Notice And Comment: The Tesla/Cooley Controversy
Notice And Comment: The Tesla/Cooley Controversy
One reader argues that Elon Musk was well within his rights to request the firing of an associate he disliked.
In the most recent issue of Judicial Notice, my weekly roundup of notable news in the legal world, I bestowed Law Firm of the Week honors upon Cooley:
This is a profile in law firm courage. As reported on Saturday by the Wall Street Journal, late last year Tesla CEO Elon Musk called up a partner at Cooley, longtime counsel to Tesla, and demanded that the firm fire an associate—yes, an associate—who had previously worked for the Securities and Exchange Commission (but had no involvement on Tesla matters at Cooley).
This associate’s transgression? Back when he worked at the SEC, the associate had interviewed Musk during the agency’s investigation of the Tesla chief’s infamous 2018 tweet claiming (falsely) to have secured funding to take Tesla private.
Cooley refused—and paid the price. In the weeks since that call, Tesla has taken steps in several cases to replace Cooley or to add additional law firms to its matters. In addition, Musk’s space exploration venture, SpaceX, has stopped using Cooley for regulatory work.
We now have more details about Tesla moving work away from Cooley, reported by Dan Packel of Law.com:
Since the start of December, the firm has been replaced by Quinn Emanuel Urquhart & Sullivan on at least three pending Tesla cases, including a high-profile trade secrets suit it launched against Amazon-backed rival Rivian. Cooley has also seen its lawyers joined by attorneys from Fish & Richardson in at least three other matters.
Former law firm leaders who spoke to Packel commended Cooley for saying no to Elon Musk:
Peter Kalis, chairman emeritus of K&L Gates: “It’s all about integrity, independence, and fidelity to professional standards. Stand up for your personnel. Clients can be replaced but a firm’s reputation, once lost, cannot.”
Ralph Baxter, former chairman and CEO of Orrick: “To be a great law firm, you must organize it and lead it in a way that is principled. You simply can’t permit outsiders, even clients, even highly valued clients, to dictate how you run the law firm. Cooley isn’t going to tell Tesla how to engineer its cars, and Elon Musk and Telsa aren’t going to tell Cooley how to run its law firm.”
And I praised Cooley as well. Assuming the associate didn’t act inappropriately toward Musk and Tesla during his time at the SEC—if the associate interrogated Musk in an abusive manner, for example, that would be a different story—I offered this assessment:
Good for Cooley for standing up to the world’s richest man and for standing by its associate—who did nothing wrong. And shame on Elon Musk for such a petty vendetta.
But it’s boring when everyone agrees. And in this case, we have at least one dissenter. One Original Jurisdiction reader, who used to work at a law firm but has since moved over to the business world, shared this contrarian take with me:
For Cooley, I can't imagine they had much choice but to stand by their associate. If they had fired the associate (who, as you say, appears to have done nothing wrong), they would have paid the price in reputational damage with their associates and other lawyers.
However, that doesn't mean Musk is wrong to have asked them to fire the associate, and to punish them for saying "no." Musk pays the bills. For the vast amount he and his companies spend, he has the right to demand high levels of loyalty from his law firms. That runs from expecting partners on his work to drive Teslas over Taycans, to having a team that hasn't attacked Musk and Tesla in the past.
Ultimately, for most lawyers, law is a client service business. Musk will easily find other high-quality lawyers to take Cooley's place. So, while you may not like what Musk did, he is good enough at his job that he gets to do stuff like punish random former SEC lawyers.
So, readers, what do you think? Did Elon Musk cross a line in making this request of Cooley—or was he just exercising his rights as a client? And should Cooley have agreed to his request and fired the associate?
Please share your views in the comments to this post (rather than emailing to me; the whole point of Notice and Comment is to get readers to post comments).1 Thanks!
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Posting on behalf of a former federal prosecutor who asked to be identified as “Queen Pizza”:
“When Elon Musk does something that seems illogical, I usually look for a deeper logic. I see something insidious at work here. I think Musk is trying to create the reputation among AmLaw100 firms, prosecutors and enforcement attorneys that if you ever cross him, he will move his work elsewhere.
Most young government attorneys take the job hoping both to do good and to set themselves up for a strong career. They expect to be on the job market at some point. They will include their high profile matters on their resumes. A Musk investigation/prosecution certainly would be a capstone.
If Musk creates the reputation that he will never hire (or stay with) a firm that employs an attorney who investigated him while in government service, law firms may shy away from hiring government attorneys who have a Musk matter on their resumes. Just about every AmLaw100 that does not have a Tesla conflict would love to get that work. It is easy to pass over a resume.
If AmLaw100 firms shy away from hiring government attorneys who have investigated or prosecuted Musk, then many talented government attorneys will hesitate to join such an investigation.
That would be a result that Musk might wish to see. Of course, he might just being acting childishly.”
Posting on behalf of a reader who has worked at multiple Biglaw firms over the years:
"While Cooley couldn’t fire the associate, they made the mistake beforehand. You run the conflict check and don’t hire the associate who will piss off the big client to begin with. It’s Musk’s money, and he has every right to say he doesn’t want his millions to go to a firm that hired an enemy of his.
Meanwhile, the associate is still in a bad way. How can he possibly have a long term future at Cooley when so many partners will resent him? He may not have been made aware of the controversy, but if he was, his best career move was to volunteer to resign in exchange for severance and help landing at an equally good job elsewhere."