By: Michelle D. Cruz
Introduction
When a controlling stockholder stands on both sides of a transaction, Delaware law requires such person prove the deal was “entirely fair,” by providing evidence sufficient to pass the Court of Chancery’s scrutiny.[1] If that evidence is destroyed, the defendant’s task changes. In re World Wrestling Entertainment, Inc. Merger Litigation shows how. On May 26, 2026, Vice Chancellor Laster issued a forty-page memorandum opinion imposing sanctions for spoilation on World Wrestling Entertainment, Inc. (“WWE”) controlling stockholder, Vince McMahon, and other senior officer for the loss of Signal messages tied to WWE’s 2023 merger with Endeavor Group Holdings, Inc. (“Endeavor”).[2] Endeavor is a global sports and entertainment company that owns and operates sports properties, and one of its subsidiaries owns and manages Ultimate Fighting Championship (“UFC”).[3] The parties later represented to have reached a settlement on the eve of the June 2026 trial, so no court will decide whether the merger was entirely fair.[4] The sanctions opinion nonetheless shows how spoliation interacts with entire fairness review.
Entire Fairness and the Spoilation Framework
The entire fairness standard applies to a transaction between an entity and its controller.[5] Entire fairness requires defendants to prove both fair dealing and fair price, which “must be examined as a whole.”[6] Fair dealing examines when a transaction was timed, how it was initiated, structured, and negotiated.[7] Part of fair dealing is “the obvious duty of candor.”[8] Fair price “relates to the economic and financial considerations of the proposed merger, including all relevant factors: assets, market value, earnings, future prospects, and any other elements that affect the [] value of a company’s stock.”[9]
The Delaware Court of Chancery analyzes the failure to preserve electronically stored information (“ESI”) under Rule 37(e).[10] “Spoilation is the destruction or significant alteration of evidence, the failure to preserve evidence properly for another’s use, or the improper concealment of evidence.”[11] The movant must show a duty to preserve, lost information, a failure to take reasonable steps, and prejudice.[12] An adverse inference requires a “culpable mental state if the party acted recklessly or with the intent to deprive another party of the information’s use in the litigation.”[13]
The WWE Sanctions
On the Court’s account of the record, which comes from the complaint and the sanctions documents, McMahon controlled about eighty-one percent (81%) of WWE’s outstanding voting power.[14] WWE circulated legal holds in June 2022 and January 2023 (“Misconduct Holds”) that expressly instructed recipients to preserve documents including relevant emails and text messages from being automatically deleted.[15] The recipients instead manually changed the auto-delete settings on individual Signal chats for chats to be deleted, ranging from eight hours to one hour, often around key events.[16] On August 5, 2022, the U.S. Department of Justice sent WWE a request for information regarding McMahon’s alleged misconduct.[17] That same day, WWE President, Nick Khan, manually changed the auto-delete setting for a Signal chat with McMahon to delete messages after one hour.[18] On January 6, 2023, two independent directors resigned in protest over McMahon’s removal of three others by written consent.[19] That same day, Khan manually changed the auto-delete setting for a Signal chat to delete messages after three hours.[20] When the government returned McMahon’s seized devices in September 2025, the chats’ contents were gone.[21]
The Court stated that the duty to preserve sale-related evidence arose by August 31, 2022, well before the sales process hold, because McMahon’s plan to return and pursue a merger amid misconduct allegations was a “high-risk strategy that would draw litigation.”[22] It rejected the argument that a large production cured any prejudice, calling the comparison “a denominator in search of a numerator,”[23] and found the defendants acted recklessly, at a minimum.[24]
The Court then presumed five facts about McMahon and Khan, including that Endeavor CEO, Ari Emmauel’s promises of a post-merger role and legal support influenced McMahon, that McMahon chose to pursue Endeavor before the strategic review began, where communications with respect to facilitating a transaction between WWE and Endeavor occurred between August and December 2022, and that McMahon and Khan steered the process toward Endeavor and away from other bidders.[25] It also raised the burden for rebutting those facts from a preponderance of the evidence to clear and convincing evidence.[26]
Analysis: How Spoliation Affects Entire Fairness Review
The sanctions imposed fall squarely within fair dealing. The presumed facts go into initiation (a pre-review decision to pursue Endeavor), negotiation (steering the process away from other bidders), and the controller’s conflict (the influence of a post-merger role and legal support).[27] Because entire fairness already places a burden on the defendant,[28] the sanctions were heavily stacked. Since both factors (fair dealing and fair price) must be weighed together, price alone would offer very little refuge.[29]
Conclusion
Although the case is settled, the sanctions opinion offers practical lessons for controller transactions. A duty to preserve can attach before any formal hold, especially where a controller’s personal interests are entangled with a sale. A hold that expressly addresses auto-deletion settings must be followed by action. Further, neither a large production nor an open channel of communication will cure the loss of messages most likely to show motive. When entire fairness depends on proving a clean process, losing the evidence of that process can be as damaging as having bad evidence.
About the Author
Michelle Cruz is a third-year law student at Widener University Delaware Law School and serves as the Lead Bluebook Editor for Volume 52 of the Delaware Journal of Corporate Law. She is currently serving as a Judicial Extern to the Honorable Magistrate Jessie R. Benavides in the Delaware Court of Chancery and as a Teaching Assistant to Professor Geeta Kohli for Contracts I. She spent the last two summers interning for the Honorable Mitchell L. Pascual in the New Jersey Superior Court, Hudson Vicinage. Following graduation, Michelle will return to the New Jersey Courts and will be clerking for the Honorable Mitzy Galis-Menendez, Presiding Judge of the Criminal Division.
[1] See Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del. 1993); see also Kahn v. M&F Worldwide Corp., 88 A.3d 635, 642 (Del. 2014) (“Where a transaction involving self-dealing by a controlling stockholder is challenged, the applicable standard of review is ‘entire fairness,’ with defendants having the burden of persuasion.”).
[2] Mem. Op. Imposing Sanctions for Spoilation, In re World Wrestling Entertainment, Inc. Merger Litig. (C.A. No. 2023-1166-JTL) [hereinafter Sanctions Op.].
[3] Id. at 7.
[4] Jarek Rutz, WWE Merger Case in Chancery Settles on the Eve of Trial, Law360, (June 8, 2026, 10:34 AM EDT) https://www.law360.com/sports-and-betting/articles/2486890; Min. Order In re World Wrestling Entertainment, Inc. Merger Litig. (C.A. No. 2023-1166-JTL).
[5] In re Dura Medic Holdings, Inc. Consol. Litig., 331 A.3d, 796, 826 (Del. Ch. Jan 29, 2025).
[6] Weinberger, 457 A.2d at 711; Ams. Mining Corp. v. Theriault, 51 A.3d 1213, 1239 (Del. 2012).
[7] Weinberger, 457 A.2d at 711.
[8] Id.
[9] Id.
[10] Ct. Ch. R. 37(e); Sanctions Op., at 19.
[11] Goldstein v. Fenner, 310 A.3d 548, 567 (Del. Ch. 2024).
[12] Id. at 557.
[13] Id. at 569.
[14] Sanctions Op., at 3, n.3.
[15] Id. at 5, 14.
[16] Sanctions Op., at 7–10, 32.
[17] Id. at 6.
[18] Id. at 6–7.
[19] Id. at 12.
[20] Sanctions Op., at 12.
[21] Id. at 18.
[22] Id. at 25
[23] Id. at 34–35.
[24] Sanctions Op., at 36.
[25] Sanctions Op., at 37.
[26] Id. at 2, 39.
[27] See Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1993); Sanctions Op., at 34–35.
[28] See Ams. Mining Corp. v. Theriault, 51 A.3d 1213, 1239 (Del. 2012).
[29] The Court notes that Endeavor negotiated a lower value than what two other companies offered. Sanctions Op., at 17.
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