X Corp Faces Legal Blow as Federal Judge Rules Breach of Contract

X Corp, formerly known as Twitter, was found to have breached contracts by neglecting to fulfil commitments of millions of dollars in bonuses to its employees, according to a ruling by a federal judge.

Mark Schobinger, who served as Twitter’s senior director of compensation until his departure from Elon Musk’s company in May, filed a lawsuit in June alleging breach of contract.

Schobinger’s legal action contended that both before and after Elon Musk’s acquisition of Twitter last year, the company assured employees of a 50% payout of their 2022 target bonuses, which, however, was never executed.

In rejecting Twitter’s motion to dismiss the case, U.S. District Judge Vince Chhabria determined that Schobinger had plausibly asserted a breach of contract claim under California law and that he was entitled to a bonus based on the company’s bonus plan.

“Once Schobinger did what Twitter asked, Twitter’s offer to pay him a bonus in return became a binding contract under California law. And by allegedly refusing to pay Schobinger his promised bonus, Twitter violated that contract,” wrote the judge.

X Corp no longer maintains a media relations office, and the company did not immediately respond to a request for comment through its X account outside of business hours.

Twitter’s legal representatives contended that the company had only made an oral promise that did not constitute a contract, and they argued that Texas law should apply.

However, the judge ruled in favor of California law governing the case, stating that “Twitter’s contrary arguments all fail.”

Since Elon Musk’s acquisition of the company and subsequent reduction of more than half its workforce, X Corp has faced numerous lawsuits from former employees and executives.

These legal actions allege various claims, including discrimination against older employees, women, and workers with disabilities, as well as failure to provide advance notice of mass layoffs. The company denies any wrongdoing.