Updated October 17, 2024 at 18:16 PM ET
A federal judge in Texas overseeing a high-profile lawsuit filed by billionaire Elon Musk against the watchdog group Media Matters was buying and selling stock in Musk鈥檚 Tesla company in 2023, the year Musk filed the suit, according to financial disclosure reports recently made public.
In August, that U.S. District Judge Reed O鈥機onnor of the Northern District of Texas had made an investment in Tesla of between $15,001 and $50,000. O鈥機onnor has delivered a string of decisions in the Media Matters lawsuit in favor of Musk, who argues the advocacy group disparaged X, his social media site.
That investment was revealed in required of all federal judges. But questions remained about whether the judge could have later sold his stock in Tesla 鈥� and if so, whether that happened before or after O鈥機onnor accepted the Media Matters case in November 2023.
While Tesla is not directly part of Musk鈥檚 Media Matters suit, legal ethics experts himself from the case, since the outcome of a lawsuit involving one of Musk鈥檚 companies could, in turn, have an effect on the stock value of another part of his empire, including electric vehicle company Tesla, which represents the majority of his wealth.
But a form filed with the Administrative Office of the U.S. Courts covering 2023鈥檚 calendar year shows that O鈥機onnor bought and sold Tesla stock that year, with his position in Tesla still totaling up to $50,000. All three transactions were made before November: O鈥機onnor bought Tesla stock in January, sold some in June, and bought again in September.
According to that filing, O鈥機onnor did not make any Tesla transactions that year after taking the case in November. He has not bought or sold Tesla stock in the first few months of 2024, according to the most recent publicly available financial disclosures.
Richard Painter, an ethics expert at the University of Minnesota Law School, pointed to that require recusal when a judge or family member can financially benefit from the outcome of a case.
鈥淭he relevant question is whether the Tesla stock price could be substantially affected by the outcome of this case,鈥� said Painter, adding that while any such effect remains uncertain, 鈥渋t possibly could if Musk鈥檚 reputation is both at issue in the case and important to Tesla's stock price.鈥�
Neither O鈥機onnor nor Media Matters returned a request for comment.
In a recent update to its terms of service, which will take effect on November 15th, X indicated that it wants to keep legal fights with its users in the court that includes O鈥機onnor.
According to the update, all legal disputes are to be filed in the federal court for the Northern District of Texas or state court in Tarrant County outside of Dallas, even though the headquarters for X is the Austin area, which is covered by the federal court for Western Texas.
Steve Vladeck, a legal ethics expert and a law professor at Georgetown University, said the terms of service update appears to be an attempt to keep X鈥檚 litigation in a friendly court.
鈥淔or X to say we want all of our litigation to go into a forum that may have no connection to where we鈥檙e located, to where plaintiffs are located, runs headlong into the federal system鈥檚 preference for convenience,鈥� Vladeck said. 鈥淎re we going to allow companies to override that principle of convenience in the name of trying to stack the deck in their favor whenever they have the power to get you to agree to terms of service?鈥�
O'Connor denies 'interested parties' disclosure request
In their lawsuit, Musk鈥檚 legal team claims Media Matters produced an 鈥渋ntentionally deceptive report鈥� highlighting neo-Nazi content on X, which helped set in motion an advertiser boycott of the platform.
In August, O鈥機onnor rejected Media Matters鈥� attempt to dismiss the complaint, ruling that Musk鈥檚 lawyers had sufficiently argued that the group had acted with 鈥渁ctual malice.鈥� That provided momentum to X鈥檚 attorneys, who had also received approval from O鈥機onnor to begin the process of requesting thousands of pages of internal documents from Media Matters.
Just before that ruling, Media Matters asked that X reveal all parties that could have a financial interest in the outcome of the case, noting O鈥機onnor鈥檚 Tesla investment. Evidence in the case, Media Matters contends, including potential testimony by Musk himself, could affect Tesla鈥檚 stock price.
O鈥機onnor dismissed this request, ruling that his Tesla stock is not relevant to the case.
鈥淔irst, there is no evidence that shows Tesla has a direct financial interest in the outcome of this case,鈥� O鈥機onnor . 鈥淭esla neither directly nor indirectly holds equity in X, Tesla is not a director or advisor, and it does not participate in the affairs of X.鈥�
In addition to siding with Musk, O'Connor ordered that Media Matters pay X's legal fees over the disclosure request. O'Connor an attempt to "force a backdoor recusal," the judge wrote. "Gamesmanship of this sort is inappropriate."
In August, O鈥機onnor himself on a separate Musk case against the World Federation of Advertisers. The judge is an investor in Unilever, one of the defendants in the case.
But he did not step aside from the Media Matters lawsuit.
None of the parties in either Musk suit are based in Texas, but lawyers for Musk wrote in filings that the cases were filed in O鈥機onnor鈥檚 district since X has users in Texas.
O鈥機onnor鈥檚 involvement in the Musk cases has led to criticism over alleged 鈥渏udge shopping,鈥� or the practice of filing a suit in a district in which a litigant hopes for a favorable outcome.
鈥淚t鈥檚 particularly extreme,鈥� Jennifer Ahearn, senior counsel for the Brennan Center's Judiciary Program, told NPR about judge shopping in northern Texas. 鈥淚t has become a problem for the judiciary in a way that it hasn鈥檛 been in the past.鈥�
In remarks O鈥機onnor delivered recently at a Fort Worth, Texas, conference for the conservative group the Federalist Society, O鈥機onnor to the controversy.
鈥淚 am confident you will find that Fort Worth is a very welcoming city. And, no, I don't mean for judge shopping, as some like to think,鈥� O鈥機onnor told conference attendees.
Copyright 2024 NPR
