What is the Delaware Court in Delaware and its role in Elon Musk’s Twitter deal?

A heated legal battle over Elon Musk’s efforts to end a $44 billion deal to buy Twitter is likely to land in a Delaware courtroom. This is where a 230-year-old court that is a key venue for the companies’ battles might consider if Twitter sues Musk to force the deal to be completed, as expected this week.

The court is known as the Delaware Court. Here’s what you need to know about it.

What is a Delaware Chancery Court?

Established in 1792, the Delaware Court is one of three courts established by the state constitution, along with the Supreme and Supreme Courts. It is known as a court of justice, not a court of law, because it allows for more flexible decisions than what the law officially provides.

said Charles Elson, founding director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. If Twitter sues Mr. Musk, for example, it could push for the acquisition to be completed and a court could order it through an injunction, he said.

“It’s an circumstance,” said Mr. Elson. “You have a broad corporate platform, which Delaware does, and you leave the rest to the judges.”

Ecclesiastical courts often hear cases related to wills, adoption, divorce, and guardianship. Delaware, Mississippi, and Tennessee are the only states with distinct judicial courts that descend from the English judicial tradition.

In Delaware, the chancellor’s court has one counsel, who is the chief justice, and six deputy counselors. The governor nominates the chancellor and vice chancellors, who must be passed by the state Senate to serve for 12-year terms. Delaware courts are located in Wilmington, Dover, and Georgetown.

Why might the hospital court consider the Twitter case?

Like many US companies, Twitter is registered as a company in Dover, Dell. More than 1.8 million companies are incorporated in the state, including more than two-thirds of Fortune 500 companies, according to the state’s division of corporations.

As a result, the Delaware Chancery Court has heard many corporate cases over the years, building expertise in the field. Many companies want cases to be heard in court because of this knowledge, which makes the arc of legal disputes there more predictable.

“If you want your labor disputes to be resolved by experts, you will generally prefer Delaware,” said Joseph Grundvist, professor of corporate governance at Stanford Law School. “You may be able to fool some of the judges somewhere, but you are unlikely to be able to fool these judges because they see these things all the time.”

The Court of Appeal is well aware of disputes involving mergers and acquisitions. Over the past two decades, it has ruled in disputes such as when a dissident shareholder fought the merger of computer companies HP and Compaq in 2002; When chemical company Hexion sued to terminate its merger with another chemical company, Huntsman, in 2008; And when luxury firms LVMH Moët Hennessy Louis Vuitton and Tiffany & Company sued each other over a takeover in 2020.

What happens once the case reaches Chancery Court?

Most cases in Chancery Court usually follow the same process, as do most civil courts in other states. Both parties can apply for an expedited judgment, which means they are asking the court to rule on all or parts of the case without going to trial. If the case goes to trial, the judge decides the facts based on the evidence presented through records and testimonies, and then decides on the decision.

The chancellor, Kathleen McCormick, appoints herself or one of the six vice chancellors to head the case. If the advisor has a conflict of interest — for example, having worked for Mr. Musk or Twitter in the past — he or she cannot chair. Cases are then decided by the presiding judge and not the jury, although the judge can call an advisory jury to assist with the deliberation. A judge’s decision can be appealed to the state Supreme Court, whose decision is final.

Have Mr. Musk and Twitter’s cases been heard in Chancery Court?

Yes, at least for Mr. Musk.

In 2016, Mr. Musk’s car company, Tesla, announced its acquisition of SolarCity Solar for $2.6 billion. Tesla shareholders filed a lawsuit to prevent the deal from moving forward, a case that landed in Chancery’s Delaware court. Tesla shareholders have accused Mr. Musk of pushing the Tesla board of directors to bail out troubled SolarCity, which the billionaire founded. The court ruled in Mr Musk’s favor in April.

Twitter did not immediately respond to a question about whether it had heard cases in Delaware Chancery Court.