Theravectys SA v. Immune Design Corp., C.A. No. 9950-VCN (Del. Ch. Oct. 31, 2014). This Court of Chancery opinion is useful for those engaged in Delaware corporate litigation to the extent that it clarifies when a subpoena served on a subsidiary can be used to obtain documents from the corporate parent of that subsidiary.
This letter decision involves a non-party that moved for a protective order under Court of Chancery Rule 26(c). The motion arises in the context of litigation against Immune Design Corp. (“IDC”) based on claims by Theravectys SA (“TVS”) that non-party Henogen manufactured products for IDC in violation of a contract between Henogen and TVS. In order to obtain discovery to establish its case, TVS served a subpoena on Novasep US, a corporate affiliate of Henogen. Novasep US and Henogen, neither of which is a party to this litigation, share a corporate parent headquartered in France. Novasep US is based in Pennsylvania.
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 whom the request is served.”
In this context, control 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.” See footnotes 4 and 5. In these instances, separate corporate identities are generally respected except in rare circumstances justifying the application of the alter ego doctrine to pierce the corporate veil of a subsidiary. The courts in Delaware decline to broaden the scope of control to include an inquiry into the practical ability of the subpoenaed to a party to obtain the documents.
The court did not address the arguments that the attempt to obtain these documents violated the applicable law in the foreign countries where the parent corporation and an affiliate were based.
The court found that Novasep US was not required to produce documents that were not in its possession, custody or control. The court allowed TVS discovery to allow it to attempt to demonstrate that the corporate structure of Novasep US and its relationships with its affiliates would allow it to determine whether the requested documents were within its control.