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Shocking criticism of Delaware's Chief Chancellor

Updated on July 11, 2016

In the wake of the TransPerfect Global case in which Chief Chancellor Andre Bouchard, while basking with impunity in the appearance of improprieties, has made several controversial decisions that could negatively affect Delaware’s corporate business status, inspiring potential law changes in the Delaware Legislature, and creating havoc in the legal community. I have again received a letter from a prominent Delaware lawyer, who fearing reprisals from the court has asked me to keep his letter anonymous.

Exercising my journalistic integrity, I intend to honor his request. This particular letter gets to the heart of apparent inequities that Chancellor Bouchard has imposed in his decisions and frankly is quite damming.

Delawareans and their law makers should keep in mind that Nevada and Rhode Island have corporate incentives that are attractive. When Delaware corporate law becomes potentially compromised by the courts, people are going elsewhere to incorporate rather than the First State, with serious consequences to Delaware’s coffers. Here below is the latest letter from “A CONCERNED DELAWARE ATTORNEY”. As always your comments are welcome and subject to being forwarded.

Letter from a concerned attorney in Delaware

“Dear Judson:

I wanted to follow up on my last letter regarding the unusual case involving the translation company, TransPerfect. My initial letter discussed the irregularities in Chancellor Bouchard’s decision, which ordered the sale of TransPerfect, a profitable company. This was an unprecedented decision never seen before in the history of the Delaware Chancery. As an attorney, I was shocked at what appears to be, at times, a total disregard of case law and evidence at trial. I believe Chancellor Bouchard’s decision could have a huge impact on Delaware’s future as the corporate capital of America.

As previously stated, it appears Chancellor Bouchard has an obvious bias against co-CEO and founder Philip Shawe, consistently ruling against him throughout the litigation. Examples of his blatant bias include the accusation that Shawe committed “burglary” because he had accessed his co-CEO’s (Liz Elting) office computer during a fraud investigation. When I dug a little deeper it became obvious that Chancellor Bouchard was purposely suppressing and disregarding evidence to achieve his desired result.

The history of the legal system in our country has shown many examples of what some describe as “judicial activism” in reaching exceptional or unusual decisions. Those cases generally have dealt with an injustice or wrong that needed to be corrected. However, in this case Chancellor Bouchard inexplicably gave substantially more weight to the testimony of one witness (Elting), versus the 10 other witnesses who testified with overwhelming physical evidence of fraud against Elitng. Even Chancellor Bouchard cited in his ruling that there was no evidence of Shawe taking money out of the company for his own personal gain or breach of his fiduciary duty, as Elitng had claimed. Furthermore, Chancellor Bouchard was compelled that there were several instances where Elting breached her fiduciary duty by taking unauthorized distributions and persuading clients not to do business with the company unless Shawe gave her more money. Despite these findings, Bouchard chose to disregard them on the grounds of “unclean hands” by Shawe based upon alleged discovery violations during the course of the trial.

It is hard to understand how a Chancellor sitting on this esteemed court could summarily dismiss the wrongdoings of one CEO – which included unauthorized unilateral distributions – and potentially sabotaging future business, because the other CEO ‘allegedly’ had unclean hands due to discovery issues unrelated to the running of the business itself. What kind of message does this send? There is something about that premise that is inherently not equitable, ironically, in a court that allegedly is one of equity.

The Chancellor seemed to bend over backwards to rule in favor of a woman who had, based upon the evidence at trial, lied, manufactured deadlock, stole $21 million from the company’s bank accounts and committed other serious breaches of fiduciary duty. Why would the Chancellor stake not only his reputation – but also the reputation of the Chancery Court – on behalf of a woman with seemingly no virtue at all. Ms. Elting has tried to make herself out as some kind of victim in this case, but in a recent article from Forbes, she appears to be solely motivated by a greedy desire for money. I would like to think Chancellor Bouchard was acting in the best interest of the company. The history of this case, unfortunately, shows otherwise.


Bias and collusion against one side

Not only has Chancellor Bouchard seemingly swept these findings against Elting under the rug, but also he has seemingly gone out of his way to keep Shawe from proving his case by suppressing relevant evidence. As I earlier stated, attorneys I’ve spoken with are split as to whether the root cause is the Chancellor’s lack of experience or the more troubling reasons you suggest in your previous articles. I think the following examples, to my disappointment, lean toward the latter.

BOUCHARD REVERSES HIS PRIOR DECISION

BOUCHARD REVERSES HIS PRIOR DECISION AND REFUSES TO ALLOW SHAWE TO DEPOSE FACT WITNESSES

This case is an attempt by Elting and her attorneys to manipulate the court system into somehow getting her a higher price for her shares than the free market is willing to give. Chancellor Bouchard has devoted an enormous amount of time on allegations that Shawe improperly accessed Elting’s personal e-mails, which he ruled were privileged, even though they were on the company’s property, its computer server.

Chancellor Bouchard has threatened to sanction Shawe in the amount of millions of dollars by shifting Elting’s legal fees to Shawe for his alleged improper conduct. This threat is totally improper and unsupported by the evidence adduced during the litigation. In order to give the appearance of fairness, Chancellor Bouchard set aside two days to hear witnesses speak only on the issue of whether Mr. Shawe was involved in spoliation of evidence.

As he was compelled to find in his August 2015 decision that Elting had committed serious breaches of her fiduciary duty to the company, shouldn’t the same rule of unclean hands apply to Elting here?

Why did the Chancellor devote two days of valuable court time on an issue stemming out of an alleged discovery violation, while only giving Mr. Shawe two-and-a-half days to present his case on saving the company from being sold and potentially causing the loss of 4,000 jobs?

Shawe apparently had 35 witnesses lined up to testify against Elting, but was prevented from presenting those witnesses because the court refused to give him more time. In the end, he was able to present 10 witnesses from the company, while Ms. Elting had time to spare, lacking no real evidence or testimony to support her claim. This is a miscarriage of justice.

More importantly, when Shawe obtained the emails in the presence of a licensed fraud examiner he discovered Elting was plotting and conspiring to manufacture deadlock with her attorneys and financial advisor to commit what was nothing less than an outright fraud on the court. Shawe pleaded with the court to read the e-mails on the grounds that the privilege was waived because they were communicating through the company server and because there was clear evidence of a crime/fraud.

Bouchard refused time and time again. This decision was shocking to say the least as it is common knowledge that no one has an expectation of privacy when using the company server to communicate with anyone including their lawyers in what would normally be considered privileged emails.

Bouchard found a case in New Jersey and New York and cobbled that together with a Delaware case that said if the language in the company handbook was vague then there was an expectation of privacy. However, there was not one shred of evidence that the TransPerfect handbook was vague, plus Elting, was one of the contributing authors of the company handbook.

The ripple effects this could have on corporate America is truly frightening. Essentially Bouchard has essentially rewritten the law for Elting by stating that even though she was employed by the company as a CEO, paid a six-figure salary and even signed a document acknowledging that she was bound by the rules of the company handbook that she was still somehow entitled to some special expectation of privacy.

In part, this finding was based on an affidavit from Ms. Elting who claimed that prior to taking her e-mails off the company server, she had allegedly spoken to two IT/forensic experts provided to her by her lawyers, who told her that her emails were secure and that no one could gain access to them without her password. This information was clear hearsay and these mystery witnesses were crucial since it was not believable that these expert witnesses would ever have told her this misinformation if they even existed at all.

Shawe argued that not only was this not the case, but that Ms. Elting was fully aware that dozens of people in the IT department were capable of seeing her emails at any given time. Simply by hooking up her personal email account to the company server, they were easily accessible to any of them, including Shawe.

This was crucial to proving Shawe’s case that he never broke into Elting’s email account, and to the contrary would have likely shown that she was clearly warned that she did not have an expectation of privacy.

Then sure enough a few days later, on October 9, 2015, Elting’s attorney, Mr. Kevin Shannon of Potter Anderson -- a person whose personal and business ties to Chancellor Bouchard have been discussed in great detail in your prior articles -- objected to providing the identities of these witnesses, let alone consenting to their depositions, claiming they were not relevant.

Not surprisingly, shortly thereafter, Bouchard reversed his own prior decision arguing that, although relevant, Shawe had waived his right to seek critical information from a witness because he waited too long.

When a court is about to sanction a litigant for millions of dollars, every opportunity should be given to that litigant to prove his innocence. Instead the court denied his request on the grounds that he waited too long!

Time was absolutely not an issue, yet Chancellor Bouchard chose to make it one. Is Delaware’s Chancery Court no longer a court of equity and fairness? Why was Mr. Shawe denied his right to due process? What is going on in Delaware?”

A CONCERNED DELAWARE ATTORNEY

As always, Respectfully Submitted

This whole case not only shocks me, but the inattention being paid to it by Delaware officials who are simply just covering for one another, their friend the Chancellor, is sickening.

Bouchard knows that he has yielded proper jurisprudence to his former partners and friends, at the expense of one party to the lawsuit, to the company and the jobs it provides, but he just does not care.

We need to tell this story.

JUDSON Bennett-Coastal Network

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