Late Friday afternoon, a federal judge ruled that Twitter, now known as Mark Schobinger, a former senior director of compensation at Twitter, filed a lawsuit against the social media company in June on behalf of himself and other current and former Twitter employees.
Texas-based Schobinger claims that a portion of 2022 bonuses were not paid to employees when they were due in the first quarter of 2023, despite repeated promises from company executives, including former CFO Ned Segal.
According to Schobinger, these commitments were made before and after Elon Musk acquired the social media platform in October 2022. Schobinger also said employees took those commitments into consideration when deciding whether to leave the social media company, and that he turned down opportunities at other companies because of promised bonuses.
Twitter's lawyers argued that the promise was only a verbal promise, not a contract. According to California Civil Code Section 1646, a contract should be interpreted in accordance with the laws and practices of the place where the contract is performed, and therefore Texas law should prevail.
U.S. District Judge Vincent Chhabria wrote in a brief three-page opinion that the case should be governed by California law because the choice of law clause in the California Civil Code "applies only to matters of contract interpretation and not to matters of contract validity or enforceability." Since Twitter did not even attempt to argue that Texas law should be applied under the government interest approach, California law will govern by default."
Chhabria said Schobinger made a specious breach of contract claim under California law, that Schobinger was covered by the bonus plan and followed all of Twitter's instructions.
"Once Schobinger did what Twitter requested, Twitter's offer to pay him a bonus became a binding contract under California law. Twitter allegedly violated that contract by refusing to pay Schobinger its promised bonus," Chhabria wrote.
"We are very pleased with this verdict," Schobinger's attorney Shannon Liss-Riordan said in a statement to Courthouse News. "This is a very important verdict and is relevant to the claims we have brought on behalf of nearly two thousand Twitter employees." The court agreed with us that even if the original written agreement was unenforceable, later promises - even verbal promises - can be binding. In this case, we claimed that during Elon Musk's tumultuous acquisition process, Twitter promised employees who stayed at the company that they would receive bonuses in 2022.
Chhabria wrote that Twitter's counterarguments were "all invalid." Twitter argued that the performance bonus plan was not an enforceable contract because it only provided for discretionary bonuses.
"But what Schobinger is suing is not Twitter's discretionary bonus program. He is suing to enforce Twitter's alleged subsequent verbal promise that if employees stayed with the company, they would actually receive a percentage of their annual bonuses specified in the program," Chhabria wrote.
The social media platform also maintains that the oral statements are unenforceable because they contradict the terms of the performance bonus plan and do not comply with California's "special rules for oral modifications of written contracts."
"But these rules only come into play if a valid, enforceable written contract already exists. As Twitter itself has argued, its discretionary bonus program was never a valid, enforceable contract in the first place," Chhabria wrote.
However, Schobinger's primary estoppel (a promise by someone to give something to another person or do something for him or her without compensation) claim was "reluctantly dismissed" but allowed modification because "the plaintiff would still need to take the (seemingly pointless) additional step of arguing that the alleged contract may be invalid or unenforceable," Chhabria wrote.
Schobinger has 21 days to file an amended complaint addressing its primary estoppel claim.
Lawyers for Twitter did not immediately respond to a request for comment.