Inside Delaware Shadow Court, Musk Vs Twitter Decision Rendered


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When Elon Musk and Twitter face off in court in October, there will be no jury and no cameras.

The judge will also not be bound by law.

That’s because Twitter has filed a lawsuit against billionaire Tesla in the Delaware Court of Chancery, where some of the world’s biggest companies often settle their disputes in obscurity.

Insiders say the so-called court of justice, a holdover from the British legal system, is a secluded judiciary where judges often befriend lawyers to whom they pass winnings, and where money and jobs are traded without much thought.

“Case in Delaware really depends a lot on your lawyer’s relationship with this chancellor who is handling your case,” said Phil Shaw, CEO and co-founder of TransPerfect, a translation company that was litigated.

“The people you argue with in court, you also host dinner parties,” Shaw said, describing the “collegiate” atmosphere that is unfriendly to outsiders.

Even Hunter Biden is helping to substantiate the office’s apparent nepotism. In 2018, the president’s beleaguered and scandal-prone son was upset that his business relationship with Chinese energy company CEFC was going awry, so he threatened to sue.

“I will be filing a lawsuit in the Delaware Court of Chancery – as you know, this is my home state and I have the privilege of working and knowing every judge in the Court of Chancery,” he wrote in a March 14, 2018 email found on his abandoned laptop. first discovered by The Post.

Elon Musk will have to defend himself against Twitter in Delaware Chancery Court.
AFP via Getty Images

Shaw said Biden’s message “sums up” the court’s reputation.

“He says, ‘If you cross my path, I will take you to the chancellor’s court, and I know everyone, and therefore they will rule as I tell them,’ Shaw told The Post. “It’s a good microcosm of how this place works.”

Another set of rules

Not surprisingly, Delaware-registered Twitter filed a lawsuit with the Chancellery.

There, cases are heard by appointed judges who are experts in commercial law and must deliver a “fair” verdict—one that can go far beyond the law.

In cases like Twitter, monetary damages are usually sought, but the social media giant filed a lawsuit with the Chancellery precisely because it wants to force Musk through a deal he refused to buy the company for $44 billion.

Many businesses prefer to conduct their business in the court of chancery.
The secret court is known to be unfriendly to outsiders and render favorable judgments to those it knows.

Chancellor Kathleen McCormick said during Tuesday’s hearing that Musk and Twitter will hold a five-day fast track trial in October.

The chancellor decides which of the six vice-chancellors will handle which business. She can also assign herself any task she wants.

In other state courts, including New York, judges assign cases randomly to avoid possible favoritism.

Insiders have told The Post that the office, meanwhile, appears to be running on favoritism.

“The Chancellor can be picky,” said Jeremy Aker, the lawyer who represented Shaw and has more than a decade of experience in the chancery.

“In recent years, more and more chancellors and vice chancellors have approached the firms most frequently brought before the courts directly, giving the appearance of a potential conflict of interest,” Eicher said.

“It’s not uncommon for vice chancellors to leave and then be hired by firms to which they have awarded large amounts of remedies and damages.”

Eicher noted that chancellors, if they so wish, can give former colleagues guardianship, which will give them millions of dollars for their work.

In 2022, the court sided with Musk.
Musk was previously in the Delaware office in 2018 to defend the SolarCity deal.

Sentences elsewhere are usually based on “testimony, witnesses, facts, merit, or circumstances that would normally lead to adjudication,” said Shaw, whose New York-based company is the world’s largest private provider of translation services.

Shaw, who sarcastically says he “probably had the privilege” of being the Chancellery’s most experienced litigator, noted that Twitter and Musk deliberately beefed up their teams with lawyers with court connections.

Cozy advice

The Musk-Twitter spat has brought attention to the dark court, and insiders say it’s unsettling to watch.

According to people familiar with the court, the legal panels chosen by Musk and Twitter, respectively, back up the claim.

According to Eicher, both sides were “looking for lawyers with deep connections at the Chancery Court” to handle the case.

In an attempt to force Musk into a $44 billion deal, Twitter hired established New York law firm Wachtell, Lipton, Rosen & Katz LLP, which has close ties to the court.

The partner there, Leo Strine, is a former Chancery Judge who served as Vice Chancellor and then Chancellor for 15 years. The other partner, Bill Savitt, who will litigate the case, is an experienced and well-connected attorney who has successfully handled several cases in the clerk’s office.

Twitter also retained office stalwart Brad Sorrels of California-based Wilson Sonsini Goodrich & Rosati, where the current vice chancellor once worked.

Meanwhile, Musk has partnered with Skadden, Arps, Slate, Meagher & Flom LLP, which is also known to have close ties to the court, the sources say.

Exterior view of the Delaware Chancery.
The lack of transparency in the work of the court is under scrutiny.
Google Maps

Skadden, which is headquartered in New York, has “oversized legal representation,” Eicher said.

“They have to believe on some level that gives them an edge,” he said.

“Outspoken Judicial Activism”

Delaware Senator Colin Bonini said there were “legitimate criticisms that the court is very isolated” and “not super transparent.”

Delaware is a small state with a small bar, and lawyers there often visit the same country clubs, insiders say.

Republican Bonini said he has seen examples of “overt judicial activism” where chancellors and outsiders have a “political agenda” that they want to achieve but that can’t be passed in the state legislature.

For example, the chancellor recently decided to demand a revaluation of homeowners and businesses to raise education tax funds, he said.

“The consequences of this will be massive increases in property taxes. If the chancellor thinks we need more money for education, then he should run for the State Assembly or the State Senate,” Bonini said.

Members of the Delaware Court of Chancery.
The Delaware Court of Chancery has seven white members, despite the large number of people of color in the state.
Chancery Court of Delaware

Meanwhile, local activist Keandra McDole claims that Delaware Attorney General Kathy Jennings filed a lawsuit against her with the office, believing she had a better chance of winning there.

McDole protested outside the homes of Justice Department employees after wrongdoing charges were dropped against two Delaware police officers who killed a black man in early 2021. Jennings took her to the office to try and limit her ability to protest.

“I was horrified because I noticed right away…the office has its own rules,” McDole said. With the help of the ACLU, McDole won the case.

“It seems to me that we were sent to the Chancery Court because the Attorney General and Deputy Attorney General thought they would get their way,” she told The Post. “No one in the office really pays attention to the police shootings and what’s going on downtown.”

MacDole noted that there are currently only white chancellors on the court in a state that is 24% black and 10% Hispanic.

“That’s where the seven-judge court doesn’t have a single person of color in the dock, and there has only been one black judge in its entire 230-year history,” Rev. Al Sharpton said in a statement, calling the Office “archaic.”

“Judges operate in secret, with no cameras or microphones in the courtroom, little – if any – public financial information from judges, and little to no transparency in how the court works,” he said.

The Court of Chancery, Delaware Attorney General, Wachtell and Skadden did not respond to requests for comment.

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