Heresniak v. Musk

Background

William Heresniak brought the action for himself and a proposed class of “all stockholders of Twitter.” He sued Elon Musk, Twitter, Inc., X Holdings I, Inc., and X Holdings II, Inc. for alleged violations of Delaware law during and resulting from Musk’s buyout of Twitter.

The parties stipulated to a stay while a related Delaware action was pending. That action ended after Musk closed the merger, which made much of the relief sought in Heresniak’s initial complaints no longer available. The parties later agreed that Heresniak could move for permission to file a second amended complaint if they could not agree on the filing.

Legal standard

Federal Rule of Civil Procedure 15(a)(2) provides that courts should freely allow amendment when justice requires. The court explained that amendment is generally favored, especially absent undue delay, bad faith, prejudice to the opposing party, repeated failure to fix earlier deficiencies, or futility. Futility means that the proposed amendment would not survive a later challenge, such as a motion to dismiss.

Court’s analysis

The defendants did not argue that Heresniak had delayed improperly, acted in bad faith, or that amendment would prejudice them. They argued only that amendment would be futile because the proposed second amended complaint would be subject to dismissal.

The court declined to decide the complaint’s merits while ruling on permission to amend. In particular, the court noted that it had not previously considered the merits of any complaint in the action and stated that the defendants could present their dismissal arguments in a future motion.

Disposition

The court granted Heresniak’s motion for leave to file his second amended complaint. The opinion did not rule on a motion to dismiss or decide whether the claims ultimately stated a viable legal claim.