Tesla and SpaceX CEO Elon Musk is suing elite Wall Street law firm Wachtell, Lipton, Rosen& Katz (Wachtell) seeking to recover most of a $90 million fee it received from Twitter for defeating his effort to back out from his $44 billion buyout of the social media company.
The X Corp owned by Musk filed the complaint in the California Superior Court in San Francisco on Wednesday, accusing the elite law firm of taking advantage of the web-based microblogging platform’s vulnerable period when he was trying to close the deal.
The complaint said, “Wachtell exploited Twitter by accepting, in the final days before the October 27, 2022, buyout closed, huge ‘success’ fees doled out by departing Twitter executives who were grateful that Musk would be forced to close.” The world’s richest person and the driving force behind Tesla Inc and SpaceX, called the $90 million payout ‘unconscionable’ given Wachtell had billed less than one-third of the sum for its few months of work on the Delaware lawsuit.
According to reports, Ryan Mac, a technology reporter focused on corporate accountability across the global tech industry, said, “Twitter sued Wachtell, Lipton, Rosen & Katz, a well-known Wall Street law firm, for unjust payments related to Elon Musk’s $44 billion acquisition of the social media company.”
Related: Twitter Hires Wachtell To Sue Musk Over $44bn Takeover
Yiwen Lu, a contributing reporter, added that Wachtell Lipton took funds from the company cash register while the keys were being handed over to Mr. Musk.
The complaint against Wachtell revealed the internal chaos at Twitter just before the $44 billion buyout took effect. It quotes former Twitter director Martha Lane Fox, when she learned of the fee payments, saying, “O My Freaking God.”
Speaking to media, John Coffee, a Columbia University law professor, said, “total legal fees could have exceeded $1 billion if the case had gone to trial.” Twitter has been involved in a slew of actual or threatened litigation since Musk’s buyout, including accusations of allowing millions in unpaid expenses to pile up from former employees, vendors, and landlords while supposedly trying to keep the company financially solvent.
However, X Corp. claims that by arranging to bill Twitter its hourly rates instead of taking the case on a contingency basis, Wachtell ‘undertook absolutely no risk in obtaining its mammoth success fee.’ It clarifies that the company’s agreement with the law firm did not include a formula or percentage from which the figure for the success fee was arrived at. Moreover, the lawsuit claims “Fully aware that nobody with an economic interest in Twitter’s financial well-being was minding the store, 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.”
It is unclear how this case will develop and what the outcome will be. Elon Musk, however, is determined to recoup the ‘excess’ fees from the law firm and has filed a complaint in the California Superior Court in an effort to do so.
