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Billionaire Elon Musk won the dismissal of a lawsuit brought by former employees of Twitter who were seeking $500 million in severance payments that Musk allegedly declined to pay following his acquisition of the social media company now known as X.
U.S. District Judge Trina Thompson in San Francisco on Tuesday issued a ruling that the ex-Twitter employees’ claims weren’t covered by the federal Employee Retirement Income Security Act (ERISA), which governs benefit plans, so she lacked jurisdiction and dismissed their claims under that law.
The lawsuit alleged that under Twitter’s severance plan, employees who remained after the Musk-led ownership group acquired the company for $44 billion would receive two or six months of pay, plus one week’s pay for every year of employment if they were laid off. The suit was initially filed in July 2023.
It was filed by Courtney McMillian, head of Twitter’s compensation and benefits department, and operations manager Ronald Cooper, who said that the company violated that plan by offering fired employees one month of pay with no benefits.
TWITTER HIT WITH LAWSUIT CLAIMING EX-EMPLOYEES OWED AT LEAST $500M IN SEVERANCE PAY
A judge on Wednesday dismissed claims made by ex-Twitter employees that Elon Musk reneged on the company’s severance plans under a federal employee benefit law. (Apu Gomes/Getty Images / Getty Images)
The judge said ERISA wasn’t applicable to Twitter’s post-buyout plan because it didn’t feature an “ongoing administrative scheme” in which the company would review claims on a case-by-case basis, or offer benefits like continued health insurance or out-placement services.
“There were only cash payments promised,” Thompson wrote.
Thompson said that employees who were fired in Twitter’s mass layoffs in 2022 and 2023 can try to amend their lawsuit, but only for claims that are not covered by ERISA.
ELON MUSK SUED BY OUSTED TWITTER EXECS FOR $128M IN SEVERANCE
Musk laid off about half of Twitter’s employees after completing the takeover, saying the cuts were needed to stem financial losses. (X account of Elon Musk/AFP via Getty Images / Getty Images)
Musk said at the time that Twitter’s mass layoffs were necessary to stave off bankruptcy because the company was losing about $4 million per day at the time it was acquired.
The company and Musk face other lawsuits that allege he reneged on promises to Twitter employees, including former CEO Parag Agrawal, as well as vendors following the company’s acquisition.
MUSK LOOKS TO END TWITTER LAWSUIT, SUGGESTS LATE DISCLOSURE WAS A MISTAKE
Musk’s ownership group completed the acquisition of Twitter in October 2022, after a legal battle in which he attempted to withdraw from the purchase. (Justin Sullivan/Getty Images / Getty Images)
Agrawal filed his suit along with several other former Twitter executives, including CFO Ned Segal, chief legal officer Vijaya Gadde and general counsel Sean Edgett.
The group of ex-Twitter executives are seeking $128 million in severance they allege Musk refused to pay after firing them for cause — a move they say was intended to deny them severance that they otherwise would have been contractually entitled to.
Musk is also dealing with a lawsuit related to his acquisition of Twitter filed by shareholders who claim that he and his wealth manager knowingly failed to comply with a Securities and Exchange Commission rule that requires acquisitions of more than 5% of a company’s stock to be disclosed.
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In a court filing last week, Musk said that his delayed disclosure, which occurred 11 days after it should have been made, was due to a misunderstanding of the rule rather than an attempt to defraud shareholders and that he promptly disclosed it once he realized his mistake.
Reuters contributed to this report.