Shawe v. Elting
157 A.3d 152
| Del. | 2017Background
- TransPerfect (TPG/TPI) is a profitable Delaware holding company with 100 shares: Elting 50, Philip Shawe 49, Shirley Shawe 1; founders Elting and Shawe served as co‑CEOs and directors and were deeply deadlocked.
- Extensive trial findings documented prolonged personal animus and operational interference by Shawe that harmed employee morale, client confidence, acquisitions, and governance.
- Elting petitioned under 8 Del. C. § 226 to appoint a custodian to resolve the deadlock; the Court of Chancery held a six‑day trial, appointed a custodian, and ordered a sale of the company as a last‑resort remedy.
- On interlocutory appeal Shawe challenged (for the first time) whether § 226 authorizes ordering a custodian to sell a solvent company; Shirley Shawe (also for the first time) raised takings/due process objections to a forced sale of her one share.
- The Delaware Supreme Court affirmed: it held appointment and sale were permissible under § 226, declined to consider issues raised for the first time below (waiver), and reviewed the Chancery Court’s remedy for abuse of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 226 permits appointment of a custodian for stockholder/director deadlock | Elting: § 226(a)(1) and (a)(2) conditions met — deadlock and threatened irreparable harm | Shawe: does not contest appointment under (a)(1); contested (a)(2) standard for irreparable injury | Affirmed: appointment proper; Chancery findings of deadlock and threatened/actual irreparable injury upheld (irreparable‑injury standard properly applied) |
| Whether § 226(b) authorizes court to order a custodian to sell a solvent corporation over stockholder objection | Shawe: § 226(b) restricts custodian to continuing the business; sale/liquidation not authorized absent narrow exceptions | Elting/Chancery: § 226(b) gives custodian powers of a receiver under § 291 and allows liquidation “when the Court shall otherwise order”; sale is a permissible remedy | Affirmed: majority reads § 226(b) to permit sale when the court otherwise orders; sale within Chancery discretion (statutory argument waived on appeal) |
| Whether Chancery abused its discretion by ordering sale without trying less intrusive remedies first | Shawe: sale is extreme; Chancery should have used custodian as third director or other intermediate measures | Chancery/Elting: court tried mediation, interim custodian mediator, delayed decision, considered but rejected permanent third‑director supervision as impractical | Affirmed: court exercised measured discretion, tried alternatives, and reasonably concluded sale was necessary as last resort |
| Whether appellate court should consider takings/due process challenges raised first on appeal | Shirley Shawe: forced sale of her one share may be an unconstitutional taking or violate due process | State/Elting: constitutional claims were not presented below and are waived; plain‑error exception inapplicable here | Held: waived — Supreme Court declined to consider constitutional claims for first time on appeal; affirmed dismissal of derivative claims against Elting as to Shirley |
Key Cases Cited
- Giuricich v. Emtrol Corp., 449 A.2d 232 (Del. 1982) (describing limits on custodial powers and irreparable‑harm concepts in § 226 context)
- Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) (principles on equitable remedies and fiduciary duties cited for context)
- Grimes v. Alteon Inc., 804 A.2d 256 (Del. 2002) (statutory interpretation in pari materia and need to read DGCL provisions harmoniously)
- Berger v. Pubco Corp., 976 A.2d 132 (Del. 2009) (abuse‑of‑discretion review of Chancery remedies and statutory framework‑focused analysis)
- LeVan v. Independence Mall, Inc., 940 A.2d 929 (Del. 2007) (statutory interpretation principles; plain meaning controls)