August 22, 2023
A recent Law 360 story by Rose Krebs, “X Corp. Accused of ‘Shirking’ Its Obligations in Legal Fee Row”, reports that three former top Twitter executives continue to urge the Delaware Chancery Court to order the Elon Musk-owned social media giant, now called X Corp., to reimburse them for at least $1.1 million in legal costs, accusing the company of "perpetually making excuses" for not meeting its obligations. In a brief, former Twitter CEO Parag Agrawal, former Chief Legal Officer Vijaya Gadde and former Chief Financial Officer Ned Segal told the court that the company is "gaining a well-earned reputation for shirking its commitments."
They took aim at a cross-motion for summary judgment and accompanying brief X Corp. filed last month, after Agrawal, Gadde and Segal had already sought to have Chancellor Kathaleen St. J. McCormick summarily order the company to pay legal fees they have incurred in connection with Twitter-focused lawsuits and regulatory inquiries.
The three assert that, in their summary judgment bid, they established "beyond any doubt that Twitter has breached its advancement obligations." "From the beginning of this dispute, plaintiffs have operated by the book — making timely demands for advancement, providing undertakings, and submitting good faith certifications from counsel attesting to the reasonableness of plaintiffs' attorneys' fees," their brief said. "Plaintiffs have done everything prescribed by Delaware law to obtain advancement from Twitter."
They accuse the company of causing months of delays and "perpetually making excuses for its failure to meet its advancement obligations." "Although Twitter would like to pretend it is a party that dutifully pays its contractual obligations as they come due, it is in fact perpetually delinquent and is gaining a well-earned reputation for shirking its commitments," they contend.
In a filing last month, they said the social media giant had advanced them roughly $575,000 for their legal costs, but is still "wrongfully" withholding about $1.1 million owed, along with roughly $270,000 in interest and "fees-on-fees" for having to litigate the Chancery suit. The three sued the social media giant in Chancery Court in April, saying they incurred significant expenses after becoming involved in several legal proceedings because of their former roles as Twitter executives.
They contend that per company bylaws and indemnification agreements, X Corp., as Twitter's successor, is obligated to advance their legal expenses. Musk fired the three when he took ownership and control of the business in October 2022. Indemnification agreements covering them, however, remain in effect for proceedings related to their former position as officers, the complaint said. In a filing last month, the three argued: "Put simply, the world's richest person does not pay his bills."
But, its own filing, X Corp. has called into question the reasonableness of fees related to Gadde's appearance before the House Committee on Oversight and Reform during the committee's investigation into the influence of social media on U.S. elections. In its own summary judgment filing last month, X Corp. called Gadde's request for fees excessive.
"Unlike many advancement actions, here, X Corp. does not challenge Gadde's entitlement to advancement of reasonable expenses — the company does not dispute that her testimony was required by reason of Gadde's role as former CLO of Twitter," the filing said. "Rather, the company here is challenging only the reasonableness of the fees for which Gadde seeks advancement with respect to the Congressional Inquiry."
X Corp. said Gadde is asking the company to advance "over $1.1 million" for fees incurred by her counsel, Sidley Austin LLP, "in connection with testifying for a single day." That amount is "nearly 1,100%" what was incurred by two other former Twitter executives who also testified at the same hearing and were "similarly situated witnesses," X Corp. contended.
"The extreme delta between Gadde's legal fees and those of not one, but two separately represented, similarly situated, former Twitter executives who engaged similarly reputable law firms, is on its own sufficiently shocking to require that the reasonableness of Gadde's fees be thoroughly addressed now," the company argues.
X Corp. asked the court to "reduce any advancement award related to Gadde's representation in the congressional inquiry from $1,153,540.81 to $106,203.28 because Gadde failed to prove that all the fees and expenses were reasonably incurred."
But, ina filing, Gadde, Agrawal and Segal fired back. "Twitter's challenge to these fees is particularly troubling given that Twitter's owner, Elon Musk, contributed to the exposure and complexity of the oversight inquiry when he publicly and repeatedly focused on Gadde and personally toured Capitol Hill to incite Republican lawmakers leading the oversight inquiry," their filing said. They argued that "the record demonstrates that Gadde's fees incurred in the oversight inquiry are reasonable."
The three criticized the company for venting "invective at Gadde's counsel," including asserting that it engaged in "over-lawyering" and "extensive duplication of effort." Gadde’s attorneys spent many hours prepping her for the committee’s questions, using five partners with hourly rates from $1,300 to $1,825, two associates charging more than $1,200 an hour and non-lawyer “policy adviser” Tracey LaTurner, who billed at $665 an hour.
"Aside from its invective, the only basis for Twitter's cross-motion is a false comparison between Gadde's attorneys' fees and the attorneys' fees of two other witnesses who testified in the same oversight inquiry," they said.