The Delaware Supreme Court rejected Phil Shawe’s appeal of a Chancery Court decision calling for a custodian to lead the sale of TransPerfect.
Shawe, his mother, and Liz Elting have a 50-50 stake in the New York translation services company. The two sides have not been able to agree on a sale. Shawe and Elting founded the company.
In a split decision, the high court rejected Shawe’s argument that Chancellor Andre Bouchard lacked the authority to order the sale of the profitable company. (See decision below)
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According to the opinion, the high court “agreed with Chancery’s conclusion that, in the circumstances such as this, when intermediate measures were attempted but failed, the Court of Chancery properly exercised its discretion to sell the company and distribute the proceeds to deadlocked stockholders.”
In her dissent, Justice Karen L. Valihura argued that Bouchard went too far in using the authority of Chancery Court in order the sale.
“The Majority Opinion now puts stockholders on notice, at least prospectively, that in deadlock situations where a custodian is appointed under Section 226, a sale to a third party over the objections of stockholders is a potential permissible outcome, even for a thriving business,” Alihurra wrote.
Shawe, who has clashed with Bouchard and received a civil fine, harshly criticized the Supreme Court decision in the following statement:
“Today’s Supreme Court ruling is unjust and more than just a defeat for us; it’s a defeat for the State of Delaware. The majority opinion adopts Chancellor Bouchard biased and predetermined outcome of the case. When any business sense, or even common sense, is applied, nobody actually believes that the best outcome for me, my mother, the 4,000 employees in this company, or thousands of customers or translators is best served by dissolving and force selling a private, profitable company against the will of 2 out of 3 shareholders.”
Shawe continued, “Justice Valihura is correct that stock is personal property protected which is protected under the law and the Constitution, and it should be beyond the court’s power to take that property for no public purpose. Now, for the first time in history, no proprietor of a Delaware incorporated business can sleep easy with the specter than the courts may just decide to take it, and give to another private citizen. Of course, we will appeal this ruling to the U.S. Supreme Court, and exploring other federal challenges, for what I can only describe an ‘old boy’ network state court verdict.”
Also critical of the decision was Citizens for a Pro-Business Delaware, a group representing TransPerfect employees.
Chris Coffey, campaign manager of Citizens for a Pro-Business Delaware, stated “this is a sad day for justice in Delaware. When a vast majority of employees have signed a petition to save the company, and the Delaware Supreme Court cites employee morale as a driving factor for their decision, something is wrong. Nothing will hurt employees more than losing their jobs, and that’s what this court order practically guarantees.”
Citizens for a Pro-Business Delaware wants the General Assembly to pass legislation that provides a cooling off period for contested sales.
