Susman Godfrey of Houston won a major victory this week in San Juan, Puerto Rico, for its client Vitol, the global energy and commodity trading company, in a 12-year-old dispute over nearly $4 billion in fuel-oil supply contracts.
The U.S, District Court in San Juan rejected claims by the Puerto Rico Electric Power Authority (PREPA) to void six fuel-oil supply contracts the state electric power company held with Vitol. In addition to ruling that the contracts, worth $3.89 billion, were valid, the court ruled that Vitol was entitled to recover $28.4 million plus interest on a counterclaim.
The Susman Godfrey team representing the Dutch-founded oil concern included co-managing partner Neal Manne, partners Alex Kaplan and Weston O’Black, and associates Michael Kelso and Florence Chen.
Litigation began in 2009, when PREPA filed the first of two lawsuits against Vitol in Commonwealth Court in San Juan. A second suit was filed in 2012. They claimed the fuel-oil contracts with Vitol, in effect between 2005 and 2009, were retroactively void based on alleged misrepresentations and alleged violations of Puerto Rico’s public-contracting law.
In a 42-page opinion issued this week, U.S. District Judge Laura Taylor Swain rejected those claims by PREPA, citing “the absence of any legal basis for invalidating any of the contracts at issue.” The court held that PREPA failed to prove its allegations of misrepresentation and contracting-law violations and said Vitol “fully performed its delivery obligations under the contracts.”
The $3.89 billion figure represents the amount Vitol already received for supplying fuel to PREPA. The $28.4 million awarded through Vitol’s counterclaim represents the unpaid portion of the fuel contracts.
Swain, a judge in the Southern District of New York, was appointed in 2017 by Chief Justice John Roberts of the U.S. Supreme Court to oversee litigation stemming from what amounted to the bankruptcy of Puerto Rico, which at the time faced about $120 billion in public debt and pension liabilities.
Kaplan, who has worked on Vitol case since Susman Godfrey was retained in January 2013, said of the judge’s ruling, “We are delighted to achieve this important victory for Vitol. It was an unusually long road to get here, but credit to Vitol for having the determination to see this through.”
This dispute has a long and complex procedural history, as noted in the court’s opinion, including a “volley of removals and remands,” with litigation in both the U.S. District Court and the Commonwealth Courts in Puerto Rico, appellate matters before the First U.S. Circuit Court of Appeals and the U.S. Supreme Court, and contested proceedings in connection with Puerto Rico’s financial reorganization.
“At every turn,” Manne said, “PREPA has sought to deny Vitol access to a federal forum for this litigation, but we ultimately prevailed on the jurisdictional issues – and that cleared the way for a merits decision in federal court.”
Susman Godfrey, he said, “thrives in complicated, high-value disputes, and this case is another great example.”
The firm’s co-counsel in Puerto Rico were Eduardo Zayas-Marxauch of McConnell Valdez and Andres Lopez, who has his own firm.
PREPA’s lawyers did not immediately respond to a request for comment. The legal team includes New York lawyers Martin Bienenstock, Jeffrey Levitan, Lary Rapaport, Margaret Dale, Chantel Febus and Laura Stafford and San Juan lawyer Hermann Bauer of O’Neill & Borges.