See what I did there? 😉 In the case In re World Wrestling Entm’t, Inc. Merger Litig., No. 2023-1166 (Del. Ch. May 27, 2026), Delaware Vice Chancellor J. Travis Laster granted the plaintiffs’ motion for spoliation sanctions arising from the loss of Signal messages, finding that the wrestling executives failed to adhere to legal holds, and imposed five rebuttable factual presumptions concerning Vincent McMahon and Nick Khan and required clear and convincing evidence to overcome them, finding that the individuals responsible for preserving the communications acted “recklessly—at a minimum.”
Case Background and Judge’s Ruling
The underlying stockholder litigation challenged the merger of World Wrestling Entertainment, Inc. (WWE) with an Endeavor subsidiary to form TKO Group Holdings. The plaintiffs alleged that McMahon, WWE’s controlling stockholder, steered the transaction toward his longtime friend, Endeavor CEO Ari Emanuel, to secure a continuing leadership position and assistance with investigations into alleged sexual misconduct.
Discovery revealed that the wrestling executives – McMahon, Khan, Stephanie McMahon, Brad Blum, and Paul Levesque – used Signal. Although Signal preserves messages indefinitely by default, users can enable automatic deletion, and one participant can change a chat’s settings for everyone. After receiving litigation holds, the users failed to check preservation settings; several also manually shortened retention periods. A subsequent forensic examination of McMahon’s devices recovered information about chat participants and retention changes, but not the deleted communications.
WWE issued its first relevant hold on June 21, 2022, addressing McMahon’s alleged misconduct. It required preservation of existing and future relevant communications and suspension of automatic deletion. Nevertheless, retention changes coincided with significant developments. On August 5, 2022, when the Justice Department requested information concerning the misconduct allegations, Khan changed a chat with McMahon to delete messages after one hour. Additional changes occurred during merger discussions and McMahon’s efforts to return to WWE. A January 19, 2023 hold expressly addressed his return and the strategic review process.
Applying Court of Chancery Rule 37(e), Vice Chancellor Laster examined the preservation duty, irretrievable loss, reasonable preservation efforts, and prejudice. He explained that adverse inferences or case-dispositive sanctions under the Delaware rule require recklessness or intentional conduct. He rejected the defendants’ request to postpone a decision until after trial: the relevant preservation failures were undisputed, recklessness supplied an adequate basis for relief, and the requested sanctions would affect trial preparation.
The defendants argued that the June hold covered misconduct allegations, with preservation obligations concerning the sale arising only upon the January hold. Vice Chancellor Laster disagreed because communications could address both subjects. Emanuel’s voicemails expressly connected a transaction with assistance concerning McMahon’s legal problems. As Vice Chancellor Laster explained, “The defendants’ argument falls short because the lost Signal chats could readily address both Vince’s alleged misconduct and the possibility of a transaction.”
Vice Chancellor Laster also found an independent preservation duty arising before the January notice. McMahon’s contemplated return and sale strategy made litigation reasonably foreseeable. Although identifying the precise trigger was difficult, the duty to preserve evidence concerning his return and a potential sale existed by August 31, 2022.
The wrestling executives conceded that the messages could not be recovered from other sources. On reasonable preservation efforts, Vice Chancellor Laster emphasized: “Simply circulating a litigation hold is not sufficient.” Quoting precedent, he explained that organizations must ensure recipients understand and comply with holds. Individuals likewise must investigate compliance requirements: “After receiving a litigation hold, an individual must take steps to determine what is necessary to comply.” Here, the users failed to check automatic deletion settings, and several affirmatively changed them to destroy messages.
Vice Chancellor Laster found prejudice because the surrounding evidence plausibly indicated that deleted communications concerned the misconduct allegations, McMahon’s return, and the merger. Retention changes corresponded with important events. Vice Chancellor Laster stated: “The plaintiffs now lack access to that evidence. They cannot use the messages as affirmative proof. They cannot use the messages to question witnesses. They cannot use the messages to cross examine witnesses.”
The defendants failed to establish a lack of prejudice. Their assertions that the missing communications were irrelevant could not be verified, while their claimed unfamiliarity with retention settings conflicted with repeated manual changes. Extensive production elsewhere did not resolve the problem: As Vice Chancellor Laster stated: “More important, not all litigation documents carry equal weight. The Signal Users selectively destroyed specific Signal chats and messages. Because the Signal Users acted selectively, ‘it is likely that the most sensitive and probative exchanges are gone.’”
To remedy that prejudice, Vice Chancellor Laster stated: “the court will presume the following:
- Emanuel’s promise to provide Vince with a continued role at any post-merger company after a transaction influenced Vince’s decision-making with respect to the merger.
- Emanuel’s offer of indemnification and other legal support related to pending federal investigations of Vince’s alleged misconduct influenced Vince’s decision-making with respect to the merger.
- Vince decided to pursue a transaction with Endeavor in 2022, before the Company initiated the strategic review process.
- Khan communicated with Emanuel between August and December 2022 to facilitate a transaction between WWE and Endeavor.
- Vince and Khan worked with Raine to steer the process toward a deal with Endeavor and away from other potential bidders.”
Explaining that heightened requirement, Vice Chancellor Laster stated: “Imposing a higher burden ensures that the defendants must convincingly overcome the uncertainty they created.” He declined a further restriction that would make uncorroborated testimony categorically insufficient, concluding that the narrow presumptions and heightened evidentiary standard adequately remedied the prejudice.
So, what do you think? Do you agree that’s an appropriate sanction for the wrestling executives failure to adhere to legal holds for Signal messages? Please share any comments you might have or if you’d like to know more about a particular topic.
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