Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—N.D. Cal.: CMO, fired by Musk following Twitter acquisition and layoffs, stated ERISA claim, (Apr 29, 2025)

By Jason Albright, J.D.

Leading up to, during, and throughout the days following the closing, the CMO was Musk’s primary contact with Twitter and the only Twitter executive with whom he was communicating.

The former Chief Marketing Officer of Twitter, fired by Elon Musk following his acquisition of the company, and after she introduced Musk to a Twitter sales executive who “questioned” one of Musk’s decisions, plausibly pleaded entitlement to injunctive relief under ERISA § 510, a federal district court found. The defendants failed to establish that the plan—which provides for a lump sum payment of cash and immediate vesting of certain shares on the 61st day following the employee’s termination—was maintained “primarily for the purpose of providing deferred compensation” as a matter of law, and the former CMO thus plausibly pleaded entitlement to at least one form of equitable relief—a surcharge remedy—under Section 510 (Berland v. X Corp., No. 24-cv-07589-JSC (N.D. Cal. Apr. 28, 2025)).

Twitter’s CMO. The plaintiff was “was Twitter’s Chief Marketing Officer [“CMO”] from February 2016 through November 1, 2022.” From August 2017 through May 2021, she was also “Head of People.”

Twitter’s Plan. Like other Twitter executives, the CMO was a participant in “the Change of Control Severance and Involuntary Termination Protection Policy [the ‘Plan’].” The “Plan was an employee welfare benefit plan within the meaning of ERISA § 3(1) (29 U.S.C. § 1002(1)) sponsored by Twitter.” Twitter, in turn, had, adopted the Plan “to provide certain protections to a select group of key Twitter, Inc. … employees if their employment is negatively affected by a change on control of Twitter.”

To be eligible for benefits under the Plan, among other things, the participant’s employment must have “ended as a result of an ‘Involuntary Termination.’” Further, an Involuntary Termination was defined as “a termination of employment by the Company other than for Cause, death or Disability or a termination of employment by [the employee] for Good Reason.”

No negative feedback. “During the course of her employment at Twitter,” in turn, “[the CMO] never received any material negative feedback, was never advised she had failed to follow company policies or rules, and was never advised that she had engaged in gross negligence, willful misconduct, or any other conduct that could even arguably constitute ‘Cause’ under the Plan.”

Musk’s acquisition of Twitter. In April 2022, Elon Musk and X Holdings “agreed to buy Twitter for $54.20 per share in cash.” The transaction closed on October 27, 2022, and “[a]t times relevant to this Complaint, Musk also was the CEO of Twitter and X Corp. and a fiduciary of the Plan,” observed the court.

“In the days leading up to the closing [of the sale] on October 27, 2022, Musk was aware that several executives would be entitled to payments under the Plan and another ERISA-governed plan that required change-of-control severance, totaling approximately $200 million.” Musk, said the court, “put into action a scheme to unlawfully deprive those executives of their employment benefits owed under the Plan.”

Initially retained. “[M]inutes after he acquired Twitter, Musk fired several Twitter executives.” However, “[l]eading up to, during, and throughout the days following the closing, [the CMO] was Musk’s primary contact with Twitter, the only Twitter executive with whom Musk was communicating, and the only Twitter executive team member Musk or his team asked for assistance during the ownership transition.”

“[W]orked well together...” “[The CMO] communicated directly and extensively with Musk,” observed the court, and the two “worked well together.”

Inauspicious introduction. As part of her work, the CMO introduced Musk to Twitter’s Head of Global Sales, and in a corporate meeting soon after he was introduced, the latter “questioned” one of Musk’s decisions. Musk, in turn, “blamed [the CMO] for [his] comment,” texting her that the sales executive was a bad recommendation.

Fired. On November 1, 2022, hours after receiving this text, “[the CMO] was fired from Twitter.” However, “Other than the purported ‘Bad recommendation,’ neither Musk nor anyone else at the company identified any reasons or cause for the termination, nor was [the CMO] told that her termination was ‘for Cause’ under the Plan.”

Now “for cause.” Her health insurance was subsequently “shut off,” so she reached out to Musk’s attorney, who reassured her that he would handle it. On November 27, 2022, however, “Musk notified [the CMO] that she had purportedly been terminated ‘for Cause.’” In the notification letter Musk “only generally alleged that [she] had failed to comply with the[sic] Twitter’s ‘written policies’ and engaged in ‘gross negligence or willful misconduct.’”

Claim with Plan. On December 8, in turn, the former CMO submitted a claim with the Plan Administrator, who told her she was properly terminated for cause and therefore “did not have an Involuntary Termination,” so she was not entitled to “accelerated vesting of unvested equity.” In September 2023, she appealed the denial of her claim, but despite attaching evidence and addressing the Administrator’s determination of policy violations, she was notified “the Committee had denied her appeal.” She alleged, in turn, that “Defendants’ characterization of [her] termination as being ‘for Cause’ was for the purpose of interfering with her attainment of rights and benefits under the Plan.”

Section 510. The defendants moved to dismiss on the ground that she failed plausibly to plead that she is entitled to equitable relief as required for a claim under Section 510, which makes it “unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan.”

Surcharge remedies? Surcharge remedies “a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary,” observed the court. “Where an ERISA fiduciary has breached a fiduciary duty, he can be required to ‘return’ to the beneficiary any ‘benefit’ the fiduciary gains by the breach or, alternatively, to pay ‘damages’ to the beneficiary for ‘actual harm,’ i.e., the amount necessary to ‘put the beneficiary in the position he or she would have attained but for the trustee’s breach.’”

Surcharge is not, however, an available remedy for “top hat” ERISA plans because top hat plans are “exempt from the fiduciary duties ERISA imposes on plan administrators.” A top hat ERISA plan is defined by three characteristics: (1) it is “unfunded”; (2) it “is maintained by an employer primarily for the purpose of providing deferred compensation”; and (3) it is maintained “for a select group of management or highly compensated employees.” 29 U.S.C. § 1051(2).

Not a “top hat” plan. The court found that the plan here was not a “top hat” plan as a matter of law because the defendants failed to establish that the Plan was maintained “primarily for the purpose of providing deferred compensation.” Here, neither the Plan nor the complaint mandated a finding the payments required by the Plan were “in consideration for [the plaintiff’s] years of dedicated service [and] loyalty to the company.” To the contrary, the Plan, provided that its purpose is “to assure that the Company will have the continued dedication and objectivity of the participants in the Policy.” Further, the Plan did not call for monthly payments for life, or monthly payments at all; it provides for a lump-sum payment of cash and immediate vesting of certain shares on the 61st day following the employee’s termination.

Equitable relief under Section 510. Because, drawing all reasonable inferences in the former CMO’s favor, the Plan was not a top hat plan, and the defendants did not challenge the availability of the surcharge remedy on any other grounds, that her complaint pleaded the availability of a surcharge remedy, and having pleaded the availability of at least one equitable remedy, she stated an ERISA § 510 claim.

The defendants’ motion to dismiss was thus denied.

The case is No. 24-cv-07589-JSC.

Judge: Corley, J.

Attorneys: Teresa Susan Renaker (Renaker Hasselman Scott) for Leslie Berland. Eric Meckley (Morgan, Lewis & Bockius) for X Corp.

Companies: X Corp.

Cases: PensionBenefitPlans Discharge Layoffs CaliforniaNews