Twitter’s lawsuit against Elon Musk: What to know

Lisa R. Parker


DOVER, Del. (AP) — Twitter Inc.’s lawsuit to force billionaire Elon Musk to make excellent on his assure to buy the social media large will be fixed in a little but powerful Delaware courtroom that specializes in higher-stakes business disputes.

Twitter has sued Musk in Delaware’s Court of Chancery in an hard work to power him to complete a $44 billion takeover offer attained in April.


Musk, the world’s richest gentleman, pledged to pay back $54.20 a share for Twitter but now would like to back again out of the settlement. He claims the business has unsuccessful to provide ample facts about the quantity of faux, or “spam bot,” Twitter accounts, and that it has breached its obligations under the deal by firing top rated professionals and laying off a major variety of workforce.

Twitter argues that Musk, CEO of electric car or truck maker and solar electricity corporation Tesla Inc., has operated in terrible religion and is intentionally striving to tank the offer for the reason that current market problems have deteriorated and the acquisition no for a longer time serves his pursuits. According to the lawsuit, the worth of Musk’s shares in Tesla, which he was to attract on to assistance finance the acquisition, has declined by extra than $100 billion given that November.

Both Musk or Twitter would be entitled to a $1 billion breakup cost if the other occasion is discovered dependable for the settlement failing. Twitter wishes a lot more, having said that, and is trying to get a courtroom order directing Musk to adhere to by means of with the offer.

WHEN DOES THE Trial Start out?

Twitter attorneys are asking the court to expedite the circumstance. They have proposed a 4-working day demo beginning Sept. 19.


The Court docket of Chancery, recognized in 1792, traces its roots to the Higher Courtroom of Chancery of Fantastic Britain, which in change evolved from an earlier institution in feudal England regarded as the King’s Chapel. The court docket, overseen by the lord chancellor as “keeper of the king’s conscience,” served as an substitute to the much more rigid and inefficient frequent regulation courts. It held the electrical power to provide solutions these kinds of as injunctions, estate administration, and, notably, “specific effectiveness,” which can force a get together to entire a transaction versus its will.

The 230-calendar year-old Court of Chancery typically handles civil scenarios exactly where a plaintiff is trying to find non-financial damages. These types of cases can include disputes over house boundaries and land buys, guardianship appointments, and estates, trusts and wills.

Extra usually than not, they require business enterprise disputes pitting businesses versus disgruntled shareholders, or functions to failed mergers and acquisitions against one an additional.

HOW DOES THE Courtroom OF CHANCERY Do the job Now?

The seven judges on the Delaware Court of Chancery exercise these powers right now, generating it a critical venue for higher-stakes company disputes. Delaware functions a nicely-established and meticulously nurtured physique of company situation legislation relationship to 1899 and is the company home to far more than 1 million organization entities, which includes extra than 60% of Fortune 500 firms. Lots of merger agreements, in reality, specify that any disputes will be heard by a Delaware Chancery Court choose.

“It’s not that they are necessarily additional brilliant than judges in other states, they just have a great deal of publicity to this stuff and are rather refined about it,” explained Lawrence Hamermesh, executive director of the Institute for Legislation & Economics at the College of Pennsylvania.


Musk is no stranger to the Court docket of Chancery. Earlier this year, he emerged victorious in a shareholder lawsuit accusing him of a conflict of desire in Tesla’s 2016 acquisition of SolarCity, a struggling solar panel corporation in which Musk was the greatest shareholder and also served as board chairman.

Hamermesh, a previous professor of corporate and small business law at Widener University Delaware Law University, noted that the precise overall performance sought by Twitter is a “pretty rare” remedy, and that it is uncertain no matter whether the court docket will pressure Musk to consummate the offer.

“There are a large amount of circumstances exactly where a decide could say, ‘Buyer, you are in breach,’ but the treatment is a termination cost,” he reported. “Given what I have found so far, my gut instinct is that Twitter’s bought the upper hand legally. No matter if they’ll get the whole distinct effectiveness or just the break up payment is a very little tougher to say.”


If the court docket does power Musk to close the deal, it would not be with out precedent.

In 2001, poultry giant Tyson Foodstuff Inc. was requested to full its $3.2 billion acquisition of meatpacker IBP Inc. when a decide granted IBP’s declare for distinct functionality.

Additional just lately, a Chancery decide very last 12 months requested private equity agency Kohlberg & Co. to shut its $550 million obtain of DecoPac Holdings Inc., which sells cake decorations and know-how to supermarkets for in-retail store bakeries. Vice Chancellor Kathaleen St. Jude McCormick stated Kohlberg experienced failed to show that a drop in DecoPac product sales amid the coronavirus pandemic constituted a “material adverse effect” letting the potential buyers to walk absent. McCormick, who was sworn in as Chancellor, or head choose of the courtroom, just a person 7 days just after her ruling, explained it as “a victory for offer certainty.”

On the flip facet, Vice Chancellor J. Travis Laster declared in 2018 that a pharmaceutical firm specific for a merger had professional these kinds of a decrease in its economical affliction that it amounted to a product adverse influence, allowing for the proposed buyer to terminate the offer. The ruling marked the 1st time the court docket identified the existence of a materials adverse outcome, or MAE, in a organization transaction. It permitted German health and fitness care corporation Fresenius Kabi AG to walk absent from its planned $4.3 billion acquisition of U.S. generic drugmaker Akorn Inc.


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