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In re TransPerfect Global, Inc.

Court of Chancery of Delaware

November 18, 2019

In re: TRANSPERFECT GLOBAL, INC.
v.
PHILIP R. SHAWE and SHIRLEY SHAWE, Respondents, ELIZABETH ELTING, Petitioner, and TRANSPERFECT GLOBAL, INC. Nominal Party.

          ORDER DENYING RESPONDENTS' MOTION FOR CERTIFICATION OF INTERLOCUTORY APPEAL

         WHEREAS:

         A. On February 15, 2018, the court entered a final order (the "Final Order") approving a securities purchase agreement (the "Sale Agreement"), pursuant to which Philip R. Shawe acquired Elizabeth Elting's 50% of Transperfect Global Inc. (the "Company" or "TransPerfect").[1] Paragraph 10 of the Final Order provides that the court has exclusive jurisdiction over the parties "for all matters relating to the Actions" (i.e., C.A. Nos. 9700 and 10449) including "the administration, interpretation, effectuation or enforcement" of the Sale Agreement and all orders entered in the Actions:

Without impacting the finality of this Order and judgment, the Court retains continuing and exclusive jurisdiction over the parties to the Actions for all matters relating to the Actions, including the administration, interpretation, effectuation or enforcement of the Sale Agreement and the Related Agreements, and all orders of the Court in Civil Action Nos. 9700-CB and 10449-CB ....[2]

         B. On May 3, 2018, the Delaware Supreme Court affirmed the Final Order.[3] The sale closed four days later. The Custodian (Robert P. Pincus) resigned as a director of the Company in connection with the closing and thereafter continued to work on other custodial matters relating to the sale and to submit to the court monthly reports and petitions for approval of his fees and expenses.[4] After the closing, until May 2019, the Custodian sought payment for his post-closing work from an escrow account established in the Sale Agreement. The escrow account, which was funded 50% each by Shawe and Elting, was set up as a non-exclusive source to pay the fees and expenses of the Custodian and various other expenses.[5]

         C. In his May 8, 2019 report (the "May Report"), the Custodian advised the court and the parties that his expenses likely would be higher in the coming months due to demands made on his time relating to two lawsuits arising out of the sale process that were filed after the closing:

• An action Cypress Partners LLC filed against Shawe in New York state court to recover payment for financial advisory services Cypress provided to Shawe in connection with the sale of the Company. The Custodian was informed that discovery, including a deposition, would be sought from him in connection with the Cypress action.
• An action TransPerfect filed against Lionbridge Technologies, Inc. and H.I.G. Middle Market LLC in New York federal court, alleging that they had misappropriated trade secrets of the Company in connection with the sale process. The Custodian and several Skadden attorneys received litigation hold notices relating to the Lionbridge actions.

         The Custodian explained in his May Report that, given the nature of the Cypress and Lionbridge actions, he intended to seek payment for fees and expenses incurred in connection with those lawsuits directly from TransPerfect instead of the escrow account.[6] The May Report cited three provisions from prior orders in the Actions as the basis for seeking payment from the Company.[7]

         D. On June 17 and July 10, 2019, the Custodian filed fee petitions requesting that TransPerfect pay certain expenses related to the two lawsuits.[8] After hearing no objection from any party, the court entered orders on June 28 and July 17, 2019, respectively, approving these two fee petitions, which required TransPerfect to pay $65, 203.85 to the Custodian (the "Fee Orders").[9]

         E. On August 13, 2019, TransPerfect sued the Custodian in Nevada state court, asserting claims for breach of fiduciary duty and declaratory relief.[10]TransPerfect sought damages against the Custodian relating to the $65, 203.85 that the court had ordered the Company to pay in the Fee Orders.[11]

         F. On August 26, 2019, the Custodian filed a motion for civil contempt and sanctions against the Company and Shawe (together, "Respondents") requesting, among other relief, entry of an anti-suit injunction and per diem monetary sanctions to coerce dismissal of the Nevada action and compliance with the exclusive jurisdiction provision of the Final Order ("Contempt Motion").[12]

         G. On September 20, 2019, the Company amended its complaint in the Nevada action to add a third claim for specific performance under a Director Indemnification Agreement (the "DIA"), which provides additional indemnification and advancement rights to the Custodian in his capacity as a director of TransPerfect.[13] The DIA contains a non-exclusive jurisdiction provision and requires the indemnitee to "submit to the Company a written request" in order to obtain indemnification under the DIA.[14] The amended complaint in the Nevada action did not allege that the Custodian ever submitted any such written request.[15]

         H. On October 17, 2019, the court issued a Memorandum Opinion (the "Opinion")[16] and Order (the "First Order")[17] adjudicating the Contempt Motion insofar as it concerned the Final Order. The Opinion explained that the court would rule in the future on the Contempt Motion insofar as it concerned the Fee Orders.[18]

         I. In the Opinion, the court granted the Contempt Motion with respect to the Final Order, finding that "the filing of the Nevada action violated paragraph 10 of the Final Order by depriving the court of exclusive jurisdiction over the Respondents (as parties to these actions) for 'matters relating to the Actions'" in at least two ways:[19]

First, the Nevada action specifically puts at issue-and thus deprives this court of exclusive jurisdiction over parties to these actions with respect to-the interpretation of the indemnification provisions in the 2015 Order, the Sale Order, the Final Order, and the Sale Agreement.
This is because, in order to grant the declaratory relief sought in the Nevada action, the Nevada court would need to construe the indemnification provisions in three of this court's orders and in the Sale Agreement....
Second, the Nevada action specifically puts at issue-and thus deprives this court of exclusive jurisdiction over parties to these actions with respect to-enforcement of the Fee Orders. This is because, in order to award the damages and/or declaratory relief sought in the Nevada complaint, the Nevada court would have to consider the legal effect of the Fee Orders ... .[20]

         J. In opposing the Contempt Motion, Respondents argued that the Nevada action did not violate the exclusive jurisdiction provision in the Final Order on the theory that the Nevada action sought relief based on the Custodian's status as a former director of the Company and thus implicated the DIA. The court rejected this contention for a number of reasons, including that there was clear and convincing evidence that the Custodian's involvement in the Cypress and Lionbridge actions related to his role as the overseer of the sale process and not as a former director of TransPerfect. That evidence included (i) allegations in the lawsuits that made clear they both related to the sale process, (ii) Shawe's own characterization of those lawsuits, and (iii) the admission of TransPerfect's General Counsel, Adam Mimeles, that "Mr. Pincus has not been involved in the Cypress or Lionbridge litigation in his capacity as an officer or director of TransPerfect."[21]

         K. The court also found that Respondents' violation of the Final Order was intentional and willful based on, among other things, (i) evidence "that Respondents knew they were concocting a false narrative in portraying" the Custodian's actions as relating to his role as a former director of the Company "in an apparent attempt to circumvent the exclusive jurisdiction provision in the Final Order," and (ii) the lack of any evidence that the Custodian requested indemnification under the DIA, which is a precondition for it to apply.[22]

         L. The court concluded that "entry of an anti-suit injunction and aper diem monetary sanction is necessary and warranted to coerce the dismissal of the Nevada action and [compel] compliance with the Final Order."[23] The court also ordered "Respondents [to] bear all of the expenses, including reasonable attorneys' fees, that the Custodian has incurred because of Respondents' contempt" (the "Contempt Fee Award").[24] The court has not yet determined the amount of the Contempt Fee Award, which undoubtedly will be the subject of future proceedings.

         M. On October 19, 2019, TransPerfect filed a Notice of Appeal from the Opinion and the First Order.[25]

         N. On October 21, 2019, the court provided additional rulings denying the Contempt Motion with respect to the Fee Orders. During the teleconference, the court modified the process for submitting petitions for the payment of fees and expenses in the future.[26] Later that day, Shawe filed a separate Notice of Appeal from the Opinion and the First Order.[27] Also on October 21, the Company dismissed the Nevada action.

         O. On October 28, 2019, despite already having filed a Notice of Appeal from the Opinion and the First Order, TransPerfect filed an application for certification of an interlocutory appeal of the Opinion and the First Order.

         P. On November 1, 2019, the court issued a second order to implement its October 21, 2019 rulings along with a confidentiality order to govern future fee petitions (together, the "Second Order")[28] On November 12, 2019, Respondents filed a motion ...


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