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A12 business
Friday 15 July 2022

EXPLAINER: Twitter, Musk and the

Delaware Chancery Court

one another.
HOW DOES THE COURT OF
CHANCERY WORK TODAY?
The seven judges on the
Delaware Court of Chan-
cery exercise these powers
today, making it a key ven-
ue for high-stakes business
disputes. Delaware fea-
tures a well-established and
carefully nurtured body of
corporate case law dat-
ing to 1899 and is the cor-
Tesla CEO Elon Musk attends the opening of the Tesla factory porate home to more than
Berlin Brandenburg in Gruenheide, Germany, March 22, 2022. 1 million business entities,
Associated Press including more than 60%
of Fortune 500 companies.
By RANDALL CHASE breakup fee if the other Many merger agreements,
AP Business Writer party is found responsible in fact, specify that any
DOVER, Del. (AP) — Twitter for the agreement failing. disputes will be heard by a
Inc.’s lawsuit to force bil- Twitter wants more, how- Delaware Chancery Court
lionaire Elon Musk to make ever, and is seeking a court judge.
good on his promise to buy order directing Musk to fol- “It’s not that they are nec-
the social media giant will low through with the deal. essarily more brilliant than
be resolved in a small but WHEN DOES THE TRIAL judges in other states, they
powerful Delaware court START? just have a lot of exposure
that specializes in high- Twitter lawyers are asking to this stuff and are pretty
stakes business disputes. the court to expedite the sophisticated about it,”
Twitter has sued Musk in case. They have proposed said Lawrence Hamer-
Delaware’s Court of Chan- a four-day trial starting mesh, executive director of
cery in an effort to force Sept. 19. the Institute for Law & Eco-
him to complete a $44 bil- WHAT IS THE COURT OF nomics at the University of
lion takeover deal reached CHANCERY? Pennsylvania.
in April. The Court of Chancery, es- HAS MUSK BEEN IN THIS
WHAT IS THE LAWSUIT tablished in 1792, traces its COURT BEFORE?
ABOUT? roots to the High Court of Musk is no stranger to the
Musk, the world’s rich- Chancery of Great Britain, Court of Chancery. Ear-
est man, pledged to pay which in turn evolved from lier this year, he emerged
$54.20 a share for Twitter an earlier institution in feu- victorious in a shareholder
but now wants to back dal England known as the lawsuit accusing him of a
out of the agreement. He King’s Chapel. The court, conflict of interest in Tesla’s
claims the company has overseen by the lord chan- 2016 acquisition of SolarCi-
failed to provide adequate cellor as “keeper of the ty, a struggling solar panel
information about the num- king’s conscience,” served company in which Musk
ber of fake, or “spam bot,” as an alternative to the was the largest shareholder
Twitter accounts, and that more rigid and inefficient and also served as board
it has breached its obliga- common law courts. It held chairman.
tions under the deal by fir- the power to offer rem- Hamermesh, a former pro-
ing top managers and lay- edies such as injunctions, fessor of corporate and
ing off a significant number estate administration, and, business law at Widener
of employees. notably, “specific perfor- University Delaware Law
Twitter argues that Musk, mance,” which can force School, noted that the spe-
CEO of electric car maker a party to complete a cific performance sought
and solar energy company transaction against its will. by Twitter is a “pretty rare”
Tesla Inc., has operated in The 230-year-old Court of remedy, and that it’s un-
bad faith and is deliber- Chancery typically handles certain whether the court
ately trying to tank the deal civil cases where a plaintiff will force Musk to consum-
because market conditions is seeking non-monetary mate the deal.
have deteriorated and damages. Such cases can “There are a lot of instances
the acquisition no longer include disputes over prop- where a judge could say,
serves his interests. Accord- erty boundaries and land ‘Buyer, you’re in breach,’
ing to the lawsuit, the value purchases, guardianship but the remedy is a termi-
of Musk’s shares in Tesla, appointments, and estates, nation fee,” he said. “Given
which he was to draw upon trusts and wills. what I have seen so far, my
to help finance the acquisi- More often than not, they gut instinct is that Twitter’s
tion, has declined by more involve business disputes got the upper hand legal-
than $100 billion since No- pitting companies against ly. Whether they’ll get the
vember. disgruntled shareholders, full specific performance
Either Musk or Twitter would or parties to failed mergers or just the breakup fee is a
be entitled to a $1 billion and acquisitions against little harder to say.”q