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Technology


TWITTER ASSEMBLES LEGAL TEAM TO SUE MUSK OVER DROPPED TAKEOVER

 * The company hired big-hitter Wachtell, Lipton, Rosen & Katz
 * Twitter aiming to file a lawsuit in Delaware early this week

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Twitter Assembles Legal Team to Sue Musk
By

Ed Hammond and

Jef Feeley

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July 10, 2022 at 6:49 PM GMT


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Twitter Inc. has hired merger law heavyweight Wachtell, Lipton, Rosen & Katz as
it races to sue Elon Musk for moving to dump his $44 billion takeover of the
company, according to people familiar with the matter.

The social media company aims to file suit early this week, according to the
people, who declined to be identified because the matter is private. By hiring
Wachtell, it gains access to lawyers including Bill Savitt and Leo Strine, who
served as Chancellor of the Delaware Chancery Court, where the case will be
heard.

Musk has brought in Quinn Emanuel Urquhart & Sullivan LLP. The firm led his
successful defense against a defamation claim in 2019 and is representing him as
part of an ongoing shareholder lawsuit over his failed attempt to take Tesla
Inc. private in 2018.




An official for Wachtell Lipton declined to comment, and officials for Quinn
Emanuel couldn’t be reached. A Twitter spokesperson declined to comment. Musk
and Jared Birchall, the head of his family office, did not respond to a request
for comment. 

Delaware is the corporate home to more than half of US public companies,
including Twitter, and more than 60% of Fortune 500 firms. There, chancery
judges -- business law experts -- hear cases without juries and can’t award
punitive damages. Based on previous merger fights, efforts to terminate a deal
can play out within a few months, often ending with settlements to avoid further
wrangling.


TOP NAMES

Savitt, a Wachtell partner, is at the top of select group of A-list chancery
court litigators. Companies such as health-insurer Anthem Inc., real-estate
giant Sotheby’s and financial titan KKR & Co. have lined up outside his door
when deals turn sour or buyouts get challenged in Delaware.




Strine, who spent over 20 years working in the Delaware courts, most recently as
Chief Justice of that state’s Supreme Court, helped shape the legal norms that
Musk will seek to test by terminating his agreement to acquire Twitter. Strine
joined Wachtell in 2020.  

Before becoming the Chief Justice, he served on the Delaware Court of Chancery
as Chancellor from 2011, and as a Vice Chancellor from 1998.




Delaware Chancery Court typically frowns on efforts to back out of merger
agreements. It’s possible that one of Strine’s most influential decisions will
determine how Musk makes his case for ditching his Twitter takeover.



In 2000, Tyson Foods Inc. agreed to acquire rival IPB Corp. Soon after agreeing
to the deal, the meat market suffered a precipitous downturn, impacting both
companies financially. Tyson argued it had been given misleading information
about IBP’s business and was thus no longer obliged to complete the $3.2 billion
merger.

In court, Strine disagreed that there had been a Material Adverse Change and
ruled that Tyson must follow through with the deal. The ruling became a landmark
and the Tyson-IBP case is still the basis for the way courts and corporations
interpret the ability of a buyer to terminate a merger agreement.

The judges also have a say over whether breakup fees must be paid. In the
Musk-Twitter deal, that fee is $1 billion.

Further Reading: 

Musk Effort to Void Twitter Buyout Sets Up Delaware Court Fight

Musk Backs Out of $44 Billion Bid for Twitter, Citing Bots

Tesla Shares Edge Higher After Musk Walks Away From Twitter Deal

Musk-Twitter Buyout Fight Poses Question of Who Might Sue First

Why Elon Musk and Twitter CEO Are Sparring Over Bots: QuickTake

In a regulatory filing after the official market closed Friday, Musk announced
plans to walk away from his $54.20-a-share offer to buy Twitter, alleging that
the company misrepresented user data. Twitter Chairman Bret Taylor responded by
vowing to enforce the deal in what promises to be an arduous court brawl.

Twitter shares closed 5.1% lower at $36.81 in official trading, and dropped
another 4.8% to about $35 in post-market activity.



— With assistance by Dana Hull, Liana Baker, and Victoria Cavaliere





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