ALAS INTERNATIONAL LIMITED, V. NELSON RAMIZ, HAYDHELM EMILIA VELASQUEZ MORALES, AND CORPORACION ALAS DE VENEZUELA, C.A,

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK: IAS PART 53

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ALAS INTERNATIONAL LIMITED,

Plaintiff,

-against-

NELSON RAMIZ, HAYDHELM EMILIA
VELASQUEZ MORALES, and
CORPORACION ALAS DE VENEZUELA, C.A.,

Defendants,

                                          Index No. 601817/97

-against-

ELDAD BEN-YOSEF, FRANKLIN HOET,
AERON AVIATION RESOURCES, INC.,
EBY CAPITAL, INC., and GALACTIC ENTERPRISES LTD.,

Counterclaim Defendants.

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CHARLES EDWARD RAMOS, J.S.C.:

Defendants move (mot. seq. no. 020) for renewal of the motion for partial summary judgment and upon renewal, the denial of summary judgment. Plaintiff cross-moves for an order compelling defendants to answer plaintiff's interrogatories, precluding the use of written responses of Judge Omana to this court's letters rogatory and deferring consideration of defendant's motion for renewal.

Plaintiff brings this action for breach of contract and breach of fiduciary duty, and seeks damages, injunctive relief, specific performance, a constructive trust and a declaratory judgment. Plaintiff alleges the following: In August 1996, defendant Nelson Ramiz ("Ramiz") approached counterclaim defendant Eldad Ben-Yosef ("Ben-Yosef"), the owner of counterclaim defendants Aeron Aviation Resources, Inc. ("Aeron") and EBY Capital, INC. ("EBY"), concerning the possible acquisition of the assets of Linea Aeropostal Venezolana, C.A. ("Aeropostal"), a bankrupt Venezuelan airline. Aeropostal had ceased operations and its assets were controlled by court-appointed receivers who planned to sell them at an auction. Ramiz explained that these assets would likely be purchased for the minimum bid of $20 million as required by the court. Ramiz also explained that the purchaser of the assets had to be a Venezuelan company, and that his wife, defendant Haydhelm Emilia Velasquez Morales ("Velasquez"), owned 100% of defendant Corporacion Alas de Venezuela, C.A. ("Alas Venzuela"), and that Alas Venezuela could act as the nominal purchaser of the assets. Ben-Yosef in turn enlisted the assistance of counterclaim defendant Galactic Enterprises Ltd. ("Galactic") and decided to structure the acquisition through plaintiff, with Ben-Yosef and Galactic as indirect controlling owners of plaintiff.

On September 12, 1996, after a $1 million deposit had been advanced by Galactic to Ramiz in order to secure a potential bid in the auction of the assets (the deposit was given to the court-appointed receivers), plaintiff was informed by John Pate, who was retained as counsel for plaintiff and defendants, that the $1 million could not be used as part of the $20 million purchase price, but was instead to be retained by the receivers for 45 days following the closing of the purchase of the assets to secure various other obligations. Therefore, plaintiff would be required to provide a total of $21 million to Alas Venezuela in order to close the transaction.

Plaintiff and defendants entered into a Memorandum of Understanding ("MOU"), dated September 26, 1996. The MOU set forth the terms under which the parties would participate in the acquisition of the assets. The MOU stated that the assets would be acquired by Alas Venezuela from the court-appointed receivers with $20 million advanced by Galactic, with title held for a short period by Alas Venzuela, and the assets then transferred to plaintiff. Ramiz would be compensated for his efforts in the transaction with 5% of the ownership of plaintiff. Ramiz and Alas Venezuela were obligated under the MOU to indemnify plaintiff against the non-return of the $1 million deposit. Plaintiff was to own 49% of Alas Venezuela and Ramiz and/or Velasquez was to own the remainder. The MOU also stated that the parties could lease, or otherwise make available, some of the assets to Alas Venezuela for the purpose of enabling Alas Venezuela to start and operate a new airline in Venezuela.

Alas Venezuela purchased the assets from the receivers in an auction that took place on September 27, 1996. The receivers returned the $1 million deposit to defendants. Instead of transferring title of the assets to plaintiff, defendants have leased the assets to a subsidiary of Alas Venezuela for the purpose of operating an airline. Thereafter, plaintiff brought this action.

In response to the lawsuit, defendants do not dispute that they entered into an agreement with plaintiff to purchase the subject assets from the court-appointed receivers. Defendants contend that the condition for the sale of the assets was that the purchaser would agree to use the assets to operate a domestic airline in Venezuela, as opposed to selling or leasing the assets outside of Venezuela. Upon the sale of the assets, plaintiff and various counterclaim defendants demanded that defendants give them immediate title and possession of the assets. Upon defendants' failure to do so, plaintiff and counterclaim defendants allegedly proceeded to harass and intimidate defendants through a series of acts, including the publication of allegedly defamatory advertisements in Venezuelan newspapers against Alas Venezuela and the commencement of civil and criminal lawsuits against defendants in the courts of Venezuela.

Plaintiff moved for partial summary judgment on the issue of liability with respect to its breach of contract and breach of fiduciary duty claims. This court granted the motion as against Ramiz and Velasquez. Defendants now move for renewal of that motion in light of allegedly new evidence submitted to the court. The evidence is the testimony of Judge Graciela Omana de Suarez ("Omana"), filed in the Venezuelan Bankruptcy Court on December 15, 1998, in response to the letters rogatory issued by this court, which responses were received in New York on January 4, 1999. Omana was the judge who supervised the administration of the bankruptcy of Aeropostal, and who set the conditions for the distribution of the assets which are the subject of this action.

Omana testified that she had conversations with officials of the Ministry of Transport and Communications, the Investment Fund of Venezuela, and trustee of Aeropostal to the effect that there was a policy that the assets being sold by the trustees had to be allocated to a national commercial airline in Venezuela. Omana took this policy into consideration in the course of determining the disposition of the assets. Omana testified that had she known that prior to Alas Venezuela's successful bid for the assets, that the assets were to be sold out of Venezuela , she would have not awarded the assets to Alas Venezuela. She testified that the purchaser was not at liberty to export the assets from Venezuela.

Defendants contend that Omana's testimony, along with the testimony of others submitted in opposition of the original motion for summary judgment, establishes that it was the policy of the Venezuelan Government that once the assets were sold they had to be used to operate an airline in Venezuela, and that any other use of the assets would be illegal in Venezuela.

Defendants argue that plaintiff cannot force performance under the MOU where defendants were complying with Venezuelan law in operating the airline in Venezuela. Moreover, defendants contend that this court should defer to the opinion of Omana and the other evidence of Venezuelan Government policy, and recognize that the transfer and exportation of the assets was prohibited by the Venezuelan Government. Defendants allegedly should not be held liable in damages for failing to transfer and exporting the assets. In effect, defendants are relying on the "act of the state" doctrine. This doctrine would excuse the performance under a contract if such performance would violate the acts and policies of a foreign government and would prohibit an American court from ordering performance or damages for non-performance, because either interferes with the foreign sovereign's exercise of authority over rights and property within its jurisdiction.

Plaintiff and counterclaim defendants oppose this motion on various grounds. First, they contend that the testimony of Omana is improper because it was not sworn under oath and is inadmissible hearsay. Second, they argue that the testimony of Omana is not new and that it is virtually identical to the testimony of the receivers which was submitted at the time of the summary judgment motion. Third, they state that no proof has been offered that would establish that the exportation of the assets would have violated any penal or civil law in Venezuela. Fourth, they state that the enforcement of the MOU would not violate any civil or criminal law, either in Venezuela or in New York.

Plaintiff wishes to defer consideration of this motion pending a cross motion to compel defendants to answer interrogatories which were served on them. The interrogatories were served because Omana did not respond to the letters rogatory by giving a deposition, but by preparing written responses to the questions. Plaintiff believes that defendants and/or their counsel engaged in ex parte communications with Omana in connection with her written responses. The interrogatories sought discovery relating to the alleged ex parte communications. Defendants refused to answer the interrogatories, claiming that the information was either privileged as attorney's work product or was neither material nor relevant. Plaintiff now seeks an order compelling defendants to answer the interrogatories and/or precluding the testimony of Omana.

Plaintiff bases its belief in the ex parte contact between defendants and Omana on a previous occasion when defendants engaged in ex parte contact with a Venezuelan judge, Carlos Guia Perra ("Guia") in submitting his written statement in opposition to the motion for partial summary judgment. Specifically, an attorney for Alas Venezuela asked Guia ex parte to issue a statement concerning the terms, conditions and scope of the contract under which the assets were sold to Alas Venezuela.

In opposition to the cross motion, defendants argue that there is no factual basis to suggest that any improper ex parte communications occurred between them and Omana, and that plaintiff is simply attempting to discount the significance of her testimony. Defendants maintain that plaintiff should or could have returned to this court to have it propound additional questions, as part of the letters rogatory to Omana that would have related to the issue of the alleged ex parte communications.

Defendants also argue that the communications between Omana and themselves and their counsel are information protected under the attorney work product privilege. The interrogatories allegedly are an attempt to uncover protected information. In addition, it is alleged that the responses of Omana with respect to the letters rogatory were official acts that she performed in her judicial capacity, pursuant to which she allegedly was not required under Venezuelan law to respond to the questions under oath. Therefore, her responses allegedly complied with Venezuelan law and procedure. Defendants' claim that if Omana had any communications with anyone in connection with the performance of her judicial duties, it is not relevant or material to this case.

The court must first determine whether to grant the cross motion before deciding on the motion. It is uncontroverted that the responses of Omana to the letters rogatory were not taken under oath. The terms of the letters rogatory provided that "[t]he testimony is, if possible, to be taken under oath and recorded by a stenographic reporter in accordance with the custom of the requesting state." The letters rogatory did not mandate an oath. Moreover, the Committee on rules of Practice and Procedure of the Judicial Conference of the United States proposed, and the United States Supreme Court adopted, the following addition to Fed. R. Civ. P. 28(b): "Evidence obtained in response to a letter rogatory need not be excluded merely for the reason ... that the testimony was not taken under oath or for any similar departure from the requirements for depositions taken within the United States ...." . In this case, the testimony of Omana shall not be excluded on the ground that it is not sworn testimony.

Plaintiff argues that Omana's testimony should be subjected to scrutiny because it might have been influenced by defendants or their counsel. To the extent that such testimony is influenced by ex parte communications would not, according to plaintiff, render it admissible under New York law. Since the testimony of Omana is the primary source of defendants' renewal motion, the court finds that information relating to how the responses were prepared is material and relevant and should be subject to discovery.

Defendants' argument that the information sought is part of attorney's work product is too general and amounts to a mere assertion. Consequently, the court finds that defendants must respond to the interrogatories. The court shall defer consideration of defendants' order for renewal of the summary judgment motion pending defendants' response to the interrogatories submitted by plaintiff.

Accordingly, it is ORDERED that the plaintiff's cross motion is granted to the extent that defendants are directed to respond to plaintiff's interrogatories within 30 days of receipt of a copy of this order with notice of entry; and it is further ORDERED that defendants' motion for renewal is stayed pending the receipt by plaintiff of the interrogatory answers; and it is further

ORDERED that plaintiff is directed to submit their supplemental opposition to the motion to renew within 10 days of receipt of the interrogatory responses; and it is further ORDERED that defendants are directed to submit their supplemental reply to plaintiff's supplemental opposition within 10 days thereafter.

DATED: April 22, 1999

ENTER:

J.S.C.