What is the Delaware Court of Chancery and what is its role in Elon Musk’s Twitter deal?

BUT litigation is brewing about Elon Musk’s efforts terminate the $44 billion deal the Twitter purchase is likely to land in a Delaware courtroom. It is here that the 230-year-old court, which is the main site of corporate battles, could hear the case if Twitter sues Mr. Black. Musk is forcing the completion of the deal, which is expected to happen this week.

The court is known as the Delaware Court of Chancery. Here’s what you need to know about it.

The Delaware Court of Chancery, created in 1792, is one of three courts established by the state constitution, along with the Supreme and Superior Courts. It is known as a court of justice rather than a court of general jurisdiction because it allows for more flexible rulings than are formally provided by law.

It is up to the court to make decisions when the law does not clearly state the outcome and when one of the parties seeks specific action other than monetary damages, said Charles Elson, founding director of the John L. Weinberg Center for Corporate Governance at the State University of New York. York. Delaware. If Twitter sues Mr. According to him, Musk, for example, can insist on the completion of the deal, and the court can require this through an injunction.

“It’s situational,” Mr. Elson said. “You have a broad corporate bylaw that Delaware has, and you leave everything else up to the judges.”

Chancery courts often hear cases involving wills, adoptions, divorces, and guardianships. Delaware, Mississippi, and Tennessee are the only states with separate clerical courts derived from the English judicial tradition.

In Delaware, the Court of Chancery has one Chancellor who is Chief Justice and six Vice Chancellors. The governor appoints the chancellor and vice chancellors, who must be confirmed by the State Senate for 12-year terms. Delaware court offices are located in Wilmington, Dover and Georgetown.

Like many American businesses, Twitter is registered as a company in Dover, Delaware. More than 1.8 million businesses are registered in the state, including more than two-thirds of Fortune 500 companies, according to the State Division of Corporations.

As a result, the Delaware Court of Chancery has handled many corporate cases over the years, gaining experience in this area. With this knowledge, many companies want cases to go to court, which also makes the arc of legal disputes there more predictable.

“If you want your business disputes to be resolved by experts, you tend to prefer Delaware,” said Joseph Grundfest, professor of corporate governance at Stanford Law School. “You might be able to fool some of the judges somewhere, but you’re less likely to fool those judges because they see it all the time.”

The Court of Chancery is well-versed in M&A disputes. Over the past two decades, she has ruled in disputes, such as when a dissenting shareholder opposed the 2002 merger of computer companies HP and Compaq; when chemical company Hexion sued to end its merger with another chemical company, Huntsman, in 2008; and when luxury companies LVMH will force Hennessy Louis Vuitton and Tiffany & Company to sue each other over acquisition in 2020.

Most cases in Chancery Court generally follow the same procedure as most civil courts in other states. Both parties can file a motion 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 establishes the facts on the basis of the evidence presented in the minutes and testimonies, and then issues a decision.

Chancellor Kathleen McCormick appoints herself or one of the six Vice-Chancellors to run the case. If the Chancellor has a conflict of interest — for example, he has worked for Mr. Musk or Twitter in the past — he or she cannot preside. Cases are then heard by the presiding judge rather than by a jury, although the judge may call an advisory jury for consultation. The judge’s decision can be appealed to the State Supreme Court, whose decision is final.

Yes, at least for Musk.

In 2016, Tesla Musk’s car company announced $2.6 billion acquisition solar panel energy company SolarCity. Tesla shareholders sued to stop the deal from moving forward, and the case was referred to the Delaware Chancery. Tesla shareholders have accused Mr. Musk of insisting that Tesla’s board of directors effectively bail out the struggling SolarCity company that the billionaire founded. The court ruled in Favor Musk in April.

Twitter did not immediately respond to a question about whether cases were heard in the Delaware Chancery Court.