Elon Musk’s X Corp recently initiated legal proceedings against the prestigious law firm Wachtell, Lipton, Rosen & Katz. The lawsuit aims to recover a significant portion of Wachtell’s $90 million fee from Twitter. This fee was awarded to the law firm for its role in thwarting Musk’s attempt to abandon his $44 billion acquisition of the social media giant.
The complaint was officially filed on Wednesday in the California Superior Court located in San Francisco. Musk’s lawsuit alleges that Wachtell took advantage of the situation by accepting substantial “success” fees from departing Twitter executives in the final days leading up to the closing of the buyout on October 27, 2022. These executives supposedly expressed gratitude towards Musk for ensuring the deal’s closure, which enabled Wachtell to benefit significantly from these fees.
The individual who holds the title of the world’s wealthiest person and also serves as the head of Tesla Inc and SpaceX expressed strong disapproval of the $90 million payout, considering that Wachtell had billed less than a third of that amount for their limited involvement in the Delaware lawsuit.
The complaint alleged that Wachtell had orchestrated a scheme to unjustly enrich itself by siphoning funds from the company’s coffers while simultaneously transferring control to Musk.
Legal Disputes Surrounding Elon Musk’s Acquisition of Twitter
Musk aims to recover the “excessive” fees that Wachtell had charged, which were authorized through an agreement signed on the day of the transaction by one of the firm’s partners and Twitter’s chief legal officer, Vijaya Gadde.
Furthermore, the complaint also cited the sentiments of former Twitter director Martha Lane Fox, who expressed astonishment upon learning the substantial amount lawyers would be compensated. In an email to general counsel Sean Edgett, she exclaimed, “Oh my goodness!”
Wachtell, the law firm mentioned in the complaint, has not yet responded to the requests for comment. It is important to note that Gadde, Fox, and Edgett are not involved as parties in the lawsuit.
Since Elon Musk acquired Twitter, the company has become embroiled in legal disputes and potential litigation. These include numerous lawsuits filed by landlords, vendors, and consultants who claim that Musk has failed to fulfill his financial obligations to them. Additionally, Twitter has threatened to take legal action against Mark Zuckerberg’s Meta Platforms due to the latter’s release of the Threads app.
Wachtell, a renowned legal firm, has been involved in various legal battles with billionaires over buyouts. One notable case involved a prolonged litigation with Carl Icahn concerning his hostile takeover of CVR Energy in 2012. The lawsuit, which spanned several years, showcased Wachtell’s expertise in handling complex and high-stakes legal disputes in the corporate world.
Wachtell’s Legal Expertise in High-Profile Buyout Disputes
In 2018, an intriguing turn occurred when a judge dismissed a malpractice claim filed by Carl Icahn against Wachtell. The claim stemmed from Icahn’s frustration over being obliged to pay higher fees to the banks that assisted in defending CVR against the hostile takeover. Interestingly, Icahn discovered that the fees incurred would have been significantly lower if the merger had failed. This discrepancy in fees further fueled the legal battle, prompting Icahn to pursue a malpractice claim against Wachtell.
However, the judge’s ruling ultimately favored Wachtell, dismissing Icahn’s malpractice claim. The decision underscored the complexities and intricacies inherent in buyout-related lawsuits, highlighting the need for legal expertise in navigating such disputes. The case was a testament to Wachtell’s extensive experience and competence in handling high-profile corporate litigation, mainly when involved by billionaires.
As a result of this ruling, the legal landscape surrounding buyouts and the potential liabilities of legal firms in such cases experienced a noteworthy development. The outcome set a precedent and sparked discussions within the legal community regarding the responsibilities and obligations of legal professionals when representing clients in buyout transactions.
Overall, Wachtell’s history of litigation with billionaires, exemplified by the high-profile dispute with Carl Icahn over the CVR Energy takeover, demonstrates the firm’s prominence and proficiency in handling complex and contentious legal matters. It highlights their ability to navigate the intricacies of corporate law and provide effective representation for their clients, even in cases involving substantial financial stakes and high-profile personalities.
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