In re Activision Blizzard, Inc. Stockholder Litig. Consolidated C.A., No. 8885-VCL, 2014 BL 47162 (Del. Ch. Feb 21, 2014) [click for opinion]
Activision purchased a subsidiary of Vivendi, Activision’s former majority owner. In addition, Activision and a company controlled by Activision’s two most senior executives acquired a majority interest in Activision. Plaintiff Anthony Pacchia alleged that the restructuring generated a gain of more than $725 million on the first trading day after closing and that Defendants, including Vivendi and several Activision directors who were also Vivendi officers, breached their fiduciary duty by failing to pursue a course of action that would have generated greater value for the company and its stockholders.
Plaintiff moved to compel the production of documents located in France and in the custody of Vivendi and the individual defendants. Vivendi objected on the grounds that French laws barred the production and claimed it could face criminal liability in France if forced to produce the documents. Vivendi cited a French “Blocking Statute” that purports to make it illegal—with imprisonment and heavy fines as possible punishments—to transmit in any manner “documents or information of an economic, commercial, industrial, financial or technical nature for the purpose of establishing evidence in view of foreign judicial … proceedings.”
Because the Blocking Statute does not apply to efforts to collect evidence in France under international agreements, Vivendi conceded that the requested documents could be produced outside of France if production complied with the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, which establishes procedures for common-law courts to request documents from foreign jurisdictions in connection with discovery. However, Vivendi argued that any production of documents would also need to comply with another French law on Information Technology, Data Files and Civil Liberties (“Data Protection Act”).
The Chancery Court first analyzed the question whether the court has the power to require a foreign litigant—even one potentially constrained by the law of its home jurisdiction—to respond to discovery requests. The Court of Chancery followed closely the Supreme Court’s holding in Societe Nationale Industrielle Aerospatiale that “an American court has the power to require a party to respond to discovery conducted in accordance with the Rules of Civil Procedure, although the court must make a discretionary determination about whether to do so on the facts of the case.”
With respect to the Hague Evidence Convention, the court looked to U.S. Supreme Court precedents which had held that the Convention “does not modify the law of any contracting state” and is instead “a permissive supplement, not a pre-emptive replacement, for other means of obtaining evidence located abroad.”
With respect to the Blocking Statute, the court noted that the French Blocking Statute does “not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate [the French] statute.”
The court noted that a “trial court nevertheless should exercise discretion in light of principles of comity.” In exercising this discretion, the court reviewed factors set forth in earlier Supreme Court decisions, and concluded that the “importance of the documents requested,” “specificity of the request,” lack of “alternative means of securing the information,” and other considerations favored production.
Although the court noted France’s strong preference for its own methods of litigation, as the Blocking Statute reflects, it held that such a preference was offset by Delaware’s powerful interest in providing a forum for redress to its corporate shareholders.
With respect to the French Data Protection Act, the court reasoned that “steps could readily be taken to accommodate the French interest reflected” therein, and that compliance with that Act “appears to require only minor modifications” to the normal discovery process of the court.
The court thus granted Plaintiff’s motion to compel production, but with certain qualifications. The court instructed Vivendi to “make a good faith effort to secure permission from French authorities to make available the information sought by the plaintiff,” although it stated that if production were not authorized by a certain date, Vivendi would still have to “produce on that date the documents called for by plaintiff’s discovery requests or face the prospect of sanctions” in the Court of Chancery. The court also instructed the parties to enter a confidentiality stipulation containing restrictions intended to mirror the requirements of the Data Protection Act.