LVI Group Investments, LLC v. NCM Group Holdings LLC
CA 12067-VCG
| Del. Ch. | Dec 4, 2017Background
- LVI and NCM merged into NorthStar Group Holdings in April 2014; each later filed fraud claims against the other arising from that transaction.
- The parties jointly entered a protective order (Aug. 29, 2016) providing that discovery material “shall be used solely for purposes of this litigation and shall not be used for any other purpose, including . . . any other litigation or proceedings.”
- NCM obtained discovery suggesting four non-parties (Simmons, Hogan, Leonard, DiCarlo) participated in LVI’s alleged fraud and wanted to sue them in their home states to avoid Delaware personal-jurisdiction and limitations defenses.
- NCM moved to modify the protective order to allow use of discovery in other litigation; the Court denied that motion in a November 1, 2017 bench ruling and also entered a similar limitation in a privileged-material order.
- NCM sought certification of an interlocutory appeal under Delaware Supreme Court Rule 42; the Vice Chancellor denied certification (Dec. 4, 2017), concluding the ruling did not present a novel Delaware legal question nor otherwise warrant interlocutory review.
Issues
| Issue | NCM's Argument | LVI/NorthStar's Argument | Held |
|---|---|---|---|
| Whether to certify interlocutory appeal under Sup. Ct. R. 42 | Certification warranted because denial of modification will effectively prevent timely suits (limitations risk) and raises important law | Deny certification: no substantial issue of material importance; Rule 42 factors not met | Denied — interlocutory appeal not certified |
| Whether the bench ruling presented a question of first impression in Delaware | The modification question implicates standards for permitting use of discovery in other litigation and is novel | Existing Delaware precedent (Hallett) and Wolhar framework control; not novel | Not first impression; Hallett and Wolhar apply |
| Proper standard to evaluate modification of a protective order | NCM urged a standard akin to Second Circuit (extraordinary circumstances/compelling need) | Court applies Wolhar balancing test used in Delaware (balance proposed modification against reliance/prejudice) | Wolhar balancing governs; Second Circuit standard not adopted |
| Whether the court misapplied Wolhar by failing to consider prejudice to producing parties | NCM said court ignored need to show substantial prejudice to oppose modification | Court credited LVI/NorthStar’s reliance and potential prejudice from having to litigate outside Delaware; Wolhar’s prejudice inquiry considered | Court did not misapply Wolhar — reliance/prejudice weighed against modification |
Key Cases Cited
- Hallett v. Carnet Holding Corp., 809 A.2d 1159 (Del. 2002) (trial court retains jurisdiction to enforce, modify, or terminate confidentiality orders)
- Wolhar v. General Motors Corp., 712 A.2d 464 (Del. Super. Ct. 1997) (articulated balancing test weighing proposed modification against producing party’s reliance and prejudice)