Since Elon Musk took over Twitter last year, the billionaire boss has made a lot of changes — including deciding not to pay some outstanding bills.
Consulting firm Charles River Associates and air charter company Private Jet Services Group are suing Twitter in Boston and New Hampshire, respectively, over unpaid invoices for services pre-dating Musk’s $44 billion takeover on October 28.
The lawsuits come as Twitter has stopped paying rent at some of its offices around the world, auctioned off office equipment, and closed one of its data centers. Musk has also laid off most of Twitter’s workforce.
In a lawsuit filed in Superior Court in Boston on January 19, Charles River Associates said it is owed $2.2 million for legal consulting it did on behalf of Twitter’s former management while Musk was trying to get out of his obligation to buy the company. The firm is seeking the amount owed, up to triple the amount in damages, plus interest and attorney’s fees.
And in a lawsuit filed in federal court in New Hampshire in December, travel firm PJS Group said it had arranged for a former Twitter executive’s round-trip, coast-to-coast flight on a private jet to meet with Musk and billed the company almost $200,000. The firm is seeking the amount owed, damages, and attorney’s fees.
Under Twitter’s prior management, the company booked a flight on October 27 for former chief marketing officer Leslie Berland from Teterboro, N.J., to San Francisco for a meeting with Musk and a return flight the following day. Berland was let go by the company a few days later.
“The facts are in our favor and I like our chances,” Greg Raiff, chief executive of the air charter company, told the Globe. “I’m only sorry it came to this.”
Raiff said he was so disappointed in Musk’s behavior that he put a Tesla he has owned since 2018 up for sale.
Twitter does not have much of a legal defense to offer, since liabilities incurred before Musk’s takeover carry over to the new ownership, according to Boston College law professor Brian Quinn, who was previously a mergers and acquisitions lawyer in Silicon Valley.
“The magic of the merger deal structure is that all of the assets and the liabilities of the acquired company pass to the acquirer,” Quinn said. “These are lawsuits [Twitter] is going to lose, even if the bills are for experts and lawyers that Musk doesn’t like.”
Twitter did not respond to a request for comment. Charles River Associates declined to comment.
Boston-based Charles River Associates sent Twitter bills for legal work through the summer and fall — up until Musk took over — but never heard back from the company, according to its lawsuit. In November, a Twitter lawyer who left after Musk’s takeover told the firm to contact Alex Spiros, the billionaire’s personal lawyer who had worked on the takeover case. Charles River said it never heard back from Spiros.
Spiros did not respond to a request for comment.
Private Jet Services Group did hear back from Twitter’s new management, the company said in its lawsuit, but not in a helpful regard. (The company filed the lawsuit in New Hampshire, where it was originally headquartered, though Raiff has since moved to Miami).
“New management is not going to budge and while yes you had been requesting, it doesn’t change the terms. ... I know you’re looking for a resolution but I can’t emphasize enough that new management wants to hold firm on this,” Marty O’Neill, Twitter’s head of global strategic sourcing, wrote in a Nov. 16 e-mail cited in the lawsuit.
Charles River was hired for the expertise of one of its merger and acquisition experts, University of Chicago emeritus professor Mark Zmijewski, according to the lawsuit. The goal was to rebut a report about Twitter’s business from Musk’s legal team written by M&A expert Yvette Austin Smith, senior managing director at Compass Lexecon.
Austin Smith was a key expert cited by Chancellor Kathaleen St. Jude McCormick, the judge overseeing the Twitter-Musk dispute in a prior, similar case.
In 2021, two private equity firms sought to get out of buying a bakery company called DecoPac Holdings. Austin Smith’s report argued that the bakery’s value had not substantially changed despite a downturn during COVID. McCormick agreed and forced the firms to complete the acquisition.