Divorce Battles Shake Up Corporate Control at Top Business Court

Divorce cases that spill into Delaware Chancery Court illustrate why mixing business with pleasure can create problems.

A slice of the court’s docket focuses on business dissolutions and shifts in corporate control necessitated by divorce proceedings. When neither personal nor professional relationships can be repaired, the Chancery Court can resolve deadlocks over management of any entity registered in Delaware.

Divorce-adjacent cases follow glacial timelines like those comprising the dispute over control of Jenzabar Inc. The education software company’s co-founders go before the Delaware Supreme Court on Wednesday in the latest hearing in their long-running breakup.

“Anytime you have acrimony—and these cases involve serious personal acrimony—you’re going to see them go on,” said Charles Elson, retired law professor at the University of Delaware. “If they had a reasonable way of working it out, they would have.”

Jenzabar’s Ling Chai Maginn and Robert Maginn Jr. began divorce proceedings in Massachusetts, but how to value and divide their Delaware assets fell to the Chancery Court. Five years, and three separate Delaware lawsuits, have gone by.

Chai and Maginn started Jenzabar in 1998 and together held a majority stake. Chai filed for divorce in Massachusetts in 2019. Multiple lawsuits in Delaware and Nevada followed the Massachusetts court’s 2023 attempt to equally divide the Jenzabar stock between them, according to Maginn’s brief.

Chai—a former Chinese student dissident leader who fled after the 1989 crackdown on pro-democracy demonstrators in Beijing’s Tiananmen Square—is appealing Chancery Court rulings that blocked her efforts to remove and elect Jenzabar directors, along with her claims that Maginn breached the stockholders agreement. Vice Chancellor Lori Will said Chai may finally have a large enough stake to push out Maginn, but she can’t keep rehashing similar claims in Chancery Court.

Divorce proceedings typically stall over alimony, child support payments, or custody, said John Culhane, professor at Widener University Delaware Law School. But if corporations are among the assets to separate, “there can be enormous complexities, even in the valuation process and in deciding issues of control and deciding what’s the most equitable remedy,” he said.

Marital Property

The tolls of these breakups add up.

A Saudi princess said she’s destitute and “exhausted” during the seventh year of her Chancery Court battle over a $33 million Beverly Hills compound owned by a Delaware company she set up with her ex-husband.

“This case has taken much longer than what I could expect,” Princess Fahdah Husain Abdulrahman Al-Athel said in a letter alleging her ex-husband intentionally delayed the vacation home’s sale. The court ruled in March that her ex, Prince Faisal bin Abdullah bin Abdulaziz Al Saud, son of the late Saudi King Abdullah, should take charge of the property.

In a dispute between Italian businessman Silvio Scaglia and Julia Haart, the subject of the Netflix reality series “My Orthodox Life,” the Delaware Supreme Court upheld a Chancery Court ruling that handed Scaglia control of the modeling agency where he had secretly kept a one-share edge over his ex despite publicly stating they held equal stakes.

A New York court in January awarded Haart 50% interest in the company, plus power of attorney over Scaglia’s half, among other significant legal wins following her filing for divorce in 2022.

A prenuptial agreement, divorce settlement, corporate charter, or bylaws could include provisions about waiving requirements for a couple’s corporate management disputes to be resolved by a Delaware court, Culhane said. But that still requires the separating couple to agree on something.

“In order for the family court to do the equitable division, there has to be a determination about who really has the right to control,” he said. “And if it sounds like it’s a fifty-fifty situation—what could go wrong, right?”

In a Sept. 20 petition to dissolve a Delaware real estate management company formed with his wife, Paul White noted a post-nuptial agreement addressed how to handle operations at their Ram Island Holdings LLC. Nevertheless, amid ongoing divorce proceedings in New York and multiple Chancery Court lawsuits, they couldn’t jointly run the company anymore “because of the animosity between them,” White’s petition said.

The litigation appears further complicated by White’s death, according to documents filed April 8.

One litigant’s animosity spilled beyond his own lawsuits. For nearly a decade, Phil Shawe has sought to discredit a 2017 Chancery Court ruling over the forced sale of his TransPerfect Global Inc. after the end of his romantic relationship with co-founder Liz Elting.

Shawe’s backed a campaign of public attacks on the Chancery Court, and he also supported a PAC that campaigned against Gov. Matt Meyer’s opponent in the Democratic gubernatorial primary. Last month, Meyer signed corporate law amendments aiming to address concerns that Delaware judges side too often with minority shareholders.