Delaware Secretary of State Makes Key Admission that Delaware's Proposed Taking of TransPerfect Stock Shares, the Personal Property of Phil Shawe and Shirley Shawe, Serves No Public Purpose

NEW YORK, July 17, 2017 /PRNewswire/ -- In his response to Philip R. Shawe's and Shirley Shawe's federal lawsuit alleging that their civil rights were violated by the Delaware Chancery Court's decision to force the sale of TransPerfect, Delaware Secretary of State Jeffrey W. Bullock states that, "Here, the State has not taken any property for public use in the context of the Fifth Amendment." He continues, "After all, the provision of the Fifth Amendment upon which Plaintiffs [Philip Shawe and Shirley Shawe] rely for their constitutional challenge is the 'Public Use Clause.'"

Secretary Bullock's interpretation is supported by Delaware Supreme Court Justice Karen L. Valihura, who, in response to Mr. Shawe's appeal of the Chancery Court, wrote in her 35-page dissenting opinion that empowering a custodian to sell stockholder's personal property against their will is unlawful under Section 226 of Delaware Law alone, before even having to reach the constitutional question.

During argument, Justice Valihura addressed TransPerfect in relation to the infamous Kelo Case and the proposed "Takings" of the Shawes' property against their will with appellee's counsel, Philip Kaufman of Kramer Levin, in the following exchange:

JUSTICE VALIHURA:· What's the public use or public -- 

MR. KAUFMAN:· The public use or interest is -- 

JUSTICE VALIHURA:· It's public use, actually, and what is it?

MR. KAUFMAN:· I would argue Delaware has a very keen interest in -- in corporations -- in regulating corporations that are Delaware corporations and in protecting the health of those corporations.

JUSTICE VALIHURA:· The U.S. Supreme Court has said that the takings clause applies to personal property, just as it does to real property, and it said in the Kelo case you can't take private property from A and give it to B.

MR. KAUFMAN:· Your Honor, the so-called private property here has always been subject to the statutes under which it was created and through which it was issued, and that -- and it is part --

JUSTICE VALIHURA:· But that's a circular argument. 

It is undisputed that the Shawes' TransPerfect private company stock certificates are personal property. For audio of Mr. Kaufman addressing case topics both in front the Delaware Supreme Court, and in other venues, click here:

https://www.youtube.com/watch?v=hj1gAtJSj9w

"The Chancellor [Bouchard] went too far, too fast"

In her dissenting opinion, Justice Valihura went on to state, "The absence of authority grounded in the statute, the conceded absence of any similar cases under Section 226, and our common law's strong preference for the least intrusive remedies in cases involving court-appointed custodians, suggest that the Chancellor went too far too fast in ordering the Modified Auction."

"Cannot point to a single case in the history"

On page 3 of the Opinion, Valihura continues, "The second principle is the long-standing, uncontested common law principle that the involvement of the Court of Chancery and court-appointed custodians in a corporation's business and affairs should be kept to a minimum. This long-standing common law view is reflected in the fact that the parties here cannot point to a single case in the history of our Section 226 jurisprudence where a court has ordered a custodial sale of a company over a stockholder's objections."

"The Court of Chancery erred by ordering the Modified Auction"

Lastly, on page 23, "Moreover, it is no answer, as Ms. Elting suggests, that Section 394 provides that all corporations agree to make all provisions (including Section 226) part of their respective charters. This is a circular argument. The question here is what are the limits, if any, of the court's power under Section 226? Our statutory scheme should be read harmoniously. Reading the statutory scheme harmoniously compels the conclusion that Section 226 does not permit the Court of Chancery to confer upon a custodian the power to sell a corporation over the objection of its shareholders. Thus, I believe that the Court of Chancery erred by ordering the Modified Auction"

Legislating From the Bench

In conclusion, page 36 of the dissent states, "The Majority Opinion now puts stockholders on notice, at least prospectively, that in deadlock situations where a custodian is appointed pursuant to Section 226, a sale to a third party over the objections of stockholders is a potential permissible outcome, even for a thriving business. This "judicially created notice" now accomplishes what is expressly stated in other provisions of the DGCL and other statutes where defeasance of property rights is possible. These stockholders, however, appear to be stuck with this unanticipated outcome."

Oral Arguments in the Philip R. Shawe Law School Scholarship Are About to Kick Off

Approximately 240 student teams from law schools across the country responded and the contestants prepared briefs addressing constitutional implications (Due Process and Takings Clauses) of the Delaware courts' powers to adopt a forced sale remedy when shareholders of a highly profitable, privately-held corporation are deadlocked. All of the briefs were judged first by a group of experienced counsel from Lateral Link Group, Inc. The top ten contestants were narrowed, and the panel of four distinguished judges then decided on the final three contestants.  These three will prepare their arguments as if they were going before the United States Supreme Court and present their oral arguments to the Panel, which will rank them. Scholarships will be given in the following amounts: First place will be awarded $65,000, second place $25,000, and third place $10,000. The remainders of top 10 teams are being brought to New York to attend, and be honored as well. The event begins on July 20th, at 5:00 pm, in Brooklyn Borough Hall Courthouse.

Property Rights Advocate Suzette Kelo and Renowned Constitutional Scholar Alan Dershowitz Will Attend

Property Rights Advocate Suzette Kelo will attend as an Honored Guest, and Harvard Law Professor Alan Dershowitz will deliver the Keynote Address.  In addition, Professor Dershowitz joins a distinguished panel of judges presiding over the mock oral arguments, including: Judge Carmen Beauchamp Ciparick (Ret), Senior Associate Judge of the New York State Court of Appeals, Justice Melvin Schweitzer (Ret), New York State Supreme Court, Commercial Division, and Joseph D. Hansen, former Director of Interns for Justice Schweitzer, New York State Supreme Court, Commercial Division.

SOURCE Shirley Shawe