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TransPerfect Loses Appeals in Delaware After Taking Case Federal

Nov. 18, 2022, 9:01 PM

TransPerfect Global Inc., which has spent years litigating the fallout of its forced sale in Delaware, was dealt twin losses by the state’s top court, closing one chapter on the legal saga just weeks after the translation company asked the US Supreme Court to write another.

Delaware’s justices issued brief orders upholding a pair of rulings against TransPerfect and its principal owner, Phil Shawe, by Chancellor Kathaleen St. Jude McCormick, chief judge of the state’s Chancery Court. Both decisions concerned sequels or spinoffs spawned by the years-long dispute.

Martin Russo, an attorney and legal strategist for the company, assailed the decisions Friday in a statement to Bloomberg Law.

“This is more of the same from the Delaware judiciary,” Russo said. “They circled the wagons and ruled without an opinion to explain their reasoning, because their decisions simply cannot be supported by law or reason. A clear sign that they had no legal basis to affirm this decision and that it is more about supporting their own and less about the law.”

Sprawling Legal Saga

The various TransPerfect cases stem from the company’s forced sale to Shawe after the breakup of his romantic relationship with the company’s other founder, Liz Elting, led to an irreconcilable deadlock.

Shawe bought out Elting through a modified auction following first-of-their-kind rulings by the Chancery Court and state supreme court ordering the company sold and placed under a custodianship based solely on the management deadlock, despite its continued profitability.

Starting in 2019, Shawe and TransPerfect launched a barrage of legal attacks against Robert Pincus, the retired Skadden, Arps, Slate, Meagher & Flom LLP partner who served as the company’s court-appointed custodian following its sale.

The attacks included a lawsuit in Nevada that led to contempt citations, which dragged the dispute back to Delaware for three more years of sprawling proceedings. TransPerfect took the contempt rulings to the US Supreme Court’s doorstep Nov. 3, asking the justices to hold that they violated its First Amendment right to petition the government.

“We are hoping that the Supreme Court of the United States takes our case and fully reviews the issue, so that Delaware will not be able to trample citizens’ right to petition in other states or jurisdictions,” Russo said Friday.

TransPerfect also sued Pincus in federal court Nov. 9, accusing him and a Credit Suisse Group AG unit of running a bogus auction that forced Shawe to pay $70 million more to buy out Elting than he should have.

Two Rulings

In one of its rulings Thursday, the Delaware Supreme Court affirmed McCormick’s decision not to close an escrow account that served as a “nonexhaustive” source of custodianship fees for Pincus. The account is supposed to remain open until a year after the non-appealable conclusion of any claims that could lead to additional fees, the state’s justices said.

That’s not until June 2023, a year after the state high court turned down the company’s challenge to $3.2 million in Pincus fees, they found.

In its other decision, the court rejected legal malpractice claims against TransPerfect’s former lawyers at Ross Aronstam & Moritz LLP. The company had claimed the attorneys should have consulted directly with Shawe—rather than Pincus, in his capacity as custodian—when challenging the fees.

TransPerfect was represented in the escrow case by Offit Kurman PA, Brownstein Hyatt Farber Schreck LLP, and Eicher Law LLC; and in the malpractice case by Offit Kurman and Capuder Fazio Giacoia LLP. Pincus was represented by Skadden. Ross Aronstam represented itself.

The cases are TransPerfect Global Inc. v. Pincus, Del., No. 131, 2022, 11/17/22 and TransPerfect Global Inc. v. Ross Aronstam & Moritz LLP, Del., No. 132, 2022, 11/17/22.

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

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com