The Court of Chancery has issued a significant decision on the preservation of electronically stored information, and it should give pause to anyone who relies on disappearing-message applications after litigation is on the horizon. In In re World Wrestling Entertainment, Inc. Merger Litigation, Consol. C.A. No. 2023-1166-JTL (Del. Ch. May 26, 2026), Vice Chancellor J. Travis Laster granted the stockholder plaintiffs’ motion for spoliation sanctions after the company’s controlling stockholder and several senior officers used the encrypted messaging app Signal, set individual chats to auto-delete on a short fuse, and allowed their communications to vanish, all after they had received litigation hold notices.
Background
The litigation arises out of the 2023 transaction in which World Wrestling Entertainment, Inc. (“WWE”) combined with a subsidiary of Endeavor Group Holdings, Inc. to form a new public company alongside the Ultimate Fighting Championship. Vincent K. McMahon co-founded WWE in 1982 and, through his high-vote Class B shares, controlled roughly 81% of the company’s voting power. He was, by any measure, WWE’s controlling stockholder.
The plaintiffs allege that McMahon steered the sale to a longtime friend, Endeavor’s CEO Ari Emanuel, and that, in exchange, he secured a senior role at the post-transaction company and assistance dealing with a federal investigation into alleged sexual misconduct. The misconduct allegations themselves had surfaced in 2022, when the board received anonymous emails describing a relationship with a former employee and a hush-money payment, prompting a special committee investigation and significant press coverage.
Two facts drive the sanctions decision. First, WWE issued two separate litigation hold notices: a “Misconduct Hold” in June 2022 directing recipients, including McMahon and several officers, to preserve all documents and ESI relating to the misconduct allegations, and a “Sale Process Hold” in January 2023 addressing McMahon’s return to the company and the evaluation of strategic alternatives. Second, McMahon and several senior officers (whom the court collectively called the “Signal Users”) communicated using Signal, an application that lets any participant in a chat set messages to auto-delete. After receiving the holds, the Signal Users not only failed to check their app settings but affirmatively changed individual chats to delete messages within hours, in one instance after a single hour.
Analysis
Vice Chancellor Laster grounded the analysis in Court of Chancery Rule 37(e), which governs the failure to preserve ESI. Signal chats are ESI, so the rule applied directly. Drawing on the framework set out in Goldstein v. Denner and refined in last year’s Facebook derivative litigation, the court explained that a moving party must show that the responding party had a duty to preserve the information, that the information was lost, that the loss is attributable to a failure to take reasonable steps to preserve it, and that the requesting party suffered prejudice. For an adverse inference or case-dispositive relief, the movant must additionally show that the responding party acted recklessly or with intent to deprive the other side of the information’s use.
The court first addressed a threshold timing question. The defendants urged the court to defer ruling until after trial, but the Vice Chancellor invoked the court’s inherent authority to control its docket and declined to wait, reasoning that the prejudice from the lost messages could be addressed before trial rather than after.
On the merits, the court found each element satisfied. The duty to preserve attached with the Misconduct Hold in June 2022, and it reached communications about the misconduct and the merger alike, because the record suggested the two were linked. More notably, the court held that the duty to preserve sale-process materials arose by August 31, 2022, months before the January 2023 Sale Process Hold. Because M&A litigation is common enough that sophisticated parties anticipate it, McMahon’s high-risk plan to return to the company and pursue a deal amid the misconduct allegations triggered a preservation duty well before any hold specifically addressed the sale. The Signal messages were then lost and could not be restored, and the loss flowed directly from the Signal Users’ conduct: both their failure to disable auto-deletion and their affirmative decision to shorten the deletion windows. On prejudice, the court acknowledged the inherent difficulty of proving the relevance of evidence that no longer exists, but emphasized that the deletion was selective. Because the users targeted specific chats, the court reasoned it was likely that the most sensitive and probative exchanges were precisely the ones destroyed.
The Vice Chancellor then found that the Signal Users acted recklessly “at a minimum.” Delaware defines recklessness in the spoliation context as a conscious awareness of the risk that one’s action or inaction may cause evidence to be destroyed. Knowledge of the duty to preserve, combined with the loss of communications and the absence of any credible explanation, was effectively dispositive.
The remedy is the most instructive part of the opinion. Rather than entering a default or a sweeping adverse inference, the court tailored the sanction. It will presume the truth of a limited set of facts concerning the conduct and motivations of McMahon and Nick Khan, the officer who openly encouraged others to move to Signal. For example, the court will presume that Emanuel’s promises of a continued role and of indemnification influenced McMahon’s decision-making, and that McMahon and Khan worked to steer the process toward Endeavor and away from other bidders. Critically, the court also elevated the defendants’ burden to overcome those presumptions from a preponderance of the evidence to clear and convincing evidence. As Vice Chancellor Laster explained, shifting the burden of proof determines who wins when the evidence is in equipoise, and because the Signal Users created that evidentiary vacuum by selectively deleting messages, they should bear the consequences of it. The court was careful to note that the presumptions reach only the two culpable fiduciaries. The non-spoliating defendants remain free to put on their case, call witnesses, and rebut the presumed facts at trial.
Key Takeaways
This decision is a clear warning that ephemeral and auto-deleting messaging applications are a serious liability once a preservation duty arises. A litigation hold is not self-executing. Custodians must actually check the settings on every application they use, including encrypted apps with participant-controlled deletion features, and counsel issuing holds should specifically identify and address these tools. The fact that one participant in a chat can erase messages from another participant’s device makes platforms like Signal especially dangerous in the corporate-fiduciary context. The August 31 preservation date is its own lesson: in the deal context, the duty can attach well before counsel circulates a formal hold.
Equally important is the court’s measured approach to the remedy. Vice Chancellor Laster did not reach for the bluntest instrument. Instead, he used targeted factual presumptions coupled with an elevated standard of proof, a remedy designed to neutralize the advantage the spoliators created without punishing innocent co-defendants or short-circuiting a trial. For practitioners, the message is twofold: the downside of careless preservation can be severe and case-shaping, and Delaware courts have a flexible toolkit under Rule 37(e) to match the sanction to the misconduct. As I previously discussed in connection with the court’s scrutiny of controlling-stockholder transactions, fiduciaries who control a sale process invite exacting review, and conduct that obscures how that process unfolded only sharpens it.
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