Twitter’s parent company sued a leading corporate law firm on Friday for what it said were unjust payments related to Elon Musk’s $44 billion acquisition of the social media company last year.
A $90 million payment that Twitter made to Wachtell, Lipton, Rosen & Katz, a top mergers and acquisitions firm, amounted to “unjust enrichment” and should be paid back, according to the lawsuit, which the parent company, X Corp., filed in San Francisco Superior Court.
The lawsuit said Wachtell Lipton took “funds from the company cash register while the keys were being handed over” to Mr. Musk, who owns X Corp.
Twitter’s previous management hired Wachtell Lipton after Mr. Musk tried to terminate his agreement to acquire the company last year. He was unsuccessful, and the purchase closed in October.
Wachtell Lipton and a Twitter spokesman did not respond to requests for comment.
Twitter has disputed other fees related to Mr. Musk’s purchase of the company. An advisory firm, Innisfree M&A, sued Twitter for $1.9 million in February over what it said were unpaid bills. Joele Frank, a public relations firm, sued Twitter in May, arguing that it wasn’t paid about $830,498 for services rendered in the deal.
Wachtell Lipton is one of the best-known law firms on Wall Street, having advised high-profile deals including Mr. Musk’s failed effort to take Tesla, his electric car company, private in 2018. The firm commands high fees, cementing its perch among the law firms with the highest profits per partner.
The firm has been sued before. In 2018, the activist investor Carl Icahn sued Wachtell Lipton over its work on his hostile 2012 attempt to take over CVR Energy. The suit was dismissed.
According to documents submitted with Friday’s lawsuit, Twitter’s board and executives approved the $90 million payment because Wachtell Lipton and one of its lawyers, William Savitt, had succeeded in making Mr. Musk abide by his agreement to buy the company.
By approving the payment, Twitter’s former executives and board breached their fiduciary duty, the lawsuit said. Twitter’s board rushed to close the deal with Mr. Musk and did not act “prudently” or “on an informed basis,” the lawsuit said.
Wachtell Lipton was wired the bulk of the $90 million fee a mere 10 minutes before the deal closed in October, the lawsuit said. Within minutes of Wachtell Lipton’s receiving that transfer, Mr. Musk fired some of Twitter’s top executives, including its chief legal officer and general counsel, according to the suit.
Yiwen Lu contributed reporting.
Source: New York Times
