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A federal judge who bought more than $15,000 worth of Tesla stock has denied a motion that could have forced him to withdraw from a lawsuit brought by Elon Musk's X Corp. against the nonprofit Media Matters for America.
U.S. District Judge Reed O’Connor of the Northern District of Texas bought Tesla shares worth between $15,001 and $50,000 in 2022, a financial disclosure report shows. He oversaw two lawsuits filed by X, recusing himself from only one of the cases.
Media Matters argued in a July court filing that Tesla should be disclosed by X as an “interested party” in the case because of Musk’s public association with the Tesla brand. O’Connor rejected Media Matters’ motion in a ruling issued Friday.
O'Connor wrote that financial interest “means ownership of a legal or equitable interest, however small, or a relationship as a director, advisor or other active participant in the affairs of a party.” He ruled that the standard was not met in this case and accused Media Matters of playing games:
Defendants failed to show facts that X's alleged connection to Tesla meets this standard. Instead, it appears that Defendants are attempting to enforce a backdoor recusal via their Motion to Compel. Such gamesmanship is improper and violates the Northern District of Texas Rules.
Judge must end case, writes law professor
O'Connor made the ruling three days after he withdrew from a similar lawsuit filed by X. In that case, X sued the World Federation of Advertisers (WFA) and several large companies, accusing them of an illegal boycott. Antitrust professors have described X's claims as weak.
O’Connor didn’t explain why he withdrew, but it seems clear it wasn’t because of his Tesla stock. O’Connor was also an investor in Unilever, one of the defendants in X’s advertising lawsuit. Given that Unilever is directly involved in the case, that’s likely the reason for O’Connor’s decision to withdraw.
Musk's case against Media Matters also relates to X's problem with advertisers fleeing the platform formerly known as Twitter. Media Matters published research into ads placed next to pro-Nazi content on X, and the lawsuit blames the group for X's ad losses.
The federal code of conduct for judges states that “a judge must disqualify himself or herself from any proceeding in which his or her impartiality could reasonably be questioned.” This includes cases in which the judge has a direct financial interest, and cases in which the judge has “any other interest that could be substantially affected by the outcome of the proceeding.”
Harvard Law School professor Noah Feldman argued that O'Connor should withdraw from the lawsuit. X v. Media AffairsWhile X and Tesla are legally separate entities, Feldman wrote in a Bloomberg Opinion article last week that O'Connor should resign because of that rule that “impartiality could reasonably be questioned.”
“The basic idea is that a judge should recuse himself if a reasonable person familiar with the relevant facts would believe that the judge has reason to be biased. And there is good reason to think that this rule covers O'Connor,” Feldman wrote. “Because Musk is so closely tied to both X and Tesla, Tesla's stock price is demonstrably affected by X's performance.”
