The judge overseeing Twitter Inc.’s TWTR-N case. for $44 billion against Elon Musk, has a no-nonsense reputation as well as the distinction of being one of the few lawyers ever to order a reluctant buyer to close a corporate merger in the US.
Kathaleen McCormick took on the role of chancellor, or chief justice, of the Court of Chancery last year, the first woman in that role. On Wednesday, she was assigned the Twitter case, which is trying to force Musk to complete his deal for the social media platform, in what promises to be one of the biggest legal battles in years.
“She already has a track record of not putting up with some of the worst behavior that we see in these areas when people want to get out of deals,” said Adam Badawi, a law professor who specializes in corporate governance at the University of California, Berkeley. . “She’s a serious, no-nonsense judge.”
In contrast to Musk’s brash and erratic demeanor, she is known as soft-spoken, approachable and kind, but also someone who stands her ground. She advocates respect among litigants and integrity in legal conferences.
“We’ve always looked out for each other, we’ve always gone out drinking after arguments, and we’ve maintained that level of civility,” she said at a meeting at the University of Delaware this year.
After weeks of confrontational tweets that suggested Twitter was hiding the true number of fake accounts, Musk said on July 8 that he was ending his acquisition of a $54.20 stake in Twitter, worth $44 billion. On Tuesday, the social media platform filed a lawsuit.
On Friday, McCormick scheduled the first hearing for July 19 in Wilmington, when he will consider Twitter’s request to expedite the case and hold a four-day trial in September.
Shares of Twitter rose about 2% to $37.11 in midday trading on Friday, but still more than 30% below the deal price.
Judges have ordered reluctant buyers to close corporate acquisitions only a handful of times, according to legal experts and court records. One of them was McCormick.
McCormick caught the attention of Wall Street traders last year by ordering an affiliate of private equity firm Kohlberg & Co LLC to close its $550 million purchase of cake decorating products maker DecoPac Holding Inc.
She described her decision as “scoring a victory for the security of the deal” and rejected Kohlberg’s arguments that it could be pulled due to lack of funding.
The case has many parallels with the Twitter deal. Like Musk, Kohlberg said he was stepping down because DecoPac was violating the merger agreement. Like Musk, Kohlberg argued in part that DecoPac failed to maintain normal operations.
There are also differences. Musk’s deal is much larger, includes a publicly traded Twitter target, and could have ramifications for Tesla Inc, the electric vehicle maker that is the source of much of Musk’s wealth.
Tesla shares were trading slightly higher on Friday at $718.04, down about $1,000 when the Twitter deal was announced.
On other occasions, she has sided with shareholders when they have clashed with management.
Last year, she blocked energy company The Williams Cos Inc from adopting a so-called poison pill measure, saying it violated their fiduciary duty to shareholders.
Last month, she said Carvana Co shareholders could sue the board for directly offering shares to select investors when the share price was depressed during the early pandemic.
A graduate of Notre Dame Law School, McCormick began her career at the Delaware branch of the Legal Aid Society, which helps low-income people navigate the court system.
She went into private practice “mainly for financial reasons,” she told the Delaware Senate during her confirmation hearing, joining Young Conaway Stargatt & Taylor, one of the state’s premier business litigation firms.
She joined the Court of Chancery in 2018 as Vice-Chancellor and became the first woman to lead the Court of Chancery last year.
Despite her soft-spoken manner, Eric Talley, who specializes in corporate law at Columbia Law School, said he doubts McCormick will be intimidated by Musk.
“I wouldn’t bet on Chancellor McCormick suddenly going weak,” he said.
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