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Big setback for Elon Musk in Twitter Trial

Twitter Inc. may fast-track its lawsuit against billionaire Elon Musk to void its $44 billion purchase of the social media platform.

Twitter Inc. may fast-track its lawsuit against billionaire Elon Musk to void its $44 billion purchase of the social media platform.

Delaware Chancery Court Chief Judge Kathleen St. J. McCormick ruled Tuesday that a five-day trial should take place in October. The decision is an early victory for Twitter, in a case where many legal experts say Musk will be an underdog.

Lawyers for San Francisco-based Twitter said they needed just four days to prove the world’s richest man would honor his deal and pay $54.20 a share for the company. Twitter filed suit last week, requesting a non-jury trial to begin on September 19.

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

‘cloud of uncertainty’

Under the buyout agreement, Musk is obligated to finalize the deal within two days after all closing conditions are met, Savitt said. Those conditions will be fulfilled in the beginning of September, he said.

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

The judge said that in seeking the trial in February, Musk’s lawyers “underestimated this court’s ability to expeditiously process” complex legal disputes over mergers and acquisitions cases.

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

Twitter shares jumped as much as 5.4% after the ruling. They were trading at $39.63 at 1:56 pm in New York, up 3.2%. The day Musk tweeted that the deal was “on hold” in mid-May, the stock fell as much as 22%. It hasn’t traded close to the deal price since the first two weeks after the acquisition was announced.

‘warp speed’

Musk’s legal team says Twitter is unfairly pushing for a “warp speed” trial. Musk said Twitter violated the terms of the purchase agreement by not providing details of so-called spam bot accounts within its systems. The lawsuit requires a “forensic review and analysis of a large amount of data” about the bots, among other legal issues, Musk’s lawyers said in the filing, seeking a trial date in February or later.

At Tuesday’s hearing, Musk’s lawyer Andrew Rossman argued there was no need to rush the trial to meet the October deadline set in the contract. The key date is when the financing commitment for the purchase expires, at the end of April next year, he told the judge. A February trial would give the court enough time to decide the case and leave room for appeals, Rossman said.

“The idea of ​​trying this case in 60 days” was “fantastic,” he said of the proposed Sept. 19 trial start on Twitter. “It’s an unreasonable time frame.”

Rossman rejected Twitter’s claim that Musk was trying to run out the clock so funding commitments would expire. His client “continues to do his best to get the deal done” by lining up financing and contacting his lawyers on Twitter with details up until the day the company filed the lawsuit, he said.

“Mr. Musk has no motivation to hurt Twitter,” said Rossman, its second-largest shareholder.

Fast court

Ultimately, he failed to convince McCormick to deny Twitter an accelerated schedule.

Chancery judges in Delaware – the corporate home of more than half of US public companies – are known for being better able to analyze the legal membrane of complex merger and acquisition disputes than any other US court. Unlike some states where it can take several years to get a case to trial, the Delaware Chancery Court usually moves quickly, often arguing within five or six months of filing the case.

Musk pulled out of a deal to buy the platform on July 8, saying in a regulatory filing that Twitter made “misrepresentations” about the number of bot accounts. Twitter also “failed to comply with its contractual obligations” to provide data to assess how prevalent bots are on the social media service, Musk said.

Twitter countered that Musk was asking for information that “does not exist, has already been provided, or is the subject of only a recent request.” The billionaire “refused to honor his obligations to Twitter and its stockholders because the agreement he signed no longer served his personal interests,” Twitter said in its lawsuit.

The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington).


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