A judge’s ruling on Tuesday granting Twitter (TWTR) fast-tracked litigation against Tesla (TSLA) CEO Elon Musk offers clues about its broader case to block him from reneging on his $44 billion contract to buy the social media company.
In a decision mostly aligned with Twitter’s request for a four-day September trial, Delaware Chancery Court Chancellor Kathaleen McCormick ordered the parties to identify five trial days in October. The judge’s ruling, a more extensive departure from Musk’s request for a date no sooner than February, came within minutes of arguments offered by Musk’s and Twitter's lawyers.
Corporate lawyers experienced in Delaware Chancery Court contract disputes say the judge’s ruling came with some important observations for Twitter’s underlying case. Still, they caution that at such an early stage Twitter would be premature to celebrate its incremental victory.
“Simply because Her Honor thought an expedited trial was warranted at this early stage of the case, does not serve as a sound basis to predict what the final post-trial ruling in the case might be,” said Francis Pileggi, corporate litigation attorney and managing partner of the Wilmington firm Lewis Brisbois.
The dispute turns largely on the prevalence of fake Twitter accounts, known as spam bots. Musk contends he's backing out of the deal because Twitter isn't providing him with data regarding the number of spam bots that operate on its platform — and in some cases, spread disinformation. Twitter says the bot issue is a pretext for backing out of the agreement, and that Musk has been deliberately trying to frustrate the deal with a series of disparaging tweets. The uncertainty surrounding the transaction, the company argues, is unfairly disrupting its stock price and business operations.
Boston College Law School professor Brian Quinn notes that McCormick disagreed with Musk that the case’s complexity warrants a February trial. Although the judge held back on which specific issues she’ll entertain, a narrow focus for the dispute, Quinn said, could play to Twitter’s hand.
“If the judge just wants to ask questions about what’s in the contract, it’s not necessarily going to be that complex,” Quinn said. “If the judge is going to allow Musk to get down to what exactly the number of bots is, then that’s a more complex question.”
Either way, he said, McCormick made it clear that the court could handle the dispute quickly.
In its suit, Twitter is seeking a remedy known as specific performance — essentially forcing Musk to go through with the deal, rather than just paying it monetary damages. Before issuing her ruling on Twitter's expedited trial request, McCormick made it clear that money damages are not an obvious solution to the high-stakes dispute.
“It is not at all apparent that damages could constitute sufficient remedy,” she said.
It's notable that the judge appeared to validate Twitter's assertion that forcing Musk to go through with the deal might be the only way to resolve the dispute, according to Anat Alon-Beck, a law professor for Case Western Reserve University School of Law.
“The court has the discretion to issue equitable remedies customized for the circumstances of a particular case, and the chancellor did specify that specific performance is important here,” Beck said.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.