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By Joel Rosenblatt
Elon Musk sued the law firm that led the court fight to make him complete his takeover of Twitter, saying it took advantage of the company while running up a $90 million bill.
Wachtell Lipton Rosen & Katz, among the most profitable firms in the US, exploited a brief, vulnerable period just as Musk was closing the $44 billion deal, according to a complaint filed in San Francisco state court by Musk’s X Corp., now the parent of Twitter.
Twitter had agreed to pay Wachtell lawyers on an hourly basis to enforce Musk’s agreement to buy the company when he tried to back out, but the firm violated its ethical duties as well as California law in the final days of its four-month representation when it solicited “gargantuan” bonus fees, according to the complaint.
The lawsuit is something of a role reversal for Musk, who is a defendant in numerous suits alleging that Twitter under his leadership allowed millions in unpaid expenses to pile up from former employees, vendors and landlords while purportedly trying to keep the company financially solvent.
Representatives of Wachtell, including William Savitt, who played a lead role in last year’s Delaware Chancery Court fight, didn’t immediately respond to a request for comment.
Pity the Lawyers: Twitter-Musk Deal Would End Legal Fee Bonanza
Twitter’s legal battle with Musk engaged dozens of lawyers on both sides for months, some charging upwards of $1,000 an hour — leading Columbia University law professor John Coffee to speculate that total legal fees could have exceeded $1 billion if the case had gone to trial.
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.” Moreover, the company’s agreement with the law firm “does not even specify the amount of the success fee, let alone any formula or percentage used to arrive at that figure,” according to the complaint.
The suit also faults “lame duck” executives at the social media platform went on a legal “spending spree” before Musk took control.
“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,” according to the complaint.
The case is X Corp. v. Wachtell, Lipton, Rosen & Katz, CGC-23-607461, California Superior Court (San Francisco).
–With assistance from Caroline Hyde.
© 2023 Bloomberg L.P.
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