TransPerfect workers submit proposal to Bar Association

A group of TransPerfect workers have submitted to the Delaware Bar Association a plan to limit the Court of Chancery's authority.

Under the plan, the court cannot immediately order the sale of a privately-held company in the event management becomes deadlocked on business issues. Instead, the court can only force a sale after three years if other remedies to resolve the deadlock have been exhausted.

If adopted, it would be the first major change to the Chancery Court's power to sell a company since 1967. The proposal has generated much debate — both nationally and locally — over the impact it could have on Delaware's corporate law reputation, a franchise that pumps more than $1.3 billion in the state's coffers annually.

TransPerfect workers, operating as Citizens for a Pro-Business Delaware, have lobbied the Legislature to change the state's corporate law after Chancery Court Chancellor Andre Bouchard concluded the New York-based translation company must be sold because its co-owners, Phil Shawe and Liz Elting have been locked in a personal feud. Bouchard said fighting between the owners created a dysfunctional atmosphere that prevented TransPerfect from moving forward with matters such as hiring employees, signing leases or opening a new office.

The decision has generated plenty of controversy. Politicians including former New York Mayor Rudy Giuliani have blasted the ruling. Shawe, who has fought the sale of the company, has appealed Bouchard's decision to the Delaware Supreme Court.

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Citizens for a Pro-Business Delaware worry the sale could impact careers and livelihoods. They fear a private equity firm or rival will use the sale to put the company out of business and cut jobs. The workers have galvanized in Delaware with a print and radio media blitz, knocking on doors and lobbying the legislature.

As part of their plan, they have submitted a proposal to modify Section 226, which grants the court's ability to sell a company, to the bar association. Traditionally, changes to Delaware Corporate Law are only approved by the General Assembly if it is endorsed by the bar association's corporate law section. If the section does not endorse the proposal, it will likely not survive a legislature vote.

Citizens for a Pro-Business Delaware propose the court appoint a director to act as the tie-breaking vote in the event of a deadlock or amend a company's bylaws to avoid a deadlock.If after three years, neither solution resolves, the deadlock, the court can move ahead with a sale.

"We are eager to have this important discussion with the section and continuing to have important discussions with elected officials and Delawareans across the state about the importance of TransPerfect jobs to so many thousands of families across the region and country," said Chris Coffey, a spokesman for Citizens for a Pro-Business Delaware. "We are confident we can find a solution in the weeks and months ahead."

Norman Monhait, the past chair of the Bar Association's Corporate Law Section, confirmed the proposal was received, but may not take any action on it for some time.

"Council has not yet met to discuss it or determine what, if any, next steps there may be," he said. "Typically the council does not complete its legislative proposals until the spring and does not publicly comment on its work in the interim."

It is not clear how receptive the General Assembly will be to any proposal. In the waning days of the most recent legislative session, Sen. Colin Bonini (R-Dover South) introduced a resolution asking the General Assembly to review the court's ability to sell a business. Bonini called Bouchard's decision "a head scratcher."

The resolution received little support. Bonini chalked up to the measure's lack of support to being introduced at the end of a session when everyone is scrambling to pass bills. Bonini cannot reintroduce the resolution until the Legislature resumes in January

While Citizens for a Pro-Business Delaware are hopeful, it is clear there will be some opposition.

Charles Elson, a professor of corporate governance at the University of Delaware, said he doesn't see the need to change the law. He said the court's power to sell a company is necessary to force solutions to deadlocks.

"This law has worked for over 50 years," he said. "There is no reason to change the law because two parties can't reach an agreement."

Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.