The Delaware Court of Chancery recently dismissed all claims against Elon Musk and his X Corp. acquisition entities brought by a Twitter Inc. investor who claimed to have lost $1.88 million because of Musk’s alleged on-and-off commitment to buy the social media platform in Khalid v. Musk, et. al., C.A. No. 2024-0443-KSJM (Del. Ch.(July 18, 2025).

Chancellor Kathaleen McCormick found insufficient support for a mix of a dozen tort, fiduciary, and contractual charges and a claim that Musk agreed to be subject to personal jurisdiction in Delaware when he chose to do the deal in Delaware. “Despite the plaintiff’s many interesting arguments, compelling narrative, and clear economic loss, the plaintiff’s claims fail for a host of legal reasons,” the Court explained.

The opinion is worthwhile reading for its fresh look at the requirements to prove claims commonly made by disgruntled investors who bought into volatile merger deals in progress.

Background

According to the Court’s decision, in April 2022, Musk agreed to acquire Twitter for $54.20 a share and merge it into his X Holdings II, Inc. as part of parent X Holdings I, Inc. and the next day retail investor ATM Shafiqul Khalid acquired 149,500 shares of Twitter at an average price of $49.46, for a total purchase of $7,393,555.70. But in the next month, Musk appeared to sour on the deal and filed a notice of termination, prompting Khalid to sell all his shares at an average price of $36.90, for $5,517,113.14 –a loss of $1,876,442.56.

After Twitter sued Musk in Chancery for specific performance in July, the parties reached an agreement and voluntarily dismissed the action two months later–the deal was on again. After unsuccessful attempts to intervene in that suit and another shareholder action, Khalid filed his complaint in April 2024, and the next month defendants moved to dismiss on a variety of grounds. 

Defendants were successful on all counts

Personal jurisdiction

Under Chancery Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the court’s exercise of jurisdiction over the defendant. “If, as here, no evidentiary hearing has been held, plaintiffs need only make a prima facia showing of personal jurisdiction, and ‘the record is construed in the light most favorable to the plaintiff,” the Chancellor said.

But even so, Delaware courts use a two-step analysis in which they first “determine that service of process is authorized by statute,” and then, the defendant must have certain minimum contacts with Delaware such that the exercise of personal jurisdiction “does not offend traditional notions of fair play and substantial justice.”

Plaintiff claimed personal jurisdiction over Musk via Delaware’s Long Arm Statute under 10 Del. C. § 3104(c)(1) because he committed to a forum selection clause to settle disputes that might arise in the merger negotiations. 

But the Court concluded that at most, Musk was only a limited third party to the merger contract and the plaintiff failed to plead that: “(i) the contracting parties . . . intended that the third party beneficiary benefit from the contract, (ii) the benefit [was] intended as a gift or in satisfaction of a pre-existing obligation to that person, and (iii) the intent to benefit the third party [was] a material part of the parties’ purpose in entering into the contract.”

The Court concluded that Musk was not subject to jurisdiction regarding plaintiff’s alleged stock losses because while all losses and damages suffered as a result of the failure of the merger transaction were covered, the transaction did not fail; it closed on the agreed terms.

Breach of Contract and Implied Covenant

These charges were dismissed because the Court determined that Plaintiff had no standing to assert them.

Promissory Estoppel 

Plaintiff claimed that Defendants (through Musk) made a promise to buy Twitter and later broke that promise by seeking to terminate the Merger, but the court said under Delaware law, “[p]romissory estoppel does not apply . . . where a fully integrated, enforceable contract governs the promise at issue.”

Breach of Fiduciary Duties 

Plaintiff alleged that Defendants drove Twitter’s stock price down so that Musk could renegotiate and mark down the merger consideration, but the Court ruled that “setting aside the issue of whether Defendants owed any fiduciary duties, Plaintiff forfeited his right to claim breach of fiduciary duties when he sold off his shares. “

Unjust Enrichment 

Plaintiff claimed that Defendants created a valuable option to negotiate a $13 billion discount by tweeting about Twitter users and were thereby unjustly enriched. The court dismissed because Delaware law requires a direct relationship between the defendant’s alleged enrichment and the plaintiff’s alleged harm “to ensure that a court accurately can reverse the unjust retention of a benefit to the loss of another.”

Negligent Misrepresentation

The Court dismissed this charge, finding that ‘to state a claim for equitable fraud or negligent misrepresentation, a plaintiff must allege either “a special relationship between the parties over which equity takes jurisdiction (like a fiduciary relationship)” or “justification for a remedy that only equity can afford.” However, the court added, “Plaintiff does neither here. He did not enjoy a fiduciary or other special relationship with Defendants. And he has not identified any remedy that only equity can afford.” For similar reasons, the court dismissed claims of common law fraud, consumer fraud, and negligent performance.

Resuscitation unlikely

Finally, the Chancellor denied plaintiff’s motion for leave to amend his pleading, finding that, “This Court may relax Court of Chancery Rule 15(aaa) in the exceptional case, but this is not an exceptional case. Plus, given the legal defects in Plaintiff’s claims, it is unclear what Plaintiff might allege to resuscitate his claim.”