This article originally appeared in sibling publication The Legal Intelligencer.
A plaintiff who alleged that a rival corporation lured away some of its employees in violation of their employment agreements is entitled to learn the details of the rival’s contact with those employees through a direct examination, the Delaware Court of Chancery has ruled. The court said it tailored the plaintiff’s request to prevent undue prejudice or oppression to the employees at the center of the litigation. Vice Chancellor Sam Glasscock III issued the letter opinion on October 12 in NuVasive v. Lanx.
NuVasive is represented by John Reed, Scott Czerwonka, Noah Katsell, and John Fitzsimmons of DLA Piper. Lanx is represented by Jon Abramczyk, Kevin Coen and Adam Kress of Morris, Nichols, Arsht & Tunnell, and by William Leone, Matthew Spohn and Tricia Wisenbaker Macaluso of Fulbright & Jaworski.
NuVasive, a San Diego medical instrument manufacturer, is alleging in a lawsuit that its rival, Lanx, of Broomfield, Colorado, lured away several employees and a consultant. In doing so, the plaintiff asserts, Lanx induced the workers to violate their employment agreements and misappropriate NuVasive’s trade secrets and other proprietary information. NuVasive also alleges that Lanx aided and abetted its former employees in the breach of fiduciary duties. The plaintiff is seeking monetary damages and an injunction preventing its former employees from engaging in acts that would violate their employment agreements.
However, NuVasive only named Lanx as a defendant in the litigation and did not file a lawsuit against the ex-employees. Lanx filed a motion for dismissal claiming that the former NuVasive employees are necessary and indispensable parties to the litigation because the plaintiff’s claims are predicated upon their actions. The defendant sought dismissal under Court of Chancery Rule 19(a)(2), which allows a lawsuit to be dismissed because of the failure to join an indispensable party. In July, Glasscock rejected Lanx’s claims, holding that while the ex-employees were necessary parties to the litigation because NuVasive’s claims arise from their actions, they are not indispensable because the court can craft remedies to prevent the employees from being prejudiced.
Shortly after Glasscock’s decision, the plaintiff filed a motion to compel, asking Lanx to reveal the identities of all NuVasive employees, both past and current, with whom Lanx has discussed possible employment over the past year. NuVasive also sought all documents exchanged with those employees regarding possible positions at Lanx.
Lanx objected to the discovery, arguing that only relevant material can be compelled and that the plaintiff’s real purpose is to identify employees who have spoken with the defendant and convince them to stay with NuVasive. The defendant also argues that NuVasive is attempting to prejudice Lanx against hiring NuVasive employees and attempting to oppress the rights of possible future employees. In response to NuVasive’s motion, Lanx offered to produce the sought documents with the names and identifying characteristics of the employees redacted and then provide a witness to testify about Lanx’s interaction with the unidentified employees.
However, Glasscock declined Lanx’s offer, saying that “a protective order of the kind suggested is unnecessary, and the proposed substitute discovery insufficient.” Instead, the vice chancellor used his authority under Chancery Court Rule 26(c) to fashion a remedy, which he said would prevent prejudice or oppression to individuals who left or may leave NuVasive. Glasscock ordered NuVasive to conduct its discovery through a direct examination of the individuals involved in the luring of its employees.
“As a result, NuVasive is entitled to discovery of the details of Lanx’s contacts with its employees and entitled to test that information through a direct examination of the individuals involved,” Glasscock wrote. “Since NuVasive has an interest in retaining its employees, and since the employees at issue are those who have elected to stay with NuVasive, the employees themselves are unlikely to suffer from this disclosure.”
“To the extent that Lanx is concerned that NuVasive employees’ ardor to join Lanx will be chilled, and that Lanx will be less successful in hiring NuVasive employees during this litigation’s pendency, I note that this matter is moving briskly, trial is scheduled for the spring and any prejudice speculated by Lanx is outweighed by NuVasive’s interests in a complete record at trial.”
Lanx expressed concern regarding Glasscock’s remedy, arguing that the depositions and requested documents could result in the disclosure of confidential information. However, the vice chancellor offered to work with the defendant in order to prevent any information being unfairly disclosed. “To the extent that Lanx believes that the current stipulated confidentiality order is insufficient, the parties should discuss the amendment, and I am available to resolve any issues in that regard,” he said.