Elon Musk Sues Law Firm for Charging Exorbitant $90M Fee in Twitter Buyout

Elon Musk is once again making headlines, this time for his legal battles. Musk's X Corp., which owns Twitter, filed a lawsuit on July 5, 2023, in the San Francisco Superior Court, against the prestigious law firm Wachtell, Lipton, Rosen & Katz LLP, accusing them of charging 'unconscionable' legal fees during a crucial period of the fight over Musk's buyout of the social media platform. In addition, Musk has also threatened to sue Meta over its newly-launched rival app, Threads. 

Musk to sue law firm over buyout fee

The company owned by Elon Musk is seeking to recoup excessive fees and attorney's fees from the $90 million that Twitter paid to Wachtell in 2022, according to CNBC. Twitter hired the law firm during the acquisition negotiations to ensure that Musk wouldn't back out of his $44 billion deal to buy the platform, per Fox Business. However, X Corp. alleges that Wachtell took advantage of the situation and charged exorbitant fees.

In the lawsuit filed in California Superior Court in San Francisco, X Corp. claims that Wachtell "arranged to effectively line its pockets with funds from the company cash register while the keys were being handed over." The suit further criticizes Wachtell for receiving substantial "success" fees from departing Twitter executives just days before Musk's takeover. X Corp. argues that the $90 million fee is "unconscionable" considering that the law firm charged significantly less in the initial months of their engagement.

These legal proceedings shed light on the complexities and high stakes involved in mergers and acquisitions and underscore the importance of transparent and fair billing practices to maintain trust between clients and law firms.

Vijaya Gadde, former Twitter Chief Legal Officer had signed the new agreement with the law firm awarding the "success fee". The complaint also included a quote by former Twitter director Martha Lane Fox who sent a shocked email reply to general counsel Sean Edgett upon learning how much lawyers would be paid: "O My Freaking God."   

Musk's threat to sue Meta

In addition to his lawsuit against Wachtell, Elon Musk has threatened to sue Meta, formerly known as Facebook, over its newly-launched rival app Threads. The app gained significant attention after amassing over 70 million users within a day of its launch. Threads was introduced as Twitter announced restrictions on the number of tweets that users who haven't signed up for the paid Blue status can view.

Musk's involvement in lawsuits surrounding his acquisition of Twitter has been a recurring theme. Since the controversial takeover, the platform has witnessed substantial layoffs and the introduction of a paid subscription service that charges $8 per month for Blue checkmarks, which previously denoted verified accounts. The threat to sue Meta highlights the intense competition between Musk and other tech giants in the social media space. As Musk continues to expand his influence and explore new ventures, clashes with established players are becoming more frequent.

Twitter said it has “serious concerns” that Meta stole trade secrets by selectively hiring former employees in a letter threatening to sue in the letter threatening to sue Meta. Per the company’s lawyer Alex Spiro, the letter stressed that Twitter intends to “strictly enforce its intellectual property rights,” per The Hollywood Reporter.

Accusations of nonpayment against Musk

Musk has been slapped with various (at least 26 times) lawsuits by landlords, vendors, and consultants over nonpayment after he acquired Twitter. Twitter was sued again in July 2023 for refusing to proceed with nearly 900 arbitration cases from former employees for not paying severance, per Daily O. Twitter also stopped paying rent at its San Francisco headquarters and was using Google's cloud infrastructure but refusing to pay for it, per CNBC.