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Elon Musk loses court battle against Twitter, judge orders October trial

The outcome of Twitter’s lawsuit against billionaire Elon Musk to get him to fulfill his pledge to pay $44 billion for the social media behemoth will be decided in a tiny but mighty Delaware court that specializes in high-stakes commercial conflicts.

With the “cloud of uncertainty” over the social media business after the billionaire’s decision to back out of a deal to purchase it, the court gave Twitter an early victory by scheduling the case’s trial for October. Chancellor Kathaleen St. Jude McCormick, the chief judge of Delaware’s Court of Chancery, which hears several high-profile corporate cases, said that “delay risks irreparable injury.” “The danger increases with the length of the wait.”

What you need to know is as follows.

What is at issue in the lawsuit?

The wealthiest man in the world, Musk, promised to buy Twitter for $54.20 per share, but he now wants to break the deal. He asserts that the business has broken the terms of the agreement by letting go of key executives and letting go of a sizable number of workers and that the business has failed to disclose sufficient information regarding the amount of phony or “spam bot” Twitter

Twitter claims that Musk, the CEO of Tesla, an electric vehicle manufacturer and solar energy firm, has acted in bad faith and is consciously attempting to kill the transaction since the market has soured and the purchase no longer suits his interests. The complaint claims that since November, the value of Musk’s Tesla shares, which he was supposed to use to help fund the purchase, has decreased by more than $100 billion.

If the other party is held accountable for the contract collapsing, either Musk or Twitter would be entitled to a $1 billion breakup fee. But Twitter wants more, and it’s asking the court to issue an order compelling Musk to carry out the agreement.

What time does the trial begin?

In September, Twitter requested a speedy trial, but Musk’s legal team recommended delaying it until the beginning of the next year due to the difficulty of the case. Musk’s team “underestimated the Delaware court’s capacity to speedily handle complicated litigation,” according to McCormick.

What does Court of Chancery mean?

The High Court of Chancery of Great Britain, which in turn developed from an older organization in feudal England known as the King’s Chapel, is where the Court of Chancery’s origins may be found. The Court of Chancery was founded in 1792. The court acted as an alternative to the stricter and less effective common law courts, and was presided over by the lord chancellor in his capacity as “keeper of the king’s conscience.” In particular, “specific performance,” which may compel a party to finish a transaction against its will, was one of the remedies it had the authority to give. Other remedies included injunctions and estate administration.

When a plaintiff seeks non-monetary damages in a civil dispute, the 230-year-old Court of Chancery normally hears the matter. Cases like this might include disagreements over land acquisitions and property lines, guardianship appointments, and estate, trust, and will matters.

The majority of the time, they involve commercial conflicts that pit rival corporations against irate shareholders or unsuccessful merger and acquisition parties against one another.

How is Chancery Court now run?

These powers are now exercised by the seven judges on the Delaware Court of Chancery, making it a crucial forum for important commercial issues. More than 1 million business entities, including more than 60% of Fortune 500 businesses, have their corporate headquarters in Delaware, which has a long-standing and carefully cultivated corpus of corporate case law going back to 1899. In reality, many merger agreements include language stating that any issues must be decided by a judge of the Delaware Chancery Court.

According to Lawrence Hamermesh, executive director of the Institute for Law & Economics at the University of Pennsylvania, “it’s not that they are inherently more clever than judges in other states, they simply have a lot of exposure to this topic and are very sophisticated about it.”

Has Elon Musk already appeared in this court?

Having experience with the Court of Chancery, Musk. He won a lawsuit filed by shareholders earlier this year that accused him of having a conflict of interest in Tesla’s purchase of SolarCity, a faltering manufacturer of solar panels, where Musk was the biggest shareholder and board chairman.

The particular performance requested by Twitter is a “very unique” remedy, according to Hamermesh, a former professor of corporate and commercial law at Widener University Delaware Law School. It is also unknown if the court would order Musk to complete the transaction.

There are several situations when a court may declare, “Buyer, you are in violation,” yet the only available remedy is a termination fee, he said. “My first impression, based on what I have seen thus far, is that Twitter has the legal advantage. It’s a bit tougher to predict whether they will get the whole particular performance or simply the breakup fee.”

What previous actions did the court take?

If the court did order Musk to complete the transaction, it would not be the first time. The $3.2 billion purchase of meatpacker IBP by poultry major Tyson Foods was required to be completed in 2001 after a court accepted IBP’s request for specific performance.

One of the judges in the Twitter case last year authorized private equity company Kohlberg & Co. to complete its acquisition of DecoPac Holdings, which supplies cake decorations and technology to supermarkets for in-store bakeries. McCormick argued that Kohlberg had failed to provide evidence that a drop in DecoPac sales during the coronavirus epidemic constituted a “material adverse impact” permitting the purchasers to withdraw. Just one week after making her decision, McCormick was sworn in as the court’s Chancellor, or chief judge, and hailed it as “a triumph for deal certainty.”

On the other hand, Vice Chancellor J. Travis Laster determined in 2018 that a pharmaceutical business that was the object of a merger had gone through a financial collapse that amounted to a substantial adverse impact, enabling the intended acquirer to cancel the agreement. In this decision, the court discovered a major adverse impact, or MAE, in a corporate transaction for the first time. It made it possible for American generic pharmaceutical Akorn to abandon its proposed $4.3 billion purchase by German healthcare giant Fresenius Kabi AG.

Source: Read Original Article by CBS News

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Written by Alex Bruno

Alex is a writer with a passion for space exploration and a penchant for satirical commentary. He has written extensively on the latest discoveries in astronomy and astrophysics, as well as the ongoing efforts to explore our solar system and beyond. In addition to his space-related work, Alex is also known for his satirical writing, which often takes a humorous and irreverent look at contemporary issues and events. His unique blend of science and humor has earned him a dedicated following and numerous accolades. When he's not writing, Alex can often be found stargazing with his telescope or honing his comedic skills at local open mic nights.

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