In a rare appellate ruling made “on the facts,” a New York state appeals court has thrown out an assault-and-battery lawsuit that was but another salvo in one of most bitter and litigious corporate breakups of the last decade: the war among founders for control of TransPerfect Global Inc., one of the world’s largest language-translation software companies.
The Appellate Division, First Department has decided that co-founder Philip Shawe’s ”improper and willful” discovery misconduct that happened during litigation focused on control of the New York-based company, including him accessing 12,000 of co-founder Elizabeth Elting’s privileged attorney-client communications and deleting documents, means that his assault lawsuit against her cannot stand.
“Among the materials improperly accessed here was a privileged memorandum from [assault-and-battery] defendant’s [Elting’s] counsel about his strategy concerning the incident underlying this action,” the panel wrote in part.
The panel added, while speaking of what Shawe learned by improperly accessing Elting’s defense materials, that “since ‘[p]laintiff’s knowledge … can never be purged,’ and he would ‘carry [that knowledge] into any new attorney-client relationship,’ we find that dismissal of the complaint is ‘the only practicable remedy here,’” quoting Lipin v Bender.
Shawe’s attorney on Friday said that he and his client will seek leave to appeal the First Department ruling to the Court of Appeals. He argued that Shawe’s “alleged [discovery] conduct [in corporate litigation]” was “ wholly unrelated” to the assault case.
The more than four-year fight for control of New York-based TransPerfect between rival founders Shawe and Etling—who met and started their company in 1992 while students at New York University, and who were once engaged to be married—captured years of headlines in publications ranging from Forbes to the Wall Street Journal.
One lengthy 2016 Forbes piece, for instance, was titled “Inside The Nasty Corporate Divorce Between Ex-Lovers Who Built A Company Worth Nearly $1 Billion.”
The battle royale involved at least three different lawsuits launched in the Delaware Chancery Court over each founder’s wish to gain control of the corporation, once the pair could no longer team together.
At one point in the fight, a Delaware Chancery Court ruling that reportedly said a third party would sell company shares in a public auction, elicited former New York Mayor Rudolph Giuliani to publicly question whether that decision would impact Delaware’s status as a widely used business incorporation state. And Harvard University professor and famed lawyer Alan Dershowitz reportedly represented a 1 percent owner of the company in an appeal of the ruling. He argued that it amounted to being an illegal constitutional taking.
Ultimately, Shawe gained control of the company, which was reported to have done more than $500 million in sales in 2015. He outbid Elting for the company, and the Chancery Court then ruled in his favor, according to a New York Post report from last year.
As the corporate battle went on, Shawe lodged an assault-and-battery suit against Elting in Manhattan Supreme Court in 2014. He alleged that at the company’s Park Avenue offices in 2014, Elting pushed, shoved, kicked and slammed him into a door, injuring him during a office outburst by Elting.
Addressing that assault-and-battery suit, in which Shawe claimed punitive damages and alleged emotional distress, the First Department panel said that the assault action “stems from three related actions in the Delaware Court of Chancery, which were joined for trial and disposition.”
In its Feb. 26 decision, the panel next wrote that in a “post trial decision, the Delaware court found that plaintiff had engaged in ‘deplorable’ misconduct by, inter alia, improperly accessing approximately 12,000 of defendant’s privileged attorney/client communications, intercepting defendant’s mail, which included communications with her attorney (including communications related to this action), deleting relevant documents and lying under oath about his conduct.”
The panel noted that “additionally, after a hearing, the Chancellor issued a decision sanctioning plaintiff over $7 million dollars for engaging in egregious litigation misconduct.”
In analyzing the appeal before it, in which Elting challenged Manhattan Supreme Court Justice Debra James’ 2017 denial of a dismissal motion, the panel wrote that Shawe’s “improper and willful access of defendant’s privileged communications and spoliation of evidence supports dismissal of his claims in this action.”
It continued, “Among the materials improperly accessed here was a privileged memorandum from defendant’s counsel about his strategy concerning the incident underlying this action. Further, plaintiff’s counsel referred to the contents of some of the privileged communications during motion practice in this litigation.”
Finally, the panel wrote that “since ‘[p]laintiff’s knowledge … can never be purged,’ … we find that dismissal of the complaint is ‘the only practicable remedy here,’” quoting Lipin v Bender.
Glenn Faegenburg of Edelstein, Faegenburg & Brown, counsel for Shawe in the assault-and-battery case and not in the Delaware corporate actions, said in an email Friday that “the Appellate Division’s drastic sanction of dismissal of Mr. Shawe’s assault claim against Elting was inappropriate given that the alleged conduct of my client that resulted in the dismissal occurred during a business lawsuit between the parties in Delaware’s business court.”
He continued, “Said conduct was wholly unrelated to the Ms. Elting’s intentional assault of Mr. Shawe and the claims surrounding that assault.
“It’s important to note,” he said, “that prior to this decision Mr. Shawe had never been sanctioned during the Assault litigation. It is our intention to seek leave to appeal to the Court of Appeals.”
Gerald Lefcourt, the defense lawyer for Elting, said in an email on Friday that “Shawe was found by the Delaware court to have engaged in ‘deplorable’ misconduct, including the improper and willful access of Ms. Elting’s privileged communications and spoliation of evidence. Acknowledging that, the Appellate Division dismissed his complaint as the only ‘practicable remedy.”