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Matthew v. Laudamiel

Court of Chancery of Delaware

July 21, 2014

Laudamiel, et al.

Submitted: July 7, 2014

Dear Counsel:

Two discovery disputes between Plaintiff Stewart Matthew and Defendant Fläkt Woods Group, SA ("Fläkt Woods") require resolution.[1] The first involves the scope of discovery into Plaintiff's scenting activities following dissolution of Aeosphere. The second raises the question of whether a non-settling defendant may inspect an unredacted settlement (the "Settlement Agreement") reached by Plaintiff and Defendants Roberto Capua and Action 1 SRL (the "Settling Defendants).

1. Fläkt Woods has inquired about Plaintiff's post-dissolution scenting activities for two reasons: mitigation and, perhaps, its unclean hands defense to Plaintiff's equitable claims. Plaintiff seeks to limit the scope of the inquiry to his actions or plans involving the so-called "scent organ" used by Aeosphere. Fläkt Woods, on the other hand, proposes a broader scope—one that is generally consistent with Plaintiff's discovery into its post-dissolution activities—addressing plans and actions generally involving scenting, not limited to specific hardware.[2]As Fläkt Woods moves from the scope suggested by Plaintiff to the scope that it now sponsors, the likelihood of useful information does decline. That reduction, however, does not justify precluding discovery. The general standard of Court of Chancery Rule 26(b)(1) ("any matter not privileged, which is relevant to the subject matter of the pending action") is, of course, liberal and does not in this instance justify limiting Fläkt Woods' efforts.[3]

Limiting Fläkt Woods' discovery along the lines advocated by Plaintiff would, unfortunately and inevitably, leave for him to decide which of his activities—if any—depended upon Aeosphere's proprietary information. Fläkt Woods is entitled to know what those actions may have been; that will enable it to conclude, through its perspective, whether Plaintiff's conduct was informed by (or dependent upon) the proprietary knowledge of Aeosphere.

2. Plaintiff settled with the Settling Defendants. Fläkt Woods wants a copy of the joint tortfeasor Settlement Agreement, intended to have been adopted under 10 Del. C. ch. 63. A redacted version was provided, and the Plaintiff has agreed to narrow the scope of his redactions to minimize concerns about the potential that there were improper incentives that may have motivated the settlement. As a practical matter, the disagreement here has been reduced to the amount of the settlement and the timing of its disclosure. If the Plaintiff prevails after trial, this number—all agree—will become subject to discovery and use in allocating liability. Fläkt Woods, however, asserts that the entire Settlement Agreement—including the settlement amount and the timing of its payment—is now proper. Conversely, Plaintiff argues that discovery of the agreement is premature.

When considering a discovery request to access such an agreement, Delaware courts "balance the interests of the parties, in terms of both facilitating the settlement of litigation, on the one hand, and allowing access to admissible evidence or information that may lead to the discovery of admissible evidence, on the other hand."[4] Matthew does not dispute the non-settling defendants' right to contribution in the form of a set off from the joint tortfeasors, the Settling Defendants. However, he primarily relies on Bottaro v. Hatton Associates[5] to support his contention that the financial information which may be used to calculate the amount of the set off should not be made until a final judgment has been rendered.[6] The Court is persuaded by those cases which did not follow Bottaro's reasoning, which was, in part, based upon Federal Rule of Evidence 408 and concerned admissibility rather than discoverability. The information requested is relevant, and as another federal court reasoned after noting the liberality of Federal Rule of Civil Procedure 26(b)(1), "[d]iscovery of the settlement documents will allow the remaining defendants to assess their remaining liability."[7] This conclusion is appropriate here as well, and no policy counsels against the timely release of such settlement information.[8]

Moreover, this Court has elsewhere ruled that similar settlement information should be released under Court of Chancery Rule 26(b), because it could "provide a basis for reducing the damages against the [non-settling] Defendants . . . or . . . the amount of any judgment entered against them."[9] Although such reasoning did not explicitly rely on 10 Del. C. § 6304, as Fläkt Woods does here, Beard Research's reasoning nonetheless supports a similar conclusion in this context. In sum, the broad standard of Court of Chancery Rule 26(b) entitles Fläkt Woods to an unredacted copy of the Settlement Agreement.[10]

Accordingly, full responses shall be provided by Plaintiff within fourteen calendar days to:

1. Request No. 45 to Defendant Fläkt Woods Group SA's Third Request for Production of Documents Directed to Plaintiff;
2. Interrogatory No. 23 and Interrogatory No. 27 to Defendant Fläkt Woods Group SA's Second Set of Interrogatories Directed to Plaintiff Stewart Matthew; and
3. Document Requests 3 and 4 to Second Set of Document Requests by Defendants Christophe Laudamiel, Roberto Capua, Action 1 SRL, and DreamAir LLC Directed to Plaintiff Stewart Matthew.[11]


Very truly ...

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