Twitter’s lawsuit against Elon Musk: What to know

Edna B. Shearer

DOVER, Del. (AP) — Twitter Inc.’s lawsuit to force billionaire Elon Musk to make very good on his assure to purchase the social media huge will be fixed in a compact but strong Delaware courtroom that specializes in significant-stakes business disputes.

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


Musk, the world’s richest guy, pledged to pay back $54.20 a share for Twitter but now desires to back again out of the arrangement. He promises the organization has failed to provide suitable facts about the range of bogus, or “spam bot,” Twitter accounts, and that it has breached its obligations under the deal by firing major professionals and laying off a important variety of staff members.

Twitter argues that Musk, CEO of electrical car or truck maker and photo voltaic vitality company Tesla Inc., has operated in bad religion and is intentionally trying to tank the deal mainly because current market circumstances have deteriorated and the acquisition no for a longer period serves his interests. In accordance to the lawsuit, the price of Musk’s shares in Tesla, which he was to attract upon to support finance the acquisition, has declined by much more than $100 billion due to the fact November.

Possibly Musk or Twitter would be entitled to a $1 billion separation price if the other occasion is found responsible for the agreement failing. Twitter needs extra, however, and is in search of a court purchase directing Musk to comply with by way of with the offer.


Twitter lawyers are inquiring the courtroom to expedite the situation. They have proposed a four-day demo starting up Sept. 19.


The Courtroom of Chancery, recognized in 1792, traces its roots to the Large Courtroom of Chancery of Great Britain, which in turn progressed from an previously establishment in feudal England known as the King’s Chapel. The court, overseen by the lord chancellor as “keeper of the king’s conscience,” served as an alternative to the extra rigid and inefficient frequent regulation courts. It held the electrical power to offer you solutions this sort of as injunctions, estate administration, and, notably, “specific efficiency,” which can drive a social gathering to entire a transaction towards its will.

The 230-12 months-outdated Courtroom of Chancery commonly handles civil conditions where by a plaintiff is trying to find non-financial damages. Such situations can involve disputes over home boundaries and land purchases, guardianship appointments, and estates, trusts and wills.

Far more generally than not, they involve business enterprise disputes pitting companies from disgruntled shareholders, or get-togethers to unsuccessful mergers and acquisitions towards just one yet another.

HOW DOES THE Courtroom OF CHANCERY Operate Now?

The seven judges on the Delaware Courtroom of Chancery training these powers now, building it a crucial location for higher-stakes enterprise disputes. Delaware features a properly-proven and meticulously nurtured human body of corporate scenario legislation relationship to 1899 and is the corporate residence to much more than 1 million business enterprise entities, like much more than 60% of Fortune 500 organizations. Quite a few merger agreements, in truth, specify that any disputes will be listened to by a Delaware Chancery Courtroom 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 fairly refined about it,” stated Lawrence Hamermesh, government director of the Institute for Regulation & Economics at the College of Pennsylvania.

HAS MUSK BEEN IN THIS Court docket In advance of?

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 having difficulties solar panel business in which Musk was the most significant shareholder and also served as board chairman.

Hamermesh, a previous professor of company and organization legislation at Widener College Delaware Law College, famous that the certain performance sought by Twitter is a “pretty rare” treatment, and that it’s unsure whether the courtroom will force Musk to consummate the deal.

“There are a good deal of cases wherever a choose could say, ‘Buyer, you’re in breach,’ but the solution is a termination fee,” he mentioned. “Given what I have found so considerably, my gut instinct is that Twitter’s received the higher hand lawfully. No matter whether they’ll get the whole certain functionality or just the breakup charge is a minimal more difficult to say.”

HOW HAS THE Courtroom ACTED IN THE Previous?

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

In 2001, poultry large Tyson Meals Inc. was purchased to total its $3.2 billion acquisition of meatpacker IBP Inc. when a choose granted IBP’s declare for specific performance.

A lot more a short while ago, a Chancery choose past year requested personal fairness company Kohlberg & Co. to near its $550 million obtain of DecoPac Holdings Inc., which sells cake decorations and technologies to supermarkets for in-keep bakeries. Vice Chancellor Kathaleen St. Jude McCormick claimed Kohlberg experienced failed to exhibit that a drop in DecoPac revenue amid the coronavirus pandemic constituted a “material adverse effect” letting the potential buyers to walk away. McCormick, who was sworn in as Chancellor, or head judge of the court, just just one 7 days soon after her ruling, explained it as “a victory for deal certainty.”

On the flip side, Vice Chancellor J. Travis Laster declared in 2018 that a pharmaceutical enterprise specific for a merger experienced seasoned these a decrease in its economic issue that it amounted to a content adverse outcome, allowing the proposed customer to terminate the deal. The ruling marked the first time the courtroom identified the existence of a substance adverse result, or MAE, in a business enterprise transaction. It permitted German well being treatment firm Fresenius Kabi AG to wander away from its planned $4.3 billion acquisition of U.S. generic drugmaker Akorn Inc.

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