Court Opinion

ID: 2704887
Source: CourtListenerOpinion
Date Created: 2014-08-04 22:01:15.804092+00
Date Added: 2024-06-11T09:16:00.044830
License: Public Domain

EFiled: Jul 21 2014 04:03PM EDT
                                                               Transaction ID 55762166
                                                               Case No. 5957-VCN

                                 COURT OF CHANCERY
                                       OF THE
                                 STATE OF DELAWARE

 JOHN W. NOBLE                                                       417 SOUTH STATE STREET
VICE CHANCELLOR                                                      DOVER, DELAWARE 19901
                                                                    TELEPHONE: (302) 739-4397
                                                                    FACSIMILE: (302) 739-6179

                                         July 21, 2014

Thad J. Bracegirdle, Esquire                        Seth J. Reidenberg, Esquire
Wilks, Lukoff & Bracegirdle, LLC                    Tybout, Redfearn & Pell
1300 North Grant Avenue, Suite 100                  750 Shipyard Drive, Suite 400
Wilmington, DE 19806                                Wilmington, DE 19801

       Re:     Matthew v. Laudamiel, et al.
               C.A. No. 5957-VCN
               Date Submitted: July 7, 2014

Dear Counsel:

       Two discovery disputes between Plaintiff Stewart Matthew and Defendant

Fläkt Woods Group, SA (“Fläkt Woods”) require resolution.1 The first involves

the scope of discovery into Plaintiff’s scenting activities following dissolution of

Aeosphere. The second raises the question of whether a non-settling defendant

may inspect an unredacted settlement (the “Settlement Agreement”) reached by

1
  Familiarity with the background of this litigation is presumed. See, e.g., Matthew v. Laudamiel,
2012 WL 605589 (Del. Ch. Feb 21, 2012), rev’d, 56 A.3d 1023 (Del. 2012) (generally reviewing
the various claims).
Matthew v. Laudamiel, et al.
C.A. No. 5957-VCN
July 21, 2014
Page 2

Plaintiff and Defendants Roberto Capua and Action 1 SRL (the “Settling

Defendants).

       1.      Fläkt Woods has inquired about Plaintiff’s post-dissolution scenting

activities for two reasons: mitigation and, perhaps, its unclean hands defense to

Plaintiff’s equitable claims. Plaintiff seeks to limit the scope of the inquiry to his

actions or plans involving the so-called “scent organ” used by Aeosphere. Fläkt

Woods, on the other hand, proposes a broader scope—one that is generally

consistent with Plaintiff’s discovery into its post-dissolution activities—addressing

plans and actions generally involving scenting, not limited to specific hardware.2

As Fläkt Woods moves from the scope suggested by Plaintiff to the scope that it

now sponsors, the likelihood of useful information does decline. That reduction,

however, does not justify precluding discovery. The general standard of Court of

Chancery Rule 26(b)(1) (“any matter not privileged, which is relevant to the

2
 Fläkt Woods has narrowed the scope of the dispute somewhat by its focus on scenting-related
activities instead of any remunerative activity that Plaintiff pursued or could have pursued.
Matthew v. Laudamiel, et al.
C.A. No. 5957-VCN
July 21, 2014
Page 3

subject matter of the pending action”) is, of course, liberal and does not in this

instance justify limiting Fläkt Woods’ efforts.3

       Limiting Fläkt Woods’ discovery along the lines advocated by Plaintiff

would, unfortunately and inevitably, leave for him to decide which of his

activities—if any—depended upon Aeosphere’s proprietary information. Fläkt

Woods is entitled to know what those actions may have been; that will enable it to

conclude, through its perspective, whether Plaintiff’s conduct was informed by (or

dependent upon) the proprietary knowledge of Aeosphere.

       2.      Plaintiff settled with the Settling Defendants. Fläkt Woods wants a

copy of the joint tortfeasor Settlement Agreement, intended to have been adopted

under 10 Del. C. ch. 63. A redacted version was provided, and the Plaintiff has

agreed to narrow the scope of his redactions to minimize concerns about the

potential that there were improper incentives that may have motivated the

settlement. As a practical matter, the disagreement here has been reduced to the

3
  A broad standard is consistent with the Fourth Amended Complaint. There, at paragraph 51,
the Plaintiff assails Defendant’s conduct not only with respect to the scent organ, but also with
“larger, commercial air scenting systems.” Aeosphere was focused on the use of the “scent
organ,” and it is likely that use of its property—tangible and intangible—would relate more
directly to the scent organ, but Aeosphere’s business aspirations cannot be confirmed so easily at
this stage.
Matthew v. Laudamiel, et al.
C.A. No. 5957-VCN
July 21, 2014
Page 4

amount of the settlement and the timing of its disclosure. If the Plaintiff prevails

after trial, this number—all agree—will become subject to discovery and use in

allocating liability.      Fläkt Woods, however, asserts that the entire Settlement

Agreement—including the settlement amount and the timing of its payment—is

now proper.         Conversely, Plaintiff argues that discovery of the agreement is

premature.

         When considering a discovery request to access such an agreement,

Delaware courts “balance the interests of the parties, in terms of both facilitating

the settlement of litigation, on the one hand, and allowing access to admissible

evidence or information that may lead to the discovery of admissible evidence, on

the other hand.”4 Matthew does not dispute the non-settling defendants’ right to

contribution in the form of a set off from the joint tortfeasors, the Settling

Defendants. However, he primarily relies on Bottaro v. Hatton Associates5 to

support his contention that the financial information which may be used to

calculate the amount of the set off should not be made until a final judgment has

4
    In re Pietlock, 2005 WL 2335460, at *1 (Del. Ch. Sept. 14, 2005).
5
    96 F.R.D. 158, 160 (E.D.N.Y. 1982).
Matthew v. Laudamiel, et al.
C.A. No. 5957-VCN
July 21, 2014
Page 5

been rendered.6 The Court is persuaded by those cases which did not follow

Bottaro’s reasoning, which was, in part, based upon Federal Rule of Evidence 408

and concerned admissibility rather than discoverability. The information requested

is relevant, and as another federal court reasoned after noting the liberality of

Federal Rule of Civil Procedure 26(b)(1), “[d]iscovery of the settlement documents

will allow the remaining defendants to assess their remaining liability.” 7 This

conclusion is appropriate here as well, and no policy counsels against the timely

release of such settlement information.8

       Moreover, this Court has elsewhere ruled that similar settlement information

should be released under Court of Chancery Rule 26(b), because it could “provide

a basis for reducing the damages against the [non-settling] Defendants . . . or . . .

6
  Id. at 160. It is relevant that a variety of cases at the federal level either rejected Bottaro’s
reasoning or found grounds upon which to distinguish it. See, e.g., Barclay v. Gressit, 2013 WL
3819937 (D. Me. July 24, 2013); Rates Tech. Inc. v. Cablevision Sys. Corp., 2006 WL 3050879
(E.D.N.Y. Oct. 20, 2006); In re CFS-Related Sec. Fraud Litig., 2003 WL 24136089 (N.D. Okla.
July 31, 2003); Johnson Matthey, Inc. v. Research Corp., 2003 WL 24136087 (S.D.N.Y.
June 16, 2003); White v. Kenneth Warren & Son, Ltd., 203 F.R.D. 364 (N.D. Ill. 2001); Bennett
v. La Pere, 112 F.R.D. 136 (D.R.I. 1986).
7
  White v. Kenneth Warren & Son, Ltd., 203 F.R.D. 364, 367 (N.D. Ill. 2001).
8
   The amount paid (or to be paid) by the Settling Defendants, of course, does not guide the
question of whether Fläkt Woods is liable.
Matthew v. Laudamiel, et al.
C.A. No. 5957-VCN
July 21, 2014
Page 6

the amount of any judgment entered against them.” 9 Although such reasoning did

not explicitly rely on 10 Del. C. § 6304, as Fläkt Woods does here, Beard

Research’s reasoning nonetheless supports a similar conclusion in this context. In

sum, the broad standard of Court of Chancery Rule 26(b) entitles Fläkt Woods to

an unredacted copy of the Settlement Agreement.10

                                           ***

       Accordingly, full responses shall be provided by Plaintiff within fourteen

calendar days to:

       1.     Request No. 45 to Defendant Fläkt Woods Group SA’s Third Request

for Production of Documents Directed to Plaintiff;

       2.     Interrogatory No. 23 and Interrogatory No. 27 to Defendant Fläkt

Woods Group SA’s Second Set of Interrogatories Directed to Plaintiff Stewart

Matthew; and

9
 Beard Research, Inc. v. Kates, 2008 WL 5330557, at *1 (Del. Ch. Dec. 15, 2008).
10
  The Plaintiff and the Settling Defendants negotiated that the settlement’s terms would be
maintained as confidential. The Settlement Agreement should be treated as such, in accordance
with the parties’ agreement.
Matthew v. Laudamiel, et al.
C.A. No. 5957-VCN
July 21, 2014
Page 7

       3.      Document Requests 3 and 4 to Second Set of Document Requests by

Defendants Christophe Laudamiel, Roberto Capua, Action 1 SRL, and DreamAir

LLC Directed to Plaintiff Stewart Matthew.11

       IT IS SO ORDERED.

                                             Very truly yours,

                                             /s/ John W. Noble

JWN/cap
cc: Stephanie S. Habelow, Esquire
     Mr. Christophe Laudamiel
     DreamAir LLC
     Register in Chancery-K

11
   Fläkt Woods pursued this discovery after the Settling Defendants resolved Plaintiff’s claims
against them. Def. Fläkt Woods Group SA’s Mot. to Compel Produc. of Docs. and Resps. to
Interrogs., Ex. J.
   Because of the novel issues and the not fully consistent authority governing the discovery
disputes, Plaintiff’s opposition to Fläkt Woods’ discovery efforts was substantially justified. See
Ct. Ch. R. 37(a)(4). Accordingly, no award of expenses is warranted.