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What if Musk loses the Twitter case but defies the court?

Analyst: Damages for breach of contract might be a possible remedy if Tesla owner loses court battle
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FILE - Tesla Motors, Inc. CEO Elon Musk speaks at the Paris Pantheon Sorbonne University as part of the COP21, United Nations Climate Change Conference in Paris on Dec. 2, 2015. An early prototype of Tesla Inc.91裸聊视频檚 proposed Optimus humanoid robot slowly and awkwardly walked onto a stage, turned, and waved to a cheering crowd at the company91裸聊视频檚 artificial intelligence event Friday, Sept. 30, 2022. (AP Photo/Francois Mori, File)

Twitter wants a Delaware court to order Elon Musk to buy the social media service for $44 billion, as he promised back in April. But what if a judge makes that ruling and Musk balks?

The Tesla billionaire91裸聊视频檚 reputation for dismissing government pronouncements has some worried that he might flout an unfavorable ruling of the Delaware Court of Chancery, known for its handling of high-profile business disputes.

Musk hopes to win the case that91裸聊视频檚 headed for an October trial. He91裸聊视频檚 scheduled to be deposed by Twitter attorneys starting Thursday.

But the consequences of him losing badly 91裸聊视频 either by an order of 91裸聊视频渟pecific performance91裸聊视频 that forces him to complete the deal, or by walking away from Twitter but still coughing up a billion dollars or more for breach of contract 91裸聊视频 has raised concerns about how the Delaware court would enforce its final ruling.

91裸聊视频淭he problem with specific performance, especially with Elon Musk, is that it91裸聊视频檚 unclear whether the order of the court would be obeyed,91裸聊视频 retired Delaware Supreme Court Justice Carolyn Berger told CNBC in July. 91裸聊视频淎nd the courts in Delaware 91裸聊视频 courts all over 91裸聊视频 are very concerned about issuing a decision or issuing an order that then is ignored, flouted.91裸聊视频

Berger, who was also a vice chancellor of the Chancery Court in the 1980s and 1990s, stood by those concerns in an interview with The Associated Press but said she doubted the Delaware institution would go so far as to make him complete the deal.

91裸聊视频淭he court can impose sanctions and the court can kind of coerce Musk into taking over the company,91裸聊视频 she said. 91裸聊视频淏ut why would the court do that when what really is at stake is money?91裸聊视频

Berger said she expects Twitter to prevail, but said a less tumultuous remedy for the company and its shareholders would make Musk pay monetary damages. 91裸聊视频淭he court doesn91裸聊视频檛 want to be in a position to step in and essentially run this company,91裸聊视频 she said.

Musk and his lawyers didn91裸聊视频檛 respond to requests for comment.

Other legal observers say such defiance is almost impossible to imagine, even from a famously combative personality such as Musk. He acknowledged he might lose in August in explaining why he suddenly sold nearly $7 billion worth of Tesla shares.

91裸聊视频淚 take him at his word,91裸聊视频 said Ann Lipton, an associate law professor at Tulane University. 91裸聊视频淗e wants to win. Maybe he91裸聊视频檚 got his own judgment as to what the odds are. But he91裸聊视频檚 also being sort of practical about this. He91裸聊视频檚 getting some cash ready so he doesn91裸聊视频檛 have to dump his Tesla shares if it turns out he is ordered to buy the company.91裸聊视频

A ruling of specific performance could force Musk to pay up his $33.5 billion personal stake in the deal; the price increases to $44 billion with promised financing from backers such as Morgan Stanley.

The Delaware court has powers to enforce its orders, and could appoint a receivership to seize some of Musk91裸聊视频檚 assets, namely Tesla stock, if he doesn91裸聊视频檛 comply, according to Tom Lin, a law professor at Temple University.

The court has made such moves before, such as in 2013 when it held Chinese company ZTS Digital Networks in contempt and appointed a receiver with power to seize its assets. But after coercive sanctions didn91裸聊视频檛 work, the receiver asked the court five years later to issue bench warrants calling for the arrest of two senior executives the next time they visited the U.S.

Speculation that Musk could be threatened with jail time for failing to comply with a ruling is unrealistic, said Berger. 91裸聊视频淎t least, not for the Court of Chancery,91裸聊视频 said the former judge. 91裸聊视频淭hat91裸聊视频檚 not the way the court operates.91裸聊视频

But more important, Lin said Musk91裸聊视频檚 legal advisers will strongly urge him to comply with the rulings of a court that routinely takes cases involving Tesla and other firms incorporated in the state of Delaware.

91裸聊视频淚f you are an executive at a major American corporation incorporated in Delaware, it91裸聊视频檚 very hard for you to do business and defy the chancery court91裸聊视频檚 orders,91裸聊视频 Lin said.

Concerns about Musk91裸聊视频檚 compliance derive from his past behavior dealing with various arms of the government. In a long-running dispute with the U.S. Securities and Exchange Commission, he was accused of defying a securities fraud settlement that required that his tweets be approved by a Tesla attorney before being published. He publicly feuded with California officials over whether Tesla91裸聊视频檚 electric car factory should remain shut down during the early stages of the COVID-19 pandemic.

He91裸聊视频檚 also taken a combative approach in Delaware Chancery Court, calling an opposing attorney a 91裸聊视频渂ad human being91裸聊视频 while defending Tesla91裸聊视频檚 2016 acquisition of SolarCity against a lawsuit that blamed Musk for a deal rife with conflicts of interest and broken promises. He and his lawyers have other Delaware cases still pending, including one involving his compensation package at Tesla.

91裸聊视频淚 think we91裸聊视频檝e got a whole lot of players who, as loose a cannon as Elon Musk is, rely on the goodwill of the Delaware courts on an ongoing basis for their businesses,91裸聊视频 Lipton said.

Musk91裸聊视频檚 argument for winning his latest Delaware case largely rests on his allegation that Twitter misrepresented how it measures the magnitude of 91裸聊视频渟pam bot91裸聊视频 accounts that are useless to advertisers. But most legal experts believe he faces an uphill battle in convincing Chancellor Kathaleen St. Jude McCormick, the court91裸聊视频檚 head judge who is presiding over the case, that something changed since the April merger agreement that justifies terminating the deal.

The trial begins Oct. 17 and whichever side loses can appeal to the Delaware Supreme Court, which is expected to act swiftly. Musk and Twitter could also settle the case before, during or after the trial, lawyers said.

Delaware91裸聊视频檚 courts are well-respected in the business world and any move to flout them would be 91裸聊视频渟hocking and unexpected,91裸聊视频 said Paul Regan, associate professor of Widener University91裸聊视频檚 Delaware Law School who has practiced in Delaware courts since the 1980s. 91裸聊视频淚f there was some kind of crisis like that, I think the reputational harm would be all on Musk, not the court.91裸聊视频

91裸聊视频擬att O91裸聊视频檅rien, The Associated Press





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