Ex-Twitter CEO who was fired by Musk sues company over unpaid legal expenses

Raise your hand if you haven’t sued Twitter —

Lawsuit: Twitter refuses to reimburse costs related to federal investigations.

Former Twitter CEO Parag Agrawal and two other ex-executives sued the company today, saying they haven’t been reimbursed for over $1 million in expenses related to federal investigations and other legal matters. The lawsuit said former executives had to respond to investigations launched by the Securities and Exchange Commission and Department of Justice, and requested “an expedited ruling requiring Defendant to comply with its obligations to advance legal fees and expenses relating to ongoing litigation and investigations.”

Twitter “has breached its obligations… by refusing to advance Plaintiffs’ Expenses,” according to the lawsuit, which was filed in the Delaware Court of Chancery and reported by The New York Times. The plaintiffs “have incurred significant expenses, including but not limited to attorneys’ fees and costs, in connection with several proceedings,” the lawsuit said.

The lawsuit against Twitter was filed by Agrawal, former Chief Legal Officer Vijaya Gadde, and former Chief Financial Officer Ned Segal, all of whom were fired by current CEO Elon Musk right after he bought Twitter in October 2022. Musk reportedly fired the executives “for cause” in a possible attempt to avoid paying golden parachute deals.

An attorney for Agrawal, Gadde, and Segal provided Twitter an invoice for legal expenses “which reasonably evidence that Plaintiffs have incurred Expenses in excess of $1 million, all of which is required to be advanced to Plaintiffs,” the lawsuit filed today said.

The lawsuit seeks an order requiring Twitter to advance all expenses the plaintiffs have incurred so far. Plaintiffs also want reimbursement for expenses incurred while suing Twitter to get reimbursement for the earlier expenses and an order “declaring that Plaintiffs are entitled to advancement of any future attorneys’ fees, costs, and expenses incurred in connection with the Proceedings.”

Twitter’s bylaws and agreements with executives require it “to indemnify Plaintiffs and advance all Expenses incurred in connection with any Proceeding in which Plaintiffs are involved by reason of their Corporate Status,” the lawsuit said. The bylaws say that payments are to be made by Twitter “in advance of the final disposition” of each proceeding, and would have to be repaid to Twitter if it turns out the executives aren’t entitled to indemnification.

Twitter “refused to acknowledge” obligation

When still working for Twitter, Agrawal and Segal were contacted by federal authorities about the SEC and DOJ inquiries, the lawsuit said. Agrawal wrote in a letter to Twitter on January 13 that “I recently was contacted by the US Securities and Exchange Commission Division of Enforcement and the US Department of Justice in connection with certain inquiries into the Company and into Elon Musk.”

“Agrawal and Segal retained counsel, provided testimony to the SEC in 2022, and their counsel have continued to engage with federal authorities,” the complaint said. “Additionally, Agrawal received requests before and after he left Twitter to take measures to preserve certain documents, which likewise relate to his prior service as an officer of Twitter.”

Agrawal, Gadde, and Segal are all defendants in a securities class action filed in September against the company and its top executives on behalf of Twitter stock owners. Gadde also had expenses from being a defendant along with Twitter in a different civil cas, and from being subpoenaed to testify at a congressional hearing on alleged “social media bias,” the lawsuit said.

“Despite timely written demand along with documentation from Plaintiffs through their counsel, the Company has not advanced to Plaintiffs their Expenses actually and reasonably incurred related to the various Proceedings,” the lawsuit said. “Over two months after Plaintiffs’ initial written demand, the Company offered only a cursory acknowledgment of receipt, but still refused to acknowledge its obligations and to remit payment of any invoices.”

Federal investigations into Twitter and Musk

When Musk was trying to get out of his deal to buy Twitter, the company told the Delaware Court of Chancery that “Elon Musk is presently under investigation by federal authorities for his conduct in connection with the acquisition of Twitter.”

The SEC was investigating Musk’s late disclosure of the 9.2 percent stake in Twitter he bought before purchasing the company outright and separately questioned Musk over his attempt to exit the merger contract. Meanwhile, the Federal Trade Commission is investigating Twitter’s privacy and data practices.

The lawsuit filed by the executives fired by Musk doesn’t say what the Justice Department was looking into. But as the New York Times noted, the DOJ has helped the FTC with previous investigations into Twitter and “often assists the SEC in criminal investigations.”

We contacted Twitter about the lawsuit today. The company continues to auto-reply with a poop emoji to all requests sent to its public relations email address.

Musk’s Twitter was already facing numerous lawsuits from vendors, landlords, and consultants who say they haven’t been paid. Four more companies sued Twitter last week with allegations of unpaid bills.