WSJ US BusinessJudge Pushes Ahead With Trial Date as Twitter, Musk Talk

October 5, 20220
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Chancellor Kathaleen McCormick ordered Mr. Musk’s team Wednesday to search for more possible text messages and other information requested by Twitter as the two sides prepare for a five-day, nonjury trial scheduled to start Oct. 17 in Wilmington, Del., over the stalled $44 billion deal. She said neither party had moved to stop the litigation.

Separately, Twitter and Mr. Musk are continuing talks about closing the deal and hope to have an agreement soon, possibly as soon as later today, according to a person familiar with the matter.

“The parties have not filed a stipulation to stay this action, nor has any party moved for a stay,” the judge wrote Wednesday. “I, therefore, continue to press on toward our trial set to begin on October 17.” In the decision addressing several unresolved requests from Twitter, Chancellor McCormick suggested Mr. Musk’s team likely let some encrypted communications disappear and thus they would be unavailable. 

A screenshot of a conversation between Mr. Musk and his adviser Jared Birchall using the Signal encrypted messaging app showed that the billionaire used the service more and for longer than he had indicated, the judge wrote. She said the extent of the use wasn’t clear.

Mr. Musk previously said that, aside from an April 25 message from venture capitalist Marc Andreessen, he didn’t recall having any other communications regarding the Twitter takeover using Signal before that point. “I did not communicate regarding the Twitter transaction using Signal (or any other messaging service that deletes messages after a period of time) from that point onward,” he said, according to a court document.

The digital record suggests otherwise, Chancellor McCormick said on Wednesday. “I am forced to conclude that it is likely that defendants’ custodians permitted the automatic deletion of responsive Signal communications between them and possibly others, and that those communications are irretrievably lost,” she said. 

Chancellor Kathaleen McCormick ordered Elon Musk’s team to search for more text messages and other information requested by Twitter.

Photo: Eric Crossan/Delaware Chancery Court

She added, “If defendants deleted documents after they were under a duty to preserve, some remedy is appropriate, but the appropriate remedy is unclear to me at this stage.” She said she would decide on Twitter’s request for sanctions over the matter after the trial.

Additionally, Chancellor McCormick said lawyers for Mr. Musk have produced no text messages from the billionaire between May 24 and May 30, or between June 1 and June 7. “These periods were important to the parties’ dispute, and I share plaintiff’s concern that Musk produced no responsive text messages from these periods,” she wrote.

The judge’s decision Wednesday addressed several requests from Twitter around information the company was seeking from Mr. Musk’s team, following oral arguments Sept. 27.

Mr. Musk this week offered to close his acquisition of Twitter on the terms he originally agreed to in April, a sudden and unexpected retreat for the billionaire entrepreneur that could end a monthslong battle he waged to get out of the agreement.

Mr. Musk’s lawyers communicated the proposal to Twitter’s lawyers, according to a letter that was filed with the Securities and Exchange Commission. It couldn’t immediately be learned what prompted Mr. Musk to abandon his battle with the company. The chancellor has at times appeared impatient with Mr. Musk’s lawyers at hearings and once called his data requests “absurdly broad.”

Twitter confirmed receipt of the letter and said it intends to close the transaction at the original price of $54.20 a share.

Should the parties agree on a plan, the proposal would enable them to avert the high-stakes trial and potentially finalize the takeover deal within days. It would represent a victory for the social-media company. 

For Mr. Musk, an agreement would likely allow him to avoid sitting for a deposition currently set to begin Thursday in Texas. 

There are no guarantees that two sides will reach a deal—or that the unpredictable Mr. Musk will follow through with his proposal and close the transaction.

Write to Alexa Corse at alexa.corse@wsj.com

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