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A federal judge who bought more than $15,000 in Tesla stock has rejected a motion that could have forced Elon Musk’s X Corp. to remove itself from a lawsuit it filed against the nonprofit Media Matters for America.
According to financial disclosure reports, U.S. District Judge Reed O’Connor of the Northern District of Texas purchased between $15,001 and $50,000 worth of Tesla stock in 2022. He oversaw two lawsuits brought by X but recused himself from only one of them.
In a court filing in July, Media Matters argued that Company X should disclose Tesla as a “party in interest” in the lawsuit because of Musk’s public ties to the Tesla brand. O’Connor dismissed Media Matters’ motion in her decision on Friday.
Judge O’Connor wrote that a financial interest “means the ownership of a legal or equitable interest, however small, or a relationship as a director, advisor, or other active participant in a party’s affairs.” In her ruling, she said that test was not met in this case and accused Media Matters of maneuvering.
“Defendants have failed to show that X’s alleged relationship with Tesla meets this standard. Instead, Defendants appear to be attempting to force the removal of Defendants through the back door through motions to compel. This type of maneuvering is improper and contrary to the rules of the Northern District of Texas.”
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O’Connor’s ruling came three days after she withdrew from a similar lawsuit brought by Company X, which accused the World Federation of Advertisers and several large companies of illegal boycotts. Antitrust professors have called Company X’s arguments weak.
O’Connor did not explain why he decided to withdraw, but it is clear that it was not because of Tesla’s stock. O’Connor also has investments in Unilever, one of the defendants in the X advertising lawsuit. Since Unilever is directly involved in the lawsuit, O’Connor’s decision to withdraw was likely due to Unilever’s investment.
Musk’s lawsuit against Media Matters is also tied to X’s problems with advertisers fleeing the platform formerly known as Twitter. Media Matters published findings that showed ads on X were running next to pro-Nazi content, and the lawsuit blames the group for X’s advertising losses.
The federal Code of Conduct for Judges states that “a judge shall disqualify himself or herself from any proceeding in which his or her impartiality may reasonably be questioned,” including when the judge has a direct financial interest or “any other interest that may be materially affected by the outcome of the proceeding.”
Harvard Law School professor Noah Feldman has argued that O’Connor should recuse herself from the lawsuit, X v. Media Matters. Though X and Tesla are legally separate companies, Feldman wrote in a Bloomberg Opinion piece last week that O’Connor should recuse herself from the case because “impartiality may legitimately be called into question.”
“The basic idea is that if a reasonable person who knows the relevant facts believes a judge is biased, the judge should recuse himself or herself. And there is good reason to believe that this rule applies in O’Connor,” Feldman wrote. “Because Musk has such close ties to both X and Tesla, one could argue that Tesla’s stock price is sensitive to X’s performance.”
