January 04, 2017
On November 2, 2016, the Supreme Court heard oral argument in Venezuela v. Helmerich & Payne International. Helmerich & Payne International Drilling Company owns a subsidiary that, in 2007, contracted to provide Venezuela's state-owned oil corporation the use of Helmerich’s drilling rigs. When unpaid invoices to the state-owned company surpassed $100 million in 2009, Helmerich refused to renew the contract and prepared to remove its equipment. Employees of the Venezuelan corporation, along with the Venezuelan National Guard, blockaded the equipment yards, and then-President Hugo Chavez issued a Decree of Expropriation.
Helmerich sued in federal district court under the expropriation and commercial activity exceptions to the Foreign Sovereign Immunities Act. Venezuela moved to dismiss, and the district court granted the motion with respect to the expropriation claim but denied it with respect to the commercial activity claim. The U.S. Court of Appeals for the District of Columbia Circuit reversed, holding that because the expropriation claim was neither insubstantial nor frivolous, the district court should not have granted the motion to dismiss that claim--but should have dismissed the commercial activity claim because the subsidiary’s commercial activity had no “direct effect” in the United States.
The question before the Supreme Court is whether the pleading standard for alleging that a case falls within the Foreign Sovereign Immunities Act’s expropriation exception is more demanding than the standard for pleading jurisdiction under the federal-question statute, which allows a jurisdictional dismissal only if the federal claim is wholly insubstantial and frivolous.
To discuss the case, we have Donald Earl “Trey” Childress III, who is Professor of Law at the Pepperdine University School of Law.