Twitter’s lawsuit against Elon Musk: What to know

ByBilly Alsman

Jul 19, 2022 , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,


DOVER, Del. (AP) — Twitter Inc.’s lawsuit to drive billionaire Elon Musk to make superior on his assure to purchase the social media big will be resolved in a little but effective Delaware court docket that specializes in substantial-stakes business disputes.

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


Musk, the world’s richest gentleman, pledged to spend $54.20 a share for Twitter but now wishes to again out of the settlement. He promises the business has unsuccessful to give satisfactory details about the quantity of pretend, or “spam bot,” Twitter accounts, and that it has breached its obligations beneath the deal by firing best managers and laying off a substantial quantity of staff members.

Twitter argues that Musk, CEO of electric motor vehicle maker and photo voltaic energy company Tesla Inc., has operated in bad religion and is deliberately trying to tank the offer simply because industry circumstances have deteriorated and the acquisition no for a longer time serves his pursuits. In accordance 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 additional than $100 billion considering the fact that November.

Both Musk or Twitter would be entitled to a $1 billion separation cost if the other get together is uncovered responsible for the arrangement failing. Twitter wants additional, however, and is seeking a courtroom buy directing Musk to abide by through with the deal.

WHEN DOES THE Trial Begin?

Twitter lawyers are inquiring the court to expedite the case. They have proposed a four-day trial starting off Sept. 19.


The Courtroom of Chancery, proven in 1792, traces its roots to the Superior Court docket of Chancery of Excellent Britain, which in transform progressed from an earlier institution in feudal England recognised as the King’s Chapel. The court docket, overseen by the lord chancellor as “keeper of the king’s conscience,” served as an alternate to the a lot more rigid and inefficient popular regulation courts. It held the electric power to present therapies these kinds of as injunctions, estate administration, and, notably, “specific efficiency,” which can drive a party to comprehensive a transaction from its will.

The 230-yr-previous Court docket of Chancery ordinarily handles civil circumstances where by a plaintiff is searching for non-financial damages. Such circumstances can contain disputes over property boundaries and land buys, guardianship appointments, and estates, trusts and wills.

Additional normally than not, they contain organization disputes pitting firms towards disgruntled shareholders, or functions to failed mergers and acquisitions against a single an additional.


The 7 judges on the Delaware Court docket of Chancery workout these powers right now, building it a vital location for large-stakes business disputes. Delaware capabilities a very well-recognized and thoroughly nurtured entire body of corporate case regulation relationship to 1899 and is the corporate household to extra than 1 million business enterprise entities, including extra than 60% of Fortune 500 corporations. A lot of merger agreements, in simple fact, specify that any disputes will be heard by a Delaware Chancery Court choose.

“It’s not that they are essentially much more amazing than judges in other states, they just have a good deal of exposure to this things and are rather refined about it,” said Lawrence Hamermesh, executive director of the Institute for Regulation & Economics at the College of Pennsylvania.

HAS MUSK BEEN IN THIS Court docket Ahead of?

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

Hamermesh, a previous professor of corporate and company legislation at Widener University Delaware Law University, famous that the particular overall performance sought by Twitter is a “pretty rare” cure, and that it is uncertain whether the courtroom will power Musk to consummate the deal.

“There are a whole lot of circumstances where by a decide could say, ‘Buyer, you are in breach,’ but the remedy is a termination charge,” he stated. “Given what I have witnessed so much, my intestine instinct is that Twitter’s received the higher hand legally. Whether or not they’ll get the entire distinct efficiency or just the break up payment is a minimal more challenging to say.”


If the court docket does force Musk to shut the deal, it would not be without precedent.

In 2001, poultry giant Tyson Food items Inc. was purchased to full its $3.2 billion acquisition of meatpacker IBP Inc. when a judge granted IBP’s claim for precise functionality.

More a short while ago, a Chancery judge very last yr ordered personal fairness business Kohlberg & Co. to near its $550 million buy of DecoPac Holdings Inc., which sells cake decorations and technological know-how to supermarkets for in-shop bakeries. Vice Chancellor Kathaleen St. Jude McCormick stated Kohlberg experienced failed to exhibit that a decrease in DecoPac revenue amid the coronavirus pandemic constituted a “material adverse effect” permitting the consumers to walk absent. McCormick, who was sworn in as Chancellor, or head judge of the court, just one particular week immediately after her ruling, described it as “a victory for deal certainty.”

On the flip side, Vice Chancellor J. Travis Laster declared in 2018 that a pharmaceutical company specific for a merger experienced expert these types of a drop in its monetary condition that it amounted to a substance adverse impact, allowing the proposed buyer to terminate the deal. The ruling marked the to start with time the courtroom observed the existence of a material adverse impact, or MAE, in a enterprise transaction. It authorized German wellness care business Fresenius Kabi AG to wander away from its planned $4.3 billion acquisition of U.S. generic drugmaker Akorn Inc.


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