TransPerfect

History

TransPerfect founders Elizabeth Elting and Phil Shawe met in a New York University (NYU) dormitory room and founded the company in 1992. With no external financing, TransPerfect grew from a two-person dormitory-based operation into one of the 125 largest privately held companies in the New York area.

Patented technology

In July 2013, TransPerfect prevailed in a U.S. Federal patent trial against competitor MotionPoint. The trial began as a result of MotionPoint's claim that TransPerfect's use of its own translation technology patent was invalid, and infringed one of MotionPoint's patents. TransPerfect sued MotionPoint, and MotionPoint filed a counter-suit. After three weeks of arguments, a California jury voted in favor TransPerfect and awarded $1 million in damages. In July 2015, the United States Patent and Trademark Office Trial and Appeal Board ruled that the claims of the Transperfect patent in question was unpatentable.

Legal activities

Following an apparent difficulty in communications between one another, Elting considered her options regarding her 50% ownership of the company. Among the issues she was concerned with was the value of her 50% ownership share. Elting sought relief from the legal system. Shawe saw that as an attempt by Elting to use the courts to help her negotiate an exit policy. In 2014, Elting sought to remove Shawe as an officer of TransPerfect Translations International, Inc. (TPI). Elting sought an injunction barring Shawe from conducting any managerial activity related to TransPerfect and sought the dissolution of TransPerfect, alleging that Shawe had engaged in "erratic and abusive behavior". New York State Supreme Court Justice Melvin Schweitzer dismissed the case, suggesting the two needed to work it out privately and not seek remedy from a court.

The suit was then taken to the Delaware Chancery where Elting reissued her complaint, and Shawe alleged that Elting had breached her fiduciary duties by not moving ahead with certain business-related opportunities, such as leases, acquisitions, and diverting funds for her own personal use. In August 2015, The Chancellor of the Delaware Chancery Court, Andre Bouchard, decided to have a third-party sell the shares of the company in a public auction.

Former New York Mayor Rudolph Giuliani chimed in and suggested that the court decision in Delaware would harm Delaware's status as a popular business incorporation state. NY Justice Schweitzer also publicly commented on the case in Delaware, saying, "I was kind of shocked at how extreme the result was... The company is still doing phenomenally well and I thought there were steps that should have been taken short of ordering a sale. That's would I would have done if I still had the case."

The argument against the Chancellor has been the misapplication of Delaware General Corporation Law, clause 226 that authorizes the sale of a company when it faces financial default and other catastrophic issues. Here, as the company has only proven to do even better each year, even during this lawsuit period. The defendants have argued that the company has not suffered and that the only remedy is the appointment of tie-breaking board member to help move issues along. Following Bouchard's decision, Shawe sought an appeal of the ruling and the oral argument was held on January 18, 2017.

For the appeal, Professor Alan Dershowitz argued for Shirley Shawe, a 1% owner in the company. Dershowitz argued that Chancellor Bouchard's decision was tantamount to an illegal constitutional taking. Delaware Chief justice Leo Strine argued back to Dershowitz that he had no right to bring that up since it was not in the initial case, and the two argued over the law. The appeal affirmed Bouchard's decision.

Shawe and Dershowitz have suggested that they will petition the U.S. Supreme Court for certiorari

Employee group forms to protect company

Included in this case has been a campaign waged by a group that calls itself Citizens for a Pro-Business Delaware to lobby the legislature to change the chancery rules regarding the forced sale of a private, well performing company. The group claims over 1200 members. "Citizens " built a website, has run television commercials, taken billboard and newspaper ads, petitioned elected leaders and held press conferences to press the issue of their concern for the jobs that may be lost and the impact this decision would have on Delaware's ability to continue attracting new companies to incorporate in the state.

Controversial legal issues

There have been charges of unethical actions by Elting's law firm Kramer Levin Naftalis & Frankel, which was sanctioned by the Chancery Court for "repeatedly instruct[ing] a witness not to answer questions.

A defamation suit was filed by Shirley Shawe against Kramer Levin, claiming that its lead attorney on the case “crossed the line” by making false statements in connection with the Delaware sale case that “were intended to damage Shawe’s business and personal reputation,” while talking to a reporter about the case. Citing that same interview, attorney Philip Kaufman was also accused of contradicting himself when he argued before the appeal court from what he claimed to the reporter. Ms. Shaw ran a series of TV ads highlighting the varying sets of comments made by Kaufman and the video was posted to Youtube.