Appeal dismissed after PREPA & fuel supplier settle lawsuit begun in 2009
By The Star Staff
After both parties reached a settlement, the U.S. First Circuit Court of Appeals late last week dismissed an appeal filed in December by the Puerto Rico Electric Power Authority (PREPA) to overturn a lower court ruling involving a decades-long suit against Vitol Inc. (VIC).
On July 20, the parties filed a joint motion to hold the case in abeyance and informed the court that they had reached an agreement in principle to settle their dispute. They finalize the agreement this week.
The litigation began in 2009, when PREPA filed the first of two lawsuits against VIC in Commonwealth Court in San Juan, with a second case filed in 2012.
The dispute was against the energy supply company based in Houston and its former parent company, VSA.
PREPA claimed that its fuel-supply contracts with VIC were void because VSA – a legally independent company that was VIC’s parent from late 2006 until late 2007 – was convicted in November 2007 of a crime in New York state court. VSA’s conviction had nothing to do with PREPA or Puerto Rico, but rather concerned the United Nations Oil-forFood Program in Iraq. PREPA claimed that VSA’s conviction caused VIC to violate a since repealed Puerto Rico statute called Law 458, which barred public corporations from entering into contracts with companies that had been convicted of certain offenses.
In the lawsuits, PREPA claimed that six fuel-oil supply contracts with VIC, in effect between 2005 and 2009 and awarded through competitive bids, had to be declared void, retroactively, based on alleged violations of Puerto Rico’s public-contracting law and alleged misrepresentations.
PREPA sought to recover $3.89 billion from VIC in the litigation, representing the full value of payments that PREPA made under the contracts.
The case was eventually transferred to federal court.
Last year, Judge Laura Taylor Swain, who is presiding over PREPA’s bankruptcy process, dismissed PREPA’s claims to void six fuel-oil supply contracts and recover $3.89 billion. The court also ruled that VIC was entitled to recover $28.4 million, plus interest, on a counterclaim it had filed.
Swain cited “the absence of any legal basis for invalidating any of the contracts at issue.” She said PREPA failed to prove any of the alleged violations of Puerto Rico’s public contracting law or any of its alleged misrepresentations, and that PREPA’s claims were deficient both factually and legally. The court noted that VIC “fully performed its delivery obligations under the contracts.” The $28.4 million that PREPA was required to pay was for fuel supplies and other services.
The appeal document did not provide details of the settlement but told both parties they had to pay for their own legal fees.