Delaware Business Litigation Report

Chancery Discharges Custodian in TransPerfect Litigation, Denies Contempt Motion, and Rules on Fee Dispute

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 14, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 14, 2021)

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 14, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 14, 2021)

In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Apr. 30, 2021) Elting v. Shawe, C.A. No. 10449-CB (Del. Ch. Apr. 30, 2021)
After seven years of multi-jurisdictional litigation stemming from an irreconcilable deadlock among the three stockholders of a profitable company, TransPerfect Global, Inc. (“TransPerfect”), the Court of Chancery discharged the court-appointed custodian of TransPerfect and denied a motion for contempt and sanctions against TransPerfect and its owner Philip Shawe. The Court subsequently granted the custodian’s fee petitions in the amount of approximately $3.2 million.

The Court adopted the discharge order proposed by the custodian, with modifications, and with the hope of bringing closure in the wake of numerous collateral litigations. The Court’s modifications specified that only the custodian, and not his attorneys, could direct post-discharge payments from escrow, deleted certain language in the proposed order that could be construed as expanding pre-existing protections for the custodian and his counsel, and clarified the process for the custodian to submit future fee petitions, as well as the scope and protections under the release and bar order.

The Court denied a motion for contempt and sanctions against Shawe brought by counsel retained by the custodian to represent TransPerfect in connection with requests for a stockholders’ meeting and for books and records demands. TransPerfect sued that counsel in New York, which allegedly was a violation of Chancery orders that had included release of claims and retention of exclusive jurisdiction. Yet TransPerfect was the lone New York plaintiff and was not clearly bound by the release of claims. Moreover, there was insufficient clear and convincing evidence that Shawe had directed TransPerfect to file the New York suit. The Court found that the New York suit violated its orders regarding exclusive jurisdiction, but nevertheless denied the motion for contempt and sanctions because TransPerfect ultimately stipulated to a stay of the New York suit and re-filed its claims in Delaware.

In granting the custodian’s fee petition, the Court resolved a litany of objections from TransPerfect and Shawe to the custodian’s requested fees. Among these were findings that counsel’s hourly rates were reasonable, time entries for “legal assistants” were synonymous with “paralegals” and properly subject to reimbursement, and Delaware law permits block billing. The Court held the custodian was entitled to reimbursement for fees with respect to TransPerfect’s and Shawe’s appeals to the Delaware Supreme Court, other lawsuits in his role as custodian, and his provision of status updates to the Court. The Court did sustain certain fee objections and deducted one-third from the custodian’s fees incurred in preparation of the proposed discharge order since the Court had rejected some terms of that proposed order, as well as fees incurred in the custodian’s preparation of a proposed settlement with TransPerfect and Shawe.

Finally, the Court rejected TransPerfect’s and Shawe’s motion alleging bad faith by the custodian in the fee petition process, and determined which elements of the fees should come from escrow versus directly from TransPerfect or Shawe.

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