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Judge in Twitter v. Musk made rare ruling: ordering a deal to close

Kathaleen McCormick was assigned Twitter lawsuit on Tuesday
Published 15 Jul, 2022 04:11pm
<p>Elon Musk
Source: Reuters</p>

Elon Musk Source: Reuters

The judge overseeing Twitter Inc’s (TWTR.N) $44 billion lawsuit against Elon Musk has a no-nonsense reputation as well as the distinction of being one of the few jurists who has ever ordered a reluctant buyer to close a U.S. corporate merger.

Kathaleen McCormick took over the role of chancellor or chief judge of the Court of Chancery last year, the first woman in that role. On Wednesday, she was assigned the Twitter lawsuit which seeks to force Musk to complete his deal for the social media platform, which promises to be one of the biggest legal showdowns in years.

“She already has a track record of not putting up with some of the worst behavior that we see in these areas when people want to get out of deals,” said Adam Badawi, a law professor who specializes in corporate governance at the University of California Berkeley. “She is a serious, no-nonsense judge.”

In contrast to Musk’s brash and volatile behavior, she is known as soft-spoken, approachable and amiable – but a person who also stands her ground. She advocates respect among litigants and integrity at legal conferences.

“We’ve always had each other’s backs, we’ve always gone out for drinks after arguments and maintained this level civility,” she told a gathering at the University of Delaware this year.

After weeks of confrontational tweets suggesting Twitter was hiding the true number of fake accounts, Musk said on Friday he was terminating the $54.20-per-Twitter share acquisition, worth $44 billion. On Tuesday, the social media platform sued.

Judges have ordered reluctant buyers to close corporate acquisitions only a handful of times, according to legal experts and court records. One of those was McCormick.

Last year, McCormick got the attention of Wall Street dealmakers by ordering an affiliate of private equity firm Kohlberg & Co LLC to close its $550 million purchase of DecoPac Holding Inc, which makes cake decorating products.

She described her ruling as “chalking up a victory for deal certainty” and rejected Kohlberg’s arguments that it could walk away because of a lack of financing.

The case has many parallels to the Twitter deal. Like Musk, Kohlberg said it was walking away because DecoPac violated the merger agreement. Like Musk, Kohlberg argued in part that DecoPac failed to maintain ordinary operations.

There are also differences. Musk’s deal is magnitudes bigger, involves a publicly traded target company in Twitter and might have implications for Tesla Inc , the electric vehicle maker that is the source of much of Musk’s fortune.

She joined the Court of Chancery in 2018 as a vice chancellor and became the first woman to lead the Court of Chancery last year.

Despite her mild manner, Eric Talley, who specializes in corporate law at Columbia Law School, said he doubts McCormick would be cowed by Musk.

“I would not be placing my bets on Chancellor McCormick suddenly becoming weak-kneed,” he said.

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Elon Musk

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