Round one to Twitter in high-stakes legal battle with Musk

Twitter can fast-track its lawsuit against billionaire Elon Musk over his cancelled US$44-billion buyout of the social media platform.

Delaware chancery court chief judge Kathaleen St J McCormick ruled on Tuesday that a five-day trial should take place in October. The decision is an early victory for Twitter, in a case in which many legal experts have said Musk will be an underdog.

Lawyers for San Francisco-based Twitter had said they needed only four days to prove the world’s richest person must honour his agreement and pay $54.20/share for the company. Twitter filed suit last week, requesting a 19 September start for the non-jury trial.

In Tuesday’s hearing, held remotely to accommodate the judge’s case of Covid, a lawyer for Twitter argued that Musk was “contractually obligated to use his best efforts to close the deal”. Instead, he is “doing the exact opposite”, attorney William Savitt told the judge. “He’s engaging in sabotage.”

Under the buyout agreement, Musk is obligated to finalise the deal within two days of all the closing conditions being met, Savitt said. Those conditions will be met in early September, he said.

“Mr Musk has no intention of keeping any of his promises,” the lawyer said.

The judge noted that in asking for a February trial, Musk’s lawyers “underestimate the ability of this court to quickly process” complex legal disputes over merger-and-acquisition cases.

‘Cloud of uncertainty’

The dispute over the teetering transaction is “creating a cloud of uncertainty” over Twitter that is harming the company, McCormick concluded after hearing arguments on whether the case should be fast-tracked.

Musk’s legal team has said Twitter was unfairly pushing for a “warp speed” trial. Musk said Twitter violated the terms of the buyout deal by not turning over detailed information about so-called spam bot accounts within its system. The case requires a “forensic review and analysis of large swaths of data” about the bots along with other legal issues, Musk’s lawyers said in the filing, seeking a trial date in February or later.

Chancery judges in Delaware — the corporate home to more than half of US public companies — are known for being able to parse legal thickets of complex merger-and-acquisition disputes more quickly than many other US courts. Unlike in some states where it can take several years to get a case to trial, Delaware chancery court generally moves quicker, with cases often argued within five or six months of being filed.

Elon Musk

Musk backed out of the deal to buy the platform on 8 July, saying in a regulatory filing that Twitter had made “misleading representations” over the number of bot accounts. Twitter also hasn’t “complied with its contractual obligations” to provide information about how to assess how prevalent the bots are on the social media service, Musk said.

Twitter countered that Musk is asking for information that “does not exist, has already been provided, or is the subject of requests only made recently”. The billionaire “refuses to honour his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests”, Twitter said in the suit.  — Jef Feeley, (c) 2022 Bloomberg LP

Now read: Elon Musk deserves to lose his fight with Twitter

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