Twitter’s parent company sued a prominent 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 leading mergers and acquisitions firm, amounted to “unjust enrichment” and should be repaid, according to the trialwhich the parent company, X Corp., filed in San Francisco Superior Court.
The lawsuit said Wachtell Lipton took “funds from the company’s coffers 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 scuttle his deal to acquire the company last year. He failed, and the purchase closed in October.
Wachtell Lipton and a Twitter spokesperson 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 was not paid approximately $830,498 for services rendered in the agreement.
Wachtell Lipton is one of the best-known law firms on Wall Street, having advised on high-profile deals including Mr Musk’s failed attempt to take Tesla, his electric car company, private in 2018. The firm commands high fees, cementing its perch at the top . the list of law firms with the highest profit per partners.
The company has been sued before. In 2018, activist investor Carl Icahn sued Wachtell Lipton for its work on his hostile 2012 takeover attempt at CVR Energy. The suit was dismissed.
According to documents filed with Friday’s lawsuit, Twitter’s board and executives approved the $90 million payment because Wachtell Lipton and one of its lawyers, William Savitt, managed to get Mr. Musk to fulfill 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 “informedly,” the lawsuit said.
Wachtell Lipton was wired the bulk of the $90 million just 10 minutes before the deal closed in October, the lawsuit said. Within minutes of Wachtell Lipton receiving that transfer, Mr. Musk fired some of Twitter’s top executives, including its chief legal officer and general counsel, according to the lawsuit.
Yiwen Lu contributed reporting.