In a new ruling in the WWE merger lawsuit, in which the shareholders challenge the Endeavor deal that created TKO, Vice Chancellor J. Travis Laster found that Vince McMahon and WWE President Nick Khan destroyed evidence. As a consequence, the court will treat five damaging facts as presumptively true when the case goes to trial next month.
Laster, who presides over the case in the Delaware Court of Chancery, issued the 41-page opinion following an earlier hearing on May 13 about the related motion. The judge found that McMahon, Khan, as well as three others — WWE Chief Content Officer Paul Levesque and former WWE executives Stephanie McMahon and Brad Blum — all used Signal’s auto-delete function, which wiped out messages they had a legal duty to preserve. Signal is an encrypted messaging app that allows users to set messages to automatically disappear after a chosen period of time: hours, days, or not at all.
The ruling is a significant setback for the defendants, who are Vince McMahon, Nick Khan, Paul Levesque, George Barrios, and Michelle Wilson. The case will now be harder, specifically for McMahon and Khan, to prevail against the shareholder plaintiffs’ allegations.
While Laster noted that the defendants still have the opportunity to plead their case and overcome the presumptions, the five facts that will be presumed true at trial are central to the plaintiffs’ theory that McMahon steered the WWE merger deal to his longtime friend, Endeavor chief executive Ari Emanuel — now TKO’s Chief Executive Officer and Chairman — not because it was the best deal for shareholders, but because Emanuel offered McMahon something no other bidder would: a continued position with WWE despite the scandal surrounding him, and help with federal investigations into his alleged sexual misconduct. The defendants have denied the central allegations of the case.
Laster listed the five presumed facts as follows:
- 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 [advisement firm] Raine to steer the process toward a deal with Endeavor and away from other potential bidders.
In addition to those five, the plaintiffs had requested two other facts to be presumed, which Laster did not grant. Those were:
- McMahon received a non-ratable benefit from the Merger in the form of a continued role at TKO Group Holdings, Inc.
- Nick Khan knew about McMahon’s negotiations with Endeavor concerning a potential Merger in 2022.
In most civil lawsuits, the party making the accusations has to prove its claims. The burden is now on the defendants to disprove these five facts. The defendants now must disprove these claims by “clear and convincing evidence,” a higher standard than by a “preponderance of the evidence,” had Laster not ordered these sanctions.
The ruling does not determine whether McMahon, Khan, or the other defendants will be found liable. Laster will ultimately make that decision at some point after the trial, scheduled to take place from June 8 to 12.
Read the full opinion:
Emanuel’s indemnification offer to Vince
A voice message sent by Emanuel to McMahon has been disclosed as evidence in the case, in which Emanuel mentions indemnifying McMahon and providing him with support related to the federal investigations into his conduct. Emanuel, in his deposition testimony, has denied that McMahon was ultimately indemnified. Nonetheless, the voice memo also alludes to Emanuel’s connections with top law firm Latham & Watkins — the same firm defending the non-McMahon defendants, Khan, Levesque, George Barrios, and Michelle Wilson in this case — and how those attorneys’ connections to the U.S. Department of Justice could help relieve the legal and potential criminal pressure McMahon was under. Though he has not been charged with any crimes, ultimately, a joint order from the parties filed this week indicates McMahon was under investigation for potential violations of various financial and securities statutes as well as multiple criminal laws against sex trafficking.
Emanuel is transcribed to have said to McMahon:
“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.”
This reporter has filed a notice asking for the release of the audio of the voice memo itself, among other sealed materials. WWE has moved to keep that audio and other material sealed. The issue is currently pending a decision from the judge.
Executives set auto-delete settings coinciding with key events in the case
Laster’s written opinion detailed a timeline supporting his determination that McMahon and Khan acted recklessly. WWE’s legal department had issued formal hold notices instructing key executives to preserve their communications in anticipation of litigation over the misconduct allegations and the sale process. McMahon and Khan, however, allowed their Signal messages to be deleted anyway.
While records of the text of the chats themselves are lost, records remain showing when and how key people changed their auto-delete settings in Signal.
The judge pointed out the conspicuous timing of when these settings were adjusted by Khan and Blum, including right after federal prosecutors sent WWE a request for information about McMahon’s alleged misconduct on August 5, 2022.
“That same day, Khan manually changed the auto-delete setting for a Signal chat with Vince to delete messages after one hour,” Laster wrote in the opinion, emphasizing it in italics. “The preceding day, Blum had manually changed the auto-delete setting for a Signal chat with Vince to delete messages after one hour.”
Laster also highlighted the August 10, 2022, lunch McMahon had with Emanuel. That was just weeks after McMahon announced his retirement from WWE following the revelation of the allegations against him. Khan and Stephanie McMahon joined them for the occasion, at which they discussed a potential WWE-Endeavor deal, the judge wrote.
“That same day, Stephanie manually changed the auto-delete setting for a Signal chat with Vince to delete messages after one hour,” Laster wrote, again using italics. Messages were set to be lost despite the legal hold notice executives received on June 21, 2022.
Laster’s narrative continued, pointing out that Blum, a longtime WWE executive and aide to McMahon, adjusted his Signal auto-delete settings as well:
“Eleven days later, on August 21, 2022, [Raine Group banker Jeff] 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.’ That same day, Blum manually changed the auto-delete setting for a Signal chat with Vince to delete messages after eight hours.”
Blum changed his auto-delete settings again on December 31, 2022, the same day that McMahon insisted to the WWE board of directors that he would return to the company, undoing his earlier resignation. McMahon told the board that its position — which had rejected his proposal to return as Executive Chairman — was unacceptable, and that he would not support any strategic transaction without direct involvement from the outset.
The opinion also summarized specific actions taken by Khan.
On November 21, 2022, McMahon called Jeff Sine — a banker who had facilitated many Endeavor deals previously but who sided with McMahon in the TKO deal. On that day, McMahon also agreed to reimburse WWE for the costs of the board’s internal investigation into his conduct. Also on that date, Khan changed his auto-delete settings multiple times for his Signal messages with McMahon before settling on an auto-delete timing of one hour.
“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,” Laster wrote, adding with emphasis: “That same day, Khan manually changed the auto-delete setting for a Signal chat with Vince to delete any messages after three hours.”
Khan changed more auto-delete settings two days later, on January 5, 2023, the day that McMahon executed his return to the WWE board, by way of his majority voting power in the company.
With McMahon back as Executive Chairman, the board held a special meeting on January 12, 2023, to discuss selling WWE. The next day, McMahon signed a settlement agreement regarding sexual misconduct claims. On that day, January 13, Laster noted, McMahon himself changed auto-delete settings for Signal chats with each of Khan and Levesque.
Part of McMahon’s own deposition testimony did not help him on this issue.
“I was always told about the Signal, and it’s good for business because no one can trace you and so forth,” McMahon testified in the deposition late last year. “It’s kind of like [the email platform] Proton. You can’t find out much about the call or the text.”
At one point in February 2023, as we’ve reported earlier, McMahon raised an issue about WWE’s creative plans for WrestleMania that year, communicating with Khan over conventional text message. Khan sent McMahon a reply that simply stated, “Langis.”
McMahon replied, “What in the blue hell is ‘Langis’ lol.”
Khan instructed him, “Read it backwards!”
Langis backwards is “Signal,” but Khan claimed in his deposition that he had “no idea” why he had written that to McMahon.
When McMahon was asked about “Langis” in his deposition, he said he didn’t know what the word meant and that he would need to “take my pencil out” to figure it out.
Laster characterized their testimony on the matter as “notably strained.”
WWE and McMahon did not respond to separate requests to provide comments for this report.
The presumed facts are tied to McMahon and Khan
The sanctions Laster ordered are particular to the WWE founder and current WWE President. The judge was careful to note that the presumed facts are tied to those two individuals’ conduct and motivations and not to those of the remaining defendants, Levesque, Barrios, and Wilson.
Laster was sure to point out that McMahon and Khan are still free to build their defense in an effort to meet their new, heightened burden.
