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’s Tesla company in 2023, the year Musk filed the suit, according to financial disclosure reports recently made public.
In August, NPR reported that U.S. District Judge Reed O’Connor of the Northern District of Texas had made an investment in Tesla of between $15,001 and $50,000. O’Connor 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 a 2022 financial disclosure form required of all federal judges. But questions remained about whether the judge could have later sold his stock in Tesla — and if so, whether that happened before or after O’Connor accepted the Media Matters case in November 2023.
While Tesla is not directly part of Musk’s Media Matters suit, legal ethics experts called on O’Connor to recuse himself from the case, since the outcome of a lawsuit involving one of Musk’s 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 newly public financial disclosure form filed with the Administrative Office of the U.S. Courts covering 2023’s calendar year shows that O’Connor 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’Connor bought Tesla stock in January, sold some in June, and bought again in September.
According to that filing, O’Connor 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 federal laws that require recusal when a judge or family member can financially benefit from the outcome of a case.
“The relevant question is whether the Tesla stock price could be substantially affected by the outcome of this case,” said Painter, adding that while any such effect remains uncertain, “it possibly could if Musk’s reputation is both at issue in the case and important to Tesla's stock price.”
Neither O’Connor 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’Connor.
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’s litigation in a friendly court.
“For X to say we want all of our litigation to go into a forum that may have no connection to where we’re located, to where plaintiffs are located, runs headlong into the federal system’s preference for convenience,” Vladeck said. “Are 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?”
O'Connor denies 'interested parties' disclosure request
In their lawsuit, Musk’s legal team claims Media Matters produced an “intentionally deceptive report” highlighting neo-Nazi content on X, which helped set in motion an advertiser boycott of the platform.
In August, O’Connor rejected Media Matters’ attempt to dismiss the complaint, ruling that Musk’s lawyers had sufficiently argued that the group had acted with “actual malice.” That provided momentum to X’s attorneys, who had also received approval from O’Connor 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’Connor’s Tesla investment. Evidence in the case, Media Matters contends, including potential testimony by Musk himself, could affect Tesla’s stock price.
O’Connor dismissed this request, ruling that his Tesla stock is not relevant to the case.
“First, there is no evidence that shows Tesla has a direct financial interest in the outcome of this case,” O’Connor wrote. “Tesla 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.”
In addition to siding with Musk, O'Connor ordered that Media Matters pay X's legal fees over the disclosure request. O'Connor called it an attempt to "force a backdoor recusal," the judge wrote. "Gamesmanship of this sort is inappropriate."
In August, O’Connor did recuse 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’Connor’s district since X has users in Texas.
O’Connor’s involvement in the Musk cases has led to criticism over alleged “judge shopping,” or the practice of filing a suit in a district in which a litigant hopes for a favorable outcome.
“It’s particularly extreme,” Jennifer Ahearn, senior counsel for the Brennan Center's Judiciary Program, told NPR in August about judge shopping in northern Texas. “It has become a problem for the judiciary in a way that it hasn’t been in the past.”
In remarks O’Connor delivered recently at a Fort Worth, Texas, conference for the conservative group the Federalist Society, O’Connor nodded to the controversy.
“I 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,” O’Connor told conference attendees.
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