Judge O’Connor Says It’s Crazy To Think Tesla Is Connected To ExTwitter; Forces Media Matters To Pay Elon’s Fees

Apparently, Judge Reed O'Connor doesn't think that owning a massive amount of Tesla stock constitutes a conflict of interest when it comes to judging Elon Musk's legal battles.

Last week, we were briefly surprised when infamously partisan Judge Reed O'Connor recused himself from Elon's nonsense SLAPP suit against GARM and some advertisers.

As we had reported back in June, Media Matters had raised the issue that Judge O'Connor owns a ton of Tesla stock, which arguably is a conflict of interest in ExTwitter's lawsuit against Media Matters (which Judge O'Connor had refused to dismiss despite its obvious problems). That matter had still been pending last week when O'Connor surprised lots of people (almost certainly including Elon's lawyers) by recusing himself from the GARM suit.

We had wondered if it was a sign that Judge O'Connor realized how bad it looked for him to hold Tesla stock while repeatedly ruling on behalf of Elon. But, no, it quickly came out that the issue was almost certainly that O'Connor also owned stock in Unilever, one of the firms that Elon was suing in the case.

And then, just days later, it was made clear that Judge O'Connor sees no conflict in owning Tesla stock. He not only rejected Media Matters' request that Elon be forced to list Tesla as an interested party, but he also made Media Matters pay Elon's legal fees over this matter.

Judge O'Connor insists it's just crazy to suggest that Tesla is somehow an interested party:

First, there is no evidence that shows Tesla has a direct financial interest in the outcome of this case. Tesla neither directly nor indirectly holds equity in X, Tesla is not a director or advisor, and it does not participate in the affairs of X. In other words, there is no indication that Tesla has any control over X or any financial ties to X, and Defendants do not claim as much. The question for disclosure is whether Tesla has a legal or equitable interest" in X. Defendants merely point to news articles that report some blurred lines between Tesla and X that do not rise to the level of financial interest. These articles do not amount to evidence of a financial interest. Tesla is a publicly traded company, with tens of thousands of stockholders, its own board of directors, and external auditors. X is a privately owned company. The mere assertions that Musk owns a constellation of companies, some former Tesla employees now work at X, and that Tesla leased workspace from X do not support a finding that Tesla and X are not separate legal entities or that they share a financial interest.

Later, in response to points about Tesla stock fluctuating in direct connection to Elon doing stupid shit on ExTwitter, O'Connor notes in a footnote: Musk, who is neither a plaintiff nor defendant in this suit."

C'mon. None of us were born yesterday.

Elon is totally driving this lawsuit. He was the one who announced that this lawsuit would be coming based on a tweet that he saw. And, obviously, Tesla's stock is tied to nonsense going on at ExTwitter. He sold a ton of Tesla stock to do the deal, and there are constant reports that he's almost certainly going to need sell more to keep ExTwitter afloat.

None of this is that big of a surprise, though. Talking to lawyers, I didn't find one who thought that O'Connor would buy this argument (which is partly why his recusal in the GARM case took me by surprise, before it was revealed that that was due to the Unilever stock).

But just to add absolute insult to injury, O'Connor said that Media Matters, a small non-profit, has to cover ExTwitter's legal fees over this motion, despite it being owned by the world's richest man:

Defendants' Motion to Compel does not have a basis in law. It lacks a reasonable basis in law because the motion is motivated by an effort to force recusal, as opposed to disclosure of unknown information. Compelling disclosure is proper only when a party lacks necessary information. Carr, 2024 WL 1675185, at *1 (compelling disclosure of unknown LLC members); Steel Erectors, 312 F.R.D. at 677 (compelling disclosure of an unknown parent corporation). The information Defendants seek to compel was not unknown to them.

A Motion to Compel Corrected Certificate of Interested Persons when that information was known appears to be unprecedented. Indeed, Defendants did not cite a single case in which a motion to compel a corrected certificate of interested person was brought under this posture, much less one in which the effort was successful under the Local Rule 3.1 financially interested" standard. Additionally, Defendants' motion has no basis in fact. Local Rule 3.1's clear incorporation of financial interest" requires legal or equitable interest." 28 U.S.C. 455(d)(4). Defendants failed to show facts that X's alleged connection to Tesla meets this standard. Instead, it appears Defendants seek to force a backdoor recusal through their Motion to Compel. Gamesmanship of this sort is inappropriate and contrary to the rules of the Northern District of Texas.10 Accordingly, Defendants' Motion is not substantially justified and attorney's fees are appropriate.

Already, Judge O'Connor's ridiculous decision to order discovery in this case, rather than properly dismissing it for lack of jurisdiction (among many other reasons), has resulted in layoffs at the non-profit. The impact of this ruling and the fee shifting is likely to do even more damage.

From the beginning, it has been clear that this was a SLAPP suit by Elon, angry that Media Matters (accurately) called out how ads on ExTwitter were appearing next to literal neo-Nazi content. The complaint from ExTwitter admitted that Media Matters accurately reported what it found. The only purpose of this lawsuit is to try to bleed Media Matters dry and to warn away other critics from doing similar reporting.

There's a reason that most anti-SLAPP laws include fee shifting going the other way (making the wealthy vexatious plaintiffs pay the legal fees of the weaker defendants). Seeing O'Connor basically flip the script here is yet another reason why anti-SLAPP laws are so important.

Having Judge O'Connor let the case move forward to discovery in the first place was already a travesty. Now awarding fee shifting over Media Matters for calling out the potential conflict regarding Tesla's connection to the case just feels like O'Connor, somewhat gleefully, twisting the knife that Elon plunged into the non-profit.