Twitter sees first win in case against Elon Musk | Business and Economics News
Twitter Inc. An early win against Elon Musk in her fight to make him complete the $44 billion acquisition, a Delaware judge agreed to expedite the case to trial date in October.
Chief Justice of the Supreme Court Kathleen St. J. McCormick on Tuesday scheduled a five-day trial in the fall, instead of two weeks in February as the billionaire requested. Twitter has argued that it is struggling under the Tesla Inc founder’s withdrawal. From the bargain and belittling the social media company.
The ruling marks Twitter’s first victory in a case in which many legal experts say Musk will be the underdog.
At a hearing in Wilmington, the judge made it clear that she saw little point in Musk’s arguments over scheduling, saying his attorneys “underestimate the ability of this court to handle complex disputes quickly” in merger and acquisition cases.
McCormick found the battle over the teetering deal was “creating a cloud of uncertainty” on Twitter. “The reality is that continued delays threaten imminent harm” to the company, she said.
The judge had no questions for Twitter’s lawyer after his argument, but he stopped Musk’s lawyer when he called the Sept. 19 trial, starting Twitter with an “unreasonable” suggestion. She cited an earlier case that went to trial within three months and dismissed Musk’s lawyers’ argument that it took a year to bring another case to trial, citing the pandemic’s limitations at the time.
McCormick asked the parties to suggest specific dates in October for the non-jury trial and the hearing — which was held remotely to accommodate her Covid case — concluded in just over an hour and a half.
Twitter shares jumped 5.4% after the ruling. It was trading at $39.32, up 2.4%, at 3:16 pm in New York. Since the day Musk tweeted that the deal was “on hold” in mid-May, the stock has fallen as much as 22%. It hasn’t traded near the transaction price of $54.20 per share since the first two weeks after the acquisition was announced.
San Francisco-based Twitter lawyers said they need just four days to prove that the world’s richest person should honor his approval. Twitter sued last week to force Musk to complete the deal.
At Tuesday’s hearing, Twitter’s lawyer said Musk was “contractually obligated to do everything in his power to complete the transaction.” Instead, attorney William Savitt told the judge he was “doing just the opposite.” “He is involved in sabotage.”
Savit said that under the takeover agreement, Musk is obligated to complete the transaction within two days of meeting all closing conditions. He said those conditions would be met in early September.
“Mr. Musk has no intention of fulfilling any of his promises,” the lawyer said.
Musk’s legal team said Twitter was unfairly paying for a “speed warp” trial. Musk said Twitter violated the terms of the acquisition deal by not providing detailed information about the so-called spam accounts within its system. Musk’s lawyers said in the filing that the case required a “forensic review and analysis of a large body of data” about the botnet, among other legal issues.
Andrew Rosman, Musk’s attorney, argued at the hearing that there was no need to speed up the trial to meet the October deadline set in the deal. He told the judge that the important date is when the financing commitments for the purchase expire near the end of April next year. Rossman said a trial in February would give the court enough time to decide the case and leave room for appeal.
“The idea of running this issue in 60 days was ‘extraordinary,'” he said of Twitter’s proposed timeline. “It’s an unreasonable time frame.”
Rossman dismissed Twitter’s assertion that Musk was trying to run out of time and thus the funding commitments would lapse. He said his client “continued to do everything in its power to make the deal” by drumming up funding and keeping his lawyer in touch with Twitter about the details until the day the company filed the lawsuit.
“Mr. Rossman has no motive to do Twitter mischief,” Mr. Rossman said, given that he is its second largest contributor.
In the end, he failed to convince McCormick to deny Twitter a quick timeline.
In interrupting his argument, the judge referred to a 2001 merger battle between chicken processors Tyson Foods Inc. and IBP Inc. which underwent trial within three months. A court judge in that case ordered Tyson to go ahead with its rival’s $4.7 billion purchase deal after it sought to cancel the deal.
McCormick has rejected Rossman’s citation of a case she chaired herself — the private equity firm Kohlberg’s bid to ditch the $550 million takeover of cake supplier DecoPac Holdings from Snow Phipps Group LLC — that took a year to go to trial. She noted that questions were raised about the acquisition at a time when the epidemic was gaining momentum. In what could be a bad omen for Musk, McCormick ordered Kohlberg to close the deal.
Court judges in Delaware, the company’s home to more than half of US public companies, are known for their ability to resolve legal controversies from complex merger and acquisition disputes more quickly than many other US courts. Unlike in some states where it can take several years to bring a case to trial, the Delaware Chancery Court generally moves faster, with cases often being discussed within five or six months of being filed.
The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington).