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A federal judge who bought more than $15,000 worth of Tesla stock has rejected a motion that could have forced him to recuse himself from a lawsuit that Elon Musk’s X Corp. filed against the nonprofit Media Matters for America.
US District Judge Reed O’Connor of the Northern District of Texas bought Tesla stock valued between $15,001 and $50,000 in 2022, a financial disclosure report shows. He was overseeing two lawsuits filed by X and recused 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 the public association between Musk and the Tesla brand. O’Connor rejected the 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 director, adviser, or other active participant in the affairs of a party.” His ruling said the standard is not met in this case and accused Media Matters of gamesmanship:
Defendants failed to show facts that X’s alleged connection to Tesla meets this standard. Instead, it appears Defendants seek to force a backdoor recusal through their Motion to Compel. Gamesmanship of this sort is inappropriate and contrary to the rules of the Northern District of Texas.
Judge should exit case, law professor writes
O’Connor made the ruling three days after recusing himself from a similar lawsuit filed by X. In that case, X sued the World Federation of Advertisers (WFA) and several large corporations that it accuses of an illegal boycott. Antitrust law professors have described X’s claims as weak.
O’Connor didn’t explain why he recused himself, but it seems clear that it wasn’t because of his Tesla stock. O’Connor also invested in Unilever, one of the defendants in X’s advertising lawsuit. Since Unilever is directly involved in the case, that’s likely what drove O’Connor’s recusal decision.
Musk’s case against Media Matters is also related to X’s problem with advertisers fleeing the platform formerly named Twitter. Media Matters published research on ads being placed next to pro-Nazi content on X, and the lawsuit blames the group for X’s advertising losses.
The federal code of judges’ conduct says that “a judge shall disqualify himself or herself in a proceeding in which the judge’s impartiality might reasonably be questioned.” This includes cases in which the judge has a direct financial interest, and cases where the judge has “any other interest that could be affected substantially by the outcome of the proceeding.”
Harvard Law School Professor Noah Feldman argued that O’Connor should recuse himself from X v. Media Matters. While X and Tesla are legally separate entities, Feldman wrote in a Bloomberg Opinion piece last week that O’Connor should exit because of that “impartiality might reasonably be questioned” rule.
“The basic idea is that a judge should recuse himself if a reasonable person in possession of the relevant facts would believe that the judge has reason for bias. And there is good reason to think that this rule covers O’Connor,” Feldman wrote. “Because Musk is so closely identified with both X and Tesla, Tesla share prices are arguably affected by the performance of X.”