Free Speech and Free Enterprise at Stake as Estranged Couple Collide Over Company

The plot twists would seem terrific if so much weren't at stake.

A classic American success story of a couple starting a company from a New York University dorm room in 1992 and watching it grow into a tech powerhouse turned into a soap opera when the former fiancés split.  When a court ordered the sale of the profitable firm, many feared that such judicial overreach could set a precedent for trampling on the free market.  On top of all that, now the matter has turned into a federal free speech case.

A direct lawsuit against a judge for a ruling might seem unusual or even unprecedented, but the actions of a Delaware state judge – in an apparent attempt to muzzle the First Amendment rights of a group that has criticized his ruling – seems unprecedented as well.

The already chaotic case of TransPerfect Global, a software translation company, has reached yet another level of absurdity.  A new federal lawsuit accuses Delaware Chancery Court judge Andrew Bouchard of threatening the jobs of the company's employees who are lobbying the state legislature to pass laws making it tougher for a judge to force the sale of a profitable company.

Bouchard ordered TransPerfect, with $500 million in annual revenues, to be sold at an auction, claiming that it would be fair because the two quarreling owners – Phil Shawe and Elizabeth Elting – could both make a bid.  The rationale for ordering the sale is "dysfunction" on the board because of constant disputes between Shawe and Elting.  Elting wanted the court to dissolve the company.  Shawe is fighting to keep the company, with 4,000 full-time employees in 90 offices, alive.

TransPerfect's director of corporate strategy, Timothy Holland, filed the lawsuit in the U.S. District Court in the Southern District of New York against Bouchard and the court-appointed custodian, Robert Pincus.  A court order from Bouchard allowed Pincus to search the private communications of TransPefect employees to determine if they were lobbying the state legislature, the lawsuit says.  Specifically, this was a search for communications between employees and Citizens for a Pro-Business Delaware, a political action committee that Holland helped found.

The lawsuit seeks "declaratory judgment against [a] judicial officer for due process and First Amendment violations," asserting that Bouchard and Pincus tried to stifle employees from advocating for their own interests on their own time.  Further, Holland's suit asserts that the judge strongly implied that "employment could be at risk" if the organization "did not cooperate with attempts to stifle employee activities" and that Holland's employment was "at risk as a result of his participation in speaking out against the order compelling the involuntary sale of TransPerfect and in petition the Delaware state legislature."

The right to petition one's government is one of the five freedoms in the First Amendment.

Citizens for a Pro-Business Delaware says it has more than 1,700 members – including many TransPerfect employees along with Delaware residents and business executives.  Separately, about 600 employees have been attempting to buy Elting's share of the company.

"We launched this campaign to make sure that no successful, profitable company could ever be sold off again. We never anticipated the court would attempt to limit our members right to free speech and to expressing themselves," said Chris Coffey, campaign manager for the group.

TransPerfect, a privately held firm based in New York, is incorporated in business-friendly Delaware, as are 50 percent of all publicly traded companies and 65 percent of Fortune 500 firms.  That's because Delaware has a business-friendly tax and regulatory environment.  So the stakes are significant for the economy if Bouchard's decision to force the sale of a profitable company becomes a legal precedent.

As former New York mayor Rudy Giuliani remarked, "it appears to be a very intrusive ruling in terms of the free market.  I hate to see the government, including courts, sharing in the control of a private business."

TransPerfect is successful by every measure except for the board strife.  Sales are up by more than 11 percent from last year, and SmartCEO Magazine recognized TransPerfect as a winner of the 2016 Future 50 Award.

The state legislature could act on a resolution calling for the Delaware State Bar Association to clarify the appropriate legal remedy for resolving any dispute of a profitable Delaware-incorporated company – which would include a lot of companies.

"As a small business owner and member of the House Economic Development Committee, I understand the significance of this case and how important it is for Delaware business," said state representative Michael Ramone, a Republican.  "We as state legislators need to recognize the impact this will have on both the company and employees, as well as our reputation as the best place to form a business corporation."

The plot twists would seem terrific if so much weren't at stake.

A classic American success story of a couple starting a company from a New York University dorm room in 1992 and watching it grow into a tech powerhouse turned into a soap opera when the former fiancés split.  When a court ordered the sale of the profitable firm, many feared that such judicial overreach could set a precedent for trampling on the free market.  On top of all that, now the matter has turned into a federal free speech case.

A direct lawsuit against a judge for a ruling might seem unusual or even unprecedented, but the actions of a Delaware state judge – in an apparent attempt to muzzle the First Amendment rights of a group that has criticized his ruling – seems unprecedented as well.

The already chaotic case of TransPerfect Global, a software translation company, has reached yet another level of absurdity.  A new federal lawsuit accuses Delaware Chancery Court judge Andrew Bouchard of threatening the jobs of the company's employees who are lobbying the state legislature to pass laws making it tougher for a judge to force the sale of a profitable company.

Bouchard ordered TransPerfect, with $500 million in annual revenues, to be sold at an auction, claiming that it would be fair because the two quarreling owners – Phil Shawe and Elizabeth Elting – could both make a bid.  The rationale for ordering the sale is "dysfunction" on the board because of constant disputes between Shawe and Elting.  Elting wanted the court to dissolve the company.  Shawe is fighting to keep the company, with 4,000 full-time employees in 90 offices, alive.

TransPerfect's director of corporate strategy, Timothy Holland, filed the lawsuit in the U.S. District Court in the Southern District of New York against Bouchard and the court-appointed custodian, Robert Pincus.  A court order from Bouchard allowed Pincus to search the private communications of TransPefect employees to determine if they were lobbying the state legislature, the lawsuit says.  Specifically, this was a search for communications between employees and Citizens for a Pro-Business Delaware, a political action committee that Holland helped found.

The lawsuit seeks "declaratory judgment against [a] judicial officer for due process and First Amendment violations," asserting that Bouchard and Pincus tried to stifle employees from advocating for their own interests on their own time.  Further, Holland's suit asserts that the judge strongly implied that "employment could be at risk" if the organization "did not cooperate with attempts to stifle employee activities" and that Holland's employment was "at risk as a result of his participation in speaking out against the order compelling the involuntary sale of TransPerfect and in petition the Delaware state legislature."

The right to petition one's government is one of the five freedoms in the First Amendment.

Citizens for a Pro-Business Delaware says it has more than 1,700 members – including many TransPerfect employees along with Delaware residents and business executives.  Separately, about 600 employees have been attempting to buy Elting's share of the company.

"We launched this campaign to make sure that no successful, profitable company could ever be sold off again. We never anticipated the court would attempt to limit our members right to free speech and to expressing themselves," said Chris Coffey, campaign manager for the group.

TransPerfect, a privately held firm based in New York, is incorporated in business-friendly Delaware, as are 50 percent of all publicly traded companies and 65 percent of Fortune 500 firms.  That's because Delaware has a business-friendly tax and regulatory environment.  So the stakes are significant for the economy if Bouchard's decision to force the sale of a profitable company becomes a legal precedent.

As former New York mayor Rudy Giuliani remarked, "it appears to be a very intrusive ruling in terms of the free market.  I hate to see the government, including courts, sharing in the control of a private business."

TransPerfect is successful by every measure except for the board strife.  Sales are up by more than 11 percent from last year, and SmartCEO Magazine recognized TransPerfect as a winner of the 2016 Future 50 Award.

The state legislature could act on a resolution calling for the Delaware State Bar Association to clarify the appropriate legal remedy for resolving any dispute of a profitable Delaware-incorporated company – which would include a lot of companies.

"As a small business owner and member of the House Economic Development Committee, I understand the significance of this case and how important it is for Delaware business," said state representative Michael Ramone, a Republican.  "We as state legislators need to recognize the impact this will have on both the company and employees, as well as our reputation as the best place to form a business corporation."