Elon Musk has successfully had a $500 million lawsuit against him dismissed. The lawsuit was brought by thousands of former Twitter employees who claimed they were owed severance pay after Musk laid off a significant portion of the workforce following his acquisition of the company.

From August 2020 through January 4, 2023, Plaintiff Courtney McMillian was an employee at Twitter as the Head of People Experience leading Compensation, Benefits, and other global functions. From June 2021 through April 28, 2023, Plaintiff Ronald Cooper was a Workplace Operations, Facilities, and People Manager.

McMillian and Cooper filed this putative class action under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001, et seq. Plaintiffs claim that their former employer, Twitter, Inc., now X Corp, provided insufficient severance payments under a post-termination benefits plan that applies to former Twitter employees due to Twitter’s takeover in October 2022.

Defendant Twitter is a social media company and online platform. Plaintiffs McMillian and Cooper, along with the putative class members, were employed by Twitter before their employment was terminated due to the takeover layoffs. Defendant X Corp is successor in interest to Twitter. After the March 2023 merger, X Corp assumed all of Twitter’s debts and obligations.

Plaintiffs claim that after the takeover they were only offered one months’ worth of severance pay but are entitled to a higher amount under the plan. As a result, Plaintiffs seek relief for (1) wrongful denial of benefits under an ERISA plan; (2) breach of fiduciary duties imposed by ERISA for failure to fund plan; and (3) failure to provide complete and accurate information about an ERISA plan.

The class is defined as “[a]ll participants and beneficiaries of the Plan who were terminated from Twitter since the date of Defendant Musk’s takeover, October 27, 2022, through the date of judgment.”

McMillian’s class action is one of multiple lawsuits filed by former Twitter employees relating to the 2022 restructuring of Twitter and subsequent layoffs. For example, on November 3, 2022, Cornet v. Twitter, Inc. was filed amidst ongoing layoffs at Twitter. No. 22-cv-06857-JD, 2022 WL 18396334, at (N.D. Cal. Dec. 14, 2022). About four months after the second amended complaint was filed in Cornet, Cornet was transferred from the Northern District of California to the District of Delaware and assigned Case No. 23-cv-00441-JLH, transfer date April 20, 2024.

The Cornet plaintiffs assert contract-based claims for severance benefits on behalf of a nationwide putative class of X Corp employees and former employees that had been promised that “if there were layoffs, employees would receive benefits and severance at least as favorable as the benefits and severance that Twitter previously provided to employees.”

Both this action and the Cornet action concern Twitter’s deficient severance payments following mass layoffs in November 2022, December 2022, February 2023, and September 2023 after Twitter was purchased in October 2022.

Defendants filed a Motion to Dismiss asserting, among other things, that ERISA did not apply to Twitter’s post-buyout plan because there was no “ongoing administrative scheme” where the company reviewed claims case-by-case, or offered benefits such as continued health insurance and out placement services. On July 9, 2024 the federal judge agreed with Plaintiffs and dismissed the case of McMillian v Musk et.al. -3:23-cv-03461in her 23 page ruling. The Court granted leave to amend the complaint, but only as to claims that are not governed by ERISA.

For Plaintiffs’ operative complaint to survive the Motion to Dismiss, Plaintiffs must plead sufficient facts that allow the court to draw the reasonable inference that the severance plan is governed by ERISA. For a severance benefit plan to be governed by ERISA however, it must be an ongoing administrative program for processing claims and paying benefits. (Fort Halifax Packing Co. v. Coyne, 482 US 1at 12.)

“The operative complaint lists the severance benefits components and the payments Plaintiffs expected for each of those components after Twitter’s takeover. The allegations state the formulas provided for the human resources staff to calculate amounts (or the cash equivalent) of benefits that would be paid to the terminated employees in one lump sum and provided at one point in time. Because there are set formulas, or mathematical calculations of severance benefits, to be paid at one point in time without any “ongoing particularized discretion”, these allegations do not show that Plaintiffs adequately pled an ongoing administrative scheme under Velarde.” (Velarde v. PACE Membership Warehouse, Inc., 105 F.3d 1313, 1317 (9th Cir. 1997) )

Upon the filing of a sufficient complaint (stating non-ERISA claims for breach of contract, promissory estoppel, etc.), the Court will consider issuing an Order finding this case related to one of the cases currently pending, such as Cornet, No. 23-cv-00441-JLH. Also related to Cornet are Arnold, No. 23-cv-00528-JLH-CJB and Woodfield, No. 23-cv-0780-JLH, both of which are pending in the District of Delaware.

If this action is found to be related to Cornet, then it can be transferred to the District of Delaware since the ERISA venue provisions will not apply once the SAC is filed with its non-ERISA claims.

$500 Million Severance Pay Lawsuit Against Elon Musk Dismissed