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One Place Where the Rules Actually Apply to Elon Musk

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Days before the wildest business saga of the year would begin, a Delaware judge explained to a room full of lawyers how she viewed her job.

Kathaleen McCormick,

the chancellor of the state’s Court of Chancery, said that her goal was to be a “gracious judge” who listened to complex arguments and offered constructive feedback when these corporate litigators brought the country’s biggest deals to her courtroom.

Her judicial philosophy was about to be tested: A few weeks later, she met

Elon Musk.

Chancellor McCormick is now presiding over the lawsuit that will determine whether Mr. Musk will proceed with his deal to buy Twitter. It’s a corporate drama pitting a company that inflames emotions against a titan who delights in mayhem, but she has guided the problem to a potential solution with a firm hand while keeping the courtroom remarkably free of chaos. The world’s richest person appears to be on his way to paying $44 billion for something he apparently doesn’t want because he collided with a reality that he couldn’t bend to his will.

Mr. Musk has long behaved as if the rules don’t apply to him. In his line of work, that audacity is required, and it helped this iconoclast build cars and companies that others dismissed as impossible. He also flouts authority, treats regulatory fines like speeding tickets, fails to deliver on promises and generally acts as if he can afford to get away with anything—which he often does.

This time might be different. You don’t plan to colonize Mars by respecting the laws of gravity. But on planet Earth, or at least in Delaware, the laws of business are still being upheld.

There has been so much noise surrounding Mr. Musk’s tumultuous pursuit of

Twitter


TWTR -0.26%

that Chancellor McCormick’s muted role managing the case has been drowned out. In her line of work, that means she succeeded.

We lionize people who break the rules. We barely recognize people when they enforce them.

Chancellor McCormick, a 43-year-old native of Delaware who goes by Katie and was given the middle name St. Jude for the patron saint of hope, made several key moves to prevent her courtroom from becoming a circus when Mr. Musk’s case of buyer’s remorse came to Delaware. Before his Twitter bid, he waived his diligence. She didn’t.

In Elon Musk’s line of work, audacity is required.



Photo:

Jordan Vonderhaar/Bloomberg News

First the court’s top judge assigned herself the lawsuit and spared colleagues the burden of a heavy workload under intense pressure. Then she expedited a scheduled trial because “the longer the merger transaction remains in limbo, the larger the cloud of uncertainty cast over the company,” she wrote. This may have seemed like an obvious decision, but legal analysts say it was bold and demanding. “Saying in July that we’re going to have a trial in October is like saying we’re going to have a presidential election on Saturday,” said

Minor Myers,

a University of Connecticut law professor.

Those early actions set the tone for months of prompt rulings on difficult calls that moved the case along.

“It told both parties this is going to be an orderly process, you’re going to be held to account and there’s not going to be any nonsense,” said

Andre Bouchard,

who preceded Chancellor McCormick atop the court.

Most analysts say Mr. Musk had the much weaker case, but Chancellor McCormick never did, even as her decisions indicated he didn’t stand much of a chance. She refused many of his requests for data and documents that could have devolved into a wild-goose chase. She also surprised observers last week by granting his motion to postpone the corporate trial of the century after Mr. Musk pledged to buy Twitter for $54.20 a share and honor the agreement that he had already signed. His lawyers said the deal would close around Oct. 28, so she’s letting them make it happen by 5 p.m. that day—or else make plans for a November court date.

‘Woe unto Elon Musk if this is some kind of feint.’


— Minor Myers

Nobody knows what might happen next. This is Elon Musk! He could hop a rocket tomorrow and tweet a poll asking if contracts apply in outer space. But you don’t need a law degree to interpret Chancellor McCormick’s judicial ultimatum as a warning against shenanigans. “Woe unto Elon Musk if this is some kind of feint,” said Mr. Myers.

The judge and representatives for Twitter and Mr. Musk declined to comment.

If they do avert the spectacle of a trial and Mr. Musk soon owns Twitter in addition to running Tesla and SpaceX—an “if” the size of his fortune—the big winner from a battle with many losers would be the Court of Chancery.

This court with English roots in business-friendly Delaware is the neutral site where many of the country’s nastiest corporate brawls get settled. Most public companies are based in Delaware for the guarantee of a smart judge with good instincts and relevant expertise who will work around the clock to referee their legal fights. They mitigate the risks of a jury trial by trusting one of seven highly qualified specialist judges, led by Chancellor McCormick, to handle their disputes with the sophistication and urgency required when billions are on the line.

It isn’t a place for poop emojis. It’s a venue for civil discourse and respectful arguments where norms matter and nothing is prized more than predictability.

The Court of Chancery, in other words, is the opposite of Twitter.

The opposite of Twitter: the Delaware Court of Chancery.



Photo:

Matt Rourke/Associated Press

This idea that judges can be a stabilizing force in business is a duty Chancellor McCormick takes seriously. The first woman to lead Delaware’s chancery court said at her 2019 investiture when she joined the bench that it was a job she gladly volunteered for—and to remind her of that anytime “the weight of responsibility inherent in a position of public trust might eclipse the sense of enthusiasm and optimism I feel today.”

People who know Chancellor McCormick portray a tough but unassuming judge who is allergic to drama and goes about her business without fuss. Her profession rewards competence, not overconfidence, and that demeanor helped keep a case involving Twitter and Mr. Musk under control.

“Anybody who underestimates her would be making a mistake,” said Mr. Bouchard.

She does flash some personality, but only when it’s fitting. In one case involving a cannabis company, for example, she opened her ruling by quoting the Grateful Dead. (The lyric was from “Keep Your Day Job” and the footnotes cite songwriters “

R. Hunter

” and “

J. Garcia.

”) When she ordered Mr. Musk to produce information about the people he’d discussed the deal with, Chancellor McCormick chided his lawyers for their “suboptimal” response by referencing the “you had one job” meme. I suspect even Mr. Musk was impressed.

But she used colorful rhetoric so infrequently that it had the intended effect when she did. She called Mr. Musk’s petition for a mountain of Twitter records “absurdly broad,” suggesting it would require the company “to produce trillions upon trillions of data points” and concluding “no one in their right mind has ever tried to undertake such an effort,” which signaled Chancellor McCormick’s impatience with the billionaire’s tactics. It was polite, but to the point.

She wasn’t just doing her job. She was living up to her goal.

And there happens to be one person who should appreciate this place where judges still play by the rules.

“That will help future Elon Musk,” said Columbia Law School professor

Eric Talley.

“Ten years down the road, when he’s in a contract, what does his promise mean? If his case is heard in Delaware, his promise means a lot.”

Write to Ben Cohen at [email protected]

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