A lawsuit says Twitter failed to pay a $1,092,000 invoice in a software contract that doesn’t expire until late 2024, and that the Elon Musk-led company apparently intends to stiff the vendor on another $7 million worth of payments.
Imply Data, Inc. sued Twitter in California Superior Court in San Francisco County, alleging breach of contract. The lawsuit was filed on Tuesday (see complaint) and reported by Bloomberg today.
“For over four years, Imply has licensed its proprietary software to Twitter, and Twitter has paid Imply over $10 million,” the lawsuit said. “Twitter has always been very pleased with Imply’s product and its related maintenance and support services, so, in mid-2021, the parties extended the term of their software license and service agreement for an additional three years from October 1, 2021, through September 30, 2024.”
In May, a few weeks after Musk struck a deal to buy Twitter, the company notified Imply Data that it would not renew the contract again but “acknowledged the License agreement would ‘continue in full force and effect’ until the end of its term on September 30, 2024,” the lawsuit said.
Payments stopped after Musk took over
Twitter continued making quarterly payments on the contract until Musk completed the purchase in late October. “However, shortly after Musk’s purchase of Twitter closed, Twitter refused to pay the outstanding quarterly invoice, which was due on November 30, 2022, and Twitter disclaimed any obligation to pay any future invoices from Imply, despite the unambiguous language in the software license and service agreement requiring Twitter to do so,” the lawsuit said.
Imply makes a database based on Apache Druid open source software as well as products for managing and monitoring Druid clusters.
The New York Times reported on November 22 that Twitter was stiffing some vendors. Imply’s complaint notes the press coverage of Twitter refusing to pay vendors and says, “This lawsuit involves one such egregious case.”
Imply uploaded the $1,092,000 invoice to Twitter’s vendor portal, and the invoice was approved by Twitter on October 5, the lawsuit said. “On November 28, 2022, when Imply accessed the vendor portal, Imply learned that Twitter had deleted the invoice and closed the License Agreement,” the lawsuit said.
“We will not be paying Imply any longer”
Imply says Twitter “also uploaded an internal email chain to the vendor portal to support those actions.” The lawsuit said this email chain included a message from Martin O’Neill, head of global strategic sourcing at Twitter, that stated, “A heads up that we will not be paying Imply any longer. If we can flag them in our AP system to not route any of their invoices for approval that would be great, thank you!”
The Twitter executive who received the email, Kristena Bravo, “forwarded that email to other Twitter employees and wrote: ‘Can you please cancel all invoices for Imply currently pending in Oracle (if any) and deactivate the supplier using the email below as evidence? ‘” the lawsuit said.
After reviewing these emails, Imply asked Twitter about the status of the payment due November 30. “Twitter’s account payable department notified Imply that the invoice had been ‘cancelled’ and that, if Imply had any concerns, Imply should ‘reach out to [Imply’s] Twitter business partner.’ Imply has reached out to Twitter to discuss the cancellation of the invoice; however, Twitter has not yet responded in substance to that outreach,” the lawsuit said.
Imply is seeking financial damages for breach of contract. “Imply anticipates that Twitter’s breach will continue, with the amount in default increasing each quarter until the end of the License Agreement’s term… Twitter’s breach has damaged and will damage Imply in an amount that will be proven at trial, but which will likely be in excess of $8 million,” Imply told the court.
Dispute over whether Twitter can terminate the contract
The lawsuit also alleges breach of covenant of good faith and fair dealing, and anticipatory repudiation. The latter term describes when a party to a contract declares they do not intend to live up to their contractual obligations.
“Twitter has expressly, unequivocally, and absolutely repudiated and renounced the License Agreement by declaring that Twitter would not pay Imply and instructing its employees not to approve any invoices and to deactivate Imply from the vendor portal. Twitter has breached the License Agreement,” the lawsuit said.
Twitter may argue it had a right to terminate the contract early. Imply’s complaint said there is a dispute between the companies as to “whether Twitter had the unilateral right to terminate the License Agreement before the end of its term.” Imply is seeking a declaratory judgment that Twitter doesn’t have that right.
We contacted Twitter about the lawsuit, but the company reportedly dismantled its public relations team after Musk took over.