Twitter sued Elon Musk on Tuesday for his attempt to Termination of $44 billion acquisition contract. Now Legal battle is heading to a Delaware courtroom, where a 230-year-old courthouse is the main venue for the company’s lawsuits that will hear the case.
The court is known as the Premier Court of Delaware. Here’s what to know about it.
What is Delaware Premier Court?
Founded in 1792, the Delaware Premier Court is one of three courts created under the state Constitution, along with the Supreme and Superior Courts. It is known as a court of justice, rather than a court of law, because it allows for more flexible solutions than formal law provides.
The purpose of the court is to make decisions in cases where the law is not clear about the outcome and when a party is seeking a specific action other than monetary damages, said Charles Elson, founding director of China. John L. Weinberg Center for Corporate Governance at the University of Delaware. For example, Twitter’s lawsuit against Mr. Musk is pushing for the acquisition to be completed, and the court could order that through an injunction, he said.
“That’s the situation,” Mr. Elson said. “You have an extensive company statute, which Delaware has, and you leave the rest to the judges.”
Premier courts typically hear cases involving wills, adoptions, divorces and guardianships. Delaware, Mississippi and Tennessee are the only states with separate premier courts, rooted in British judicial tradition.
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In Delaware, the Premier Court has a prime minister as chief justice and six deputy prime ministers. The governor nominates the prime minister and deputy prime ministers, who must be confirmed by the state Senate to serve 12-year terms. Delaware’s premier courts are in Wilmington, Dover and Georgetown.
Why did the Court of Chancery hear a case on Twitter?
Like many US businesses, Twitter is registered as a company in Dover, Del. More than 1.8 million businesses are incorporated in the state, including more than two-thirds of the Fortune 500 companies, according to the State Division of Corporations.
As a result, Delaware’s Premier Court has heard a variety of corporate cases over the years, building on expertise in the field. Many companies want cases to be heard by the courts because of that knowledge, which also makes the arc of legal disputes there more predictable.
“If you want your business disputes to be resolved by professionals, you will prefer Delaware,” says Joseph Grundfest, a professor of corporate governance at Stanford Law School. “You might fool some of the judges somewhere, but you’re less likely to fool these judges because they see these things all the time.”
The Prime Minister’s Court is very familiar with disputes related to mergers and acquisitions. Over the past two decades, it has ruled in disputes such as when a shareholder dissented against the merger of computer companies HP and Compaq in 2002; when chemical company Hexion sued to end its merger with another chemical company, Huntsman, in 2008; and when luxury company LVMH Moët Hennessy Louis Vuitton and Tiffany & Company sued each other over an acquisition in 2020.
What happens when a case goes to Chancery Court?
Cases in the Court of Chancery generally follow the same process, similar to most civil courts in other states. Both parties can apply for summary judgment, which means they ask the court to rule on all or parts of the case without going to trial. If the case goes to trial, the judge determines the facts based on the evidence provided through the records and testimony, and then prescribes the settlement.
The prime minister, Kathaleen McCormick, appoints herself or one of six deputy prime ministers to preside over the case. If a prime minister has a conflict of interest – for example, has worked for Mr Musk or Twitter in the past – he or she cannot chair. Subsequent cases are decided by the presiding judge, not the jury, although the judge may call the advisory jury to help consult. The judge’s decision can be appealed to the State Supreme Court, where the decision is final.
Have Musk and Twitter ever tried cases in the Chancery Court?
Right.
In 2016, Mr. Musk’s auto company, Tesla, announced a Acquisition of $2.6 billion by solar energy company SolarCity. Tesla shareholders sued to prevent the deal from proceeding, a lawsuit that was brought before Delaware’s Premier Court. Shareholders accuse Mr. Musk of pushing Tesla’s board to effectively bail out the struggling SolarCity that the billionaire’s cousin founded. The court ruled in Mr Musk’s favor in April, a decision that has been appealed to the state Supreme Court.
Twitter has also dealt with the court in a number of cases, including a lawsuit in May by a police pension fund in Orlando, Fla., to delay the settlement with Mr. Musk. In 2020, Twitter shareholders also sued the company in Court of Chancery, accusing executives of inflating user statistics. Last year, the court approved a $38 million settlement.
