May 18, 2024


Technology and Age

Twitter’s lawsuit against Elon Musk: What to know

DOVER, Del. (AP) — Twitter Inc.’s lawsuit to drive billionaire Elon Musk to make fantastic on his assure to buy the social media huge will be fixed in a modest but powerful Delaware court docket that specializes in high-stakes enterprise disputes.

Twitter has sued Musk in Delaware’s Courtroom of Chancery in an effort to power him to total a $44 billion takeover deal attained in April.


Musk, the world’s richest guy, pledged to pay $54.20 a share for Twitter but now desires to again out of the arrangement. He statements the organization has failed to present enough information about the variety of fake, or “spam bot,” Twitter accounts, and that it has breached its obligations under the offer by firing best professionals and laying off a important quantity of staff.

Twitter argues that Musk, CEO of electric car or truck maker and photo voltaic vitality corporation Tesla Inc., has operated in undesirable religion and is deliberately making an attempt to tank the deal for the reason that current market circumstances have deteriorated and the acquisition no extended serves his passions. In accordance to the lawsuit, the benefit of Musk’s shares in Tesla, which he was to draw upon 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 break up price if the other occasion is uncovered liable for the agreement failing. Twitter wants extra, even so, and is trying to find a court purchase directing Musk to adhere to by with the deal.

WHEN DOES THE Demo Get started?

Twitter attorneys are inquiring the court docket to expedite the case. They have proposed a 4-day trial starting off Sept. 19.


The Court of Chancery, set up in 1792, traces its roots to the Substantial Courtroom of Chancery of Excellent Britain, which in switch evolved from an previously institution in feudal England regarded as the King’s Chapel. The courtroom, overseen by the lord chancellor as “keeper of the king’s conscience,” served as an option to the additional rigid and inefficient frequent legislation courts. It held the electric power to give treatments this kind of as injunctions, estate administration, and, notably, “specific performance,” which can drive a bash to total a transaction against its will.

The 230-12 months-old Court of Chancery typically handles civil instances in which a plaintiff is searching for non-monetary damages. These kinds of conditions can incorporate disputes around property boundaries and land buys, guardianship appointments, and estates, trusts and wills.

Much more generally than not, they entail small business disputes pitting businesses towards disgruntled shareholders, or parties to failed mergers and acquisitions against 1 a further.

HOW DOES THE Court docket OF CHANCERY Get the job done Nowadays?

The 7 judges on the Delaware Courtroom of Chancery workout these powers currently, making it a critical venue for significant-stakes company disputes. Delaware features a well-established and diligently nurtured system of company circumstance legislation dating to 1899 and is the company household to a lot more than 1 million small business entities, together with much more than 60% of Fortune 500 companies. Quite a few merger agreements, in point, specify that any disputes will be heard by a Delaware Chancery Court choose.

“It’s not that they are essentially additional amazing than judges in other states, they just have a whole lot of publicity to this stuff and are really advanced about it,” said Lawrence Hamermesh, govt director of the Institute for Legislation & Economics at the College of Pennsylvania.

HAS MUSK BEEN IN THIS Court docket Prior to?

Musk is no stranger to the Courtroom of Chancery. Previously this year, he emerged victorious in a shareholder lawsuit accusing him of a conflict of interest in Tesla’s 2016 acquisition of SolarCity, a battling solar panel business in which Musk was the biggest shareholder and also served as board chairman.

Hamermesh, a former professor of corporate and organization legislation at Widener College Delaware Legislation University, pointed out that the specific efficiency sought by Twitter is a “pretty rare” cure, and that it’s unsure irrespective of whether the court will drive Musk to consummate the deal.

“There are a good deal of instances wherever a choose could say, ‘Buyer, you are in breach,’ but the cure is a termination fee,” he claimed. “Given what I have witnessed so significantly, my intestine intuition is that Twitter’s bought the higher hand lawfully. No matter if they’ll get the whole unique functionality or just the breakup payment is a tiny tougher to say.”


If the courtroom does power Musk to close the deal, it would not be without precedent.

In 2001, poultry big Tyson Foods Inc. was purchased to total its $3.2 billion acquisition of meatpacker IBP Inc. when a judge granted IBP’s claim for particular general performance.

Additional not long ago, a Chancery choose previous 12 months ordered non-public equity organization Kohlberg & Co. to shut its $550 million purchase of DecoPac Holdings Inc., which sells cake decorations and technologies to supermarkets for in-retailer bakeries. Vice Chancellor Kathaleen St. Jude McCormick mentioned Kohlberg had unsuccessful to display that a decline in DecoPac sales amid the coronavirus pandemic constituted a “material adverse effect” making it possible for the customers to stroll away. McCormick, who was sworn in as Chancellor, or head judge of the court docket, just just one week immediately after her ruling, explained it as “a victory for offer certainty.”

On the flip side, Vice Chancellor J. Travis Laster declared in 2018 that a pharmaceutical corporation qualified for a merger had seasoned these kinds of a decrease in its monetary issue that it amounted to a content adverse effect, letting the proposed consumer to terminate the deal. The ruling marked the initially time the court uncovered the existence of a product adverse effect, or MAE, in a company transaction. It allowed German overall health care corporation Fresenius Kabi AG to stroll absent from its prepared $4.3 billion acquisition of U.S. generic drugmaker Akorn Inc.