X Corp., formerly known as Twitter, must pay $1.1 million in legal fees racked up by a group of the social-media platform’s former top executives, a judge ruled.
Lawyers for the group — led by ex-Twitter Chief Executive Officer Parag Agrawal and former top lawyer Vijaya Gadde – Tuesday persuaded Delaware Chancery Court Judge Kathaleen St. J. McCormick that Twitter violated its duties to cover legal expenses generated by their work for the company.
The former executives argued Twitter violated its own bylaws by refusing to cover the sums even though they were tied to investigations of the social-media platform’s operations. They were ousted when billionaire Elon Musk bought the company for $44 billion last year. Musk has faced a raft of lawsuits over his failure to pay Twitter vendors for things such as rent and consulting fees.
Company officials didn’t immediately return an email for comment Tuesday on McCormick’s ruling. She was the judge that oversaw the legal dispute tied to Musk’s attempt to nix his $54.20-per-share offer to buy the social-media platform. He gave up his effort to invalidate the buyout in October 2022.
The company has paid about $600,000 of what it owes, but has withheld $1,158,427 in fees for lawyers’ work representing the former top managers in a congressional inquiry into the influence of social media on US elections, which required Gadde to appear before the House Committee on Oversight and Reform, according to legal filings.
Michael Blanchard, one of the company’s lawyers, said X officials got “sticker shock” when they got the bill from Gadde’s lawyers, which they found to be “quite excessive.”
Blanchard said the fees weren’t for litigation “that’s going to go for several years,” but instead were for “one-day of testimony.” X officials considered the request a “clear abuse” of the firm’s legal duty to indemnify executives for work on behalf of the company.
David Anderson, a lawyer for the former Twitter executives, countered X officials wrongfully suggested Gadde had run up excessive fees as revenge for being forced out of the company. The case boiled down to “ongoing delays” in paying legal fees that were mandated under Agawal’s and Gadde’s employment contracts, he added.
After hearing arguments, McCormick noted Delaware courts lean in favor of granting executives’ request to have legal fees covered when tied to their actions on behalf of companies. She said she didn’t see any reason to deviate from the norm in the case.
“I have reviewed the amount in question, and although it is high and probably higher than most humans would like to pay, it’s not unreasonable,” she said.
The case is Agrawal v. Twitter Inc., 2023-0409, Delaware Chancery Court (Wilmington).
(Updates with judge’s comment in 10th paragraph)