Delaware Chancery Court in Georgetown, Delaware. Photographer:  Pat Crowe II/ Bloomberg News.
Delaware Chancery Court in Georgetown, Delaware. Photographer: Pat Crowe II/ Bloomberg News.

Delaware Judge at Center of Power Controversy Fights Lawsuit

By Jef Feeley, Bloomberg News

A Delaware judge embroiled in a state-wide lobbying battle over the power of the business court is fighting back against claims he overstepped his authority by appointing an administrator to run a profitable company and ordering its sale.

Delaware Chancery Court Judge Andre Bouchard’s order in May that a Manhattan-based translation-services company be sold at auction following the split of its feuding founders sparked a backlash. It included a high-profile media campaign against the power of the Chancery Court and a lawsuit by a former TransPerfect Global Inc. employee who claims his free-speech rights are being trampled.

Bouchard responded to the lawsuit in Manhattan federal court last week calling it nonsensical, frivolous and urging that it be thrown out.

The Delaware business court has legal authority over half of all U.S. public companies. The TransPerfect controversy poses a challenge to Delaware officials, who carefully guard their court’s business-friendly reputation as rivals like Nevada and Oklahoma woo companies with their own enticements. More than 1 million legal entities are incorporated in Delaware paying annual fees of more than $1 billion, accounting for one-quarter of the state’s budget.

Bouchard’s sale order came under fire from Philip Shawe, one of the co-founders of TransPerfect, who called it draconian.

Timothy Holland, TransPerfect’s director of corporate strategy, sued the judge after employees at the company were told to stop the campaign to pressure the Delaware court.

“Attempting to intimidate judicial officers by naming them as defendants in baseless lawsuits is unconscionable and should be summarily rejected,” Bouchard’s lawyers said in a Nov. 4 court document.

Andrew Goodman, Holland’s lawyer, said Bouchard’s attorneys missed the point. “Our view is that the analysis they put forward doesn’t address the issues we raised in our complaint,” the lawyer said in an interview Tuesday.

Holland claims his job has been threatened and his constitutional rights infringed because he helped form Citizens for Pro-Business Delaware, a political-action group seeking to change Delaware law governing the sales of businesses.

Elizabeth Elting founded TransPerfect with Shawe, her ex- fiance, while they were in college. It grew into the second- biggest translation-services company with sales of more than $500 million. Elting filed a petition in Delaware Chancery Court in 2014 to dissolve the partnership because the two partners were deadlocked over who should run the company.

Ruling Appealed

Bouchard backed Elting’s calls for a sale. He tapped Robert Pincus, a partner at Skadden Arps Slate Meagher & Flom LLP, as an administrator to help run the software maker while officials readied it for buyout bids. Shawe has appealed the judge’s ruling to the Delaware Supreme Court.

Citizens for Pro-Business Delaware has taken out newspaper ads in the state and hired a lobbyist to urge lawmakers to rein in chancery court judges’ power when it comes to selling businesses, according to earlier court filings. The group also urged Delaware voters to bombard Bouchard’s office with calls telling him to leave TransPerfect alone, the judge’s lawyers said in the latest filing.

Holland’s rights haven’t been violated as a result of the judge’s or administrator’s actions and allegations are based on a “nonsensical interpretation” of Bouchard’s orders related to the sale, according to the filing.

Federal judges should shy away from “allowing disgruntled litigants, or their allies, to sue Delaware judges to enjoin sale orders that are clearly permitted under Delaware law,” Bouchard’s lawyers added.

The case is Holland v. Bouchard, 16-cv-05936, U.S. District Court, Southern District of New York (Manhattan).

For more news, visit Bloomberg.

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