Twitter’s lawsuit against Elon Musk: What to know

DOVER, Del. (AP) — Twitter Inc.’s lawsuit to power billionaire Elon Musk to make excellent on his promise to purchase the social media large will be solved in a small but effective Delaware court that specializes in higher-stakes company disputes.

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


Musk, the world’s richest gentleman, pledged to fork out $54.20 a share for Twitter but now would like to again out of the arrangement. He promises the corporation has unsuccessful to present ample facts about the range of phony, or “spam bot,” Twitter accounts, and that it has breached its obligations underneath the deal by firing major supervisors and laying off a significant number of workforce.

Twitter argues that Musk, CEO of electric car or truck maker and photo voltaic electricity corporation Tesla Inc., has operated in negative faith and is deliberately attempting to tank the offer mainly because current market conditions have deteriorated and the acquisition no longer serves his passions. According to the lawsuit, the value of Musk’s shares in Tesla, which he was to draw on to assistance finance the acquisition, has declined by more than $100 billion considering that November.

Either Musk or Twitter would be entitled to a $1 billion breakup fee if the other party is discovered dependable for the agreement failing. Twitter wants more, having said that, and is trying to get a court docket buy directing Musk to abide by by means of with the deal.

WHEN DOES THE Trial Start out?

Twitter legal professionals are inquiring the court to expedite the circumstance. They have proposed a four-working day trial beginning Sept. 19.


The Court of Chancery, proven in 1792, traces its roots to the Higher Courtroom of Chancery of Good Britain, which in switch progressed from an previously establishment in feudal England acknowledged as the King’s Chapel. The court docket, overseen by the lord chancellor as “keeper of the king’s conscience,” served as an option to the more rigid and inefficient prevalent regulation courts. It held the electrical power to give treatments these types of as injunctions, estate administration, and, notably, “specific efficiency,” which can force a get together to entire a transaction versus its will.

The 230-year-outdated Courtroom of Chancery normally handles civil circumstances the place a plaintiff is searching for non-monetary damages. This sort of scenarios can consist of disputes in excess of home boundaries and land buys, guardianship appointments, and estates, trusts and wills.

More generally than not, they involve business disputes pitting businesses from disgruntled shareholders, or get-togethers to failed mergers and acquisitions from a single one more.

HOW DOES THE Court OF CHANCERY Operate Nowadays?

The seven judges on the Delaware Court docket of Chancery physical exercise these powers nowadays, building it a vital venue for substantial-stakes small business disputes. Delaware attributes a properly-founded and diligently nurtured entire body of corporate case regulation dating to 1899 and is the company dwelling to additional than 1 million organization entities, including more than 60% of Fortune 500 companies. Lots of merger agreements, in truth, specify that any disputes will be read by a Delaware Chancery Courtroom choose.

“It’s not that they are necessarily more outstanding than judges in other states, they just have a great deal of publicity to this stuff and are very complex about it,” explained Lawrence Hamermesh, govt director of the Institute for Regulation & Economics at the University of Pennsylvania.

HAS MUSK BEEN IN THIS Court Right before?

Musk is no stranger to the Courtroom of Chancery. Previously this 12 months, he emerged victorious in a shareholder lawsuit accusing him of a conflict of desire in Tesla’s 2016 acquisition of SolarCity, a struggling solar panel organization in which Musk was the major shareholder and also served as board chairman.

Hamermesh, a previous professor of company and business enterprise legislation at Widener University Delaware Legislation Faculty, noted that the precise performance sought by Twitter is a “pretty rare” remedy, and that it’s uncertain regardless of whether the court will force Musk to consummate the offer.

“There are a large amount of circumstances where by a choose could say, ‘Buyer, you are in breach,’ but the solution is a termination cost,” he stated. “Given what I have seen so much, my gut instinct is that Twitter’s bought the upper hand legally. No matter whether they’ll get the entire distinct effectiveness or just the separation rate is a little harder to say.”


If the courtroom does drive Musk to close the deal, it would not be with out precedent.

In 2001, poultry huge Tyson Meals Inc. was requested to entire its $3.2 billion acquisition of meatpacker IBP Inc. when a judge granted IBP’s assert for particular general performance.

A lot more not too long ago, a Chancery decide past year purchased personal fairness business Kohlberg & Co. to close its $550 million buy of DecoPac Holdings Inc., which sells cake decorations and technologies to supermarkets for in-shop bakeries. Vice Chancellor Kathaleen St. Jude McCormick claimed Kohlberg experienced unsuccessful to display that a decrease in DecoPac sales amid the coronavirus pandemic constituted a “material adverse effect” making it possible for the purchasers to walk away. McCormick, who was sworn in as Chancellor, or head judge of the courtroom, just a single 7 days soon 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 business targeted for a merger had skilled this sort of a decrease in its money condition that it amounted to a material adverse result, allowing the proposed purchaser to terminate the deal. The ruling marked the very first time the court docket discovered the existence of a substance adverse effect, or MAE, in a organization transaction. It authorized German wellness treatment firm Fresenius Kabi AG to walk away from its planned $4.3 billion acquisition of U.S. generic drugmaker Akorn Inc.

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