A FEDERAL JUDGE sitting in Oakland has dismissed nearly a dozen of the claims billionaire Elon Musk has asserted in his pending lawsuit against OpenAI Inc., the artificial intelligence developer, but ruled that the core claims in the case may proceed.
The case — already full of twists and turns — has its roots in Musk’s contention that OpenAI, the nonprofit corporation that he co-founded in 2015 with Sam Altman and Gregory Brockman to develop AI technology, abandoned its initial charitable mission and is being used for the financial enrichment of its insiders.
According to Musk, the co-founders formed OpenAI as a Delaware nonprofit corporation that would develop artificial intelligence for the good of humanity and would make the technology widely available on an open-source basis so that Google — then the leader in the space — would not be able to lock up the technology and use it for private gain.
Musk alleged that he provided OpenAI with tens of millions of dollars in contributions and led the recruitment of the best technologists in the world. He said he relied on the founders’ agreement that OpenAI would not be in it for the money, but rather for good of the world.
However, in 2019 OpenAI created a for-profit subsidiary and used it to obtain billions in funding from Microsoft. In return, OpenAI gave Microsoft access to the technology and allowed it to integrate its cutting-edge AI models into Microsoft’s products. Musk claimed that the noble goals that animated OpenAI’s founding were being perverted.
Musk initially brought suit against Altman, Brockman and OpenAI in state court in San Francisco, but before a hearing could be held, he withdrew the case, changed lawyers, and filed it anew in federal court, adding Microsoft as a defendant. The scope of the case also expanded, ultimately including 26 separate claims.
The case was assigned to U.S. District Judge Yvonne Gonzalez Rogers, who presided over Apple Inc.’s high stakes litigation with Epic Games Inc. concerning the commission that Apple charged for allowing a developer’s apps to be marketed in its app store.
Alternate realities
Altman and Brockman’s version of prior events is very different than Musk’s.
In their version, Musk — through his company xAI — is a competitor also developing artificial intelligence. They say Musk was disgruntled after his alleged offer to combine OpenAI with Musk’s company Tesla was rejected.
In their view, Musk “abandoned” OpenAI because he thought it would be unsuccessful and only reemerged with his lawsuit after he was proven wrong. In their view, the suit is simply an attempt to gain advantage for xAI by interfering with their mission.
In November of 2024, while the federal case was pending, Musk learned that OpenAI was exploring changes to its corporate structure that allegedly would put effective control of its technology under a for-profit affiliate, allegedly diminishing the rights of the nonprofit.
Musk then asked Gonzalez Rogers to block OpenAI from proceeding in that direction while the case was in litigation.
Gonzalez Rogers denied that relief but said that swift resolution of Musk’s claim that the defendants had breached a “charitable trust” was in the public interest. (Assets that are owned by a nonprofit corporation may be subject to special restrictions because of their charitable purpose.)
Because of the importance of that issue, acting on her own initiative, she put that particular claim on an expedited basis and said she would push it to trial quickly.
The case has generated intense interest both because OpenAI’s technology is extraordinarily valuable and because Musk has hurled far-reaching and lurid allegations, accusing Altman and Brockman of self-dealing and fraud. (In one claim, he asserts that the defendants’ conduct amounts to racketeering.)
OpenAI and Microsoft filed motions to dismiss Musk’s claims, arguing that even if all the facts Musk alleged were accepted as true, they still would not amount to valid legal claims. Such motions are filed in most complex cases and often serve to winnow the claims down to the ones the court believes could be successful if the plaintiff establishes the truth of its allegations at trial.
While the judge agreed that many of Musk’s claims were not valid, she ruled in Musk’s favor with respect to five.
The judge allowed Musk to advance his claim that the defendants fraudulently promised to maintain OpenAI’s nonprofit status in order to obtain Musk’s contributions ‘to create a for-profit venture to enrich themselves.’
Musk may pursue his claim that there was an implied contract in which Musk, Altman and Brockman agreed that OpenAI would operate as a nonprofit corporation for the benefit of humanity. The judge said that while there was no traditional written contract, contemporaneous emails, discussions and other actions taken all together could be considered an “implied contract.”
She also greenlit Musk’s claim that the defendants were “unjustly enriched” by their conduct, in other words, they obtained Musk’s contributions under circumstances that make it unfair for them to retain those benefits.
Importantly, she allowed Musk to advance his claims for fraud and constructive fraud. She said that Musk adequately alleged that the “defendants promised to maintain OpenAI’s non-profit status and structure in order to obtain his contributions” and they did so in order “to create a for-profit venture to enrich themselves.”
Those claims, together with the claim that the defendants’ actions breached a charitable trust, will go forward in the expedited trial.
The judge also ruled on Microsoft’s motion to dismiss the counts Musk asserted against it. As she did with her rulings on the claims against the other defendants, she allowed Musk to litigate his core claims that Microsoft aided and abetted OpenAI’s alleged fraud and its alleged breach of fiduciary duty.
Marching onward to a March trial
The court’s rulings give Musk an opportunity to move forward on the central parts of his claim against Altman, Brockman and OpenAI and also provide Musk a chance to tie Microsoft into the allegedly fraudulent conduct.
Marc Toberoff, Musk’s lawyer, said in a statement that “the ruling acknowledges Musk’s serious allegations of fraud, and breaches of contract, charitable trust and fiduciary duty … My client remains committed to protecting OpenAI’s original charitable mission and the safe development of AI.”
While the claims will move forward on an expedited basis, expedited in the world of federal litigation does not mean fast, especially when compared to the pace of development in the world of artificial intelligence.
Because the parties will need to take discovery — that is, exchanging tens of thousands of documents and taking depositions of dozens of witnesses and experts — the jury trial is not scheduled to begin until March 30, 2026. Between now and then, there will be room for many more twists and turns in the litigation.
Requests for comment from counsel for the defendants were not immediately returned.
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