Elon Musk Flees to Billionaires’ New Court
Elon Musk’s lawsuit-plagued SpaceX rocket company is departing Delaware for a new legal home base in Texas just as the Lone Star State rolls out a new, separate court system for businesses that will allow Republican Texas Governor — and longtime Musk ally — Greg Abbott to handpick judges.
Texas’s oil and gas industries, alongside a host of other corporate interests, lobbied hard last year for the state’s new business court system, which will begin hearing cases this September. The fierce support from Big Oil, Texas’s largest industry, was evidence, critics charged, that business interests in Texas were effectively trying to buy their own courts.
Despite pushback, businesses succeeded. After lawmakers brought the bill to his desk, Abbott signed the proposal into law in June. Texas has now created what critics argue is a two-tiered system of justice, where cases involving massive corporations are funneled into separate courts and heard by judges appointed personally by the governor.
“It’s an end run around the elected judiciary for the benefit of Governor Abbott and his campaign contributors,” said Rick Levy, the president of the Texas chapter of the AFL-CIO federation of unions, adding that he saw the new court system as “another instance of trying to concentrate political power in the hands of a governor who seems very eager to amass it.”
While Musk has not said the new courts are a factor in the move, he and his explosion-prone spacecraft company are poised to benefit from the new court system, as well as his long-standing chummy relationship with Abbott.
“I think [Musk] thinks that maybe he’ll have influence there — that if there’s too much litigation, then he’ll push the legislature to limit it,” said Michal Barzuza, a professor at the University of Virginia School of Law who writes about corporate governance.
Barzuza emphasized Abbot’s warm reception to Musk’s announcement of his SpaceX reincorporation plans. “Welcome Home!” the governor tweeted on Feb. 14 in response to Musk’s announcement that SpaceX would reincorporate in the state.
Some 29 other states have similar business courts to the Texas plan. Such a system, proponents say, can ensure complex cases involving big corporations are overseen by judges with appropriate legal expertise. But while other courts are often overseen by both lawmakers and the governor’s office, as in Delaware, Texas’s courts will be uniquely at the whims of the executive branch. Judges in Texas’s courts will serve two-year terms — far shorter than most other states — and will be appointed by the governor.
This could, in theory, make it quite easy for Abbott to quickly replace judges that don’t toe the line.
“The judge essentially doesn’t have the last say if who’s on the court can be quickly changed,” said Anne Tucker, a professor at Georgia State University College of Law who has worked on developing business courts in other states. “Particularly if there’s an unpopular — even if legally correct — outcome.”
“We’re Proud He Calls Texas Home”
Until this month, SpaceX, which Musk founded in 2002, was incorporated in the state of Delaware, often a headquarters of choice for business thanks to business-friendly laws and the state’s own ostensibly advantageous corporate court system that tries cases only before judges, not juries. But after a Delaware business court judge handed down a series of unfavorable rulings to Musk — most recently finding in January that Musk’s $56 billion compensation deal from Tesla should be reversed — the billionaire turned against the state.
“Never incorporate your company in the state of Delaware,” Musk wrote on X shortly after the ruling came down. Within two weeks, he had filed to reincorporate SpaceX in Texas. Musk proclaimed he would fight to bring Tesla to the state as well, although because Tesla is a publicly traded company, the move would require a shareholder vote.
Musk and Abbott, who has reigned dictatorial over Texas during his three terms as governor, have long had a close relationship. Musk was an early Abbott supporter, donating $10,000 to his first gubernatorial campaign in 2014. The investment has paid off.
“There is no greater entrepreneur in the entire world than Elon Musk,” Abbott said in May 2023 when Tesla broke ground on a $375 million lithium refinery for its electric-vehicle batteries in the state. “We’re proud he calls Texas home.”
Texas has given various sweetheart deals to Musk and his companies over the years, despite the company’s troubling environmental impacts in the state, including filling fragile national wildlife refuge lands with rocket debris. SpaceX received $15 million in incentives from former Texas governor Rick Perry (R) to bring parts of the company’s operations to the state in the first place.
Under Abbott, the special treatment has continued. Tesla received $60 million in local tax rebates when the company brought a new factory to the Austin area in 2020, and state officials are currently considering a generous land swap with SpaceX that would give the company 43 acres of a state park in the vicinity of its massive starship launchpad and facilities in Boca Chica, despite opposition from local residents and environmentalists.
“The love affair between the Republican officials here and Elon Musk seems to be paying off for both of them,” said Levy with the AFL-CIO.
Abbott has also been a champion of the state’s oil and gas industries — which represent some of his biggest campaign donors. These fossil fuel interests were among the companies that lined up to support the bill that created Texas’s new court system: Supporters included oil trade groups including the Texas Pipeline Association and the Texas Oil & Gas Association, as well as other pro-business groups like the Texas Association of Manufacturers and the Texas Association of Businesses.
State Rep. Jeff Leach (R), a key co-author of the Texas business-court bill and member of the state’s Judiciary and Civil Jurisprudence Committee that oversaw the legislation, also celebrated SpaceX’s reincorporation this month alongside Abbott. “We’ve been proud to consider SpaceX a Texan for quite some time — congratulations on making it official!” he tweeted on Feb. 14.
“A Massive Stress Test”
While Musk hasn’t fully divulged his motivations for moving to Texas, Barzuza at the University of Virginia School of Law noted that Musk likely expects he could wield greater “political clout” in a state where SpaceX conducts significant operations.
Now, too, his companies will have access to a tailor-made court system. “I would imagine that it’s only seen as a bonus of getting away from Delaware and getting access to the specialized courts,” said Tucker at the Georgia State University College of Law.
Abbott has not yet appointed judges for the new courts. But according to records obtained by trade publication The Texas Lawbook, applicants include Sylvia Matthews, a judge that shielded dozens of natural gas companies from litigation over power-grid failures during a devastating winter storm in 2021, Scott Brister, a former Texas Supreme Court justice who defended oil and gas conglomerate BP in litigation over the devastating oil spill in the Gulf of Mexico, and David Gunn, an appellate attorney who touts the victories he has won for ExxonMobil in environmental cases.
“It is early days and would be premature to speculate about how the new court might affect specific businesses,” noted Alex Winslow, the director of communications for the Texas Trial Lawyers Association — which opposed the new court system — in an email to The Lever.
Tucker echoed this sentiment. “The Texas business court may end up being a robust and well-functioning judiciary — that is just yet to be seen,” she said.
But, she noted, how the courts handle a case involving a company like SpaceX would be revealing. “A new and untested court is going to potentially have a massive stress test if it is asked to flex its new judicial powers against either [Musk] or one of his companies,” she said.
Musk has shown an interest in cases with implications that go far beyond the narrow interests of his companies. A suit brought by SpaceX in Texas, for instance, is currently challenging the fundamental structure of the National Labor Relations Board, a case that threatens the very foundation of workers’ protections in the U.S.
Musk has been fighting to keep that case in Texas court, even though it revolves around a labor dispute in California. A Texas judge on Feb. 15 ruled that the case should be heard in the presumably less-friendly California courts, but an appellate judge last week put the transfer on hold while it considers SpaceX’s appeal — keeping the case, for now, in Texas.
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