PHILIP R. SHAWE, Plaintiff/Respondent Below-Appellant,
ELIZABETH ELTING, Defendant/Petitioner Below-Appellee.
Submitted: January 18, 2017
Below-Court of Chancery of the State of Delaware C.A. Nos.
9661, 9686, 9700, 10449
Appeal from the Court of Chancery of the State of Delaware:
B. Ladig, Esquire, Morris James LLP, Wilmington, Delaware;
David B. Goldstein, Esquire, Rabinowitz, Boudin, Standard,
Krinsky & Lieberman, P.C., New York, New York for
Plaintiff/Respondent, Appellant, Philip R. Shawe.
R. Shannon, Esquire, Berton W. Ashman, Jr., Esquire,
Christopher N. Kelly, Esquire, Jaclyn C. Levy, Esquire, and
Mathew A. Golden, Esquire, Potter Anderson & Corroon LLP,
Wilmington, Delaware; Eric Alan Stone, Esquire, Robert A.
Atkins, Esquire, and Gerard E. Harper, Esquire, Paul, Weiss,
Rifkand, Wharton & Garrison LLP, New York, New York;
Philip S. Kaufman, Esquire, Ronald S. Greenberg, Esquire,
Marjorie E. Sheldon, Esquire, and Jared I. Heller, Esquire,
Kramer Levin Naftalis & Frankel LLP, New York, New York
for Defendant/Petitioner, Appellee, Elizabeth Elting.
STRINE, Chief Justice; HOLLAND, VALIHURA, VAUGHN, and SEITZ,
Justices, constituting the Court en Banc.
Shawe appeals an order of the Court of Chancery sanctioning
him for misconduct throughout litigation with his current
business partner and former romantic partner, Elizabeth
Elting. After an evidentiary hearing, the Court of Chancery
found that Shawe deleted documents from his computer,
recklessly failed to safeguard his cell phone, improperly
gained access to Elting's e-mails, and lied multiple
times under oath. The court also found that Shawe's
improper conduct impeded the administration of justice,
unduly complicated the proceedings, and caused the court to
make false factual findings. The Court of Chancery ordered
Shawe to pay 100% of the fees Elting incurred in connection
with bringing the motion for sanctions, and 33% of the fees
she incurred litigating the merits of the case, awarding
Elting a total of $7, 103, 755 in fees and expenses.
appeal, Shawe argues that the Court of Chancery erred in
three respects: (1) by finding that he acted in bad faith
when he deleted the files from his laptop and failed to
safeguard his cell phone; (2) for failing to afford him
criminal due process protections before sanctioning him for
"perjury"; and (3) by awarding Elting an excessive
fee. After a careful review of the record, we find that the
Court of Chancery followed the correct legal standards and
made no errors of law in its sanctions ruling. Shawe's
behavior was "unusually deplorable, " and thus the
Court of Chancery acted well within its discretion by
sanctioning him for his bad faith conduct. We therefore
affirm the judgment of the Court of Chancery.
companion opinion issued today, the Court has set forth the
long history of personal and business conflicts between Shawe
and Elting as the co-founders and co-CEOs of Transperfect
Global, Inc. ("TPG"). We assume familiarity with
those facts, and in this decision set forth only the facts
necessary to decide the appeal from the sanctions order.
October 2013, Elting hired Kramer Levin Naftalis &
Frankel LLP to try to resolve the various disputes between
Shawe and her. Shawe became enraged by this and began spying
on Elting. He directed employees to intercept Elting's
mail and to monitor her phone calls. Then, in December 2013,
Shawe began monitoring Elting's personal e-mails.
first, Shawe falsely claimed that he, working alone, took
Elting's computer and removed her hard drive so he could
read her e-mails. In reality, Shawe broke into Elting's
office on December 31, 2013 and brought her computer to
Michael Wudke, then-President of TPG's forensic
technology business. Wudke imaged Elting's hard drive by
removing it from the computer and connecting it to a forensic
"Tableau device" with a "write blocker, "
to conceal what he had done.After imaging the drive, Wudke
restored it, and Shawe brought the computer back to
Elting's office. Wudke then exported Elting's e-mail
files onto an external device so that Shawe would have a
copy. Wudke helped Shawe download Elting's e-mails on at
least two other occasions in 2014 in substantially the same
fashion. Shawe instructed Wudke not to document his actions.
As explained further below, Shawe concealed Wudke's role
until November 2015.
also remotely accessed Elting's computer at least
forty-four times on twenty-nine different occasions. He did
this by using a "map" to gain access to
Elting's computer using the TPG shared drive. Because
Shawe had the proper administrative permissions, he was able
to access her computer remotely through the shared
drive. The majority of these instances occurred
in the late evening and early morning hours. He gained access
to approximately 19, 000 of Elting's e-mails, including
approximately 12, 000 privileged communications between her
and her counsel.
Nathan Richards Hired As Shawe's
April 1, 2014, Nathan Richards, a former TPG employee, met
with Shawe in New York. Richards believed he was being
summoned for a marketing assignment. Instead, Shawe hired
Richards as his personal "paralegal, " though
Richards had no experience in such a role. Shawe paid him
$250, 000-almost twice his previous high salary-for his
services. Throughout his tenure, Richards broke into
Elting's office in the early hours of the morning to take
photographs and remove hard copies of documents.
the ensuing months, relations between Shawe and Elting
deteriorated even further, and it became abundantly clear
that litigation was imminent. Thus, on April 11, 2014, Shawe
distributed a litigation hold notice to senior management and
other TPG employees.
2014, Shawe and Elting filed four separate lawsuits against
each other, one in New York and three in the Court of
Chancery. The Delaware suits dealt with Elting's petition
for dissolution of TPG and the associated LLC (Shawe's
and Elting's asset protection and distribution vehicle)
and Shawe's claimed fiduciary violations against Elting.
On September 3, 2014, Elting served Shawe with document
requests and sent out a second, similar litigation hold
notice to TPG personnel.
November 2014, shortly after the Court of Chancery ordered an
expedited trial on the parties' claims, Shawe revealed
that he had been reading Elting's personal e-mails,
including privileged communications between Elting and her
counsel. The court thus ordered expedited discovery for a
possible sanctions motion.
The Cell Phone
the two litigation hold notices and specialized knowledge as
the CEO of a company whose expertise is in document
preservation and production, Shawe did not preserve his cell
phone or laptop.
November 22, 2014, just four days after the Court ordered an
expedited trial, Shawe's cell phone was allegedly damaged
by his niece. According to Shawe, while he and his brother
were in the other room, his niece dropped the phone in a
plastic cup of Diet Coke. Shawe tried to revive it by drying
it and charging it, but was unsuccessful. The next week, he
gave his phone to his assistant, Joe Campbell, to try and fix
it. Shawe did not remind Campbell about his need to preserve
the phone due to the litigation hold notices or outstanding
discovery requests. Campbell's only qualification for the
task was that his own phone fell into a toilet once and it
worked after he let it dry.
made modest (unsuccessful) efforts to revive the phone and
eventually put it in a desk drawer in his office. According
to Campbell, sometime in December 2014, he opened the drawer
containing Shawe's phone and noticed rat droppings in the
drawer. In a "visceral reaction, " he tossed the
contents of the drawer including the phone into the garbage.
Campbell had been a paralegal for five years and had received
both litigation hold notices. The Court of Chancery found
this story "bizarre" and incredible. So do we.
Shawe Reveals He Has Been Reading Elting's
days after the "Diet Coke" incident, Shawe sought a
declaration by a New York court that the e-mails Shawe
accessed were not privileged. Until then, Elting had not
known that Shawe had been accessing her personal e-mails.
Based on the new information, Elting moved for expedited
discovery to aid her in a motion for sanctions. The court
granted the motion, finding that "expediting discovery
was urgently necessary to protect Elting's rights and the
integrity of these proceedings and related
The December 2014 Deletions
the Court of Chancery ordered expedited discovery, Shawe
continued to use his personal laptop. He made an image of the
laptop on December 20, 2014 (the "December 20
Image") but deleted 18, 970 files the day before doing
so. He deleted files by sending them to the "recycle
bin" folder and then emptying the recycle bin. Shawe did
not regularly empty his recycle bin, and as of December 19,
2014, forensic evidence showed that he had files dating back
to August 2014 in his recycle bin. Shawe also cleared his
temporary internet files, browser history, and temporary
files created by application software, which included
evidence of his use of a program to view Elting's
e-mails. Unbeknownst to Shawe, his operating system created
volume shadow copies on December 8, 12, 16, and 19. As a
result, all but 1, 068 of the e-mails were recovered. With
Wudke's assistance, Shawe deleted another 22, 000 e-mails
on December 22. Wudke used a specialty software program to
permanently erase the files from the computer. As explained
below, Shawe lied for nearly a year about Wudke's
involvement and, instead, blamed the deletions on Richards.
not until late December 2014 when Shawe's own expert
determined that files had been deleted from Shawe's
laptop. On January 9, 2015 the expert reported his findings
to Shawe's counsel. On January 12, Shawe flew to San
Diego to hand deliver to his expert the December 20 Image. On
January 16, Shawe's "professional responsibility
counsel, " Ronald Minkoff, sent Elting's counsel a
letter disclosing the deletions, stating that Shawe had asked
an "assistant" to make a full forensic copy of his
laptop and to then delete certain files. The letter did not
list the identity of the "assistant." Shawe had
retained Minkoff to serve as his special counsel to advise
him on various ethical issues, including his use of
False Interrogatory and Deposition Responses
was scheduled to be deposed on January 20, 2015 about the
e-mail issues. The night before the deposition, Shawe
submitted amended responses to interrogatories from Elting.
The Court of Chancery found the following concerns with his
· Interrogatory No. 5 asked Shawe to describe each
instance in which he had accessed Elting's hard drive.
Shawe referenced only the 2013 incident ...