Dershowitz Adds Star Power to Heated TransPerfect Fight

Updated on
  • Co-founder Shawe asks Delaware court to block break up
  • Constitutional lawyer has represented O.J. Simpson, von Bulow

The normally staid Delaware Supreme Court got a bit of celebrity drama on Wednesday as famed lawyer Alan Dershowitz urged justices to reverse a decision forcing the sale of a profitable software company.

TransPerfect Global Inc. was put up for sale in May after a judge concluded its owners -- ex-lovers whose business relationship later soured -- were deadlocked over the firm’s direction. Co-founder Philip Shawe is seeking to block the sale while his mother, a minority investor, is turning to Dershowitz, best known for defending big-name criminal defendants like O.J. Simpson and Claus von Bulow, to defend her stake.

Shawe is battling partner and one-time fiancee Liz Elting for control of the New York-based translation-software maker. The late addition of Dershowitz, a Harvard law professor, to his team attacking Delaware Chancery Court Judge Andre Bouchard’s sale order is the latest twist in one of the more bizarre corporate-law fights to be heard in the state. Dershowitz declined to comment on the case.

“The TransPerfect folks seem to think that if you have a famous lawyer on your side it gives your arguments more credibility,” said Larry Hamermesh, a Widener University professor who specializes in Delaware corporate law. “Dershowitz is going to have to persuade the Delaware Supreme Court that the chancellor drew unreasonable conclusions from the facts of this case, and that may be tough to do.”

For more on the TransPerfect dispute, click here.

Dershowitz ran into some skepticism Wednesday after telling the court that TransPerfect’s forced sale amounts to an unconstitutional taking of Shirley Shawe’s interest in the software firm. Shawe and her son both oppose the sale.

Accusations that Bouchard trampled on the U.S. Constitution by ordering the sale of a company hampered by a deadlocked management team amounted to a “novel argument, that would upset a century” of corporate law, Chief Justice Leo Strine said. 

The U.S. Supreme Court is taking a fresh look at what constitutes wrongful takings of private property, Dershowitz countered. The lawyer’s request for more time to argue the case at the conclusion of the hearing was met with a pointed “Thank You, Mr. Dershowitz,” from Strine as the justices left the bench in Dover, Delaware. They didn’t say when they would rule on the case.

A renowned constitutional scholar, Dershowitz was part of the legal team that won Simpson’s acquittal on murder charges in 1995 and also helped overturn the 1982 attempted murder conviction of von Bulow, husband of a Rhode Island socialite left in a coma after she was injected with an overdose of insulin.

Worker Protest

While Shawe and his mother appeal Bouchard’s ruling, a group representing some TransPerfect employees is bombarding the state with television ads, sending out mailers and lobbying lawmakers to change the law governing forced business sales. Some TransPerfect employees also staged a protest outside the Supreme Court, on Dover’s historic Green, before arguments began on Wednesday.

A TransPerfect executive sued Bouchard in federal court in New York, accusing him of trampling on his free-speech rights by allowing a company administrator to bar employees from working with the employees’ group, Citizens for Pro-Business Delaware. That case is still pending.

The controversy over Bouchard’s order has unsettled some Delaware officials, who carefully guard the state’s business-friendly reputation as rivals such as Nevada and Oklahoma woo companies eyeing incorporation.

More than 1 million legal entities are incorporated in Delaware paying annual fees of more than $1 billion, which account for a quarter of the state’s budget.

Deadlocked Company

Lobbyists for TransPerfect, which has just a handful of its 4,000 workers in Delaware, want lawmakers to amend the state’s business-dissolution law to require a three-year delay before a judge can force a deadlocked company to be sold.

Bouchard ordered the sale of TransPerfect, which generates more than $500 million a year in revenue, after finding the impasse between Shawe and Elting left the software maker with an “irretrievably dysfunctional” management structure. The pair, who both hold the title of chief executive officer, can’t decide on buying out each other’s shares.

The feud spurred some TransPerfect employees to complain that the company’s “toxic environment” has caused a “mass exodus” of workers.

The judge also cited the personal nature of the dispute between the business partners, noting an e-mail in which Shawe indicates he intentionally booked a seat next to Elting on a flight to Paris to harass her. Elting switched seats on the flight to avoid her business partner, according to court filings.

‘Intrusive Remedy’

“What was the business purpose of Mr. Shawe’s trip to Paris?” Strine asked his lawyer David Goldstein during Wednesday’s argument. “Was the reason that he thought it was just funny to stalk Ms. Elting?”

Goldstein denied Shawe stalked his former fiancee and said the co-founder may have been on his way to visit TransPerfect’s Paris branch.

Bouchard chose “the most intrusive remedy” when ordering the sale of a “profitable business” that functioned well despite its founders’ conflicts, Goldstein argued. The judge could have asked a custodian to run the company while Shawe and Elting tried to work out their problems, the lawyer said.

Strine questioned how long a custodian would have to act as a “daycare provider,” refereeing management battles between the co-CEOs to satisfy Shawe. Goldstein said he couldn’t speculate how long the company should be run by a court-appointed monitor.

Shawe, who was ordered to pay $7.1 million in sanctions for ditching evidence and lying in the case, faced criticism from Elting’s lawyer for “creating a circus at the company” and attacking “cherished legal institutions” in Delaware.

TransPerfect will continue on its “poisonous course” unless Shawe and his mother are forced to acquiesce to a sale, Philip Kaufman, Elting’s attorney, told the court. 

The case is Philip R. Shawe and Shirley Shawe v. Elizabeth Elting, No. 423, 2016, Delaware Supreme Court (Dover).

(Updates with arguments starting in seventh paragraph.)
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