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The jury’s decision cut short the bench trial on potential remedies in the case.
Value Protected
Defending Reputation and Keeping OpenAI’s Nearly $1 Trillion IPO on Track
Value Protected
Defending Reputation and Keeping OpenAI’s Nearly $1 Trillion IPO on Track
Key Contacts
How do you respond to being accused of “stealing a charity”?
In this highly publicized litigation and trial, OpenAI and cofounders Sam Altman and Greg Brockman were accused of breaking promises, breaching a charitable trust and unjust enrichment — claims that threatened to unwind a potentially trillion-dollar AI business.
In March 2019, OpenAI Inc. — a nonprofit organization founded in 2015 by Elon Musk, Sam Altman and Greg Brockman, now known as The OpenAI Foundation — publicly announced the formation of a for-profit affiliate, now known as OpenAI Group PBC, that would enable OpenAI to raise many billions of dollars in capital investment. In August 2024, Mr. Musk, who had resigned from the nonprofit’s board of directors in February 2018, brought a lawsuit alleging, among other things, that the OpenAI defendants, with the assistance of Microsoft, had broken promises to use his charitable contributions to maintain OpenAI as a nonprofit organization and prioritized profits over the founding mission. At trial, Mr. Musk asserted claims for breach of charitable trust, aiding and abetting breach of charitable trust, and restitution based on unjust enrichment. Among other remedies, Mr. Musk sought to unwind OpenAI’s 2025 recapitalization and disgorgement of OpenAI’s and Microsoft’s alleged wrongful gains.
Compass Lexecon and Professors Ilya A. Strebulaev, Daniel Hemel and Somesh Jha were retained by the OpenAI defendants through their outside counsel, Wachtell, Lipton, Rosen & Katz, to act as consultants and expert witnesses in the litigation.
Our Impact
Following a three-week trial on the issues of liability, the jury returned a unanimous verdict after less than two hours of deliberation, finding that Mr. Musk had brought his lawsuit outside the statute of limitations.
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U.S. District Judge Yvonne Gonzalez Rogers, who oversaw the case, accepted the jury's unanimous decision and dismissed Mr. Musk’s claims against OpenAI and Microsoft, including alleged damages of up to $135 billion.
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The outcome clears a path for OpenAI to pursue an IPO currently valued at $850 billion.
Our Role
Economic and industry-specific expertise in defense of OpenAI’s restructuring and recapitalization.
Compass Lexecon experts analyzed economic, financial, nonprofit governance and AI safety issues to support OpenAI’s defense. The engagement spanned expert reports, depositions, live trial testimony and written direct testimony.
Professor Strebulaev (the David S. Lobel Professor of Private Equity and Professor of Finance at the Stanford Graduate School of Business) analyzed the economic and financial considerations relevant to OpenAI’s past restructuring and its 2025 recapitalization and responded as a rebuttal expert to Mr. Musk’s damages expert’s analysis of OpenAI’s alleged wrongful gains. Professor Strebulaev also submitted rebuttal written direct testimony in the remedies phase of the trial, which was halted following the liability verdict.
Professor Hemel (the John S. R. Shad Professor of Law at New York University School of Law) evaluated whether OpenAI’s past restructuring, its partnership with one of its investors and its 2025 recapitalization conformed to the customs and practices of large U.S. charitable organizations and responded to an opposing expert’s opinions concerning nonprofit customs and practices. Professor Hemel also testified during the liability phase of the trial.
Professor Jha (the Lubar Chair of Computer Science at University of Wisconsin-Madison) filed a rebuttal report and provided deposition testimony in response to Mr. Musk’s expert’s opinions concerning AI safety risks.
Jonathan Arnold (Compass Lexecon Senior Consultant) was also retained by Microsoft, through its outside counsel, to respond to Mr. Musk’s damages expert’s analysis of Microsoft’s alleged wrongful gains. Dr. Arnold filed a rebuttal report, testified at deposition and submitted rebuttal written direct testimony in the remedies phase of the trial.
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