IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

GEMALTO, INC., ) ) Plaintiff, ) )

v. ) ) C.A. No. N15M

- 07

- 052 MERCHANT CUSTOMER EXCHANGE S , LLC, ) ) Defendant

. ) )

Date Submitted: August 21, 2015 Date Decided: September 2, 2015

ORDER

GEMALTO’S MOTION TO COMPEL DISCOVERY OF DOCUMENTS AND NON

- PARTY PAYDIANT , LLC’S MOTION TO QUASH PLAINTIFF’S OUT

- OF

STATE SUBPOENA
Daniel A. Griffith, Esquire, WHITEFORD TAYLOR PRESTON, LLC, 405 North King Street, Wilmington, DE 19801; Benjamin L. Stewart
, Esquire, pro hac vice , BAILEY BRAUER, PLLC, Campbell Centre I, 8350 N. Central Expy, Site 20 6, Dallas Texas 75206. Attorney for Gemalto, Inc.

Karl G. Randall, Esq uire
, MORRIS, NICHOLS, ARSHT & TUNNELL, LLP, 1201 N. Market Street, P.O. Box 1347, Wilmington Delaware 19899

- 1347. Attorney for Non

- Party Paydiant, LLC.

M ANNING , Commissioner1 Before the Court is Plaintiff Gemalto’s Motion to Compel Production of Documents
,
based on its out

- of

- state subpoena dues tecum
, directed against n on

- Party Paydiant, LLC.
Additionally, Paydiant, has moved to Quash Plaintiff ’s o ut

- of

- s tate s u bpoena . Paydiant argues

that Gemalto ’s subpoena is unduly burdensome and imp roperly seeks to obtain confidential and

trade secret informati on of Paydiant

.
FACTS AND PROCEDURAL HISTORY
A business dispute between Gemalto and Merchant Customer Exchanges, LLC, (MCX)
is currently being arbitrated before the American Arbitration Association (AAA) in Texas. The

essence of the dispute is that MCX terminated its contact with Gemalto for the development of
payment processing sof tware for use by smartphones, in violation of their agreement
, and failed
to pay Gemalto a $40 million USD decommissioning indemnity payment. Upon termination of

the contract, MCX hired Paydia nt to develop the same type of software; Paydient and Gemalto

w ere, and are still, direct competitors in this field . On April 21, 2015, the AAA authorized a
subpoena directed against Paydiant ( Delaware Corporation ) . On July 10, 2015, a Delaware
subpoena duces tecum was served on Paydiant’s registered agent in Dover Delaware. Receiving
no acceptable response, Gemalto filed a Motion to Compel Production of Documents from
Paydiant on July 30, 2015 . In turn, Paydiant filed a Motion to Quash Gemalto’s Motion on
August 7, 2015. Paydiant argues that the Request for Produ ction is unduly burdensome and will
force it to reveal confidential and proprietary trade secret information to a direct competitor. 1 A
hearing before all parties was held on August 21, 2015.

1 Paydiant also points out that it was not afforded an opportunity to be heard by the AAA prior to issuance of the subpoena in question and had no chance to object at that sta ge

— a valid point as far as the C ourt can see.2 ANALYSIS
Discovery in a civil case is generally controlled b y Superior Court Civil Rule 26. 2

“Parties may seek discovery of any non

- privileged, relevant matter, as well as information
reasonably calculated to lead to the discovery of admissible information.” 3 Rule 26(a)(1)(a)(i)

states that the Court shall limit the extent of discovery if it determines that the “discovery sought
is unreasonably cumulative or duplicative, or is obtainable from some other source that is more
convenient, less burdensome, or less expensive... .” Moreover, w h en trade secret information is
at issue, the dispute is controlled by Super Court Civil Rule 45(c)(3)(A). Rule 45(c)(3)(A) states
that “[o]n timely motion, the Court shall quash or modify a subpoena if it . . . (ii) requires
disclosure of privileged infor mation or other protected matter and no exception or waiver
applies.”

2 Rule 26. General provisions governing discovery. (a) Discovery methods.

-- Parties may obtain discovery by one or more of the following methods: Depositions upon oral examination or written questions; written interrogatories; production of documents or things or permission to enter upon land or other property, for inspection and other purposes; physical and mental examinations; and requests for admission. (b) Discovery scope and limits.

-- Unless otherwise limited by order of the Court in accordance with these ru les, the scope of discovery is as follows: (1) In general.

-- Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the part y seeking discovery or to the claim or defense of any other party, including the existence, description, nature, custody, condition and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence. The frequency or extent of use o f the discovery methods set forth in subdivision (a) shall be limited by the Court if it determines that: (i) The discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in co ntroversy, limitations on the parties' resources, and the importance of the issues at stake in the litigation. The Court may act upon its own initiative after reasonable notice or pursuant to a motion under subdivision (c). 3 Huff Fund Inv. P’Ship v. CKX, INC ., 2012 WL 3552687, at *1 (Del. Ch. August 15, 2012).3 Deposition Topics
Gemalto’s Request for Production of Documents comprised a list of ten topics. 4 Gemalto
subsequently withdraw its request as to items No.5, No.6 and No.9. The crux of the dispute, as
Gemalto alleges, is that MCX terminated the c ontract for reasons of convenience

— namely that

MCX’s new CEO, Dekker Davison
, had a prior relationship with Paydiant , a company now
owned by eBay Inc., and wanted them to have the dev elopment contract. Conversely , MCX

claims that it terminated the contract based on the failure of Ge malto to meet performance goals,
and nothing more. Thus, the dispositive question is what was the real motivation behind MCX’s

termination of the contract with Gemalto.
According to argument by counsel for Gemalto, discovery against MCX is still on

- going
at this stage and there are currently motions to compel pending in other courts . Additionally,
Gemalto’s pleadings indicate that, to date, MCX has provi ded over 312,000 pages of responsive
documents in discovery. As noted , the issue in th is litigation is the reason why MCX termi nated
the contract with Gemalto. Logically, documents ev idencing MCX’s internal thought processes
and subjective opinions of Ge malto
, will be found in the possession of MCX.
Gemalto has not made any showing, thus far, that it cannot obtain all relevant discovery

fro m MCX

— it just wants to cast a wider net and see what Paydiant might have in its possession.

As a non

- party to the litigation
, requiring Paydiant to produce any discovery is burdensome;

whether it is “unduly burdensome” is a question for another day. In any event, as a non

- party,
Paydiant should not be placed in a position of providing discovery that is duplicative, cumulative

or could more conveniently and reasonably be located in the possession of its creator

— MCX.
However, the Court recognizes that in the course of soliciting Paydiant to take

- over the software

4 Plaintiff’s Motion to Compel, Exhibit C at 4.4 development from Gemalto, MCX may have com municated information concerning the reason
for Gemalto’s termination to Paydiant; information that may be relevant to Gemalto’s claim.
Accordingly, the Court will limit discovery to the following topics only :

1. All documents (created prior to the filing of the Arbitration Complaint) in the
possession of Paydiant regarding, referencing or concerning MCX’s decision to termi nate its
agreement with Gemalto

.
2. All documents (created prior to the filing of the Arbitration Complaint) in the
possession of Pay diant regarding the Lexington pilot , its alleged failure and/or Gemalto’s ability,

or lack thereof, to perform under the terms of its agreement with MCX

.
3. All documents regarding Gemalto and its contract with MCX
, between Paydiant and

Dekkers Davidson
, created between July 2013 and the filing of the Arbitration Complaint.
As suggested by counsel for Gemalto at the hearing, Gemalto will pay all costs
reasonably associated with the discovery production by Paydiant. The term “document” will

have the same definition as originally provided by Gemalto. Nothing in this production should

be taken as to require Paydiant to disclose trade secrets or commercially sensitive information. If

necessary, however, Paydiant is entitled to redact such information and sh all create a Privilege
Log f or future review by the Court if necessary.5 CONCLUSION

F or the reasons set forth herein, Gemalto’s Motion to Compel is GRANTE D in part and
DENIED in part ; Paydiant’s Motion to Quash is also GRANTE D in part and DENIED in

part.

IT IS SO ORDERED

.

/s/ Bradley V. Manning BRADLEY V. MANNING, Commissioner

oc: Prothonotary