The Intersection Of Section 230, SLAPP Threats, The Streisand Effect And Sex Discrimination In Corporate Structures

from the so,-so-much dept

Make sure you read the update at the end

This is a story that appears like it was created just to get Techdirt coverage, given how many issues we cover it touches on. Here's how it starts: Tulane law professor Ann Lipton, an expert on corporate governance and corporate law, wrote an academic paper about "Capital Discrimination." It's really interesting, and you should read it -- and a lot more people have been reading it over the last few days because of the situation I'm about to describe. The gist of the paper is that sex and gender discrimination happens in disputes regarding corporate structures/ownership, but that we don't generally have language in typical discussions of corporate ownership that recognize this very real dynamic. The article highlights multiple examples where courts try to apply the more traditional language of corporate ownership disputes in cases where there is clearly an element of sex discrimination.

One of the examples cited is In re: Shawe & Elting LLC, et al., which involves a somewhat incredible dispute between two people, Philip Shawe and Elizabeth Elting, who founded a company together, Transperfect Global. Without getting into all of the sordid details, Shawe and Elting had been in a relationship very early on, around the time of the formation of the business. At some point they were engaged to be married, though, according to the documents, Elting called off the engagement in 1997. From all of the details discussed in the opinion in the legal dispute between them, one could surmise that Shawe and Elting -- despite working together as co-CEOs, being the only two members of the board, and building up the company into a massive success, employing thousands of employees, and making hundreds of millions of dollars in revenue a year -- spent an awful lot of time fighting with each other in incredibly immature ways. It seems like they had been able to work together semi-amicably for over a decade after their personal relationship broke off, but things went off the rails sometime around 2012. The opinion linked above has detail after detail of incredibly petty and ridiculous behavior, sometimes on both of their parts, but quite frequently driven by Shawe. Here's just one example from the ruling:

On February 6, 2013, Elting was asked to approve a bonus for an employee working in one of the divisions (TDC) Shawe managed. Elting was willing to approve the bonus if Shawe approved other “raises that [were] being held up.” Intent on eliminating dual approvals, Shawe would not sign off on the raises Elting wanted to implement unless she would agree that “other small TPT/TDC decisions go through with eitherpartner’s approval...to avoid hostaging and eventual nuclear war.” Elting would not agree: “No, Phil. Not how it works here . . . the arrangement is to share it all with both of us. If there is good justification and transparency I will never hold things up.” Shawe would not relent. He instructed Boodram not to release any of the raises: “They will remain hostaged... until we figure out how to make decisions in general without hostaging.” The episode was played out in an email string on which many of the Company’s senior managers were copied.

In an email exchange on February 14, 2013, Shawe put a new hire for one of Elting’s divisions (TPT) “[o]n hold” to pressure Elting to abandon dual approvals. Kevin Obarski, Senior Vice President of Sales, who was copied on the email string, chimed in with a private email to Shawe telling him that he was acting like a child:

You told me in New Orleans that I should tell Liz when she is being crazy- This is me telling you that you are being crazy. I know you are going through a tough time- but you are acting like a child, ruining the rep that you have spent two decade[s] to build and all for what. Because you need to run things by people. It is wasting your own and everyone’s time- just so you can be right. Who cares about being right. We are about to change the world and you are wasting your energy and time on something that does not matter.

In his private response to Obarski, Shawe revealed his plan to “create constant pain” for Elting until she acquiesced to his demands. He wrote, in relevant part:

I will not run small things by anyone for my divisions. I will make decisions for my division...and I will hold up Liz’s TPT stuff till they are pushed through. I cannot fight on every small decision. I cannot and will not live that way. I will not change my position. I will simply create constant pain until we go back to the old way of doing things...

There are multiple stories along these lines -- many of which appeared to be petty disputes between two co-CEOs posturing over who had power (there's a side issue in which technically Elting owned 50% of the business and Shawe 49%, but the other 1% was ostensibly held by Shawe's mother, in order to take advantage of being a "majority woman-owned business," but in practice, Shawe controlled his mother's share, so it was a 50/50 company). Many of the business disputes seem incredibly counter-productive, and seem to involve trying to make life difficult for the other one by delaying/hindering business decision making. As they argued, some of the behavior went into really, really questionable territory:

On the evening of December 31, 2013, when he knew “[w]ith virtual certainty” that Elting would not be in her office, Shawe secretly accessed her locked office on four different occasions using a master key card with the intent to obtain the hard drive from her computer. Having gained this access, Shawe dismantled Elting’s computer, removed the hard drive, made a mirror image of it, and reinstalled the hard drive later that night. A log of the key card access reflects that Shawe entered Elting’s office on New ear’s Eve at 4:29 p.m., 5:34 p.m., 7:22 p.m., and 7:47 p.m. Shawe began reviewing the contents of the hard drive image the next day.

In addition to breaking in to Elting’s computer, Shawe arranged to access the hard drive on her office computer remotely. Using the personal identification number he had previously obtained from the back of Elting’s computer, he mapped to her hard drive from his computer through the Company’s computer network. Shawe accessed Elting’s computer in this manner on at least twenty separate occasions from April 3, 2014, to July 23, 2014. At some point, either through reviewing the hard drive image or his remote access snooping (he could not remember precisely when or which method he used), Shawe discovered that there was a .pst file of Elting’s Gmails on her hard drive. Thereafter, when Shawe remotely accessed Elting’s hard drive, he downloaded a replica of the .pst file of Elting’s Gmails (each later .pst file having accumulated more of Elting’s Gmails) to thumb drives so he could view Elting’s Gmails privately on his laptop, which allowed him to conceal what he was doing. Through these stealthy actions, Shawe 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. Presumably concerned about the nature of Shawe’s actions, Sullivan & Cromwell LLP, Shawe’s lead litigation counsel in this Court, told him at the outset of its retention in March 2014 not to send information about the substance of Elting’s Gmails to anyone at the firm.

But some of the issues go way beyond arguments over how the business should be run or how its finances should work -- including some pointers that suggest odd behavior in response to the failure of the personal relationship. From a footnote:

Elting’s testimony on these events gives color to her and Shawe’s relationship. After the break-up, Shawe became very angry and “got under the bed and he stayed there for at least a half hour.” Shawe repeated the same bizarre behavior years later when Elting was in Buenos Aires, Argentina, on business. Shawe showed up unannounced at Elting’s hotel room, refused to leave and again “got under the bed” for about a half hour. Shawe also oddly invited himself and his mother (Ms. Shawe) to Elting’s wedding in Montego Bay, Jamaica. Id. 13-17 (Elting). Shawe did not deny taking any of these actions.

You can see how this dispute was of interest to Lipton's paper. It's one of multiple examples that fits right in and she quotes from the opinion directly. A draft of her paper was uploaded (like many pre-publication papers) to the Elsevier-owned SSRN website, and it was scheduled to be published in the Houston Law Review. However, if you go to the SSRN link now it shows the following:

This paper has been removed from SSRN at the request of the author, SSRN, or the rights holder.

It was not removed at the request of the author or of "the rights holder." It was removed by SSRN because Shawe had a lawyer send a ridiculous SLAPPy cease-and-desist letter, claiming that the law review article was defamatory. The cease and desist, from lawyer Martin Russo demands that the article be removed.

‘The defamatory article defines “capital discrimination” as “when women principals experience sex discrimination” and then incorrectly identifies four alleged instances of litigated cases, including one involving Mr. Shawe, that demonstrate “The Many Faces of Capital Discrimination.” The article admits that "sex discrimination was neither alleged nor proved,” but nonetheless falsely asserts that the lack of allegations and proof was "because there is no clear avenue of recourse” and that “these stories exemplify instances where firm ... partners acted against ‘women principals for reasons that at least appear to have stemmed from the. principals’ status as women, and the managers’ relationship to the principals specifically as women... What these scenarios have in common is that the managers may have acted because of the woman's sex.”

“The first of several false examples of alleged discrimination is called “Clash of the Founders,” and details certain findings of the Delaware Chancery Court regarding Mr. Shawe’s alleged conduct. After one paragraph about a failed romantic relationship between Elizabeth Elting and Mr. Shawe in 1999, the article: factually ignores 12 years of profitable joint business operations to arrive at the 2012 disagreements between the co- CEOs over the direction of the company. What follows are anecdotes plucked from the record which have no obvious connection to sex or gender except for the fact that the co-CEO/founders were aman and a woman. Without any factual basis, the article falsely states *[rJeading the Delaware court’ findings and the parties’ submissions, the gendered aspects of the conflict are difficult to miss.” In fact, the gendered aspects of the conflict are dificult to find, because they do not exist. The article then goes on to more specifically falsely accuse Mr. Shawe of so-called capital discrimination by “refusing to pay dividends” and “making a low-ball buyout offer” to his former partner. Finally, the article falsely states, in the absence of any claim or proof of sex or gender-based conduct, that if ‘Shawe’s stalking and undermining of Elting’s authority had been identified as gender-based harassment, his breach of fiduciary duty to the TransPerfect corporation may have persuaded the court to impose a non-competition order, allowing for a sales process that would have been more favorable to Elting."

The crux of Shawe's complaint is that their legal dispute had nothing to do with their previous relationship, and was entirely a more traditional business dispute. But... that's an opinion. As is Lipton's opinion regarding how it relates the thesis of her paper. And, opinions are not defamatory. Other elements in the paper, including the references to Shawe's terrible behavior, seem obviously protected under fair reporting privilege. Honestly, the crux of Shawe/Russo's complaint is that they don't like how Lipton characterizes the nature of the dispute, but that's easily protected opinion and not defamatory.

Also, if Shawe wants to contend that the behavior at issue in the lawsuit was solely because of differences in how the business should be run, and not having anything to do with his failed personal relationship with Elting, he maybe should not have done the following, as detailed in the court's opinion:

Shawe sought to have Elting criminally prosecuted by referring to her as his ex-fiancée seventeen years after the fact when filing a “Domestic Incident Report” as a result of a seemingly minor altercation in her office.

So, maybe it wasn't Lipton who was connecting the failed relationship with the business dispute -- perhaps it was Shawe himself who sought to make use of the failed relationship claim to give him leverage in the business dispute, including seeking to have Elting criminally prosecuted by filing a "domestic incident report."

Given all of this, it's hard to see the cease and desist letter as anything more than blustery nonsense. But, ridiculously, SSRN pulled the paper, as has the Houston Law Review. To their credit, Lipton's employer, Tulane University is standing behind her:

The article is a thorough and meticulously-source scholarly work. The factual assertions regarding Mr. Shave are sourced from publicly-available court opinions and filings in the litigation between Mr. Shawe and his former business partner. The source of each statement is set forth in the Article's footnotes. The “cease and desist” letter of December 23, 2021, does not contend that the facts attributed to Mr. Shawe are false. Rather, the letter takes issue with the Article's conclusions and commentary on the facts presented (i.e., that Mr. Shawe’s conduct is an example of sex discrimination).

The Article’s conclusions constitute opinions protected by the First Amendment. As the United States Supreme Court has observed, “[u]nder the First Amendment there is no such thing. as a false idea. However pernicious an opinion may seem, we depend for its correction not on the conscience of judges and juries but on the competition of other ideas.”

Furthermore, it is well-settled that a statement of opinion based on fully disclosed facts is not actionable unless the stated facts are themselves false and defamatory. The rationale behind this rule is clear: When the facts underlying a statement of opinion are disclosed, readers understand they are getting the authors interpretation of the facts presented. “Because the reader understands that such supported opinions represent the writer's interpretation of the facts presented, and because the reader is free to draw his or her own conclusions based upon those facts, this type of statement is not actionable in defamation."

The letter also points out to SSRN that no terms of service have been violated, and they believe SSRN should repost the article.

So combine this all together and we have a situation in which Shawe is angry about how he is portrayed in the paper, but that doesn't make it defamatory. The cease and desist letter has all the hallmarks of a frivolous SLAPPy legal threat. It highlights no false statements of fact, but merely calls out the statements of opinion made by Lipton in her paper, which are based on the facts that -- again -- Shawe's letter does not dispute. So this seems like a pretty blatant SLAPP threat.

Then, let's get to SSRN, which should not be pulling down the article. First, even a semi-competent review of the cease and desist would find that the defamation claims appear baseless. One would hope that SSRN would do such an analysis and not fall prey to a heckler's veto. Second, even if there were defamatory content (and again, that seems like a huge stretch), SSRN would be easily protected under Section 230. SSRN is an interactive computer service under the law, and cannot be held liable for the speech of third party content providers, such as Lipton.

In fact, this situation highlights the importance of Section 230, in that without Section 230, bumptious threats like this one would enable anyone to get just about anything pulled off of an online host. The nature of Section 230's immunity, is that it allows all sorts of different kinds of websites to host content, without having to freak out at the first sign of a legal threat over the content uploaded by a user. SSRN is within its own rights to pull down any content, of course, but the decision to do so here strongly suggests that (1) it did not carefully review the letter and the paper, or (2) that it doesn't understand how Section 230 protects it here.

Finally, there's the Streisand Effect. I'd never heard about this paper, or the dispute between Shawe and Elting. And now I and many, many, many more people have read the article (and I went and read the opinion in the Delaware Chancery Court with many, many, many more details on Shawe's behavior). So, once again, in filing a highly questionable legal threat intended to suppress this information, Shawe and Russo have only served to make people much, much, much more aware of the court record regarding Shawe's behavior.

Update... and just as I was putting the finishing touches on this post, SSRN put the paper back up. On Twitter, it explained itself as follows:

To add some detail, SSRN has always had the policy of taking down any paper related to a defamation or other legal claim while the claim was being investigated. To date, we have not had problems with this approach and I am sorry how this situation has played out. We have now had lengthy discussions with the legal department and will be amending the approach going forward. Your paper has been reposted, all counts are updated, and I apologize for the confusion.

And one can argue that taking it down while you investigate is a reasonable policy -- though a key part of the way Section 230 works is that you don't need to. And, frankly, that's the appropriate setup, because it recognizes that the potential harm from suppressing legal speech is a huge problem. In the end, though, it's good that SSRN appears to be revising its policy.

Filed Under: ann lipton, cease and desist, corporate structures, defamation, elizabeth elting, houston law review, martin russo, philip shawe, section 230, sex discrimination, slapp, streisand effect
Companies: elsevier, ssrn, transperfect global