Elon Musk's X Corp. filed a lawsuit against a law firm Twitter hired last year this week after Musk attempted to violate the terms of their $44 billion merger agreement. In his lawsuit filed in San Francisco County Superior Court, Elon Musk claims that Wachtell, Lipton, Rosen & Katz overcharged Twitter by $90 million, including $84.3 million on the day Musk closed on his purchase of Twitter.
In a lawsuit brought by X Corp., the company that will eventually replace Twitter, Wachtell was accused of trying to fundamentally change the terms of its fee arrangement as litigation counsel in order to obtain an improper bonus payment in violation of its fiduciary and ethical obligations to its client. Wachtell "abused a corporate client left defenseless by lame duck fiduciaries who had lost their incentive to act in Twitter's best interest pending its impending sale to Elon Musk and his entities, X Holdings I, Inc. and X Holdings II, Inc.
The business hired Wachtell in July 2022 to handle the lawsuit that eventually forced Musk to complete the merger after Musk attempted to back out of his agreement to purchase Twitter. When it became apparent that he would probably lose in court, Musk finally complied with the merger agreement in October.
On October 27, the Musk/Twitter agreement came to an end. For several months of work, Wachtell allegedly charged Twitter $90 million, of which $84.3 million was paid on the day the merger closed. The lawsuit claimed that the $90 million fee included earlier invoices totaling almost $18 million.
Musk's lawsuit claimed that Wachtell "arranged to effectively line its pockets with funds from the company cash register while the keys were being handed over to the Musk Parties" because it was "fully aware that nobody with an economic interest in Twitter's financial well-being was minding the store.
Since then, it appears that Musk's Twitter hasn't paid many bills because the company is currently involved in over 20 lawsuits over allegedly unpaid rent and other bills. Twitter is also dealing with lawsuits from former workers over unpaid bonuses and severance pay, as well as one from the former CEO Parag Agrawal and other ex-executives over unpaid reimbursements.
Most of the $84.3 million was a "success fee."
Wachtell allegedly received $84.3 million on October 27 in total, with the majority of that sum going to Wachtell as a "success fee" for pressuring Musk to finalize the deal. It is "impossible to determine what portion of the $90 million total fee due to Wachtell under the Closing Day Letter Agreement represents the referenced success fee," according to Musk's lawsuit. It is estimated that the success fee will be between $61 million and $72 million based on other invoices and accrued costs.
The complaint makes several claims against Wachtell, including unjust enrichment, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and violations of California's Business & Professions Code. We reached out to Wachtell, Lipton, Rosen & Katz today, and if we hear back, we'll update this post.
The lawsuit stated that Wachtell "should be required to forfeit its entire $90 million total fee under the Closing Day Letter Agreement and make restitution in the amount of $90 million due to its egregious violations of its professional duties and applicable ethical rules."
Musk contends that Wachtell "should be ordered to make restitution for the difference between the $90 million total fee it received and the reasonable fees it would have received had it adhered to the billing guidelines it agreed upon in the June 21 Engagement Letter" if the court does not order Wachtell to forfeit the entire fee.
Musk's lawsuit claims that while Wachtell initially "signed an engagement letter for an hourly fee representation," it "failed to obtain a written agreement for any fee tied to the results of the underlying case." According to the lawsuit, Wachtell's last-minute success fee shows that it "apparently believed that it—unlike other law firms bound by ethical and fiduciary obligations—was free to solicit a handout, aid and abet corporate waste by former Twitter executives in the death throes of their fiduciary roles, and walk away with a total fee that made it $90 million richer."
In a lawsuit brought by X Corp., the company that will eventually replace Twitter, Wachtell was accused of trying to fundamentally change the terms of its fee arrangement as litigation counsel in order to obtain an improper bonus payment in violation of its fiduciary and ethical obligations to its client. Wachtell "abused a corporate client left defenseless by lame duck fiduciaries who had lost their incentive to act in Twitter's best interest pending its impending sale to Elon Musk and his entities, X Holdings I, Inc. and X Holdings II, Inc.
The business hired Wachtell in July 2022 to handle the lawsuit that eventually forced Musk to complete the merger after Musk attempted to back out of his agreement to purchase Twitter. When it became apparent that he would probably lose in court, Musk finally complied with the merger agreement in October.
On October 27, the Musk/Twitter agreement came to an end. For several months of work, Wachtell allegedly charged Twitter $90 million, of which $84.3 million was paid on the day the merger closed. The lawsuit claimed that the $90 million fee included earlier invoices totaling almost $18 million.
Musk's lawsuit claimed that Wachtell "arranged to effectively line its pockets with funds from the company cash register while the keys were being handed over to the Musk Parties" because it was "fully aware that nobody with an economic interest in Twitter's financial well-being was minding the store.
Since then, it appears that Musk's Twitter hasn't paid many bills because the company is currently involved in over 20 lawsuits over allegedly unpaid rent and other bills. Twitter is also dealing with lawsuits from former workers over unpaid bonuses and severance pay, as well as one from the former CEO Parag Agrawal and other ex-executives over unpaid reimbursements.
Most of the $84.3 million was a "success fee."
Wachtell allegedly received $84.3 million on October 27 in total, with the majority of that sum going to Wachtell as a "success fee" for pressuring Musk to finalize the deal. It is "impossible to determine what portion of the $90 million total fee due to Wachtell under the Closing Day Letter Agreement represents the referenced success fee," according to Musk's lawsuit. It is estimated that the success fee will be between $61 million and $72 million based on other invoices and accrued costs.
The complaint makes several claims against Wachtell, including unjust enrichment, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and violations of California's Business & Professions Code. We reached out to Wachtell, Lipton, Rosen & Katz today, and if we hear back, we'll update this post.
The lawsuit stated that Wachtell "should be required to forfeit its entire $90 million total fee under the Closing Day Letter Agreement and make restitution in the amount of $90 million due to its egregious violations of its professional duties and applicable ethical rules."
Musk contends that Wachtell "should be ordered to make restitution for the difference between the $90 million total fee it received and the reasonable fees it would have received had it adhered to the billing guidelines it agreed upon in the June 21 Engagement Letter" if the court does not order Wachtell to forfeit the entire fee.
Musk's lawsuit claims that while Wachtell initially "signed an engagement letter for an hourly fee representation," it "failed to obtain a written agreement for any fee tied to the results of the underlying case." According to the lawsuit, Wachtell's last-minute success fee shows that it "apparently believed that it—unlike other law firms bound by ethical and fiduciary obligations—was free to solicit a handout, aid and abet corporate waste by former Twitter executives in the death throes of their fiduciary roles, and walk away with a total fee that made it $90 million richer."
