Elon Musk"s X Corp is taking legal action against the law firm Wachtell, Lipton, Rosen & Katz (Wachtell Lipton) due to a massive "success fee" it charged Twitter just before he took over. The law firm helped the old Twitter owners close the deal with Musk as he tried to back out and subsequently left Musk’s Twitter down $90 million in professional fees.
According to Twitter, much of the $90 million professional fees were paid by the company to the law firm just hours before Musk took over the company. Now he is arguing that Wachtell Lipton exploited a corporate client being run by “lame duck fiduciaries who had lost their motivation to act in Twitter’s best interest”.
What’s even more shady about the whole arrangement is that Wachtell Lipton’s invoices to the social media firm came to millions of dollars in hours billed and the time entry descriptions were just completely blank, according to X Corp.
Then Twitter board member Martha Lane Fox, who is also a life peer in the UK’s House of Lords, is reported as saying “O My Freaking God” after seeing the bill the law firm had charged but despite this, she, along with the rest of the board, approved the fee payment.
In the complaint filed by X Corp (which runs Twitter now), Elon Musk had asked Twitter not to make any more outbound payments to third parties in anticipation of the imminent merger but the board approved this payment anyway.
According to the court documents, the invoices that Wachtell Lipton has earlier charged were just under $18 million but then an “incredibly accelerated” success fee was agreed taking the grand total to $90 million. X Corp points out that this $90 million made up 10% of the law firm’s gross revenue in 2022.
As part of this complaint, X Corp wants the success fee paid back and said the contract it was handed over under is unenforceable and in violation of Wachtell Lipton’s and Twitter’s then leadership’s fiduciary duties and California law.
Source: Reuters (PDF) via Financial Times