Shawe v. Elting
157 A.3d 142
| Del. | 2017Background
- Philip Shawe and Elizabeth Elting, co-CEOs and co-founders of TransPerfect, became litigants in multiple suits arising from personal and business disputes; the Court of Chancery conducted a merits trial and later a sanctions hearing.
- Beginning in late 2013, Shawe accessed Elting’s office and personal e-mails (including privileged counsel communications), sometimes by imaging her hard drive and by remotely mapping to her computer; he concealed the full extent of these actions for years.
- Litigation hold notices were issued (one by Shawe); after expedited discovery was ordered, Shawe deleted tens of thousands of files from his laptop in December 2014 and failed to preserve his cell phone, which was later discarded by an assistant.
- Shawe repeatedly gave false written responses, deposition testimony, trial testimony, and an affidavit blaming subordinates for the deletions; the Court later learned an IT employee (Wudke) had assisted in imaging and deletions.
- The Court of Chancery found Shawe acted in bad faith (intentional deletions, reckless phone preservation, repeated lies), awarded Elting $7,103,755 (100% of sanctions-motion fees and 33% of merits fees/expenses), and ordered payment within ten business days.
Issues
| Issue | Plaintiff's Argument (Shawe) | Defendant's Argument (Elting) | Held |
|---|---|---|---|
| Whether deleting laptop files and failing to safeguard phone constituted bad faith spoliation | Deletions caused no lasting prejudice because most files were recovered; intent to thwart discovery not proven | Shawe intentionally deleted files after litigation holds/expedited discovery to hide evidence | Court: Bad faith proven; deletions intended to frustrate discovery and justified sanctions |
| Whether failure to preserve cell phone warranted sanctions | Texts were not shown to be relevant to the merits; no basis for sanction | Phone was a likely source of relevant texts; turning it over to an unqualified subordinate was at least reckless | Court: Reckless failure to preserve phone evidence; sanction proper because texts were relevant and others were later used at trial |
| Whether sanctioning Shawe for lying required criminal due process protections for perjury | Sanctioning for perjury-like lies is punitive and required criminal-process protections | Sanction was civil (attorney-fee shifting) for litigation misconduct, not a criminal conviction | Court: No criminal process required; civil sanctions for repeated falsehoods were within discretion |
| Whether the fee award was excessive or unsupported | Award excessive; Elting didn’t prove additional fees caused by limited misconduct; some merits claims resolved for Shawe | Misconduct pervaded and complicated the merits phase from Dec 2014 onward; 33% of merits fees plus all sanction-motion fees reasonably approximate harm | Court: Award not an abuse of discretion; 100% of sanctions fees and 33% of merits fees justified and supported by record |
Key Cases Cited
- Montgomery Cellular Holding Co., Inc. v. Dobler, 880 A.2d 206 (Del. 2005) (describing bad-faith exception to American Rule for fee shifting)
- Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542 (Del. 1998) (bad-faith sanctions and courts’ fee-shifting authority)
- Genger v. TR Inv’rs, LLC, 26 A.3d 180 (Del. 2011) (preservation obligations and discovery sanction principles)
- RBC Capital Markets, LLC v. Jervis, 129 A.3d 816 (Del. 2015) (standard of review for chancery fee awards)
- Kaung v. Cole Nat. Corp., 884 A.2d 500 (Del. 2005) (sanctions for abusive litigation tactics)
- Beard Research, Inc. v. Kates, 981 A.2d 1175 (Del. Ch. 2009) (duty to preserve and sanctions for destroyed evidence)
- Beck v. Atlantic Coast PLC, 868 A.2d 840 (Del. Ch. 2005) (bad-faith findings where party altered testimony or misled court)