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Charge Injection Technologies Inc. v. E.I. DuPont De Nemours & Co.

Superior Court of Delaware, New Castle

February 27, 2014

Charge Injection Technologies, Inc. Plaintiff,
v.
E.I. DuPont de Nemours and Company, Defendant.

Submitted: February 7, 2014

Upon Plaintiffs' Motion for Protective Order and for Dissolution of the Stay of Proceedings – DENIED IN PART, DEFERRED IN PART

Ryan P. Newell, Esquire, Connolly Gallagher LLP, Amir H. Alavi, Esquire, (pro hac vice) (argued), Ahmad, Zavitsanos, Anaipakos, Alvi, Mensing, Attorneys for Plaintiff.

Kathleen F. McDonough, Esquire (argued), John A. Sensing, Esquire, Michael B. Rush, Esquire, Potter, Anderson & Corroon LLP, Attorneys for Defendant.

OPINION

JAN R. JURDEN, JUDGE

I. INTRODUCTION

Before the Court is Plaintiff Charge Injection Technologies, Inc.'s ("CIT") Motion for Protective Order and for Dissolution of the Stay of Proceedings, stemming from circumstances rarely seen in Delaware courts.

In August 2013, Defendant E.I. du Pont de Nemours and Company ("DuPont") filed an emergency motion to stay all proceedings in this case to allow it to conduct discovery into a potential defense of champerty and maintenance. In that motion, DuPont alleged that CIT obtained financing from an outside source to fund the prosecution of this litigation. DuPont further alleged that there is a strong likelihood that this litigation-financing arrangement violates Delaware's prohibition against champerty and maintenance, which would render CIT's claims subject to dismissal.

CIT now asks for a protective order to prevent DuPont from taking any discovery on the champerty and maintenance defense and to lift the stay, claiming that "the entire legal premise of DuPont's stay request is false."[1] For the reasons set forth below, CIT's motion is DENIED IN PART, DEFERRED IN PART.

II. BACKGROUND

CIT instituted this suit against DuPont in December 2007. Between November 2010 and October 2011, there was little activity, apparently because of CIT's failure to pay prior counsel's bills.[2] On October 31, 2011, the Court granted CIT's original counsel's motion to withdraw.[3] On December 1, 2011, CIT's current lead counsel, Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing ("AZA") entered its appearance in the case.[4] At some point in 2012, CIT obtained litigation financing from Aloe Investments Limited ("Aloe").[5]

In July and August 2013, DuPont uncovered certain facts, including CIT's relationship with Aloe, that caused DuPont to believe that CIT had engaged in champerty and maintenance in violation of Delaware law. Consequently, on August 12, 2013, DuPont filed its Emergency Motion to Stay Pending Resolution of Issues Relating to Champerty and/or Maintenance (the "Stay Motion"), [6]requesting a stay of this litigation until the champerty and maintenance issues were resolved. CIT agreed that a stay was warranted, [7] but sought to carve out a stay exclusion for its then-pending motion to compel. On August 15, 2013, the Court heard argument on CIT's motion to compel and DuPont's Stay Motion. The Court characterized the issues relating to champerty and maintenance as raising "serious allegations" and potentially involving a "game-ending motion."[8] The next day, the Court advised the parties that the case would be stayed for 90 days.

Prior to filing its Stay Motion, DuPont had served CIT with discovery requests on the champerty and maintenance issue. CIT's interrogatory responses identified Aloe as an investor, and stated that CIT had no relationship to Aloe prior to January 1, 2007.[9] CIT refused to produce any documents in response to DuPont's document requests, including the litigation-financing agreement between CIT and Aloe (the "Financing Agreement" or "Litigation-Financing Agreement"), claiming such documents are "protected as attorney work product and/or subject to attorney/client privilege, " "the requests are overly broad and unduly burdensome, " and "the requests are irrelevant because the champerty and maintenance defenses are meritless."

Although CIT is withholding documents on privilege grounds, it has refused to produce a privilege log as required by Delaware law.[10]During the parties' meet-and-confer process, CIT disclosed to DuPont that it did not assign any part of its claims to Aloe, and that it retains full control over litigation strategy and settlement.[11] CIT claims that the purpose of this disclosure was to "put the Court's, and DuPont's, mind at ease that nothing remotely improper has occurred."[12] CIT's disclosures, however, did not put DuPont's mind at ease, but rather, heightened DuPont's concern that CIT might be engaging in champerty and maintenance. Frustrated by CIT's refusal to produce any documents and/or a privilege log, DuPont filed a ...


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