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Shawe v. Elting

157 A.3d 152 (2017)

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Shawe v. Elting

Delaware Supreme Court

157 A.3d 152 (2017)

Facts

In 1992, Shawe (defendant) and Elting (plaintiff) cofounded TransPerfect Global, Inc. Each controlled half of the corporation’s common stock. In 1996, the two got engaged to be married. In 1997, Elting called off the engagement and married someone else two years later. Shawe did not take the breakup well, and over the next several years engaged in a pattern of behavior bringing his personal discontent to bear on the corporation. Examples include invading Elting’s privacy, filing a “Domestic Incident Report” against Elting 17 years after the alleged conduct, and disparaging Elting both publicly and privately to company employees. As of 2007, Elting and Shawe were the corporation’s only two directors. Elting filed a petition under Delaware law seeking a court order declaring a deadlock and ordering a custodian to sell the company. The company was profitable, but Elting and Shawe stipulated that the corporation suffered from stockholder deadlock. Company employees testified that the parties’ feud was harmful to the company in a variety of ways, including resulting in low employee morale and the departure of key personnel. Some of the company’s major clients were aware of the ongoing dispute between Shawe and Elting and expressed their concerns about it. The parties’ personal disagreements resulted in them being unable to agree on as many acquisitions for the corporation, business that generally accounted for up to 20 percent of the company’s annual revenue. The Delaware Court of Chancery found “complete and utter dysfunction” and granted Elting’s petition. In so doing, the court noted previous unsuccessful attempts to resolve the issues, including settlement negotiations, mediation, and sessions with a court-appointed Special Master in New York. Further, the court considered but rejected appointing a third director as a tiebreaker. Shawe appealed, arguing that the court did not have the authority to grant the petition for a profitable business.

Rule of Law

Issue

Holding and Reasoning (Seitz, J.)

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