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A federal judge has rejected a special master’s attempt to force Venezuela and a gold mining company to absorb a $3.1 million legal bill tied to the sprawling Citgo sale litigation, ruling they should not be saddled with more than their “ordinary share” of the costs.

The dispute — the latest twist in yearslong efforts by creditors to auction off shares connected to Venezuela’s prized U.S. refinery asset — adds another layer of complexity to one of the most closely watched sovereign debt battles in U.S. courts.

Judge Rejects Fee Reallocation Request

In an oral order Monday, U.S. Circuit Judge Leonard P. Stark denied a late December bid by special master Robert Pincus to reallocate $3.1 million in legal fees he incurred defending against what he characterized as “frivolous” attempts to have him disqualified.

Pincus, who is overseeing the sale process, had argued that Venezuela, state-owned oil company Petróleos de Venezuela SA (PDVSA), and Canadian gold miner Gold Reserve should split the tab because they brought the disqualification motions.

Judge Stark disagreed.

“Notwithstanding that the motions to disqualify were the fourth and fifth such efforts filed in this action, and that the court denied the motions on multiple grounds, the court is not persuaded this situation merits requiring the moving parties to bear more than their ordinary share of the special master's fees associated with the motions,” the judge said.

Stark, elevated to the Federal Circuit in 2022 after serving as a Delaware district court judge, continues to preside over numerous creditor actions against Venezuela in Delaware federal court.

Sale Order Sets Default Cost Allocation

The judge pointed to a sale procedures order governing payment of the special master’s expenses, which states that such costs “shall be shared by the sale process parties and any additional judgment creditors.”

While the order allows the special master to seek deviation “if the circumstances require” — such as when a party generates excessive disputes or takes unreasonable positions — Stark concluded that shifting the entire $3.1 million bill to Venezuela and Gold Reserve was not justified.

The fee fight unfolded through letters filed last month. Defunct mining company Crystallex International Corp., ConocoPhillips and ACL1 Investments Ltd. — all Venezuela creditors — urged Stark to make Venezuela, PDVSA and Gold Reserve foot the bill.

The structure of the case means judgment creditors who stand to benefit from the sale must shoulder sale-related costs. At stake are shares of PDVSA subsidiary PDV Holding Inc., the indirect parent of oil giant Citgo.

Creditors Push Back

ConocoPhillips argued that Venezuela and its affiliates have consistently tried to derail the Citgo sale, filing “an inordinate number of motions and objections,” including four disqualification bids.

“Those circumstances warrant the special master's request for reallocation to the Venezuela parties,” ConocoPhillips said.

Crystallex, whose claim arises from its ouster from a Venezuelan gold mine near the Guyana border, echoed that view. It argued the disqualification efforts were “tactical, untimely, and meritless,” and said Venezuela and Gold Reserve should bear sole responsibility for the expenses tied to opposing them.

ACL1 Investments Ltd., owed roughly $119 million under defaulted Venezuelan bonds, said the burden of paying its share of Pincus’ fees was especially heavy given its far smaller expected recovery compared with creditors such as Crystallex, which is owed more than $1 billion. For ACL1, covering those costs would be “inequitable,” it argued.

Venezuela countered in January that its motion to disqualify Pincus was never deemed frivolous or unreasonable.

“It is difficult to understand how the special master and his advisers would have felt the need to spend more than $3 million (of which at least $2.78 million appears to consist of legal fees billed by [Weil Gotshal & Manges LLP]) to defend against a frivolous motion,” the country said.

Disqualification Motions and Bid Controversy

The push to disqualify Pincus and his advisers centered on alleged ties to hedge fund Elliott Investment Management. Elliott’s affiliate, Amber Energy Inc., ultimately submitted the $5.892 billion bid that Pincus endorsed in his updated final recommendation.

Gold Reserve had initially secured Pincus’ backing with a $7.4 billion offer for the PDV Holding shares. But the special master later reversed course, concluding Elliott’s lower bid provided the best combination of price and closing certainty.

In November, Judge Stark approved the Amber bid, noting it would satisfy judgments owed to 10 creditors who had secured writs of attachment, extinguishing $5.892 billion in claims. The transaction would also wipe out $3 billion in additional debt incurred by Venezuela and PDVSA by largely resolving obligations to bondholders holding a 50.1% stake in Citgo Holding, a PDV Holding subsidiary.

Gold Reserve separately sought to disqualify Judge Stark himself for alleged bias. Stark rejected both disqualification motions in a 54-page opinion.

Venezuela and Gold Reserve have since appealed the Citgo sale order to the Third Circuit, where the matter remains pending.

Representation and Next Steps

Counsel for ACL1 declined to comment Tuesday. Lawyers for the other parties did not immediately respond to requests for comment.

Gold Reserve is represented by attorneys from Womble Bond Dickinson, Norton Rose Fulbright and Brithem LLP. Pincus is represented by teams from Potter Anderson & Corroon LLP and Weil Gotshal & Manges LLP.

Venezuela and PDVSA are represented by counsel from Heyman Enerio Gattuso & Hirzel LLP, Munger Tolles & Olson LLP, and Curtis Mallet-Prevost Colt & Mosle LLP. PDV Holding and Citgo are represented by Morris Nichols Arsht & Tunnell LLP and Eimer Stahl LLP.

Crystallex is represented by Richards Layton & Finger PA and Gibson Dunn & Crutcher LLP. ACL1 Investments Ltd. is represented by Ashby & Geddes PA and Riley & Jacobson PLC. ConocoPhillips is represented by Ross Aronstam & Moritz LLP.

As the Venezuela Mining Citgo Fees dispute shows, even the referees of this high-stakes auction are not immune from the crossfire — and the meter, it seems, keeps running.