Musk Defends $500 Million Twitter Severance Suit Win on Appeal

Elon Musk and X Corp. urged the Ninth Circuit to reject an appeal by laid-off Twitter Inc. employees, saying their case failed because the social media platform didn’t offer a severance plan governed by ERISA.

The workers haven’t identified any plan documents shared with Twitter employees or other communications that could establish the existence of a benefit plan governed by the Employee Retirement Income Security Act, Musk and Twitter successor X told the US Court of Appeals for the Ninth Circuit in a Thursday brief. This is fatal to their proposed class action, which seeks more than $500 million in severance payments on behalf of thousands of former employees, the defendants said.

In particular, the workers can’t establish an ERISA plan by pointing to a confidential and privileged “severance matrix” that plaintiff Courtney McMillian “improperly took” when she left the company, the defendants said. The workers are attempting to establish an ERISA plan by coupling that matrix with a handful of corporate communications, but those documents at most show that some Twitter workers were offered a single lump sum severance payment that doesn’t qualify as an ERISA scheme, the defendants said.

“Plaintiffs do not identify any formal plan documents, such as summary plan descriptions, or any other communications disseminated to Twitter employees before the announcement of Musk’s proposed acquisition to support their contention that Twitter established an ERISA plan in 2019,” they said. “In fact, Plaintiffs argued to the district court that Twitter ‘kept the Plan largely secret until the day’ the proposed acquisition was announced.”

The lawsuit says about 6,000 former Twitter employees were wrongly denied benefits under the company’s severance plan, which workers say provides payments as high as six months’ base pay plus one additional week of pay for each full year of service. A California federal judge last year granted the defendants’ motion to dismiss, which argued there’s “no such thing” as a Twitter severance plan governed by ERISA, saying the workers didn’t show the existence of an ongoing administrative scheme that required sufficient discretion to administer.

The workers appealed to the Ninth Circuit, receiving support from the US Department of Labor. According to the department’s amicus brief, the Twitter severance policy qualifies for ERISA coverage because it pays benefits on an ongoing basis, regardless of whether it requires “particularized discretion” to administer.

Former Twitter employees have filed multiple severance lawsuits against X and Musk since his 2022 acquisition of the platform. A lawsuit filed by former chief executive officer Parag Agrawal and other high-ranking officers was allowed to advance last year.

Sanford Heisler Sharp McKnight LLP represents McMillian and the workers. Morgan, Lewis & Bockius LLP represents the defendants.

The case is McMillian v. Musk, 9th Cir., No. 24-5045, brief 1/9/25.