Welcome
Corporate Law News

Transperfect Must Pay $30,000 Daily Until It Drops Skadden Suit

Oct. 17, 2019, 8:23 PM

Transperfect Global Inc. must pay a $30,000 contempt fine per day until it drops a Nevada lawsuit challenging fees charged by a former Skadden partner appointed to run the translation company’s forced sale, a Delaware Chancery Court judge ruled Oct. 17.

Chancellor Andre G. Bouchard held in 2015 that co-founders Phil Shawe and Liz Elting were incapable of running Transperfect after their romantic relationship ended. He appointed Robert B. Pincus of Skadden Arps Slate Meagher & Flom to serve as the company’s custodian and tiebreaking director.

The state’s top court affirmed, upholding the judge’s authority to order the sale of a profitable but deadlocked company. Bouchard later entered a final order retaining “exclusive jurisdiction” over the matter. Pincus has since retired from Skadden, though he stayed on as custodian.

The case attracted attention for both its legal issues and its tabloid-ready details. It included a shouting match between Harvard Law professor Alan Dershowitz—who was representing Shawe’s mother, Shirley, a 1% shareholder—and the Delaware Supreme Court’s chief justice. A Transperfect executive also unsuccessfully sued Bouchard.

Shawe subsequently bought out Elting and moved the company from Delaware to Nevada. Transperfect sued Pincus there in August, accusing him of “shady” billing.

Pincus and Skadden fired back in Delaware, saying Transperfect isn’t paying its bills. They asked Bouchard to impose “meaningful civil contempt sanctions.”

Bouchard granted the motion, saying Transperfect violated the “exclusive jurisdiction” provision. He rejected the company’s contention that the provision doesn’t cover the Nevada suit because it concerns Pincus’s role as director, not his custodianship.

“This distinction is legally irrelevant,” Bouchard wrote. There’s “strong evidence” that “respondents knew they were concocting a false narrative,” he said.

The judge also dismissed the argument—advanced by Dershowitz, who joined Transperfect’s legal team Oct. 3—that the suit is “too complex” for a finding of willful defiance.

Bouchard said he would lift the daily fine if Transperfect drops its suit by Oct. 21. But if the case isn’t dismissed by the end of the month, “the court would entertain a motion to increase the amount,” he said.

Skadden is also entitled to reimbursement of costs and fees “incurred because of the respondents’ contempt,” the judge found.

The firm praised the decision Oct. 17.

“Once again, Shawe’s attempt to ‘create constant pain’ to others through frivolous litigation has backfired against himself and Transperfect,” Skadden said in a statement.

Transperfect attorney Martin P. Russo of Kruzhkov Russo PLLC criticized the decision and the judge.

“The chancellor’s decision is devoid of merit, and has the appearance of impropriety,” Russo said. “Chancellor Bouchard has a bone to pick with Mr. Shawe. Why hasn’t the chancellor recused himself?”

He added that “strong appeals will be forthcoming.”

The ruling comes about six weeks after a group called Citizens for a Pro-Business Delaware—funded by Shirley Shawe—announced a campaign to increase Chancery Court transparency.

The Delaware State Bar Association’s president has portrayed the group as a fake grassroots organization and called its ads “a false and misleading smear campaign” aimed at Bouchard.

The case is In re Transperfect Global Inc., Del. Ch., No. 9700, 10/17/19.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com