Musk Loses to Altman & NLRB Rocked b y Decision

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1:22It's a mess. But PDF Spaces and Adobe Acrobat gives you one collaborative workspace to streamline every file and comment. So, if you need six departments to finally agree on a proposal, do that with Acrobat. Need to turn a mountain of feedback into one plan of action? Do that with Acrobat. Want to stop searching for files and finally get everyone on the same page? Do that. Do that. Do That With Acrobat. Learn more at adobe.com slash do that with Acrobat. This is Bloomberg Law with June Grosso from Bloomberg Radio. It's a huge win for Sam Altman and a massive defeat for Elon Musk. Today, a jury rejected Musk's claims that OpenAI under Altman's leadership betrayed its mission to benefit the public by morphing into a for-profit business, with a verdict finding that Musk waited too long to sue the company.

2:24The jury didn't reach the merits of Musk's claims, but decided the case on a procedural point involving the statute of limitations. Musk intends to appeal the decision. Joining me is Bloomberg legal reporter Madeline Meckleburg, who covered the trial. Madeline, so this was a unanimous verdict by a nine-member jury. Tell us about it. The jury in Oakland delivered a verdict after, I think, about two hours, maybe less than two hours of deliberations on Monday morning. And that verdict was that Elon Musk had waited too long to bring his claims against OpenAI, Sam Altman, Greg Brockman, and Microsoft.

3:04It was a three-year statute of limitations. Explain what the factual dispute was about when the statute started running. Jurors were told by Judge Yvonne Gonzalez Rodriguez, who's presiding over this case, that the way they should assess statute of limitations is whether or not Elon Musk should have known about the conduct that he's alleging at an earlier date and whether a reasonable person would have known. You know, there's a lot of qualifiers in there, a reasonable person. And given the circumstances, basically, they're saying he should have known about this well before he did. This was something we heard about a bit at trial.

3:39They were really attempting to build out kind of a timeline of communications because Elon left OpenAI in 2018. He formed his own AI company in 2023. And then he brought this lawsuit in 2024. And as he described it to jurors, his feelings towards his co-founders and the company, they changed over time. So he described how he started to lose faith in them, lose confidence, and then he only became convinced that they stole a charity as he describes it much later on. But I think jurors obviously were not buying that explanation. Based on this verdict, I think it would be fair to suggest that they probably believed that if he was genuinely concerned about this, this is something that he would have filed much sooner.

4:21That's ultimately what this boils down to. So you have three weeks about of testimony and they never reached the merits of Musk's claim, but went off on a procedural issue. That's right. So the jury did not issue a verdict on any of the specific claims that Musk brought forward. All they said was he didn't sue soon enough. Those were the first three questions on the verdict form. And so, you know, all the other things are muted. If he didn't sue early enough, then there's no reason for them to go through the rest of the form. And I know we've talked previously, the way that this case was set up, the jury verdict was going to be an advisory verdict.

4:59So something non-binding for the judge to take back to her chambers, mull and decide later. But after they handed down their verdict, she said immediately, I'm going to accept the jury's verdict. I'm dismissing these charges. And that's the end of it and kind of wiped her hands of this phase of the litigation. I understand that one of Musk's lawyers said they were going to appeal. That should come as no surprise to anybody who's followed Elon Musk or any of his litigation in the past. Yes, they are planning to file an appeal in this case. They believe that the jury and the judge got it wrong. So this is not the last that we're going to hear from them.

5:36And I think eagle-eyed watchers of the docket in this case might remember that there are actually a few other live claims that didn't make it to trial. And those are antitrust claims that Musk filed against OpenAI and Microsoft. And what happened here is the judge basically said, there's too much going on in this case. We're going to separate it into a few different phases. This first one is going to be focused just on the breach of charitable trust and unjust enrichment. So now that this phase is done, you know, pending the outcome of these appeals, now they're going to have to figure out how to deal with these other antitrust claims.

6:10Some might be thinking that it would make logical sense for the open AI lawyers to now argue, well, if the statute of limitations was in play here, surely that should apply to these claims as well. And I think that's still an open-ended question. So this is far from the last word in the Musk-Altman feud showdown, however you want to describe it. We've got a lot more litigating to go. So let's talk about the trial a little bit. Was it a test of the credibility of Mosk versus the credibility of Altman or was it more than that? I mean, legally speaking, no, it's not about credibility. It's about what did the contract say?

6:49What did the paper say? Like, it's about these legal statutes that they're fighting over. But I think attorneys on both sides kind of in their closing statements, we heard from them very clearly that they do believe that this is a case of credibility. Again, the jury didn't really get to this by talking about the statute of limitations, but that was their argument on both sides. There are some fundamental facts about this that we can't really dispute. We know what happened kind of on paper. We know who gave money, how much money, but what we don't know and what we have to rely on the witnesses for is filling in some of those gaps.

7:23How were people feeling? What were the intentions behind making certain moves. And so, of course, the OpenAI attorneys say that you need to trust Sam Altman's version of events. They stressed to the jury that there's no documents or emails or any testimony that they heard in court that backs up what Elon Musk said. And then Musk's lawyers spent a huge portion of their time presenting their case in trying to poke holes in Altman's credibility and questioning people about his ouster in 2023 and just kind of trying to really make a go at his reputation and repeatedly calling him a liar and saying he's untrustworthy.

7:59So I think at the end of the day, they wanted it to be kind of a character contest between these guys. I think when the trial first started, I said, why are they such bitter enemies after they were friends? So can you explain what the trial revealed about that? Right. The trial kind of gave us a look behind the curtain at a lot of things like this is a story that you know, if you're following tech and AI is kind of AI started as this scrappy startup and now is, you know, estimated to be worth a trillion dollars or whatever, you know, this gave us a look at what actually happened there. And I think a lot of it boiled down to disagreements about the future of open AI very generally, but it was very personal for these guys.

8:44I think like for Elon Musk, he's really made AI and this AI safety, he's trying to make that a really big part of who he is, what's important to him, what he's fighting for. And the same goes for these other guys. They've really put all of their focus and attention on building this company. And the 2017 scuffle over the power struggle, essentially, between these guys about who should actually control open AI, I think that's what got us to where we are today, where there's such animosity. I think if you talk to Musk critics, they might paint this as someone who regrets kind of picking up his marbles and walking out the door when he did.

9:24Because, of course, in 2017, they wouldn't have known what a tremendous success OpenAI would become. And Elon Musk gets no part of that pie now. And so I think there's certainly some element of that and kind of hindsight, you know, you can see the full picture. But now that Elon Musk has emerged as a competitor in the AI space, I think that's only adding kind of fuel to the fire. And certainly he's been doing his best to continue kind of throwing elbows at OpenAI as things have moved forward. And OpenAI doesn't take it quietly. You know, they push back. Altman pushes back. This is not a one-way feud.

10:00They definitely both have a lot of animosity towards each other that this is not going to resolve. Outside of Musk and Altman, who were the main witnesses? I think Greg Brockman was a really important witness. And he's someone who often gets overwritten in the headlines because it's, you know, Musk versus Altman. But it's also Musk versus Greg Brockman, who's the president of OpenAI. He's also one of the co-founders. And he had a really, I think, important perspective. He was on the stand for quite some time. And one of the most interesting things that I think he was talking about was his concerns about what Elon did or didn't know about AI.

10:37and kind of raising doubts that he had the chops and the vision necessary to be a leader. But he was also an important witness, I think, for Musk's case, because we got to see a lot of his personal journal entries from this time period, where he would document conversations he had with people and kind of weigh out a pros and cons of different decisions that he was making. And I think, you know, there wasn't really like a big key piece of evidence. It's like, oh, my gosh, in this case. But he had one line in his journal where he was talking about what will it take to get me to one billion dollars.

11:09And that's something that Musk's lawyers like really zeroed in on because they were trying to show that they were motivated by money and enriching themselves and not by promoting the mission of OpenAI. So I think he was a really valuable witness in that he got in some some good jabs for OpenAI, but he also exposed some vulnerability for kind of Musk's perspective there. Microsoft was part of this trial, though you'd never know it to see the coverage of it. I mean, did they put on any witnesses? We heard very little from Microsoft, and their lawyer actually joked about that during the closing arguments.

11:43He was like, you hardly heard from us during the course of this trial, and I don't think I have to tell you why. Like, that's kind of their whole argument is like, this is nothing to do with us. Like, leave us out of it. We did hear from Microsoft's CEO Satya Nadella at one point kind of talking about his decision to make those early investments in OpenAI and why it was something the company valued. And we heard from a handful of other people at the company. I think at the end of the day, it isn't their bite. I don't think they're wrong about that. Legally, like certainly they're part of this.

12:16They've contributed significant amount of money to OpenAI and have this unique partnership with them. But even when we're talking about the jury verdict, where they're talking about the statute of limitations, there are three questions, you know, the statute of limitations for breach of charitable trust for unjust enrichment, but also for Microsoft aiding and abetting the breach of charitable trust. And they didn't even answer that one because if they decided there's no breach of charitable trust, you know, claim to be considered in the first place, then they don't have to get into that. So definitely Microsoft was taking a backseat in this one, and I think they were probably okay with that.

12:51So finally, this gives OpenAI the go-ahead to go public? I don't know if this is something that they were necessarily waiting for. I don't have any special insights into that. Essentially, though, it should have been business as usual for them. Hard to say what's ahead. Thanks so much, Madeline, for your reporting throughout the trial. That's Bloomberg Legal Reporter Madeline Meckleberg. Coming up next on the Bloomberg Law Show, the National Labor Relations Board wants the full Sixth Circuit to review a decision that dampens its power. It's a case that's likely headed to the Supreme Court. I'm June Grosso, and you're listening to Bloomberg.

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15:51With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com slash business. Chase for Business. Make more of what's yours. The Chase Mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A., member FDIC. Copyright 2026, JPMorgan Chase and Company. The U.S. Court of Appeals for the Sixth Circuit rocked the National Labor Relations Board with a recent ruling that threatens the NLRB's power to establish labor policy through individual case decisions, potentially disrupting the way the agency has operated for more than 90 years.

16:37In a 3-2 decision, the appellate court ruled that the board overstepped its authority by creating a new framework aimed at better policing union elections. The board is asking the full circuit to review the decision en banc. My guest is an expert in labor law, Ann Lofaso, a professor at the University of Cincinnati. Law School. And tell us about the case itself. So in that case, the board found that the employer committed these extensive unfair labor practices during an organizational drive at the Woodford Reserve Distillery. And then once the employer found out about this, that there was a majority of employees who signed these cards, management responded with a rapid series of unprecedented targeted benefits.

17:25A second across the board raised. It started at$1 and went up another for. So think about that. That's$5 an hour across the board raise. That's a$10 ,000 pay raise for everyone. Expanded merit and progression pay. I mean, I can go on these benefits, which were really like bribes. And you left out the free bottles of bourbon. Yeah, I was going to say also the bourbon and you know, bourbon costs, I looked it up for bourbon goes for like anything from like, I think$39 to over$60 a bottle, maybe even more expensive. So these were nice, decent bottles of bourbon, you know, from mid-range to a little bit higher.

18:02And so this obviously interfered with employee free choice. So the region asked for both a Gissel bargaining order and a CMEX bargaining order, which are two different bargaining orders, but they basically are the same remedy, but they're based on two different theories. And the board just decided to go with the one CMEX. So then tell us about the CMEX bargaining order, what that is. So under CMEX, which is a new Supreme Court precedent, it's only a few years old under the Biden board. Once a union presents evidence of majority support with cards and requests recognition, then the employer has a choice of two things.

18:40It has to either voluntarily recognize the union or it has to, within two weeks, file what's called an RM petition, which is a petition for an election. But it's called an RM petition because management, the employer has to file the election. not the employees. So they have a choice. They can either say, okay, I recognize you, or I'm not so sure. I have a doubt. I'm going to ask for an election. So if the employer chooses the election route and commits any unfair labor practices, then the board will see, will view the election process as tainted and will issue the bargaining order as a remedy to restore the employee's last uncoerced expression of free choice, which was the cards, because the majority cards expressed that there was a majority that wanted the union.

19:29Now, the other remedy, which the Supreme Court adopted in 1969, and you know, that's almost 60 years now, that remedy said that the employees have to file the election. And if there are a lot of unfair layer practices, then they can issue this bargaining order. So both have the bargaining order, but they're kind of based on two different theories. One is based on the sheer number of unfair labor practices, and the other is based on unfair labor practices that are tainting the election. Okay, so they're two different theories getting to the same thing, and they're both remedial. Now, the Sixth Circuit agreed with the board on the facts.

20:12It said, yep, you're right. This was atrocious. I mean, they don't use the word atrocious, but they agreed that the employer committed multiple unfair layer practices, and that it was supported by substantial evidence, and that the board properly considered all the behavior. But they said the remedy was wrong. Now, the board only decided, even though the ALJ found both a CMEX and a Gissel bargaining order, In other words, either rationale got you there. The board said, we're only going to use CMEX. We don't need to go to Gissel. The court said, you can't do that. They had several reasons. And they said, but the most important one, which was really, this is what was very shocking about the decision.

20:55So the most important one, because CMEX was an unlawful legislative rule that could not be adopted through adjudication. In other words, the board engaged in a policy decision and that CMEX creates this new substantive rule that imposes new obligations, legal obligations on employers, and therefore is required under the APA to go through notice and comment rulemaking. Now, this is shocking because the Supreme Court has never said this. In fact, it has always said it's the board's choice whether to engage in so-called rulemaking or policymaking through rulemaking or through adjudication. So the board is asking the whole circuit to review this two-to-one decision.

21:45Unsurprisingly, the board decided that it had to file a petition for a rehearing en banc. And so there's right now two petitions for rehearing en banc. There's one by the union that's supporting the board. And of course, the board filed one. So then there's absolutely no Supreme Court precedent for this. The court has never, never rejected what the board did because it chose adjudication over rulemaking. Never. The Supreme Court. The 60 year precedent was when the Supreme Court said Gissel was an appropriate remedy and that Gissel reasoning was appropriate. That's a 60 year. They never reached the Gissel question here because the board decided we only need CMEX to support the bargaining order.

22:33Is this like, is this then a novel interpretation by the Sixth Circuit? It's not only a novel interpretation, it's an interpretation that flies in the face of administrative law, of Supreme Court precedent, of every single precedent. It's really a shocking decision when you read it. They could have said, we don't think the CMEX bargaining order fits here. They could have said a lot of things. We think CMEX is ultra virus. Like, in other words, the board really can't do that for other reasons. But they say the board can't do it the way it did it, that it wasn't allowed to adopt a CMEX bargaining order through adjudication.

23:09The CMEX bargaining order was adopted through adjudication in another case, CMEX. This is Brown. So then the board took its precedent, CMEX, and then it applied it in this case. The board does this all the time. Now, just imagine now that the board can't create any policies through adjudication. It has to do all rulemaking. This would change the entire landscape of how the board does policymaking. And you can go Supreme Court after Supreme Court precedent that says that the board is allowed to do this through adjudication. I mean, the board does almost everything through adjudication. So that's what's so shocking about this case.

23:51What about that extended football metaphor? So likening the NLRB having a choice between adjudication and rulemaking to a team electing to run or pass the ball. Quote, but once the board chooses a run play, it cannot throw the ball downfield after crossing the line of scrimmage. The board cannot exercise its rulemaking power through the adjudication process. I don't even understand what that means. I mean, it's nice that he knows football. I understand that once you run, you're not passing. I get that. But that is irrelevant here. The board always does this. Look, let's say he's right. Let's say the court's right.

24:32The Supreme Court has to say that. The Supreme Court has to overrule its precedent. All the Supreme Court precedent says the opposite. So this is completely activist. How do you litigate if you can't even depend upon on the courts of appeals to apply Supreme Court precedent. Fine. We know the Supreme Court can change its rules. And even when the Supreme Court changes its rules, then it shakes up business. It shakes up how we understand the law. It shakes up the rule of law, right? So for example, the Supreme Court decided that Roe v. Wade was no longer the law of the land. We knew that could happen.

25:08It did, okay? The Supreme Court has overturned Plessy v. Ferguson and Brown v. Board of Education. The Supreme Court's allowed to do this. But imagine if a lower court did that. What the lower court could do is say, we think this is a bad rule. Supreme Court, you should overrule its precedent. But it can't overrule Supreme Court precedent, which is what it's done here. Just logistically, is it wise to ask the whole Sixth Circuit to review this when 10 of its 16 active status judges were appointed by Republicans, including seven by President Trump? So if the circuit grants an en banc review and then they lose there, isn't it worse?

25:53no for a couple reasons one is that it's the board's policy at least it was when i was there to go for um bonk review before it goes to the supreme court so to me the signals that the board thinks this is so important that we consider going to the supreme court the second reason is this actually doesn't help the conservatives and this is the reason the board currently has a republican majority has a trump appointed republican majority and a trump appointed general counsel. If that Trump appointed Republican majority cannot make policy through adjudication, it's going to slow it down a lot. I mean, this is a procedural question, really.