A recent Delaware Court of Chancery decision offers a blunt reminder for executives, directors and legal teams: once litigation is reasonably anticipated, private messaging apps may fall within the scope of discovery and the company’s related preservation obligations.
Background
The case arose from litigation challenging Endeavor’s acquisition of WWE, the world leader in professional wrestling. Endeavor acquired WWE and combined it with UFC, creating TKO Group Holdings as a publicly traded sports-entertainment company. The plaintiffs alleged that key figures, including executives and members of the broader McMahon family, used Signal, including chats with auto-delete settings, while issues surrounding longtime WWE head Vince McMahon’s return to professional wrestling, government investigations and a potential sale were all unfolding.
After litigation holds were issued, the court found that relevant Signal communications were not preserved. Some users failed to check whether messages were set to disappear, while others changed settings so messages would be deleted within short periods. The court found, in very strong language, the conduct was more than a technical mistake. The problem was not simply that key personnel used Signal. Rather, the problem was that they used, maintained or adjusted deletion settings after preservation duties had commenced. The court concluded that the lost messages likely mattered because the timing overlapped with important deal events and backchannel communications.
The Court’s Response
The court did not enter judgment against the defendants, but it imposed a serious evidentiary sanction. For purposes of the case, the court will now presume five facts relating to the case.
- Endeavor leader Ari Emanuel’s promise to give Vince McMahon a continued role at the post-merger company influenced McMahon’s decision-making regarding the WWE-Endeavor merger.
- Emanuel’s offer of indemnification and other legal support relating to pending federal investigations into McMahon’s alleged misconduct influenced his merger-related decision-making.
- McMahon decided to pursue a transaction with Endeavor in 2022, before WWE formally began its strategic review process.
- WWE executive Nick Khan communicated with Emanuel between August and December 2022 to facilitate a transaction between WWE and Endeavor.
- McMahon and Khan worked with bankers / financial advisers to steer the sale process toward Endeavor and away from other potential bidders
The defendants may contest those presumptions, but they must do so under a heightened proof standard.
Key Takeaways for Companies
Update Legal Hold Practices
Generic instruction to preserve documents may not be enough if executives use texts, Signal, WhatsApp, Slack, Teams or similar tools. Although different cases may bring different preservation requirements, companies should nevertheless partner with their legal counsel to reevaluate their legal hold language to meet a fast-evolving information sharing environment.
Preservation Requires Action
A company, with their counsel’s help and when preservation is called for, should confirm that auto-delete settings are disabled, relevant chats are captured and custodians understand that informal messages can be discoverable.
Set Clear Rules Before Issues Arise
Executives need simple rules before a crisis arises. If business is conducted on an app, assume information shared across the app may become evidence. If the company cannot preserve it reliably, the company should consider when, if, and how they allow and/or guardrail sensitive business discussions.
Act Early in High Risk Situations
Deal activity, internal investigations, leadership disputes and government inquiries can quickly trigger preservation obligations. Waiting until a complaint is filed may be too late, making early coordination with counsel critical.
Bottom Line
The broader lesson is not that encrypted or ephemeral tools are forbidden. It is that courts expect companies and individuals to preserve relevant evidence once litigation is reasonably foreseeable. When messages disappear after that point, a court may fill the gap in the other side’s favor.
For guidance on updating preservation practices or navigating discovery risks, contact KJK Partner Dave Campbell (JDC@kjk.com).