Litigation Against Elon Musk Touches on Securities, AI, Labor and More


Elon Musk has been no stranger to controversy. As far back as 1999 the then-only millionaire wanted to combine retail and investment banking under the roof of the first X.com, which was, at the time, illegal under the Glass-Steagall Act. President Bill Clinton repealed this section of Glass-Steagall the following year.  In the last six years, the self-described “Technoking” has increasingly fallen under legal scrutiny. Since 2018, he has been the subject of 118 cases.

Like any notorious public figure, Musk has faced a considerable quantity of litigation brought by pro se plaintiffs. For the tech billionaire, seventy-six, or 64%, of the cases he has faced have been brought by such individuals. These suits tend to resolve quickly, with the judge dismissing the case after a median of fifty-nine days and seven or eight filings. 

Securities Litigation

Outside of suits filed by pro se plaintiffs, the plurality of suits brought against Musk have concerned alleged securities fraud. In August 2018, the first plaintiffs filed suit in what would become a massive class action. At issue was a series of Tweets the billionaire made on August 7 in which he claimed that he was taking Tesla private, though current stockholders could keep their shares. Tesla has remained a publicly traded company through the present day. The plaintiffs argue that these tweets constituted securities fraud since Musk allegedly never planned to follow these tweets, and subsequent messages to stockholders, with action. He merely, the plaintiffs say, wanted to fight back against short-sellers and boost Tesla’s stock price. As of February 2024, Tesla stocks accounted for 36% of Musk’s then $203 billion net worth. After many trials, tribulations, months, and hundreds of filings, the case went to trial before a jury. They dismissed the case with each party bearing its own fees. 

The U.S. Securities and Exchange Commission (SEC) had better luck. They filed a case in September 2018 over the same underlying events and extracted two $20 million consent decrees the following February. However, litigation has continued since as Musk has yet to pay the fine. At the time of the consent decree, his net worth was estimated at $22 billion. 

Since, the Tesla CEO has faced several smaller garden-variety securities fraud suits over Tesla’s acquisition of SolarCity, promises he has made about Model 3 production and self-driving technology, promises and tweets about Dogecoin, allegedly concealing information on the working conditions at Tesla’s Freemont factory, and his acquisition of Twitter. 

Last October, the SEC once again sued Musk, this time to enforce a subpoena in an ongoing investigation. On May 31, 2024, Judge Jacqueline Scott Corley granted the parties’ stipulation that Musk would testify. A discovery hearing occurred on September 27, 2024. 

Labor

Since 2018, Musk has faced twelve suits concerning labor issues. Seven of these revolve around the billionaire firing Twitter executives during the transition to X without their contractually obligated severance. An additional two lawsuits concern allegedly unpaid JAMS arbitration fees in similar labor disputes. Many of these so-called “Tweeps” allege they were fired for refusing to carry out Musk’s illegal demands. The remainder concerns wrongful termination.

Musk v. Altman et al

As previously covered by Law Street, on August 8, 2024, Elon Musk filed suit against Sam Altman, Gregory Brockman, and OpenAI’s myriad of corporate entities. In the complaint, Musk alleges that Sam Altman and Gregory Brockman fraudulently enticed the billionaire with promises that OpenAI would be a nonprofit company and would develop artificial intelligence for the good of humanity. However, between 2018 and 2023 OpenAI spun off over a dozen corporate entities that, Musk alleges, allow OpenAI to function as a de facto for-profit company. The main investment entity, OpenAI, L.P. has a profit cap of 100x, a limit so high as to be functionally non-existent. However, Sam Altman has recently made moves to remove that cap.

The complaint describes Musk’s belief that OpenAI made this switch to profit-seeking because they had finally developed artificial general intelligence (AGI). AGI has been a holy grail/bogeyman for “longtermists” since the philosophical movement began. Longtermism is the idea that people should do the most good for the most people, including future people; Musk described the worldview as “a close match for [his] philosophy.” According to philosopher and intellectual historian Dr. Émile Torres, longtermists tend to prioritize concerns that AGI might one day “turn us into the equivalent of paperclips” over present issues, such as global poverty or climate change. 

In their 2020 report on the state of artificial intelligence and intellectual property law, the U.S. Patent and Trademark Office described AGI “as merely a theoretical possibility that could arise in a distant future.”

Lemon v. Musk et al

One month later, Don Lemon turned the fraud tables on Musk. The former CNN host sued the billionaire and X for inducing him into an exclusive partnership only to renege on the deal after Lemon’s first video. The complaint details how Musk and executives at X sought out a partnership with Lemon as an attempt to buoy the plummeting ad revenue at the social media site formerly known as Twitter.

The journalist alleges that Musk and X traded on his name and reputation to lure advertisers back to the platform. The exclusivity deal was even contingent on Lemon’s appearance at the CES Conference with X executives. However, after Lemon’s first video premiered, in which he oppositionally interviewed Musk, the defendants canceled the partnership. In June 2023, Musk told Lemon in a phone call that there would be no need for a formal written agreement or to “fill out paperwork.” The deal, which would have guaranteed Lemon $1.5 million with incentives and performance bonuses that could bring Lemon’s income north of $4 million, was never put on paper. 

Defamation

On September 27, 2024, the Office of the Haitian Diaspora (ODIHA) and the Haitian Diaspora Political Committee (HDPAC) sued Elon Musk, Donald Trump, J.D. Vance, and others for allegedly spreading the lie that Haitian migrants in Ohio are eating pets. The rumor originated at an August 27 Springfield City Council meeting, in which a self-described “social media influencer” claimed that Haitian migrants were poaching ducks from public parks. Soon after, other locals made baseless claims that Haitian migrants were eating pets, and the story spread on X, largely parrotted by neo-Nazi accounts. ODIHA and HDPAC allege that the defendants knew or should have known that the rumors were false, yet spread them anyway, allegedly causing untold harm and strife in the Springfield Haitian community. Since Trump spouted this claim at the Presidential Debate, Springfield, Ohio has faced over thirty bomb threats. 

This is far from Musk’s first defamation case. On September 17, 2018, Vernon Unsworth sued the billionaire for stating on Twitter that the caver partly responsible for rescuing the boys soccer team and coach trapped in Tham Luang Nang Non caves was a pedophile and child rapist. The case went to trial, and on December 6, 2019, the jury ruled in favor of Musk. The parties agreed to pay their own legal fees and not appeal. 

Legal Representation

Musk has not favored any particular law firm, though he worked most often with Quinn Emanuel Urquhart & Sullivan, who primarily handled his securities litigation; Morgan, Lewis & Bockius, who handled his labor litigation; and Fenwick & West, who also handled some of his securities litigation.