E-Discovery Company Co-CEO Sanctioned For Gross E-Discovery Violations And Other Misconduct

The Delaware Court of Chancery imposed significant sanctions for destruction of evidence and lying under oath in a partnership dispute

 Elizabeth Elting and Philip Shawe are the co-founders and co-CEOs of TransPerfect Global, Inc. (“TPG” or the “Company”). As chronicled in a post-trial decision issued last year, their management of the corporation devolved into a state of dysfunction. Emblematic of the deep divisions and fundamental distrust between them, virtually every aspect of this litigation has been turbulent, with each side filing motions for sanctions against the other. This decision resolves the sanctions motion Elting filed against Shawe based on an evidentiary hearing that was held earlier this year. 

As explained below, clear evidence adduced at the sanctions hearing establishes that Shawe acted in bad faith and vexatiously during the course of the litigation in three respects: (1) by intentionally seeking to destroy information on his laptop computer after the Court had entered an order requiring him to provide the laptop for forensic discovery; (2) by, at a minimum, recklessly failing to take reasonable measures to safeguard evidence on his phone, which he regularly used to exchange text messages with employees and which was another important source of discovery; and (3) by repeatedly lying under oath—in interrogatory responses, at deposition, at trial, and in a post-trial affidavit—to cover up aspects of his secret deletion of information from his laptop computer and extraction of information from the hard drive of Elting’s computer.

Shawe’s actions obstructed discovery, concealed the truth, and impeded the administration of justice. He needlessly complicated and protracted these proceedings to Elting’s prejudice, all while wasting scarce resources of the Court. Accordingly, Elting’s motion for sanctions is granted. Shawe will be required to pay a significant portion of her attorneys’ fees and expenses…

Some background

In October 2013, Elting hired Kramer Levin Naftalis & Frankel LLP to try to negotiate a resolution of the increasingly acrimonious disputes that had been brewing between Shawe and Elting for some time over their management of the Company. This enraged Shawe. Rather than hire his own counsel and engage in a mature dialogue, Shawe undertook a campaign to spy on Elting in pursuit of what had become a personal battle in which Shawe was determined to get his way over Elting at all costs, even if (to use Shawe’s words) it meant “shutting down” or “dismantling” the Company.

Shawe initially directed employees to intercept Elting’s regular mail, including her correspondence with Kramer Levin, and to monitor her phone calls. By the end of December 2013, Shawe’s surreptitious monitoring of Elting had expanded to include her private emails, including those with her counsel.

What follows is a tale of corporate espionage that is almost cinema-worthy and which, among other things, led to improper access to over 12,000 privileged emails.

12,000!

The record also shows that Shawe has a demonstrated propensity to use subordinates firmly under his control to do dirty work for (and with) him in secret, off the grid, and usually late at night. He turned to Wudke late on New Year’s Eve (and other occasions) to extract files from Elting’s hard drive and told him not to document what he was doing even though he insists it was part of a legitimate “corporate” investigation. He hired Richards as his “personal paralegal” at the princely rate of $30,000 per month despite having a number of reputable law firms with vast resources at his disposal, and immediately tasked him with photographing Elting’s office and removing documents from it in the wee hours of the morning. When it came to his iPhone, he turned to another trusted subordinate, Campbell, who sits next to him in the same office in New York. Given Shawe’s modus operandi and Campbell’s farcical explanation of what happened to the phone when Elting was pressing for discovery of Shawe’s text messages, it is more likely that Shawe told or otherwise made it clear to Campbell to get rid of the phone. In any event, whether Shawe did so or not is of no moment because, at a bare minimum, he recklessly failed to take appropriate measures to preserve the phone so that genuine efforts to recover information from it could have been utilized.

One rather notable aspect of this mess

Shawe is the co-CEO of a company specializing in e-discovery, which employs personnel qualified to conduct forensic recovery of damaged devices, and which has relationships with other professionals who can assist if needed.  Shawe was represented by an able team of counsel, who engaged a forensic computer expert and who easily could have engaged an expert in data recovery if Shawe had been genuinely interested in trying to recover evidence on his phone. Faced with an embarrassment of riches in terms of professionals to whom he could turn to recover data from his phone, Shawe instead inexplicably chose to give the phone to a subordinate under his control who had no forensic training in retrieving data from a phone. Campbell’s sole experience is that his own phone once fell into a toilet and it worked after he let it dry. To top it off, Shawe gave the phone to Campbell without providing him even minimal instructions about why he wanted him to attempt to revive the phone, the need to preserve the evidence given the pending litigations, or even about ensuring an appropriate chain of custody.

Crain’s New York Business provides details on the co- CEO relationship and its fallout, which they called The TransPerfect Storm

Shawe and Elting started the company in 1992 in their New York University dorm room. In 1996, the pair got engaged, but Elting called it off a year later and married someone else in 1999. (Shawe married in 2011.) The two split their business 50-50 and built one of the nation’s leading translation companies, with 92 offices in 86 countries housing 3,500 full-time employees, plus a network of 10,000 translators, editors and proofreaders working in about 170 languages.

All was sweetness and light in public between Shawe and Elting, but behind the scenes the former lovers came to loathe one another. They frequently cursed each other out in f-bomb-laden emails, and Elting once ended a meeting by dumping a pitcher of water onto Shawe. “Don’t call me in … and start f–king with me for no reason!” Shawe growled in one email to Elting, who fired back, “If sharing feedback on a potential acquisition is no reason, you’re a f–king idiot.” People who know them say Elting and Shawe cursed each other out as their way of communicating.

(Mike Frisch)