Compass Lexecon Client OpenAI Obtains Total Defense Victory in Elon Musk’s Suit Over For-Profit Restructuring

Following a three-week trial on the issues of liability, the jury returned a unanimous verdict after less than two hours of deliberation, finding that Mr. Musk had brought his lawsuit outside the statute of limitations. The jury’s decision cut short the bench trial on potential remedies in the case. US District Judge Yvonne Gonzalez Rogers, who oversaw the case, accepted the jury's unanimous decision and dismissed Mr. Musk’s claims.

Compass Lexecon and Professors Ilya A. Strebulaev, Daniel Hemel, and Somesh Jha were retained by the OpenAI defendants through their outside counsel, Wachtell, Lipton, Rosen & Katz, to act as consultants and expert witnesses in the litigation.

Mr. Musk was one of the cofounders of OpenAI, Inc., a nonprofit organization n/k/a The OpenAI Foundation, but terminated his public association with OpenAI when he resigned from the nonprofit’s board of directors in February 2018. In March 2019, the nonprofit publicly announced the formation of a for-profit affiliate n/k/a OpenAI Group PBC that would enable OpenAI to raise many billions of dollars in capital investment from Microsoft and other investors. In August 2024, Mr. Musk brought this lawsuit alleging, among other things, that the OpenAI defendants, with the assistance of Microsoft, had broken promises to use his charitable contributions to maintain OpenAI as a nonprofit organization and prioritized profits over the nonprofit’s founding mission.

At trial, Mr. Musk asserted claims for breach of charitable trust, aiding and abetting breach of charitable trust, and restitution based on unjust enrichment. Among other remedies, Mr. Musk sought to unwind OpenAI’s 2025 recapitalization and disgorgement of OpenAI’s and Microsoft’s alleged wrongful gains, which Mr. Musk’s damages expert had calculated to be in the range of $79 billion to $135 billion.

Professor Strebulaev (the David S. Lobel Professor of Private Equity and Professor of Finance at the Stanford Graduate School of Business) opined on the economic and financial considerations relevant to OpenAI’s past restructuring and its 2025 recapitalization and responded as a rebuttal expert to Mr. Musk’s damages expert’s analysis of OpenAI’s alleged wrongful gains. In addition to providing expert reports and deposition testimony, Professor Strebulaev submitted rebuttal written direct testimony in the remedies phase of the trial, which was halted following the liability verdict.

Professor Hemel (the John S. R. Shad Professor of Law at New York University School of Law) evaluated whether OpenAI’s past restructuring, its partnership with Microsoft, and its 2025 recapitalization conformed to the customs and practices of large US charitable organizations and responded to an opposing expert’s opinions concerning nonprofit customs and practices. In addition to providing expert reports and deposition testimony, Professor Hemel also testified during the liability phase of the trial.

Professor Jha (the Lubar Chair of Computer Science at University of Wisconsin-Madison) filed a rebuttal report and provided deposition testimony in response to Mr. Musk’s experts’ opinions concerning artificial intelligence safety risks.

Jonathan Arnold (Compass Lexecon Senior Consultant) was also retained by Microsoft, through its outside counsel, to respond to Mr. Musk’s damages expert’s analysis of Microsoft’s alleged wrongful gains. Dr. Arnold filed a rebuttal report, testified at deposition, and submitted rebuttal written direct testimony in the remedies phase of the trial.

OpenAI was successfully represented by William Savitt, Sarah Eddy, Randall Jackson, Bradley Wilson, Steven Winter, and others at Wachtell, Lipton, Rosen & Katz and William Frentzen and Jordan Eth of Morrison Foerster.

Constance Kelly, Niall MacMenamin, Todd Kendall, David Strahlberg, Erika Morris, David Gross, Andrew Linde, Youfei Chang, Heidi Luu, and others in Compass Lexecon’s Chicago, Los Angeles, and New York offices provided support to Professors Strebulaev, Hemel, and Jha and worked extensively with the Wachtell, Lipton, Rosen & Katz team during the course of the litigation.