Judge issues rare ruling in Twitter vs. Elon Musk: Orders a deal to end

SAN FRANCISCO: The judge overseeing Twitter Inc's $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 demeanor, she's known for being soft-spoken, approachable and friendly -- but someone who stands her ground. She advocates respect among litigants and integrity in legal conferences.

"We've always had each other's backs, we've always gone out for drinks after arguments and maintained this level of civility," she said at a conference this year at the University of Delaware.

Musk announced on Friday that the $44 billion acquisition of Twitter, which was valued at $54.20 per share, had been terminated after weeks of combative tweets indicating Twitter was concealing the true number of false accounts. The social media site filed a lawsuit on Tuesday.

According to legal professionals and court records, judges have only a small number of instances ordered reluctant buyers to complete corporate purchases. McCormick was among them.

By directing an unit of private equity firm Kohlberg & Co LLC to complete its $550 million acquisition of cake decorating supplies manufacturer DecoPac Holding Inc, McCormick caught the eye of Wall Street dealmakers last year.

She dismissed Kohlberg's claims that it would back out of the purchase due to a lack of funding and characterised her decision as "chalking up a victory for deal certainty."

The Twitter agreement and the case have numerous similarities. Kohlberg claimed, like Musk, that it was leaving because DecoPac had broken the merger agreement. Kohlberg, like Musk, argued that DecoPac failed to maintain routine operations.

There are variations as well. Musk's offer is far greater, involves a publicly traded target company in Twitter, and might have an impact on Tesla Inc., the maker of electric vehicles that provides Musk with the majority of his wealth.

In other cases, she has come down on the side of shareholders when they clashed with management.

She stopped The Williams Cos Inc., an energy business, from implementing a so-called poison pill anti-takeover tactic last year, claiming that it violated their fiduciary duty to shareholders.

She stated last month that Carvana Co. stockholders could bring a lawsuit against the board for selling stock directly to a small group of investors while the stock price was low during the early pandemic.

McCormick, a Notre Dame Law School alumna, began her legal career as a court navigator for low-income clients with the Legal Aid Society of Delaware.

During her confirmation hearing, she told the Delaware Senate that she entered private practise "primarily for financial reasons" and joined Young Conaway Stargatt & Taylor, one of the state's leading companies for business litigation.

She began working for the Court of Chancery in 2018 as a vice chancellor, and last year she was the first woman to hold that position.

Despite her polite demeanour, Eric Talley, a corporate law expert at Columbia Law School, said he didn't think McCormick would be intimidated by Musk.

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