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Twitter takes Elon Musk to court, accusing him of bad faith and hypocrisy

Twitter's lawsuit sets the social media company and the world's richest man up for a lengthy, expensive and high-stakes battle.
Soumyabrata Roy/NurPhoto via Getty Images; Patrick Pleul/picture alliance via Getty Images
Twitter's lawsuit sets the social media company and the world's richest man up for a lengthy, expensive and high-stakes battle.

Updated July 12, 2022 at 6:48 PM ET

Twitter has sued Elon Musk to compel him to buy the social media company for $44 billion – a deal the world's richest person said last week he was calling off.

The lawsuit, filed in Delaware's Court of Chancery on Tuesday, accuses Musk of hypocrisy and bad faith in breaching his contract with Twitter.

It claims that Musk used pretexts, including a question about how many fake and spam accounts are on the platform, as way to try to kill the acquisition after a market downturn made it look like he was getting a bad deal. Yet, the suit points out, he was under a legally binding contract.

"Musk wanted an escape. But the merger agreement left him little room," wrote attorney William Savitt and other lawyers representing the social media company.

The lawsuit sets Twitter and Musk up for an expensive and high-stakes battle in which a once-reluctant seller will try to force the hand of a now unwilling buyer.

"Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests," Twitter's lawyers allege in the suit. "Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away."

Musk tweeted, "Oh the irony lol," shortly after the lawsuit was filed. Neither he nor his representatives responded to NPR's request for comment.

Under Delaware law, Musk's legal team has 20 days to respond to the complaint. Twitter has proposed an expedited timetable, however, arguing that any delay would hurt the company.

Lawyers with experience in the Delaware Court of Chancery say Musk winning will be an uphill battle. Experts say the case will likely hinge on proving that Twitter was not forthcoming in the negotiations.

"There is a body of caselaw in Delaware that says buyers' remorse does not allow a buyer to back out of a deal," said Daniel Griffith, a lawyer who has practiced in the court for 14 years.

"This is a complicated case, but, at the end of the day, the legal analysis won't be that sophisticated: It's just whether there was what's called a material adverse change or not," he said.

Twitter: Musk got buyers' remorse once tech stocks plunged

The Tesla and SpaceX CEO struck an agreement to buy Twitter for $54.20 a share in late April after he became its largest shareholder. He vowed to make the platform a bastion of unfettered free speech and clean up the long-running issue of spam and automated bots.

But since then, the mercurial billionaire has flipped. He launched a fight with the company over the prevalence of fake accounts, which he claims, without offering evidence, is higher than Twitter lets on. He's also aimed a near-constant stream of criticism at the company, including using his Twitter feed to attack executives and complaining about its content moderation decisions and features.

Under the deal, there is a $1 billion fee if one party walks away under certain circumstances. Musk could try to accuse Twitter of misrepresenting the number of bots on the platform as a way of avoiding that fee, but legal experts say that argument is unlikely to prevail in court. In other merger disputes that have landed in the Delaware court, parties have resolved their differences by renegotiating at a lower sale price.

Twitter brushed off Musk's arguments in its complaint.

According to the lawsuit, once stock market conditions made the bid look less attractive and Tesla shares, Musk's main source of wealth, declined, the billionaire iced out Twitter executives, disparaged the company and made public requests aimed at making the company appear as if it was being negligent.

Twitter officials suspected Musk was attempting to wiggle out of the agreement.

"From the outset, defendants' information requests were designed to try to tank the deal. Musk's increasingly outlandish requests reflect not a genuine examination of Twitter's processes but a litigation-driven campaign to try to create a record of non-cooperation on Twitter's part," the company's lawsuit says.

Then there was a sudden departure.

On June 23, according to the suit, Musk informed Twitter leadership that he was parting ways with one of his point people on the deal, former Intel CEO Bob Swan. "We are not on the same wavelength," Musk allegedly texted Twitter management.

After that, Twitter attempted to reach Musk's team. Officials from two banks advising the company, Goldman Sachs and JP Morgan, also tried in vain to talk to Swan's successor, according to the suit.

Twitter's team used a provision of the merger agreement to get an update on the status of Musk's financing. A day later, the suit says, Musk texted Twitter CEO Parag Agrawal and finance chief Ned Segal.

"Your lawyers are using these conversations to cause trouble," Musk allegedly wrote. "That needs to stop."

Copyright 2022 NPR. To see more, visit https://www.npr.org.

Shannon Bond is a business correspondent at NPR, covering technology and how Silicon Valley's biggest companies are transforming how we live, work and communicate.
Bobby Allyn is a business reporter at NPR based in San Francisco. He covers technology and how Silicon Valley's largest companies are transforming how we live and reshaping society.