DRFP, LLC v. Bolivarian Republic of Venezuela


The U.S. Court of Appeals for the Sixth Circuit upheld a lower court judgment in favor of Foley Hoag’s client, the Bolivarian Republic of Venezuela, in an action brought by an Ohio company seeking to collect on two fake promissory notes with a face value of $100 million that were alleged to have been issued in 1981 by a defunct Venezuelan bank. Foley Hoag took the case to trial in 2016 in the U.S. District Court for the Southern District of Ohio and prevailed.

Federal Court of Appeals Upholds Victory for Foley Hoag Client, The Republic of Venezuela, in Fake Promissory Note Case

Sixth Circuit denounces Plaintiff’s “calculated effort to pull off a ‘gotcha’ against a foreign sovereign”

August 25, 2017

The U.S. Court of Appeals for the Sixth Circuit upheld a lower court judgment in favor of Foley Hoag’s client, the Bolivarian Republic of Venezuela, in an action brought by an Ohio company seeking to collect on two fake promissory notes with a face value of $100 million that were alleged to have been issued in 1981 by a defunct Venezuelan bank. Foley Hoag took the case to trial in 2016 in the U.S. District Court for the Southern District of Ohio and prevailed.

On August 24, 2017, the Sixth Circuit affirmed the July 2016 judgment of the District Court dismissing plaintiff Skye Ventures’ claim against Venezuela. The District Court’s opinion, following a 23-day bench trial, concluded that the promissory notes at issue were fraudulent. DRFP, LLC v. Bolivarian Republic of Venezuela, Case No. 2:04-cv-0793, 2016 U.S. Dist. LEXIS 96205 (S.D. Ohio July 22, 2016). The District Court also rejected Skye’s arguments that Venezuela could nonetheless be forced to pay on the fake notes based on a retracted internal legal opinion of Venezuela’s Attorney General. On appeal, Skye challenged only the District Court’s rulings on those arguments.

The Sixth Circuit Court of Appeals noted that Skye did not contest the District Court’s finding that the notes were fraudulent and recounted the abundant evidence—much of which was known to Skye—of the falsity of the notes. The Sixth Circuit agreed with the District Court that the Venezuelan Attorney General’s opinion was not legally binding and that Skye could not invoke the doctrine of “equitable estoppel” to force Venezuela to pay on the fake notes because that doctrine cannot be used to perpetuate a fraud.

The Sixth Circuit further noted that this 13-year litigation, including a lengthy trial and two appeals, “all stemmed from Skye’s plan to invest with a known criminal (who had already been convicted for trading in false Bandagro notes) by buying counterfeited notes at less than two percent of their face value in a calculated effort to pull off a ‘gotcha’ against a foreign sovereign.” Concluding that Skye advanced arguments on appeal “untethered to valid analysis of either Ohio or Venezuelan law,” the Sixth Circuit took the unusual step of inviting Venezuela to apply for reasonable attorneys’ fees and costs associated with the appeal.

“The decision is a resounding victory for Venezuela, which has long fought efforts to enforce fake Bandagro notes,” said Foley Hoag partner Andrew Z. Schwartz (Picture), who argued the appeal for Venezuela.

In addition to Schwartz, Foley Hoag’s representation of Venezuela was led by partners Matthew C. Baltay, and Richard G. Baldwin, and counsel Thomas R. Ayres, II. The legal team also included Julia Amrhein, Kevin J. Conroy, Benjamin Guthrie, Christopher Escobedo Hart, Madeleine Rodriguez, Tracy Roosevelt and Peter Shults. The trial and appeal were overseen for Venezuela by its Procurador General, Reinaldo Muñoz.

Involved fees earner: Andrew Schwartz – Foley Hoag; Matthew Baltay – Foley Hoag; Richard G. Baldwin – Foley Hoag; Thomas Ayres – Foley Hoag; Julia Amrhein – Foley Hoag; Kevin Conroy – Foley Hoag; Benjamin Guthrie – Foley Hoag; Christopher Escobedo Hart – Foley Hoag; Madeleine Rodriguez – Foley Hoag; Tracy Roosevelt – Foley Hoag; Peter Shults – Foley Hoag; Andrew Schwartz – Foley Hoag;

Law Firms: Foley Hoag;

Clients: Republic of Venezuela;

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Author: Ambrogio Visconti