Musk Pleads No Personal Liability in Former Employee Severance Claims

A Delaware federal judge heard arguments recently on Elon Musk’s motion to dismiss all claims against him personally in a lawsuit filed by former Twitter employees over severance benefits. The case is Arnold et al. v. X Corp. et al., case number 1:23-cv-00528, the U.S. District Court for the District of Delaware.

Musk argued that he did not sign off on the provisions of the 2022 Twitter takeover deal concerning continuing employee benefits. As a result, he claimed he had no control over the severance ex-employees received post-takeover. Musk maintained that any alleged breach of contract claims stemmed from contracts between Twitter and the employees, not Musk and the employee, and from conduct before the merger closed. Furthermore, Musk maintained that neither federal nor state laws governing mass layoffs provide for individual liability.

Twitter’s new owner also argued that any fraudulent conduct, i.e., promises of certain severance packages, occurred before the merger became final and thus are not attributable to Musk or his company. According to Musk, the claims related to the fraud contain no facts alleging that Musk committed any fraudulent acts, directed Twitter to commit any fraudulent acts, or even had the power or authority to cause Twitter to engage in fraud.

Finally, Musk argued that the ex-workers were third parties with no standing to bring the lawsuit, as they were not parties to the deal that gave Musk ownership of the company.

Musk disclosed in 2022 that he had purchased a stake in Twitter and intended to purchase the company and take it private. Twitter’s board approved the sale in April 2022, including a merger agreement that would provide remaining employees with severance payments and benefits “no less favorable” than those that Twitter offered before the merger.

Following the merger, six ex-Twitter employees filed this lawsuit, alleging that Twitter induced them to stay through the merger with promises of severance in the event of layoffs. Instead, they failed to receive the promised severance benefits after Twitter fired or constructively discharged them. The former employees allege that the final merger agreement required Twitter and Musk to provide them with the same severance benefits that Twitter previously provided its employees for at least one year after the merger.

Nonetheless, once the merger closed in October 2022, Musk began laying off employees, including two plaintiffs in the suit, and giving them severance packages worth much less than promised. Other plaintiffs alleged that they were forced to resign after the company drastically changed the terms and conditions of their employment, including requiring them to break leases and contracts.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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