In May 1992, the Black Crowes reached the top of the charts signing “all I want is a remedy!” Now Twitter is singing it to the Delaware Chancery Court.

The Merger (or lack thereof)

Last April, Musk revealed that he acquired a 9% stake in Twitter and quickly followed with a bid to buy the company for a 38% premium of the stock price. In May, Musk tweeted the deal was “on hold” citing concerns about spam and fake accounts. July 8th, Musk said he was terminating the deal because Twitter breached multiple provisions of the merger agreement by not providing information about fake bot accounts.

A week later, Twitter sued Musk in Chancery Court in Delaware to force him to complete the deal. This case is in the very early stages and it’s not clear whether Musk is in breach or if his performance was excused. The Delaware court hearing the case scheduled a five-day trial in October.

However, the interesting part for me is what Twitter is asking for. When a plaintiff files a lawsuit, it is usually required to include a prayer for relief. What it wants as a “remedy.” That’s the interesting part of this case. Twitter didn’t want to be bought out when Musk first disclosed his interest, but now they are suing to enforce the agreement.

The Law of Remedies

Remedies are all about what you can get. Assuming you prove liability, what are you entitled to?  That is assuming you prove the defendant was negligent, or in this case, breached the contract.

Should you be paid money for the losses you suffered? What we call “compensatory damages.” Or, maybe you’re entitled to the benefit of your bargain, “expectation damages.” Maybe you suffered some additional losses outside of the transaction and you are entitled to “consequential damages.” And those are just money damages. There are also equitable remedies like injunctions and specific performance.

The law of remedies is common to all civil lawsuits, and it’s an important area of law. I like remedies because it often gets overlooked at the early stages of a case when the focus is on proving liability. But, the remedy is often the most important issue. There is a big difference between keeping someone’s earnest money when they back out of contract and making them pay the full price to buy your house.

That is what twitter is asking for in this case. They want “specific performance.” Twitter wants the court to order Musk to go through with the deal and buy the company for $44 billion. Otherwise, they may only get $1 billion under the damages clause in the contract.  I’m not real sure how much money matters when you start dealing with that many zeros, but presumably, there’s still a big difference between $1bil and $44bil.

So can a court do that, can it force someone to buy a company?

Maybe.

Specific performance is usually only awarded when money damages are not adequate. Courts don’t like to order specific performance because it can be a lot more difficult to administer. It’s much easier to order someone to pay money. Specific performance of a merger agreement is a pretty rare remedy, but it’s not without precedent.

In 2001, Tyson Foods was ordered to complete its $3.2 billion acquisition of meatpacker IBP when a judge granted IBP’s claim for specific performance. On the flip side, a Delaware court declared in 2018 that a pharmaceutical company targeted for a merger had experienced such a decline in its financial condition that it amounted to a “material adverse effect,” allowing the proposed buyer to terminate the deal. Most people think that will be a big argument in favor of Musk based on his comments about bots on the platform.

So it is possible that a court may order Musk to buy a company for $44bil. I think that would be a wild result, considering the initial opposition to the takeover. It’s also possible that he’ll walk away without paying anything.

What do you think of his chances?