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Court Of Chancery Imposes Sanctions For Spoliation Of Signal Messages
06/09/2026On May 26, 2026, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery imposed sanctions for the spoliation of evidence in a fiduciary duty case arising from the merger of a wrestling entertainment company (the “Company”) with a global sports and entertainment company (the “Acquiror”). In re World Wrestling Ent., Inc. Merger Litig., C.A. No. 2023-1166-JTL (Del. Ch. May 26, 2026). The Court found that the Company’s controlling stockholder and senior officers—at a minimum, recklessly— destroyed Signal chats and messages after receiving legal hold notices and that plaintiffs were prejudiced thereby because “context suggests” that the lost evidence was relevant. As a result, the Court ordered a shift of the burden of proof from plaintiffs to defendants by presuming the truth of a limited set of facts in favor of plaintiffs, subject to rebuttal only by clear and convincing evidence.
Former stockholder plaintiffs alleged that the controlling stockholder of the Company, who had previously been the Chairman and CEO of the Company, steered the sale of the Company to the Acquiror and its CEO, who was the controlling stockholder’s longtime friend, in exchange for promises regarding a senior role post-merger and assistance with federal investigations into the controlling stockholder’s alleged sexual misconduct. After receiving two legal hold notices that required preservation of text and instant messages, including an initial misconduct hold—in connection with the allegations of misconduct and related investigations—and a later sale-process related hold, the controlling stockholder and senior officers allegedly communicated using Signal’s ephemeral messaging feature and affirmatively changed the auto-deletion settings multiple times, often coinciding with key merger events. Plaintiffs moved for sanctions, arguing that defendants destroyed evidence likely related to the motivations behind the merger. Defendants countered by arguing that only the later sale-process related hold encompassed these Signal communications, Signal was used infrequently for business purposes, and the extensive documentary record produced in discovery eliminated any prejudice.
The Court first found that a relevant duty to preserve arose no later than the initial misconduct hold because the lost chats and messages could readily address both the misconduct allegations and the possibility of a transaction. The Court further determined that the sale-process-related preservation duty independently arose when litigation was reasonably foreseeable, even before a formal litigation hold was issued, given that merger litigation is sufficiently common and anticipated by sophisticated parties. The Court also found that the controlling stockholder and senior officers failed to preserve evidence and that their affirmative conduct was reckless.
The Court thus imposed two significant sanctions. First, the Court presumed a limited set of facts to be true, including, e.g., that (i) the controlling stockholder decided to pursue a transaction with the Acquiror before the Company initiated a strategic review process; (ii) the promises to the controlling stockholder about a continued role at the Company and indemnification related to the alleged misconduct influenced the controlling stockholder’s decision-making; and (iii) the controlling stockholder and the Company’s then-CEO worked with the Company’s financial advisor to steer the process toward the Acquiror and away from other potential bidders. Second, the Court elevated the standard of proof for rebutting those presumptions from a preponderance of the evidence to clear and convincing evidence. The Court explained that “[p]resuming those facts to be true forces the defendants to deal with the evidentiary uncertainty that the Signal users created,” but added that “[t]he defendants remain free to present their case at trial and convince the court to find differently.”
