In re World Wrestling Entertainment, Inc. Merger Litigation

EFiled: May 27 2026 07:57AM EDT Transaction ID 79564177 Case No. 2023-1166-JTL IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN RE WORLD WRESTLING CONSOLIDATED ENTERTAINMENT, INC. MERGER C.A. No. 2023-1166-JTL LITIGATION MEMORANDUM OPINION IMPOSING SANCTIONS FOR SPOLIATION Date Submitted: May 13, 2026 Date Decided: May 26, 2026 Kimberly A. Evans, Lindsay K. Faccenda, Irene R. Lax, Robert Erikson, BLOCK & LEVITON LLP, Wilmington, Delaware; Gregory V. Varallo, Anthony M. Calvano, Tayler D. Bolton, Alexander J. Rigby, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, Wilmington, Delaware; Jason M. Leviton, Nathan Abelman, BLOCK & LEVITON LLP, Boston, Massachusetts; Rebecca Boon, Mark Lebovitch, Jonathan D’Errico, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, New York, New York; Brian J. Robbins, Stephen J. Oddo, Richard N. Lozano, ROBBINS LLP, San Diego, California; Richard A. Maniskas, RM LAW, P.C., Berwyn, Pennsylvania; Attorneys for Plaintiffs. Michael A. Pittenger, T. Brad Davey, Nicholas D. Mozal, Adriane M. Kappauf, Megan R. Thomas, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Sandra C. Goldstein, Stefan Atkinson, Haley S. Stern, KIRKLAND & ELLIS LLP, New York, New York; Attorneys for Defendant Vincent K. McMahon. William M. Lafferty, Ryan D. Stottmann, Alexandra M. Cumings, Jacob M. Perrone, Jialu Zou, Anneliese Ostrom, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Michele D. Johnson, Kristin N. Murphy, Ryan A. Walsh, Allison O’Hara, LATHAM & WATKINS LLP, Costa Mesa, California; Colleen C. Smith, LATHAM & WATKINS LLP, San Diego, California; Jordan Mundell, LATHAM & WATKINS LLP, San Francisco, California; Attorneys for Defendants Nick Khan, Paul Levesque, George A. Barrios, and Michelle D. Wilson. LASTER, V.C.  The plaintiffs contend that a corporation’s controlling stockholder steered a sale of the company to his longtime friend. In return, the controlling stockholder received a senior role at the post-transaction company and help dealing with a federal investigation into his alleged sexual misconduct. Discovery revealed that the controlling stockholder and the company’s senior officers communicated using ephemeral messages. Signal is a messaging application. Users can adjust its auto-deletion settings to apply to all their chats or to individual chats. Signal’s default setting preserves messages indefinitely, but the user can enable auto-deletion for all chats. For individual chats, any participant can enable auto-deletion or adjust the setting for all participants in the chat. That means that one participant can cause messages on another participant’s application to disappear. After receiving litigation holds, the controlling stockholder and the senior officers did not take any steps to check the settings on their Signal apps and chats. Not only that, but they manually changed the auto-deletion settings for individual Signal chats to implement short-fuse destruction periods measured in hours or less. Those changes resulted in the loss of the existing messages in those chats and meant that any future messages would quickly disappear. The plaintiffs moved for sanctions based on spoliation of evidence, including electronically stored information (“ESI”). This decision finds that spoliation occurred and that the controlling stockholder and the senior officers acted recklessly—at a minimum—in allowing the spoliation to occur.  As a consequence, the court will presume the truth of a limited number of facts relating to the conduct and motivations of two defendants: the controlling stockholder and the senior officer who openly encouraged Signal use. Presuming those facts to be true forces the defendants to deal with the evidentiary uncertainty that the Signal users created. The defendants remain free to present their case at trial and convince the court to find differently. In addition, the court will elevate the standard of proof for overcoming the presumed facts from a preponderance of the evidence to clear and convincing evidence. Elevating the burden recognizes that the plaintiffs lack access to the spoliated evidence and therefore cannot use it in their case in chief or to impeach the defendants’ testimony. Elevating the standard of proof levels the playing field by forcing the defendants to make a convincing case for their position. I. FACTUAL BACKGROUND The facts are drawn from the operative complaint and the parties’ submissions in connection with the sanctions motion.1 What follows are not formal factual findings, but rather how the record appears at this stage of the case. A. Vince And The Company Vincent K. McMahon is a larger-than-life figure in the world of professional wrestling. He co-founded World Wrestling Entertainment, Inc. (“WWE” or the 1 Citations in theform “Compl. ¶ __” refer to paragraphs of the operative complaint. Citations in the form “Ex. __ at __” refer to exhibits the plaintiffs submitted in connection with their motion for sanctions and reply brief. 2 “Company”) in 1982 with his wife Linda McMahon.2 From 1982 until 2009, Vince served as WWE’s Chairman, and Linda served as CEO. After Linda left the Company in 2009, Vince took over as CEO while continuing to serve as Chairman. Vince was always the Company’s controlling stockholder with the ability to exercise a supermajority of its outstanding voting power.3 Before the merger challenged in this litigation, the Company principally engaged in the production and distribution of wrestling entertainment content and related products. Its stock traded publicly on the New York Stock Exchange under the ticker symbol “WWE.” B. The Misconduct Allegations In March and April 2022, the Company’s board of directors (the “Board”) received a series of anonymous emails alleging that Vince had a sexual relationship with a former Company employee and paid $3 million to cover it up. Other women came forward with additional allegations of sexual harassment, sexual abuse, and hush-money payments. 2 My ordinary practice is to refer to individuals by surnames without honorifics. Because there are multiple individuals involved in the case with the surname McMahon, this decision uses their first names after their initial appearance. That usage is for clarity. It is not intended to imply familiarity or convey disrespect. 3 As of April 2, 2023, Vince owned (i) 28,682,948 shares of high-vote Class B common stock and (ii) 69,157 shares of Class A common stock. Through his holdings, Vince could wield 81% of the Company’s outstanding voting power. 3  In June 2022, the Board formed a special committee to investigate the allegations (the “Special Committee”). The results of the Special Committee’s investigation have not been made public, but the Wall Street Journal published an article detailing survivor reports about sexual harassment, sexual abuse, and hush- money payments totaling nearly $15 million. C. The Misconduct Hold On June 21, 2022, WWE’s Assistant General Counsel circulated a legal hold notice addressing the misconduct allegations against Vince (the “Misconduct Hold”). The recipients included Vince, his Chief of Staff Brad Blum, Company President Nick Khan, Chief Content Officer Paul Levesque, and his daughter and Company executive Stephanie McMahon.4 It stated: On June 15, 2022, an article was published by the Wall Street Journal which reported that WWE’s board of directors has been conducting an investigation into: a purported relationship involving . . . [Vince] McMahon and a former WWE employee; a monetary payment allegedly made by [Vince] to the former employee; a separation agreement allegedly entered into by the Company and the former employee; and, purported additional relationships between [Vince] . . . and one or more Company employees that also involve allegations of sexual relationships, monetary payments and related agreements (the “Matter”).5 The Misconduct Hold instructed its recipients that that they must “preserve and retain all documents and ESI described in this Record Hold Notice.”6 4 See Ex. 1. 5 Id. at 1. 6 Id. (emphasis in original). 4  The Misconduct Hold specified that the recipients “must suspend any procedures which you control that could delete, destroy or alter any documents or ESI, including emails, PowerPoint slides, presentations, spreadsheets, electronic documents, hard copy documents or other materials that may be relevant to the Matter.”7 The legal hold specifically referred to “instant messages” and “text messaging.”8 The legal hold later reiterated that “you must take all reasonable steps necessary to prevent the destruction or deletion of documents.”9 The legal hold further emphasized that “[i]f your settings for emails, text messages or otherwise includes automatic deletion protocols, it is your responsibility to ensure that Relevant Documents, including relevant emails and text messages, are preserved.”10 The Misconduct Hold made clear that it applied to documents created in the future. It stated: “The duty to preserve Relevant Documents applies not just to documents that already exist, but also to documents created in the future (including new emails). Accordingly, be sure to preserve all hard copy and electronic Relevant Documents that you create or that you receive in the future.”11 7 Id. at 2 (emphasis in original). 8 Id. at 3. 9 Id. (emphasis in original). 10 Id. (emphasis in original). 11 Id. (emphasis in original). 5  The Misconduct Hold cast a wide net. After instructing recipients to retain documents relevant to Vince’s alleged misconduct, the Misconduct Hold identified more specific categories, including: • “All documents that relate to or potentially relate to, involve, or concern the allegations against Vincent K. McMahon.” • “All documents that relate to or potentially relate to, involve, or concern an alleged relationship between Vincent K. McMahon and any employee of WWE.” • “All documents that relate to or potentially relate to, involve, or concern any investigation conducted by WWE regarding an alleged relationship between alleged relationship between Vincent K. McMahon and any employee of WWE.” • “All documents that relate to or potentially relate to, involve, or concern any agreements between WWE and any WWE employee in connection with the Matter.”12 The Misconduct Hold did not suggest or imply that the categories were exclusive. In other words, a document relevant both to a topic identified in the Misconduct Hold and another topic would fall within the scope of the Misconduct Hold. D. Vince’s Hiatus On July 22, 2022, one month after the issuance of the Misconduct Hold, Vince retired from his roles as CEO and Chairman. Stephanie took over as Chair. She and Khan became co-CEOs. On August 5, 2022, the U.S. Department of Justice sent WWE a request for information regarding Vince’s alleged misconduct. That same day, Khan manually 12 Id. at 2. 6 changed the auto-delete setting for a Signal chat with Vince to delete messages after one hour. The preceding day, Blum had manually changed the auto-delete setting for a Signal chat with Vince to delete messages after one hour. E. Endeavor Approaches Vince About A Deal. Endeavor Group Holdings, Inc. (“Endeavor”) is a global sports and entertainment company that owns and operates sports properties. One of its subsidiaries owns and manages the Ultimate Fighting Championship (“UFC”). Endeavor’s stock trades on the New York Stock Exchange under the ticker symbol “EDR.” Ari Emanuel is the CEO of Endeavor. He and Vince have been friends for over twenty years. Mark Shapiro is the President and Chief Operating Officer for Endeavor. On July 22, 2022, the day Vince resigned from his roles at WWE, Shapiro texted with another senior executive at Endeavor. He wrote: Nick [Khan] and Stephanie are going to take over the WWE for the next nine months. At the end of the nine months Vince [will] be back with a new board or he will take the company private or he will sell it/coming to us. The race is on. The courtship is on.13 The other executive replied, “Let’s go.”14 Shapiro’s message links the eventual merger to Vince’s hiatus from WWE and the misconduct allegations that caused it. 13 Ex. 3. 14 Id. 7  On August 8, 2022, Emanuel invited Vince to lunch on August 10. Vince suggested bringing Khan and Stephanie. Emanuel was enthusiastic. Jeff Sine is another key player in the story. He is an investment banker with The Raine Group (“Raine”) and has served as Emanuel’s longtime financial advisor. In preparation for the August 10 meeting, Sine sent Emanuel a presentation titled “Project Stunner” that described a potential deal with WWE. During the lunch on August 10, Vince, Khan, Stephanie, and Emanuel discussed a potential transaction between Endeavor and WWE. That same day, Stephanie manually changed the auto-delete setting for a Signal chat with Vince to delete messages after one hour. Eleven days later, on August 21, 2022, Sine met with Vince and reviewed a version of the Project Stunner presentation. On August 22, Emanuel texted Vince to say, “I know you met with Jeff Sine yesterday.”15 That same day, Blum manually changed the auto-delete setting for a Signal chat with Vince to delete messages after eight hours. Emanuel and Vince set up a call for the following day, August 23, 2022. On August 28, Sine proposed to switch sides and represent Vince instead of Endeavor in connection with any transaction. Vince responded enthusiastically.16 15 Ex. 5. 16 Ex. 7 (“I Love that idea Jeff” with two thumbs-up emojis). 8 F. Vince’s Discussions With Emanuel Intensify. In September 2022, Emanuel told Vince expressly that if WWE engaged in a transaction with Endeavor, then he could help Vince with the federal investigation into his alleged misconduct at WWE. In one voicemail message, Emanuel stated: I spoke to my lawyer from Latham. Just FYI. Everybody at the DOJ is former Latham lawyers so on that side will be helpful. SEC of course is SEC, but that’s just a penalty. As it relates to everything else, yes we can indemnify you and we will. If it’s criminal of course you can’t stop criminal, but this is not criminal. Call me when you get a chance.17 In another voicemail message, Emanuel stated: “I really do think that we all need to get together and talk through all the issues. Because I think whether it be the DOJ or anything, there’s ways around this to figure this out, and I don’t know what you’re hearing or thinking, so give me a call if you have five seconds.”18 Both messages link the deal with Endeavor to the misconduct allegations against Vince. In November 2022, the discussions about a deal intensified. Between November 10 and 12, Sine and Emanuel had nine separate telephone calls. On November 20, Vince asked Raine to analyze a management buyout (“MBO”). On November 21, Vince and Sine had an eight minute call. That same day, Vince asked a colleague for a draft letter pledging to reimburse the Company for the costs of investigating the misconduct allegations. Also that same day, Khan repeatedly 17 Ex. 8. 18 Ex. 9. 9 changed the auto-delete setting for a Signal chat with Vince. As a result of those changes, the chat was set to delete messages after one hour. G. Vince Returns. On December 13, 2022, Vince, Khan, and Stephanie met with Emanuel and Shapiro to continue the merger discussions. Immediately after the dinner, Vince left Sine a message telling him that he had a “very good meeting” with Emanuel and that “I think it probably is the best thing to do is to go forward with the deal with Ari.”19 He added that “it solves a lot of problems” and that “together I think it’s a stronger situation than either one of us on our own.”20 He concluded that while he had not committed to Emanuel, he was “pretty sure that’s the way I want to go now” because it was “easier, faster, and all that other kind of stuff.”21 One week later, on December 20, 2022, Vince sent a letter to the Board proposing that the Company launch a review of strategic alternatives, including a potential sale. Vince noted that any potential counterparty would likely want to speak with him and have his support as the Company’s majority stockholder. He therefore proposed that the directors invite him back as “Executive Chairman.” He asked the Board to respond by January 3, 2023. 19 Ex. 11. 20 Id. 21 Id. 10  By letter dated December 27, 2022, the Board advised Vince that it would initiate a strategic review process. The Board also stated it would welcome Vince to play a role in the strategic review process but rejected his proposal to return as a director. The Board offered to enter into a settlement with Vince under which the Company would not sue him if Vince agreed to pay for the millions of dollars the Company had incurred in investigation-related expenses. By letter dated December 31, 2022, Vince told the Board that his return to the Company was necessary and that the Board’s position was unacceptable. He stated that “unless I have direct involvement and input as Executive Chairman from the outset, I will not be able to support or approve any media rights deals or strategic transaction (including any commitments made by or on behalf of the Company regarding a potential transaction or process).”22 On the same day Vince sent his letter, Blum manually changed the auto-delete setting for a Signal chat with Vince to delete messages after one day. On January 3, 2023, the Board reiterated that it would not be in the Company’s best interests for Vince to return to the Company because of pending government investigations. Vince called Emanuel three times that day. That same day, Khan manually changed the auto-delete setting for a Signal chat with Vince to delete any messages after three hours. 22 Compl. ¶ 64. 11  On January 5, 2023, before receiving the Board’s response, Vince acted by written consent to remove three independent directors. He replaced them with two allies and himself. The next day, two independent directors resigned in protest. One was the Company’s lead independent director. The Company then issued an announcement stating that “the Board ceased to be comprised of a majority of independent directors.”23 That same day, Khan manually changed the auto-delete setting for a Signal chat with Vince, Levesque, and Stephanie to delete any messages after three hours. On January 10, 2023, Vince resumed his post as Executive Chair. Khan continued as sole CEO. Vince’s daughter Stephanie resigned to facilitate those changes. That same day, the Company announced that it was exploring strategic alternatives. The message Shapiro sent to his colleague at Endeavor on the day Vince resigned had predicted correctly what would happen. It was just happening after six months rather than nine. H. The Sale Process Begins. On January 12, 2023, the Board held a special meeting to discuss the exploration of strategic alternatives. On January 13, 2023, WWE retained Raine— Emanuel’s longtime financial advisor—as a third financial advisor. WWE had already retained J.P. Morgan and Moelis. 23 Id. ¶ 38. 12  That day also saw Vince sign a settlement agreement resolving claims of alleged sexual misconduct. He also spoke with Emanuel by phone. That same day, Vince manually changed the auto-deletion settings for two Signal chats, one with Khan and the other with Levesque. Vince changed both to delete after one day. Blum separately changed the auto-deletion setting for a Signal chat with Vince and Khan to delete after one day. On January 17, 2023, the Board’s financial advisors—Raine, J.P. Morgan, and Moelis—began contacting potential bidders. Sine and Emanuel spoke repeatedly during January. Sine called Emanuel eight times, and Emanuel contacted Sine twenty-one times. I. The Sale Process Hold On January 19, 2023, WWE’s Assistant General Counsel circulated another legal hold notice, this time addressing matters related to Vince’s return to the Company and the decision to evaluate strategic alternatives (the “Sale Process Hold”).24 The recipients included Vince, Stephanie, Khan, Blum, and Levesque. It stated: The Company has become aware of certain lawsuits that have been filed relating to recent events at WWE, including changes to the composition of the Board, amendments to the Company’s bylaws, changes to the Company’s executive team, and the investigation by the Special Committee of the Board. In addition, investigations by certain governmental entities, including the U.S. Attorney’s Office for the 24 See Ex. 13. 13  Southern District of New York and the Securities & Exchange Commission (SEC) remain ongoing.25 The Sale Process Hold explained that “it is essential that WWE and its employees preserve and retain all documents and ESI (including emails, texts and other electronic communications) described in this Record Hold Notice.”26 Like the Misconduct Hold, the Sale Process Hold specified that the recipients “must suspend any procedures which you control that could delete, destroy or alter any documents or ESI, including emails, texts and other electronic communications, PowerPoint slides, presentations, spreadsheets, electronic documents, hard copy documents or other materials that may be relevant.”27 Like the Misconduct Hold, the Sale Process Hold specifically referred to “instant messages” and “text messaging.”28 It later reiterated that “you must take all reasonable steps necessary to prevent the destruction or deletion of documents.”29 The legal hold further emphasized that “[i]f your electronic mail or text settings include automatic deletion protocols, it is your 25 Id. at 1. 26 Id. (emphasis in original). 27 Id. (emphasis in original). 28 Id. at 3. 29 Id. at 3–4 (emphasis in original). 14 responsibility to ensure that Relevant Documents, including relevant electronic mail and text messages, are preserved.”30 In addition to instructing recipients to retain documents generally relevant to the litigations and investigations, the Sale Process Hold identified more specific categories, including all documents and communications concerning: • “The investigation by the Special Committee”; • “The decision by McMahon to temporarily step down as CEO”; • “Correspondence between McMahon and the Board”; • “The written consent of January 5, 2023”; • “The negotiation and/or re-negotiation of WWE’s media rights deals”; and • “The recently-announced review of strategic alternatives.”31 Like the Misconduct Hold, the Sale Process Hold made clear that it applied to documents created in the future, stating: “The duty to preserve Relevant Documents applies not just to documents that already exist, but also to documents created in the future (including new electronic communications). Accordingly, be sure to preserve all hard copy and electronic Relevant Documents that you create or that you receive in the future.”32 30 Id. at 4 (emphasis in original). 31 Id. at 2. 32 Id. at 4 (emphasis in original). The Company issued another hold notice on May 23, 2023, that went into greater detail about the merger. See Ex. 14. The third hold did not alter any of the preservation obligations already in existence. 15 J. The Sale Process Continues. On February 6, 2023, the Company began entering into confidentiality agreements with potential bidders. The next day, Endeavor submitted a proposal to combine its UFC subsidiary with the Company to form TKO Group Holdings, Inc. (“TKO”). Endeavor envisioned a transaction in which WWE stockholders could choose between cash or stock, with the consideration valued at $88.43 per share, and with Endeavor paying a maximum of $2 billion in cash. If no Company stockholders elected to receive cash, resulting in the greatest possible dilution for Endeavor, then Endeavor would own 57% of the combined business. On February 24, 2023, the Company told interested bidders that any written indications of interest must be received by March 13. The Company did not tell potential bidders that Endeavor had submitted its offer weeks before, that Endeavor was already far along in its due diligence process, or that Emanuel and Shapiro had already met with Vince and Khan to discuss Endeavor’s offer. By March 13, 2023, the Company had received three other expressions of interest in a whole company sale. Liberty Media Corporation (“Liberty”) proposed to acquire the Company for cash in the range of $95 to $100 per share. KKR proposed to acquire the Company for cash in the range of $90 to $97.50 per share. Base 10 proposed to acquire the Company for a mix of stock and cash in the range of $76.83 per share. None of the bidders gave any indication that they intended to retain Vince. 16 K. A Post-Deal Position For Vince Becomes A Key Term. Vince and the Board did not respond substantively to Liberty, KKR, or Base 10. They negotiated exclusively with Endeavor, even though its proposal carried a lower value than the Liberty and KKR offers. On March 21, 2023, Vince and the Board countered Endeavor’s proposal with an all-stock deal with no cash election. The surviving company’s board would have eleven seats, six appointed by Endeavor and five by WWE. Emanuel would be the CEO of the combined company. The five WWE directors would select the Executive Chair. The term sheet implied a value for WWE of $95.66 per share. That value fell at the low end of Liberty’s opening range and toward the upper end of KKR’s range. On March 22, 2023, Vince and Khan met with Emanuel and Shapiro to discuss the deal. They agreed in principle to the all-equity consideration and the 51/49% split. On March 23, 2023, Endeavor submitted a revised term sheet that incorporated the new 51/49% split. It also proposed that Vince would (1) serve as Executive Chair of the combined company until his death, resignation, or incapacity, (2) select five of the eleven directors on the combined company’s board, and (3) enjoy veto rights over various corporate actions. Those rights were later incorporated in a governance agreement. The merger agreement was finalized on April 1, 2023. At the time, Emanuel, Vince, and Khan were together at Wrestlemania 39 in Los Angeles, California. On April 3, the Company announced the deal. It closed on September 12. 17 L. This Litigation Various plaintiffs now representing a class of the Company’s stockholders filed suit in November 2023. They contend that Vince and his fellow directors breached their fiduciary duties in connection with the merger. One of the plaintiffs’ principal theories asserts that Vince steered the deal to Endeavor and his friend Emanuel because he knew he would have a role with the surviving company, receive help with the legal fallout from his alleged sexual misconduct, and be indemnified. Discovery has been extensive. As part of discovery, Vince disclosed that federal agents had seized his iPhone and iPad (the “Seized Devices”) in July 2023 as part of their investigation into his alleged misconduct. Vince disclosed that there could be discoverable information on the Seized Devices that was not otherwise available because Signal stores data locally. In September 2025, the government returned the Seized Devices. Vince’s counsel conducted a forensic analysis of the Seized Devices that identified when each Signal chat was created, who participated in it, and whether any participant adjusted the retention settings. The contents of the chats, however, were no longer available. II. LEGAL ANALYSIS The plaintiffs contend that Vince, Stephanie, Khan, Blum, and Levesque (the “Signal Users”) spoliated evidence by not checking the Signal application’s message settings to ensure that messages were preserved after receiving the Misconduct Hold 18 and later the Sale Process Hold, then manually changing individual chat settings so that prior messages would be destroyed and future messages deleted.33 “Spoliation is the destruction or significant alteration of evidence, the failure to preserve evidence properly for another’s use, or the improper concealment of evidence.”34 Court of Chancery Rule 37(e) addresses the failure to preserve ESI. It states: If ESI that should have been preserved in the reasonable anticipation of or actual notice of imminent litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court: (1) upon finding prejudice to another party from loss of information, may order measures no greater than necessary to cure the prejudice; or (2) only upon finding that the party acted recklessly or with the intent to deprive another party of the information’s use in the litigation, may, among other things: (A) presume that the lost information was unfavorable to the party; or (B) dismiss the action or enter a default judgment.35 Signal chats are ESI, so Rule 37(e) applies. 33 The plaintiffs also contend that Khan deleted specific text messages and that Vince and Blum failed to preserve hard copy documents. The Signal messages are the main event. The remedy that the court imposes for the spoliation of the Signal chats also remedies any spoliation involving specific text messages and hard copy documents. 34 Goldstein v. Denner, 310 A.3d 548, 567 (Del. Ch. 2024). 35 Ct. Ch. R. 37(e) (formatting altered). 19  To obtain sanctions for a party’s failure to preserve ESI, the requesting party must show (i) the responding party had a duty to preserve the ESI, (ii) the ESI is lost, (iii) the loss is attributable to the responding party’s failure to take reasonable steps to preserve the ESI, and (iv) the requesting party suffered prejudice. For an adverse inference or case-dispositive sanctions, the plaintiff must show that the responding party acted recklessly or intentionally when failing to preserve ESI.36 A. The Threshold Issue Of Timing When considering a motion addressing spoliation, there is always a threshold question of timing.37 The defendants argue that the court should defer ruling on the plaintiffs’ motion until after trial. Rule 37 does not contain any specific reference to the timing of the filing of a motion seeking spoliation sanctions.38 “Delaware trial courts have inherent power to control their dockets.”39 That authority includes determining how a case should proceed for the “orderly adjudication of claims.”40 36 Goldstein, 310 A.3d at 557. 37 In re Facebook Inc. Deriv. Litig., 2025 WL 262194, at *6 (Del. Ch. Jan. 21, 2025); Goldstein, 310 A.3d at 569. 38 See Ct. Ch. R. 37; Goldstein, 310 A.3d at 570. 39 Solow v. Aspect Res., LLC, 46 A.3d 1074, 1075 (Del. 2012). 40 Unbound P’rs Ltd. P’ship v. Invoy Hldgs. Inc., 251 A.3d 1016, 1030 (Del. Super. 2021) (internal quotation marks omitted). 20  As a general matter, Rule 37 is a rule about discovery, implying that a motion under Rule 37(e) should generally be part of the discovery process. Nevertheless, determining when to address a spoliation motion “rests in the discretion of the court based on the facts of each case.”41 Pertinent factors include “the nature of the [spoliation] issue, the stage of the case, the court’s ability to provide case-specific relief, and any scheduling order that might apply.”42 “If a party seeks an order compelling the defendants to provide additional discovery or to pay for the movant to conduct additional discovery, then it would be foolish to defer the motion until trial.”43 Along similar lines, “[i]f a ruling on the motion will help the parties prepare for trial or limit the issues to be addressed at trial, then it often will make sense to address the motion before trial.”44 But “[i]f the motion turns on evidentiary issues that the court will evaluate at trial, then it will make sense to defer the motion until trial.”45 Here, the motion rests on undisputed facts regarding the failure to preserve ESI and affirmative steps to change automatic deletion settings for ESI. The motion does not turn on disputed facts that would warrant an evidentiary hearing or post- trial adjudication. The defendants argue that the court should defer ruling on the 41 Goldstein, 310 A.3d at 571. 42 Id. 43 Id. 44 Id. 45 Id. 21 motion so it can observe the Signal Users’ credibility before making a finding of intent, but recklessness provides an adequate basis for the sanctions the plaintiffs request. Equally important, the plaintiffs seek remedies that will affect how trial unfolds. Whether the court grants those sanctions will affect how the parties prepare for trial and present their evidence. The proper time to consider the plaintiffs’ motion is now.46 B. Was There A Duty To Preserve The Signal Chats? Under Rule 37(e), the first question is whether the ESI “should have been preserved.”47 “Rule 37(e) does not apply . . . when information or evidence is lost before a duty to preserve attaches.”48 A party must “preserve potentially relevant evidence as soon as the party either actually anticipates litigation or reasonably should have anticipated 46 United States District Judge Iain D. Johnston has provided particularly helpful and characteristically insightful guidance on the timing of spoliation motions. See Groves Inc. v. R.C. Bremer Mktg. Assocs., 2024 WL 4871368 (N.D. Ill. Nov. 22, 2024). Applying his framework, the court here has access to the specific facts necessary to decide the motion, and the remedy sought will affect how the parties approach trial, which is the next key stage in the case. Cf. id. at *5–6. But as he explains, when to rule on a spoliation motion requires a case-by-case call. See id. at *6. 47 Ct. Ch. R. 37(e). 48 Goldstein, 310 A.3d at 571 (quoting Living Color Enters., Inc. v. New Era Aquaculture, Ltd., 2016 WL 1105297, at *4 (S.D. Fla. Mar. 22, 2016)). 22 litigation.”49 “A party is not obligated to preserve every shred of paper, every e-mail or electronic document.”50 But a party is obligated to “preserve what it knows, or reasonably should know, is relevant to the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.”51 “An organization’s decision to circulate a litigation hold notice is a strong indication that a duty to preserve evidence exists, because it shows that the organization subjectively anticipated litigation.”52 The Signal Users accept that an obligation to preserve documents existed on June 21, 2022, when the Company circulated the Misconduct Hold, but they maintain that the Misconduct Hold only encompassed materials relating to Vince’s alleged misconduct. As they see it, the Misconduct Hold did not explicitly encompass the sale process or the merger. Nor could it, because the sale process did not formally start until February 2023, and the merger would not take place until months later. The defendants conclude that no duty to preserve sale-process-related documents arose until January 19, 2023, when the Company circulated the Sale Process Hold. 49 Id. (footnote omitted); see also Beard Rsch., Inc. v. Kates, 981 A.2d 1175, 1187 (Del. Ch. 2009). 50 Seibold v. Camulos P’rs LP, 2012 WL 4076182, at *23 (Del. Ch. Sept. 17, 2012) (internal quotation marks omitted). 51 Id. (internal quotation marks omitted). 52 Goldstein, 310 A.3d at 573. 23  The defendants’ argument falls short because the lost Signal chats could readily address both Vince’s alleged misconduct and the possibility of a transaction. The evidence adduced in discovery suggests the two were linked. Shapiro immediately understood the connection between Vince’s departure and a future deal. Emanuel expressly connected the two concepts in his voicemails. The Signal chats likely included communications addressing both issues. The Misconduct Hold put the Signal Users on notice that they needed to retain communications related to Vince’s alleged misconduct, including communications relating to Vince’s alleged misconduct and the merger. As of June 21, 2022, the date of the Misconduct Hold, the defendants took on an affirmative duty to preserve their Signal chats. The defendants are also incorrect to assert that no duty to preserve sale- process-related documents arose until January 19, 2023, when the Company issued the Sale Process Hold. The duty to preserve information indisputably applied after that date, but the duty actually arose earlier. In M&A transactions, a duty to preserve can arise before a litigation hold is issued because litigation involving M&A transactions is sufficiently common that sophisticated parties anticipate it.53 In August 2022, Vince met with Emanuel to discuss a potential transaction, then later met with Sine to discuss a deal. In September 2022, Emanuel made at least two offers to help Vince with the federal 53 Id. 24 investigation into his alleged misconduct, as long as WWE engaged in a transaction with Endeavor. By November 2022, discussions about Vince returning to the Company and pursuing a merger with Endeavor had reached a serious stage. On November 20, Vince asked Raine to analyze an MBO. On November 21, Vince and