OpenAI and Microsoft Lose Bid to Dismiss Musk Lawsuit, Trial Set for April
Federal Judge Yvonne Gonzalez Rogers rejected OpenAI and Microsoft's requests to dismiss Elon Musk's lawsuit alleging breach of charitable trust and fraud. The court found Musk has legal standing to enforce charitable conditions on his $38 million donation despite using an intermediary. Internal emails from OpenAI co-founder Greg Brockman suggesting potential deception about nonprofit commitment will be examined at the April jury trial. While dismissing unjust enrichment claims against Microsoft, the judge found sufficient evidence that the software giant had knowledge of potential wrongdoing to warrant jury consideration.
*this image is generated using AI for illustrative purposes only.
A federal judge has denied OpenAI and Microsoft's attempts to avoid a jury trial over Elon Musk's allegations that the artificial intelligence startup abandoned its charitable mission when it accepted billions in funding and restructured as a for-profit entity. The ruling sets the stage for a high-profile legal battle between former business partners turned rivals in the AI industry.
Court Rejects Dismissal Motions
US District Judge Yvonne Gonzalez Rogers in Oakland, California rejected the companies' dismissal requests on Thursday and ordered the case to proceed to trial scheduled for late April. The judge found that Musk, who helped launch OpenAI in 2015 before founding competing AI company xAI in 2023, has sufficient legal standing to challenge the company's transformation.
| Legal Claim | Court Decision | Key Finding |
|---|---|---|
| Breach of Charitable Trust | Denied Dismissal | Musk has standing despite using intermediary |
| Fraud Allegations | Denied Dismissal | Internal emails show potential deception |
| Microsoft Unjust Enrichment | Granted Dismissal | No quasi-contractual relationship established |
| Microsoft Knowledge of Wrongdoing | Denied Dismissal | Sufficient evidence for jury consideration |
Charitable Trust Claims Survive
Judge Gonzalez Rogers refused to dismiss Musk's core accusation that OpenAI breached its promise to operate as a charitable trust. She noted that while evidence remains unclear, Musk claims his contributions had "a specific charitable purpose" with two fundamental conditions: that OpenAI remain open source and maintain its nonprofit status, consistent with the company's original charter and mission.
The court rejected OpenAI's argument that Musk's use of an intermediary to donate $38 million in seed funding strips him of legal standing to enforce those charitable conditions. "Holding otherwise would significantly reduce the enforcement of a large swath of charitable trusts, contrary to the modern trend," the judge wrote.
Internal Communications Reveal Doubts
The judge's decision to allow fraud allegations to proceed centered on internal communications from OpenAI co-founder Greg Brockman. In September 2017, Brockman emailed Musk expressing his desire to "continue with the non-profit structure" of OpenAI.
However, two months later, Brockman wrote in a private note: "cannot say that we are committed to the non-profit. don't want to say that we're committed. if three months later we're doing b-corp then it was a lie." The judge determined these communications raise sufficient questions about potential deception to warrant jury consideration.
Microsoft's Role Under Scrutiny
While the court dismissed Musk's claim that Microsoft "unjustly" enriched itself at his expense, citing the lack of a quasi-contractual relationship between Musk and the software giant, other allegations against Microsoft will proceed to trial. Judge Gonzalez Rogers found that Musk presented "considerable evidence raising a triable issue of fact that Microsoft had actual knowledge beyond vague suspicion of wrongdoing."
The jury will ultimately decide whether Microsoft helped OpenAI breach its responsibilities to donors like Musk when the companies formed their multibillion-dollar partnership.
Company Responses and Background
OpenAI dismissed the lawsuit in a statement, calling it "baseless and a part of his ongoing pattern of harassment." The company, maker of ChatGPT and recently valued at $500 billion, announced its restructuring in October, granting Microsoft a 27% ownership stake while keeping the nonprofit arm in control of for-profit operations.
| OpenAI Restructuring Details | Information |
|---|---|
| Company Valuation | $500 billion |
| Microsoft Ownership Stake | 27% |
| Restructuring Announcement | October |
| New Structure | Public benefit corporation |
| Control Mechanism | Nonprofit arm oversees for-profit operations |
The transformation fulfilled CEO Sam Altman's long-held objective to operate as a public benefit corporation. OpenAI previously rejected Musk's unsolicited $97.4 billion bid to acquire the nonprofit's assets, with Altman denouncing the lawsuit as weaponization of the legal system to slow down a competitor.
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