In a resounding legal decision on Friday, a federal judge in California delivered a significant blow to X Corp, formerly known as Twitter, ruling in favor of Mark Schobinger, a former senior director of compensation.
The ruling pertained to a lawsuit filed by Schobinger against X Corp, alleging a breach of contract regarding unpaid bonuses promised to employees.
U.S. District Judge Vince Chhabria’s decision was a resounding affirmation of Schobinger’s claim of breach of contract under California law. The lawsuit, filed in June after Schobinger’s departure from Elon Musk’s company in May, centered on Twitter’s alleged commitment, both pre and post-Musk’s acquisition last year, to pay employees 50% of their 2022 target bonuses. However, these promised bonuses were never disbursed, leading to a legal battle.
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Judge Chhabria’s ruling hinged on the assertion that Schobinger had adequately presented a case demonstrating a breach of contract under California law.
“Once Schobinger did what Twitter asked, Twitter’s offer to pay him a bonus in return became a binding contract under California law. And by allegedly refusing to pay Schobinger his promised bonus, Twitter violated that contract,” he said.
Notably, X Corp, now devoid of a media relations office, remained silent in response to requests for comments made outside standard business hours. This silence from the company further amplifies the intrigue and speculation surrounding the legal proceedings.
Twitter’s defense attempted to refute the allegations by contending that the company had only made an oral promise, which they argued did not amount to a legally binding contract. Moreover, they sought for Texas law to govern the case. However, Judge Chhabria’s decision conclusively dismissed these arguments, asserting that California law was the applicable jurisdiction, deeming Twitter’s counterarguments inadequate.
The lawsuit filed by Schobinger against X Corp is just one facet of the legal quagmire that has emerged following Elon Musk’s acquisition and subsequent restructuring of the company, resulting in the reduction of more than half of its workforce.
X Corp has faced a barrage of legal challenges from former employees and executives, encompassing a spectrum of allegations, including discrimination against older employees, women, and individuals with disabilities. Additionally, claims have been made regarding insufficient notice provided during mass layoffs. Despite these allegations, X Corp vehemently denies any wrongdoing.
The ruling favoring Schobinger highlights the intricate legal complexities and the intricate aftermath resulting from the organizational changes following Elon Musk’s acquisition of the social media giant late last year. The case is one of the ongoing legal disputes confronting X Corp, revealing contractual conflicts and purported breaches after substantial corporate restructuring.
Musk was reportedly not interested in compensating over 50% of the Twitter employees who were laid off following his takeover.
According to the lawsuit, former Twitter CFO Ned Segal made repeated assurances to Schobinger and other employees, guaranteeing them 50% of their expected bonuses according to the company’s bonus plan—a structure tied to the overall financial performance of the company.
Following Musk’s acquisition of the company in November, employees were informed that their 50% bonuses would be honored if they opted to continue working under the new leadership. Schobinger claimed to have been approached by various recruiters and companies offering alternative job opportunities in the months after the acquisition. However, he declined these offers based on the promised bonus payout.
Traditionally, Twitter disbursed bonuses in the first quarter of the new year, typically around March. However, when the quarter concluded, none of the employees received any portion of their promised bonuses. Subsequently, in June, Schobinger filed a lawsuit citing breach of contract.