Elon Musk is facing a lawsuit from Twitter, his onetime takeover target, over his stated intention to pull out of an agreement to purchase the company for $44 billion.
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Musk has said he wants to nix the deal because Twitter lowballs the number of bots, or nonhuman accounts, on the platform. The Delaware Court of Chancery, which often handles mergers and acquisition cases, will ultimately decide what happens next.
Twitter, for its part, is pulling no punches.
“Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” says the company in its lawsuit.
It’s not the only case Musk will have before the Delaware court. Heck, it’s far from the only case Musk faces. A Grid review counted at least 11 significant ongoing investigations and suits facing Musk and his businesses, with allegations ranging from sexual harassment and racism to faulty “self-driving” technology and even a Dogecoin pyramid scheme, because of course.
Howard Fischer, a former senior trial counsel at the Securities and Exchange Commission and a partner at law firm Moses & Singer, said that while all companies have a lot of litigation, “in Musk’s case, it’s probably worse because he fosters an aura of noncompliance and disrespect for authority and for social norms.”
Fischer said that of all the lawsuits listed, he believes those posing the greatest risk to Musk and his enterprises are the ones relating to Twitter. Tesla and Alex Spiro, Musk’s personal lawyer, did not respond to requests for comment.
Here’s a roundup of active lawsuits experts say carry some of the more serious implications for Musk and his businesses:
Twitter finally sues
Twitter has formally filed a scathing suit against Musk, in part addressing the “specific performance” aspect of the agreement, which is the legal mechanism by which the company could compel Musk to complete the transaction he is trying to pull out of, even if he doesn’t want to. Importantly, the suit said “the agreement also makes clear that financing is not a condition to closing.”
“Musk’s exit strategy is a model of hypocrisy,” the suit reads, referencing his bot pivot.
Fischer likened Musk’s reasoning to someone saying, “Oh no, there is all this gambling going on at this casino I’m buying.”
The suit notes that Musk waived his ability to conduct due diligence on the deal, which the company argues is the process by which he could have scrutinized its claims regarding its business performance, including its tally of so-called spam accounts.
“Musk’s counsel sent over a draft agreement, reiterated that Musk’s offer was not contingent on any due diligence, and underscored that the form of the proposed agreement was ‘intended to make this easy on all to get to a deal asap,’” reads Twitter’s lawsuit. Musk has not yet filed a response.
The delayed Twitter share disclosure
Musk faces a Federal Trade Commission probe over potential antitrust violations arising from his purchase of large volumes of Twitter stock earlier this year, just prior to his offer to buy the company.
Federal antitrust law requires investors to disclose large stock purchases in companies in which they have an active role. Musk began purchasing Twitter shares in February as a passive investor but didn’t report his purchases to the SEC until April, just prior to his purchase offer to the company.
The FTC is now probing his communications with the Twitter board prior to his offer to see if he intended to be an active investor at the time of his purchases.
Musk’s Twitter acquisition has been something of a dumpster fire taking a roller-coaster ride. He’s jerked the stock price around with his tweets, disparaged the company and individual employees, and even declared the deal on pause (via tweet). Meanwhile, he’s declined to present a coherent vision of how he would handle complex moderation decisions.
In May, Twitter shareholders filed a lawsuit against Musk and Twitter itself over the chaotic nature of the acquisition. The lawsuit claims Musk violated California corporate law on a variety of fronts, including the aforementioned failure to disclose his initial purchase of Twitter stock.
The notorious “funding secured” tweet
Musk still faces lawsuits over his 2018 tweet that he had secured funding to take Tesla private at $420 a share. The tweet resulted in shareholder lawsuits and an SEC settlement that removed him as chairman of Tesla’s board, forced a $40 million payment and mandated Musk have draft tweets vetted by counsel if they might influence the Tesla share price when sent.
A court recently found that “there was nothing concrete” about the funding talks Musk was having at the time, according to Reuters, which will have a huge impact on potential damages awarded to shareholders. Musk has been trying to have the court order undone.
Allegations of racial discrimination
Tesla workers filed a lawsuit this year alleging numerous instances of racism and racial discrimination. Black workers alleged that they were regularly called the N-word while working on the assembly line; one said he was fired after complaining that a supervisor had called him and co-workers “monkeys.” Others said they heard co-workers make “chicken jokes” based on a false Black stereotype.
This builds on allegations made by over 4,000 workers as part of a California Department of Fair Employment and Housing (DFEH) suit filed in February.
In a February blog post, Tesla said that it “will be asking the court to pause the case and take other steps to ensure that facts and evidence will be heard,” and said that in every case where DFEH closed an investigation, it did not find misconduct against Tesla and it “therefore strains credibility for the agency to now allege, after a three-year investigation, that systematic racial discrimination and harassment somehow existed at Tesla.”
“That is significant,” said Fischer. “And it is also unusual. If a lot of that is fact-based, there is a temptation to say, ‘If there is that much smoke, there’s probably some kind of humongous conflagration.’ If there is widespread discrimination, that’s a huge potential payout and penalty.”
Multiple suits over Tesla cars failing, from self-driving tech to doors not opening
Tesla is facing multiple suits over deaths that the suits allege were caused by Tesla cars. One suit, filed in February, claims that Tesla Autopilot caused a car to crash into a firetruck, killing the Tesla owner’s wife. The parties are debating whether the case should proceed in federal or state court. Another suit, filed just last month, claims that a man was killed when his Tesla’s door handles, which recede into the car while it’s moving, didn’t reemerge after he crashed, meaning rescuers were unable to get to him while the car was on fire.
In the case of the door handles, in court filings, Tesla denied the allegations and said that the car was made to industry standards. It also claimed that the driver had drugs and alcohol in his system.
The National Highway Traffic Safety Administration recently found that there were 273 crashes in the last year involving Tesla’s self-driving technology. Just days ago, the NHTSA opened yet another investigation into a fatal Tesla crash. The investigation now covers 830,000 Teslas that use its proprietary Autopilot technology.
Even Tesla customers who weren’t killed because of faulty systems are frustrated that Tesla has failed to deliver on Musk’s yearslong promise of a “full self-driving” car. The flaws have been well-documented, and identifying and sharing those flaws publicly has caused at least one employee to be fired. The issues have caused at least one customer to file a lawsuit against Tesla arguing that it made false claims about “full self-driving.”
Tesla disputes those charges and has filed a motion to dismiss the case.
Sexual harassment allegations at Tesla
Tesla is facing six separate lawsuits filed in late 2021 over sexual harassment filed by customer service and factory workers who claim that they were victims of intimate touching and catcalling, according to the Washington Post. Some claimed they were afraid to report the behavior to Tesla’s human resources department. One of the plaintiffs told the Washington Post that Musk’s frequent tweeting of sexual jokes only made the harassment worse. In all six cases, Tesla is attempting to force the cases to arbitration. The cases are currently ongoing.
Those lawsuits follow on a previous claim in which the plaintiff alleged “rampant sexual harassment at Tesla.” In that case, Tesla sought to have the case sent to arbitration, only to have that request denied. Tesla is appealing that ruling.
In 2020, Tesla fired an employee who filed a whistleblower complaint with the SEC alleging that solar panel system defects resulted in increased fire risk to Tesla vehicles. The former employee is suing Tesla, claiming the firing was retaliation for him raising safety concerns. The U.S. Consumer Product Safety Commission is considering evidence submitted by the whistleblower in its own inquiry into the solar installations.
As Reuters reported, the SEC confirmed that there is an active and ongoing investigation into Tesla over the whistleblower complaint. The U.S. Consumer Product Safety Commission is considering evidence submitted by the whistleblower in its own inquiry into the solar installations.
Stock till you drop
Musk and Tesla have been sued over an alleged breach of fiduciary duty after the company’s board greenlit a multibillion-dollar pay package for Musk in 2018 that consisted largely of stock options, helping propel Musk toward becoming the richest man in the world. The suit claims the package was excessive and that the board had a conflict of interest given Musk shaped the plan with his former divorce attorney Todd Maron, who was also Tesla’s general counsel at the time. Musk attempted to have the case dismissed but was denied, and the case is pending.
Dogecoin to the moon
Musk has tweeted numerous times about Dogecoin, a cryptocurrency based on an internet joke. In one, Musk claimed his company SpaceX “is going to put a literal Dogecoin on the literal moon,” playing on cryptocurrency shorthand: A currency going “to the moon” is one that has shot up in value.
Musk faces a lawsuit that he ran an alleged pyramid scheme involving Dogecoin, according to Reuters. The suit claims Musk was aware that Dogecoin had no value, but continued to promote it. Musk appeared on Saturday Night Live in May 2021 and at that point called Dogecoin a “hustle.” Musk and his companies have not yet responded to the case.
Jason Paladino contributed to this article. Thanks to Lillian Barkley for copy editing this article.