Court Opinion

ID: 8208323
Source: CourtListenerOpinion
Date Created: 2022-09-22 14:01:53.969635+00
Date Added: 2024-06-11T16:41:31.369878
License: Public Domain

COURT OF CHANCERY
                                           OF THE
                                     STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK                                             LEONARD L. WILLIAMS JUSTICE CENTER
        CHANCELLOR                                                          500 N. KING STREET, SUITE 11400
                                                                           WILMINGTON, DELAWARE 19801-3734

                                          September 22, 2022

     Peter J. Walsh, Jr., Esquire                           Edward B. Micheletti, Esquire
     Kevin R. Shannon, Esquire                              Lauren N. Rosenello, Esquire
     Christopher N. Kelly, Esquire                          Skadden, Arps, Slate, Meagher & Flom LLP
     Mathew A. Golden, Esquire                              920 N. King Street, 7th Floor
     Callan R. Jackson, Esquire                             Wilmington, DE 19899
     Potter Anderson & Corroon LLP
     1313 N. Market Street
     Hercules Plaza, 6th Floor
     Wilmington, DE 19801

     Brad D. Sorrels, Esquire
     Wilson Sonsini Goodrich & Rosati, P.C.
     222 Delaware Avenue, Suite 800
     Wilmington, DE 19801

                     Re:    Twitter, Inc. v. Elon R. Musk et al.,
                            C.A. No. 2022-0613-KSJM

      Dear Counsel:

               This letter decision addresses the Second Motion for Leave to Amend Defendants’

      Verified Counterclaims, Answer, and Affirmative Defenses filed by Defendants Elon R.

      Musk, X Holdings I, Inc. and X Holdings II, Inc. (“Defendants”) on September 9, 2022. 1

      Plaintiff Twitter, Inc. filed its opposition on September 21, 2022. 2 I assume that the reader

      is familiar with the background of this dispute, so I will skip to the facts germane to the

      motion at issue.

      1
          C.A. No. 2022-0613-KSJM, Docket (“Dkt.”) 440 (“Second Mot. to Amend”).
      2
          Dkt. 566 (“Opposition”).
C.A. No. 2022-0613-KSJM
September 22, 2022
Page 2 of 5

         Defendants previously moved for leave to amend their Complaint on September 7,

2022, to add allegations concerning former Twitter employee Peiter “Mudge” Zatko’s

federal whistleblower complaint. 3 Through their Second Motion to Amend, Defendants

seek leave to allege facts revealed to Defendants for the first time on September 3, 2022,

regarding a June 28, 2022 severance agreement entered between Twitter and Zatko

reflecting a $7.75 million payment to Zatko. According to Defendants, Twitter did not

seek Defendants’ consent before making the payment to Zatko, although such consent was

allegedly required under Section 6.1(e) of the merger agreement.

         Plaintiff does not oppose the Second Motion to Amend. This is wise given that

Court of Chancery Rule 15(a) provides that leave to amend should be “freely given when

justice so requires.” 4 This court interprets Rule 15(a) to “allow for liberal amendment in

the interest of resolving cases on the merits.” 5 Leave to amend is therefore typically

granted.

         Plaintiff instead argues that granting the Second Motion to Amend should be

conditioned on Defendants’ compliance with Plaintiff’s additional discovery demands

relating to the motion. Specifically, Plaintiff has propounded two additional document

requests and one interrogatory.

         The document requests sought:

3
    See Dkt. 244, Ex. A.
4
    Ct. Ch. R. 15(a).
5
    Gould v. Gould, 2011 WL 141168, at *7 (Del. Ch. Jan. 7, 2011).
C.A. No. 2022-0613-KSJM
September 22, 2022
Page 3 of 5

                 All communications from December 1, 2021 through August
                 22, 2022 between Peiter Zatko or anyone acting on his behalf,
                 on the one hand, and Defendants or their Advisors, Lenders, or
                 Co-investors, on the other, and any documents reflecting,
                 referring to, or summarizing such communications, and

                 All communications sent or received by Defendants or their
                 Advisors, Lender, or Co-investors, from December 1, 2021
                 through August 22, 2022 that relate to Zatko or his July 6
                 complaint, including any of the allegations contained therein. 6

          The interrogatory states:

                 State “yes” or “no” whether, during the period January 1, 2022
                 through August 22, 2022, any of Elon R. Musk; Jared Birchall;
                 any lawyer of Skadden, Arps, Slate, Meagher & Flom LLP that
                 did any work relating to Twitter for any of defendants; any
                 lawyer of Quinn Emanuel Urquhart & Sullivan, LLP that did
                 any work relating to Twitter for any of Defendants, or any
                 employee of Morgan Stanley that did any work relating to
                 Twitter for any of Defendants had knowledge, whether directly
                 or indirectly obtained from Zatko or any other source, of any
                 criticisms, allegation, opinion, or views relating to Twitter that
                 were made or held by Zatko or were attributed to Zatko, during
                 the period November 1, 2020 through August 22, 2022. 7

          Defendants initially refused to provide this discovery on the grounds that it was

requested too late. 8 In addition, they objected to the portion of the interrogatory that asks

for information regarding Morgan Stanley; it is unclear whether they objected to the rest. 9

They initially objected to the document requests on the grounds that they had “no reason

6
    Opposition, Ex F at 1.
7
    Opposition, Ex. G at 5.
8
    Opposition, Ex. A at 10.
9
    Id. at 11.
C.A. No. 2022-0613-KSJM
September 22, 2022
Page 4 of 5

to think” that responsive documents existed. 10          Defendants then pivoted to say that

responding to the documents requests would be “unduly burdensome” to the extent such

requests covered communications by “Advisors, Lenders, or Co-Investors.” 11 Twitter

clarified its interrogatory and narrowed its document request. 12          Defendants again

objected. 13

           It is unclear to me from the correspondence what Defendants are agreeing to

produce. Any reply filed by Defendants in further support of the Second Motion to Amend

should clarify their position.

           In any event, the Second Motion to Amend is granted. Plaintiff’s request that the

court allow the amendment subject to conditions relating to discovery concerning the

amendment is reasonable. I have not yet determined what scope of additional discovery

should be permitted. The parties shall present argument on the scope of additional

discovery during the September 27, 2022 hearing.

           IT IS SO ORDERED.

                                            Sincerely,

                                            /s/ Kathaleen St. Jude McCormick

                                            Kathaleen St. Jude McCormick
                                            Chancellor

10
     Id.
11
     Id. at 7–8.
12
     Id. at 6–7; id., Ex. K at 1–2.
13
     Opposition, Ex. A at 4–5.
C.A. No. 2022-0613-KSJM
September 22, 2022
Page 5 of 5

cc:   All counsel of record (by File & ServeXpress)