United States District Court, D. Delaware
filed a Motion for Issuance of a Letter of Request to obtain
evidence in the United Kingdom of Great Britain and Northern
Ireland. (D.I. 91). Plaintiff opposes this motion. (D.I. 97).
Factual and Procedural History
August 6, 2013, Plaintiff Compagnie des Grands Hotels
d'Afrique S.A. ("CGHA") commenced an
arbitration proceeding (the "Arbitration") through
the International Chamber of Commerce ("ICC")
against Woodman Maroc S.a.r.l. ("Woodman") and
Travelodge Hotels Ltd. ("Travelodge"). (D.I. 82-1
at 4; D.I. 91 at 2). Woodman is a former subsidiary of
Defendant Starwood Capital Group Global I LLC
("SCG") and Defendant Starman Hotel Holdings LLC
("Starman"). (D.I. 82-1). Travelodge Hotels Ltd. is
the Guarantor of the management agreement. (D.I. 91 at 2).
CGHA voluntarily dismissed Travelodge from the Arbitration,
proceeding solely against Woodman. (Id.). The basis
of this Arbitration was that, after Woodman was obtained by
the Meridian Group ("Meridian") in 2005, Woodman
failed to properly invest in CGHA's hotel, the Royal
Mansour Hotel (the "Hotel"). (Id.). By
2005, Travelodge had obtained the Guarantor and assumed its
place in the relevant agreement. (D.I. 91 at 2). Woodman was
contracted with for the purpose of managing the Hotel.
(Id.). Ten months after CGHA commenced the
Arbitration, Starman sold Woodman's parent company and
Woodman to a United Kingdom entity, Maquay Investments Ltd.
("Maquay"). (Id. at 4). Maquay then placed
Woodman's parent into insolvency proceedings.
(Id.). Woodman formally withdrew from the
Arbitration, citing insolvency and inability to pay any
judgment or award. (Id.). CGHA requested and
received an interim order from the Arbitrators directing
Woodman (1) to return possession and operation of the Hotel
to CGHA, (2) to account for payments it had made after
ceasing to pay the minimum fee of the Arbitration award, and
(3) to cease making payments to third parties. (Id.
at 4-5). CGHA was awarded approximately $60 million in
damages from Woodman in the Arbitration. (Id. at 5).
The Arbitrators also found that Starman had acted in the
place of Woodman under the management agreement, that CGHA
was led to believe that it could rely on Starman assuming all
of Woodman's responsibilities under the agreement, and
that Maquay had been formed solely to receive the shares of
Woodman's parent and place it into voluntary liquidation.
(Id.). This judgment was recognized in a court
tribunal in Morocco on December 14, 2016. (Id.).
Arbitration was decided against Woodman and, because of the
insolvency proceedings, Woodman is now unable or unwilling to
pay the award. (Id.). CGHA brought the present
action against Starman in order to collect the award from it,
rather than Woodman. (D.I. 83 at 3). CGHA initially claimed
that Starman could be held liable for Woodman's actions
based either on agency theory or alter ego theory.
(Id.). This Court dismissed the agency cause of
action on January 9, 2019, but allowed CGHA to proceed with
the alter ego claim. (Id. at 2).
Starman filed a motion for a letter of request seeking
information from Travelodge in the United Kingdom. (D.I. 91
at 4). Plaintiff CGHA opposes the issuance of this letter
because the information sought is either irrelevant or could
be obtained more easily from Plaintiff. (D.I. 97 at 2). As
this evidence is sought in the United Kingdom, a letter of
request must be issued in accordance with the Hague
Convention on the Taking of Evidence Abroad in Civil or
Commercial Matters ("Hague Convention"). (D.I. 91
at 1). Both the United States and the United Kingdom are
signatories to the Hague Convention. (Id.). This
order addresses whether to issue this letter of request.
Standard for the Issuance of Letters of Request
the United States and the United Kingdom are signatories of
the Hague Convention, there is a mutual commitment between
the nations to provide evidence for use in the other's
legal proceedings. (Id.). Courts "routinely
issue such letters where the movant makes a reasonable
showing that the evidence sought may be material or may lead
to the discovery of material evidence." Netherby
Ltd. v. Jones Apparel Grp., Inc., 2005 WL 1214345, at *1
(S.D.N.Y. May 18, 2005); see Tulip Computers Intern. B.
V. v. Dell Computer Corp., 254 F.Supp.2d 469, 474 (D.
Del. 2003). The "burden is not great" for a party
seeking a letter of request because "the Convention
procedures are available whenever they will facilitate the
gathering of evidence by the means authorized in the [Hague]
Convention." Tulip Computers Intern. B. V, 254
F.Supp.2d at 474. However, "[w]here the relevancy or
materiality of the [discovery] sought is doubtful, the court
should not grant the application for letters of
request." Merck Sharp & Dohme Corp. v. Sandoz,
Inc., 2013 WL 12203112, at *3 (D.N.J. June 7, 2013)
(quoting United States v. Rosen, 240 F.R.D. 204, 215
(E.D. Va. 2007)). Only "[f]acts germane to any claim or
defense in the pleadings are properly the subject of
discovery." In re Intel Corp. Microprocessor
Antitrust Litig., 2007 WL 137152, at *7 (D. Del. Jan.
Evidence Sought to Prove Alter Ego Theory
order to prove alter ego liability, a plaintiff "must
show (1) that the corporation and its shareholders operated
as a single economic entity, and (2) that an overall element
of injustice or unfairness is present." Trevino v.
Merscorp, Inc., 583 F.Supp.2d 521, 528 (D. Del. 2008).
Undercapitalization of the subsidiary can prove the first
element required of alter ego liability. Radaszewski ex
rel. Radaszewski v. Telecom Corp., 981 F.2d 305, 310
(8th Cir. 1992). "If the subsidiary is financially
responsible, whether by means of insurance or
otherwise," then it is not undercapitalized.
Id. at 309. The second element requires plaintiffs
to prove that defendants' "use of the corporate form
would, if left unchecked, work as a fraud or something in the
nature of a fraud." Mobil Oil Corp. v. Linear Films,
Inc., 718 F.Supp. 260, 267 (D. Del. 1989). The evidence
sought with the letters of request must relate to at least
one of the two elements of alter ego liability.
parties disagree as to whether to issue a letter of request
to obtain evidence from Travelodge in the United Kingdom.
(D.I. 91 at 4; D.I. 97 at 4). Defendant Starman filed a
motion for a letter of request seeking (1) communications
between Travelodge and CGFIA and its owners and
representatives, (2) communications relating to the
negotiation of the management agreement to which Travelodge
is a party, (3) documents about the arbitration from which
CGHA voluntarily dismissed Travelodge, (4) communications
relating to the Hotel, and (5) communications about claims
made by CGHA in Travelodge's insolvency proceedings.
(D.I. 91 at 4).
argues that this letter of request should be issued because
the documents sought "[were] designed to protect against
undercapitalization [and] are plainly relevant to determining
whether CGHA could meet its burden of proof of [the first
element of] its alter ego claim." (D.I. 91 at 4).
Starman also argues that Fed.R.Civ.P. 26(b)(1) dictates that
"information within this scope of discovery need not be
admissible in evidence to be discoverable." (D.I. 99 at
2). Further, Starman argues that information from Travelodge
could disprove the necessary elements of fraud and injustice.
(Id. at 3). Starman also argues that CGHA, by making
the equitable claim of alter ego liability, has opened itself
up to equitable defenses, such as laches, waiver,
acquiescence, ratification, and unclean hands.
(Id.). Finally, Starman argues that CGHA conceded
that the documents sought are relevant in its response, while
also claiming that the request is overbroad and irrelevant.
(Id. at 4).
opposes the motion for issuance of a letter of request based
primarily on the evidence sought being (1) irrelevant to the
alter ego theory, (2) more easily obtained from CGHA, or (3)
a collateral attack on the Arbitration award. (D.I. 97 at
1-2). CGHA argues that the request for Travelodge's
communications make no sense in the context of an action to
enforce the Arbitration award against Starman on an alter ego
theory of liability. (Id. at 5). CGHA says that the
documents are irrelevant to whether Starman and Woodman
operated as a single economic entity or whether Starman
perpetrated an injustice or unfairness against CGHA.
(Id. at 7). CGHA alleges that Starman's requests
to Travelodge seek to shift the spotlight away from
Starman's actions and towards the financial
responsibility, actions, and interactions of Travelodge,
Trusthouse, and Starman. (Id. at 6). CGHA finally
alleges that this request, even if arguably relevant to