Judge in Elon Musk-Twitter case once made rare order forcing deal to close

The Delaware judge overseeing Twitter’s lawsuit against Elon Musk once forced a reluctant company to complete a merger agreement it tried to exit.

Kathaleen McCormick, the chief judge of Delaware Chancery Court, will play a key role in determining whether Musk will be forced to honor his original $44 billion agreement to buy Twitter – despite his attempt to back out due to spam bots in the company’s user base.

McCormick’s history as a decision-maker could have implications for the Musk-Twitter battle. She is one of the few judges on record to have ordered the closure of a deal after one corporate entity tried to back out, Reuters reported, citing legal experts and available court documents.

Last year, McCormick compelled a subsidiary of private equity firm Kohlberg & Co. to complete a $550 million deal to buy DecoPac Holding Inc., a company that makes cake decorating products.

Kohlberg originally agreed to acquire DecoPac in March 2020, but tried to exit while arguing that the COVID-19 pandemic was a “materially adverse effect” on the agreement and that it lacked necessary financing. The firm also argued that DecoPac had failed to maintain normal business operations.

Like Twitter, DecoPac sued in an effort to force the deal’s completion. McCormick sided with DecoPac and described her ruling as “chalking up a victory for deal certainty.”

Musk accused Twitter of violating the merger agreement in the filing last week revealing his intent to back out of the deal. The Tesla CEO’s camp has also claimed the company has failed to maintain its normal business operations.

Meanwhile, Twitter argued that “Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.”

McCormick is the first woman to serve as chief judge of the Delaware Chancery Court.

“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,” Adam Badawi, a law professor at the University of California Berkeley, told Reuters. “She is a serious, no-nonsense judge.”

Twitter has already requested a four-day trial on its case in September.

While some analysts have suggested that Twitter has the upper hand in its legal action against Musk, the final outcome for the dispute remains murky at best. It’s unclear what would happen if Musk were to simply refuse an order from the Chancery Court to complete the transaction.

CNBC’s David Faber has suggested that Musk could face jail time in that circumstance.