ANSWER: “HEAVEN HAS NO RAGE LIKE LOVE TO HATRED TURNED.”
As William Congreve noted in The Mourning Bride in 1697, ex-lovers can turn mean. Emotions can cloud judgment, but $7.1 million in sanctions resulted from very obscured judgment.
Ex-Lovers Feud Over Billion Dollar Business!
The founders and co-owners of TransPerfect Global, an electronic translation service and litigation support service, are fighting for control of the business. Philip Shawe and Elizabeth Elting started TransPerfect in the dorm room they shared in 1992. They got engaged, but Liz eventually called off the marriage. The relationship deteriorated. As Judge Bouchard wrote, “Their management of the corporation devolved into a state of dysfunction.” In re: Shawe & Elting LLC, 2016 WL 3951339 (Court of Chancery of Delaware, decided July 20, 2016.)
While starting the new business in Phil’s dorm room, Liz and Phil split the business 50-50, but never had a buy-sell agreement or exit strategy. In his quest to “get his way over Elting at all costs,” Phil threatened to shut down or dismantle TransPerfect. When Phil and Liz could not “negotiate a resolution of the increasingly acrimonious disputes,” the judge ordered the sale of the business.
Ex-Sweethearts Throw Temper Tantrums.
As Phil and Liz began fighting things got nasty. Liz poured a bottle of water on Phil to get him to leave her office. Each of them started blocking routine business matters such as raises, profit distributions and acquisitions. Phil sent an email saying: “I will simply create constant pain until we go back to the old way of doing things.” Phil accused Liz of assaulting him with her high heels. Liz claimed that Phil hid under her bed on more than one occasion. Their conversations and emails in the office were filled with obscenities.
And then the personal drama spilled over into the litigation….
Stolen Email.
Late on New Year’s Eve, 2013, Phil used a master key to get into Liz’s office. He removed her computer and carried it to his office and made an image of the hard drive. He then returned the computer with the hard drive restored back to Liz’s office. He did the same thing on at least two other occasions.
But that wasn’t good enough! Phil obtained Liz’s “unique identification number from the back of her office computer” and “mapped his way to her hard drive.” He could then access Liz’s office computer remotely and he did so at least 44 times and gained access to approximately 19,000 of Liz’s Gmails, “including approximately 12,000 privileged communications with her counsel….”
Failure to Preserve Evidence.
The judge noted that Phil was familiar “with litigation discovery practices as the co-CEO of a company engaged in providing litigation support services.” Phil did nothing, however, to image or preserve the information on his iPhone or laptop.
As to the iPhone, four days after the judge ordered an expedited trial of the disputes between Phil and Liz, Phil’s 5-year-old niece dropped the iPhone into a plastic cup of Diet Coke. Phil couldn’t get it to work again and neither could his assistant, Joe Campbell. Mr. Campbell tried to recharge the iPhone, but he “did not contact Apple or visit the Apple Store eight blocks from his office, nor did he solicit aid from TPB’s forensics team.” Mr. Campbell just put the phone in his desk drawer. The judge said that what happened next was “bizarre” and described it as follows:
According to Campbell, sometime in December 2014, he opened his desk drawer where he had left Shawe’s iPhone and concluded from seeing “some droppings” in the drawer that a rat had invaded the desk—which was located on the 39th floor of a commercial office building at 3 Park Avenue—and chewed on a PowerBar. Campbell claims that, in a “visceral” reaction, he tossed the contents of the drawer, including the iPhone, into the garbage. Campbell had been a paralegal for five years and was a recipient of both Litigation Hold Notices. His claim that he threw out the phone because of rat droppings is inexplicable.
Phil Deleted Files From His Laptop Before Having an Image Made of the Laptop.
Phil deleted approximately 19,000 files from his laptop the day before an image was made of the laptop. As the judge noted: “Shawe testified at the Merits Trial that he did not delete any files from his laptop before the December 20 Image was made. That testimony was plainly false.”
Phil also deleted about 22,000 files after the image had been made of the laptop.
Here Comes the Judge!
The judge summarized the bad faith conduct of Phil as “unusually deplorable behavior.” The judge said that Phil had repeatedly lied under oath to cover-up stealing information from Liz’s hard drive and to cover-up deleting information from his own laptop and having his iPhone destroyed.
Phil’s misdeeds “needlessly complicated the litigation,” so the judge ordered Phil to pay Liz’s attorneys’ fees and expenses of about $7.1 million. Phil was given 10 business days to pay the sanctions!
Don’t Do These Things in Your Dorm Room or Your Office!
If you are going to start a business with your fiancé and roommate, make sure you have a buy-sell agreement and an exit strategy (both personally and for the business). Never split a business 50-50 without having a tie-breaker. Never put anything in an email that you don’t want to see in court pleadings or in Forbes Magazine.
Keep personal feelings and animosities out of the board room. And as your kindergarten teacher told you: “Follow the rules and play nicely!”
Best regards,
GAMMAGE & BURNHAM, P.L.C.
By
Michael R. King
This article may be distributed with attribution but may not be excerpted or modified without the permission of the author.
Copyright © 2016 Michael R. King mking@gblaw.com 602-256-4405