Former President Donald Trump and his legal team are entangled in yet another high-stakes legal battle, this time concerning a lawsuit filed in the Delaware Chancery Court. The case centers on the ownership and potential dilution of shares in Trump Media & Technology Group (TMTG), the parent company of Truth Social. The lawsuit was brought by two former contestants from Trump’s reality TV show “The Apprentice,” Andy Litinsky and Wes Moss, who co-founded TMTG alongside Trump. The case, now drawing significant attention, raises complex legal issues that could have severe consequences for Trump, his legal team, and his business interests.
The Delaware Chancery Court: The Pinnacle of Corporate Law
To fully grasp the gravity of this lawsuit, it’s crucial to understand the role of the Delaware Chancery Court in U.S. corporate law. The Delaware Chancery Court is widely regarded as the “Supreme Court” for corporate America. Nearly 60% of Fortune 500 companies are incorporated in Delaware due to its business-friendly laws, making this court a central hub for corporate litigation.
What sets the Delaware Chancery Court apart is its focus on equity rather than law, which means it deals with fairness and justice in business dealings rather than strict legal codes. The court does not use juries; instead, cases are decided by chancellors—judges with extensive expertise in corporate law. Their rulings can set precedents that influence corporate governance across the United States. This makes the court an incredibly powerful entity in disputes involving stockholders, mergers, acquisitions, and other corporate matters. For Donald Trump, whose companies are incorporated in Delaware, this court holds significant sway over his corporate dealings.
The Lawsuit: Founders vs. Trump
The lawsuit was initiated by Litinsky and Moss, who together hold an 88.6% stake in Truth Social, a social media platform that has been positioned as an alternative to mainstream networks like Twitter and Facebook. The lawsuit claims that their shares are at risk of being diluted without their consent if additional shares are issued. Stock dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders and potentially devaluing their shares.
To protect their substantial ownership stake, Litinsky and Moss sought relief from the Delaware Chancery Court, which responded by “locking” their shares. This legal mechanism ensures that no changes can be made to their stock holdings while the lawsuit is ongoing. Such orders are common in Delaware, where the court frequently deals with disputes over shareholder rights, ensuring that plaintiffs are protected during litigation.
The lawsuit also underscores a broader issue: the potential misuse of corporate governance structures to sideline or diminish the rights of minority shareholders. In this case, Litinsky and Moss allege that Trump’s actions threaten to undermine their financial interests and violate their shareholder rights. The Delaware Chancery Court is well-versed in handling these types of disputes, and its rulings could set important precedents for how similar cases are handled in the future.
Trump’s Response: A Strategic Miscalculation?
In an apparent attempt to counter the Delaware lawsuit, Trump and his legal team filed a separate lawsuit in Florida against Litinsky and Moss. This Florida lawsuit seeks to cancel their shares entirely, accusing them of failing to fulfill their responsibilities, such as not securing a buyer for the company quickly enough or not maximizing the company’s potential value. Essentially, Trump is challenging the legitimacy of their stake in TMTG by questioning their performance and contributions to the company.
However, this strategy has raised significant legal questions. Filing a parallel lawsuit in another jurisdiction, especially one that directly contradicts an ongoing case in Delaware, is a risky move. The Delaware Chancery Court had already issued an order protecting Litinsky and Moss’s shares, and Trump’s Florida lawsuit could be seen as an attempt to circumvent that order. This raises the issue of forum shopping—choosing a court perceived to be more favorable to one’s case—which is generally frowned upon in the legal community. It also risks drawing the ire of the Delaware Chancery Court, a venue that does not take kindly to attempts to undermine its authority.
Contempt of Court: Walking a Legal Tightrope
One of the most significant risks Trump and his legal team now face is being held in contempt of court. Contempt of court occurs when a party disobeys or shows disrespect for a court’s order, and it can lead to serious consequences, including fines, sanctions, or even jail time for the offending party. In this case, the Delaware Chancery Court judge stopped short of finding Trump and his legal team in contempt. However, she made it clear that their actions—filing a contradictory lawsuit in Florida—violated the spirit of her earlier order. The judge emphasized that while the Florida lawsuit did not technically breach the letter of her order, it did violate its intent, which was to preserve the status quo while the Delaware case proceeded.
The judge’s comments signal that Trump and his legal team are treading on thin ice. If they continue to disregard the court’s authority, they could face harsher penalties. Delaware courts are known for their strict enforcement of court orders, particularly in cases involving corporate governance. If the court finds that Trump’s actions were intended to undermine its authority, it could impose sanctions that would not only affect the outcome of this case but also damage Trump’s legal standing in future corporate litigation.
The Broader Legal and Regulatory Implications
This case is not happening in a vacuum. Trump’s decision to take Truth Social public has opened the company up to increased scrutiny from regulators, particularly the Securities and Exchange Commission (SEC). The SEC, under the Biden administration, has shown a willingness to aggressively pursue cases involving corporate misconduct, and Trump’s legal troubles could attract their attention. If the SEC decides to investigate, it could lead to additional legal challenges for Trump and his company.
Moreover, the Delaware plaintiff’s bar—lawyers who specialize in representing shareholders in corporate lawsuits—could seize this opportunity to bring additional claims against Trump. Delaware is home to some of the most skilled and aggressive plaintiff’s lawyers in the country, and they have a track record of holding corporate executives accountable for actions that harm shareholders. If Trump’s legal team continues to misstep, they could find themselves facing a barrage of lawsuits that could further complicate their legal strategy.
Potential Outcomes: A Legal Crossroad
The outcome of this lawsuit could have far-reaching implications for Trump’s business empire. If the Delaware Chancery Court rules in favor of Litinsky and Moss, it could prevent Trump from diluting their shares and force him to negotiate a settlement that preserves their ownership stake. Such a ruling would also reaffirm the power of the Delaware Chancery Court in protecting shareholder rights, setting a precedent for future cases involving corporate governance disputes.
On the other hand, if Trump’s legal team can successfully argue that Litinsky and Moss failed in their duties and should lose their shares, it could give Trump greater control over TMTG and Truth Social. However, this outcome seems less likely given the current posture of the case and the judge’s warnings.
Additionally, the potential for sanctions or penalties looms large. If the Delaware Chancery Court finds that Trump’s legal team has continued to act in bad faith, it could impose fines or other penalties that would not only affect the lawsuit but also damage Trump’s reputation in the corporate world. For a businessman who relies heavily on his brand, such an outcome could be particularly damaging.
Conclusion
The legal battle over Truth Social and Trump Media & Technology Group is a complex and high-stakes case that highlights the power of the Delaware Chancery Court in corporate governance disputes. Trump’s decision to file a parallel lawsuit in Florida has raised serious legal questions and put his legal team at risk of contempt of court. As the case unfolds, the court’s decisions will have significant implications for Trump’s business interests and could set important precedents for future corporate litigation.
For Donald Trump, the message from the Delaware Chancery Court is clear: the court expects its orders to be respected, and any attempt to undermine its authority will be met with severe consequences. This case serves as a reminder that in the world of corporate law, the Delaware Chancery Court holds unparalleled power, and those who ignore its rulings do so at their peril.
Key Legal Takeaways
- Delaware Chancery Court: The most influential court in U.S. corporate law, particularly for companies incorporated in Delaware. It focuses on equity and fairness, with decisions made by experienced chancellors without juries.
- Stock Dilution: The primary legal issue in this case is the potential dilution of shares, which could devalue the ownership stakes of Litinsky and Moss in Truth Social.
- Contempt of Court: Trump’s legal team is at risk of being held in contempt for filing a parallel lawsuit in Florida, potentially violating the spirit of the Delaware court’s order.
- Broader Implications: The case could attract regulatory scrutiny from the SEC and lead to further legal challenges from shareholder lawyers, complicating Trump’s business strategy.
This ongoing case highlights the intricate and sometimes perilous world of corporate governance and the legal challenges that can arise when shareholder rights are at stake. For Trump and his legal team, the road ahead is fraught with legal risks that could have lasting consequences on his business ventures.
