Musk’s battle with former Twitter execs intensifies as X value reaches new low.
Former Twitter executives, including former CEO Parag Agrawal, are urging a court to open discovery in a dispute over severance and other benefits they allege they were wrongfully denied after Elon Musk took over Twitter in 2022.
According to the former executives, they've been blocked for seven months from accessing key documents proving they're owed roughly $200 million under severance agreements that they say Musk willfully tried to avoid paying in retaliation for executives forcing him to close the Twitter deal. And now, as X's value tanks lower than ever—reportedly worth 80 percent less than when Musk bought it—the ex-Twitter leaders fear their severance claims "may be compromised" by Musk's alleged "mismanagement of X," their court filing said.
The potential for X's revenue loss to impact severance claims appears to go beyond just the former Twitter executives' dispute. According to their complaint, "there are also thousands of non-executive former employees whom Musk terminated and is now refusing to pay severance and other benefits" and who have "sued in droves."
In some of these other severance suits, executives claimed in their motion to open discovery, X appears to be operating more transparently, allowing discovery to proceed beyond what has been possible in the executives' suit.
But Musk allegedly has "special ire" for Agrawal and other executives who helped push through the Twitter buyout that he tried to wriggle out of, executives claimed. And seemingly because of his alleged anger, X has "only narrowed the discovery" ever since the court approved a stay pending a ruling on X's motion to drop one of the executives' five claims. According to the executives, the court only approved the stay of discovery because it was expecting to rule on the motion to dismiss quickly, but after a hearing on that matter was vacated, the stay has remained, helping X's alleged goal to prolong the litigation.
To get the litigation back on track for a speedier resolution before Musk runs X into the ground, the executives on Thursday asked the court to approve discovery on all claims except the claim disputed in the motion to dismiss.
"Discovery on those topics is inevitable, and there is no reason to further delay," the executives argued.
The executives have requested that the court open discovery at a hearing scheduled for November 15 to prevent further delays that they fear could harm their severance claims.
Neither X nor a lawyer for the former Twitter executives, David Anderson, could immediately be reached for comment.
X’s fight to avoid severance payments
In their complaint, the former Twitter executives—including Agrawal as well as former Chief Financial Officer Ned Segal, former Chief Legal Officer Vijaya Gadde, and former general counsel Sean Edgett—alleged that Musk planned to deny their severance to make them pay for extra costs that they approved that clinched the Twitter deal.
They claimed that Musk told his official biographer, Walter Isaacson, that he would "hunt every single one of" them "till the day they die," vowing "a lifetime of revenge." Musk supposedly even "bragged" to Isaacson about "specifically how he planned to cheat Twitter’s executives out of their severance benefits in order to save himself $200 million."
Under their severance agreements, the executives could only be denied benefits if terminated for "cause" under specific conditions, they said, none of which allegedly applied to their abrupt firings the second the merger agreement was signed.
"'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,'" their complaint noted.
Musk attempted to "manufacture" "ever-changing theories of cause," they claimed, partly by claiming that "success" fees paid to the law firm that defeated Musk's suit attempting to go back on the deal constituted "gross negligence" or "willful misconduct."
According to Musk's motion to dismiss, the former executives tried to "saddle Twitter, and by extension the many investors who acquired it, with exorbitant legal expenses by forcing approximately $100 million in gratuitous payments to certain law firms in the final hours before the Twitter acquisition closed." Musk had a huge problem with this, the motion to dismiss said, because the fees were paid despite his objections.
On top of that, Musk considered it "gross negligence" or "willful misconduct" that the executives allegedly paid out retention bonuses that Musk also opposed. And perhaps even more egregiously, they allowed new employees to jump onto severance plans shortly before the acquisition, which "generally" increased the "severance benefits available to these individuals by more than $50 million dollars," Musk's motion to dismiss said.
Musk was particularly frustrated by the addition of one employee who allegedly "already decided to terminate and another who was allowed to add herself to one of the Plans—a naked conflict of interest that increased her potential compensation by approximately $15 million."
But former Twitter executives said they consulted with the board to approve the law firm fees, defending their business decisions as "in the best interest of the company," not "Musk's whims."
"On the morning" Musk acquired Twitter, "the Company’s full Board met," the executives' complaint said. "One of the directors noted that it was the largest stockholder value creation by a legal team that he had ever seen. The full Board deliberated and decided to approve the fees."
Further, they pointed out, "the lion’s share" of those legal fees "was necessitated only by Musk’s improper refusal to close a transaction to which he was contractually bound."
"If Musk felt that the attorneys’ fees payments, or any other payments, were improper, his remedy was to seek to terminate the deal—not to withhold executives’ severance payments," their complaint said.
Reimbursement or reinstatement may be sought
To force Musk's hand, executives have been asking X to share documents, including documents they either created or received while working out the Twitter buyout. But X has delayed production—sometimes curiously claiming that documents are confidential even when executives authored the documents or they've been publicly filed in other severance disputes, executives alleged.
Executives have called Musk's denial of severance "a pointless effort that would not withstand legal scrutiny," but so far discovery in their lawsuit has not even technically begun. While X has handed over incomplete submissions from its administrative process denying the severance claims, in some cases, X has "entirely refused" to produce documents, they claimed.
They're hoping once fact-finding concludes that the court will agree that severance benefits are due. That potentially includes stock vested at the price of Twitter on the day that Musk acquired it, $44 billion—a far cry from the $9 billion that X is estimated to be valued at today.
In a filing opposing Musk's motion to dismiss, the former executives noted that they're not required to elect their remedies at this stage of the litigation. While their complaint alleged they're owed vested stock at the acquisition value of $44 billion, their other filing suggested that "reinstatement is also an available remedy."
Neither option would likely appeal to Musk, who appears determined to fight all severance disputes while scrambling for nearly two years to reverse X's steady revenue loss.
Since his firing, Agrawal has won at least one of his legal battles with Musk, forcing X to reimburse him for $1.1 million in legal fees. But Musk has largely avoided paying severance as lawsuits pile up, and Agrawal is allegedly owed the most, with his severance package valued at $57 million.
Last fall, X agreed to negotiate with thousands of laid-off employees, but those talks fell through without a settlement reached. In June, Musk defeated one severance suit that alleged that Musk owed former Twitter employees $500 million. But employees involved in that litigation can appeal or join other disputes, the judge noted.
For executives, a growing fear is seemingly that Musk will prolong litigation until X goes under. Last year, Musk bragged that he saved X from bankruptcy by cutting costs, but experts warned that lawsuits piling up from vendors—which Plainsite is tracking here—could upend that strategy if Musk loses too many.
"Under Musk’s control, Twitter has become a scofflaw, stiffing employees, landlords, vendors, and others," executives' complaint said. "Musk doesn’t pay his bills, believes the rules don’t apply to him, and uses his wealth and power to run roughshod over anyone who disagrees with him."
Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.
