In a recent lawsuit filed by Twitter’s new corporate owner, X Corp, against prominent law firm Wachtell, Lipton, Rosen & Katz, serious allegations of financial exploitation and fiduciary duty violations have emerged. The lawsuit contends that Wachtell charged an astounding $90 million in fees, which included an unusually high “gargantuan” success fee before Elon Musk acquired the social media giant.
According to the lawsuit filed on July 5, 2023, Wachtell’s initial engagement letter from June 2022 outlined hourly fees for their services. However, just hours before the sale closed on October 27, 2022, Wachtell and Twitter entered into a separate agreement that included the substantial success fee. Twitter argues that Wachtell took advantage of the company’s vulnerable state, with nobody diligently safeguarding its financial interests during the transition to new ownership.
The lawsuit accuses Wachtell of orchestrating a scheme to benefit financially from Twitter’s resources while the company was in the process of changing hands to the Musk parties. It asserts that Wachtell violated its fiduciary duties by exploiting the situation for its own gain, leaving Twitter financially compromised.
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Wachtell had previously represented Twitter in a legal battle against Elon Musk, aiming to enforce an agreement for him to acquire the social media platform. However, the relationship between the two parties took an unfortunate turn as Twitter’s new owners discovered alleged improprieties related to Wachtell’s billing practices.
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Before the new fee agreement was executed, the lawsuit claims that Wachtell submitted excessive invoices based on hourly fees, some of which contained blank time entry descriptions for millions of dollars in billing. The former Twitter executives reportedly approved a payment of nearly $18 million, including a staggering $15.6 million for just a few months of work.
The $90 million fee agreement in question encompassed compensation for the hourly services rendered by Wachtell and an unspecified but significant success fee. Twitter’s lawsuit asserts claims of unjust enrichment, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty against the law firm.
In response to inquiries, Wachtell’s general line answered the call but failed to transfer it to the media relations department or a law firm spokesperson. As of now, the law firm has not issued an immediate response to the allegations.
This legal battle between Twitter and Wachtell highlights the immense financial stakes involved in high-profile corporate transactions and underscores the importance of upholding fiduciary duties and maintaining transparency throughout the legal process. As the lawsuit unfolds, the outcome will have far-reaching implications for both Twitter and the legal profession as a whole.
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