Billionaire entrepreneur Elon Musk has filed a lawsuit against prestigious law firm Wachtell, Lipton, Rosen & Katz in an attempt to recover a substantial portion of the $90 million fee the firm received from Twitter. The fee was awarded for successfully defeating Musk’s bid to withdraw from his $44 billion acquisition of the social media giant.
Musk’s company, X Corp, which owns Twitter, filed the complaint on Wednesday in the California Superior Court in San Francisco. The lawsuit accuses Wachtell of taking advantage of the situation by accepting significant “success” fees from departing Twitter executives just before the buyout closed on October 27, 2022. These executives were reportedly grateful that Musk would be compelled to proceed with the acquisition.
Being the world’s wealthiest individual and the head of Tesla Inc (TSLA.O) and SpaceX, Musk denounced the $90 million payout as “unconscionable.” He pointed out that Wachtell had billed less than one-third of that amount for its work on the Delaware lawsuit over a few months.
According to the complaint, Wachtell effectively enriched itself with funds from Twitter while the transfer of ownership was taking place. Musk aims to recover the “excess” fees charged by Wachtell, which were agreed upon in a contract signed by one of the firm’s partners and Twitter’s chief legal officer, Vijaya Gadde, on the closing day.
The lawsuit also cites Martha Lane Fox, a former Twitter director, who expressed astonishment at the lawyers’ payment when she emailed general counsel Sean Edgett, exclaiming, “O My Freaking God.”
Wachtell has yet to respond to requests for comment, while Gadde, Fox, and Edgett are not named as defendants in the lawsuit.
Lawsuits from landlords, vendors, and consultants
This legal action adds to the series of litigations and threatened lawsuits involving Twitter following Musk’s acquisition. The company has faced lawsuits from landlords, vendors, and consultants who claim that Musk failed to pay them, as well as a potential lawsuit against Mark Zuckerberg’s Meta Platforms (META.O) concerning its new Threads app.
Wachtell is familiar with lawsuits from billionaires regarding buyouts, as it was previously involved in lengthy litigation with Carl Icahn over his hostile takeover of CVR Energy (CVI.N) in 2012. In 2018, a judge dismissed Icahn’s malpractice claim, which arose from the higher fees he had to pay to banks defending against the takeover compared to a failed merger scenario.
The case, identified as X Corp v Wachtell, Lipton, Rosen & Katz, is currently pending in the California Superior Court, County of San Francisco, under the docket number CGC-23-607461.