Delaware Business Litigation Report

District Court Rules That Spanish Subsidiary of Delaware Parent Corporation is an Indispensible Party to Allegations under DUTSA

Ethypharm S.A. France v. Bentley Pharmaceuticals, Inc., 388 F. Supp. 2d 426 (D.Del. 2005). United States District Court for the District of Delaware considered motions to dismiss for failure to join an indispensable party and a motion to dismiss various common law counts are precluded by the Delaware Uniform Trade Secret Act ("DUTSA"). A French pharmaceutical company and its subsidiary filed suit against a Delaware parent company, alleging common law fraud, unjust enrichment and intentional interference with actual and prospective business relationships, as well as violation of the DUTSA. At issue was whether the Spanish subsidiary of the defendant was an agent of the Defendant, and therefore did not have to be joined. Plaintiff also opposed the joinder of the subsidiary because so doing would eliminate the Court's diversity jurisdiction and thus cause the case to be dismissed. The Court found that under Rule 19, the Spanish subsidiary was a necessary and indispensable party because the Plaintiff's interactions were almost entirely with the subsidiary and not the parent. The court further found that issues of the parent's liability for the acts of the subsidiary under the two tests promulgated to determine when piercing the corporate veil was appropriate (the alter ego test and the agency test) required discovery. The court therefore denied Defendant's Motion to Dismiss without prejudice to renew upon the discovery of facts which would negate the existence of such circumstances. Defendant also moved to dismiss the common law claims as preempted by the DUTSA. The court agreed that the claim for fraud and unjust enrichment were preempted by DUTSA, but that the claim for intentional interference with actual and prospective business relationships was not necesarily preempted. The court so found because, "while some of the same facts that support the misappropriation claim are alleged in the intentional interference count, the intentional interference claim is not necessarily 'grounded' in thosefact." Accordingly, the Court denied the motion to dismiss for failure to join an indispensable party pending discovery on the issue of agency and defendant's motion to dismiss the claim for intentional intereference with actual and prospective business relationships. The court granted the motion to dismiss the remaining common law claims. Share