21 ms·

I found this part most interesting. Public awareness of the Delaware Court of Chancery is about to skyrocket during this court battle. The fact that Musk is wo

I found this part most interesting. Public awareness of the Delaware Court of Chancery is about to skyrocket during this court battle. The fact that Musk is working in such bad faith here — that he seems so unconcerned with law and the contract he signed — cuts both ways. On the one hand, it will certainly annoy a Delaware chancellor; Delaware likes to think of itself as a stable place for corporate deals, with predictable law and binding contracts, and Musk’s antics undermine that. On the other hand it might intimidate a Delaware chancellor: What if the court orders Musk to close the deal and he says no? They’re not gonna put him in Chancery jail. The guy is pretty contemptuous of legal authority; he thinks he is above the law and he might be right. A showdown between Musk and a judge might undermine Delaware corporate law more than letting him weasel out of the deal would.

throwaway09223 4y ago
> What if the court orders Musk to close the deal and he says no? I can't believe people are taking this very silly statement seriously. This is utter nonsense. There are remedies for people who disobey court orders. Having assets makes you more vulnerable to a court's authority because you have something to lose. If a court orders specific performance and he doesn't do it then he's liable and the court will take his assets to compensate. Is Levine seriously suggesting that US courts don't have the authority to impose financial penalties, find liability, and seize assets? This is such an absurd thing to say it's hard to find a way to charitably respond.
- hotpotamus 4y ago
  Anytime the idea of a wealth tax is brought up, I see commenters coming out of the woodwork to say that it would be impossible to actually collect it from the wealthy. Though I will note that it seems like we are able to collect yachts and planes from Russian oligarchs now, so perhaps our techniques have advanced in the last few months.
  - sascha_sl 4y ago
    There's an entire profession who's job it is to go full scale threat modeling on assets held directly or indirectly by the extremely rich. Seems likely they either didn't account for war sanctions or thought the impacted assets would not be worth putting behind 10 proxy legal owners for the unlikely case of such sanctions. Yachts and planes seem like they'd be particularly hard to turn into assets owned by a local proxy entity, since they move around so much.
  - nikanj 4y ago
    It’s easier to collect from foreign billionaires who don’t have the connections. Igor will probably not fund your re-election campaign, but Musk might.
  - throwaway09223 4y ago
    This is a different problem and has to do with privacy. The government can't compel you to disclose everything you're doing without cause, and without due process. Having a court ordered judgement entered against you is cause and is a result of due process. It's an entirely different scenario.
    - pc86 4y ago
      Assuming that a wealth tax was passed, wouldn't the cause here be proper reporting and collection of said tax? You can declare illegal income on your federal return and pay taxes on it. They're not (in this hypothetical I guess?) asking what you're doing, just how much it's made you.
      - throwaway09223 4y ago
        The issue is that people can change how they own things so they don't have to disclose. The law is necessarily public and people can adjust the way they structure ownership accordingly. We see this all the time already. For example, Medicaid won't pay for your extremely expensive end of life care if you have assets. So, people give away their assets (to a trust, to family) before applying for Medicaid to cover their nursing home. It becomes a game of cat and mouse. People will adjust where they can to avoid tax. This also already happens with income tax. For example, executive compensation is primarily provided as capital gains rather than income because it's much more tax efficient. Everything is in the open. The other issue here is one of cost. The IRS has to fund the cost of analyzing filings and deciding to audit. This is very different from a post-judgement scenario.
- heartbreak 4y ago
  Levine’s take is based on how Musk’s previous encounters with court orders have gone.
  - throwaway09223 4y ago
    No, it isn't. It's completely disconnected from reality. There isn't even one single court imposed fine which he hasn't paid.
    - dragontamer 4y ago
      How goes his court ordered Twitter sitter that's supposed to prevent Musk from Tweeting about material effects related to Tesla? That's what I thought. Musk just ignores the law and gets away with things on a regular basis.
      - CamperBob2 4y ago
        That was a stupid order that would never survive scrutiny under prior-restraint doctrine. Specific performance is something different, though... I can't think of any constitutional problems that might block enforcement of that.
        rurp 4y ago
        Musk and his lawyers agreed to the provision, and a court approved the deal. That is pretty strong evidence it's not an absurd provision.
        CamperBob2 4y ago
        He has also violated it multiple times, with no sign of any consequences. That is pretty strong evidence that it was, at best, pointless.
    - slotrans 4y ago
      But he has agreed to SEC sanctions and then subsequently ignored them...
- daenz 4y ago
  >the court will take his assets to compensate. How do you seize billions of dollars of stock without affecting share prices?
  - pg_1234 4y ago
    You just continue seizing assets until the accumulated cash value realized from the sale of the assets matches the value of the financial judgement against the guilty party. The drop in share prices as you do this is not your concern.
  - almost_usual 4y ago
    Don’t invest in a company ran by a lunatic?
    - abirch 4y ago
      Twitter employees are watching the board force a lunatic to buy their company.
      - scaramanga 4y ago
        Because they know he has absolutely no ability to do so. They are simply trying to collect legal fees at this point.
        bandyaboot 4y ago
        I mean, he does though right? It’s just that doing so at this point would cause a world of hurt for Tesla and its shareholders?
        scaramanga 4y ago
        I don't think so, I mean, you are not just going to place a single market order for $44bn of stock, you are going to have liquidity problems because there is not that much buy-side volume in the market, so the price must fall drastically to attract new buyers. Also I assume musk has legal obligations not to do stuff like that to begin with, as an executive with fiduciary responsibilities to shareholders. If Musk can tank Tesla, Exxon execs can dismantle Exxon to save the environment. But there's also the fact that a lot of his Tesla shares are already leveraged on loans. The most likely course would be for him to take out loans on the remaining unleveraged stock, but he doesn't have enough of that at the rates the banks are offering. Anyway, I'm no expert on Musk, and I have almost zero interest in Tesla, or Twitter, or any of this clown show. So maybe my ballpark guesstimations of all the relevant numbers are way off. So take it all with a huge pinch of salt. I am just some uninformed spectator watching two lizards fight in the dust and speculating who will win or whatever :) Edit: leveraged -> unleveraged, woops
- dreamcompiler 4y ago
  Levine has addressed this in past columns. Of course the courts have such authority, but individual people have to enforce the court's decisions, and sometimes those people are reluctant to take on Musk. Musk is a special case because he has done things like threatening to ruin the careers of SEC lawyers who have come after him, and he has the power to make that happen. Is this illegal? Probably. Does Musk get away with it? Yes.
  - throwaway09223 4y ago
    You're talking about Musk pressuring Cooley to fire a lawyer who previously worked against him at the SEC. But the result was that Cooley told Musk no. Hardly a success story for Musk. There's no shortage of law firms willing to go up against billionaires. Hell, there's no shortage of firms willing to go up against criminal enterprises like drug cartels. The idea that Musk is somehow more threatening than the types that the US court system regularly puts under their thumb is simply laughable.
    - sroussey 4y ago
      Cooley then lost business from Musk firms.
      - throwaway09223 4y ago
        So what? This is business as usual for law firms. They will lose clients every time they take a case due to conflicts of interest and so on, even if everyone has a happy outcome. What Musk did was petty and questionable, but it didn't fundamentally change anything for Cooley. It's not a big deal.
        rurp 4y ago
        It's unlikely Musk expected Cooley to cave to his ridiculous demand. It's very likely the intended target for this action was every person who deals with Musk's future illegal actions.
- paulcole 4y ago
  > Is Levine seriously suggesting that US courts don't have the authority to impose financial penalties, find liability, and seize assets No. He’s suggesting that Musk’s wealth and power will make the people who work in US courts reluctant to impose financial penalties, find liability, and seize assets.
  - scaramanga 4y ago
    Not to mention his bizarre hold on the public imagination. He's the worlds most simped compulsive liar. I think authorities may also be afraid of looking like Nazi jackboots on the neck of this innocent guy who would be in federal prison serving long sentences if he was just some obscure hedge fund dude, known only to other hedge fund dudes, like Bernie Madhoff.
    - kibwen 4y ago
      > He's the worlds most simped compulsive liar. Still a strong #2, but he sure is trying his hardest for that top spot.
      - myth_drannon 4y ago
        Who is number one?
        paulcole 4y ago
        Has to be Trump.
- reverend_gonzo 4y ago
  Levine is suggesting that they don’t have the balls to enforce those penalties. And by history, he may very well be right.
- phillipcarter 4y ago
  Perhaps it's just a general sense of disillusionment, but I've come to see that "court orders X" and "X happens" are entirely orthogonal. I will be personally surprised if Musk pays a single cent.
  - smaudet 4y ago
    Depends I guess on how 007 you think the world operates (reference to James Bond) - X will happen, but maybe 2-10 years after various counter-suits. Case studies are what has happened e.g. with Microsoft, other large businesses - long legal battles are fought, nothing happens while things are in limbo. When the rubber finally hits the road, things happen fairly quickly, but until then it does look a bit like "nothing happens". This is of course, a problem, perhaps one that needs innovating around.
    - tambourine_man 4y ago
      What has happened to Microsoft? They still have a default browser pre-installed, Office wasn’t spun-off to another company… and I don’t remember the Java stuff anymore but I think nothing happened either, even though it’s a lot less relevant now.
      - brianwawok 4y ago
        The stuff stuff made them spin off C#, which likely made them more money
- 082349872349872 4y ago
  Note that in TFA, the continuation of this very silly statement is footnoted [6], which literally starts with "I made this joke before...", so none of us ought to be taking it seriously.
  - majormajor 4y ago
    The footnote only applies to the "Chancery jail" bit, not the suggestion that the court may not want to risk a public showdown: "A showdown between Musk and a judge might undermine Delaware corporate law more than letting him weasel out of the deal would." - this sentence is after that footnote.
- mise_en_place 4y ago
  Ok let’s say he has a bunch of stock as well as paintings, cars, etc. how do you divvy that up? Cut the painting in half and give it to Twitter? The rich are very wise at hiding money in assets that cannot be evenly divided nor distributed. That’s why the vast majority of taxes in the US comes from the middle class, they usually sit on piles of cash and have salaries from which to levy fines to.
  - aunty_helen 4y ago
    Or ya no, liquidate the asset and divvy up the cash. I'm sure you could've thought of that.
    - mise_en_place 4y ago
      That will take years and Elon could easily stall them out in court.
      - brutusborn 4y ago
        Auctions don't usually take years :P
  - carpo 4y ago
    You sell it for money
  - blibble 4y ago
    auction
  - jmccaf 4y ago
    Most of the middle class in America has a salary, or at least a paycheck, but distressing little cash saved. But they do pay the taxes that pay the bills.
- kolbe 4y ago
  Well, throwaway09223, you certainly sound like as much an authority as a former Wachtell and Goldman Sachs associate. Strong arguments like "this is utter nonsense" and "this is so absurd [that I can't actually argue against it]" are sure to sway the educated crowd on HN. If you would like to go see ways in which the government fails to penalize powerful entities, look no further than the financial crisis fines. What you were told were 10 figure fines ended up becoming a few million dollars in consumer relief headaches
- jjav 4y ago
  > There are remedies for people who disobey court orders. There are remedies for people like you and me and most people who disobey court orders. You can observe time and again that for those who are well connected and have some billions, the concept of law is far more malleable.
  - iab 4y ago
    More malleable, or just literal putty
  - b112 4y ago
    Even if what you say is true (it isn't), this is a battle between billionaires, eg the board and large stockholders @ twitter.
- zackees 4y ago
  Why would the court force Elon to buy the company when the remedy in the contract is a one billion payout?
  - majormajor 4y ago
    It appears that that's the remedy for failing to get funds, not for cold feet; there's a performance clause for the latter, so Levine suggests "Musk’s goal here is presumably to walk away from Twitter and pay only $1 billion in damages." - that Musk is negotiating by making a stink to even be able to pay instead of going through with the deal he signed.
    - zackees 4y ago
      Your repeating opinion of someone with extreme biases for clickbait. This fantasy of forcing musk to buy the company doesn’t exist in any contract. Your asking the court to make up a new contract and enforce it. That’s not how the court works, except in extreme circumstances which don’t apply to this twitter acquisition attempt. Also, Musk asserts that upto 50% of twitter users are bots, which is totally believable. So the chances Musk will have to pay anything is actually remote, since twitter would have to produce evidence that would reveal trade secrets. Here’s my prediction: Musk will pay nothing because Twitter has allowed itself to be infiltrated with bots and revealing this will be far more damaging than losing out on a billion. Musk will walk away.
      - FabHK 4y ago
        > This fantasy of forcing musk to buy the company doesn’t exist in any contract. That is precisely what the merger agreement is: a contract forcing Musk to buy Twitter.
- codesections 4y ago
  > This is such an absurd thing [for Matt Levine, a former 3rd Circuit clerk, Yale Law grad, and Wachtell M&A attorney] to say it's hard to find a way to charitably respond. If your interpretation of the post suggests that a highly qualified attorney is getting the basics of US law absurdly incorrect, you might want to reconsider whether you're understanding the intended meaning. (Here, Levine is making a specific claim about the remedies that the Delaware chancellory court typically employs, not about the authority of US courts)
  - XorNot 4y ago
    This is an appeal to authority that is not valid: there are plainly a lot of lawyers out there who's legal opinion leaves a lot of daylight against the actual law. Rudy Giuliani took a long time to get disbarred.
    - codesections 4y ago
      > This is an appeal to authority that is not valid I'm open to that criticism; I'm typically pretty skeptical of appeals to authority myself. But to be clear: the appeal to authority I'm making isn't "legal opinion of a lawyer" (I agree that's very weak) but rather "opinion on corporate law by a Wachtell attorney who practiced corporate law" (Wachtell is probably the best corporate law firm in the world, and clearly in the top handful)
      - wutbrodo 4y ago
        And in the example the parent comment gave: RUDY Guiliani was a US Attorney and the Associate Attorney General (third highest position in the DoJ).
- avalys 4y ago
  From the Wall Street Journal this afternoon: "“What are they going to do if there is a judgment and he says, ‘Well, I’m still not going to buy it’?” said Zohar Goshen, professor of transactional law at Columbia Law School. “They don’t really have tools to force him to go through with it. You don’t put people in jail because they don’t buy something.”" https://www.wsj.com/articles/twitter-elon-musk-set-for-unprecedented-legal-battle-over-deal-collapse-11657404303?mod=hp_lead_pos1 https://www.wsj.com/articles/twitter-elon-musk-set-for-unpre...
  - genocidicbunny 4y ago
    No, but if the court orders it and he refuses, can that not be construed as contempt of court? People definitely go to jail for that.
    - b112 4y ago
      That's criminal, not civil court. Civil court works on fiscal, property to mitigate damage. If he is found to breach contract, a court could order seizure of assets (cash or property). There could be punitive damages assessed too, if his actions are seen as purposefully malign.
      - phrz 4y ago
        Are you under the impression that judges presiding over civil cases cannot exercise their inherent power (in some jurisdictions) to jail those in (severe) contempt of court?
        b112 4y ago
        To both replies, I agree contempt of court is a thing. I misspoke. What I mean is, the remedy for non-compliance with contracts, is fiscal, seizure, penalties of thus nature. The goal of civil court is not the state punishing, but instead, laying out compensation, for damages, to the harmed. There is no contempt of court for not paying these damages.
- gnicholas 4y ago
  If he had the cash to buy it, they could force him to. But if he lined up financing and those people bail, what then? Would the court make him liquidate all his Tesla stock, without regard to how that would injure other Tesla shareholders? Having assets does make one more vulnerable to court judgments, but savvy birch people will set themselves up to remain in the driver’s seat when possible.
- kortilla 4y ago
  > There are remedies for people who disobey court orders. A Delaware court doesn’t have as much reach as you might think if most of Musk’s assets are not there.
  - b112 4y ago
    Good lord, registering judgements in jurisdictions is trivial. Not to mention, how many corporations which Musk has shares in, are Delaware companies? All of this, how to assess and collect damages, goes back to Roman law.
- benreesman 4y ago
  To the extent that Elon Musk might represent a corner case w.r.t. the legal system even more than you’re average billionaire it would most likely be because of the national security tie-ins around SpaceX. This is pure speculation on my part, but I don’t think it’s insane.
- phendrenad2 4y ago
  I can't believe people are looking at this from such a silly angle. It's obvious that no court can order you to buy something. That goes against the personal freedom we have in this country, and if a court tried it, it would be an easy appeal. But that misses the point, because nobody is going to order Elon to buy Twitter. What MIGHT happen is, a court declares "Congratulations! You already bought Twitter! It has nothing to do with us, we just interpreted the contract. Again, congrats on your purchase, don't go getting buyer's remorse now winky face"
  - striking 4y ago
    What are you trying to assert is false about this viewpoint? Specific performance is actually a kind of legal remedy and it can in fact be ordered by a court. It might be one of the last tools in a judge's toolbox, but I don't think it's anywhere near a "silly angle" after a quick googling of "specific performance".
  - sk5t 4y ago
    > It's obvious that no court can order you to buy something. A court can compel "specific performance" if the contract's terms require it.
wronglyprepaid 4y ago
> The guy is pretty contemptuous of legal authority; he thinks he is above the law and he might be right Of all the funny things I have read this week this takes the cake, Biden will not allow him to get away with it, not a joke.
Waterluvian 4y ago
Reminds me of the impotence of the American system to deal with Trump over the years. And he opened the flood gates for scofflaws. If they don’t make an example of Musk (if he so deserves it), the same thing will happen and Delaware will become less useful for corporations.
akimball 4y ago
Amusingly, I first read that as "the Delaware Court of Chicanery".
matt3210 4y ago
The laws are enforced with fines, and there for Elon And other rich over lords are above the law.
pbreit 4y ago
"There is not a whisper of evidence for this claim, no hint that there might be evidence, no acknowledgement that a reasonable reader of this letter might want to see evidence." This is completely wrong, right? The evidence might not be terrific but it's definitely more than a whisper.
sklargh 4y ago
This is the thing. I feel like the Delaware Chancery Court is going to compel specific performance and the incentives for all other parties here are tilted deeply towards compliance. On a practical level, every large financial institution with dollar assets (I mean this literally) has a far greater vested interest in maintaining a productive relationship with the Chancery than they do with Musk. On a political level, could easily see the Delaware governor getting a kick out of sending the state police to arrest Musk for contempt, impound his assets. Then again, Musk is a pretty good gambler.
la64710 4y ago
I was thinking this was a case of white privilege that we consider the conduct of Musk as “rich people just wanna have fun” and not a criminal conspiracy. But the more I think the more I realize the privilege is not that , the privilege is that a white successful immigrant is loved by so many people in this country , a brown or black successful immigrant is not loved in the same way in this country. And that my friends is indeed a privilege.
deleted 4y ago
[deleted]
- deleted 4y ago
  [deleted]
tyleo 4y ago
Or they could put him in Chancery jail? The law is already undermined if no attempt is even made at upholding it.
- xxpor 4y ago
  But that's not how it works when you simply owe money (usually, modulo things like probation violations and child support, but lets ignore that for now). We don't have debtors prisons). They can seize his money though, garnish his wages (lol in this specific case though), etc.
  - gnopgnip 4y ago
    Contempt of court can lead to jail time in civil cases when you have the ability to but refuse to pay
  - mirntyfirty 4y ago
    It’s an interesting irony I think that one of the worst punishments for him is to have him follow through on the agreement that he signed.
  - tyleo 4y ago
    I’m being loose with words but I do mean that he should see punishment. Not necessarily jail.
    - metadat 4y ago
      He should see jailtime for the market manipulation. We'll see what happens. This isn't even a thing the SEC is known to be pursuing presently, so don't hold your breath.
      - parineum 4y ago
        > He should see jailtime for the market manipulation. Is that the normal punishment?
jollybean 4y ago
Could ask him to pay the $1B fine in the deal for walking away?
- eftychis 4y ago
  No. The $1B clause does not involved the two contractual parties pulling out of the deal.
  - jollybean 4y ago
    ? It's my understanding that if Musk walks, he's supposed to pay $1B and visa versa. So he's using the 'bot' issue to find an excuse for a deal he wants out of. [1] https://www.cbc.ca/news/business/elon-musk-twitter-1.6432315 https://www.cbc.ca/news/business/elon-musk-twitter-1.6432315
    - imustbeevil 4y ago
      It seems like a common misunderstanding because the reporting around this is so bad. > Musk and Twitter agreed to a so-called reverse termination fee of $1 billion when the two sides reached a deal last month. Still, the breakup fee isn’t an option payment that allows Musk to bail without consequence. > A reverse breakup fee paid from a buyer to a target applies when there is an outside reason a deal can’t close, such as regulatory intermediation or third-party financing concerns. A buyer can also walk if there’s fraud, assuming the discovery of incorrect information has a so-called “material adverse effect.” A market dip, like the current sell-off that has caused Twitter to lose more than $9 billion in market cap, wouldn’t count as a valid reason for Musk to cut loose — breakup fee or no breakup fee — according to a senior M&A lawyer familiar with the matter. https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-away-from-twitter-deal-by-paying-1-billion.html https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-awa...
      - jollybean 4y ago
        What did I misunderstand? Yes, I get that if there are 'material issues' maybe he can walk (even though he apparently waved a lot of that). He can't just walk away for 'no reason' and not pay the fine. The crashing price is probably not a legit reason.
moomin 4y ago
This is one of those things that could genuinely cause problem for the entire US (corporate) legal system. There’s a genuine danger that the result of this case will be “some people are too powerful to be regulated by the US system, and this is now obvious”.
- typon 4y ago
  It's wild to me that people think that Elon might actually face legal consequences for this. The Delaware court isn't some magical place run by elves. It's a court in the US. You know what's a lot cheaper than $34 billion dollars, or heck even $1 billion dollars? $200k for 3-4 judges. The Supreme Court just changed the law of the land based on a right-wing political campaign. You think a billionare, let alone the richest billionare is going to be subject to any serious consequences? It's absurd to even entertain this.
  - parineum 4y ago
    > The Supreme Court just changed the law of the land based on a right-wing political campaign. You think a billionare, let alone the richest billionare is going to be subject to any serious consequences? It's absurd to even entertain this. You know who has the authority to overturn that decision? Our democratically elected legislature.
    - zerocrates 4y ago
      I wouldn't be so sure a hypothetical federal law enshrining a Roe-ish right to abortion would itself survive the inevitable challenge to its own constitutionality.
      - cmurf 4y ago
        I expect this Court would find it a violation of he 10th amendment, leaving the issue to be decided only at the state level.
      - parineum 4y ago
np- 4y ago
Assuming that is the appropriate penalty (I know nothing about Chancery law), why exactly can’t they just issue a warrant for his arrest and put him in jail? He doesn’t have a private militia or anything like that
- hollasch 4y ago
  And who do you imagine would do the arresting bit on behalf of the Delaware court?
  - gamblor956 4y ago
    Other states will enforce a lawfully issued arrest warrant from another state. It happens literally all the time.
lkxijlewlf 4y ago
Maybe this is a good reason a single human being shouldn't be so fucking rich. If enough money makes you untouchable by the law, then our system is simply broken.
- serf 4y ago
  > Maybe this is a good reason a single human being shouldn't be so fucking rich. if you look at this as a problem with the rich, you're not being creative enough. Speaking as if we're assuming Musk gets away with this, this is a justice enforcement problem -- when all the mega-rich are gone the justice system that displays this level of corruption will just skim the highest payers available to them; they won't just give up these corrupt practices because there isn't a local billionaire to tap.
- wronglyprepaid 4y ago
- bmitc 4y ago
  I continue to be super concerned about this. I do not understand how the U.S. government does not view these billionaires as serious ideological threats to democracy, the court system, national security, etc. Makes one realize just how bought out Congress is. Once a person has wealth over, say, $500 million, then there should be a 100% tax.
  - nightski 4y ago
    Meh the government doesn't need more money to conduct frivolous and corrupt spending with. However it might be interesting to explore an option that required people who own a stake in a company that has grown beyond a certain size to be required to siphon off some of those shares to employees over time in a way where it was not conducted on the open market and would not affect share price. I also question whether corporate entities should be allowed to own shares and what the benefits are of that. Should private investment firms be allowed to accumulate massive stakes in public companies?
    - 4y ago

throwaway09223 4y ago

> What if the court orders Musk to close the deal and he says no? I can't believe people are taking this very silly statement seriously. This is utter nonsense. There are remedies for people who disobey court orders. Having assets makes you more vulnerable to a court's authority because you have something to lose. If a court orders specific performance and he doesn't do it then he's liable and the court will take his assets to compensate. Is Levine seriously suggesting that US courts don't have the authority to impose financial penalties, find liability, and seize assets? This is such an absurd thing to say it's hard to find a way to charitably respond.

hotpotamus 4y ago
Anytime the idea of a wealth tax is brought up, I see commenters coming out of the woodwork to say that it would be impossible to actually collect it from the wealthy. Though I will note that it seems like we are able to collect yachts and planes from Russian oligarchs now, so perhaps our techniques have advanced in the last few months.
- sascha_sl 4y ago
  There's an entire profession who's job it is to go full scale threat modeling on assets held directly or indirectly by the extremely rich. Seems likely they either didn't account for war sanctions or thought the impacted assets would not be worth putting behind 10 proxy legal owners for the unlikely case of such sanctions. Yachts and planes seem like they'd be particularly hard to turn into assets owned by a local proxy entity, since they move around so much.
- nikanj 4y ago
  It’s easier to collect from foreign billionaires who don’t have the connections. Igor will probably not fund your re-election campaign, but Musk might.
- throwaway09223 4y ago
  This is a different problem and has to do with privacy. The government can't compel you to disclose everything you're doing without cause, and without due process. Having a court ordered judgement entered against you is cause and is a result of due process. It's an entirely different scenario.
  - pc86 4y ago
    Assuming that a wealth tax was passed, wouldn't the cause here be proper reporting and collection of said tax? You can declare illegal income on your federal return and pay taxes on it. They're not (in this hypothetical I guess?) asking what you're doing, just how much it's made you.
    - throwaway09223 4y ago
      The issue is that people can change how they own things so they don't have to disclose. The law is necessarily public and people can adjust the way they structure ownership accordingly. We see this all the time already. For example, Medicaid won't pay for your extremely expensive end of life care if you have assets. So, people give away their assets (to a trust, to family) before applying for Medicaid to cover their nursing home. It becomes a game of cat and mouse. People will adjust where they can to avoid tax. This also already happens with income tax. For example, executive compensation is primarily provided as capital gains rather than income because it's much more tax efficient. Everything is in the open. The other issue here is one of cost. The IRS has to fund the cost of analyzing filings and deciding to audit. This is very different from a post-judgement scenario.
heartbreak 4y ago
Levine’s take is based on how Musk’s previous encounters with court orders have gone.
- throwaway09223 4y ago
  No, it isn't. It's completely disconnected from reality. There isn't even one single court imposed fine which he hasn't paid.
  - dragontamer 4y ago
    How goes his court ordered Twitter sitter that's supposed to prevent Musk from Tweeting about material effects related to Tesla? That's what I thought. Musk just ignores the law and gets away with things on a regular basis.
    - CamperBob2 4y ago
      That was a stupid order that would never survive scrutiny under prior-restraint doctrine. Specific performance is something different, though... I can't think of any constitutional problems that might block enforcement of that.
      - rurp 4y ago
        Musk and his lawyers agreed to the provision, and a court approved the deal. That is pretty strong evidence it's not an absurd provision.
        CamperBob2 4y ago
        He has also violated it multiple times, with no sign of any consequences. That is pretty strong evidence that it was, at best, pointless.
  - slotrans 4y ago
    But he has agreed to SEC sanctions and then subsequently ignored them...
daenz 4y ago
>the court will take his assets to compensate. How do you seize billions of dollars of stock without affecting share prices?
- pg_1234 4y ago
  You just continue seizing assets until the accumulated cash value realized from the sale of the assets matches the value of the financial judgement against the guilty party. The drop in share prices as you do this is not your concern.
- almost_usual 4y ago
  Don’t invest in a company ran by a lunatic?
  - abirch 4y ago
    Twitter employees are watching the board force a lunatic to buy their company.
    - scaramanga 4y ago
      Because they know he has absolutely no ability to do so. They are simply trying to collect legal fees at this point.
      - bandyaboot 4y ago
        I mean, he does though right? It’s just that doing so at this point would cause a world of hurt for Tesla and its shareholders?
        scaramanga 4y ago
        I don't think so, I mean, you are not just going to place a single market order for $44bn of stock, you are going to have liquidity problems because there is not that much buy-side volume in the market, so the price must fall drastically to attract new buyers. Also I assume musk has legal obligations not to do stuff like that to begin with, as an executive with fiduciary responsibilities to shareholders. If Musk can tank Tesla, Exxon execs can dismantle Exxon to save the environment. But there's also the fact that a lot of his Tesla shares are already leveraged on loans. The most likely course would be for him to take out loans on the remaining unleveraged stock, but he doesn't have enough of that at the rates the banks are offering. Anyway, I'm no expert on Musk, and I have almost zero interest in Tesla, or Twitter, or any of this clown show. So maybe my ballpark guesstimations of all the relevant numbers are way off. So take it all with a huge pinch of salt. I am just some uninformed spectator watching two lizards fight in the dust and speculating who will win or whatever :) Edit: leveraged -> unleveraged, woops
dreamcompiler 4y ago
Levine has addressed this in past columns. Of course the courts have such authority, but individual people have to enforce the court's decisions, and sometimes those people are reluctant to take on Musk. Musk is a special case because he has done things like threatening to ruin the careers of SEC lawyers who have come after him, and he has the power to make that happen. Is this illegal? Probably. Does Musk get away with it? Yes.
- throwaway09223 4y ago
  You're talking about Musk pressuring Cooley to fire a lawyer who previously worked against him at the SEC. But the result was that Cooley told Musk no. Hardly a success story for Musk. There's no shortage of law firms willing to go up against billionaires. Hell, there's no shortage of firms willing to go up against criminal enterprises like drug cartels. The idea that Musk is somehow more threatening than the types that the US court system regularly puts under their thumb is simply laughable.
  - sroussey 4y ago
    Cooley then lost business from Musk firms.
    - throwaway09223 4y ago
      So what? This is business as usual for law firms. They will lose clients every time they take a case due to conflicts of interest and so on, even if everyone has a happy outcome. What Musk did was petty and questionable, but it didn't fundamentally change anything for Cooley. It's not a big deal.
      - rurp 4y ago
        It's unlikely Musk expected Cooley to cave to his ridiculous demand. It's very likely the intended target for this action was every person who deals with Musk's future illegal actions.
paulcole 4y ago
> Is Levine seriously suggesting that US courts don't have the authority to impose financial penalties, find liability, and seize assets No. He’s suggesting that Musk’s wealth and power will make the people who work in US courts reluctant to impose financial penalties, find liability, and seize assets.
- scaramanga 4y ago
  Not to mention his bizarre hold on the public imagination. He's the worlds most simped compulsive liar. I think authorities may also be afraid of looking like Nazi jackboots on the neck of this innocent guy who would be in federal prison serving long sentences if he was just some obscure hedge fund dude, known only to other hedge fund dudes, like Bernie Madhoff.
  - kibwen 4y ago
    > He's the worlds most simped compulsive liar. Still a strong #2, but he sure is trying his hardest for that top spot.
    - myth_drannon 4y ago
      Who is number one?
      - paulcole 4y ago
        Has to be Trump.
reverend_gonzo 4y ago
Levine is suggesting that they don’t have the balls to enforce those penalties. And by history, he may very well be right.
phillipcarter 4y ago
Perhaps it's just a general sense of disillusionment, but I've come to see that "court orders X" and "X happens" are entirely orthogonal. I will be personally surprised if Musk pays a single cent.
- smaudet 4y ago
  Depends I guess on how 007 you think the world operates (reference to James Bond) - X will happen, but maybe 2-10 years after various counter-suits. Case studies are what has happened e.g. with Microsoft, other large businesses - long legal battles are fought, nothing happens while things are in limbo. When the rubber finally hits the road, things happen fairly quickly, but until then it does look a bit like "nothing happens". This is of course, a problem, perhaps one that needs innovating around.
  - tambourine_man 4y ago
    What has happened to Microsoft? They still have a default browser pre-installed, Office wasn’t spun-off to another company… and I don’t remember the Java stuff anymore but I think nothing happened either, even though it’s a lot less relevant now.
    - brianwawok 4y ago
      The stuff stuff made them spin off C#, which likely made them more money
082349872349872 4y ago
Note that in TFA, the continuation of this very silly statement is footnoted [6], which literally starts with "I made this joke before...", so none of us ought to be taking it seriously.
- majormajor 4y ago
  The footnote only applies to the "Chancery jail" bit, not the suggestion that the court may not want to risk a public showdown: "A showdown between Musk and a judge might undermine Delaware corporate law more than letting him weasel out of the deal would." - this sentence is after that footnote.
mise_en_place 4y ago
Ok let’s say he has a bunch of stock as well as paintings, cars, etc. how do you divvy that up? Cut the painting in half and give it to Twitter? The rich are very wise at hiding money in assets that cannot be evenly divided nor distributed. That’s why the vast majority of taxes in the US comes from the middle class, they usually sit on piles of cash and have salaries from which to levy fines to.
- aunty_helen 4y ago
  Or ya no, liquidate the asset and divvy up the cash. I'm sure you could've thought of that.
  - mise_en_place 4y ago
    That will take years and Elon could easily stall them out in court.
    - brutusborn 4y ago
      Auctions don't usually take years :P
- carpo 4y ago
  You sell it for money
- blibble 4y ago
  auction
- jmccaf 4y ago
  Most of the middle class in America has a salary, or at least a paycheck, but distressing little cash saved. But they do pay the taxes that pay the bills.
kolbe 4y ago
Well, throwaway09223, you certainly sound like as much an authority as a former Wachtell and Goldman Sachs associate. Strong arguments like "this is utter nonsense" and "this is so absurd [that I can't actually argue against it]" are sure to sway the educated crowd on HN. If you would like to go see ways in which the government fails to penalize powerful entities, look no further than the financial crisis fines. What you were told were 10 figure fines ended up becoming a few million dollars in consumer relief headaches
jjav 4y ago
> There are remedies for people who disobey court orders. There are remedies for people like you and me and most people who disobey court orders. You can observe time and again that for those who are well connected and have some billions, the concept of law is far more malleable.
- iab 4y ago
  More malleable, or just literal putty
- b112 4y ago
  Even if what you say is true (it isn't), this is a battle between billionaires, eg the board and large stockholders @ twitter.
zackees 4y ago
Why would the court force Elon to buy the company when the remedy in the contract is a one billion payout?
- majormajor 4y ago
  It appears that that's the remedy for failing to get funds, not for cold feet; there's a performance clause for the latter, so Levine suggests "Musk’s goal here is presumably to walk away from Twitter and pay only $1 billion in damages." - that Musk is negotiating by making a stink to even be able to pay instead of going through with the deal he signed.
  - zackees 4y ago
    Your repeating opinion of someone with extreme biases for clickbait. This fantasy of forcing musk to buy the company doesn’t exist in any contract. Your asking the court to make up a new contract and enforce it. That’s not how the court works, except in extreme circumstances which don’t apply to this twitter acquisition attempt. Also, Musk asserts that upto 50% of twitter users are bots, which is totally believable. So the chances Musk will have to pay anything is actually remote, since twitter would have to produce evidence that would reveal trade secrets. Here’s my prediction: Musk will pay nothing because Twitter has allowed itself to be infiltrated with bots and revealing this will be far more damaging than losing out on a billion. Musk will walk away.
    - FabHK 4y ago
      > This fantasy of forcing musk to buy the company doesn’t exist in any contract. That is precisely what the merger agreement is: a contract forcing Musk to buy Twitter.
codesections 4y ago
> This is such an absurd thing [for Matt Levine, a former 3rd Circuit clerk, Yale Law grad, and Wachtell M&A attorney] to say it's hard to find a way to charitably respond. If your interpretation of the post suggests that a highly qualified attorney is getting the basics of US law absurdly incorrect, you might want to reconsider whether you're understanding the intended meaning. (Here, Levine is making a specific claim about the remedies that the Delaware chancellory court typically employs, not about the authority of US courts)
- XorNot 4y ago
  This is an appeal to authority that is not valid: there are plainly a lot of lawyers out there who's legal opinion leaves a lot of daylight against the actual law. Rudy Giuliani took a long time to get disbarred.
  - codesections 4y ago
    > This is an appeal to authority that is not valid I'm open to that criticism; I'm typically pretty skeptical of appeals to authority myself. But to be clear: the appeal to authority I'm making isn't "legal opinion of a lawyer" (I agree that's very weak) but rather "opinion on corporate law by a Wachtell attorney who practiced corporate law" (Wachtell is probably the best corporate law firm in the world, and clearly in the top handful)
    - wutbrodo 4y ago
      And in the example the parent comment gave: RUDY Guiliani was a US Attorney and the Associate Attorney General (third highest position in the DoJ).
avalys 4y ago
From the Wall Street Journal this afternoon: "“What are they going to do if there is a judgment and he says, ‘Well, I’m still not going to buy it’?” said Zohar Goshen, professor of transactional law at Columbia Law School. “They don’t really have tools to force him to go through with it. You don’t put people in jail because they don’t buy something.”" https://www.wsj.com/articles/twitter-elon-musk-set-for-unprecedented-legal-battle-over-deal-collapse-11657404303?mod=hp_lead_pos1 https://www.wsj.com/articles/twitter-elon-musk-set-for-unpre...
- genocidicbunny 4y ago
  No, but if the court orders it and he refuses, can that not be construed as contempt of court? People definitely go to jail for that.
  - b112 4y ago
    That's criminal, not civil court. Civil court works on fiscal, property to mitigate damage. If he is found to breach contract, a court could order seizure of assets (cash or property). There could be punitive damages assessed too, if his actions are seen as purposefully malign.
    - phrz 4y ago
      Are you under the impression that judges presiding over civil cases cannot exercise their inherent power (in some jurisdictions) to jail those in (severe) contempt of court?
      - b112 4y ago
        To both replies, I agree contempt of court is a thing. I misspoke. What I mean is, the remedy for non-compliance with contracts, is fiscal, seizure, penalties of thus nature. The goal of civil court is not the state punishing, but instead, laying out compensation, for damages, to the harmed. There is no contempt of court for not paying these damages.
gnicholas 4y ago
If he had the cash to buy it, they could force him to. But if he lined up financing and those people bail, what then? Would the court make him liquidate all his Tesla stock, without regard to how that would injure other Tesla shareholders? Having assets does make one more vulnerable to court judgments, but savvy birch people will set themselves up to remain in the driver’s seat when possible.
kortilla 4y ago
> There are remedies for people who disobey court orders. A Delaware court doesn’t have as much reach as you might think if most of Musk’s assets are not there.
- b112 4y ago
  Good lord, registering judgements in jurisdictions is trivial. Not to mention, how many corporations which Musk has shares in, are Delaware companies? All of this, how to assess and collect damages, goes back to Roman law.
benreesman 4y ago
To the extent that Elon Musk might represent a corner case w.r.t. the legal system even more than you’re average billionaire it would most likely be because of the national security tie-ins around SpaceX. This is pure speculation on my part, but I don’t think it’s insane.
phendrenad2 4y ago
I can't believe people are looking at this from such a silly angle. It's obvious that no court can order you to buy something. That goes against the personal freedom we have in this country, and if a court tried it, it would be an easy appeal. But that misses the point, because nobody is going to order Elon to buy Twitter. What MIGHT happen is, a court declares "Congratulations! You already bought Twitter! It has nothing to do with us, we just interpreted the contract. Again, congrats on your purchase, don't go getting buyer's remorse now winky face"
- striking 4y ago
  What are you trying to assert is false about this viewpoint? Specific performance is actually a kind of legal remedy and it can in fact be ordered by a court. It might be one of the last tools in a judge's toolbox, but I don't think it's anywhere near a "silly angle" after a quick googling of "specific performance".
- sk5t 4y ago
  > It's obvious that no court can order you to buy something. A court can compel "specific performance" if the contract's terms require it.

wronglyprepaid 4y ago

> The guy is pretty contemptuous of legal authority; he thinks he is above the law and he might be right Of all the funny things I have read this week this takes the cake, Biden will not allow him to get away with it, not a joke.

Waterluvian 4y ago

Reminds me of the impotence of the American system to deal with Trump over the years. And he opened the flood gates for scofflaws. If they don’t make an example of Musk (if he so deserves it), the same thing will happen and Delaware will become less useful for corporations.

akimball 4y ago

Amusingly, I first read that as "the Delaware Court of Chicanery".

matt3210 4y ago

The laws are enforced with fines, and there for Elon And other rich over lords are above the law.

pbreit 4y ago

"There is not a whisper of evidence for this claim, no hint that there might be evidence, no acknowledgement that a reasonable reader of this letter might want to see evidence." This is completely wrong, right? The evidence might not be terrific but it's definitely more than a whisper.

sklargh 4y ago

This is the thing. I feel like the Delaware Chancery Court is going to compel specific performance and the incentives for all other parties here are tilted deeply towards compliance. On a practical level, every large financial institution with dollar assets (I mean this literally) has a far greater vested interest in maintaining a productive relationship with the Chancery than they do with Musk. On a political level, could easily see the Delaware governor getting a kick out of sending the state police to arrest Musk for contempt, impound his assets. Then again, Musk is a pretty good gambler.

la64710 4y ago

I was thinking this was a case of white privilege that we consider the conduct of Musk as “rich people just wanna have fun” and not a criminal conspiracy. But the more I think the more I realize the privilege is not that , the privilege is that a white successful immigrant is loved by so many people in this country , a brown or black successful immigrant is not loved in the same way in this country. And that my friends is indeed a privilege.

deleted 4y ago

[deleted]

deleted 4y ago
[deleted]

tyleo 4y ago

Or they could put him in Chancery jail? The law is already undermined if no attempt is even made at upholding it.

xxpor 4y ago
But that's not how it works when you simply owe money (usually, modulo things like probation violations and child support, but lets ignore that for now). We don't have debtors prisons). They can seize his money though, garnish his wages (lol in this specific case though), etc.
- gnopgnip 4y ago
  Contempt of court can lead to jail time in civil cases when you have the ability to but refuse to pay
- mirntyfirty 4y ago
  It’s an interesting irony I think that one of the worst punishments for him is to have him follow through on the agreement that he signed.
- tyleo 4y ago
  I’m being loose with words but I do mean that he should see punishment. Not necessarily jail.
  - metadat 4y ago
    He should see jailtime for the market manipulation. We'll see what happens. This isn't even a thing the SEC is known to be pursuing presently, so don't hold your breath.
    - parineum 4y ago
      > He should see jailtime for the market manipulation. Is that the normal punishment?

jollybean 4y ago

Could ask him to pay the $1B fine in the deal for walking away?

eftychis 4y ago
No. The $1B clause does not involved the two contractual parties pulling out of the deal.
- jollybean 4y ago
  ? It's my understanding that if Musk walks, he's supposed to pay $1B and visa versa. So he's using the 'bot' issue to find an excuse for a deal he wants out of. [1] https://www.cbc.ca/news/business/elon-musk-twitter-1.6432315 https://www.cbc.ca/news/business/elon-musk-twitter-1.6432315
  - imustbeevil 4y ago
    It seems like a common misunderstanding because the reporting around this is so bad. > Musk and Twitter agreed to a so-called reverse termination fee of $1 billion when the two sides reached a deal last month. Still, the breakup fee isn’t an option payment that allows Musk to bail without consequence. > A reverse breakup fee paid from a buyer to a target applies when there is an outside reason a deal can’t close, such as regulatory intermediation or third-party financing concerns. A buyer can also walk if there’s fraud, assuming the discovery of incorrect information has a so-called “material adverse effect.” A market dip, like the current sell-off that has caused Twitter to lose more than $9 billion in market cap, wouldn’t count as a valid reason for Musk to cut loose — breakup fee or no breakup fee — according to a senior M&A lawyer familiar with the matter. https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-away-from-twitter-deal-by-paying-1-billion.html https://www.cnbc.com/2022/05/13/elon-musk-cant-just-walk-awa...
    - jollybean 4y ago
      What did I misunderstand? Yes, I get that if there are 'material issues' maybe he can walk (even though he apparently waved a lot of that). He can't just walk away for 'no reason' and not pay the fine. The crashing price is probably not a legit reason.

moomin 4y ago

This is one of those things that could genuinely cause problem for the entire US (corporate) legal system. There’s a genuine danger that the result of this case will be “some people are too powerful to be regulated by the US system, and this is now obvious”.

typon 4y ago
It's wild to me that people think that Elon might actually face legal consequences for this. The Delaware court isn't some magical place run by elves. It's a court in the US. You know what's a lot cheaper than $34 billion dollars, or heck even $1 billion dollars? $200k for 3-4 judges. The Supreme Court just changed the law of the land based on a right-wing political campaign. You think a billionare, let alone the richest billionare is going to be subject to any serious consequences? It's absurd to even entertain this.
- parineum 4y ago
  > The Supreme Court just changed the law of the land based on a right-wing political campaign. You think a billionare, let alone the richest billionare is going to be subject to any serious consequences? It's absurd to even entertain this. You know who has the authority to overturn that decision? Our democratically elected legislature.
  - zerocrates 4y ago
    I wouldn't be so sure a hypothetical federal law enshrining a Roe-ish right to abortion would itself survive the inevitable challenge to its own constitutionality.
    - cmurf 4y ago
      I expect this Court would find it a violation of he 10th amendment, leaving the issue to be decided only at the state level.
    - parineum 4y ago

np- 4y ago

Assuming that is the appropriate penalty (I know nothing about Chancery law), why exactly can’t they just issue a warrant for his arrest and put him in jail? He doesn’t have a private militia or anything like that

hollasch 4y ago
And who do you imagine would do the arresting bit on behalf of the Delaware court?
- gamblor956 4y ago
  Other states will enforce a lawfully issued arrest warrant from another state. It happens literally all the time.

lkxijlewlf 4y ago

Maybe this is a good reason a single human being shouldn't be so fucking rich. If enough money makes you untouchable by the law, then our system is simply broken.

serf 4y ago
> Maybe this is a good reason a single human being shouldn't be so fucking rich. if you look at this as a problem with the rich, you're not being creative enough. Speaking as if we're assuming Musk gets away with this, this is a justice enforcement problem -- when all the mega-rich are gone the justice system that displays this level of corruption will just skim the highest payers available to them; they won't just give up these corrupt practices because there isn't a local billionaire to tap.
wronglyprepaid 4y ago
bmitc 4y ago
I continue to be super concerned about this. I do not understand how the U.S. government does not view these billionaires as serious ideological threats to democracy, the court system, national security, etc. Makes one realize just how bought out Congress is. Once a person has wealth over, say, $500 million, then there should be a 100% tax.
- nightski 4y ago
  Meh the government doesn't need more money to conduct frivolous and corrupt spending with. However it might be interesting to explore an option that required people who own a stake in a company that has grown beyond a certain size to be required to siphon off some of those shares to employees over time in a way where it was not conducted on the open market and would not affect share price. I also question whether corporate entities should be allowed to own shares and what the benefits are of that. Should private investment firms be allowed to accumulate massive stakes in public companies?
  - 4y ago