Legal Clash: Musk vs. Wachtell
Elon Musk is suing prestigious law firm Wachtell, Lipton, Rosen & Katz to recover a large chunk of a $90 million fee, the firm was paid by Twitter for quashing his attempt to escape his $44 billion buyout of the social media giant. The lawsuit, brought forward by Musk's X Corp, the current owner of Twitter, was filed on Wednesday in the California Superior Court in San Francisco.
Accusations of Exploitation and Exorbitant Fees
Musk's charges against Wachtell are hard-hitting. He accuses the firm of exploiting Twitter by accepting enormous "success" fees from exiting Twitter executives, right before the completion of the October 27, 2022 buyout. According to Musk, who runs both Tesla (NASDAQ: TSLA) and SpaceX, the $90 million fee is "unconscionable", as Wachtell had only billed a third of that for a few months of work on a Delaware lawsuit.
Legal Back-and-forth and Questionable Agreements
The complaint alleges that Wachtell "arranged to effectively line its pockets with funds from the company cash register while the keys were being handed over" to Musk. The main contention is to reclaim the "excess" fees that Wachtell charged, under an agreement signed on the day of closing by one of its partners and Twitter's chief legal officer Vijaya Gadde.
Shocks and Reactions
The hefty legal fees left many in disbelief, including former Twitter director Martha Lane Fox. Upon learning about the lawyer’s payout, she expressed her shock in an email to general counsel Sean Edgett: "O My Freaking God."
Lawsuits Galore: Twitter under Musk's Reign
Since Musk's acquisition, Twitter has been embroiled in numerous actual or threatened litigations. These include lawsuits by landlords, vendors, and consultants who claim that Musk has defaulted on payments, and a potential lawsuit from Mark Zuckerberg's Meta Platforms over its new Threads app.
Wachtell's History with Billionaires
This is not Wachtell's first rodeo with billionaires over buyouts. The firm previously spent years in litigation with Carl Icahn over his 2012 hostile takeover of CVR Energy (NYSE: CVI). A judge dismissed a malpractice claim by Icahn in 2018, who had been forced to pay banks defending CVR higher fees than if the merger had failed.
The ongoing case is filed as X Corp v Wachtell, Lipton, Rosen & Katz, California Superior Court, County of San Francisco, No. CGC-23-607461.
