Here are four past cases that Twitter and Elon Musk’s lawyers will review as they head to court


SpaceX founder Elon Musk reacts at a post-launch press conference after the SpaceX Falcon 9 rocket, carrying the Crew Dragon spacecraft, lifted off on an uncrewed test flight to the Space Station from the Kennedy Space Center in Cape Canaveral, Florida, United States, March 2, 2019.

Mike Blake | Reuters

After billionaire Elon Musk said he was ending his acquisition of Twitter, the social media company hit back, citing a contractual provision that is often invoked when a party tries to back out of a deal.

The clause, known as specific performance, is often used in real estate business to prevent buyers and sellers from canceling transactions without good reason. But it is also included in corporate merger agreements as a means of forcing a buyer or seller into a deal, barring material breaches such as fraud.

In notifying Twitter of its intention to terminate the agreement on Friday, Musk’s attorneys made three arguments as to why Twitter breached his contract. First, they claim that Twitter fraudulently reported the number of spam accounts, which the company has long estimated at around 5% of users. Musk would have to prove that the number of so-called bots is much higher and show a “significant adverse effect” on Twitter’s business to justify ending the deal.

Second, Musk’s lawyers claim that Twitter “failed to provide much of the data and information” requested by Musk, violating a contractual clause that specifies that Twitter must provide reasonable access to “the property, books and records of the company and its subsidiaries.

Finally, Musk’s attorneys say Twitter breached another contractual clause that required the company to obtain consent before departing from its normal course of business. Musk cites Twitter’s decision to lay off two “high-ranking” employees, lay off a third of its talent acquisition team and institute a blanket hiring freeze as examples of decisions made without his consultation.

The Delaware Court of Chancery, a non-jury court that primarily hears corporate cases based on shareholder lawsuits and other internal matters, has ruled on a number of cases where a company cited the release clause. specific performance to force a sale. None were as big as Musk’s Twitter deal – $44 billion – and the details behind them also differ.

Still, past cases can provide context for how the Musk-Twitter dispute might end.

IBP vs. Tyson Foods

In that 2001 deal, Tyson agreed to acquire IBP, a meat distributor, for $30 a share, or $3.2 billion, after winning a bidding war. But when both Tyson and IBP’s businesses suffered as a result of the deal, Tyson attempted to walk away from the deal. Tyson argued that there were hidden financial issues at the IBP.

Judge Leo Strine found no evidence that IBP had materially breached the contract, instead saying that Tyson simply had “buyer’s regret”. This did not justify voiding an agreement, the judge said.

The exterior of a Tyson Fresh Meats plant is seen May 1, 2020 in Wallula, Washington. More than 150 factory workers have tested positive for COVID-19, according to local health officials.

david ryder | Getty Images

Strine decided that Tyson should buy IBP given the specific performance clause in the contract.

“Specific execution is the far preferable remedy for Tyson’s breach, as it is the only method by which to adequately remedy the harm threatened to IBP and its shareholders,” Strine wrote.

More than 20 years later, Tyson still owns IBP.

Still, the Tyson deal differs in a few key ways. Tyson hoped a judge would allow him to walk away from the deal in part because of the significant deterioration in IBP’s business after the deal was signed. Musk argues that false and vague information about spam accounts should keep him going.

Additionally, unlike Tyson’s deal for IBP, Musk’s acquisition of Twitter involves billions of dollars in external funding. It’s unclear how a ruling in favor of Twitter would affect potential funding for a deal, or if it could impact the closing.

Strine now works for Wachtell, Lipton, Rosen & Katz, the Twitter company hired to argue his case in Delaware Chancery Court.

AB Stable vs. Maps Hotels and Resorts

In this 2020 deal, a South Korean financial services company agreed to buy 15 U.S. hotels from AB Stable, a subsidiary of China-based Anbang Insurance Group, for $5.8 billion. The deal was signed in September 2019 and is expected to close in April 2020.

The buyer argued that the Covid-19 closures were the cause of a material adverse effect on the deal. The seller sued for specific performance.

Judge J. Travis Laster found that the hotel closures and dramatic capacity reductions violated the “ordinary course” of the trade clause and ruled that the buyer could opt out of the deal.

The Delaware Supreme Court upheld the decision in 2021.

Tiffany versus LVMH

In another Covid-19-related deal, LVMH originally agreed to buy jeweler Tiffany for $16.2 billion in November 2019. LVMH then tried to cancel the deal in September 2020 during the pandemic, before is concluded in November. Tiffany sued for specific performances.

In that case, a judge never made a decision because the two sides agreed to a price cut to account for the drop in demand during the global economic downturn from Covid-19. LVMH agreed to pay $15.8 billion for Tiffany in October 2020. The deal closed in January 2021.

A Tiffany & Co. storefront in Mid-Town, New York.

Images by John Lamparski/SOPA | Light flare | Getty Images

Genesco against the finish line

In that 2007 deal, shoe retailer Finish Line originally agreed to buy Genesco for $1.5 billion in June 2007 with a closing date of December 31, 2007. Finish Line attempted to terminate the deal in September 2007, claiming that Genesco “committed securities fraud and fraudulently induces Finish Line to enter into the agreement by failing to provide material information” regarding earnings projections.

As in the Tyson case, the Delaware Chancery court ruled that Genesco had fulfilled its obligations and that Finish Line simply had buyer’s remorse for paying too much. The markets had started to collapse in mid-2007 when the real estate and financial crisis began.

But rather than close the deal, the two parties agreed to end the transaction, with Finish Line paying damages to Genesco. In March 2008, with the credit market cratering, Finish Line and its main lender UBS agreed to pay Genesco $175 million, and Genesco received a 12% stake in Finish Line.

Genesco remains to this day an independent stock listed on the stock exchange. JD Sports Fashion agreed to buy Finish Line for $558 million in 2018.

WATCH: Elon Musk walks away from deal on Twitter, possibly heading to court


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