Plaintiffs late last week argued that the Northern District of California court overseeing the class action against Elon Musk over his alleged illegal market manipulation leading up to his purchase of co-defendant Twitter Inc. should permit a pleading amendment.
According to the plaintiff’s motion, the case is still recent and events have transpired since last amendment in July that warrant granting the motion under the Federal Rules’ liberal pleading standard.
The May-filed case argued that Musk and his co-defendants acted unlawfully in the months before the $44 billion deal’s close in several ways.
The complaint first alleges that before making the offer, Musk secretly acquired Twitter shares beginning in January 2022, and in so doing, failed to comply with the federal securities laws’ reporting requirements when his Twitter holdings exceeded the 5% threshold. This purportedly caused Twitter stock “to trade at artificially depressed prices and allowed him to save hundreds of millions of dollars while continuing to increase his stake in Twitter to above 9% by April 2022,” the plaintiff said.
The complaint also accused Musk of aiding and abetting Twitter leaders Jack Dorsey and Egon Durban in their breaches of fiduciary duties owed to shareholders by failing to shop Twitter to other buyers and to adequately appraise Musk’s sources of financing. Lastly, the lawsuit said Musk, without justification, delayed the buyout, thereby earning interest on his wealth and depriving the plaintiff and other Twitter shareholders of interest on the buyout proceeds they should have received over a month before the eventual closing in October 2022.
In previous iterations of the complaint, the shareholder sought to compel the deal, alongside other relief. In September, Twitter moved to dismiss the case on grounds that the shareholder had no right to interfere with it and Musk’s contract.
Now, the plaintiff says that recent events have given rise to “additional bases for Plaintiff’s claims and necessarily altered some of Plaintiff’s potential remedies.” The motion points out that discovery has not begun, briefing on the defendants’ motions to dismiss has not been completed, and the sufficiency of the complaint has not been tested.
Without a claim for prejudice, the defendants cannot stand in the way of amendment, the motion adds. The proposed complaint maintains the same claims: aiding and abetting breaches of fiduciary duty, declaratory relief, and unjust enrichment.
The plaintiff is represented by Cotchett, Pitre & McCarthy, LLP and Bottini & Bottini Inc. and Musk by Quinn Emanuel Urquhart & Sullivan LLP and Twitter by Shearman & Sterling LLP.