Elon Musk Wins Legal Battle: $500 Million Severance Lawsuit Dismissed
By Jonathan Stempel
(Multibagger) - In a significant legal victory, Elon Musk has successfully fended off a lawsuit that accused him of withholding at least $500 million in severance payments from thousands of Twitter employees after his acquisition of the social media giant, now rebranded as X.
U.S. District Judge Trina Thompson in San Francisco ruled on Tuesday that the federal Employee Retirement Income Security Act (ERISA), which governs benefit plans, does not cover the claims made by the former employees. Consequently, the judge stated she did not have jurisdiction over the case.
The plaintiffs' legal representatives have yet to comment on the ruling. Similarly, Musk's legal team has not provided any statements in response to inquiries.
This lawsuit is one of many legal challenges facing Musk, who has been accused of failing to honor commitments made to ex-Twitter employees and vendors following his $44 billion purchase of the company in October 2022. Among those affected is former Twitter Chief Executive Parag Agrawal.
Musk, who also heads Tesla (NASDAQ: TSLA), holds the title of the world's richest person according to Forbes magazine.
The complaint specified that under Twitter's 2019 severance plan, employees who remained with the company post-buyout were entitled to receive two to six months of salary, plus an additional week of pay for each year of service, in the event of layoffs.
Plaintiffs Courtney McMillian, who managed Twitter's compensation and benefits, and Ronald Cooper, an operations manager, claimed that the severance offered was only one month of pay, with no additional benefits.
Judge Thompson clarified that ERISA did not apply to Twitter's post-buyout severance plan as it lacked an "ongoing administrative scheme" involving case-by-case review or extended benefits like continued health insurance and outplacement services.
"There were only cash payments promised," noted Thompson.
The judge indicated that the plaintiffs could amend their complaint, but only for claims not governed by ERISA.
The case is McMillian et al v. Musk et al, U.S. District Court, Northern District of California, No. 23-03461.
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Breaking Down the Case: How It Impacts You
What Just Happened?
Elon Musk, the billionaire entrepreneur, won a court case where he was accused of not paying $500 million in severance to Twitter employees he let go after buying the company.
Why Did He Win?
The judge ruled that the federal law (ERISA) that governs employee benefits doesn’t cover the claims made by the fired Twitter employees. The law only applies to plans with ongoing reviews and additional benefits, which wasn't the case here.
What’s Next?
The employees can try to amend their lawsuit, but they can only do so for claims that don’t fall under ERISA.
How Does This Affect You?
If you're an employee, this case highlights the importance of understanding your severance package and the laws that protect you. If you're an investor, it underscores the legal complexities companies face, which can impact their financial bottom line and stock performance.
In Simple Terms:
- Elon Musk was sued for not paying enough severance to fired Twitter employees.
- The judge said the law didn’t apply in this case, so Musk won.
- The employees can still sue, but under different claims.
- Knowing your rights as an employee is crucial.
- For investors, legal issues like this can affect a company’s stock price and financial health.