X Corp is now suing a sublessee for unpaid rent
- Reference: 1696265110
- News link: https://www.theregister.co.uk/2023/10/02/x_sues_sublessee/
- Source link:
X says in its [1]complaint [PDF] that Atlas Exploration, a company marketing an invite-only credit card with dining and travel perks (and formerly known as Point Up), sublets the entire 30th floor of [2]650 California Street (where The Register also has an office) from X with a contract lasting until 2025.
Last year, Atlas negotiated an early termination of that lease with X which required it to pay a $1.1 million early termination fee and several months of rent, but X Corp alleges it hasn't forked over a dime.
[3]
"Atlas failed to timely make any of the payments to X Corp that it agreed to under the Termination Agreement, and has since refused to make any of those payments, despite X Corps' demands," the complaint asserts.
[4]
[5]
The lawsuit (and the termination agreement included as an exhibit) indicate that Atlas would pay the termination fee in three installments, as well as the back rent for months the space was unoccupied – in this case September, October and November of 2022, totaling $340,263.09. X says it has fully drawn Atlas' letter of credit, leaving a remaining balance of $713,569.09 that X says it's owed.
X says in the complaint that it contacted Atlas in April 2023, demanding the $714k it was owed, and Atlas responded with a letter (both included as exhibits to the complaint linked above) that alleged X Corp had operated in bad faith and "misled" Atlas during the lease termination negotiations.
[6]
"Twitter assured Atlas repeatedly that it should expect to move out in August. Accordingly, Atlas relied on Twitter's assurances and vacated the premises in August, 2022," Atlas attorney Kevin Hill says in his email back to X's lawyers.
[7]Twitter scores legal hat trick with three cases filed against it in one day
[8]Ex-Twitter sextet sues Elon Musk for 'stiffing' them on severance
[9]Ex-Twitter execs sue over $1M+ in unpaid legal expenses
[10]Twitter stiffed us on $2m bill, claim consultants in lawsuit
Hill claims in the email: "Due to Twitter's delays, however, the Agreement was not executed until October. Twitter is now demanding that Atlas pay rent in full for September and October, 2022, even though Twitter had possession of the premises in August 2022."
X's response is that Atlas still owes the money because the new sublessee hadn't moved in yet, meaning X's delay in getting the early termination agreement completed may be a key factor in deciding the case.
Likewise, X also says that Atlas made no mention of the early termination fee in its response to X, which Musk and co concluded means it didn't dispute that it owed the unpaid termination fee. The termination agreement itself, however, mentions that the fee is based on an early termination date of August 1, while the agreement itself has October 5 penciled into the contract as the date the agreement was entered into.
We need not remind El Reg readers of the multitude of lawsuits that Twitter, now X, is facing that allege unpaid rent since Elon Musk took over.
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Early this year, multiple landlords accused Twitter/X of not paying the rent, including on its [12]Market Square HQ , property [13]owned by the British crown, and even [14]unpaid rent at 650 California Street - the building in question in this suit.
While X argues in the suit that it "has suffered monetary and other damages" in an amount at least that of the three-quarters of a million bucks it's trying to extract, Atlas quite apparently disagreed.
In a letter, marked as exhibit 4 in the [15]complaint [PDF], Atlas claims: "We understand that Twitter did not pay rent to the landlord for the months of September and October, 2022, and consequently has not suffered any actual damages.
It went on to allege: "The payment of rent to Twitter for [those] months … would constitute an [16]unjust windfall because Twitter did not even pay rent for such period."
We contacted lawyers for both X and Atlas to ask questions about the case, and get some clarification, but haven't heard back from either. ®
Get our [17]Tech Resources
[1] https://regmedia.co.uk/2023/10/02/x-atlas-lawsuit2.pdf
[2] https://www.theregister.com/2023/01/03/elon_musks_costcutting_campaign_at/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZRs9hfMgRGkWJeoNiBBE6AAAAIs&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZRs9hfMgRGkWJeoNiBBE6AAAAIs&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZRs9hfMgRGkWJeoNiBBE6AAAAIs&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZRs9hfMgRGkWJeoNiBBE6AAAAIs&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2023/04/05/more_twitter_lawsuits/
[8] https://www.theregister.com/2023/05/18/twitter_staff_sue_musk/
[9] https://www.theregister.com/2023/04/11/former_execs_sue_twitter/
[10] https://www.theregister.com/2023/01/23/twitter_consultant_lawsuit/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZRs9hfMgRGkWJeoNiBBE6AAAAIs&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[12] https://www.theregister.com/2023/01/31/twitter_market_square_lawsuit/
[13] https://www.theregister.com/2023/01/24/monarchy_chasing_twitter_rent/
[14] https://www.theregister.com/2023/01/03/elon_musks_costcutting_campaign_at/
[15] https://regmedia.co.uk/2023/10/02/x-atlas-lawsuit2.pdf
[16] https://legal.thomsonreuters.com/blog/cause-of-action-for-unjust-enrichment-in-california/
[17] https://whitepapers.theregister.com/
Re: IANAL Opinion
I'm not a lawyer either. But I'm amazed that at this point Musk is still able to hire people who are.
Re: IANAL Opinion
Surely, they ensure a retainer covering all costs, and then some, just in case.
(amount including the almost inevitable counter claims by his muskness when they fail to deliver the intended result)
Re: IANAL Opinion
Just like people still are willing to represent Trump, the exposure they can get (win or lose) from representing a high profile client can potentially be worth it even if you end up getting stiffed on your bill. You just have to remember not to drink the kool-aid.
There was a line in the show Community that went something along the lines of how lawyers get paid not to give a shit about their client's issue, and in fact, the less of a shit they give, the better they tend to be at their job. That's what Twitler's legal team needs to remember. It's just a job like any other, don't go thinking it's going to lead to some kind of long-term gig being the personal corporate lawyer for Twitler, or even a cushy in-house counsel job at Tesla. It might help get you to partner a little faster, but that's about it. But when they take even a tiny sip of the kool-aid, it's all over. Just look at Cohen, Giuliani, Eastman, Powel, Chesbro, and probably plenty of others for examples of what can happen. If you think it can't happen to you... well, that's what they all thought too.
Re: IANAL Opinion
"I love the dig at Twitter not paying its own rent in the filing. I don't think that will hold any water from a legal standpoint, but it's still hilarious."
As do I, it's very much the 'This You?' in statement form, played well. I don't think it's a legal defence so much as a negotiating position - for Twitter to force this through weakens Twitter's defence against the greater claims by their landlords, especially the landlord of that property. It's saying, drop the claim against us or it will help to cost you more.
I'm sure the "I'm not paying my bills, because you didn't pay yours" argument will fall flat.
At least the lawyers will get rich on both sides.
What an utter shitbag of a company
I know Elon is 'special', and maybe has no concept of morals, but this is beyond the pale.
How to make money in property
1. rent a building
2. sublet it
3. get rent from sub-lessee
4 don't pay yur own rent
There's a way to make even more money - ask for money from sub-lessees for months even after they've terminated their lease because you couldn't find another sub-lessee.
Atlas still owes the money because the new sublessee hadn't moved in yet
Huh?
You buy something off me regularly, once a month. You stop buying it from me. I can not get anyone else to buy it from me, so I have a right to demand you keep on paying for it.
Very glad magazine subscriptions don't work like that.
This is what happens
When you downsize by firing the entire "accounts payable" team but keep everyone from "receivable".
IANAL Opinion
The bit about Twitter claiming that they're owed money by Company A because Company B didn't move in and start paying money on the expected date seems pretty weak. If I sign a lease on an apartment that starts on the first of October, it doesn't matter if I can't move in until November, I'm still on the hook to pay for October. It sounds like Twitter told this company they need to be out by Oct. 5 (or 5 Oct for our European friends) and they were, though I suppose there will likely be some dispute over when that modification to the agreement was added.
And I just have to add, I love the dig at Twitter not paying its own rent in the filing. I don't think that will hold any water from a legal standpoint, but it's still hilarious.