Court Opinion

ID: 2747441
Source: CourtListenerOpinion
Date Created: 2014-10-31 21:04:46.749068+00
Date Added: 2024-06-11T11:26:15.794842
License: Public Domain

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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 2

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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 3

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
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 4

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
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 5

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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 6

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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 7

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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 8

      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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 9

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)).
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 10

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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 11

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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 12

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.”).
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 13

      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.
Theravectys SA v. Immune Design Corp.
C.A. No. 9950-VCN
October 31, 2014
Page 14

     IT IS SO ORDERED.

                                        Very truly yours,

                                        /s/ John W. Noble

JWN/cap
cc: Register in Chancery-K