Twitter’s parent company sued a major corporate law firm on Friday over what it said were unfair payments related to Elon Musk’s $44 billion acquisition of the social media company last year.
A $90 million payment Twitter made to Wachtell, Lipton, Rosen & Katz, a top M&A firm, amounted to “unfair enrichment” and should be repaid, the court said. lawsuitthat the parent company, X Corp., filed in the San Francisco Superior Court.
The lawsuit says Wachtell Lipton took “funds from the company’s cash register while the keys were being handed over” to Musk, owner of X Corp.
Twitter’s former management hired Wachtell Lipton after Musk tried to back out of his deal to acquire the company last year. It was unsuccessful and the purchase closed in October.
Wachtell Lipton and a Twitter spokesperson did not respond to requests for comment.
Twitter has disputed other charges related to 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 invoices. Joele Frank, a public relations firm, sued Twitter in May, arguing that about $830,498 was not paid 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 Musk’s failed effort to take Tesla, his electric car company, private in 2018. The firm charges high fees, cementing its position among law firms with higher earnings per partner.
The firm has been sued before. In 2018, activist investor Carl Icahn sued Wachtell Lipton over his work in his hostile 2012 bid to take over CVR Energy. The claim was dismissed.
According to documents filed with the lawsuit Friday, Twitter’s board of directors and executives approved the $90 million payment because Wachtell Lipton and one of his lawyers, William Savitt, got Musk to honor his agreement to buy the company.
By approving the payment, Twitter’s former executives and board of directors breached their fiduciary duty, according to the lawsuit. Twitter’s board of directors rushed to close the deal with Musk and failed to act “prudently” or “on an informed basis,” the lawsuit says.
Wachtell Lipton was wired most of the $90 million fee just 10 minutes before the deal closed in October, according to the lawsuit. Minutes after Wachtell Lipton received that transfer, Musk fired some of Twitter’s top executives, including his chief legal officer and general counsel, according to the lawsuit.
Yiwen-lu contributed reporting.