NCM Group Holdings, LLC v. LVI Group Investments, LLC

IN THE SUPREME COURT OF THE STATE OF DELAWARE
NCM GROUP HOLDINGS, LLC, §
§
Defendant/Counter- § No. 506, 2017
Plaintiff Below, §
Appellant, § Court Below—Court of Chancery
§ of the State of Delaware
v. §
§ C.A. No. 12067
LVI GROUP INVESTMENTS, LLC, §
§
Plaintiff/Counter- §
Defendant Below, §
§
and §
§
NORTHSTAR GROUP HOLDINGS, §
LLC and SCOTT STATE, §
§
Counter-Defendants Below, §
Appellees.
Submitted: December 6, 2017
Decided: January 17, 2018
Before VALIHURA, VAUGHN, and SEITZ, Justices.
ORDER
This 17th day of January 2018, having considered the notice and supplemental
notice of appeal from an interlocutory order under Supreme Court Rule 42, it appears
to the Court that:
(1) In the Court of Chancery, the parties are litigating competing claims of
fraud in connection with a merger. This interlocutory appeal arises from a Court of
Chancery bench ruling, issued on November 1, 2017, that denied Appellant-
Defendant/Counter-Plaintiff Below NCM Group Holdings, LLC’s motion to modify
a stipulated protective order. The protective order, entered on August 29, 2016,
governed the use of discovery material in litigation arising from alleged
misrepresentations in a merger. Paragraph 9 of the protective order provided that
discovery material “shall be used solely for purposes of this litigation and shall not
be used for any other purpose, including … any other litigation or proceedings.”1
NCM sought to modify the protective order so it could use information learned from
discovery material in the Delaware litigation to file complaints in Illinois and New
York against individuals who might not be subject to personal jurisdiction in
Delaware.2
(2) The Court of Chancery concluded NCM had not shown good cause for
modification because the opposing parties’ substantial reliance on paragraph 9 of the
protective order in how they handled document production outweighed NCM’s
desire to use discovery material to sue individuals outside of Delaware. The Court
of Chancery also granted Appellee-Counter Defendant Below NorthStar Group
Holdings, LLC’s motion to enter a protective order for the production of highly
confidential privileged discovery material that limited the use of that material to the
1
Protective Order ¶ 9.
2
NCM has since sued two of the individuals in New York without relying on the discovery
material.
2
current litigation. On November 13, 2017, NCM filed an application for certification
to take an interlocutory appeal. Appellee-Plaintiff/Counter-Defendant Below LVI
Group Investments, LLC, NorthStar, and Appellee Counter-Defendant Below Scott
State opposed the application.
(3) On December 4, 2017, the Court of Chancery denied the application.3
The Court of Chancery concluded that neither of the Rule 42(b)(iii) criteria raised
by NCM—a question of law resolved for the first time in the State or the
considerations of justice—weighed in favor of certification. As to the question of
law, the Court of Chancery held that it properly applied the balancing test set forth
in Wolhar v. General Motors Corp.4 as requested by NCM. As to the considerations
of justice, the Court of Chancery held that NCM should have been aware of the
possibility it might wish to sue the two Illinois individuals at the time of the
protective order because it had alleged in its counterclaims that these individuals
helped LVI commit fraud.
(4) We refuse without prejudice NCM’s application for interlocutory
review of the Court of Chancery’s Bench Ruling. As stated in NCM’s application
3
LVI Group Investments, LLC v. NCM Group Holdings, LLC, 2017 WL 5989047 (Del. Dec. 4,
2017).
4
712 A.2d 464, 469 (Del. Super. Ct. 1997) (balancing the proposed modification of a protective
order against the opposing party’s reliance upon the order to determine whether the modification
would prejudice the opposing party’s substantial rights).
3
papers, trial is presently scheduled for April 30, 2018.5 According to NCM, the
earliest the statute of limitations could run for the claims it seeks to assert outside of
Delaware is April, 2019.6 Trial court proceedings should be completed well in
advance of the statute of limitations deadline. Thus, at this time, there is no
“substantial issue of material importance that merits appellate review before a final
judgment.”7 If trial court proceedings are delayed, or appellate review cannot be
completed in the normal case, then NCM can renew its application, or move to
expedite an appeal, as the circumstances warrant.
NOW, THEREFORE, IT IS HEREBY ORDERED that the interlocutory
appeal is REFUSED, without prejudice.
BY THE COURT:
/s/ Collins J. Seitz, Jr.
Justice
5
NCM Group Holding Inc.’s November 13, 2017 Application for Certification of the Interlocutory
Order Entered On November 1, 2017 ¶ 23.
6
Id. at ¶ 21.
7
Supreme Court Rule 42(b)(i).
4