Expropriation. President Chavez issued the decree, which emphasized that “the availability of drilling equipment [such as Helmerich’s] is very low both in the country and at world level, and the lack thereof would affect [Venezuela’s national oil drilling] Plan.” The decree directed PDVSA to take “forcible” possession of H&P-V’s drilling rigs and other property.

Id. at 5.

Two eminent domain lawsuits filed in Venezuelan Courts resulted in failed service of process and an indefinite stay on the second. Helmerich and its subsidiary, seeing this was going nowhere, brought suit in the District Court for D.C. alleging a taking of property in violation of international law, claiming jurisdiction under the expropriation exception to the Foreign Sovereign Immunities Act.

In denying Venezuela’s motion to dismiss, the Court held that Hemerich was a foreign citizen, as corporations are nationals of the state under the laws of which the corporation is organized, an important holding since “generally, a foreign sovereign’s expropriation of its own national’s property does not violate international law.” Id. at 10. Put another way:

What another country has done in the way of taking over property of its nationals, and especially of its corporations, is not a matter for judicial consideration here. Such nationals must look to their own government for any redress to which they may be entitled. Id. at 10 (quoting U.S. v. Belmont, 301 U.S. 324, 332 (1937)).

Venezuela’s repeated propaganda relating to this seizure referencing ‘imperialist Americans’ ultimately was its undoing. International law makes clear that singling out aliens of a particular nationality’ for discrimination violates international law. The Court, in ruling that the pleadings for a motion to dismiss must be viewed in a light most favorable to the plaintiff (Helmerich) held that the complaint alleged sufficient facts, particularly those relating to Venezuela’s statements singling out Helmerich as American, for the Court to accept jurisdiction and continue to consider the case.

Helmerich has a long way to go and multiple additional hurdles to jump before a compensable expropriation claim can go before a judge or jury to determine compensation owed. Stay tuned . . .

Uncategorized

May 13th, 2015

Katrina Flooding leaves Army Corps of Engineers Liable for a Taking

The Court of Federal Claims in  St. Bernard Parish Gov’t v. United States, No. 05-1119L (May 1. 2015) – has ruled in favor of a class of plaintiffs including St. Bernard Parish (Louisiana has parishes instead of counties) and citizens of the Ninth Ward in New Orleans for flooding damages they suffered when the levees broke during Hurricane Katrina. Plaintiffs asserted the United States, and specifically the Army Corps of Engineers, decisions to reroute the flow, build levees and failures in maintaining the levees led to the flooding and constituted an inverse condemnation/temporary taking of their property.

Spinning Nightmare

In a lengthy but fascinating opinion, the Court details the history of the extreme southern Mississippi River Delta and the changes made to the flow, including levee construction. Summing it all up, the Court held:

The Army Corps’ construction, expansions, operation, and failure to maintain the MR-GO caused subsequent storm surge that was exacerbated by a “funnel effect” during Hurricane Katrina and subsequent hurricanes and severe storms, causing flooding on Plaintiffs’ properties that effected a temporary taking under the Fifth Amendment to the United States Constitution.

For the whole opinion, click here brought to you by our friends over at inversecondemnation (see their full writeup on the case here.

 

ND

Uncategorized

June 4th, 2014

Osceola Parkway sparks resident furor

Look at all the landowners under that footprint

Look at all the landowners under that footprint

The Osceola Expressway Authority held a public meeting last Thursday night to roll out five alternative alignments of where their proposed roadway extension will be located. Project engineers attempted to explain to a packed house the process and need for the parkway. We were in attendance to see these proposed corridors and help property owners determine which ones would or would not impact them.

Many home and property owners indicated this was the first they were hearing of the parkway potentially impacting their homes or property. This is alarming. Even worse, many of these owners were even more confused and surprised to find out their properties, many of which are in Orange County, are being threatened by the Osceola County Expressway Authority.

Pursuant to legislation the Governor is expected to sign soon, the Orlando/Orange County Expressway Authority will become the Central Florida Regional Expressway Authority which will have board members drawn from Seminole, Orange and Lake Counties. Osceola County was to merge into the CFREA, but that was delayed by certain legislators who fought to delay the Osceola County Expressway Authority’s absorption until 2018, giving the Osceola Expressway Authority time to complete 3 major projects, including the extension of Osceola Parkway. Given the significant opposition that showed up to make their voices heard on Thursday, some serious decisions need to be made and quickly so that these hundreds of property owners, home owners and developers are not stuck in limbo waiting to find out if their property will be impacted.

 

See News13’s story here.

WFTV covered the meeting as well, here.

 

 

 

 

Uncategorized

April 11th, 2014

Bailouts a Taking?

Another victim on the Boulevard of Broken Dreams
Photo by John Martinez Pavliga, Berkeley, USA

Here’s an unusual takings (maybe?) case making its way through the Federal Courts:

A&D Auto Sales v. U.S.

The issue goes something like this. As part of the bailouts of GM and Chrysler, the Feds mandated that these two automakers cancel franchise agreements with certain dealerships, including the Plaintiffs.

Plaintiffs brought suit alleging a taking of their franchise agreements. But are these franchise agreements ‘property’ as defined by the Constitution and case law protecting property? The government argued no, moving to dismiss the case and also argued that the terminations were not causally linked to the government demands.

The Court of Federal Claims refused to dismiss, and the Federal Circuit agreed, saying this unique case of first impression warranted a continued look, but sent the case back down for the Plaintiffs to amend their complaint to more clearly define and explain that the government action, not the financial situation for GM and Chrysler, caused the loss in value.

Stay tuned, this could get interesting as more facts are developed in the case.

Uncategorized

February 17th, 2014

Eminent Domain and Mortgage Foreclosure

 

Sign of the Times

We live in the age of foreclosures. The courthouses are filled with pro se litigants, trying to find the proper hearing room, or showing up 20 minutes late and missing the hearing entirely.

None of this has stopped Florida’s population growth and the deterioration of our roads. FDOT and other condemning authorities can’t wait around for the foreclosures to work their snail’s pace through the system. So the ‘condemnation in concert with foreclosure’ has become more of a rule than exception in residential eminent domain matters.

Several of our attorneys are currently on all sides of this issue. In one case, we represent a property owner who was already deep in a foreclosure case when he received notice of a taking, creating a tangled web of interacting and overlapping interests of the taking authority, bank, courts and property owner.

In other cases, we are working on behalf of a condemning authority which needs a portion of property for a public project. The problem is the property is deep in foreclosure and the owner is nowhere to be found.

Finally, the third side. In yet other cases, we work on behalf of banks which have been put on notice that they have an interest in, or a property they are in the process of foreclosing has been slated for partial acquisition.

The unique issues created when these two claims colide have yet to make it to the appelate courts, and questions still abound. For example, does the condemning authority take subject to the foreclosure? Could they end up paying the wrong party if the Court grants the foreclosure? What are an owner’s rights to the proceeds in an eminent domain action where they are already in foreclosure?

No matter whether you are an owner, bank or represent a condemning authority, the first step is to check your mortgage. Most, if not all, have a provision entitling the bank to some or all of the proceeds of any condemnation, provided they are applied to the outstanding balance. Moreover, many contain provisions allowing the bank, either always or in situations where the owner is not appropriately defending their title, to hire attorneys to stand in the owner’s shoes and contest the taking or argue for appropriate compensation.

Foreclosure Notices make for a nice wallpaper at the Courthouse

The real Gordian Knot comes where a condemning authority needs only a portion of property already in a mortgage foreclosure. There, a lis pendens has been filed on behalf of the bank seeking the foreclosure judgment. A lis pendens is a document filed in the public records putting the world on notice that there is a lawsuit out there, or a claim, where someone other than the title holder is asserting a right to title to a piece of property. Anyone who acquires title to the property while a lis pendens is in place may be doing so subject to the outcome of the litigation.

This means the condemning authority may or may not (depending on who you ask) be willing to go forward and secure title to the property. The competing theories are as follows: (1) with a lis pendens in place, any title transferred is subject to the decision of the foreclosure court where the case is pending. In this scenario, if a condemning authority obtains title from the fee owner, ignoring the mortgage holder’s lis pendens, the condemning authority could be taking the property subject to the outcome of the foreclosure case. In this scenario, the condemning authority may end up taking the property twice. Because of this, many condemning authorities want clarity in the title and concert between the eminent domain case and the foreclosure matter.

Alternatively, the power of condemnation may not subject to a lis pendens, as all property is held subject to the sovereign’s ultimate right to retake it. While this is probably the legally correct view, the practical application of this in system with title insurers who want title as clear as possible remains murky.

If you or your clients are experiencing both foreclosure and an eminent domain suit and would like more information on this topic or to discuss it further, feel free to contact us.

Constitutional Law,Florida Eminent Domain