Judge Allows Elon Musk's Lawsuit Against OpenAI to Proceed, Narrowing Scope of Claims

Judge allows Elon Musk's lawsuit against OpenAI to move forward

Elon Musk's lawsuit against OpenAI and chief executive Sam Altman has taken a significant step towards trial after a California judge rejected the ChatGPT maker's attempt to dismiss the case. The ruling keeps the two billionaires on track for a legal showdown as they compete for primacy over increasingly powerful artificial intelligence. Musk, an OpenAI co-founder who donated much of the capital to get it off the ground, claims the group's ongoing efforts to convert from a non-profit to for-profit entity constitute a breach of contract and fraud. The Tesla chief filed a suit against Altman, OpenAI and the $300bn company's biggest backer, Microsoft, last year and sought a preliminary injunction to block OpenAI's conversion. A judge denied the request to block in March but also agreed to expedite the trial -- currently scheduled for March 2026 -- by holding back some of the claims in the original lawsuit. The judge, Yvonne Gonzalez Rogers of the Northern District of California, dismissed some aspects of the case on Thursday but concluded that Musk's lawyers had made sufficiently sound allegations for it to proceed. "In the world of litigation this is a big win," said a person close to Musk, emphasising that Gonzalez Rogers had retained a number of "big-ticket items", including Musk's argument that OpenAI engaged in fraud. "Musk adequately alleges that the defendants promised to maintain OpenAI's non-profit status and structure in order to obtain his contributions, and that they intended to do so in order to obtain the capital needed to create a for-profit venture to enrich themselves," the judge wrote in her ruling. Gonzalez Rogers also denied OpenAI's bid to dismiss Musk's claim that a contract existed between Musk and OpenAI. "Although there is no express contract, Musk adequately pleads in the alternative that there is an implied-in-fact contract," she wrote. OpenAI can appeal against the decision. The company is trying to simplify its novel corporate structure to become a for-profit public benefit corporation, in part to ensure it can more easily raise capital from outside investors. It is currently governed by a non-profit board with a mission to create powerful AI for the benefit of all humanity. Its efforts to convert to a for-profit have drawn criticism from former employees and AI experts including Geoffrey Hinton, Margaret Mitchell and Stuart Russell, who say the move would transfer control of the development of such tools to a company driven by profits. OpenAI declined to comment. The company countersued Musk last month, arguing that his efforts to derail its conversion were "bad-faith tactics to slow down OpenAI and seize control of the leading AI innovations for his personal benefit". Musk is the founder of xAI, which is developing similar technology to that of OpenAI. Microsoft did not immediately respond to a request for comment. Musk's legal team declined to comment.

OpenAI Can't Dodge Elon Musk's Fraud Claims in Restructuring Suit

Musk says OpenAI was created to develop AI for the good of humanity A judge narrowed claims in Elon Musk's lawsuit alleging that OpenAI broke its promise to function as a public charity by making plans to transform itself into a for-profit business. US District Judge Yvonne Gonzalez Rogers in Oakland, California, on Thursday ruled that the world's richest person can pursue fraud claims in the complaint he filed against OpenAI last year. She also declined to dismiss an unjust enrichment claim against OpenAI and Microsoft, a major investor in the startup. But she threw out claims of false advertising and breach of fiduciary duty claims against the startup. Both companies won dismissal of Musk's racketeering claims, but she gave the billionaire a chance to revise that allegation through an amended complaint. In response to a request for comment, an OpenAI spokesperson cited a social media post from last month saying that Musk's actions are an unlawful bid to curb the company's growth for the benefit of his rival startup, xAI, that he launched in 2023. A lawyer for Musk welcomed the ruling, saying it acknowledges his "serious allegations" that will proceed to trial. "My client remains committed to protecting OpenAI's original charitable mission and the safe development of AI," the attorney, Marc Toberoff, said in an email. Representatives of Microsoft didn't immediately respond to a request for comment. The legal wrangling between Musk and Sam Altman, who worked together to launch OpenAI a decade ago, is playing out as the startup is in talks with officials in Delaware and California over its restructuring plans and faces pressure to complete the overhaul by the end of 2025. If not, SoftBank Group would be able to drop the amount of funding it's contributing to the startup from $30 billion to $20 billion, as Bloomberg has reported, while OpenAI would have the option to find other investors. Gonzalez Rogers recently said she intended to scale back the claims in the lawsuit when she scheduled a March trial over the dispute. Musk has alleged the alliance OpenAI built with Microsoft after he left the startup's board in 2018 is a bid to dominate the generative AI industry that threatens free market competition by rivals. His lawyers also claim Microsoft knew OpenAI co-founders Altman and Greg Brockman were engaging in "a scheme to defraud Musk of his valuable contributions and backing to enrich themselves." Gonzalez Rogers granted a request by OpenAI and Microsoft to toss out Musk's claim they aided the fraud. But she ruled that Microsoft must face claims of interfering with OpenAI and Musk's contract, which he says called for the startup's technology to benefit the public. Musk has "plausibly alleged that Microsoft knew of the charitable trust and took steps constituting 'substantial assistance or encouragement' in the violation" of the contract, Gonzalez Rogers said in her ruling. The case is Musk v. Altman, 24-cv-04722, US District Court, Northern District of California (Oakland). © 2025 Bloomberg LP

OpenAI can't dodge Musk's fraud claims in restructuring suit

A US judge has limited the scope of Elon Musk's lawsuit against OpenAI. The lawsuit alleges that OpenAI abandoned its original non-profit mission. Musk can still pursue fraud claims. Claims of false advertising and breach of duty were dismissed. Microsoft will face claims of interfering with OpenAI and Musk's contract. The legal battle unfolds as OpenAI plans restructuring.A judge narrowed claims in Elon Musk's lawsuit alleging that OpenAI broke its promise to function as a public charity by making plans to transform itself into a for-profit business. US District Judge Yvonne Gonzalez Rogers in Oakland, California, on Thursday ruled that the world's richest person can pursue fraud claims in the complaint he filed against OpenAI last year. She also declined to dismiss an unjust enrichment claim against OpenAI and Microsoft Corp., a major investor in the startup. But she threw out claims of false advertising and breach of fiduciary duty claims against the startup. Both companies won dismissal of Musk's racketeering claims, but she gave the billionaire a chance to revise that allegation through an amended complaint. In response to a request for comment, an OpenAI spokesperson cited a social media post from last month saying that Musk's actions are an unlawful bid to curb the company's growth for the benefit of his rival startup, xAI, that he launched in 2023. A lawyer for Musk welcomed the ruling, saying it acknowledges his "serious allegations" that will proceed to trial. "My client remains committed to protecting OpenAI's original charitable mission and the safe development of AI," the attorney, Marc Toberoff, said in an email. Representatives of Microsoft didn't immediately respond to a request for comment. The legal wrangling between Musk and Sam Altman, who worked together to launch OpenAI a decade ago, is playing out as the startup is in talks with officials in Delaware and California over its restructuring plans and faces pressure to complete the overhaul by the end of 2025. If not, SoftBank Group would be able to drop the amount of funding it's contributing to the startup from $30 billion to $20 billion, as Bloomberg has reported, while OpenAI would have the option to find other investors. Gonzalez Rogers recently said she intended to scale back the claims in the lawsuit when she scheduled a March trial over the dispute. Musk has alleged the alliance OpenAI built with Microsoft after he left the startup's board in 2018 is a bid to dominate the generative AI industry that threatens free market competition by rivals. His lawyers also claim Microsoft knew OpenAI co-founders Altman and Greg Brockman were engaging in "a scheme to defraud Musk of his valuable contributions and backing to enrich themselves." Gonzalez Rogers granted a request by OpenAI and Microsoft to toss out Musk's claim they aided the fraud. But she ruled that Microsoft must face claims of interfering with OpenAI and Musk's contract, which he says called for the startup's technology to benefit the public. Musk has "plausibly alleged that Microsoft knew of the charitable trust and took steps constituting 'substantial assistance or encouragement' in the violation" of the contract, Gonzalez Rogers said in her ruling. The case is Musk v. Altman, 24-cv-04722, US District Court, Northern District of California (Oakland).