I posted earlier this week with a plug for my new paper on the internal affairs doctrine and an update on the Lee v. Fisher forum selection bylaw litigation in the Ninth Circuit, so I’ve just got a quick hit for today.

Unless you’ve been living in a cave, you know that Musk closed his purchase of Twitter on Thursday night; as of Friday, the stock had been delisted.  The litigation over whether Twitter lied about its business has come to a halt….

….or has it?

You may recall that in August, a Twitter whistleblower – Peiter Zatko – came forward as a whistleblower about Twitter’s internal business operations.  Elon Musk amended his complaint in Chancery to incorporate Zatko’s claims, alleging that the problems Zatko identified – such as a failure to comply with an FTC settlement – represented additional fraudulent actions on Twitter’s part that allowed Musk to terminate the deal.

What you may have missed, though, is that shortly after Zatko went public, the Rosen Law Firm filed a securities class action, Baker v. Twitter, C.D. Cal. 22-cv-06525, based on Zatko’s allegations.  The complaint names several Twitter executives – including Jack Dorsey – and Twitter itself as a defendant.  (It also, amusingly, appears to have accidentally cut-and-pasted allegations from an Activision complaint.)   

And as far as I can tell, there is no reason why that suit should not continue.  There has to be a lead plaintiff, of course, and an amended complaint, but legally, it persists against the named executives and now the Musk-owned Twitter.  Better yet, though there may be problems with loss causation depending on how Twitter’s stock moved on any given day, there’s really no reason the amended complaint couldn’t beef up allegations about spam and misleading mDAU figures, relying not only on the Zatko complaint, but also on the confidential Twitter data that Musk revealed when he filed his own complaints in Chancery.

Which means, Musk may be stuck arguing to a court that there were never any problems, let alone mDAU problems, at Twitter at all.

We all look forward to the CW allegations from any recently-fired Twitter personnel.

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Photo of Ann Lipton Ann Lipton

Ann M. Lipton is a Professor of Law and Laurence W. DeMuth Chair of Business Law at the University of Colorado Law School.  An experienced securities and corporate litigator who has handled class actions involving some of the world’s largest companies, she joined…

Ann M. Lipton is a Professor of Law and Laurence W. DeMuth Chair of Business Law at the University of Colorado Law School.  An experienced securities and corporate litigator who has handled class actions involving some of the world’s largest companies, she joined the Tulane Law faculty in 2015 after two years as a visiting assistant professor at Duke University School of Law.

As a scholar, Lipton explores corporate governance, the relationships between corporations and investors, and the role of corporations in society.  Read more.

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