Elon Musk has taken legal action against the prominent law firm Wachtell, Lipton, Rosen & Katz in an effort to recover the majority of a $90 million (approximately Rs. 743 crore) fee they received from Twitter. This fee was awarded to the firm for successfully thwarting Musk’s attempt to withdraw from his $44 billion (approximately Rs. 3,37,465 crore) acquisition of the social media platform.
The lawsuit, filed by Musk’s X Corp, which holds ownership of Twitter, was submitted on Wednesday in the California Superior Court in San Francisco. Musk accuses Wachtell of exploiting Twitter by accepting substantial “success” fees just days before the October 27, 2022, buyout deadline. These fees were provided by departing Twitter executives who were grateful that Musk would be compelled to follow through with the acquisition.
As the wealthiest individual in the world and the head of Tesla and SpaceX, Musk deems the $90 million (approximately Rs. 743 crore) payout to be “unconscionable,” particularly since Wachtell had billed less than one-third of that amount for their work on the Delaware lawsuit over a few months.
The complaint states that Wachtell orchestrated a scheme to enrich themselves using funds from Twitter while the acquisition was taking place, as the keys were being handed over to Musk.
Musk intends to recover the “excessive” fees charged by Wachtell, as agreed upon in a contract signed on the day of the closing by one of the firm’s partners and Twitter’s chief legal officer, Vijaya Gadde.
The complaint also includes a quote from former Twitter director Martha Lane Fox, who expressed astonishment upon learning the amount lawyers would be paid, emailing general counsel Sean Edgett with the exclamation, “O My Freaking God.”
Wachtell has yet to respond to requests for comment, and Gadde, Fox, and Edgett are not involved in the lawsuit.
Since Musk’s acquisition of Twitter, the company has faced numerous actual or threatened legal disputes, including lawsuits from landlords, vendors, and consultants alleging non-payment, as well as a potential lawsuit from Twitter against Mark Zuckerberg’s Meta Platforms regarding the latter’s new Threads app.
Wachtell is no stranger to lawsuits from billionaires regarding acquisitions, having engaged in years-long litigation with Carl Icahn over his 2012 hostile takeover of CVR Energy.
In 2018, a judge dismissed a malpractice claim by Icahn, who found himself obligated to pay higher fees to banks that assisted in defending CVR against the takeover, even if the merger failed.
The case is titled X Corp v Wachtell, Lipton, Rosen & Katz, and it is being heard in the California Superior Court, County of San Francisco, under the docket number CGC-23-607461.
© Thomson Reuters 2023
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