Twitter’s lawsuit against Elon Musk: What to know

Anderson Hacken

DOVER, Del. (AP) — Twitter Inc.’s lawsuit to drive billionaire Elon Musk to make superior on his assure to invest in the social media large will be fixed in a tiny but strong Delaware court that specializes in substantial-stakes business enterprise disputes.

Twitter has sued Musk in Delaware’s Court of Chancery in an exertion to drive him to comprehensive a $44 billion takeover deal attained in April.


Musk, the world’s richest gentleman, pledged to pay back $54.20 a share for Twitter but now wishes to back out of the settlement. He promises the enterprise has unsuccessful to deliver satisfactory info about the amount of pretend, or “spam bot,” Twitter accounts, and that it has breached its obligations beneath the offer by firing best managers and laying off a major quantity of staff.

Twitter argues that Musk, CEO of electric powered auto maker and solar electrical power firm Tesla Inc., has operated in undesirable faith and is intentionally striving to tank the offer due to the fact market place conditions have deteriorated and the acquisition no for a longer period serves his pursuits. In accordance to the lawsuit, the value of Musk’s shares in Tesla, which he was to draw upon to assistance finance the acquisition, has declined by additional than $100 billion due to the fact November.

Possibly Musk or Twitter would be entitled to a $1 billion break up payment if the other celebration is observed responsible for the settlement failing. Twitter wants far more, however, and is in search of a courtroom get directing Musk to observe through with the deal.

WHEN DOES THE Trial Get started?

Twitter legal professionals are asking the courtroom to expedite the scenario. They have proposed a 4-working day trial setting up Sept. 19.


The Courtroom of Chancery, proven in 1792, traces its roots to the Large Court of Chancery of Excellent Britain, which in flip evolved from an before institution in feudal England acknowledged 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 far more rigid and inefficient popular regulation courts. It held the power to supply cures these types of as injunctions, estate administration, and, notably, “specific performance,” which can power a get together to entire a transaction towards its will.

The 230-year-old Court of Chancery ordinarily handles civil situations where a plaintiff is seeking non-financial damages. Such conditions can include things like disputes in excess of residence boundaries and land buys, guardianship appointments, and estates, trusts and wills.

Extra normally than not, they contain small business disputes pitting providers towards disgruntled shareholders, or parties to failed mergers and acquisitions against a person a different.

HOW DOES THE Courtroom OF CHANCERY Perform These days?

The 7 judges on the Delaware Courtroom of Chancery work out these powers currently, creating it a important location for high-stakes small business disputes. Delaware attributes a well-recognized and meticulously nurtured human body of company case legislation relationship to 1899 and is the company house to more than 1 million enterprise entities, which include far more than 60% of Fortune 500 organizations. Numerous merger agreements, in reality, specify that any disputes will be listened to by a Delaware Chancery Court decide.

“It’s not that they are always additional good than judges in other states, they just have a good deal of publicity to this things and are really innovative about it,” said Lawrence Hamermesh, government director of the Institute for Regulation & Economics at the College of Pennsylvania.

HAS MUSK BEEN IN THIS Court docket Before?

Musk is no stranger to the Court docket 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 company in which Musk was the biggest shareholder and also served as board chairman.

Hamermesh, a former professor of corporate and company law at Widener University Delaware Legislation Faculty, mentioned that the particular efficiency sought by Twitter is a “pretty rare” solution, and that it’s uncertain no matter if the court will force Musk to consummate the deal.

“There are a good deal of instances exactly where a decide could say, ‘Buyer, you’re in breach,’ but the treatment is a termination price,” he claimed. “Given what I have noticed so much, my intestine intuition is that Twitter’s bought the upper hand lawfully. No matter if they’ll get the total certain efficiency or just the break up fee is a very little more difficult to say.”

HOW HAS THE Courtroom ACTED IN THE Previous?

If the courtroom does drive Musk to shut the offer, it would not be devoid of precedent.

In 2001, poultry giant Tyson Foods Inc. was requested to total its $3.2 billion acquisition of meatpacker IBP Inc. when a choose granted IBP’s assert for precise general performance.

More not too long ago, a Chancery choose previous 12 months requested private fairness company Kohlberg & Co. to near its $550 million buy of DecoPac Holdings Inc., which sells cake decorations and engineering to supermarkets for in-store bakeries. Vice Chancellor Kathaleen St. Jude McCormick said Kohlberg experienced failed to demonstrate that a drop in DecoPac income amid the coronavirus pandemic constituted a “material adverse effect” allowing the potential buyers to walk absent. McCormick, who was sworn in as Chancellor, or head judge of the court, just one particular 7 days just after her ruling, explained it as “a victory for deal certainty.”

On the flip facet, Vice Chancellor J. Travis Laster declared in 2018 that a pharmaceutical enterprise specific for a merger had knowledgeable these types of a decline in its economical issue that it amounted to a content adverse impact, permitting the proposed consumer to terminate the deal. The ruling marked the very first time the court docket located the existence of a materials adverse outcome, or MAE, in a company transaction. It authorized German health and fitness treatment firm Fresenius Kabi AG to wander away from its prepared $4.3 billion acquisition of U.S. generic drugmaker Akorn Inc.

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