Court Opinion

ID: 4017459
Source: CourtListenerOpinion
Date Created: 2016-07-20 16:03:22.691932+00
Date Added: 2024-06-11T14:34:13.081162
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
___________________________________________
                                                       )
In re: SHAWE & ELTING LLC                              ) C.A. No. 9661-CB
___________________________________________ )
                                                       )
PHILIP R. SHAWE, derivatively on behalf of             )
TRANSPERFECT GLOBAL, INC., and in his                  )
individual capacity,                                   )
                    Plaintiff,                         )
                                                       )
             v.                                        )
                                                       ) C.A. No. 9686-CB
 ELIZABETH ELTING,                                     )
                                                       )
                    Defendant,                         )
                                                       )
             and                                       )
TRANSPERFECT GLOBAL, INC.,                             )
                                                       )
                    Nominal Party.                     )
______________________________________________________ )
                                                       )
In re: TRANSPERFECT GLOBAL, INC.                       ) C.A. No. 9700-CB
___________________________________________ )
                                                       )
ELIZABETH ELTING,                                      )
                                                       )
                    Petitioner,
                                                       )
             v.                                        ) C.A. No. 10449-CB
                                                       )
PHILIP R. SHAWE and SHIRLEY SHAWE,                     )
                                                       )
                    Respondents,                       )
                                                       )
             and                                       )
TRANSPERFECT GLOBAL, INC.,                             )
                                                       )
                    Nominal Party.                     )
______________________________________________________ )
                        MEMORANDUM OPINION

                       Date Submitted: April 27, 2016
                        Date Decided: July 20, 2016

Kevin R. Shannon, Berton W. Ashman, Jr., Christopher N. Kelly, Jaclyn C. Levy
and Matthew A. Golden, POTTER ANDERSON & CORROON LLP, Wilmington,
Delaware; Kurt M. Heyman and Melissa N. Donimirsky, PROCTOR HEYMAN
ENERIO LLP, Wilmington, Delaware; Philip S. Kaufman, Ronald S. Greenberg,
Marjorie E. Sheldon and Jared I. Heller, KRAMER LEVIN NAFTALIS &
FRANKEL LLP, New York, New York; Robert A. Atkins, Eric Alan Stone and
Gerard E. Harper, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP,
New York, New York; Attorneys for Elizabeth Elting.

Gregory P. Williams, Lisa A. Schmidt, Robert L. Burns and J. Scott Pritchard,
RICHARDS LAYTON & FINGER, P.A., Wilmington, Delaware; Peter B. Ladig
and Brett M. McCartney, MORRIS JAMES LLP, Wilmington, Delaware; Paul D.
Brown, CHIPMAN BROWN CICERO & COLE LLP, Wilmington, Delaware;
David L. Finger, FINGER & SLANINA LLC, Wilmington, Delaware; David B.
Goldstein, RABINOWITZ, BOUDIN, STANDARD, KRINSKY & LIEBERMAN,
P.C., New York, New York; Philip L. Graham, Jr. and Penny Shane, SULLIVAN
& CROMWELL LLP, New York, New York; Howard J. Kaplan and Joseph A.
Matteo, KAPLAN RICE LLP, New York, New York; Ronald C. Minkoff and
Andrew Ungberg, FRANKFURT KURNIT KLEIN & SELZ, P.C., New York,
New York; Attorneys for Philip R. Shawe.

Robert A. Penza, R. Montgomery Donaldson and Christopher Coggins,
POLSINELLI PC, Wilmington, Delaware; Jay S. Auslander, Natalie Shkolnik and
Julie Cilia of WILK AUSLANDER LLP, New York, New York; Attorneys for
Shirley Shawe.

Jennifer C. Voss, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,
Wilmington, Delaware; Attorney for Custodian Robert B. Pincus.

BOUCHARD, C.
      Elizabeth Elting and Philip Shawe are the co-founders and co-CEOs of

TransPerfect Global, Inc. (“TPG” or the “Company”). As chronicled in a post-trial

decision issued last year, their management of the corporation devolved into a state

of dysfunction.    Emblematic of the deep divisions and fundamental distrust

between them, virtually every aspect of this litigation has been turbulent, with each

side filing motions for sanctions against the other. This decision resolves the

sanctions motion Elting filed against Shawe based on an evidentiary hearing that

was held earlier this year.

      As explained below, clear evidence adduced at the sanctions hearing

establishes that Shawe acted in bad faith and vexatiously during the course of the

litigation in three respects: (1) by intentionally seeking to destroy information on

his laptop computer after the Court had entered an order requiring him to provide

the laptop for forensic discovery; (2) by, at a minimum, recklessly failing to take

reasonable measures to safeguard evidence on his phone, which he regularly used

to exchange text messages with employees and which was another important

source of discovery; and (3) by repeatedly lying under oath—in interrogatory

responses, at deposition, at trial, and in a post-trial affidavit—to cover up aspects

of his secret deletion of information from his laptop computer and extraction of

information from the hard drive of Elting’s computer.

                                         1
         Shawe’s actions obstructed discovery, concealed the truth, and impeded the

administration of justice.      He needlessly complicated and protracted these

proceedings to Elting’s prejudice, all while wasting scarce resources of the Court.

Accordingly, Elting’s motion for sanctions is granted. Shawe will be required to

pay a significant portion of her attorneys’ fees and expenses, as explained below.

I.       BACKGROUND

         These are the facts as I find them based on the documentary evidence and

witness testimony provided during a two-day hearing held on January 7-8, 2016

(the “Sanctions Hearing”). Five fact witnesses and two expert witnesses testified.

The two experts provided testimony concerning Shawe’s deletion of files from his

laptop computer after he had been ordered to provide the laptop for forensic

discovery.     Elting’s expert was Daniel Schilo of Deloitte Financial Advisory

Services LLP (“Deloitte”). Shawe’s expert was Michael Bandemer of Berkeley

Research Group.       I accord the evidence the weight and credibility I find it

deserves.

         For additional background on the disputes between Shawe and Elting in their

management of the Company, the reader is referred to the post-trial opinion issued

on August 13, 2015 (the “Merits Opinion”), 1 after a six-day trial (the “Merits

Trial”). The facts relevant here begin in late 2013.

1
    In re Shawe & Elting LLC, 2015 WL 4874733 (Del. Ch. Aug. 13, 2015).

                                           2
      A.     Shawe Obtains Access to Elting’s Gmails with Wudke’s Help

      In October 2013, Elting hired Kramer Levin Naftalis & Frankel LLP to try

to negotiate a resolution of the increasingly acrimonious disputes that had been

brewing between Shawe and Elting for some time over their management of the

Company. This enraged Shawe. Rather than hire his own counsel and engage in a

mature dialogue, Shawe undertook a campaign to spy on Elting in pursuit of what

had become a personal battle in which Shawe was determined to get his way over

Elting at all costs, even if (to use Shawe’s words) it meant “shutting down” or

“dismantling” the Company. 2

      Shawe initially directed employees to intercept Elting’s regular mail,

including her correspondence with Kramer Levin, and to monitor her phone calls.

By the end of December 2013, Shawe’s surreptitious monitoring of Elting had

expanded to include her private emails, including those with her counsel.

2
  See id. at *5 (quoting Shawe’s emails). On April 11, 2016, Shawe moved to
supplement the Sanctions Hearing record to include evidence that Elting reimbursed the
Company in December 2015 for approximately $159,000 that the Company paid two
years earlier to Kramer Levin and Kidron Corporate Advisors LLC, a financial advisor
Kramer Levin had hired. Mot. to Supplement the Record to Include Post-Hearing
Evidence (April 11, 2016). In that motion, Shawe claims that “the event that finally
pushed Shawe to go into Elting’s office was discovering that Elting was using
TransPerfect funds to pay her lawyers.” Id. ¶ 4. I rejected this asserted justification in
the Merits Opinion and see no basis to revisit it now. Merits Opinion, 2015 WL
4874733, at *27 n.288). In any event, the supplemental evidence is irrelevant to the
matters at issue here, namely, Shawe’s intentional deletion of files from his laptop, his
reckless failure to safeguard evidence on his phone, and his repeated, intentionally false
statements under oath in connection with the Merits Trial.

                                            3
         Late on New Year’s Eve, 2013, Shawe used a master cardkey to access her

office. Shawe removed her computer and carried it to his office, where Michael

Wudke, President of TPG’s Forensic Technology business, was waiting. 3 Shawe

directed Wudke to make an image of Elting’s hard drive. 4 Wudke did so by

removing the hard drive and connecting it to a forensic “Tableau device” with a

“write blocker,” which ensured that no trace of his actions would be left on

Elting’s computer. 5 Wudke then restored the hard drive to Elting’s computer,

which Shawe returned to her office.6 Shawe did not tell Wudke whose computer it

was, and he directed Wudke not to document the copying. 7

         On January 1 or 2, 2014, Shawe ordered Wudke to search for emails on the

image Wudke had made of Elting’s hard drive. Wudke exported the Outlook

“.pst” and “.ost” files (which archive emails) onto an external device. 8 Wudke saw

that one of the files was named “lizelting1@gmail.com.pst.,” from which he

3
 Transcript of Sanctions Hearing (“Tr.”) 347 (Wudke) (Jan. 7-8, 2016); Tr. 484-85
(Shawe).
4
    Tr. 347-48 (Wudke).
5
    Tr. 358-59 (Wudke).
6
    Tr. 359-60 (Wudke).
7
    Tr. 360-62 (Wudke).
8
    Tr. 352-54, 364-65 (Wudke).

                                           4
deduced that the hard drive was Elting’s. 9 Wudke gave the external device

containing Elting’s emails to Shawe.10

         Wudke helped Shawe download Elting’s Gmails on at least two other

occasions in early 2014.         Each time, also late at night, Shawe took Elting’s

computer from her office, brought it to Wudke’s office, and had Wudke extract

Elting’s emails from her hard drive while instructing him not to document his

actions. 11

         During the first quarter of 2014, Wudke installed “NUIX” onto Shawe’s

laptop.12 NUIX is a forensic tool that allows a user to search information from

unstructured data.13 Wudke taught Shawe how to enter search terms into NUIX to

find responsive emails, and entered NUIX searches that Shawe requested. 14

         As discussed below, Shawe repeatedly provided false testimony during the

litigation to conceal Wudke’s involvement in the extraction of Gmails from the

hard drive of Elting’s computer as well as other activities involving the deletion of

9
    Tr. 363-64 (Wudke).
10
     Tr. 354 (Wudke).
11
     Tr. 355-56, 365-68 (Wudke).
12
     Tr. 78 (Schilo); Tr. 385-88 (Wudke).
13
     Tr. 385-86 (Wudke).
14
     Tr. 386-88 (Wudke).

                                            5
files from Shawe’s laptop.         Wudke’s role did not become known until late

November 2015, shortly before the Sanctions Hearing.

           B.    Shawe Remotely Accesses Elting’s Privileged Communications

           Beginning on March 31, 2014, Shawe arranged to access Elting’s hard drive

on her office computer remotely. 15 Having obtained her unique identification

number from the back of her office computer, he mapped his way to her hard

drive.16 Event logs from Elting’s and Shawe’s work computers show that Shawe

used this method to access Elting’s computer at least 44 times on 29 different dates

between March and July 2014.17 These events occurred late in the evening or in

the early hours of the morning.18 Through his stealthy actions, Shawe ultimately

gained access to approximately 19,000 of Elting’s Gmails, including

approximately 12,000 privileged communications with her counsel at Kramer

Levin and her Delaware counsel in this litigation.19

15
     Merits Opinion, 2015 WL 4874733, at *13.
16
     Id.; see JX-S 16 ¶¶14-15; Tr. 539 (Shawe); Shawe Dep. 226 (Dec. 23, 2015).
17
     JX-S 16 ¶¶12-16 & App’x A.
18
     Id.
19
     Merits Opinion, 2015 WL 4874733, at *13.

                                             6
         C.     Shawe Hires Nathan Richards, Who Assists in Spying on Elting

         On April 1, 2014, Nathan Richards, a former TPG employee who worked for

Shawe, came to New York at Shawe’s request to meet with him. 20 Richards

believed he was coming for a marketing assignment. 21 Just five days later, on

April 6, Richards used a temporary card key to enter Elting’s office at 4:47 a.m. 22

Richards took photographs of Elting’s office, including the inside of her file

cabinets, and removed hard copies of documents, which Richards delivered to an

investigator working for Shawe’s lawyers at Sullivan & Cromwell LLP. 23

         In May 2014, Shawe entered into a “Consulting Agreement” with Richards

that provided for Richards to perform “paralegal and litigation support services”

and to “facilitate the rendering of legal services” by Shawe’s counsel “in

connection with disputes between or among” Shawe, Elting and related parties.24

The Agreement was back-dated to “as of April 4, 2014,” before Richards entered

Elting’s office on April 6. 25

20
     Tr. 399-403, 436 (Richards).
21
     Tr. 436 (Richards).
22
     Tr. 412, 440-41 (Richards); JX 1348 at 7.
23
     Tr. 444, 447-48 (Richards); JX-S 35 at 36-38, 41.
24
     JX-S 3 at 1.
25
     Id.; Tr. 402, 437-38 (Richards).

                                                 7
         Richards had no experience as a paralegal or in litigation support,

investigative work, or “document preservation”— a task Shawe later would stress

was one of Richard’s key functions. 26 Richards had worked at TransPerfect in

communications and marketing, later at a not-for-profit, and then formed his own

company offering marketing services. 27 The “Consulting Agreement” promised

Richards $30,000 a month, and eventually yielded him $250,000 for approximately

ten months of work—almost twice the highest salary Richards had ever earned

before.28

         On later occasions, all early in the morning and all at Shawe’s direction,

Richards entered Elting’s office and that of TPG employee Gale Boodram to go

through and photograph their files.29 Richards described his procedure for taking

the photographs as a technique he had learned from television crime shows. 30

Richards deployed these methods because Shawe told him that they were engaged

26
     Tr. 405, 434-35, 443 (Richards); Tr. 491-92 (Shawe).
27
     Tr. 398-402 (Richards).
28
     Tr. 436-39 (Richards); JX-S 3 at 1.
29
     Tr. 441-46 (Richards).
30
     Tr. 416 (Richards).

                                             8
in a “fraud investigation” involving, among other things, forgery. 31 As Richards

later acknowledged, that suspicion proved baseless. 32

         D.     The Litigation Hold Notices

         In May 2014, Shawe and Elting filed four separate lawsuits against each

other, one in New York and three in this Court.             Anticipating the onset of

litigation, Shawe distributed a “Litigation Hold Notice” to senior management and

other employees of TPG on April 11, 2014. 33 The notice applied to both text

messages and data on laptop computers.34 Shawe instructed that recipients were

“to retain and not destroy any documents or communications, either in hard copy

or electronic form, relating in any way, either directly or indirectly, to Shawe &

Elting LLC. If you are uncertain as to whether a particular document related to

this matter, it should be retained.”35

         On September 3, 2014, as the Delaware litigation was heating up, Elting

served Shawe with document requests seeking Shawe’s text messages,

communications from Shawe’s personal email addresses, and documents
31
     Tr. 412-14 (Richards); Tr. 477-78 (Shawe).
32
     Tr. 442 (Richards).
33
     JX-S 5 at 5-6.
34
     See Tr. 596 (Shawe).
35
  JX-S 5 at 5. The entity referred to in this litigation hold notice, Shawe & Elting LLC,
served as a vehicle to receive money from TPG and to make distributions periodically to
Shawe and Elting. Merits Opinion, 2015 WL 4874733, at *2.

                                             9
concerning Richards. 36 That same day, Elting sent out her own litigation hold

notice to TPG senior management and other employees. 37 Similar to the one

Shawe issued in April, it called for the preservation of documents, including emails

and text messages, on personal phones and laptops.             Elting instructed that,

“[b]ecause of the number of issues in dispute, you must retain and may not destroy

any documents or communications, whether in hard copy or electronic form, and

including those stored on personal computers or handheld electronic devices, that

relate in any way to TransPerfect, your employment here, or to me or Phil.” 38

Shawe replied to the email, stating that “Liz is absolutely correct” and that

everyone must “save all documents that might be relevant.”39

          Despite these two litigation hold notices (the “Litigation Hold Notices”) and

his familiarity with litigation discovery practices as the co-CEO of a company

engaged in providing litigation support services, Shawe did nothing to image or

preserve his iPhone or laptop, both of which he continued to use.40 Nor did Shawe,

or anyone else, tell Richards that the Litigation Hold Notices applied to Richards’

own documents, including his communications with Shawe, even though Richards
36
     JX-S 4 at 21.
37
     JX-S 5 at 3-4.
38
     Id. at 4.
39
     Id. at 3.
40
     Tr. 596-600, 603-04 (Shawe).

                                            10
was (according to Shawe) working directly for Shawe on “litigation support

services” and his key task was “document preservation.”41

          E.       The September 26 Conference and Scheduling of Trial

          On September 26, 2014, the Court held a conference at which it granted

Elting leave to retain a vendor to collect the Company’s electronically stored

information. 42 The parties ultimately agreed to use Deloitte for this purpose.

Concerned that the manifest tensions between the parties presaged that discovery

would be highly contentious, I cautioned the parties about the dangers of spoliating

evidence:

          [T]he last thing anybody should want to have happen here – and I’m
          not suggesting anybody would, but the last thing you want to allow
          any of your clients to be in the position or exposed to having happen
          is some ESI or other discovery gone missing. That will be a horrible
          outcome for whoever is found responsible for that, if that were ever to
          occur. And the sanctions, you know, can range from financial in
          nature to adverse inferences to losing the case[.]43

          On November 18, 2014, at the conclusion of a hearing during which the

deep divisions between Shawe and Elting again were apparent, I ordered that the

41
     Tr. 492 (Shawe); JX-S 3 at 1; JX-S 5.
42
     Tr. of Teleconference at 5 (Sept. 26, 2014).
43
     Id. at 7-8.

                                               11
three then-pending cases be scheduled for an expedited trial on a consolidated

basis. 44 Trial was later scheduled to begin on February 23, 2015.

         F.     Shawe’s iPhone is Damaged and Discarded

         On Saturday, November 22, 2014, just four days after the Court ordered an

expedited trial, Shawe’s iPhone allegedly was damaged when Shawe visited his

brother Larry at his apartment. 45 I say “allegedly” because, as discussed below, the

phone ended up being discarded in a strange episode and was never made available

for a forensic examination.

         At some point during Shawe’s visit, the brothers went into the kitchen,

leaving Shawe’s phone in the adjacent living room with Larry’s five year-old

daughter, Ava.46 Hearing Ava scream, the brothers ran into the living room to find

Shawe’s iPhone partly submerged in a plastic cup of Diet Coke. 47 The partial

submersion, which Larry characterized as a “1 out of 100,000” shot, lasted just a

44
   See In re TransPerfect Global, Inc., 2014 WL 6810761, at *1-3 (Del. Ch. Dec. 3, 2014)
(denying motion for the appointment of a temporary custodian but noting that Elting had
“identified a number of areas of fundamental disagreement between her and Shawe that
may well support a finding of deadlock and warrant the appointment of a custodian under
8 Del. C. § 226(a)(2) after the trial of this action is held and the Court has the opportunity
to consider a full record.”).
45
     Tr. 281-82 (Larry Shawe); Tr. 496 (Shawe).
46
     Tr. 283 (Larry Shawe).
47
     Tr. 283, 285, 287 (Larry Shawe).

                                             12
couple of seconds. 48 Shawe retrieved the phone, dried it, charged it, and tried

“several techniques with the buttons” to revive it, without success.49

           The next week, before Thanksgiving, Shawe gave the phone to his “trusted

assistant” Joe Campbell, with whom Shawe shared the same office, and instructed

Campbell to attempt to revive the phone. 50 Shawe did not say anything to

Campbell about the outstanding discovery requests or remind him about the

Litigation Hold Notices. 51

           After taking possession of the phone, Campbell tried to recharge it and

unsuccessfully searched Google for solutions.52 He did not contact Apple or visit

the Apple Store eight blocks from his office,53 nor did he solicit aid from TPG’s

forensics team. 54 After making some modest efforts to revive the phone, Campbell

said he put the phone in the drawer of his office desk. 55 The story of what

allegedly happened with the phone next is bizarre.

48
     Tr. 286-87 (Larry Shawe).
49
     Tr. 497, 589-90 (Shawe).
50
     Tr. 308 (Campbell); Tr. 497-98, 597 (Shawe).
51
     Tr. 312 (Campbell).
52
     Tr. 310 (Campbell).
53
     Tr. 311 (Campbell).
54
     Id.
55
     Tr. 293 (Campbell).

                                            13
         According to Campbell, sometime in December 2014, he opened his desk

drawer where he had left Shawe’s iPhone and concluded from seeing “some

droppings” in the drawer that a rat had invaded the desk—which was located on

the 39th floor of a commercial office building at 3 Park Avenue—and chewed on a

PowerBar.56 Campbell claims that, in a “visceral” reaction, he tossed the contents

of the drawer, including the iPhone, into the garbage. 57 Campbell had been a

paralegal for five years and was a recipient of both Litigation Hold Notices.58 His

claim that he threw out the phone because of rat droppings is inexplicable.

         G.     The December 11 Expedited Discovery Order

         On December 2, 2014, Elting moved for expedited discovery in aid of a

motion for sanctions she later filed (the “Sanctions Motion”) based on her

discovery, on November 25, 2014, that Shawe had accessed and reviewed her

personal Gmails, including emails with her counsel. On December 11, I entered an

order granting this motion (the “Expedited Discovery Order”), finding that

expediting discovery was “urgently necessary to protect Elting’s rights and the

integrity of these proceedings and related actions.” 59

56
     Tr. 294-95, 313-14 (Campbell).
57
     Tr. 294, 296 307, 314 (Campbell).
58
  Tr. 307 (Campbell); JX 5; see also Tr. 330 (Campbell) (admitting he would not have
thrown out the phone if he had recalled the Litigation Hold Notices).
59
     JX-S 6 at 2.

                                          14
          The Expedited Discovery Order granted discovery on an expedited basis into

“[t]he full extent of, and reasons for, Shawe’s attempt to access Elting’s Gmail,”

including the “identity and role of all persons who assisted Shawe in such conduct

and who were aware (or should have been aware) of such conduct (and when).”60

It directed Shawe to respond to Elting’s interrogatories and document requests, and

permitted Elting to depose “Shawe and other individuals who either assisted Shawe

in accessing Elting’s Gmail . . . or individuals who were otherwise involved or

knew of Shawe’s conduct.” 61 The Expedited Discovery Order also permitted

Elting to take forensic discovery of Shawe’s “computers, telephones, and any other

devices or systems that may contain information relevant to the issues presented in

the Expedited Discovery Motion.”62

          Campbell could not recall with specificity when he discarded the phone.63 It

is thus not clear whether it was discarded before or after the Expedited Discovery

Order was entered. But Campbell estimated that Shawe did not ask him about the

60
     Id. at 2-3.
61
     Id. at 3-4.
62
     Id. at 4.
63
     See Tr. 314 (Campbell).

                                           15
status of the iPhone until January 2015, at which point Campbell told Shawe he

had thrown the phone out. 64

         H.     Shawe Deletes Files from His Laptop Before it is Imaged

         After the Expedited Discovery Order was entered, Shawe continued to use

his laptop for nine days, 65 until an image of the laptop was made on December 20

(the “December 20 Image”).           Crucial to the pending motion, Shawe deleted

approximately 19,000 files from the laptop on December 19, the day before the

December 20 Image was made. 66 The deletions on December 19 took three forms.

         First, Shawe added files to, and then emptied, the recycle bin on his

computer.67 The recycle bin is where users send files they wish to delete, but the

files sent there generally are not actually deleted unless the bin is emptied, in

which case the space on the hard drive once dedicated to the data is no longer

protected and may be overwritten. 68 Shawe was not a regular emptier of his

recycle bin. Forensic evidence shows that files dating back to August 2014 were
64
     Tr. 292-94 (Campbell).
65
   Noting that Shawe’s hard drive was over 95% full on December 11 when the
Expedited Discovery Order was entered, Elting argues that Shawe’s continued use of the
laptop “likely caused data in unallocated space of the hard drive to be overwritten” so as
to spoliate evidence. Elting Op. Br. 20-21. I have considered the cited testimony
carefully but the record is too inconclusive for me to make any finding on this issue.
66
     Tr. 553-54 (Shawe); JX-S 10 at 4.
67
     Tr. 65-67 (Schilo).
68
     Tr. 58-59 (Schilo).

                                           16
still in his recycle bin on December 19. 69 On the evening of December 19, Shawe

added several thousand more files to his recycle bin and then emptied it.70

         Second, Shawe cleared his temporary internet files, which included the

histories of three different internet browsers Shawe used dating back to August

2013 (Explorer and Firefox) and January 2014 (Chrome). 71 Browser histories can

be an important source for forensic examination because, for example, temporary

internet files can disclose email searches and identify files the user considered

important enough to open.72

         Third, Shawe deleted temporary files created by application software, which

included evidence of his use of NUIX to review Elting’s Gmails.73

         Shawe’s own expert, Bandemer, testified that a total of 18,970 files were

deleted from Shawe’s laptop on December 19. 74 As discussed below, Shawe

testified at the Merits Trial that he did not delete any files from his laptop before

the December 20 Image was made. 75 That testimony was plainly false.

69
     Tr. 66 (Schilo).
70
     Tr. 66-67 (Schilo).
71
     Tr. 235 (Bandemer).
72
     Tr. 68-72 (Schilo).
73
     Tr. 79-80 (Schilo).
74
     Tr. 232-33 (Bandemer).
75
     Tr. 620-21 (Shawe) (quoting Trial Tr. 875 (Feb. 25, 2015)).

                                             17
         A significant part of the Sanctions Hearing focused on the ability of the

forensic experts to recover information Shawe deleted from his laptop before it

was imaged on December 20 using a “volume shadow copy” of the computer’s

hard drive that the Windows operating system automatically generates

periodically. A volume shadow copy constitutes a “snapshot” of the hard drive

that “freezes all the files at that date” so that one can “roll back to the files that

existed as of those dates.” 76 The December 20 Image contained volume shadow

copies that were generated on December 8, 12, 16, and at 12:06 p.m. on December

19. Bandemer testified that he was able to recover most of the files Shawe deleted

from his laptop using the December 19 volume shadow copy. 77 Despite these

efforts, as Bandemer admitted, and as Elting’s expert (Schilo) agreed, 1,068 out of

the 18,970 files that Shawe had deleted from his laptop were unrecoverable. 78

         I.     The December 20 Image and Richards’ Departure

         On December 20, nine days after entry of the Expedited Discovery Order,

Wudke made an image of Shawe’s laptop using a forensics program called

76
     Tr. 59-62 (Schilo); see also Tr. 220, 234 (Bandemer).
77
     Tr. 222 (Bandemer).
78
  Tr. 233, 243, 260 (Bandemer). The unrecoverable files consisted of those that were
created after the volume shadow copy was created around noon on December 19 and
deleted before the December 20 Image was made. Tr. 233, 260 (Bandemer).

                                              18
EnCase. 79 Even though EnCase permits the user to identify the image-maker,

Wudke omitted that information in creating the December 20 Image. 80 At Shawe’s

request, Wudke did not document his work, as he normally would do for a client

when imaging a hard drive.81

         Also on December 20, Richards left for Europe. 82 Before doing so, he

deleted all of his text messages. 83 Richards testified that no one told him to

preserve his text messages and that he would not have deleted them had he been so

instructed. 84

         J.      Shawe Deletes More Files on his Laptop on December 22

         On December 22, 2014, Shawe again deleted significant amounts of

information from his laptop computer. Specifically, Shawe sat with Wudke in

front of his laptop and identified approximately 22,000 files that he wanted Wudke

to delete. 85 Wudke deleted the files Shawe selected using a program called

CCleaner, which Bandemer, Shawe’s forensic expert described as “a specialty

79
     Tr. 340-41 (Wudke).
80
     Tr. 53 (Schilo).
81
     Tr. 375-77 (Wudke).
82
     Tr. 457 (Richards).
83
     Tr. 458 (Richards).
84
     Tr. 458-59 (Richards).
85
     Tr. 32 (Schilo); Tr. 343-44, 378-81 (Wudke).

                                             19
software program designed for the purpose of deletion, with the result that files and

information would be permanently erased from the computer.” 86 Wudke used

CCleaner’s “secure” mode, which makes recovery of files “really hard” even for a

forensic examiner.87 As a certified fraud examiner, Wudke is bound by an ethics

code, which requires members to “comply with the lawful orders of the courts.” 88

But Shawe did not tell Wudke about the Expedited Discovery Order.89

         The files Shawe instructed Wudke to delete on December 22 included

Elting’s privileged Gmails with her lawyers on a range of topics, 90 and files that

were personal to Elting and relevant to the Merits Trial.91 The subject matter of

86
     Tr. 344 (Wudke); JX-S 29 ¶ 22.
87
     Tr. 33 (Schilo), 344 (Wudke).
88
     Tr. 394-95 (Wudke); JX-S 46.
89
     Tr. 382 (Wudke).
90
     JX-S 23 ¶ 23.
91
  Files personal to Elting included her personal banking statements, Kramer Levin’s
detailed invoices, a confidentiality agreement between Elting and an investment bank,
recommendations to Elting about money managers, and an email about Elting’s personal
credit line. Files relevant to the Merits Trial included a statement by a TransPerfect
employee alleging supposed harassment by Elting, communications about Shawe &
Elting LLC, emails reflecting Shawe’s monitoring of the interactions of the Company’s
Chief Information Officer (Yu-Kai Ng) with Deloitte on document production, emails
concerning Shawe’s use of Ng to obtain access to software blocking emails from Kramer
Levin, an Elting Gmail to TransPerfect IT Director George Buelna concerning
Boodram’s computer access, an email reflecting Shawe’s knowledge of NUIX software,
and emails between Elting and Boodram on payroll issues. See JX-S 23 ¶ 21.

                                         20
these deletions belie Shawe’s attempt to rationalize his deletion of information out

of concern for the security of his “personal, medical, and privileged” information.92

         K.     Shawe’s Expert Discovers the December 22 Deletions

         On December 22, 2014, Shawe’s counsel engaged Bandemer to assist in

procuring information from Shawe’s laptop to provide to Elting’s counsel in order

to comply with the Expedited Discovery Order. 93 Shawe did not tell Bandemer

about his December 22 deletions or the December 20 Image that Wudke had

created.94

         On December 26, Bandemer received Shawe’s laptop by Federal Express.

He immediately imaged it, and began creating a file listing. 95 In doing so, he

observed artifacts signaling the use of CCleaner, i.e., many of the files had been

renamed with “random Z characters.”96 Bandemer reported his findings about the

deletions to Shawe’s counsel on January 9, 2015. 97 On January 12, Shawe flew to

San Diego to deliver the December 20 Image to Bandemer in person.98 On January

92
     Tr. 502, 509 (Shawe).
93
     Tr. 195-99 (Bandemer); JX-S 9.
94
     Tr. 244, 272 (Bandemer).
95
     Tr. 199-200, 244 (Bandemer).
96
     Tr. 200 (Bandemer).
97
     Tr. 201 (Bandemer); JX-S 10 at 5.
98
     Tr. 274 (Bandemer); Tr. 516 (Shawe).

                                            21
16, 2015, Shawe’s professional responsibility counsel, Ronald Minkoff, sent a

letter to Elting’s counsel, which was filed with the Court the same day, disclosing

the post-December 20 deletions to Shawe’s laptop. 99 The letter reported that: “Mr.

Shawe states as follows: After the Court issued the Expedited Discovery Order,

Mr. Shawe continued to use his personal laptop in the ordinary course of business.

At that time, he did not believe that the Expedited Discovery Order required him to

disclose personal, medical or privileged material to Ms. Elting’s counsel or anyone

else.” 100 The letter continued, stating that counsel had “recently learned” that

Shawe had asked an “assistant to make a full forensic copy of the personal laptop,

which was completed on December 20, 2014,” and then “to delete certain files so

as to produce the personal laptop with only the files relevant to the ‘limited

discovery’ surrounding Elting/Kramer Gmails ordered by the Court.”101 The letter

did not identify the referenced “assistant,” and it did not disclose Shawe’s

December 19 deletions.102

99
     JX-S 10.
100
      Id. at 4.
101
      Id. at 5.
102
      Id.

                                        22
            Shawe testified he did not tell his lawyers about the deletion of files on his

laptop until after Bandemer noticed them. 103 This is consistent with Minkoff’s

representation in his January 16 letter that counsel had “recently learned” that

deletions were made to Shawe’s laptop.104

            L.    Shawe Provides False Interrogatory Answers

            Shawe was scheduled for deposition about Gmail issues on January 20,

2015.         The night before, Shawe verified under oath amended responses to

interrogatories Elting had propounded. 105 Shawe’s sworn responses were false in

several important respects.

            Interrogatory No. 5 asked Shawe to “Identify and describe each instance in

which You have accessed the hard drive of Elting’s TransPerfect computer.” 106

Shawe referenced only the New Year’s Eve incident.                He omitted the other

occasions when he took Elting’s computer from her office and brought it to Wudke

to extract information from it. 107

            Interrogatory No. 17 asked Shawe to “[i]dentify every person who may have

knowledge of any facts concerning Your downloading a replica ‘.pst’ file of
103
      Tr. 582 (Shawe).
104
      JX-S 10 at 5.
105
      JX-S 11.
106
      Id. at 6.
107
      Id.

                                              23
Elting’s Gmail account.         For each person identified, describe the knowledge

possessed by each such person.”108 In response, Shawe listed 27 people, five of

whom he added in amending his responses. 109 Shawe did not identify Wudke.

            Interrogatories 20, 21 and 23 asked Shawe to identify persons with

knowledge of facts concerning, or who may have assisted him, in accessing or

reviewing documents on Elting’s hard drive. 110 Shawe answered by swearing that

“there are no persons other than his counsel . . . with knowledge of any facts

concerning his ‘accessing or reviewing documents stored on the hard drive of

Elting’s TransPerfect computer,’” that “no other person assisted him in

downloading replica ‘.pst’ files of Elting’s Gmail emails,” and that “no person

assisted him in accessing Elting’s Gmail emails.” 111            Once again, Shawe

concealed Wudke’s involvement.

            M.     Shawe Provides False Testimony at His Deposition

            Shawe appeared for deposition on January 20. During the deposition, Shawe

again provided false testimony to conceal Wudke’s involvement in accessing

108
      Id. at 12.
109
      Id. at 12-13.
110
      Id. at 15-16.
111
      Id.

                                            24
Elting’s hard drive as well his involvement in deleting information from Shawe’s

laptop.

            When asked about the New Year’s Eve extraction of information from

Elting’s hard drive, Shawe omitted Wudke from the story. 112 Instead, he falsely

claimed to have imaged Elting’s hard drive “personally” and to have exported the

files himself using equipment he borrowed from Wudke.113

            When asked to identify the “assistant” mentioned in Minkoff’s January 16

letter who had helped Shawe delete information from his laptop just 30 days

earlier, Shawe testified that it was Richards, 114 and that he had “tasked Mr.

Richards” both with making “a mirror image copy” and with selecting and deleting

supposedly “personal, privileged, or medical” documents.115 According to Shawe,

Richards not only was the person who made the deletions—Richards was the

person who decided which files to delete.116

            It was convenient for Shawe to name Richards as his accomplice because

Shawe knew at the time that Richards was quitting his job with Shawe and heading

112
      Shawe Dep. 65-66 (Jan. 20, 2015).
113
      Id. at 66, 68-69.
114
      Id. at 142-43.
115
      Id. at 153.
116
      Id.

                                           25
home to his family in the state of Washington. 117 At 8:49 a.m. on January 20,

shortly before Shawe’s deposition, Richards sent Shawe a text message that said,

simply, “Godspeed.” 118 Knowing that Richards would be gone and difficult to

track down before the rapidly approaching Merits Trial, Shawe used Richards as a

scapegoat.

         N.     Further Disputes as the Merits Trial Approaches
         On January 23, 2015, Elting’s counsel reported to the Court her concerns

that Shawe had spoliated evidence on his laptop and had failed to comply with the

Expedited Discovery Order by, among other things, not making his laptop

available for inspection. On January 28, Shawe’s ethics counsel responded, stating

that “Shawe understands the seriousness of ‘spoliation’ concerns arising out of his

efforts to provide responsive information,” and representing to the Court (with

bold text in the original) that “Mr. Shawe arranged for a full forensic image of his

personal laptop … on December 20, 2014, before any files were removed from the

laptop.”119 That representation, which only could have been made with Shawe’s

knowledge and approval, was false because, as discussed previously, Shawe had

117
      Tr. 424, 460 (Richards).
118
      JX-S 43 at 30.
119
      JX-S 13 at 1-2.

                                         26
deleted almost 19,000 files from his laptop the day before the December 20 Image

was made.

          On February 2, 2015, after hearing argument on an application to require

Shawe to comply with the Expedited Discovery Order, the Court issued another

Order finding that “Shawe has failed to allow Elting to conduct forensic discovery

of computers, telephones, and other devices or systems in his possession, custody,

or control that may contain information relevant to the issues presented in the

Expedited Discovery Motion, despite Elting having requested on multiple

occasions that Shawe comply fully with the Expedited Discovery Order.” 120 I

further ordered that Shawe produce to Deloitte the December 20 Image within 72

hours. 121 Three days later, on February 5, Shawe sought “clarification” of this

Order to allow Bandemer to oversee and limit Deloitte’s inspection of the

devices.122 I rejected that application the same day. 123 Only at this point, with less

than three weeks to go before the Merits Trial was scheduled to begin, did Deloitte

receive the December 20 Image. 124

120
      JX-S 15 at 2.
121
      Id. at 3.
122
      C.A. No. 9700-CB, D.I. No. 336.
123
      C.A. No. 9700-CB, D.I. No. 337.
124
      Tr. of Post-Hearing Oral Arg. 157 (Apr. 27, 2016).

                                             27
          On February 11, 2015, during another pre-trial hearing, Shawe’s counsel

acknowledged that Shawe had made no effort to preserve or collect his text

messages.125 Shawe also informed the Court for the first time that his “prior phone

broke in November [2014],” with his counsel expressing uncertainty “what the

state of being able to retain those . . . text messages is” while suggesting the

presence of “a forensic consultant who will do that investigation.” 126 Shawe was

ordered to produce personal emails and “text messages that involve any

communications with any of the 32 employees that were the subject of subpoenas”

Elting had served previously. 127 His counsel also was to provide a certification

“regarding whether any deletions occurred to” Shawe’s text messages or Gmails. 128

          On February 15, 2015, Shawe produced two weeks’ worth of text messages

with the subpoenaed employees, a total of 537 text messages, many of which were

125
      Hr’g Tr. 59, 63-64 (Feb. 11, 2015).
126
      Id. at 66-67.
127
   Id. at 76-77. Shawe frequently communicated with Company employees through
personal emails and text messages. In November, Elting had served subpoenas on 32
employees to obtain such communications, but counsel that Shawe hired for them
objected to the subpoenas and the employees refused to produce documents to Elting
without a fight. C.A. No. 9700-CB, D.I. 178, Ex. 43. Thus, the most practical way to
obtain Shawe’s personal emails and text messages with the employees in time for the
Merits Trial was to get them from Shawe.
128
      Hr’g Tr. 77 (Feb. 11, 2015).

                                            28
relevant to the issues in the case. 129 That same day, Minkoff stated in an affidavit

that “Shawe has been unable to locate” his cell phone.130

            On February 19, 2015, the Court held a pre-trial conference and heard

arguments on several motions in limine, including whether to order production of

Shawe’s communications involving Richards.131 With respect to Shawe’s missing

iPhone, counsel for Shawe represented that they were “looking into [locating the

phone] even as we speak” and said that a “niece of Mr. Shawe’s named Ava

dropped his phone into a Coke.” 132 Counsel continued, stating: “It is a work in

progress to try to track it down [and it] may still exist, Coke and all. And it was

handled by a TransPerfect employee who assists Mr. Shawe . . . as I understand it,

he will attest that when he got it, it was in no condition for salvage or could not be

salvaged. He [Campbell] has that technical ability.” 133 The last statement grossly

overstated Mr. Campbell’s “technical” abilities with iPhones.

            Also on February 19, the Court ordered Shawe to produce communications

with Richards, including text messages, from the 30-day period before and after

129
      See JX-S 18 at 6, 12, 19; Hr’g Tr. 100-05 (Feb. 19, 2015).
130
      JX-S 17 ¶ 10.
131
      Hr’g Tr. 163-86 (Feb. 19, 2015).
132
      Id. at 126-27.
133
      Id.

                                              29
“the date on which e-mails were deleted from Mr. Shawe’s laptop.”134 The Court

ordered that Richards produce the same documents, noting that, according to

representations by Shawe and his counsel, Richards “[p]resumably[ ] [is] acting

under Mr. Shawe’s control and should take the direction to produce such

information.”135 Shawe did not disclose at this time that Richards already had quit

working for him.

          Of the text messages Shawe produced after the February 19 hearing, nearly

200 were between Richards and Shawe.136 The texts ended on January 15, 2015.

They did not include the “Godspeed” text of January 20.137

134
      Id. at 183-85.
135
      Id. at 184.
136
   JX-S 21. The Court also conducted during trial an in camera review of
communications between Shawe and Richards over which privilege had been asserted,
and ordered the production of many of these documents. See C.A. No. 9700-CB, D.I.
No. 486.
137
   Elting argues that the failure to produce the “Godspeed” text message from Richards
violated the Court’s February 19 order. That order, which was delivered orally, required
the production of text messages between Shawe and Richards 30 days before and 30 days
after “the date on which emails were deleted from Mr. Shawe’s laptop.” Given that the
focus at the time was on deletions Shawe made after the December 20 Image was made,
the “Godspeed” text message of January 20 should have been produced. I am not
prepared, however, to find that the failure to do so was done in intentional disregard of a
court order because of the imprecise wording of the oral ruling.

                                            30
         O.     Shawe Testifies Falsely at the Merits Trial and Submits a False
                Affidavit During Post-Trial Briefing

         The Merits Trial began on February 23, 2015. During the third day of trial,

Shawe falsely testified (again) that it was Richards who made the December 20

Image and that it was Richards who performed the deletions on his laptop:

         Q.     When you gave your laptop to Mr. Richards, you instructed him
                to make a full backup or mirror image of everything stored on
                the laptop; correct?

         A.     Correct.
         Q.     But you also instructed him at that same time to delete
                everything from the computer that he did not regard as
                responsive to Ms. Elting’s discovery; correct?
         A.     My words were redact and sequester everything that didn’t have
                – that was personal, that didn’t have to do with the Gmails,
                such as my family photos and things like that.
         Q.     Yeah. But you left it up to him to decide what was responsive
                or relevant and what wasn’t; right?
         A.     That’s correct. . . . 138

Shawe also falsely disclaimed any knowledge of how the December 20 Image was

made and which files had supposedly deleted:

         Q.     Let me ask you this, Mr. Shawe: Do you know how the image
                was made?
         A.     I don’t.

         Q.     Do you know where it was made?

         A.     I don’t.
138
      Trial Tr. 871-72 (Feb. 25, 2015).

                                            31
          Q.        Do you know exactly what files Mr. Richards deleted?

          A.        I do not know exactly what files, but I do know that from
                    comparing the subsequent image that I gave to the original
                    image, you could – you could figure that out.139

          Shawe again concealed Wudke’s role in making the December 20 Image and

in deleting files from the laptop, and Shawe acted as if someone else selected the

files to be deleted when it was Shawe who directed which files to delete. Shawe

also failed to mention Wudke in the context of the December 31, 2013 search of

Elting’s office,140 and he falsely testified that no deletions were made before the

December 20 Image was created:

          Q.        Now, Mr. Shawe, even before you gave your laptop to Mr.
                    Richards, you yourself deleted or had someone else with
                    technical skill delete files from that device, didn’t you?
          A.        I -- I don’t think that’s true, no.

          Q.        Are you certain of that, Mr. Shawe?
          A.        I didn’t have anyone delete anything from the laptop. There
                    would be no purpose.

          Q.        Did you?
          A.        No. 141
          Once again, it was convenient for Shawe to use Richards as the fall guy to

conceal Wudke’s involvement.                The same day Shawe provided the testimony

139
      Id. at 875.
140
      See id. at 861-64.
141
      Id. at 875.

                                                   32
quoted above during the Merits Trial, his counsel disclosed to the Court that

Richards had “resigned from his position as a paralegal at the end of January,” and

that, despite “efforts to get in contact with him since that time,” Richards “is not

responsive” to either Shawe or counsel.142

          On April 3, 2015, in connection with post-trial briefing, Shawe submitted an

affidavit in opposition to the Sanctions Motion in which he reiterated the lie that

Richards was the person who made the December 20 Image and who deleted files

from his laptop:

          I understand Ms. Elting also claims that I subsequently spoliated
          electronic files relating to the Elting Gmails as well as text messages
          relating to discovery issues in these actions. This is also untrue. After
          first instructing my paralegal Nathan Richards to make a mirror image
          of my laptop – and thereby preserve it – I requested that he delete
          certain irrelevant, personal information that I feared would be misused
          by Ms. Elting. No relevant information on that laptop was lost. 143

In the same affidavit, Shawe swore that Campbell “misplaced” his damaged

iPhone and that it “cannot be located.”144 This statement also was false because, as

142
      Id. at 605.
143
      JX-S 28 ¶ 3.
144
   Id. ¶¶ 3, 25. In a brief accompanying this affidavit, it was stated that Campbell was
“unable to revive the device and therefore discarded it,” as if one followed from the
other. Tr. 325-26 (Campbell). That characterization does not square with Campbell’s
version of events.

                                             33
Shawe knew from speaking to Campbell months before Shawe signed his affidavit

on April 3, Campbell did not “misplace” Shawe’s iPhone – he had thrown it out. 145

          P.         The Merits Opinion and the Sanctions Hearing

          On August 13, 2015, the Court issued the Merits Opinion. Based on false

testimony Shawe provided at trial and his concealment of Wudke’s involvement

through repeated false statements under oath, the Merits Opinion incorrectly states

that it was Richards who had assisted Shawe in deleting files from his laptop, when

in reality it was Wudke who had done so.146

          As noted in the Merits Opinion, Shawe objected to having the Sanctions

Motion decided based on facts not admitted at trial, such as affidavits that had been

submitted by the computer forensic experts. 147 For this reason, and given the

seriousness of the issues raised in the Sanctions Motion, I deferred ruling on it

pending the holding of an evidentiary hearing. On November 13, 2015, the Court

entered an order scheduling the Sanctions Hearing for January 7-8, 2016.

145
   As discussed above, Campbell testified during the Sanctions Hearing that he told
Shawe in January 2015 that he had thrown the phone out. Tr. 292, 296-97 (Campbell).
Campbell also testified that he told Shawe’s lawyers the full story of the iPhone,
including that he had thrown it out, but the date of this meeting is a matter of dispute. In
his deposition before the Sanctions Hearing, Campbell initially placed the date of his
meeting with Shawe’s lawyers in January 2015, but he submitted an errata sheet changing
that answer to say the meeting with Shawe’s lawyers occurred on March 16, 2015, which
is how he testified at the Sanctions Hearing. Tr. 315 (Campbell).
146
      2015 WL 4874733, at * 24.
147
      Id. at * 25.

                                             34
         On November 25, 2015, a newly retained member of Shawe’s legal team

(David L. Finger) emailed Elting’s counsel to add Wudke to Shawe’s previously

exchanged witness list, saying that he had “just learned” that Wudke “was the

party who, at Nate Richards’ request, made the forensically valid copy of the hard

drive of Mr. Shawe’s laptop.”148 This disclosure prompted Wudke’s deposition,

during which the true nature of his involvement in the extraction of information

from Elting’s hard drive, the creation of the December 20 Image, and the

subsequent deletion of files from Shawe’s laptop all came to light for the first time.

         At the Sanctions Hearing, Shawe continued to insist that his concern about

his laptop involved only “personal” files. 149     Shawe professed to be confused

between Wudke and Richards,150 he recalled Wudke as a “passive” participant151

who was kept on a “need-to-know” basis, 152 but Shawe ultimately did not dispute

Wudke’s testimony. 153

148
      JX-S 37.
149
      Tr. 577 (Shawe).
150
      Tr. 555-59 (Shawe).
151
      Tr. 531 (Shawe).
152
      Tr. 538 (Shawe).
153
      Tr. 485, 556 (Shawe).

                                         35
II.      LEGAL ANALYSIS

         A.     Legal Standard
         Delaware follows the “American Rule” under which courts generally do not

award attorneys’ fees to prevailing parties in litigation. 154 A well-recognized

exception to this rule is when the “losing party has ‘acted in bad faith, vexatiously,

wantonly, or for oppressive reasons.’” 155 “The purpose of this exception is not to

award attorney’s fees to the prevailing party as a matter of right, but rather to

‘deter abusive litigation in the future, thereby avoiding harassment and protecting

the integrity of the judicial process.’” 156 Delaware courts have shifted fees upon

finding that a party “delayed the litigation, asserted frivolous motions, falsified

evidence and changed their testimony to suit their needs.” 157 “[A]ny one of these

findings alone would be sufficient to justify a shifting of fees,”158 and the “Court of

Chancery has broad discretion in fixing the amount of attorney fees to be

awarded.”159

154
      Kaung v. Cole Nat’l Corp., 884 A.2d 500, 506 (Del. 2005).
155
   Brice v. State Dept. of Corrs., 704 A.2d 1176, 1179 (Del. 1998) (quoting Alyeska
Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 258-59 (1975)).
156
      Id. (quoting Schlank v. Williams, 572 A.2d 101, 108 (D.C. 1990).
157
      Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 546 (Del. 1998).
158
   ATR-Kim Eng Fin. Corp. v. Araneta, 2006 WL 3783520, at *22 (Del. Ch. Dec. 21,
2006) (Strine, V.C.) (awarding attorneys’ fees where defendant “engaged in a deliberate
pattern of obfuscation ranging from the obstruction of legitimate discovery requests, to
the presentation of baseless and shifting defenses, and ultimately to the telling of outright
                                             36
       Because the remedy of shifting fees for bad faith is an extraordinary one, the

“bad faith exception is not ‘lightly invoked.’” 160 To shift fees, “a finding that the

defendants acted in bad faith must be based upon clear evidence.” 161 In its most

stringent formulation, the Court of Chancery has held that “the bad faith exception

only applied when the party in question displayed ‘unusually deplorable

behavior.’” 162

       Shawe’s conduct meets all of these standards. For the reasons discussed

below, clear evidence adduced at the Sanctions Hearing establishes that Shawe

acted in bad faith and vexatiously during the course of this litigation in three

respects which, in my view, constitute unusually deplorable behavior: (1) by

intentionally attempting to destroy information on his laptop computer after the

Court had entered an order requiring him to provide the laptop for forensic

lies under oath and the submission of a phony defense . . . .”), aff’d, 930 A.2d 928 (Del.
2007) (TABLE).
159
  Johnston, 720 A.2d at 547; accord Kaung, 884 A.2d 500, 506 (“The Court of
Chancery’s discretion is broad in fixing the amount of attorneys’ fees to be awarded.”)
160
   Auriga Cap. Corp. v. Gatz Props., 40 A.3d 839, 880 (Del. Ch. 2012) (Strine, C.)
(quoting Nagy v. Bistricer, 770 A.2d 42, 64 (Del. Ch. 2000)), aff’d, 59 A.3d 1206 (Del.
2012).
161
    Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225 (Del. Ch. 1997),
aff’d, 720 A.2d 542 (Del. 1998).
162
    ATR-Kim, 2006 WL 3783520, at *23 (quoting Barrows v. Bowen, 1994 WL 514868,
at *2 (Del. Ch. Sept. 7, 1994) (Allen, C.), and describing that test as “more stringent than
that articulated recently by our Supreme Court in Kaung v. Cole National Corp.”).

                                            37
discovery, (2) by, at a minimum, recklessly failing to safeguard evidence on his

phone, which he regularly used to exchange text messages with employees and

which was an important source for discovery, and (3) by repeatedly lying under

oath to conceal aspects of his secret extraction of information from Elting’s hard

drive and the deletion of information from his laptop.

         B.     Shawe Intentionally Sought to Destroy Evidence He Was
                Judicially Ordered to Make Available for Forensic Discovery
         On December 11, 2014, the Court entered the Expedited Discovery Order. It

followed the initiation of litigation in May, the service of discovery requests from

Elting, and the issuance of two Litigation Hold Notices (in April and September)

that should have made it abundantly clear to Shawe many months earlier that he

had a duty to preserve electronic information. But the Expedited Discovery Order

went further. It explicitly granted Elting leave to conduct forensic discovery of

Shawe’s computers, phones and other devices concerning his review of Elting’s

Gmails, and it specifically directed Shawe “to allow and cause to be allowed any

such forensic discovery.”163 Shawe’s laptop computer indisputably was central to

and fell within the ambit of the Expedited Discovery Order.

         A court order is a serious matter and should be treated with the utmost

gravity. One reasonably would expect that Shawe, faced with the mandate of a

163
      JX-S 6 ¶ 6 (emphasis added).

                                         38
court order requiring him to allow “forensic discovery” of his electronic devices,

immediately would have turned over his laptop to a member of his vast legal team

(which was in the process of engaging the assistance of a forensic computer expert)

to ensure that all the information on it was preserved. But, in a very calculated and

devious way, Shawe chose a different path.         He proceeded on two separate

occasions, in secret and without the assistance of counsel,164 to delete a substantial

amount of information from the laptop. “The most natural inference that arises

when sophisticated people act secretively in a process that is governed by a court

order and that has been placed under the purview of counsel to ensure compliance

is that they have something to hide.” 165 Here, no such inference is necessary

because the record shows that many of the deleted files that were recovered were

directly relevant to the Merits Trial. 166 More broadly, the record shows, and I find,

that the intended purpose of Shawe’s actions was to make information unavailable

for the required forensic discovery in direct contravention of the Expedited

Discovery Order. But for two fortuitous events, Shawe would have succeeded.

         The first set of deletions, consisting of almost 19,000 files, occurred on

December 19. All but 1,068 of these files eventually were recovered through use

164
      See supra Part I.K.
165
      TR Investors, 2009 WL 4696062, at *9.
166
      See supra Part I.H.

                                              39
of the volume shadow copy system in the laptop’s operating system. Tellingly, the

record is devoid of any evidence that Shawe expected that the files he deleted on

December 19 would be recoverable. He did not testify that he was familiar with

the volume shadow copy system generally, or how it operated on his laptop

specifically, such as how often and when it would generate images of the laptop’s

hard drive. Based on all the evidence, and having observed Shawe’s demeanor in

trying to explain why he would delete files before making a mirror image of his

laptop, I conclude that Shawe fully intended and attempted to destroy a substantial

amount of information from his laptop on December 19 but, through the fortuity of

the volume shadow copy system, was unsuccessful in doing so in a permanent and

irretrievable manner. Being an ineffective spoliator does not negate the intention

to spoliate.167

       The second set of deletions, consisting of approximately 22,000 files,

occurred on December 22. Unlike the December 19 deletions, the record does not

support the inference that Shawe intended to destroy these files permanently

because he already had created the December 20 Image from which the deletions

could be restored. 168 That is not to say that the December 20 deletions were

167
   See TR Investors, 2009 WL 4696062, at *9 (“Admittedly, this was a clumsy effort.
But tricksters are often ham-handed, and they are not absolved of wrongdoing simply
because their improper conduct was not completely effective.”)
168
   Technically, as Wudke testified and the experts agreed, one would not be able to
recover files created and deleted between the making of the December 20 Image and the
                                         40
proper. To the contrary, Shawe intended to make these files unavailable for the

forensic review in a different way—by trying to sneak one past his computer

expert, who had just been hired. In pursuit of this plan, Shawe sent his laptop to

Bandemer without disclosing to him (or to Shawe’s own counsel) that he had

deleted information from it on December 19 and 22.             It was not until after

Bandemer discovered evidence of deletions and reported his findings to Shawe’s

lawyers that Shawe sent him the December 20 Image. No logical reason comes to

mind why Shawe would do this except the obvious one—he was hoping to get

away with it and made the December 20 Image to use as a “get out of jail free

card” in case he got caught.

         Shawe seeks to justify the deletions he made because the scope of discovery

in the Expedited Discovery Order was “limited to the issues surrounding the Gmail

account emails,” and it did not “order Shawe’s laptop immediately impounded or

imaged.” 169 That “justification” is meritless. The central point of the Expedited

Discovery Order was to make Shawe’s laptop (and other devices) available for

time the December 22 deletions were made. Tr. 52 (Schilo); Tr. 247-49 (Bandemer); Tr.
383-84 (Wudke). The loss of this information, however, is not a basis for sanctions in
my view. Although one may need to supplement a discovery response in certain
circumstances, see Ct. Ch. R. 26(e), no authority has been provided in which an
obligation has been imposed to continually image a computer to comply with the
discovery rules. The core of the wrongdoing at issue here stems from Shawe’s failure to
safeguard the information on his laptop promptly after the Expedited Discovery Order
was entered, before engaging in two rounds of deletions.
169
      JX-S 6, 4-5.

                                          41
“forensic discovery” concerning Elting’s Gmails. It was not a license to self-

define the universe of information to be searched forensically.

         The record shows, furthermore, that Shawe—who chose the files to delete

from his laptop on both occasions—caused the deletion of Elting Gmails and

documents about them from his laptop, including a “Partner” folder that contained

Elting Gmails that Shawe felt were important or noteworthy; voicemails from

Elting’s lawyers, which he obtained as attachments to Elting’s Gmails; and records

of searches Shawe conducted of his own Gmails for references to Elting’s

Gmails. 170      Thus, even under his own erroneous reading of the Expedited

Discovery Order, Shawe intentionally violated it. The nature of these deletions

also squarely puts the lie to Shawe’s rationalization that he was just seeking to

remove personal information from the laptop.

         Because of the volume shadow copy system on his laptop and because of

Bandemer’s intervention, all of the approximately 41,000 files that Shawe deleted

from his laptop ultimately were recovered except for 1,068 files. It is not possible

to know with certainty what information was contained in these unrecoverable

files. 171 Ordinarily, one would infer in this circumstance that the destroyed

170
      Tr. 71-72, 75-77 (Schilo); Tr. 578-79 (Shawe).
171
   Bandemer testified that “those files were largely of the temporary type of files
associated with Internet browsing and the kinds of files such as history files, the graphics,
icons, the type of things that get downloaded to your computer when you browse the
                                             42
information would be adverse to the spoliator’s litigation position. 172 Giving

Shawe every benefit of the doubt, I am reluctant to draw such an inference here

because the files that were destroyed logically must have been both created and

deleted within a very narrow window between when the volume shadow copy

snapshot was made on December 19 and when Wudke imaged Shawe’s laptop on

December 20, 173 and because this narrow window occurred after the Expedited

Discovery Order had been entered.          Thus, I consider the possibility that the

unrecoverable files concerned Elting’s Gmails to be rather remote.

Internet.” Tr. 233 (Bandemer). The basis for this testimony is not clear to me and, in any
event, Bandemer could not account for all of the 1,068 permanently deleted files.
172
    Beard Research, 981 A.2d at 1192 (“[D]rawing an adverse inference is appropriate
when an actor is under a duty to preserve evidence while being consciously aware of a
risk that he or she will cause or allow evidence to be spoiled by action or inaction and
that risk would be deemed substantial and unjustifiable by a reasonable person.”); see
also Equitable Trust v. Gallagher, 102 A.2d 538, 541 (Del. 1954) (“It is the duty of a
court, in such a case of wil[l]ful destruction of evidence, to adopt a view of the facts as
unfavorable to the wrongdoer as the known circumstances will reasonably admit. The
maxim is that everything will be presumed against the despoiler.”); Triton, 2009 WL
1387115, at *9 (“In the case of [defendant’s] Work Computer, the availability of the
ghost copy presumably supplies most of the missing information. To the extent there are
any significant gaps, however, it is appropriate to infer that the missing information
would have supported [plaintiff’s] position on any issue to which that information was
relevant.”); TR Investors, 2009 WL 4696062, at *16 (“For a party to intentionally violate
an order not to destroy or tamper with information and then to claim that he did little
harm because no one can prove how much information he eradicated takes immense
chutzpah. For a court to accept such a defense would render the court unable to govern
situations like this in the future, as parties would know that they could argue extenuation
using the very uncertainty their own misconduct had created.”).
173
      Tr. 233, 260 (Bandemer).

                                            43
       Although I am not convinced that Shawe’s laptop deletions resulted in the

permanent destruction of relevant evidence, his conduct prejudiced Elting’s ability

to litigate effectively, drove up the costs of the litigation, and wasted the Court’s

resources. As a result of Shawe’s actions, Elting did not receive access to the

information on Shawe’s laptop until the first week of February—almost two

months after the Expedited Discovery Order was entered on December 11, and less

than three weeks before the Merits Trial was scheduled to begin on February 23.

Shawe’s attempts to spoliate documents on his laptop necessitated last-minute

diversions to discover the facts before an already expedited trial, necessitated

collateral proceedings within the Merits Trial, and precipitated the need for the

Sanctions Hearing.174

       C.     Shawe Recklessly Failed to Safeguard Evidence on His Cell Phone
       A party in litigation has a duty to “preserve what it knows, or reasonably

should know, is relevant in the action, is reasonably calculated to lead to the

discovery of admissible evidence, is reasonably likely to be requested during

174
   See Auriga, 40 A.3d 839, 881 (“[Defendant] and his counsel also created evidentiary
uncertainty by . . . having [defendant], who appears not to have been adequately
counseled by his legal advisors, delete relevant documents while litigation was either
pending or highly likely. The constant presentation of arguments that were not plausible
resulted in excess work by the court and, most important, by counsel for the [plaintiffs].”)

                                            44
discovery and/or is the subject of a pending discovery request.” 175 Shawe’s

missing cell phone fits into each of these categories.

         Shawe frequently used text messages to communicate with employees of

TPG and others who worked for him personally, such as Richards.               Those

communications were an important source of discovery that were reasonably

calculated to yield information relevant to the Merits Trial, such as evidence of

deadlocks between the Company’s co-CEOs and the bias of witnesses who

testified on Shawe’s behalf. Indeed, many text messages retrieved from Shawe’s

next phone provided relevant evidence at the Merits Trial. 176

         It was reckless for Shawe not to take measures to safeguard the information

on his phone early in the merits litigation. By September 2014, Shawe knew he

had a duty to preserve this information as he was embroiled in multiple litigations

in Delaware as well as in New York, discovery had been served on him, and two

Litigation Hold Notices that covered text messages had been issued, including one

he issued himself.

         The timing of the “1 out of 100,000” submergence of Shawe’s iPhone into a

plastic cup of Diet Coke—coming just four days after an expedited trial was

175
   TR Investors, 2009 WL 4696062, at *17 (quoting Zubulake v. UBS Warburg LLC, 220
F.R.D. 212, 217 (S.D.N.Y. 2003)); see also Beard Research, 981 A.2d at 1185; Kan-Di-
Ki, LLC v. Suer, 2015 WL 4503210, at *29 (Del. Ch. July 22, 2015).
176
      See supra Part I.N.

                                          45
ordered—raises an eyebrow of suspicion about what really happened to the phone.

But the evidence concerning the loss of the phone is palpably suspicious.

Campbell’s story of having such a “visceral” reaction to seeing rat droppings in his

office desk drawer that he spontaneously threw out the phone is so preposterous

that it is not even recounted in Shawe’s own brief.

      The record also shows that Shawe has a demonstrated propensity to use

subordinates firmly under his control to do dirty work for (and with) him in secret,

off the grid, and usually late at night. He turned to Wudke late on New Year’s Eve

(and other occasions) to extract files from Elting’s hard drive and told him not to

document what he was doing even though he insists it was part of a legitimate

“corporate” investigation. He hired Richards as his “personal paralegal” at the

princely rate of $30,000 per month despite having a number of reputable law firms

with vast resources at his disposal, and immediately tasked him with

photographing Elting’s office and removing documents from it in the wee hours of

the morning. When it came to his iPhone, he turned to another trusted subordinate,

Campbell, who sits next to him in the same office in New York. Given Shawe’s

modus operandi and Campbell’s farcical explanation of what happened to the

phone when Elting was pressing for discovery of Shawe’s text messages, it is more

likely that Shawe told or otherwise made it clear to Campbell to get rid of the

phone. In any event, whether Shawe did so or not is of no moment because, at a

                                         46
bare minimum, he recklessly failed to take appropriate measures to preserve the

phone so that genuine efforts to recover information from it could have been

utilized.

         Shawe is the co-CEO of a company specializing in e-discovery, which

employs personnel qualified to conduct forensic recovery of damaged devices,177

and which has relationships with other professionals who can assist if needed.178

Shawe was represented by an able team of counsel, who engaged a forensic

computer expert 179 and who easily could have engaged an expert in data recovery

if Shawe had been genuinely interested in trying to recover evidence on his phone.

Faced with an embarrassment of riches in terms of professionals to whom he could

turn to recover data from his phone, Shawe instead inexplicably chose to give the

phone to a subordinate under his control who had no forensic training in retrieving

data from a phone.180 Campbell’s sole experience is that his own phone once fell

into a toilet and it worked after he let it dry. 181 To top it off, Shawe gave the phone

to Campbell without providing him even minimal instructions about why he
177
      Tr. 307 (Campbell); Tr. 388 (Wudke).
178
      Tr. 389 (Wudke).
179
   Tellingly, in the one instance when Shawe turned one of his devices to someone not
under his control (Bandemer), as opposed to one of his subordinates, he was caught in an
act of deception.
180
      Tr. 307 (Campbell).
181
      Tr. 288, 307-08 (Campbell).

                                             47
wanted him to attempt to revive the phone, the need to preserve the evidence given

the pending litigations, or even about ensuring an appropriate chain of custody.

       Taking into account all evidence of record, I find that Shawe’s failure to

safeguard information on his phone earlier in the litigation (certainly by September

2014) and his decision to entrust his damaged phone to Campbell amounted to a

reckless failure to safeguard evidence.              Delaware Courts have defined

“recklessness” in this context as “as a conscious awareness of the risk that one’s

action or inaction may cause evidence to be despoiled.” 182 Given Campbell’s

limited capabilities and Shawe’s lack of instructions regarding preservation

obligations, Shawe was aware, or certainly should have been aware, that giving

Campbell the cell phone created—at a minimum—a high risk of losing evidence.

As with Shawe’s laptop deletions, his actions prejudiced Elting by making it

impossible for her to search an important source for relevant evidence before the

182
   TR Investors, 2009 WL 4696062, at *17 (citing Beard Research, 981 A.2d at 1192
(“Reckless conduct reflects a knowing disregard of a substantial and unjustifiable risk. It
amounts to an ‘I don’t care attitude.’”).

                                            48
Merits Trial, 183 and by needlessly protracting and increasing the cost of the

litigation. 184

         D.       Shawe Knowingly Provided False Testimony
         Under Delaware law, “[a] person is guilty of perjury in the third degree

when the person swears falsely.” 185 “Perjury is obvious bad faith.” 186 Shawe’s

repeated false statements under oath during the course of this litigation plainly

support the conclusion that Shawe subjectively acted in bad faith to obstruct

discovery and conceal the truth about activities relevant to this case.

         Shawe’s false statements under oath concerning the deletions to his laptop,

the concealment of Wudke’s role in those deletions and in the extraction of emails

from Elting’s hard drive, and the nature of Richards’ involvement (or lack thereof)

183
   As noted previously, Elting served subpoenas on 32 employees of the Company in
order to obtain their personal emails and text messages with Shawe, but that discovery
was essentially shut down after Shawe hired counsel for them. See supra. note 127.
Even if that avenue were available, it is no defense to one’s reckless failure to safeguard
evidence. See Kan-Di-Ki, 2015 WL 4503210, at *30 (rejecting defense to spoliation of
text messages based on failure to produce “other-ends”).
184
    Citing to documents outside the Sanctions Hearing record, Shawe seeks to deflect
attention from his actions by focusing on Elting’s handling of her electronic devices. See
Ans. Br. 13. Those matters are irrelevant to the issues before the Court. See Kan-Di-Ki,
2015 WL 4503210, at *30 (rejecting defense to spoliation of text messages based on
plaintiff’s own failure “to produce a large number, or perhaps any, text messages of its
own.”).
185
      11 Del. C. § 1221.
186
   Arbitrium, 705 A.2d at 236 n.44 (quoting Bower v. Weisman, 674 F.Supp. 109, 112
(S.D.N.Y. 1987)).

                                            49
in these activities, took seemingly every form imaginable. As detailed above,

Shawe provided false statements on these topics (1) in his sworn interrogatory

responses in January 2015, (2) during his deposition on January 20, 2015, (3) on

the witness stand at the Merits Trial, and (4) in an affidavit submitted on April 3,

2015, after the Merits Trial.

      Shawe’s testimony that he may have confused Richards with Wudke when

testifying about who deleted the files from his laptop strains all credibility. Shawe

was in the same room with Wudke directing him to make the deletions on

December 22, less than 30 days before he was deposed on January 20. Having

observed Richards and Wudke at trial, they do not lend themselves to confusion in

their physical characteristics or their computer skills. Wudke was a qualified

computer expert, who knew exactly how to image a hard drive and to securely

delete files. Richards was a makeshift “paralegal” who had no such skills.187

      During his deposition, when he falsely fingered Richards for the December

22 deletions, Shawe knew that Richards was quitting his tour of duty with Shawe

and leaving town. Just that morning, Shawe had received the “Godspeed” text

message from him.        Shawe was not confused, but was very deliberate in

perpetuating a lie because he knew Richards would be difficult to track down

187
  Richards was not even in the country on December 22, 2014—he was in London.
Shawe knew this at the time. On December 24, Shawe sent Richards a “text asking how
Europe was and wishing [him] Merry Christmas.” Tr. 450-51 (Richards).

                                         50
before the Merits Trial. Wudke, on the other hand, was a current TPG employee

who easily could have been available for deposition and trial testimony concerning

the laptop deletions, which likely would have shed light on other aspects of

Shawe’s secret activities. In short, Shawe used Richards as a convenient fall guy

to prevent Wudke from being deposed in order to conceal the truth about Shawe’s

extraction of Elting’s Gmails and laptop deletions.

         There also is no excuse for Shawe’s failure to identify Wudke in his sworn

responses to Elting’s interrogatories, which specifically called for the identity of

every person knowledgeable about accessing Elting’s hard drive or the making a

replica of the “.pst” file of her Gmails. 188 Wudke again was in the same room as

Shawe when this occurred. This was not an act of confusion—it was one of

concealment to prevent the truth of Shawe’s activities from being discovered and

probed.

         In sum, I find that Shawe’s pervasive false statements under oath concerning

who assisted him in accessing Elting’s hard drive and the deletions made to his

laptop were made intentionally to conceal the truth of his surreptitious activities.

These actions had the effect of obstructing the administration of justice, prejudiced

Elting’s ability to fully develop the record at the Merits Trial, and protracted the

188
      JX-S 11 (Interrogatory Nos. 17, 20, 21, 23 and 27).

                                              51
proceedings.189 They also had another pernicious effect. As noted above, Shawe’s

false testimony misled the Court and caused Richards to be identified mistakenly

in the Merits Opinion as a participant in the December 22 deletions to Shawe’s

laptop.190 Richards credibly testified that he was “horrified” when he saw this.191

         E.     Remedy

         “In determining what remedy to award for spoliation, the court should

consider (1) the culpability of the spoliating party; (2) the degree of prejudice

suffered by the aggrieved party; and (3) the availability of lesser sanctions that

could both avoid unfairness to the aggrieved party and serve as an adequate penalty

to deter such future conduct.” 192 More generally, “[t]o award fees under the bad

faith exception, the party against whom the fee award is sought must be found to

have acted in subjective bad faith.”193 The Court evaluates the totality of a party’s

189
    See Hardy v. Hardy, 2014 WL 3736331, at *18 (Del. Ch. July 29, 2014) (“false
statements under oath, among other things, warrant fee shifting” in a case where behavior
by defendants “unnecessarily increased [plaintiff’s] litigation expenses.”)
190
      2015 WL 4874733, at *24.
191
   Tr. 450 (Richards). This Court has sanctioned bad faith conduct by a defendant which
evidenced “a willingness to put an innocent administrative employee of his at risk by
falsely suggesting” actions taken by that employee. ATR-Kim, 2006 WL 3783520, at *2;
see also id. at *7 (“[Defendant] seems to have created this fiction in order to set up a
phony defense to this court’s jurisdiction and to claim that [the employee] was
responsible for any misfeasance at the [company] . . . –a futile exercise in ‘plausible
deniability.’”).
192
      TR Investors, 2009 WL 4696062, at *18 (citing Beard Research, 981 A.2d at 1189).
193
      Arbitrium, 705 A.2d 225, 232.

                                            52
misconduct to determine whether the party litigated in bad faith and to determine

the amount of fees to award.194

         As to each category of conduct discussed above, Shawe’s bad faith has been

proven by clear evidence. His deletions to the laptop on December 19 and 22—

done in secret, without the involvement of counsel, and in the face of a court

order—were done intentionally for the purpose of making files unavailable for the

forensic discovery the Court had ordered. Shawe may not have succeeded in his

goal because of events beyond his control—the fortuity of the laptop’s volume

shadow copy system and Bandemer’s intervention—but that does not negate his

illicit intent. His failure to safeguard evidence from his iPhone, an important

source of discovery given his frequent use of text messages, by not safeguarding it

in the first place and by turning the allegedly damaged phone over to a subordinate

under his firm control who was not competent to recover information from it was,

at a minimum, reckless, and potentially much worse. And his repeated, intentional,

making of false statements under oath concerning the laptop deletions and the

extraction of Gmails from Elting’s hard drive was flagrant and calculated—the

epitome of subjective bad faith.

         Each form of Shawe’s misconduct prejudiced Elting’s ability to fully

develop the record for, and needlessly complicated the litigation of, the Merits

194
      ATR-Kim, 2006 WL 3783520, at *22.

                                          53
Trial. Shawe’s actions also necessitated holding a second evidentiary hearing to

address the issues raised by the Sanctions Motion.

       In exercising its discretion to determine an appropriate sanction for bad faith

and vexatious litigation conduct, 195 this Court has shifted a portion of, and on

occasion the entirety of, the opposing side’s attorneys’ fees. 196 Here, the sensible

starting point is to shift to Shawe all reasonable attorneys’ fees and expenses

(including expert expenses) Elting incurred in prosecuting the Sanctions Motion.197

An additional amount is appropriate because Shawe’s bad-faith misconduct

significantly complicated and permeated the litigation of the Merits Trial, from at

least December 2, 2014, the date on which Elting sought expedited discovery in aid

of her later-filed Sanctions Motion, until its conclusion.            For that period, an

195
    See, e.g., Johnston, 720 A.2d at 547; Kaung, 884 A.2d at 506; see also Beard
Research, 981 A.2d at 1189 (“The Court has the power to issue sanctions for discovery
abuses under its inherent equitable powers, as well as the Court’s ‘inherent power to
manage its own affairs.’”); Ct. Ch. R. 37(b)(2) (“If a party . . . fails to obey an order to
provide or permit discovery, . . . the Court may make such orders in regard to the failure
as are just.”).
196
   See, e.g. ATR-Kim, 2006 WL 3783520, at *23 (defendant, whose conduct “made the
procession of the case unduly complicated and expensive . . . easily qualifies for an order
requiring him to pay [plaintiff’s] attorneys’ fees and expenses.”); Arbitrium, 705 A.2d at
237 (Because “bad faith conduct . . . permeated virtually [the] entire litigation, that alone
would justify an award of all of the plaintiffs’ attorneys’ fees.”)
197
   See, e.g., TR Investors, 2009 WL 4696062, at *19 (“because [defendant’s] misconduct
has occasioned great expense, I award [plaintiffs] their reasonable attorneys’ fees and
expenses related to the motions for contempt and spoliation.”); Kan-Di-Ki, 2015 WL
4503210, at *30 (awarding plaintiff “the reasonable attorneys’ fees and expenses it
incurred in filing and prosecuting its Motion for Sanctions.”).

                                             54
appropriate sanction is to shift to Shawe a reasonable percentage of the attorneys’

fees and expenses Elting incurred in connection with the Merits Trial because

Shawe’s misconduct unduly complicated and drove up the costs of that

proceeding. 198 Based on my deep familiarity with the twists and turns of this case,

33% is a reasonable approximation to compensate Elting fairly for that time period.

       To sum up, as a sanction for the conduct discussed above, Shawe will be

ordered to pay Elting the following amount: (1) 33% of her attorneys’ fees and

expenses incurred in connection with the litigation of the Merits Trial (including

computer expert expenses but not including other experts) from December 2, 2015

up to the resolution of the Merits Trial, i.e., the date on which the Merits Opinion

was issued, plus (2) 100% of her attorneys’ fees and expenses (including computer

expert expenses) incurred in connection with the litigation of the Sanctions

Hearing.

198
   In cases where shifting the entirety of fees was not appropriate, this Court has used
percentage approximations to determine an appropriate amount of fees to shift. See, e.g.,
Auriga, 40 A.3d at 881, 882 (awarding 50% of “reasonable attorneys’ fees and costs”
where behavior by defendant and his counsel “made this case unduly expensive for
[plaintiffs] to pursue”); HMG/Courtland Props., Inc. v. Gray, 749 A.2d 94, 124-25 (Del.
Ch. 1999) (Strine, V.C.) (awarding plaintiff “half of [its] total fees and expenses left after
[defendant] pays fully for the costs incurred by [plaintiff] in connection with: i) its
successful motions to compel” and other specific costs occasioned by defendant’s
misconduct); Preferred Inv. Servs., Inc. v. T & H Bail Bonds, Inc., 2013 WL 3934992, at
*26-27 (Del. Ch. July 24, 2013) (awarding 80% of reasonable attorneys’ fees and
expenses where bad faith actions “reflect[ed] a flagrant disregard or inexcusable
ignorance of a litigant’s obligation to preserve its documents, including its electronically
stored information”).

                                             55
III.   CONCLUSION
       For the foregoing reasons, Elting’s motion for sanctions is granted. Elting is

directed to prepare and file with the Court within ten business days an

implementing order stating the amount of the reasonable attorneys’ fees and

expenses she incurred during the periods described above, along with an affidavit

documenting the same. The implementing order shall provide for the sanction to

be paid within ten business days of entry of that order.

                                         56