Delaware Chancery Clarifies Discovery Obligations of Domestic Affiliate of Foreign Company
The Delaware Court of Chancery recently held that, for purposes of responding to a non-party subpoena, documents held by the foreign affiliate of a US corporation were not within the US corporation’s “possession, custody, or control” and therefore were not required to be produced.
Theravectys SA had a contract with Henogen SA, a Belgium-based manufacturer of biomolecules. Theravectys sued Immune Design Corporation on the theory that Immune Design Corporation induced Henogen to breach its contract with Theravectys and/or that Immune Design Corporation misused Theravectys’s confidential and proprietary information. Theravectys then served non-party Novasep Inc., a Pennsylvania-based corporate affiliate of Henogen, with various discovery requests.
Novasep claimed that it only markets Henogen to American clients and generally ceases interaction with the client once a manufacturing agreement is signed; as such, relevant documents (concerning Henogen’s manufacture and shipment of products to Immune Design Corporation) were only located in Henogen’s files. The court agreed that documents held by Henogen, a foreign affiliate, were not in the “possession, custody or control” of Novasep. Absent facts warranting veil piercing or application of the alter ego doctrine, US entities are not required to produce documents held by foreign affiliates.
The court did find that Novasep must produce documents in its own files concerning its corporate structure so that Theravectys could supplement its efforts to demonstrate Novasep’s control over Henogen sufficient to obtain the Immune Design Corporation-manufacturing and -shipping documents located in Henogen’s files. Although Novasep’s corporate structure was not itself relevant, the corporate structure documents were “reasonably calculated” to lead to the discovery of admissible evidence.
Theravectys SA v. Immune Design Corp., C.A. No. 9950-VCN (Del. Ch. Oct. 31, 2014).