Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 1 of 23
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`Daniel H.R. Laguardia (SBN 314654)
`SHEARMAN & STERLING LLP
`535 Mission Street, 25th Floor
`San Francisco, CA 94105
`Telephone:
`(415) 616-1100
`Fax:
`(415) 616-1199
`Email: Daniel.Laguardia@shearman.com
`
`Adam S. Hakki (admitted pro hac vice)
`Paula H. Anderson (admitted pro hac vice)
`SHEARMAN & STERLING LLP
`599 Lexington Avenue
`New York, New York 10022
`Telephone:
`(212) 848-4000
`Fax:
`(212) 848-7179
`Email: Adam.Hakki@shearman.com
`
`Paula.Anderson@shearman.com
`
`Attorneys for Defendant Twitter, Inc.
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`WILLIAM HERESNIAK, on behalf of himself
`and all others similarly situated,
`
`Plaintiff,
`
`v.
`
`ELON R. MUSK, X HOLDINGS I, INC., X
`HOLDINGS II, Inc., and TWITTER, INC.,
`
`Defendants.
`
`Case No. 3:22-cv-03074-CRB
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`DEFENDANT TWITTER INC.’S NOTICE
`OF MOTION AND MOTION TO DISMISS
`UNDER RULES 12(b)(1) AND 12(b)(6), OR
`IN THE ALTERNATIVE, MOTION TO
`DISMISS FOR FORUM NON
`CONVENIENS OR TRANSFER UNDER 28
`U.S.C. § 1404(a); MEMORANDUM OF
`POINTS AND AUTHORITIES IN
`SUPPORT OF THEREOF
`
`Hearing: Dec. 2, 2022, 10 A.M.
`Courtroom: 6 – 17th Floor
`Judge:
`Hon. Charles Breyer
`Date Filed: May 25, 2022
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`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 2 of 23
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`NOTICE OF MOTION AND MOTION
`TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
`PLEASE TAKE NOTICE that on December 2, 2022, at 10 A.M. in Courtroom 6 – 17th
`Floor of the United States District Court, Northern District of California, San Francisco Division,
`San Francisco Courthouse, 450 Golden Gate Avenue, San Francisco, California 94102, Defendant
`Twitter, Inc. (“Twitter”) will and hereby does move to dismiss Plaintiff William Heresniak’s
`(“Plaintiff”) second cause of action for declaratory and injunctive relief against Twitter and
`Defendants Elon R. Musk, X Holdings I, Inc., and X Holdings II, Inc. (collectively, the Musk
`Defendants”) in the First Amended Complaint (“Amended Complaint” or “Am. Compl.”) under
`Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and pursuant to the
`Brillhart abstention doctrine, and under Federal Rule of Civil Procedure 12(b)(6) for failure to
`adequately plead standing. In the alternative, Twitter moves to dismiss this action on forum non
`conveniens grounds or to transfer this action to the District of Delaware under 28 U.S.C. § 1404(a).
`The Motion is based on this Notice; the Memorandum of Points and Authorities; the papers,
`pleadings, and documents on file herein, including, without limitation, the Amended Complaint;
`the Declaration of Paula H. Anderson and accompanying exhibits; and on such other documents
`incorporated by reference into the Amended Complaint or the proper subject of judicial notice.
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`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 3 of 23
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`Dated: September 9, 2022
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`SHEARMAN & STERLING LLP
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`By: /s/
`
`
`
`
`
`Adam S. Hakki
` Adam S. Hakki
`SHEARMAN & STERLING LLP
`Daniel H.R. Laguardia (SBN 314654)
`535 Mission Street, 25th Floor
`San Francisco, CA 94105
`Telephone: (415) 616-1100
`Fax: (415) 616-1199
`
`SHEARMAN & STERLING LLP
`Adam S. Hakki (admitted pro hac vice)
`Paula H. Anderson (admitted pro hac vice)
`599 Lexington Avenue
`New York, New York 10022
`Telephone: (212) 848-4000
`Fax: (212) 848-7179
`
`Attorneys for Defendant Twitter, Inc
`
`
`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`2
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 4 of 23
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`TABLE OF CONTENTS
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`INTRODUCTION ........................................................................................................................... 1
`BACKGROUND ............................................................................................................................. 2
`ARGUMENT .................................................................................................................................. 5
`I.
`The Court does not have jurisdiction over Plaintiff’s claim against Twitter
`because Plaintiff lacks standing to enforce the terms of the Merger
`Agreement. .............................................................................................................. 5
`The Court should decline jurisdiction over Plaintiff’s claim against Twitter
`under the Brillhart Doctrine. ................................................................................... 8
`In the alternative, the Court should dismiss this action on forum non
`conveniens grounds or transfer it to the District of Delaware under 28
`U.S.C. § 1404(a). ................................................................................................... 12
`CONCLUSION ............................................................................................................................. 15
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`II.
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`III.
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`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 5 of 23
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`Cases
`
`TABLE OF AUTHORITIES
`
`
`
`Page
`
`Alfarah v. City of Soledad,
`2016 WL 3456697 (N.D. Cal. June 24, 2016) ................................................................ 8, 9, 11
`ALPS Prop. & Cas. Ins. Co. v. Snyder,
`2021 WL 4913251 (W.D. Wash. Oct. 21, 2021) .................................................................... 11
`Amirsaleh v. Bd. of Trade of City of New York, Inc.,
`2008 WL 4182998 (Del. Ch. Sept. 11, 2008) ........................................................................... 7
`Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Tex.,
`571 U.S. 49 (2013) .................................................................................................................. 13
`Benerofe v. Cha,
`1998 WL 83081 (Del. Ch. Feb. 20, 1998) ................................................................................. 6
`Bremen v. Zapata Off-Shore Co.,
`407 U.S. 1 (1972) .................................................................................................................... 12
`Brillhart v. Excess Insurance Co. of Am.,
`316 U.S. 491 (1942) ......................................................................................................... passim
`Bushansky v. Armacost,
`2012 WL 3276937 (N.D. Cal. Aug. 9, 2012) .......................................................................... 10
`Colwell v. Dep’t of Health & Human Servs.,
`558 F.3d 1112 (9th Cir. 2009) ................................................................................................... 5
`In re CytRx Corp. Stockholder Derivative Litig.,
`2015 WL 12745084 (C.D. Cal. Jan. 8, 2015) .......................................................................... 10
`DeFeo v. Procter & Gamble Co.,
`831 F. Supp. 776 (N.D. Cal. 1993) ........................................................................................... 9
`Duvall v. Galt Med. Corp.,
`2007 WL 4207792 (N.D. Cal. Nov. 27, 2007) .......................................................................... 5
`Emp’rs Mut. Cas. Co. v. S.D. Helgeson, Inc.,
`2021 WL 4777838 (D. Mont. Oct. 13, 2021) .......................................................................... 11
`In re Facebook Internet Tracking Litig.,
`140 F. Supp. 3d 922 (N.D. Cal. 2015) ...................................................................................... 5
`Fid. Nat. Fin., Inc. v. Ousley,
`2006 WL 2053498 (N.D. Cal. July 21, 2006) ........................................................................... 9
`Fortis Advisors LLC v. Medicines Co., & Melinta Therapeutics, Inc.,
`2019 WL 7290945 (Del. Ch. Dec. 18, 2019) ............................................................................ 7
`Hart v. Facebook Inc.,
`2022 WL 1427507 (N.D. Cal. May 5, 2022) ............................................................................ 5
`
`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 6 of 23
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`
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`In re IBP, Inc. S’holders Litig. v. Tyson Foods, Inc.,
`789 A. 2d 14 (Del. Ch. 2001) .................................................................................................. 10
`Knievel v. ESPN,
`393 F.3d 1068 (9th Cir. 2005) ................................................................................................... 1
`MAI Systems Corp. v. UIPS,
`856 F. Supp. 538 (N.D. Cal. 1994) ........................................................................................... 5
`Manetti-Farrow, Inc. v. Gucci Am., Inc.,
`858 F.2d 509 (9th Cir. 1988) ................................................................................................... 13
`Manila Indus., Inc. v. Ondova Ltd. Co.,
`334 F. App’x 821 (9th Cir. 2009) ............................................................................................ 13
`McCreary v. Celera Corp.,
`2011 WL 1399263 (N.D. Cal. Apr. 13, 2011) ........................................................................ 10
`Mehta v. Power-One, Inc.,
`2014 WL 12603185 (C.D. Cal. June 2, 2014) ......................................................................... 14
`Midwest Project Servs., LLC v. Advantage Sales & Mktg., LLC,
`2017 WL 4123302 (D. Kan. Sept. 18, 2017) .......................................................................... 14
`NAMA Holdings, LLC v. Related World Mkt. Ctr., LLC,
`922 A. 2d 417 (Del. Ch. 2007) .................................................................................................. 5
`NovelPoster v. Javitch Canfield Grp.,
`2014 WL 5687344 (N.D. Cal. Nov. 4, 2014) ............................................................................ 5
`Personnel Staffing Grp., LLC v. Protective Ins. Co.,
`843 F. App’x 961 (9th Cir. 2021) ............................................................................................ 14
`R.R. St. & Co. Inc. v. Transp. Ins. Co.,
`656 F.3d 966 (9th Cir. 2011) ................................................................................................. 2, 9
`Simon Greenstone Panatier Bartlett PC v. John Crane, Inc.,
`2016 WL 4769749 (C.D. Cal. Aug. 26, 2016) .................................................................. 11, 12
`Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp.,
`549 U.S. 422 (2007) .......................................................................................................... 12, 14
`Souley Vegan LLC v. Webb,
`2019 WL 5536205 (N.D. Cal. Oct. 25, 2019) ......................................................................... 12
`St. Paul Fire & Marine Ins. v. San Francisco City & Cnty.,
`2005 WL 8177648 (N.D. Cal. Dec. 20, 2005) .......................................................................... 9
`Sun v. Advanced China Healthcare, Inc.,
`901 F.3d 1081 (9th Cir. 2018) ................................................................................................. 13
`T-Mobile W. Corp. v. Site Mgmt. Sols.,
`2011 WL 13217942 (C.D. Cal. May 4, 2011) ........................................................................... 9
`
`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`iii
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 7 of 23
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`TAAG Linhas Aereas de Angola v. Transam. Airlines, Inc.,
`915 F. 2d 1351 (9th Cir. 1990) ................................................................................................ 13
`Tooley v. Donaldson, Lufkin & Jenrette, Inc.,
`845 A.2d 1031 (Del. 2004) ........................................................................................................ 7
`U.S. Surgical Corp. v. Litvack,
`1999 WL 33220034 (D. Del. Dec. 30, 1999) .......................................................................... 11
`Walters v. Famous Transps., Inc.,
`488 F. Supp. 3d 930 (N.D. Cal. 2020) .................................................................................... 13
`Whitaker v. Monroe Staffing Servs., LLC,
`42 F. 4th 200 (4th Cir. 2022) ................................................................................................... 12
`Wilton v. Seven Falls Co.,
`515 U.S. 277 (1995) .................................................................................................................. 8
`Zito Family Tr. v. John Hancock Fin. Servs., Inc.,
`2022 WL 3044583 (E.D. Cal. Aug. 2, 2022) ............................................................................ 5
`Statutes and Regulations
`28 U.S.C. § 1404(a) ..................................................................................................... 12, 13, 14, 15
`28 U.S.C. § 2201 ............................................................................................................................. 8
`Other Authorities
`Fed. R. Civ. P. 12(b)(6) ................................................................................................................... 5
`Reder and Vincent, Chancery Court-Reiterating High Bar for Proving “MAE”-
`Requires Buyer to Honor Its Obligations Under Acquisition Agreement, 74
`VAND. L. REV. EN BANC 13 (2021) ......................................................................................... 10
`
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`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 8 of 23
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`INTRODUCTION
`Plaintiff’s single claim against Twitter should be dismissed because it is both legally
`improper and entirely unnecessary. The claim seeks a declaratory judgment and injunctive relief
`to enforce the Musk Defendants’ obligations under a merger agreement between the Musk
`Defendants and Twitter (the “Declaratory/Injunctive Claim”). Plaintiff is not a party to that
`agreement. Twitter is already vigorously pursuing a judgment against the Musk Defendants for
`essentially the same declaratory and injunctive relief in the Court of Chancery for the State of
`Delaware (“Delaware Chancery Court”). That case is set for trial on October 17, 2022—before
`briefing on this Motion is currently scheduled to conclude—and will almost certainly render this
`case moot. In addition, another Twitter stockholder has brought a separate action in Delaware
`Chancery Court seeking substantially the same declaratory and injunctive relief on behalf of a
`putative class of Twitter stockholders (including Plaintiff). That action is before the same judge
`(Chancellor Kathaleen St. J. McCormick) hearing the Twitter action against the Musk Defendants,
`and a motion to dismiss that putative class action has already been fully briefed. Unwilling to stand
`back – even briefly – while Twitter pursues enforcement of the Merger Agreement1 against the
`Musk Defendants, Plaintiff (a purported Twitter stockholder from Virginia) insists on pursuing a
`wholly unnecessary claim in this Court demanding substantially the same relief that both Twitter
`and another Twitter stockholder are pursuing on an expedited schedule in Delaware.
`This Court has already denied Plaintiff’s request for expedited discovery, Dkt. 37, and there
`is no reason the Court should permit the Declaratory/Injunctive Claim (again, the only claim
`asserted against Twitter) to proceed further. As a threshold matter, the Court cannot exercise
`subject matter jurisdiction over the claim because Plaintiff lacks standing to enforce the terms of
`an agreement to which he is not a party. Under Delaware law, which governs the Merger
`Agreement, only parties and third-party beneficiaries have standing to enforce a contract. Plaintiff
`acknowledges, as he must, that he is not a party to the Merger Agreement and does not even attempt
`
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`1 “Merger Agreement” refers to the Agreement and Plan of Merger between Twitter, X Holdings
`I, Inc., and X Holdings II, Inc. dated April 25, 2022, and attached as Exhibit 1 to the Declaration
`of Paula H. Anderson (“Anderson Decl.”). The Amended Complaint incorporates the Merger
`Agreement by reference. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005).
`NOTICE OF MOT. AND MOT.
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`CASE NO. 3:22-CV-03074
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 9 of 23
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`to claim that he has standing to pursue his claim as a third-party beneficiary. Nor could he. There
`is an express “No Third-Party Beneficiaries” provision in the Merger Agreement that forecloses a
`third-party beneficiary theory. Even taking the allegations in the Amended Complaint as true,
`Plaintiff has not satisfied his obligation to plead standing to enforce the terms of the Merger
`Agreement, and as a result, has failed to establish subject matter jurisdiction with respect to the
`Declaratory/Injunctive Claim.
`Even if there were not a threshold jurisdictional barrier to Plaintiff’s claim, the Court
`should decline to hear the Declaratory/Injunctive Claim for prudential reasons. Jurisdiction under
`the Declaratory Judgment Act is not mandatory. “A district court has discretion to dismiss a federal
`declaratory judgment action when ‘the questions in controversy ... can better be settled in’ a
`pending state court proceeding.” R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 975 (9th
`Cir. 2011) (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942)). The Court should
`decline jurisdiction over the Declaratory/Injunctive Claim, as there are parallel state court actions
`seeking the same relief in a more appropriate forum on a highly expedited schedule. Those two
`actions in Delaware Chancery Court (an appropriate forum under the forum selection provision in
`the Merger Agreement and the forum designated under Twitter’s bylaws) involve the same claim,
`the same relief, and the same issues of governing Delaware law. It would make no sense for this
`Court to wade into the resolution of important issues of Delaware law raised by the Musk
`Defendants’ purported termination of the Merger Agreement when Chancellor McCormick of the
`Delaware Court of Chancery will have resolved these same claims and issues in a matter of weeks.
`Finally, even if Plaintiff could adequately plead standing (which he cannot), and the Court
`accepts jurisdiction (which it should not), the Declaratory/Injunctive Claim should be dismissed
`on forum non conveniens grounds, or at a minimum transferred to the District of Delaware, as
`required by the forum selection clause in the Merger Agreement and further supported by the
`circumstances of this action and other actions pending in Delaware Chancery Court.
`BACKGROUND
`Twitter is a publicly traded company that operates a social media platform. Am. Compl. ¶
`2. Starting in January of this year, Musk started acquiring shares of Twitter stock on the open
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`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 10 of 23
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`market, and by March, owned approximately 9.2 percent of all outstanding shares. Id. ¶¶ 9, 46-52.
`On April 13, he sent a proposal to Twitter’s chairman offering to acquire 100 percent of
`outstanding Twitter shares at a substantial premium over the trading price on the New York Stock
`Exchange. Id. ¶ 74. After further negotiations over the course of the following weeks, Twitter and
`the Musk Defendants entered into the Merger Agreement on April 25. Id. ¶¶ 3, 74-86. Under the
`Merger Agreement, the Musk Defendants agreed to acquire all outstanding shares of Twitter stock
`at an agreed upon price of $54.20. Id. The total consideration contemplated by the deal amounts
`to approximately $44 billion. Id.
`The Merger Agreement includes several conditions that must be satisfied prior to closing.
`For example, the deal must be approved by a shareholder vote, which is currently scheduled for
`September 13. Anderson Decl., Ex. 1 § 4.3. If all conditions of the deal are met, Musk must close
`on the transaction no later than the second business day after the satisfaction of all conditions. Id.
`§ 2.2. At closing, outstanding Twitter shares will convert to a right to payment for the
`corresponding portion of the merger consideration. Id. § 3.1(c). The Merger Agreement contains
`three other provisions of relevance here:
`• First, there is a “No Third Parties Beneficiaries” provision: “Subject to Section 9.13, this
`Agreement is not intended to and shall not confer upon any Person other than the parties
`hereto any rights or remedies hereunder. provided, however, that it is specifically intended
`that (A) the D&O Indemnified Parties (with respect to Section 6.6 from and after the
`Effective Time), (B) the Company Related Parties (with respect to Section 8.3) are third-
`party beneficiaries and (C) the Parent Related Parties (with respect to Section 8.3) are third-
`party beneficiaries.” Id. § 9.7.
`Second, there is a forum selection provision: “[E]ach of the parties … agree that it will
`not bring any action relating to this Agreement … in any court other than the Delaware
`Court of Chancery, any other court of the State of Delaware or any federal court sitting in
`the State of Delaware.” Id. § 9.10.2
`• Third, there is a “Governing Law Provision”: “This Agreement and all actions . . . relating
`to this Agreement … shall be governed by … the laws of … Delaware.” Id. § 9.8.
`
`•
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`2 There is also a forum selection provision in Twitter’s bylaws that designates Delaware Chancery
`Court as the exclusive forum for “any action asserting a claim governed by the internal affairs
`doctrine” or “any action asserting a claim of breach of a fiduciary duty owed by, or otherwise
`wrongdoing by, any director, stockholder, officer or other employee of the corporation to the
`corporation or the corporation’s stockholders.” Dkt. 35-1, Ex. 8 Art. VIII. Those bylaws cover one
`of the claims against Musk alleged in this action that is premised on a breach of fiduciary duty by
`certain Twitter directors. See Am. Compl. ¶¶ 155-162.
`NOTICE OF MOT. AND MOT.
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 11 of 23
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`On July 8, Musk purported to terminate the Merger Agreement, alleging that Twitter was
`in breach. Dkt. 26 at 3. The same day, Twitter’s chairman announced that Twitter would pursue
`legal action in Delaware to enforce the Merger Agreement. Anderson Decl., Ex. 2. Shortly
`thereafter, on July 12, Twitter filed suit in Delaware Chancery Court, seeking an order that requires
`the Musk Defendants “to specifically perform their obligations under the merger agreement and
`consummate the closing in accordance with the terms of the merger agreement” and “granting such
`injunctive relief as is necessary to enforce the decree of specific performance.” Id., Ex. 3 at 61. On
`July 19, the court granted Twitter’s motion for expedition, and subsequently entered a condensed
`scheduling order, culminating in a trial commencing on October 17. Id., Ex. 4.
`Plaintiff, a purported Twitter stockholder residing in Virginia, filed the original Complaint
`in this case on May 25, after Musk publicly stated that the deal was “temporarily on hold,” and
`filed an Amended Complaint on July 1. See Dkt. 1, Dkt. 7. Plaintiff did not take any action to serve
`the Musk Defendants or Twitter until July 11. See Dkt. 16. By that time, Twitter had announced
`that it was pursuing its own action in Delaware.
`The Amended Complaint asserts three claims, but only one naming Twitter as a defendant.
`See Am. Compl. ¶¶ 155-69. That claim alleges “[t]he conditions that Musk has stated must be met
`before the Buyout can go forward do not appear to be part of the contract he signed with Twitter,”
`and asks for “a declaration concerning these facts and issues and the parties’ respective rights and
`obligations” and “appropriate injunctive relief.” Id. ¶ 165. The other two claims seek money
`damages against Musk for conduct relating to the Merger Agreement. Id. ¶¶ 155-69.
`On July 29, another Twitter stockholder filed a putative class action complaint in Delaware
`Chancery Court seeking substantially the same relief against the Musk Defendants as Plaintiff and
`Twitter – “an order of specific performance, requiring Defendants to comply with the Merger
`Agreement and effectuate the Merger.” Anderson Decl., Ex. 5 at 33. The case is assigned to the
`same judge overseeing the Delaware action between Twitter and Musk – Chancellor McCormick.
`The plaintiff in that case has moved for coordinated discovery and asked for a schedule that mirrors
`the schedule in the action between Twitter and Musk. Id., Ex. 6. The stockholder’s case is subject
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 12 of 23
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`to a pending motion to dismiss that has already been fully briefed and is now awaiting decision.
`Id.
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`ARGUMENT
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`I.
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`The Court does not have jurisdiction over Plaintiff’s claim against Twitter because
`Plaintiff lacks standing to enforce the terms of the Merger Agreement.
`
`“Under Rule 12(b)(1), a defendant may move to dismiss for lack of standing and thus lack
`of subject matter jurisdiction.” Hart v. Facebook Inc., 2022 WL 1427507, at *5 (N.D. Cal. May 5,
`2022) (Breyer, J.). “The burden of establishing … standing rests on the party asserting the claim.”3
`Colwell v. Dep’t of Health & Human Servs., 558 F.3d 1112, 1121 (9th Cir. 2009). A party’s
`inability to enforce the terms of a contract as a non-party raises a standing issue that defeats
`jurisdiction. NovelPoster v. Javitch Canfield Grp., 2014 WL 5687344, at *3 (N.D. Cal. Nov. 4,
`2014) (dismissing claims for lack of subject matter jurisdiction because a nonparty to the contract
`did not have standing to pursue breach of contract claims). Additionally, a failure to adequately
`plead standing warrants dismissal under Rule 12(b)(6) for failure to state a claim. MAI Systems
`Corp. v. UIPS, 856 F. Supp. 538, 540 (N.D. Cal. 1994) (“Failure to properly allege standing is
`ground for dismissal under Rule 12(b)(6).”); Zito Family Tr. v. John Hancock Fin. Servs., Inc.,
`2022 WL 3044583, at *2 (E.D. Cal. Aug. 2, 2022) (same).
`Plaintiff’s single claim against Twitter – the Declaratory/Injunctive Claim – should be
`dismissed because Plaintiff does not have standing to enforce the terms of the Merger Agreement.
`Under applicable Delaware law,4 “only parties to a contract and intended third-party beneficiaries
`may enforce an agreement’s provisions.” NAMA Holdings, LLC v. Related World Mkt. Ctr., LLC,
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`3 “When, as here, a defendant makes a facial challenge, all material allegations in the complaint
`are assumed true, and the court must determine whether lack of federal jurisdiction appears from
`the face of the complaint itself.” In re Facebook Internet Tracking Litig., 140 F. Supp. 3d 922, 928
`(N.D. Cal. 2015).
`4 Delaware law applies to the determination of whether Plaintiff has rights under the Merger
`Agreement by virtue of the Delaware choice of law provision. See Duvall v. Galt Med. Corp., 2007
`WL 4207792, at *7 (N.D. Cal. Nov. 27, 2007) (“Where claims are based on a contract that contains
`a choice of law provision, the court must apply the law designated by the contractual provision
`unless (1) the chosen state has no substantial relationship to the parties or transaction; or (2) such
`application would run contrary to a California public policy or evade a California statute.”).
`Twitter is a Delaware corporation, and application of Delaware law would not run contrary to
`California public policy.
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`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 13 of 23
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`922 A.2d 417, 434 (Del. Ch. 2007). Plaintiff is not a party to the Merger Agreement. Nor is he a
`third-party beneficiary. The Amended Complaint makes no claim that Plaintiff pursues the
`Declaratory/Injunctive claim as a third-party beneficiary, and the “No Third Party Beneficiaries”
`provision in the Merger Agreement bars such a theory.
`The “No Third Party Beneficiaries” provision expressly states that the Merger Agreement
`“is not intended to and shall not confer upon any Person other than the parties hereto any rights or
`remedies.” Anderson Decl., Ex. 1 § 9.7. There are three carve-outs for specific provisions of the
`Merger Agreement, but these carve-outs are of no help to Plaintiff. Two of the carve-outs include
`only “D&O Indemnified Parties” and “Parent Related Parties” and do not apply to Plaintiff.5 The
`third carve-out covers “Company Related Parties,” which includes Twitter stockholders such as
`Plaintiff, but is limited in scope. It states: “[P]rovided, however, … it is specifically intended that
`… the Company Related Parties (with respect to Section 8.3) are third-party beneficiaries.” Id. §
`9.7. With respect to Company Related Parties, Section 8.3 serves only as a release of liability in
`connection with any breach of the Merger Agreement by Twitter.6 There are no other rights or
`benefits afforded Company Related Parties in that provision. Thus, Plaintiff may have standing to
`enforce the release of liability in Section 8.3 if the Musk Defendants attempted to sue him, but that
`is all. Plaintiff has no other enforceable right as a third-party beneficiary of the Merger Agreement
`given the narrow scope of the carve-out. See Benerofe v. Cha, 1998 WL 83081, at *6 n.22 (Del.
`Ch. Feb. 20, 1998) (“Plaintiffs’ standing as third-party beneficiaries, rather than as parties, to the
`Agreement limits their rights under the Agreement to those clearly provided by the Agreement”).
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`5 The term “D&O Indemnified Parties” is defined as “current or former directors, officers and
`employees.” Anderson Decl., Ex. 1 § 6.6. The term “Parent Related Parties” is defined as the Musk
`Defendants “and any of their respective former, current or future general or limited partners,
`stockholders, members, managers, directors, officers, employees, agents, Affiliates or assignees.”
`Id. § 8.3(c). Plaintiff does not fit within either definition.
`6 See Anderson Decl., Ex. 1 § 8.3(c) (“[U]pon payment of [a Termination Fee by Twitter], none of
`the Company Related Parties shall have any further liability or obligation relating to or arising out
`of this Agreement or the transactions contemplated by this Agreement (except that the Company
`shall also be obligated with respect to Section 8.6).”).
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`NOTICE OF MOT. AND MOT.
`MPA ISO MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 41 Filed 09/09/22 Page 14 of 23
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`The specificity of the carve-outs “reveal that the parties knew how to expressly confer
`third-party beneficiary status” and the exclusion of other rights in favor of Company Related
`Parties “was intentional.” Fortis Advisors LLC v. Medicines Co., & Melinta Therapeutics, Inc.,
`2019 WL 7290945, at *4 (Del. Ch. Dec. 18, 2019). Because the Merger Agreement
`“unambiguously disclaims any intent” to confer third-party beneficiary status on Twitter
`stockholders beyond the limited carve-out entitling Plaintiff to a release of liability, Plaintiff is
`foreclosed from invoking third-party beneficiary status to obtain declaratory or injunctive relief
`with respect to any other terms of the Merger