Elon Musk completed his US$44bn takeover of Twitter on 28 October following a turbulent six months of litigation.

The twists and turns within this high profile suit are not uncommon, with litigation very rarely straightforward, and often subject to various curveballs along the way.

There are, however, lessons to be learnt from the way these proceedings have progressed to settlement, narrowly avoiding trial, which was due to take place in Delaware starting on 17 October.

1) Consider the possible resolutions at the outset of a dispute

Ultimately, Twitter and Musk have reached a resolution which puts them in the same position they would have been in had the deal gone ahead as planned in April 2022, i.e. Musk has purchased Twitter for US$54.20 per share. However, in engaging in litigation, both parties have incurred the time and resources of putting together their respective cases, and (subject to the agreed position regarding costs) incurred significant legal costs and been subject to a media storm.

There are significant benefits to exploring all potential options during the pre-action phase before incurring the costs of engaging in protracted litigation. Whilst the parties in this case had particularly deep pockets, the longer the litigation proceeds, the less monies a party has to put towards a settlement with resources otherwise put towards court costs and legal fees.

It is therefore important to exhaust all means of dispute resolution prior to engaging in litigation.

2) Ensure you are able to comply with the terms of a settlement proposal

Whilst ultimately Musk was able to complete the deal, it was contingent on receipt of debt financing, which could have compromised the settlement reached. 

In the UK, there could have been particularly dire consequences were an offer to settle framed as a Part 36 offer.

A Part 36 offer is a settlement offer made without prejudice save as to costs and subject to the provisions of Part 36 of the Civil Procedure Rules. The rules set out the costs and other consequences that a party will face if it refuses a reasonable offer to settle. This includes a strict period for acceptance, for example, unless the parties have otherwise agreed in writing, an offer to pay a single sum of money must be paid within 14 days of acceptance. If not paid within 14 days or the period agreed, the offeree may enter judgment for the unpaid sum. A judgment against a company or individual will have commercial consequences such as impact on ability to obtain credit, which could have wider, potentially catastrophic, implications on their business.

It is therefore critical to ensure before making any offers to settle, that the party making the offer is capable of complying with the terms therein.

3) The importance of looking at the bigger picture 

Often there are commercial reasons why a party would want to settle litigation rather than risk the uncertainty of a judgment after trial. Whether that be to free up time to focus attention on other areas of the business, or to protect yourself against a potential adverse costs order.

In this case, there are various reasons as to why Musk may have decided to U-turn and proceed with the takeover initially agreed in April 2022 (see my previous article here). It is most likely that Musk was advised of the potential outcomes at trial, including Twitter winning and Musk being ordered to buy the company for US$44bn, i.e. putting them back in the position they would have been in had the deal proceeded as intended in April. 

News bulletins since the takeover concluded seem to suggest there was always a “big picture” as to what Musk intended would happen with the tech giant after his purchase.

Whilst each case will turn on its own facts, it is important to remember that there are big picture considerations in any dispute and remaining focused on the end goal, whether that be to secure the best settlement, or to defend proceedings against you, is imperative in seeking to ensure the best outcome.

As the tech landscape continues to evolve, it will be interesting to see whether further cases of this nature make their way through the judicial system.

If you are dealing with a commercial dispute and need information or advice, Ince can help.