I 90 milioni di dollari chiesti a (e pagati da) Twitter dallo studio Watchell Lipton Rosen& Katz per completare la acquisizione dopo un precedente accordo su base oraria sono chiesti ora in restituzione .
I motivi di irragionevolezza:
<<72. First, Wachtell engaged in improper overreaching in soliciting and negotiating the success
fee. Wachtell and Twitter were parties to the June 21 Engagement Letter, which did not entitle Wachtell
to a success fee. Wachtell had not procured any other written agreement entitling it to a success fee or
any other fee tied to results achieved, as required by California law and Wachtell’s ethical duties. And
Wachtell had already performed all work on an hourly fee basis under the June 21 Engagement Letter,
for which Wachtell had already procured a material concession from Twitter in the form of Twitter’s
waiver of its normal request for a 15% discount. Moreover, Wachtell engaged in overreaching because,
as discussed below, it made misleading statements and omissions surrounding its fee.
73. Second, Wachtell failed to disclose all material facts to Twitter related to the success fee.
Wachtell did not disclose its ethical duties and obligations related to fee modifications or related to the
requirement for written agreements for any success fees or similar fees. And Wachtell did not disclose
facts sufficient to enable Twitter to evaluate the reasonableness of the success fee portion of Wachtell’s
requested $90 million total fee relative to Wachtell’s fees in other matters, instead sending the incomplete
and self-serving October 20, 2022 memo. As described above, Wachtell’s October 20, 2022 memo on
fees suggested that Wachtell “often” received premium fees of 67%–100% of investment banking fees,
while failing to disclose numerous factors that would be relevant and necessary to compare those fees (in
dissimilar transactional matters) to the size of the fee Wachtell was requesting from Twitter. In the end,
Wachtell was paid more than any of the investment banks. Similarly, as described above, Wachtell’s
October 20, 2022 memo self-servingly suggested that Wachtell “frequently” received fees of 2x to 2.5x
its run rate fees in litigation, without disclosing facts relevant to assessing whether those matters were
fairly representative and comparable to the fee Wachtell was requesting from Twitter. In other words,
Wachtell transmitted a memo to Twitter making it sound like the premium it requested in the form of the
success fee was typical and ordinary, when in reality the fee represented a windfall—even by Wachtell’s
standards—for a litigation matter in which Wachtell bore zero risk and had already completed all work
under the June 21 Engagement Letter on an hourly basis.
74. Third, the fee was grossly excessive in proportion to the value of the services performed.
Wachtell would have received a windfall relative to the value of the services performed had it just been
paid in full for hourly time billed given that (1) Wachtell’s hourly rates are already high relative to market
rates, (2) Wachtell billed unreasonable amounts of time to the litigation, and (3) several Wachtell
timekeepers failed to provide any description whatsoever of the time supposedly spent, let alone adequate
detail to assess the work performed. The addition of Wachtell’s requested success fee drove its alreadyexcessive
billings higher still, resulting in a $90 million total fee that was nearly six times the already
inflated hourly fees in the invoices Wachtell submitted. And unlike in traditional contingency fee
engagements where premiums over hourly rates establishing market norms are justified because the law
firm took on substantial risk, Wachtell took on no risk whatsoever in connection with the Closing Day
Letter Agreement. All services had already been performed, deal closing was imminent, and the Closing
Day Letter Agreement provided that Wachtell would continue to be paid both its full hourly rates in the
extremely unlikely event that the merger failed to close at the last minute plus a (presumably higher)
success fee to be determined later.
75. Fourth, Wachtell was more sophisticated and knowledgeable than Twitter when it comes
to the market rate for legal services in mergers and litigation surrounding mergers. In addition, Wachtell knew that it was dealing with lame duck fiduciaries who made no attempt to honor their duties to Twitter
as a continuing corporation. So, Wachtell exploited that information asymmetry, and the ill-will of
Twitter’s disgruntled executives, to pass off its success fee request as normal or typical when the size of
its $90 million total fee was anything but typical.
76. Fifth, Wachtell was one of six large law firms that represented Twitter in connection with
the merger litigation, a relatively straightforward breach of contract dispute in which Twitter sought to
hold the Musk Parties to the Merger Agreement and to close the transaction. While there were important
factual disputes, there were not novel or difficult questions of law involved, nor did the litigation require
any special skills beyond that which Twitter could have procured by paying hourly rates to many other
reputable law firms with experience litigating in the Delaware Chancery Court, including those hired to
work alongside Wachtell.
77. Sixth, entering into the Closing Day Letter Agreement did not preclude Wachtell from
taking on other matters (i.e., there were no opportunity costs) because the litigation had concluded and
Wachtell’s work was complete.
78. Seventh, at the time the Closing Day Letter Agreement was entered into, there were no
time limitations imposed by Twitter or other circumstances that would have required some outsized fee
to retain counsel to pursue the representation. Rather, the litigation had already been resolved.
79. Eighth, even assuming Wachtell attorneys’ experience, reputation, and ability may
command a slightly higher fee than other counsel, any justifiable premium was already incorporated into
Wachtell’s standard hourly rates. Wachtell had agreed to represent Twitter for its full hourly rates (after
rejecting the standard 15% discount requested by Twitter) under the June 21 Engagement Letter.
80. Ninth, while the success fee requested by Wachtell was conditioned on the merger closing,
the fee was not a typical contingency fee in that: (a) the Closing Day Letter Agreement was not entered into until the day the merger closed and after the litigation for which Wachtell was retained had already
been resolved; and (b) the Closing Day Letter Agreement provided that Wachtell would still receive
payment on all time billed at its full hourly rates even if the transaction fell apart later that day. Thus,
Wachtell bore no risk whatsoever (unlike a typical contingency fee arrangement).
81. Tenth, no additional time and labor was likely to be required at the time Wachtell
negotiated its success fee and entered into the Closing Day Letter Agreement. The litigation had already
been resolved, after which it became a foregone conclusion that the merger would close.
82. Eleventh, Twitter did not give informed consent to the success fee. Although Twitter’s
board of directors ultimately approved the $90 million total fee, the directors were not provided with all
material facts, largely due to Wachtell’s own lack of disclosure. Wachtell did not advise Twitter to seek
independent counsel with respect to the last-minute modification of the fee. Despite ample opportunity
to do so, Wachtell did not provide the details of its hourly billings after August 31, 2022, to make it clear
how much of a bonus it was requesting Twitter pay.
83. Further, Wachtell’s October 20, 2022 memo was self-servingly misleading (for the
reasons discussed above) and was never provided to the members of Twitter’s board aside from Taylor
and Pichette. And Twitter’s board was likewise not provided with other information—such as Wachtell’s
prior invoices or the terms of the June 21 Engagement Letter—that would enable the board to ascertain
the outlandishness of authorizing the requested success fee at the conclusion of Wachtell’s engagement.
84. Finally, the Closing Day Fee Letter was an eleventh-hour, blatantly impermissible
modification of a pre-existing written contract for which Wachtell offered no new consideration
whatsoever. Indeed, the Closing Day Letter Agreement expressly acknowledged that the closing of the
merger was imminent, and that the contemplated $90 million total fee payment, including the unspecified
success fee, was “in consideration” solely for Wachtell’s past “work on Twitter’s behalf since inception
of its engagement.” And, even if the transaction did not close later the same day that the Closing Day
Letter Agreement was executed, Wachtell would still be paid its hourly fees consistent with the June 21
Engagement Letter. In other words, it took zero risk on the representation that would have entitled it to
seek such an extraordinary success fee>>.
Nei §§ seguenti le causes of action (causae petendi delle domande, suppergiù …).
La domanda consiste in un <equitable claim for restitution or unjust enrichment>, § 92.
<<94. It would be unjust for Wachtell to keep the excess fees it received at Twitter’s expense for all of the reasons alleged herein. Wachtell bore no risk in the engagement to warrant any premium over the fees contemplated in the June 21 Engagement Letter that Wachtell agreed to. Wachtell flagrantly engaged in unreasonable staffing and billing practices, and yet Wachtell—in part due to overreaching— procured a success fee for past services by soliciting lame duck Twitter directors and officers to effectively pilfer cash from the company right before the merger closed. The total fee that Wachtell received was several multiples of what a reasonable fee would have been under the hourly engagement that Wachtell agreed to in the June 21 Engagement Letter.
95. Due to its egregious violations of its professional duties and applicable ethical rules, Wachtell should be required to forfeit its entire $90 million total fee under the Closing Day Letter Agreement and make restitution in the amount of $90 million.
96. To the extent that Wachtell is not required to forfeit its entire fee, it should be ordered to make restitution for the difference between the $90 million total fee it received and the reasonable fees it would have received had it adhered to the billing guidelines it agreed upon in the June 21 Engagement Letter>>.