Saturday, August 31, 2019

Delaware the Obscure

Delaware Chancery court is apparently being dragged into the presidential race, via a new attack ad against Joe Biden.  As reported by Shane Goldmacher, well:

There is so much to talk about here.

First, there’s the fact that the advertisement is misleading; Biden and Warren were apparently sparring about bankruptcy courts, not Chancery.

Second, there’s the fact that Biden – as a federal legislator – has no authority over Delaware Chancery. 

Third, there’s the fact that while I won’t dispute that Delaware courts are too white, Delaware Chancery, at least, now has 3 women and 4 men.  I’d be delighted to see more women on Chancery – and certainly the Delaware Supreme Court – but criticizing Chancery as too male is so last year.

Fourth, there’s the shifting numbers about the size of the ad buy; original reports said $500K, then the number was upped to $1 million, with print as well, and to be honest, I suspect that by blogging it I’m probably giving it the free attention that was the real aim.

But really the salient point is the identity of the buyer: Shirley Shawe, one of the litigants involved in the long-running TransPerfect dispute, tried before Chancellor Bouchard (which is why he is singled out for criticism in the advertisement).

TransPerfect was formed by Shirley Shawe’s son, Philip Shawe, and his one time-fiancee, Elizabeth Elting.  They ended their romantic relationship but continued with the business.  Elting had a 50% interest, and Philip Shawe a 49% interest, with 1% going to his mother so that the business as a whole could qualify as women-owned.  Since Shirley always voted with her son, this meant that authority was split 50/50.

The business was successful but the working relationship was not, leading to prolonged and acrimonious litigation.  Frankly, the Delaware opinions describing the fights between Shawe and Elting read more like a stalking complaint or domestic abuse than a business falling-out; among other things, Shawe was found to have hacked into Elting’s personal email, and – on two! occasions – hidden under her bed

Ultimately, Chancellor Bouchard ordered that the company be sold, and Philip Shawe purchased it.  The matter was not settled, though, because after that, the Shawes claimed that the Skadden partner who ran the auction “looted” the company.

Even today, the Shawes can’t let the matter go.  From what I can glean, Shirley Shawe is involved with this nonprofit, formed in the wake of the TransPerfect dispute and devoted to criticizing the Delaware Chancery court (the group is not officially connected to Shawe, but this article describes her as a “driving force” behind it, and reports that she funded and starred in its advertisements).  And now, of course, there’s this bizarrely irrelevant advertisement in the presidential race.

What the whole thing highlights, I think, is how business disputes that are tangled with family disputes don’t unfold like ordinary business matters, because the issues are far more personal.  And business courts don’t really know how to address the family dynamics.  That’s very much on display in TransPerfect, and it’s also the point of Allison Tait’s article, Corporate Family Law, 112 Nw. U. L. Rev. 1 (2017).  Though she doesn’t talk about TransPerfect specifically, the situation really illustrates her point.

https://lawprofessors.typepad.com/business_law/2019/08/delaware-the-obscure.html

Ann Lipton | Permalink

Comments

Behold the splendor of closely held businesses - where the thin line between love and hate in some families is often just as front and center as whether a vote was taken properly, or whether there was authority, or whether this duty or that duty was breached. Passion! Drama! Third-generation step-siblings! It's all there.

Posted by: Doug | Aug 31, 2019 7:31:50 AM

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