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	The Short Form - March 12, 2018

The Chancery Daily has recently reported a number of rulings in matters before the Court of Chancery involving co-pending criminal investigations or criminal or regulatory proceedings involving the same subject matter. Several of those rulings addressed motions to stay; however, as noted in our February 8, 2018 edition, a ruling in A. Schulman, Inc., et al. v. Citadel Plastics Holdings, LLC, et al., C.A. No. 12459-VCL, order 1 of 2 (Del. Ch. Feb. 7, 2018), addressed a civil litigant's obligation to produce documents related to the subject matter of the litigation that the litigant has separately provided to government officials. Today's edition discusses In re Insys Therapeutics Inc. Derivative Litigation, C.A. No. 12696-VCMR (consol.), tr. ruling (Del. Ch. Feb. 8, 2018; filed Mar. 2, 2018), which also addresses a civil litigant's obligation to produce documents that it has provided to the government. Specifically, the Court requires the production of documents provided to the government, but indicates that its ruling is based on the facts presented, which include evidence of spoliation, including the absence of certain documents from books and records previously obtained through inspection under 8 Del. C. § 220, and the "extreme" nature of the conduct giving rise to plaintiffs' claims -- off-label marketing of an extremely powerful opioid pain medication. Perhaps most importantly, the Court emphasizes that it's ruling is one that it wouldn't want "cited back" as authority for a general outcome in other matters -- a disclaimer that TCD highlights so as not to oversell anything. While the disclaimer may render the Insys ruling less useful, we compile a few relevant authorities -- in addition to the Citadel order mentioned above -- that touch upon the issue.

The Court in In re Duke Energy Corp. Derivative Litigation, C.A. No. 7705-CS (consol.), transcript (Del. Ch. Dec. 11, 2013; filed Dec. 30, 2013), stayed derivative claims, but ordered that all written discovery provided to the defendants in a co-pending federal action be provided to plaintiffs.

The Court in Walter E. Ryan, Jr. v. John F. Gifford, et al. and Maxim Integrated Products, Inc., C.A. No. 2213, letter op. (Del. Ch. Nov. 30, 2007), ordered production of materials that an issuer had provided to the SEC as part of an investigation.

The Court in Noel Saito v. McKesson HBOC, Inc., C.A. No. *18533-CC, opinion (Del. Ch. Oct. 25, 2002; rev. Nov. 13, 2002), held that when a civil litigant communicates with a law enforcement agency about the subject matter of the litigation and provides information that has not been produced in the litigation, that information is discoverable unless a recognized privilege applies.

The Court in WT Equipment Partners, LP v. Karl M. Parrish, et al., C.A. No. *15616-VCJ, letter op. (Del. Ch. Sept. 7, 1999), held that when a civil litigant communicates with a law enforcement agency about the subject matter of the litigation and provides information that has been produced in the litigation, the litigant generally has no obligation to disclose the communication to its adversaries or to re-produce the same material to reveal what has been provided to the government.

Forum Non Conveniens Dismissal Affirmed

Peter R. Hall v. Maritek Corp., et al., No. 379, 2017, order (Del. Mar. 12, 2018)

The Supreme Court affirms the Superior Court's dismissal for forum non conveniens but finds the Trial Court erred by stating that defendants, who were officers and directors of a Delaware Corporation connected to the case, had no Delaware connections.
AFFIRMED: Superior Court judgment

Forum Non Conveniens; Delaware Connection; Corporate Officer; Corporate Director

Derivative Plaintiffs to Receive Discovery Provided to the Government

In re Insys Therapeutics Inc. Derivative Litigation, C.A. No. 12696-VCMR (consol.), tr. ruling (Del. Ch. Feb. 8, 2018; filed Mar. 2, 2018)

The Court clarified that defendants' paper discovery provided to the government in related criminal matters should be produced to plaintiffs in a stayed derivative action, citing spoliation concerns and the extreme nature of the underlying allegations.
GRANTED IN PART AND DENIED IN PART: Motion to clarify judgment
Stockholder plaintiffs brought derivative claims against nominal defendant's directors, arising out of potential damage to the company from off-label drug marketing, while a related securities class action and criminal investigation were already underway. The Court previously granted defendants' motion to stay, ordering defendants to provide plaintiffs with all discovery produced in the securities action. Plaintiffs moved for clarification that the prior ruling was not intended to be limited to discovery defendants produced in the securities action. The Court, in an oral ruling which it emphasized was limited to the facts -- involving absence of documents produced in a prior 8 Del. C. § 220 demand and evidence of possible spoliation -- and not intended to be cited as authority in other cases, clarified its intent that plaintiffs receive defendants' "paper discovery," provided to the government and third parties, not limited to the securities action.

This transcript is available for purchase from the Chancery Court Reporters. To order, call (302) 255-0524.

Ct. Ch. R. 26; Stay Proceedings; Written Discovery; Criminal Proceedings; Spoliation; 8 Del. C. § 220

Summary Judgment Deferred Pending Hearing on Foreign Law

Rafael Mora Funes v. Andrew Batkin, et al. and IBT Internet Business Technologies Corp., C.A. No. 2017-0687-JRS, transcript (Del. Ch. Jan. 17, 2018; filed Feb. 14, 2018)

The Court, in an action to determine membership of a corporate board, deferred ruling on plaintiff's motion for summary judgment pending the outcome of a Ct. Ch. R. 44.1 hearing on a contested issue of foreign law.
DEFERRED: Ruling on plaintiff's motion for summary judgment
Plaintiff, a purported stockholder and director of nominal defendant company, brought suit under 8 Del. C. § 225 to establish that he and a non-party Portuguese entity are nominal defendant's sole stockholders, that he and others are validly elected directors, and that defendants are not directors. Defendants contend that plaintiff is not a stockholder and that the Portuguese entity transferred its shares to another entity and could therefore not have executed the consents. Plaintiff argues that the transfer was cancelled by an administrator appointed in the Portuguese entity's insolvency proceedings, and moved for summary judgment, asking the Court to apply Portuguese law to determine that the purported stock transfer was validly cancelled and that the challenged written consents were valid. In this oral ruling, the Court defers judgment pending a Ct. Ch. R. 44.1 hearing on the application of Portuguese law.

This transcript is available for purchase from the Chancery Court Reporters. To order, call (302) 735-2113.

Standing; 8 Del. C. § 225; Insurgent Director; Proper Plaintiff; Summary Judgment; Foreign Law; Ct. Ch. R. 44.1; Question of Law; Court-Appointed Expert; Material Fact; Remote Testimony

COMPLAINTS

Stewart N. Goldstein v. Bioverativ, Inc., C.A. No. 2018-0156, compl. (Del. Ch. Mar. 8, 2018)

Nature of Action: Demand for books and records
Plaintiff's Counsel: COOCH AND TAYLOR; ROBBINS GELLER RUDMAN & DOWD; JOHNSON FISTEL
Entity Defendant(s): Bioverativ, Inc.

Lexington Services, Ltd. v. US Patent No. 8019807, LLC, et al., C.A. No. 2018-0157, compl. (Del. Ch. Mar. 8, 2018)

Nature of Action: Declaratory judgment concerning patent ownership
Plaintiff's Counsel: WHITE & WILLIAMS ; McINNES & McLANE
Individual Defendant(s): Florian Karrer
Entity Defendant(s): US Patent No. 80198807 Delegate, LLC

Merlin Partners, LP v. Rice Energy, Inc., C.A. No. 2018-0158, compl. (Del. Ch. Mar. 8, 2018)

Nature of Action: Demand for appraisal
Plaintiff's Counsel: PRICKETT JONES & ELLIOTT
Entity Defendant(s): Rice Energy, Inc.