Elon Musk has initiated legal proceedings against the prominent law firm Wachtell, Lipton, Rosen & Katz, seeking to recover a significant portion of the $90 million fee that the firm received from Twitter. This fee was related to the firm’s efforts in preventing Musk from backing out of his $44 billion acquisition of the social media platform.
The lawsuit, filed on Wednesday with the California Superior Court in San Francisco, represents Musk’s X Corp, the parent company of Twitter.
Musk has accused Wachtell of taking advantage of Twitter’s financial situation in the final days leading up to the completion of the buyout on October 27, 2022. He alleges that the firm received substantial “success” fees from outgoing Twitter executives, who were relieved that Musk would be compelled to finalize the deal.
The billionaire entrepreneur, who also leads Tesla and SpaceX, expressed his view that the $90 million payment is “unconscionable,” particularly given that Wachtell had charged less than one-third of that amount for its work on the litigation in Delaware.
“Wachtell arranged to effectively line its pockets with funds from the company cash register while the keys were being handed over” to Musk, the legal complaint stated.
Musk’s lawsuit aims to reclaim what he considers “excess” fees that Wachtell charged under a contract signed by one of its partners and Twitter’s chief legal officer, Vijaya Gadde, on the day of the buyout’s completion.
The complaint also referenced a remark from former Twitter director Martha Lane Fox, who, upon learning the amount being paid to the attorneys, expressed shock via email to general counsel Sean Edgett, stating, “O My Freaking God.”
Wachtell has yet to respond to requests for comment regarding the lawsuit. It is important to note that Gadde, Fox, and Edgett are not named as parties in this legal action.
Since Musk’s acquisition, Twitter has faced a multitude of legal challenges, including lawsuits from landlords, vendors, and consultants alleging that Musk has failed to settle outstanding bills. There is also a potential lawsuit from Twitter against Meta Platforms regarding its new Threads app.
Wachtell is experienced in dealing with litigation involving high-profile buyouts. The firm previously engaged in extended legal disputes with Carl Icahn over his hostile takeover of CVR Energy in 2012, which concluded with a judge dismissing Icahn’s malpractice claim.
The current case is officially titled X Corp v Wachtell, Lipton, Rosen & Katz, in the California Superior Court, County of San Francisco, under No. CGC-23-607461.
© Thomson Reuters 2023
