Theravectys SA v. Immune Design Corp. ( 2014 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
417 SOUTH STATE STREET
JOHN W. NOBLE DOVER, DELAWARE 19901
VICE CHANCELLOR TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
October 31, 2014
P. Clarkson Collins Jr., Esquire Todd Charles Schiltz, Esquire
Morris James LLP Drinker Biddle & Reath LLP
500 Delaware Avenue, Suite 1500 222 Delaware Avenue, Suite 1410
Wilmington, DE 19801 Wilmington, DE 19801
John D. Hendershot, Esquire
Richards, Layton & Finger, P.A.
920 North King Street
Wilmington, DE 19801
Re: Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
Date Submitted: October 28, 2014
Dear Counsel:
Non-Party Novasep Inc. (“Novasep US”) has moved for a protective order
pursuant to Court of Chancery Rule 26(c). Its motion arises in the context of
litigation between Plaintiff Theravectys SA (“TVS”)1 and Defendant Immune
Design Corporation (“IDC”). TVS’s claims against IDC derive from Henogen
1
TVS has filed a Cross-Motion to Compel that deals with the same issues as Novasep
US’s Motion for a Protective Order. This letter opinion addresses arguments raised in
both motions and is dispositive as to both.
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C.A. No. 9950-VCN
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SA’s (“Henogen”) manufacture of antiviral vectors for IDC, in violation of a
services contract between Henogen and TVS.2 TVS alleges tortious interference,
unfair competition, misappropriation of trade secrets, and unjust enrichment, and
seeks to establish that IDC knowingly induced Henogen to breach its contract with
TVS and/or that IDC intentionally used TVS’s confidential and proprietary
information.
In its efforts to establish its case, TVS served Novasep US, a corporate
affiliate of Henogen, with discovery requests. Novasep US and Henogen, neither
of which is a party to this litigation, share a corporate parent, Novasep Holdings
S.A.S. (“Novasep S.A.S.”), which is headquartered in France. Novasep US is
based in Pennsylvania and serves as the American sales and marketing force for its
foreign affiliates, including Henogen. Based in Belgium, Henogen is a contract
manufacturing organization specializing in the development and production of
2
“Lentiviral vectors are gene transfer vectors derived from HIV, able to integrate
the genome of dividing and non-dividing cells, allowing a stable expression of
transgene in host cells and serve as biological instruments to treat or prevent all
pathologies. In prophylactic and therapeutic vaccination settings, lentiviral vectors
are used to induce an antigen-specific immune response to fight infectious diseases
and cancers.” Compl. ¶ 5.
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biomolecules for third parties. Novasep US markets Henogen’s services to
American clients, but generally ceases its interaction with a client after the client
signs an initial contract with Henogen.
Novasep US’s involvement in the events underlying the TVS-IDC litigation
was limited to marketing communications with IDC before IDC and Henogen
entered into the Master Agreement for Development & Manufacturing Services on
April 27, 2012 (the “Manufacturing Agreement”). After the Manufacturing
Agreement was signed, all products created for IDC were manufactured, tested,
and shipped to IDC by Henogen.
I. TVS’S DISCOVERY REQUESTS
Novasep US objects to TVS’s requests for documents related to (i) the
manufacture and testing of the lentiviral vectors for IDC, (ii) the shipment of those
vectors to IDC, (iii) the negotiation and formation of the Manufacturing
Agreement, (iv) the litigation between TVS and IDC, and (v) Novasep US’s
corporate structure and relationships with its affiliates.
Novasep US argues that documents related to the manufacture, testing, and
shipment of the lentiviral vectors (the “Foreign Affiliate Documents”) are outside
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of its possession, custody, or control. It was not involved in these processes and
the Foreign Affiliate Documents are possessed and controlled by Henogen and
Novasep US’s other European affiliates.
Novasep US contends that even if it controlled the Foreign Affiliate
Documents, French and Belgian laws prevent their production. Further, Novasep
US argues that none of the categories of documents that it resists producing is
relevant to TVS’s claims, and their production would be unduly burdensome.
As explained below, TVS has not established Novasep US’s control over the
Foreign Affiliate Documents or any documents related to agreements between
Henogen and IDC to cooperate with respect to litigating against TVS.
Accordingly, Novasep US need not produce those documents. However, to the
extent that Novasep US controls documents responsive to TVS’s remaining
requests, Novasep US will produce them.
A. There is Insufficient Evidence That Novasep US Controls the
Foreign Affiliate Documents
Court of Chancery Rule 34(a) provides that a party may only request
documents “which are in the possession, custody or control of the party upon
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whom the request is served.”3 The Foreign Affiliate Documents are not in
Novasep US’s possession or custody. However, TVS argues that Novasep US has
“control” over those documents.
“In the Rule 34 context, [c]ontrol has been defined to include the legal right
to obtain the documents requested upon demand. Thus, the key inquiry is whether
the company has the power, unaided by the court, to force production of the
documents.”4 Both state and federal courts in Delaware “decline[] to apply a
broader definition of ‘control’ that would also include an inquiry into the practical
ability of the subpoenaed party to obtain documents.”5 Separate corporate
identities are generally respected “except in rare circumstances justifying the
application of the alter ego doctrine to pierce the corporate veil of the subsidiary.” 6
3
Ct. Ch. R. 34(a).
4
Deephaven Risk Arb Trading Ltd. v. UnitedGlobalCom, Inc., 2005 WL 1713067, at *11
(Del. Ch. July 13, 2005) (alteration in original) (internal quotation marks omitted).
5
Cradle IP LLC v. Tex. Instruments, Inc., 2013 WL 1794992, at *1 (D. Del. Apr. 29,
2013).
6
Id.
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The alter ego doctrine typically only applies when the use of “the corporate form in
and of itself operates to serve some fraud or injustice.”7
The strongest pieces of evidence supporting an application of the alter ego
doctrine are (i) the Mutual Confidential Disclosure Agreement between IDC and
Novasep US, signed January 9, 2012 (the “CDA”), and (ii) the Cooperation
Agreement between Henogen (and its group companies) and IDC, dated
February 13, 2014 (the “Cooperation Agreement”).
Novasep US entered into the CDA “acting on its own name and behalf and
on the name and behalf of its ‘Affiliates.’”8 The CDA defines Affiliates to include
Henogen, as well as Novasep US’s French parent, Novasep S.A.S. TVS argues
that Novasep US’s ability to bind its affiliates shows that the entities are
intertwined and that Novasep US exercises control.
The CDA was entered into in contemplation of a potential business
relationship between Henogen and IDC. As Henogen’s marketing agent in the
United States, Novasep US apparently had the limited power to bind its affiliates to
7
Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical, 2004 WL 415251, at *4 (Del. Ch.
Mar. 4, 2004).
8
Transmittal Aff. of Albert J. Carroll Ex. I.
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the CDA. Novasep US’s role is to facilitate agreements between its affiliates and
clients, and the CDA was entered into before IDC and Henogen’s Manufacturing
Agreement. The fact that Novasep US signed the CDA on its affiliates’ behalf
does not prove its control over the Foreign Affiliate Documents.
The Cooperation Agreement is weaker evidence of Novasep US’s control.
That agreement is between IDC (and its group companies) and Henogen (and its
group companies). TVS argues that, despite the lack of clarity regarding the
identities of the “group companies,” the Cooperation Agreement is evidence that
Henogen and its affiliates, including Novasep US, are so intertwined that Henogen
bound both itself and Novasep US to the agreement. This argument is
unpersuasive because there is no evidence that Novasep US is bound by the
Cooperation Agreement, and regardless, Henogen’s ability to bind Novasep US
would not support the conclusion that Novasep US has control over the Foreign
Affiliate Documents and can obtain these documents on demand.9
9
Novasep US had no involvement in the drafting or execution of the Cooperation
Agreement. Decl. of Andrew Brennan in Supp. of Novasep US’s Reply Br. in Supp. of
its Mot. for a Protective Order (“Brennan Decl.”) ¶ 9.
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TVS’s other arguments that Novasep US controls the Foreign Affiliate
Documents are equally unpersuasive. Novasep US has rebutted the assertion that
there is overlap between its directors and Novasep S.A.S.’s board.10 The fact that
Novasep US has a defined role in a broader corporate structure and interacts with
its affiliates is hardly surprising, and does not support piercing the corporate veil.
Novasep US’s role in the events underlying this litigation continued only until
Henogen and IDC signed the Manufacturing Agreement. Novasep US has its own
board of directors, keeps its own books, and operates as an entity independent from
its affiliates.11 It does not, in the ordinary course of business, access or receive
documents from its affiliates concerning their manufacturing, testing, or shipment
of products.12
For the foregoing reasons, at this time, there is no evidence that the Foreign
Affiliate Documents are within Novasep US’s possession, custody, or control, and
it is not required to produce them.
10
Regardless, overlapping directors would not be sufficient to ignore the separate
corporate identities of Novasep US and its affiliates.
11
Brennan Decl. ¶ 11.
12
Id. ¶ 10.
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B. Novasep US Must Produce the Requested Non-Foreign Affiliate
Documents in Its Possession and Control
Court of Chancery Rule 26 provides that a party may obtain discovery
“regarding any matter, not privileged, which is relevant to the subject matter
involved in the pending action.”13 “[T]he standard of relevance that the court must
apply is whether the discovery sought is reasonably calculated to lead to
admissible evidence.”14 The Court permits a broad scope of discovery and will not
allow objections to discovery requests “unless there have been clear abuses of the
process which would result in great and needless expense and time
consumption.”15
1. Novasep US’s Internal Marketing Communications Relating
to the Negotiation and Formation of the Manufacturing Agreement
TVS requests production of Novasep US’s internal marketing
communications concerning the negotiation and formation of the Manufacturing
Agreement. While Novasep US has agreed to produce its pre-contract
13
Ct. Ch. R. 26(b)(1).
14
Prod. Res. Gp., L.L.C. v. NCT Gp., Inc., 863 A.2d 772, 802 (Del. Ch. 2004).
15
Id. (quoting Van De Walle v. Unimation, Inc., 1984 WL 8270, at *1 (Del. Ch. Oct. 15,
1984)).
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communications with IDC, it resists production of its internal communications.
Novasep US admits that producing such documents would not be substantially
burdensome or prejudicial. However, it argues that such documents are irrelevant
to TVS’s claims against IDC since the documents were never shared with IDC and
cannot reflect IDC’s knowledge or intentions.
The Manufacturing Agreement and IDC’s motivation for entering into it are
central components of TVS’s case. Given the broad scope of allowable discovery,
TVS’s requests are “reasonably calculated to lead to admissible evidence.” It is
conceivable that Novasep US’s internal documents reference IDC’s knowledge of
Henogen’s relationship with TVS or IDC’s reasons for entering into the
Manufacturing Agreement. Novasep US has failed to meet its burden to show that
TVS’s requests for the internal marketing documents are improper, and Novasep
US is directed to respond to those requests.
2. Documents Concerning the Litigation Between TVS and IDC
TVS’s requests for documents related to the dispute between TVS and IDC
focus on the apparent cooperation between IDC and Henogen with respect to
litigating against TVS, as manifested by the February 13 Cooperation Agreement.
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However, Novasep US was not involved in the creation or signing of the
Cooperation Agreement, or any other similar communications or agreements.16
Any documents regarding cooperation between IDC and Henogen are in the
custody, possession, and control of Henogen or other European affiliates. These
documents, like the Foreign Affiliate Documents, are outside of Novasep US’s
control, and it is not required to produce them.
3. Documents Related to Novasep US’s Corporate Organization
TVS requests discovery concerning the relationships among Novasep US
and its affiliates and the extent to which documents are exchanged between these
entities in the regular course of business. Novasep US argues that these requests
have no relevance to TVS’s claims in this litigation. However, TVS explains that
it requested this category of documents in anticipation of Novasep US’s refusal to
produce documents allegedly outside of its control. TVS has not established that
the Foreign Affiliate Documents or communications related to the Cooperation
Agreement are within Novasep US’s control. However, TVS is entitled to
discovery in its attempt to demonstrate that Novasep US’s corporate structure and
16
Brennan Decl. ¶ 9.
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relationships with its affiliates are sufficient to bring those documents within its
control. Novasep US will respond to this category of requests to the extent that it,
not only its affiliates, controls responsive documents.
II. TVS’S DEPOSITION SUBPOENA
TVS has issued a deposition subpoena that includes the same topics as its
document requests. Novasep US is willing to produce an employee to testify
concerning its marketing interactions with IDC during 2011 and early 2012.
However, it argues that its witness should not be required to testify on matters
conducted by Novasep US’s foreign affiliates. As discussed supra, Novasep US
had no involvement in the manufacturing, testing, or shipment of the products
created for IDC. Novasep US also had no involvement relating to the Cooperation
Agreement. Novasep US will not be required to educate a witness to testify in a
manner binding on the company on matters in which it was not involved.17
17
See In re Ski Train Fire of Nov. 11, 2000 Kaprun Austria, 2006 WL 1328259, at *9
(S.D.N.Y. May 16, 2006) (“It is simply not comparable [to requiring document
production] to require a corporate parent to acquire all of the knowledge of the subsidiary
on matters in which the parent was not involved, and to testify to those matters in a
manner which binds the parent, a separate legal entity.”).
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Nonetheless, consistent with the limits placed on the document discovery,
Novasep US will produce a witness to testify regarding the negotiation and
formation of the Manufacturing Agreement, as well as Novasep US’s corporate
structure and relationships with its affiliates.
III. CONCLUSION
Novasep US’s Motion for a Protective Order is thus granted in part and
denied in part. Novasep US is not required to produce the Foreign Affiliate
Documents, communications related to the Cooperation Agreement, or any other
documents outside its possession, custody, or control, as set forth in this letter
opinion. However, Novasep US will produce documents related to its negotiation
of the Manufacturing Agreement or any other involvement it had in the events
underlying this litigation. It will also produce documents describing its corporate
structure and relationships with affiliates to the extent that such documents are
reasonably related to TVS’s efforts to establish control. Finally, Novasep US will
produce a witness to testify on the topics determined appropriate in this letter
opinion.
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IT IS SO ORDERED.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Register in Chancery-K