What Is Delaware’s Court of Chancery and Its Role in Elon Musk’s Twitter Deal?

The brewing court struggle over Elon Musk’s efforts to end the $ 44 billion deal to buy Twitter will probably land in a Delaware court. If Twitter sued Mr. Musk to force the deal to close, as scheduled this week, it’s here that a 230-year-old court, a major place in the corporate battle, could file a proceeding.

This court is known as the Delaware Peace Court. What you need to know about this.

What is the Delaware Peace Court?

Founded in 1792, the Delaware Equality Court is one of three courts established by the State Constitution, along with the Supreme Court and the Superior Court. Known as the Court of Equity, not the Court. This is to allow for a more flexible solution than the law officially stipulates.

The court’s authority is to make a decision when the law is unclear about the outcome and one party requires specific action beyond financial damages, John L. Weinberg, Corporate Governance Center at the University. Charles Elson, the founding director of the company, said. Delaware. For example, if Twitter sued Mr. Musk, he said he could seek the completion of the deal and the court could demand it through an injunction.

“It depends on the situation,” Elson said. “You have a wide range of corporate laws in Delaware, and the rest is left to the judge.”

The Court of Chancery often hears cases related to wills, adoptions, divorces, and guardians. Delaware, Mississippi, and Tennessee are the only states with a clear coincidence court that derives from the British judicial tradition.

In Delaware, the Chancery Court has one Prime Minister, the Supreme Court Justice, and six Deputy Prime Ministers. The Governor nominates the Prime Minister and Deputy Prime Minister and must be confirmed by the Legislature to serve a 12-year term. Delaware’s accidental courts are located in Wilmington, Dover, and Georgetown.

Why does the Chancery Court hear the Twitter proceedings?

Like many US companies, Twitter is registered as a company on Dell’s Dover. According to the state corporate sector, more than 1.8 million companies have been incorporated into the state, including more than two-thirds of the Fortune 500 companies.

As a result, the Delaware Court of Equality has over the years heard many types of corporate litigation and accumulated expertise in this area. Many companies want to try proceedings in court because of their knowledge. This makes the arc of legal controversy there more predictable.

Joseph Grundfest, a professor of corporate governance at Stanford Law School, said: “You may be able to fool judges somewhere, but they’re always looking at things like this, so it’s less likely that you can fool these judges.”

The Equality Court is familiar with disputes related to mergers and acquisitions. For the past two decades, disputed shareholders have dominated controversies, such as when they fought the merger of computer companies HP and Compaq in 2002. When the chemical company Hexion appealed to end the merger with another chemical company Huntsman in 2008. When luxury companies LVMH Moët Hennessy Ivyton and Tiffany filed a proceeding against each other over an acquisition in 2020.

What happens if the case lands in Chancery Court?

Most cases in the Court of Chancery, like most civil courts in other states, usually follow the same process. Both sides can file a motion for summary judgment. This means asking the court to rule all or part of the case without going to court. When a case is brought to justice, the judge decides the facts based on the evidence provided through records and testimony, and then decides the resolution.

Prime Minister Cataleen McCormick appoints himself or one of the six Deputy Prime Ministers to preside over the case. If the Prime Minister has a conflict of interest (for example, if he has worked for Mr. Musk or Twitter in the past), he or she cannot preside over. The case is then decided by the presiding judge, not the jury, but the judge can consult with the advisory jury. The judge’s decision can be appealed to the State Supreme Court, and the decision is final.

Have Mr. Musk and Twitter heard of the case in the Chancery Court?

Yes, at least for Mr. Musk.

In 2016, Musk’s car company Tesla announced the acquisition of $ 2.6 billion in solar panel energy company SolarCity. Tesla’s shareholders have filed a proceeding to prevent the proceedings of the transaction, which has landed in the Delaware Court of Peace. Tesla shareholders have accused Mr. Musk of pushing Tesla’s board to effectively bail out the struggling SolarCity founded by millionaires. The court ruled in April in favor of Mr. Musk.

Twitter didn’t immediately answer the question of whether the case was heard in the Delaware Court of Equality.