A New York federal judge on Tuesday dismissed a lawsuit accusing the chancellor of Delaware’s Chancery Court and a court-appointed custodian of stifling the free speech rights of a TransPerfect Global Inc. employee in connection with the forced sale of the profitable translation-services company.
In a nine-page opinion, U.S. District Judge Vernon S. Broderick of the Southern District of New York cited the Younger abstention doctrine in declining to exercise jurisdiction over the case. Broderick said that allowing the case to continue in federal court would interfere with parallel litigation in the Delaware Court of Chancery, where Chancellor Andre G. Bouchard in 2015 ordered TransPerfect’s sale after finding that its corporate governance structure was hopelessly deadlocked.
“Abstention is appropriate here because the Delaware Court of Chancery has a strong interest in enforcing its orders relating to the governance and management of Delaware corporations,” the judge wrote.
Timothy Holland, TransPerfect’s director of corporate strategy, had filed the federal lawsuit last July against Bouchard and Robert B. Pincus, a Skadden, Arps, Slate, Meagher & Flom attorney appointed to oversee the sale.
In the complaint, Holland said he and other TransPerfect employees had been intimidated from speaking out against the sale, and he challenged Bouchard’s 2016 sale order, which vested Pincus with the authority over the process and subjected workers to Chancery Court sanction if they did not comply with his instructions.
Bouchard and Pincus moved to dismiss the suit last November, arguing that the federal court was required to give the Chancery Court room to carry out its functions. The Delaware defendants invoked the Younger doctrine, which holds that federal abstention is warranted when there is a parallel, pending state case that involves a state’s interest in enforcing court orders.
Holland opposed the motion, saying that his challenge did not impact the sale process and thus did not interfere with Bouchard’s order.
On Tuesday, Broderick called Holland’s argument “unpersuasive and without merit.”
“The provisions to which plaintiff objects relate to the ability of the Delaware Court of Chancery to enforce the July 2016 order, as well as the ability of Pincus to fulfill his duties as custodian and carry out the sale,” he wrote. “For these same reasons, plaintiff’s challenge also implicates Delaware’s ability to govern and manage corporations.”
John K. Villa, a partner with Williams & Connolly, represented both Bouchard and Pincus in the New York federal action. In a statement, he praised Broderick’s ruling and said that his clients would continue to push back against any efforts to derail TransPerfect’s sale.
“The court’s ruling is clearly the correct result,” he said. “We will continue to meet and dispatch all similar litigation that would interfere with matters properly before the Delaware Chancery Court.”
An attorney for Holland did not respond Wednesday to a call seeking comment on the ruling.
According to court documents, TransPerfect’s sale could be completed by the end of the year. However, the terms of a final order would be subject to Chancery Court approval and an appeal to the Delaware Supreme Court.
In a 4-1 ruling earlier this year, Delaware’s five justices upheld both the sale order and Bouchard’s decision to dissolve the firm.
The case, in New York federal court, was captioned Holland v. Bouchard.