Trevor Cokley, U.S. Air Force
Elon Musk speaks at U.S. Air Force Academy in Colorado Springs, Colo., 2022.
Elon Musk, the richest person on Earth, has had a very busy month.
On November 15, Musk boosted an “anti-Jewish conspiracy theory” on X, the company formerly known as Twitter, that he purchased in 2022. The following day, the rightwing monitoring group Media Matters for America published a report showing that X had placed ads from companies like Apple and IBM next to neo-Nazi content. As advertisers began to pull funding in response, Musk pledged to file a “thermonuclear lawsuit” against Media Matters.
Less than a week later, the Tesla CEO was in Israel visiting a kibbutz with Prime Minister Benjamin Netanyahu amid the country’s ongoing siege of Gaza. The trip was widely seen as an “apology tour,” a transparent last-ditch attempt to distance himself—and his increasingly costly social media platform—from being seen as a tool of the far right. Musk later denied the trip’s connection to his post on X, during a live-streamed interview with New York Times columnist Andrew Ross Sorkin in which he also told advertisers (singling out Disney CEO Bob Iger) to “go fuck themselves,” if they want to pull advertising from X.
Musk, who has frequently referred to himself as a free speech absolutist, has moved forward with his defamation suit against Media Matters, which was assigned to Judge Reed O’Connor, a partisan operative with a history of handing out victories to conservative litigants. If the case succeeds, it could set a dangerous precedent for other wealthy narcissists to hamper news outlets that they find inconvenient. But beyond X v. Media Matters, Musk has already negatively impacted the legal landscape—through the lesser-known arbitration agreements that he forces on employees at Tesla and X Corp., formerly Twitter.
On September 30, for instance, United States District Judge Haywood Gilliam handed Tesla and Elon Musk a legal victory in Musk’s continuing war of attrition through arbitration.
It is often to corporations’ advantage to make the arbitration process as lengthy and as expensive to the individuals involved as possible.
The plaintiffs in Matsko v. Tesla, Inc., et al are owners of Tesla vehicles who filed a class action suit against the company for its repeated “false statements indicating that its ADAS [advanced driver assistance systems] technology was on the precipice of delivering fully self-driving cars,” as well as alleging that the “ADAS system is unsafe and has led to accidents, injuries, and deaths.”
Judge Gilliam ordered that the owners should not be allowed to sue the company in court, but instead must abide by arbitration agreements they signed when purchasing their cars in order to seek individual, arbitrated resolutions to their grievances.
Because Tesla sells its vehicles directly to consumers, rather than through dealerships, it is able to dictate the terms of the purchase contracts it makes buyers sign. Currently, the purchase contract includes an arbitration clause that states, effectively, that owners are not allowed to pursue individual or class action lawsuits against the company, but must seek redress through individual arbitration cases.
Arbitration, a method of judging disputes by a neutral third party, has been around for “thousands of years” and is often considered a valuable tool for private party dispute resolution. A 2019 survey found that members of the public still largely view the process of arbitration very favorably, and the majority of respondents felt confident that, through arbitration, “a dispute between you and a company would be fairly resolved.”
Research has indicated that consumer faith in fairly resolved arbitration processes might be misplaced, but the greater danger in the escalating use of arbitration in both consumer and employee cases is secrecy. Unlike class-action or other lawsuits, arbitration disputes and resolutions are typically kept private.
Paul Bland, executive director of the nonprofit legal advocacy organization Public Justice, has represented both consumers and workers in cases challenging such “forced arbitration.” As he tells The Progressive, the ubiquity of such arbitration has exploded largely because so many people are unaware of how corporations use it as a legal tool. Bland, however, is very aware of what arbitration can mean for individuals: It means that “they can’t go to court or have their case heard by a jury if the corporation breaks the law and hurts them; that the arbitrators are overwhelmingly favorable to corporations over people; that the system is secretive.”
In the Matsko case, Judge Gilliam ordered that the plaintiffs had been offered an opportunity to opt out of the arbitration clause in their Tesla purchase contracts (the arbitration agreement states that consumers must send a letter with specific product information, within thirty days of purchase, to Tesla, Inc., in Fremont, California), but had failed to do so. One of the plaintiffs had, in fact, opted out of the arbitration clause at the time of the purchase, but his claim was dismissed because he had waited too long to sue.
Tesla is not the only company controlled by Musk that makes masterful use of the arbitration process.
In August 2023, it was revealed that more than 2,200 former employees of X were attempting to bring arbitration cases against X and Musk for the sweeping changes he made after taking over the platform. (Musk told the BBC in April 2023 that he had laid off more than 6,000 employees at Twitter since his takeover.) Many of those laid-off employees are charging that X failed to pay for their severance packages after their employment was terminated, and that X and Musk have delayed the arbitration process by refusing to pay the necessary filing fees.
It is ironic that X’s manipulation of the arbitration process has come to light thanks to two recent court filings. In Ma v. Twitter, Inc. (filed on July 3, 2023), plaintiff Fabien Ho Ching Ma petitioned the court to compel Twitter to arbitrate his and others’ employment cases because “Twitter has refused to engage in arbitration—despite having compelled employees to arbitrate their claims.”
In a similar case, Woodfield v. Twitter, X. Corp., and Elon Musk (filed July 18, 2023), former senior staff network engineer Chris Woodfield has argued that, after his position was cut, Twitter (renamed as X) failed to pay him the severance it had promised. It has been reported in multiple news stories that the cost to X to file all those arbitration cases would cost in excess of $3.5 million.
In refusing to pay filing fees and otherwise hindering the process of the 2,200 former Twitter employees to have their grievances addressed in arbitration, Musk is following an arbitration playbook that seems to depend on drawing disputes out rather than resolving them more efficiently (as arbitration is often considered to do).
In the case of at least one former Tesla employee, Cristina Balan, pursuing her case in arbitration for wrongful termination emphatically did not make for an efficient or quickly resolved case. Balan, who worked at Tesla as an automotive engineer, was so instrumental in developing the battery pack for the early Model S sedan that the company incorporated her initials into its design as a tribute.
In 2014, Tesla employees were encouraged, by Musk, to contact him directly with any concerns they had about the company or its engineering. Balan took him at his word and asked to meet with him about several quality control issues. In response to that whistleblowing, she was forced to resign from Tesla in 2014 and filed her first arbitration claim, for wrongful termination (among other issues), in 2015. Those proceedings were eventually decided in her favor, and in 2017 Tesla was ordered to pay her $320,000.
Musk is effectively leveraging some of the most old-fashioned legal tactics around to consolidate his power.
While that arbitration case was still being decided, Balan’s story was told in a 2017 Huffington Post article. After it was published, Tesla took the additional step of writing a rebuttal to the article, demanding that it be published along with the original article text. That statement included numerous workplace charges against Balan and were serious enough that Balan felt compelled to file a defamation suit against Tesla in order to preserve her professional reputation.
Balan’s case is complicated and has been documented extensively by Russ Mitchell in the L.A. Times. Her case has also been lengthy. Her suit against Tesla continues, even though in 2022 she was diagnosed with an aggressive form of breast cancer and has had to spend much of her time pursuing treatment. She is currently seeking a new lawyer, as she must submit her next brief in the ongoing arbitration suit by January 16, 2024.
In speaking with The Progressive about her arbitration cases with Tesla, which have now dragged on for more than eight years, Balan highlights the power granted corporations to hide their legal proceedings in private arbitrations. Even though Tesla’s allegedly defamatory remarks about Balan were made in an online publication, she was ordered to pursue the case in arbitration because the accusations made referred to her performance at work, and had “some direct relationship” with her employment, making her still bound by her original employment arbitration agreement with Tesla.
This, according to Balan, sets a dangerous legal precedent in favor of corporations.
“What Tesla did by sending me back to arbitration,” Balan told The Progressive, is that “they made it a precedent that any company in America can come after any employee, for life.”
It is often to corporations’ advantage to make the arbitration process as lengthy and as expensive to the individuals involved as possible, and X is illustrating this by the way it is responding to the thousands of arbitration requests it is currently facing. By simply refusing to pay arbitration filing fees–for which it has many legal arguments—it is working to ensure that it will outlast individual employees who may not have the time or resources to pursue seemingly endless cases.
Even after arbitration cases are allowed to move forward, they are not typically won by employees. In a 2015 report on the subject, the Economic Policy Institute noted that employees bound by arbitration clauses are not often successful in actual arbitration: “Employee win rates in mandatory arbitration are much lower than in either federal court or state court, with employees in mandatory arbitration winning only just about a fifth of the time.” Bland, of Public Justice, further notes in speaking with The Progressive that, in addition to favoring corporations over individuals, “there is no meaningful judicial review of an arbitrators’ decision, even if the decisions are badly wrong.”
Musk’s fans, in spite of all the recent news, will most likely continue to view him as an unfairly maligned genius, while his critics will increasingly dismiss him for becoming deranged. Following the various legal cases (the ones in open court, that members of the public are allowed to follow) of both Tesla and X Corp., however, will reveal a different truth.
By forcing both consumers and employers to pre-emptively sign away their rights to public court cases, and delaying any arbitration cases they do attempt to bring, Musk is effectively (and surprisingly quietly) leveraging some of the most old-fashioned legal tactics around to consolidate his power while simultaneously obliterating consumer and worker protections.