The long-awaited jury selection will begin in a few days musk vs altman Case. At the end of that process, an Oakland federal court will task nine regular people with deciding whether OpenAI defrauded Elon Musk when it announced, and recently completed, its restructuring to become a more traditional for-profit business. More than just being the place where two billionaires will publicly air their grievances against each other, this trial has the potential to reshape the AI industry.
How did we get here?
Musk first sued OpenAI in 2024, but the seeds of the dispute were sown when Sam Altman emailed the billionaire on the evening of May 25, 2015. Altman wrote at the time, “I’ve been thinking a lot about whether it’s possible to prevent humanity from developing AI. I think the answer is definitely not.” “If it’s going to happen anyway, it seems like it would be good for someone other than Google to do it first. Any thoughts on whether it would be good for [Y Combinator] “To launch a Manhattan Project for AI?”
Musk responded a few hours later, “Probably worth a conversation.” That same year, OpenAI announced itself to the world, with Altman and Musk co-chairing the new joint venture. “OpenAI is a non-profit artificial intelligence research company. Our goal is to advance digital intelligence in a way that is likely to benefit all of humanity without the need to generate financial returns. Since our research is free of financial obligations, we can better focus on positive human impact.”
If we are to believe what OpenAI has said about subsequent events, by 2017, almost everyone at the company, including Musk, agreed that a for-profit entity “would have to be part of the next phase for OpenAI”, as it required huge amounts of investment to pursue its core mission. Before Musk left OpenAI’s board of directors in February 2018, OpenAI claims he sought full control of the company, with the intention of eventually merging it with Tesla.
Following Musk’s departure, OpenAI created its own for-profit arm in 2019, which at the time was organized under a “capped-profit” structure designed to limit investors’ returns to 100x, with any excess windfall flowing to the company’s nonprofits. The idea is that if OpenAI achieved artificial general intelligence, its non-profit organizations would be the biggest beneficiaries. However, following the success of ChatGPT in 2022, that structure became problematic for OpenAI as the company sought to raise more capital, and as part of its $6.6 billion funding round in October 2024, it reportedly agreed to a deadline of less than two years to free its profits from the nonprofit’s control.
Professor Michael Dorf, executive director of the Lowell Milken Institute for Business Law and Policy at UCLA, explains, “At the core of this trial is that OpenAI started out as a non-profit organization, and then decided it needed to become a for-profit organization in order to raise the huge amount of money needed to develop the technology it wanted to build.” “This is a very troubling change under the law.”
Earlier this year, after lengthy negotiations with Microsoft (the largest investor in the for-profit) and the state attorneys general of California and Delaware, OpenAI announced a successful restructuring of its corporate structure. As things stand, the for-profit corporation is now a public benefit corporation, making it more attractive to investors looking for a simpler return structure. Meanwhile, the nonprofit — now known as the OpenAI Foundation — holds equity in the for-profit arm, with the stake valued at $130 billion when the deal was announced.
Late last year, Musk filed for an injunction to stop the restructuring but was unsuccessful. As an early donor to OpenAI, Musk will not receive a cent of the money when the company holds an initial public offering, due to the fact that donations are made without the expectation of any returns. Musk has therefore argued that OpenAI’s founding group, which includes CEO Sam Altman and Chairman Greg Brockman, have defrauded him as a donor.
Determining the exact amount Musk contributed to OpenAI was a preliminary question during pre-trial discovery. You see, Musk has greatly exaggerated his monetary contribution. latest by March 2023The billionaire regularly claimed to have donated nearly $100 million to OpenAI. He later halved that estimate, stating cnbc In May 2023: “I’m not sure of the exact number but it’s something on the order of $50 million.” In recent court filings, that number was raised again to $38 million, and that’s the number it currently stands at.
What’s at stake for OpenAI?
Professor Dorf says that in its original complaint, Musk’s legal team tried to “throw the kitchen sink” at OpenAI. In subsequent filings, Musk’s lawyers limited their client’s desired outcomes to a handful of measures. Should the jury rule in his favor, Musk has requested the court to force Altman and Brockman to step down, and to restructure OpenAI as “a bona fide public charity that operates as a non-profit consistent with its founding charter and mission.” He has also made the highly unusual request that any monetary damages awarded to him in the judgment be redirected to OpenAI’s own non-profit arm.
According to Professor Dorff, it is highly unlikely that Musk will be able to undo the restructuring of OpenAI. For one, District Judge Yvonne Gonzalez Rogers has already signaled her reluctance to do so — and it is she, not a jury, who will decide whether this is an appropriate measure. Effectively, Musk is asking the judge to “unscrew the eggs” of a complex corporate restructuring.
“There was a moment when this might have been possible, when the attorneys general of Delaware and California intervened and reached the current agreement,” explains Dorf. “Whether you agree or disagree with what the AG decided to do, I think it’s unlikely that the court would find it appropriate to void that agreement because it involved senior government officials who theoretically had all the right incentives.” When Musk filed his request for a preliminary injunction to prevent OpenAI from turning itself into a for-profit company, the judge said the request was “extraordinary and rarely granted.” “The fact that Musk is deeply involved with OpenAI’s competitor XAI” may also weigh heavily on the judge, says Droff.
Even more uncertain is how Musk’s other demands might be met, as a jury will decide whether OpenAI is guilty of defrauding him. According to Dorf, most high-stakes business cases end with a settlement from both parties because of the risk of the outcome involving a jury. “Given the nature of the dispute, I don’t see that happening here,” he says. “It seems unlikely that either side will compromise.”
If the case ends in a jury verdict, it will be up to those nine people, with the judge’s guidance, to decide on monetary damages. “It would be very difficult to figure out because there’s a maximalist version of this, and there’s a minimalist version of this. They’re very different numbers and the results could be anywhere between the two,” says Dorf. Musk’s legal team is seeking to recover between $65.5 billion and $109.43 billion from OpenAI (and between $13.3 billion and $25.06 billion from Microsoft, which is a co-defendant in the case). In a worse case scenario, Professor Dorff suggests that Altman could lose the confidence of OpenAI’s board, which could lead to him losing his position as CEO. He may also be forced to write some checks to repay the payment amount.
Dorf suspects that OpenAI would “like” a minimal version where the $38 million donation was returned to Musk. Should some other disgruntled donors sue OpenAI for fraud? musk vs altman “The cases will make it easier to prosecute those cases,” Dorff says, “by mapping out which legal claims are likely to succeed.” However, they will be the equivalent of “traffic tickets” for OpenAI.
Whatever happens next, it should be an eventful trial. With public testimony from Microsoft CEO Satya Nadella, former OpenAI board member and Musk confidant Shivon Zilis, and even Altman himself, we’ll at least be treated to a trove of previously private communications — and some new pieces of terminology — between some of the tech sector’s richest people.
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