Tuesday’s hearing featured strongly worded arguments from both sides — including Twitter’s lawyer at one point referring to Musk as a “pledged enemy” — setting the stage for an almost certain contentious legal battle.
Twitter lead counsel William Savitt railed against Musk at the start of the hearing as he argued in favor of a speedy trial. Savitt said the continued uncertainty surrounding the company from the pending deal and litigation is “hurting Twitter every day, every hour, every day.” He also pointed to what he described as Musk’s continued deprecation of Twitter, including on his own platform.
“Musk was and remains contractually bound to make every effort to close this deal,” Savitt said. “What it does is the exact opposite; it’s sabotage.”
Musk’s lawyer, Andrew Rossman, pushed back, saying that Musk “has no incentive to keep this up for very long,” noting that the billionaire remains one of Twitter’s largest shareholders. He also noted that Twitter didn’t sue Musk for alleged violations of the deal until after it moved to end the deal, suggesting the company’s wait negated its desire to ship. (The judge said in her comments that Twitter’s timing was not “unreasonable.”)
Musk’s team has proposed that the dispute go to trial early next year. “We’re not against the mission period, we’re not asking for years here,” Rossman said. “What we offer instead, Your Honor, is an incredibly fast and sensible program.”
After each side argued, the judge overseeing the case, Delaware Court of Chancery Chancellor Kathaleen St.
“The reality is that delay threatens irreparable damage [to Twitter] … the longer the delay, the greater the risk,” McCormick said in announcing the planning scheme. He added that while few cases warrant a trial longer than five days, he would entertain a request from either side to extend the trial if necessary.
Even with this early scheduling disagreement, the stakes were high for Twitter. The company was already struggling to grow its user base and advertising business before Musk got involved, and now it and many other tech companies are reeling from costs amid rampant inflation and fears of a recession. Twitter needs a quick resolution to its battle with Musk to limit uncertainty for its shareholders, employees and customers, as well as any fallout for its business that could be exacerbated by costly, protracted litigation.
While Tuesday’s hearing was largely procedural, it provided a glimpse into how each side might approach what is likely to be a messy legal process. It can also provide a glimpse into how the judge overseeing the case approaches the dispute.
“There may be hints from what he’s asking and what he’s saying, and what they’re saying, during the hearing that they might be telling us something,” said Carl Tobias, a professor at the University of Richmond School of Law.
The case has already hit a small snag: While the hearing was originally scheduled to be held in person, McCormick sent a letter to both parties on Monday notifying them that she had tested positive for Covid-19 and would be moving the hearing to Zoom.
Less than three months after signing the acquisition agreement, Musk proceeded to terminate the deal. He accused Twitter of violating the agreement by making misleading statements about the number of bot and spam accounts on the platform and allegedly withholding data that Musk says is needed to assess the scale of the issue. Twitter fired back last week in a 60-plus-page lawsuit, alleging that Musk is the one who breached the agreement. In the suit, Twitter suggested that Musk is using bots as a pretext to try to back out of a deal he now has buyer’s remorse after the market downturn has sent shares of Twitter down, as well as those of Tesla ( TSLA ), which the billionaire relies on in part to finance the deal.
Rossman on Tuesday called the idea that Musk’s concerns about bots are a pretext for exiting the deal “nonsense.”
“We have reason to believe, based on what we’ve seen so far, that the actual numbers [of bots and fake accounts on Twitter] are significantly higher [than Twitter has publicly reported]with huge consequences for the long-term value of the company,” Rossman said. He added that Twitter’s claims that Musk is in breach of the deal “are being fabricated to try to strip Mr. Musk of his right to terminate the deal.”
Twitter asked the court to compel Musk to complete the deal to buy the company. While many legal experts say Twitter likely has the strongest argument in the dispute, some also expect the company may end up settling with the billionaire if the case starts to drag on, in an effort to reduce disruption to its operations.
As with the controversy in general, Twitter and Musk were very different on whether they should have a speedy trial. In its motion, Twitter said the shipment is necessary to ensure the deal can be completed before the Oct. 24 “drop dead” date the two sides previously agreed to close the deal and to “protect Twitter and its its shareholders from continued market risk and operational harm resulting from Musk’s attempt to bully his way out of an airtight merger deal.”
In a court filing Friday, Musk’s lawyers called Twitter’s request an “extreme mission” and claimed the dispute is “extremely factual and expert, requiring substantial time for discovery.” They also claimed that the original agreement stipulated that the license expiration date would no longer apply if a party filed an appeal of the agreement, calling Twitter’s request “arbitrary” and asking that a 10-day trial be scheduled for or after Feb. 13. 2023.
Twitter’s lawyer on Tuesday dismissed claims by Musk’s team that the discovery process would take months because it would require examining details related to the number of bots and fake accounts on the platform. The bot question is “emphatically and clearly not before the court in this case,” Savitt said.
“Nothing in the merger agreement addresses this issue, there is no representation or warranty in the merger related to how many fake accounts there may be on Twitter,” Savitt said. He added that “Musk could have handled this” before the deal was signed, but he didn’t.
Meanwhile, Twitter continues to take the necessary steps to move forward with the acquisition. The company sent a letter Friday to shareholders urging them to vote on the deal to sell Twitter to Musk for $54.20 per share at a special meeting at an unspecified date and time later this year, according to a regulatory filing. Twitter’s board previously unanimously recommended that shareholders vote in favor of the deal, a position it reiterated in the letter.
Despite Musk’s move to end the deal, “we are committed to closing the merger at the price and terms agreed upon with Mr. Musk,” Friday’s letter said. “Your vote at the special meeting is critical to our ability to complete the merger.”
