ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Tuesday, December 6, 2022

Lawyer to Chief Twit, "You Will Lose, and You Know It"

Akiva Cohen is an attorney representing former Twitter employees who allege that they have not received termination payments that Elon Musk promised to make when he acquired Twitter.  The title of this blog post is the heart of his recent letter to Mr. Musk.  Just to recap, Mr. Musk first agreed to purchase Twitter for $44 billion.  He then claimed that Twitter was in breach of the agreement because there were more bot accounts on Twitter than Twitter had disclosed.  Twitter then sued Mr. Musk for specific enforcement of his promise to purchase the company or in the alternative for damages.  The agreement itself provided for a specific performance remedy and included a $1 billion cancellation fee.  

In July, John Patrick Hunt (right) explained John Patrick Hunton this blog that specific enforcement of acquisitions was not uncommon in Delaware.  Mr. Musk, perhaps reconsidering his options in light of Professor Hunt's arguments, changed course and acquired Twitter for $44 billion.  He promptly fired Twitter's top executives and half of its employees.  More left after Mr. Musk issued an ultimatum, telling employees to take three months' severance if they were not willing to work long hours at high intensity to build Twitter 2.0.  

To nobody's surprise, Twitter's former employees are now complaining that they have not received payments promised as part of the terms of Mr. Musk's acquisition of Twitter.  Mr. Cohen, addressed Mr. Musk and his attorney in a letter posted on Twitter.  The letter gives Mr. Musk until December 7th to confirm that he will make all severance payments the employees seek.  If he does not do so, Mr. Cohen threatens an "arbitration campaign."  Mr. Cohen points out that Mr. Musk will lose those arbitrations on the merits and also that he will be on the hook for arbitration costs and that, even should Mr. Musk win, that victory would by Pyrrhic, given that the arbitration costs would exceed whatever Mr. Musk thinks he can save by not paying severance.  Echoes of mass arbitration themes to which Nancy Kim alerted us here and about which readers can learn more from J. Maria Glover's piece in the Stanford Law Review.

Twitter-logo.svgMr. Cohen then detailed what was owed to his clients -- no less than two months' salary plus the value of their Twitter shares ($54.2o each), pro-rated bonus payments, healthcare coverage, and unpaid portions of Twitter's contributions to retirement plans.  The letter then anticipates Mr. Musk's legal argument -- that the employees are not third-party beneficiaries entitled to recovery under Mr. Musk's agreement to acquire Twitter -- and argues that the argument will not succeed under Delaware law.  And even if it did succeed, Mr. Cohen's clients would still win under promissory estoppel.  There are intimations of further claims for punitive damages and for discriminatory treatment in terminations. 

There is a bit of a carrot in the letter.  If Mr. Musk pays up, Mr. Cohen will go away without a fee, and all the money will go to Twitter's employees.  And then there's the stick, as some states allow recovery not just from the company, but from Mr. Musk himself.

Tomorrow is the deadline.  Stay tuned.

 

https://lawprofessors.typepad.com/contractsprof_blog/2022/12/lawyer-to-chief-twit-you-will-lose-and-you-know-it.html

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