SAN FRANCISCO (Reuters) – Late Friday afternoon, a federal judge decided that Twitter, now known as X, broke a contract by failing to pay tens of millions of dollars in incentives that the firm had orally promised its employees.
In June, Mark Schobinger, Twitter’s former senior director of pay, filed a lawsuit against the social media firm for himself and other current and former Twitter workers.
Schobinger, who is based in Texas, argues that despite repeated pledges from senior executives at the firm, including Ned Segal, the company’s former chief financial officer, employees were not paid a portion of their 2022 incentives when they were due in the first quarter of 2023. Employees who stayed with the firm until the first quarter of 2023 were eligible for this incentive.
These assurances, according to Schobinger, were made both before and after Elon Musk purchased the social networking site in October 2022. Schobinger also stated that employees considered these guarantees when determining whether or not to quit the social media firm, and that he rejected down offers from other organizations at the time due to the promised bonus.
Twitter’s attorneys contended that the pledge was merely an oral promise and not a contract and that Texas law should rule under section 1646 of the California Civil Code, which stipulates that a contract must be read by the law and custom of the location where it is to be performed.
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In a brief three-page judgment, U.S. District Judge Vincent Chhabria said that California law dominates the case because the choice-of-law clause in the California Civil Code “applies only to matters of contract interpretation, not to matters of contract validity or enforceability.” Because Twitter does not attempt to establish that Texas law should apply under the governmental interest approach, California law takes precedence.”
Chhabria stated that Schobinger’s breach of contract claim was plausible under California law and that Schobinger was protected by the bonus plan and followed all of Twitter’s instructions.
“Once Schobinger complied with Twitter’s request, Twitter’s offer to pay him a bonus in exchange became a legally binding contract under California law.” “Twitter allegedly violated that contract by refusing to pay Schobinger his promised bonus,” Chhabria wrote.
Schobinger’s attorney, Shannon Liss-Riordan, said Courthouse News, “We are very pleased with this decision.” This critical judgment affects the claims we have brought on behalf of over 2,000 Twitter workers. The court agreed with our position that subsequent promises, including oral pledges, might be binding even if the original written agreement is unenforceable. In this lawsuit, we asserted that existing Twitter workers who stayed with the firm during Elon Musk’s rocky purchase were promised a bonus for 2022.”
According to Chhabria, Twitter’s counter-arguments “all fail.” Twitter claimed that the performance incentive plan was unenforceable since it only provided for a discretionary bonus.
“However, Schobinger is not suing to compel Twitter to implement its discretionary bonus plan.” “He is suing to compel Twitter to enforce its alleged subsequent oral promise that employees would receive a percentage of the annual bonus contemplated by the plan if they stayed with the company,” Chhabria said.
The social media platform also maintained that the oral remarks were unenforceable because they contradicted the conditions of the performance incentive plan and did not comply with California’s “special rules for oral modification of written contracts.”
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“However, those rules apply only when a valid, enforceable written contract already exists.” And, as Twitter contends, its discretionary incentive scheme was never a legitimate, enforceable contract in the first place,” Chhabria ruled.
Schobinger’s major estoppel claim, on the other hand, was “reluctantly dismissed” with leave to amend because “the plaintiff still needs to take the (seemingly pointless) extra step of pleading that the alleged contract may be invalid or unenforceable,” according to Report.
Schobinger has 21 days to submit an amended complaint to address his major estoppel allegation.
