There’s a saying in Delaware that the rest of the world remembers we exist every six months.
I love it when every 6 mo or so the whole world discovers Delaware again
— Jeanne Kuang (@JeanneKuang) July 8, 2022
It’s actually been only a few weeks since a “frozen in time” Burger King from the ’90s was rediscovered at Concord Mall — the kind of quirky, “Delabear“-type viral story that keeps Delaware’s reputation as comfortably inscrutable.
Of course, since the election of President Joe Biden, the state is invoked more regularly than it used to be, if only to allow people to complain about Biden “running off” to Delaware, or the inconvenience of a Joe Jam.
Delaware is in the headlines this week for that other reason people remember we exist periodically: the Delaware Court of Chancery, set off by a tweet from Twitter Chair Bret Taylor.
The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.
— Bret Taylor (@btaylor) July 8, 2022
That was Friday, and Twitter is still bubbling with armchair Delaware Court of Chancery judiciaries, reporters, tech CEOs and legal analysts debating who will come out on top in this billion(s)-dollar battle: Elon Musk or Twitter. The latter has hired law firm Watchell, Lipton Rosen & Katz, whose counsel includes Leo Strine, former chief justice of the Delaware Supreme Court and, before that, Chancellor of the Delaware Court of Chancery.
Twitter hires top Delaware law firm Watchell, Lipton Rosen & Katz to sue Elon Musk for pulling out of $44bn deal https://t.co/1imZ0cfPv6
— Daily Mail US (@DailyMail) July 10, 2022
You probably know the story: Tesla and SpaceX CEO Musk decided to buy Twitter for $44 billion a few months back, to the consternation if the Twitter board. A deal was made, Tesla stocks tanked, and Musk changed his mind. Musk claimed that requests for information on Twitter’s fake accounts and bot activity went unanswered, causing a breach in the agreement. It isn’t known whether Twitter is seeking to close the deal that was on the table, to renegotiate another deal, or make Musk pay a hefty breakup fee.
On Twitter itself, you’ll find everything from flowcharts to memes to deep-dive analysis about it:
Elon Musk's decision to try to terminate his deal to buy Twitter has set up a massive court fight in Delaware, and has significantly reduced the range of possible outcomes. https://t.co/XYmELF5EHM pic.twitter.com/NqHef2WcW7
— Axios (@axios) July 8, 2022
Billion dollar troll play.
Delaware courts can be tricky but they may not look favourably on this. Unless of course Elon can prove a massive amount of fraud at Twitter.
This is getting wild. https://t.co/uh51y01TeW
— ♤ ™̶ ɹǝʇsɐW ʇǝddnW – Grabbed all the Wheels (@MuppetMastertm) July 11, 2022
I continue to think the interesting question in the Twitter/Musk deal isn't whether Musk has any plausible contractual basis for getting out of the deal (of course he doesn't) but what a judge would/will decide to do remedy-wise.
— Morgan Ricks (@MorganRicks1) July 8, 2022
So, it’s a broken contract deal on a massive scale. But what does it have to do with Delaware?
This is one of those things that comes up a couple of times a year and is inevitably new information to some every time, like Pete Wentz’s Afro-Jamaican heritage.
It’s not even going to be the first time Musk has made a very public appearance at the Court of Chancery. Almost a year ago to the day, Musk went up against a shareholder plaintiff in Wilmington. In 2017, Mark Zuckerberg famously visited Delaware for a Chancery Court appearance, and spent his day off from court court meeting with members of the University of Delaware Disaster Research Center at Iron Hill Brewery to discuss Facebook’s crisis response tool.
— Univ. of Delaware (@UDelaware) September 26, 2017
The short answer of why Twitter and Elon Musk are going to duke it out in a Delaware court is because Twitter, like more than 60% of Fortune 500 companies including Tesla and Facebook, is incorporated in Delaware.
The reason why so many companies, big and small, choose to incorporate in Delaware instead of their own state, has to do with Delaware’s corporate laws, some tax breaks and, especially, its Chancery Court.
A Chancery Court is pretty much as old-timey as it sounds, going back to medieval England and inspired by the Roman Equity. Equity law, in this context, is about taking certain framework specifics of a case into account rather than applying general law broadly.
In the case of Delaware, the non-jury Court of Chancery is specifically a court for corporate law cases. Only two other states — Tennessee and Mississippi — still have Chancery Court, neither corporate-focused.
In many ways, Chancery Court became seen as antiquated and too British in the United States. But not in Delaware. Its Chancery Court, though not without flaws, is commonly referred to as the “gold standard of corporate law,” ruling with efficiency using consistent standards. Which is ultimately why so many companies choose to incorporate in Delaware, and why we in Wilmington get to witness when mega moguls are called to court.
I would pay NFL prices to attend the Elon Musk/Twitter trial in Delaware. Twitter bringing out genetically engineered M&A lawyers made from Henry Kravis’ sperm, Elon saying he shouldn’t have to pay them penalties using a printed out ceiling cat memes…trial of the millennium
— Never Back Down #BackBoris (@ByYourLogic) July 8, 2022
Elon Musk. The Twitter Board. Steel Cage. Two enter, only one will exit. Get your tickets now at the DELAWARE COURT OF CHANCERY!!!
— Infinite Content #GetVaccinated #wearadamnmask (@soulbrotha215) July 9, 2022
— Philipp Kloeckner (@pip_net) July 11, 2022
Knowledge is power!
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