Musk’s X Rebuffs Wachtell’s Bid to Arbitrate $90 Million Fee

Elon Musk’s X Corp. is pushing back on Wachtell, Lipton, Rosen & Katz’s attempt to arbitrate the company’s lawsuit over a $90 million success fee related to the sale of social media platform Twitter Inc.

X (formerly Twitter) filed Sept. 29 its opposition to Wachtell’s motion to compel arbitration in San Francisco Superior Court, claiming that Twitter and the New York-based law firm “never intended to permit an arbitrator to decide the ‘arbitrability’ of such equitable claims.”

The filing is the latest turn in the case that was filed in July by X, the newly rebranded parent company of Twitter, which claimed that the $90 million fee paid to Wachtell following the closing of Twitter’s $44 billion sale to Musk amounted to “unjust enrichment.” Wachtell has said in court papers that Twitter never agreed to limit the firm’s fees to hourly rates.

Wachtell filed a motion to compel arbitration Sept. 8, asking the court to enforce an arbitration provision in the master retention agreement between Wachtell and Twitter. X’s most recent motion took Wachtell to task for targeting Musk.

“The factual background section in Wachtell’s brief is largely devoted to petty, irrelevant ad hominem attacks on Mr. Musk and a boastful history of the litigation leading up to Mr. Musk’s acquisition of Twitter,” the company said.

Wachtell was brought on to represent the company last year in litigation over its proposed sale to Musk after the technology mogul attempted to walk back his initial offer to buy Twitter. The firm continued advising Twitter through its eventual sale to Musk, a deal that closed a year ago this month.

X claims that its dispute is excepted from the arbitration provision because it solely seeks “equitable” relief, which is a carveout of the arbitration provision contained in Wachtell’s engagement letter with Twitter.

“Wachtell has failed to meet its burden,” states the motion by X. “Far from consigning this case to mandatory arbitration, the Arbitration Provision makes clear that the Court, not the arbitrator, has the power to determine if X Corp.’s claims here fall into the carveout for equitable claims.”

Marc Dworsky, a former partner at Munger, Tolles & Olson, and William Reid of litigation boutique Reid Collins & Tsai are leading a team counseling X along with Adrian Sawyer of California’s Sawyer & Labar. Morrison & Foerster partners Jordan Eth and Ragesh Tangri are representing Wachtell in the litigation.

Lawyers for both sides didn’t respond to requests for comment, nor did X.

The company has moved to rebuild a corporate law department buffeted by layoffs and exits since Musk took over Twitter last year. In July, X hired Adam Mehes from Musk’s Tesla Inc. to be its top in-house litigator and named a new public policy chief in Wifredo ‘Wifi’ Fernández.

Those appointments came after Adeeb Sahar, a former Skadden, Arps, Slate, Meagher & Flom associate who was part of team advising Musk on his Twitter takeover, was tapped to head commercial, corporate, and international legal.

The case is X Corp. vs. Wachtell, Lipton, Rosen & Katz, No. CGC-23-607461, California Superior Court (7/5/2023).