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LVI Group Investments, LLC v. NCM Group Holdings, LLC

Court of Chancery of Delaware

December 4, 2017

LVI GROUP INVESTMENTS, LLC, Plaintiff,
v.
NCM GROUP HOLDINGS, LLC, SUBHAS KHARA, EVERGREEN PACIFIC PARTNERS, L.P., EVERGREEN PACIFIC PARTNERS GP, LLC, EVERGREEN PACIFIC PARTNERS II, L.P., EVERGREEN PACIFIC PARTNERS II GP, L.P., EVERGREEN PACIFIC PARTNERS II GP, LLC, EVERGREEN PACIFIC PARTNERS MANAGEMENT COMPANY, INC., TIMOTHY BRILLON, MICHAEL NIBARGER, and TIMOTHY BERNARDEZ, Defendants. NCM GROUP HOLDINGS, LLC., Counter-Plaintiff,
v.
LVI GROUP INVESTMENTS, LLC, SCOTT STATE, PAUL CUTRONE, and NORTHSTAR GROUP HOLDINGS, LLC, Counter-Defendants.

          Submitted: November 27, 2017

          John L. Reed, Esquire Ethan H. Townsend, Esquire DLA Piper LLP

          Rudolf Koch, Esquire Matthew W. Murphy, Esquire Matthew D. Perri, Esquire Richards, Layton & Finger, P.A.

          Bradley R. Aronstam, Esquire Nicholas D. Mozal, Esquire

          Richard D. Heins, Esquire Peter H. Kyle, Esquire

          John A. Sensing, Esquire Jaclyn Levy, Esquire Potter Anderson & Corroon LLP

          Peter B. Ladig, Esquire Meghan A. Adams, Esquire Morris James LLP

         Dear Counsel:

         This case involves dueling fraud claims between LVI Group Investments, LLC and NCM Group Holdings, LLC. In April 2014, LVI and NCM merged into NorthStar Group Holdings. The competing fraud claims involve alleged misrepresentations each party made to the other in connection with the merger.

         On August 29, 2016, about six months after this action began, I entered a protective order, agreed to and provided by the parties, governing the use of discovery material produced in this litigation. Paragraph nine of the protective order provided that such 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."[1] Discovery began, and NCM received documents purportedly showing that four individuals-Brian Simmons, Robert Hogan, John Leonard, and Gregory DiCarlo-participated in the fraud LVI allegedly perpetrated against NCM. Simmons and Hogan reside in Illinois; Leonard and DiCarlo work or reside in New York. NCM wanted to sue these four individuals, but it decided that bringing suit in Delaware would be too risky, because the supposed wrongdoers would (perhaps successfully) raise defenses based on personal jurisdiction and the applicable statute of limitations. NCM could avoid litigating those defenses if it sued the four individuals in the states they live or work in. But that option was foreclosed by the protective order, because NCM needed to use the materials it obtained in discovery in this case in order to adequately plead fraud against the four individuals[2] in courts outside of Delaware.. Such, at least, is what NCM represented to this Court in urging modification of the protective order. NCM now says that it has sued Leonard and DiCarlo in New York without relying on any of the information it obtained during discovery in this case.

         Faced with the dilemma described above-which NCM alleges continues with respect Simmons and Hogan-NCM moved to amend the protective order. On November 1, 2017, I issued a bench ruling denying NCM's motion. I also granted NorthStar's motion to enter an order governing the production of privileged material, which order contained a limitation on the use of privileged material that is substantively identical to that found in the protective order. NCM now seeks certification of an interlocutory appeal from those rulings. For the reasons that follow, I deny certification.

         Supreme Court Rule 42 establishes that "interlocutory appeal is an extraordinary remedy, which 'should be exceptional, not routine, because [such appeals] disrupt the normal procession of litigation, cause delay, and can threaten to exhaust scarce party and judicial resources.'"[3] This Court will not certify interlocutory appeal of a decision unless it "decides a substantial issue of material importance that merits appellate review before a final judgment."[4] In deciding whether to grant certification, "the trial court should identify whether and why the likely benefits of interlocutory review outweigh the probable costs, such that interlocutory review is in the interests of justice."[5] Moreover, "[i]f the balance is uncertain, the trial court should refuse to certify the interlocutory appeal."[6]

         Supreme Court Rule 42 establishes eight factors to be considered in conducting this balancing test.[7] NCM argues that two of those factors support certification. Specifically, it suggests that my bench ruling involves an issue of first impression in this state, and that interlocutory review may serve considerations of justice. In my view, neither factor supports certification.

         First, my bench ruling does not "involve[] a question of law resolved for the first time in this State."[8] Indeed, our Supreme Court held in Hallett v. Carnet Holding Corp. that "a trial court retains the jurisdiction and authority to enforce, modify, or terminate any confidentiality order it has entered."[9] While Hallett did not provide a standard for evaluating requests to modify confidentiality orders, it cited with approval Wolhar v. General Motors Corp., which set out a framework for analyzing such requests.[10] In Wolhar, the Court "balance[d] the . . . proposed modification of the protective order against GM's reliance upon the order to determine whether such a modification would prejudice substantial rights of GM."[11]NCM itself urged me to apply the balancing test established in Wolhar. That test is more favorable to modification (and thus to NCM) than the one advanced by LVI and NorthStar, which requires a showing of "extraordinary circumstances" or "compelling need."[12] This more stringent standard is set out in caselaw of the Second ...


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