Elon Musk has tried to own Lip so hard that he I ignored basic legal advice from skilled transaction attorneys. When he realized he didn’t actually want to go through with the deal, Twitter set Wachtell to sue Musk in Delaware in a lawsuit. Judicial lawsuits. Since then, Musk has made a net worth of $44 billion to $15 billion (and falls) and he took refuge in it Send empty legal threats. The point of that is…listen to your lawyer.
That’s what Twitter did during the acquisition, and that’s what Musk’s latest bid for some kind of win is all about. Well, his last bid for some kind of win is Penis measuring contestTough words for a man whose mother just stepped in to protect him from the fight.
But his mother did not stop him Wachtell sued (Update: Presumably, it’s the Wachtell we all know and love, though the complaint gives the esteemed law firm the wrong address and moves it 10 blocks away), seeking to recover fees incurred by the firm to represent Twitter and force Musk to move forward with the Twitter deal.
Wachtell took advantage of a corporate client left unprotected by lame confidantes who had lost their incentive to act in Twitter’s best interests pending its imminent sale to Elon Musk and Keaniyah’s X Holdings I, Inc. and X Holdings II, Inc.
I think we can all agree on one thing: it wasn’t like that at all Twitter The best interest is to get Musk to buy the company. Although that was in the interest of the former Twitter contributors and this is the constituency that the Trustees actually served at the time.
The crux of the complaint is that Wachtell shifted its fee structure from hourly billing to a “success fee” benefit payable to the company that ensures Musk’s compliance by allocating $44 billion to the company. At that point, the roughly $17 million that Wachtell had been paid hourly had turned into $90 million.
scandal!!! Why would a company agree to such a runaway fee arrangement that pays the company far more than the hours billed? Well, as one company said…
We believe success fee arrangements are the best way to synchronize client and attorney interests. By betting on ourselves, we make the customer’s main priority, which is to achieve a positive result, our main priority.
Once engaged, we think of each case as if we were the customer. While traditional law firms and most of our competitors often have large cadres of partners focused on maximizing billable hours and fee generation, our trial teams are dedicated to one thing: getting our clients’ cases to trial. Our fee arrangements are based on the idea that our compensation is tied to the success of our clients. Their win is our win too.
Who is this Reed Collins and Tsai… who represent Musk in this case.
And while the complaint they drafted called the payment “unreasonable,” the $90 million in exchange for making the company’s shareholders $44 billion seems like a pretty cool deal. It’s a 0.2 percent contingency fee! It might make headlines noting that the matter accounts for about 10 percent of Biglaw’s total revenue, but that’s just the way it goes when companies dealt with the world’s highest-profile non-Con law lawsuits in the past year over contingency.
What is the basis for this complaint? Musk argues that the deal violates California’s ethical codes because a success fee must be negotiated at the start of participation, and Wachtell and Twitter have agreed to an hourly arrangement initially.
This is a fair argument, but the deeper you go into the complaint, the more complex it becomes. After Musk acquiesced in buying Twitter, the line between litigation and mergers and acquisitions began to blur. Presumably, Wachtell was involved in those discussions as part of getting the client to the finish line while preserving his rights in court if Musk tries to withdraw again.
The complaint appears to acknowledge this:
Wachtell’s October 20 fee memo to Sean Edgett stated, “You have asked us to provide information regarding fee arrangements similar to those contemplated in WLRK’s Twitter post.” See Figure 7. The memorandum first discussed “Participation Fee as a Percentage of Bank Charges,” claiming that “(a) As we have discussed, in engagements for pending transactions for which a premium fee is contemplated, our Firm will often receive fees in the range of 60 to 80 percent of the fees paid to investment advisors.
This looks like a transactional agreement. So, has the company really changed the terms of its participation in the litigation or opened new conversations about the blanket fees involved in both litigation and transaction advice?
The complaint notes that the October 20 memo does not explicitly make that distinction, although the fact that there was a colorful reason why the company sought a new fee structure seems troubling to Musk’s case. The complaint slams the notion that Wachtell could seek the success fee after “close of the deal was imminent”, given the “highly unlikely event of a merger failing at the last minute” even though the buyer had already forced all to sue for non-honour. . Really tough deal.
The complaint argues that Twitter is an unsophisticated party exploited by the smartest lawyers and… good luck for the argument of “the global tech company’s legal employees as widows and orphans.” But failing that, the complaint says Twitter executives were indignant and openly defying the closing directives:
The closing day directive was an unambiguous statement on behalf of Twitter’s remaining claimants regarding the company’s preference to pause outgoing payments pending that day’s closing so that the company’s new owner can have a “reasonable opportunity to review those payments.”
That wasn’t the intent of the claim, but “the former executives knew we intended to violate the company’s contractual obligations” isn’t the killer argument Musk believes.
Technicalities aside, that’s the whole issue. How discontented can be buyer Recover the money spent to force him to buy the company? Because if this is a precedent, why would any company represent a target company? The company will essentially agree to a “failure fee,” and will only be able to guarantee payment if it fails to close the deal and opens the door for the buyer to void the terms of the engagement.
Obviously, there can be some hypothetical scenarios where a law firm is really trying to corrupt the acquiring company in an unethical way. But the standard for making this kind of guesswork must be very high.
Such kind of height.
previously: Elon Musk sends a legal threat to Facebook and as soon as Facebook is done laughing I’m sure they’ll get right back to it.
The Twitter complaint shows that every lawyer, everywhere, is always smarter than Elon Musk
Elon Musk will defeat Twitter! The Wall Street Journal says it’s obvious…assuming you change every fact and law.