Twitter’s lawsuit against Elon Musk: What to know


DOVER, Del. (AP) — Twitter Inc.’s lawsuit to pressure billionaire Elon Musk to make excellent on his assure to buy the social media giant will be fixed in a modest but effective Delaware court docket that specializes in large-stakes business disputes.

Twitter has sued Musk in Delaware’s Courtroom of Chancery in an exertion to pressure him to comprehensive a $44 billion takeover deal arrived at in April.


Musk, the world’s richest person, pledged to fork out $54.20 a share for Twitter but now needs to again out of the arrangement. He promises the company has failed to supply enough data about the quantity of fake, or “spam bot,” Twitter accounts, and that it has breached its obligations underneath the offer by firing prime administrators and laying off a major amount of staff.

Twitter argues that Musk, CEO of electric powered motor vehicle maker and solar power organization Tesla Inc., has operated in lousy faith and is deliberately seeking to tank the offer because market disorders have deteriorated and the acquisition no more time serves his passions. In accordance to the lawsuit, the price of Musk’s shares in Tesla, which he was to attract on to assist finance the acquisition, has declined by much more than $100 billion because November.

Either Musk or Twitter would be entitled to a $1 billion breakup cost if the other party is discovered responsible for the arrangement failing. Twitter desires a lot more, however, and is seeking a court order directing Musk to comply with by with the deal.

WHEN DOES THE Trial Start out?

Twitter legal professionals are asking the court to expedite the case. They have proposed a four-working day demo starting off Sept. 19.


The Courtroom of Chancery, set up in 1792, traces its roots to the Significant Court docket of Chancery of Fantastic Britain, which in convert progressed from an previously establishment in feudal England recognized as the King’s Chapel. The courtroom, overseen by the lord chancellor as “keeper of the king’s conscience,” served as an alternate to the more rigid and inefficient frequent legislation courts. It held the electrical power to offer cures these as injunctions, estate administration, and, notably, “specific effectiveness,” which can pressure a get together to complete a transaction towards its will.

The 230-year-old Court docket of Chancery generally handles civil scenarios where by a plaintiff is seeking non-financial damages. These types of cases can include disputes around property boundaries and land buys, guardianship appointments, and estates, trusts and wills.

Much more generally than not, they entail business disputes pitting corporations versus disgruntled shareholders, or parties to unsuccessful mergers and acquisitions towards one particular another.

HOW DOES THE Court docket OF CHANCERY Work Currently?

The 7 judges on the Delaware Court of Chancery exercising these powers today, building it a essential location for substantial-stakes business disputes. Delaware options a very well-recognized and very carefully nurtured physique of corporate scenario law courting to 1899 and is the corporate house to extra than 1 million business entities, like a lot more than 60% of Fortune 500 firms. Numerous merger agreements, in truth, specify that any disputes will be heard by a Delaware Chancery Court docket judge.

“It’s not that they are essentially more brilliant than judges in other states, they just have a good deal of exposure to this things and are very innovative about it,” explained Lawrence Hamermesh, govt director of the Institute for Legislation & Economics at the University of Pennsylvania.

HAS MUSK BEEN IN THIS Courtroom In advance of?

Musk is no stranger to the Courtroom of Chancery. Earlier this year, he emerged victorious in a shareholder lawsuit accusing him of a conflict of fascination in Tesla’s 2016 acquisition of SolarCity, a battling photo voltaic panel enterprise in which Musk was the most significant shareholder and also served as board chairman.

Hamermesh, a former professor of company and business law at Widener University Delaware Regulation Faculty, famous that the particular effectiveness sought by Twitter is a “pretty rare” solution, and that it is uncertain no matter if the court will drive Musk to consummate the offer.

“There are a large amount of situations where by a choose could say, ‘Buyer, you are in breach,’ but the cure is a termination fee,” he reported. “Given what I have noticed so much, my gut instinct is that Twitter’s obtained the higher hand legally. Whether or not they’ll get the total unique overall performance or just the breakup cost is a minor more challenging to say.”


If the courtroom does power Musk to close the deal, it would not be devoid of precedent.

In 2001, poultry large Tyson Foods Inc. was purchased to full its $3.2 billion acquisition of meatpacker IBP Inc. when a judge granted IBP’s declare for certain performance.

More lately, a Chancery judge previous yr purchased non-public equity business Kohlberg & Co. to near its $550 million acquire of DecoPac Holdings Inc., which sells cake decorations and know-how to supermarkets for in-keep bakeries. Vice Chancellor Kathaleen St. Jude McCormick reported Kohlberg experienced unsuccessful to demonstrate that a drop in DecoPac income amid the coronavirus pandemic constituted a “material adverse effect” allowing the buyers to wander absent. McCormick, who was sworn in as Chancellor, or head judge of the court, just 1 7 days following her ruling, explained it as “a victory for deal certainty.”

On the flip aspect, Vice Chancellor J. Travis Laster declared in 2018 that a pharmaceutical business qualified for a merger had seasoned these a drop in its financial situation that it amounted to a content adverse result, enabling the proposed customer to terminate the offer. The ruling marked the initial time the court docket identified the existence of a substance adverse impact, or MAE, in a business transaction. It allowed German health treatment enterprise Fresenius Kabi AG to stroll away from its planned $4.3 billion acquisition of U.S. generic drugmaker Akorn Inc.


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