Former Twitter execs sue Elon Musk over severance payments

Mar 4, 2024, 5:43 PM

FILE - Left to right, clockwise: Twitter former executives Vijaya Gadde, Parag Agrawal, Ned Segal, ...

FILE - Left to right, clockwise: Twitter former executives Vijaya Gadde, Parag Agrawal, Ned Segal, Sean Edgett, who have filed a lawsuit against Elon Musk over severance payments they say they are due. (Andrew Harnik, Associated Press; Kevin Dietsch, Patrick T. Fallon, and Martina Albertazzi, Bloomberg/Getty Images)

(Andrew Harnik, Associated Press; Kevin Dietsch, Patrick T. Fallon, and Martina Albertazzi, Bloomberg/Getty Images)

New York (CNN)A group of former Twitter executives sued Elon Musk on Monday in a bid to recover more than $128 million in severance that they allege Musk has not paid since he acquired the company, now called X, more than a year ago.

The executives include former Twitter CEO Parag Agrawal, former CFO Ned Segal, former Chief Legal Officer Vijaya Gadde and former General Counsel Sean Edgett — all of whom were fired within hours after Musk took control of Twitter.

The lawsuit alleges that Musk declined to make the severance payments as a form of “revenge” against the executives after he was forced to go through with the $44 billion acquisition deal, which he had spent months trying to get out of.

“Because Musk decided he didn’t want to pay Plaintiffs’ severance benefits, he simply fired them without reason, then made up fake cause and appointed employees of his various companies to uphold his decision,” the complaint, filed Monday in the US District Court for the Northern District of California, states. “He claimed in his termination letters that each Plaintiff committed ‘gross negligence’ and ‘willful misconduct’ without citing a single fact in support of this claim.”

X did not immediately respond to a request for comment.

Monday’s lawsuit is just the latest legal action brought by former Twitter employees related to Musk’s acquisition. One lawsuit brought by a former Twitter human resources leader in July, seeking class action status, seeks an order for Musk and the company to pay additional severance benefits allegedly owed to former employees in an amount no less than $500 million. The company has also been accused of failing to pay annual bonuses to employees laid off after Musk’s takeover.

Agrawal, Gadde and Segal also previously sued Musk to recover more than $1 million in legal fees they said they were owed; the company was ordered to pay the fees in a Delaware Chancery Court ruling last year.

Musk and X have also faced lawsuits from vendors, landlords and business partners who claim the company has failed to pay what they are owed.

“Musk’s refusal to pay Plaintiffs is part of a larger pattern and practice of failing to comply with his payment obligations,” the former executives claimed in Monday’s lawsuit.

Evidence from a biography

A key focus of Monday’s lawsuit is an anecdote reported in the Musk biography published by journalist Walter Isaacson last year.

The complaint cites the anecdote as evidence Musk intentionally sought to “cheat” the former executives out of what they were contractually owed, quoting the biography’s account of the moments leading up to Musk closing the Twitter acquisition in October of 2022.

In the narrative, Musk reportedly claimed that closing the deal on Thursday, October 27 — a day before the scheduled close — and firing Agrawal and the other executives immediately would prevent them from resigning and claiming their severance benefits, saving the company an estimated $200 million.

Closing the deal so quickly forced Agrawal to scramble to send his own letter of resignation, but it was too late, according to the account; Agrawal had already been fired and his access to email revoked.

Musk’s apparent gambit to head off the severance obligations violated federal labor laws, the lawsuit alleges, because the reasons Musk cited for firing Agrawal and others do not stand up to scrutiny.

“’Cause’ under the severance plans is limited to extremely narrow circumstances, such as being convicted of a felony or committing ‘gross negligence’ or ‘willful misconduct,’” the lawsuit said. “’Cause’ is not ‘Board-approved business decisions that Musk dislikes’ from the time before he owned the company.”

According to the complaint, Musk’s termination letters to some of the executives explained that the source of their misconduct was a failure to cooperate with a government or internal investigation of Twitter, but the letters did not substantiate those allegations.

The former executives claim they spent months trying to obtain the severance payments from X prior to filing the lawsuit but allege that the company and its leaders “have withheld documents and taken other actions designed to inhibit Plaintiffs’ presentation of their claims.”

In addition to the severance payments themselves, the lawsuit also seeks a court order forcing Musk to make interest payments on the allegedly unpaid amounts, as well as a penalty for Musk’s alleged failure to send the executives legally required plan documents associated with their benefits.

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Former Twitter execs sue Elon Musk over severance payments