Elon’s Next Big Case

Alex Spiro, a superstar Quinn Emanuel partner, is representing Tesla.
Alex Spiro, a superstar Quinn Emanuel partner, is representing Tesla. Photo: Justin Sullivan/Getty Images
Eriq Gardner
February 20, 2023

Back in the autumn of 2021, Owen Diaz made history regarding the racial discrimination that he survived, in 2015, as an elevator operator at Tesla’s factory in Freemont, California. Diaz was repeatedly called the N-word during his few months working for the electric carmaker. Jurors saw the racist drawings that once adorned the building’s walls. They heard testimony about supervisors who did very little to intervene. They were told during the closing argument that someone needed to teach this corporation a lesson. And the jurors delivered: $4.5 million in past compensatory damages, $2.4 million in future compensatory damages, and $130 million in punitive damages, believed to be the largest race harassment verdict in American history. 

Soon thereafter, Musk replaced his trial team with new lawyers from Quinn Emanuel, including superstar appellate attorney Kathleen Sullivan, who successfully convinced U.S. District Court Judge William Orrick that the $137 million wouldn’t hold up under a Supreme Court precedent that imposed constitutional limitations on punitive damages. Last April, the trial judge made Diaz a $15 million offer. Orrick concluded that this man’s emotional harm from being called the n-word only supported $1.5 million in compensatory damages, and that the Constitution would only permit a punitive damages award that was nine times the amount of compensatory damages. The judge denied Tesla’s motion for a new trial on the condition that Diaz accepted this lesser amount. A couple months later, however, Diaz rejected the offer, thereby sending the case to a new trial.

This surprising decision confounded me. Given the judge’s view that the Constitution wouldn’t tolerate an excessive punitive damages award, I couldn’t grasp what Diaz hoped to achieve by a second trial. At best, I imagined, he’d repeat his early success only to once again have a judge step in. So I got on the phone with Diaz’s attorney, Larry Organ, who not surprisingly, had a much different assessment of the situation.

He first told me that there are two reasons why a second trial will be taking place next month. “Number one, Elon Musk has a massive ego and can’t stand losing,” Organ said. “And second, because there’s a class action, plus that suit, from California’s civil rights agency. So they are trying to keep the damages down because if you multiply even 15 by 2,000 or 3,000 people, that’s a lot of money.” 

OK, sure, but how did that impact Diaz’s personal calculus, I wondered.  “He might have gotten 15 million, or he might not have,” Organ continued. “Tesla never offered that. They insisted they’d appeal, and the way this is set up, if we accepted the remittitur [where the judge made the $15 million offer], we wouldn’t be able to make our own appeal. So the number could only go down, not up, and after you start slicing the 15 for attorneys and taxes, it’s even less.”

I started to at least appreciate his logic, if not fully accept this to be the wisest course. Organ apparently feels the need to preserve his ability to challenge the wipeout of the original $137 million verdict, and in the meantime, he hopes he’ll score another massive verdict and that the judge won’t be able to turn his cheek twice. As for the prospect of appeal, Diaz’s attorney pointed out that in State Farm v. Campbell, the 2003 Supreme Court decision that limited punitive damages by reading into the due process clause of the U.S. Constitution, Antonin Scalia and Clarence Thomas, not to mention Ruth Bader Ginsburg, dissented. 

Now that the high court tilts towards Scalia-like thinking, maybe that means there could be a re-examination of the State Farm precedent. If Diaz v. Tesla was to get to the Supreme Court, might we see a pair of liberals interested in racial justice (Sonia Sotomayor and Ketanji Brown Jackson) join the constitutional originalists (Thomas, Neil Gorsuch, and Amy Coney Barrett) to restore the $137 million verdict? 

That possibility is down the line. In the meantime, there’s a new trial ahead. “I didn’t get into civil rights law to be rich,” Organ tells me. “I went into it to change society, which is a much harder thing to do. Obviously, you need a lot of luck to get something like $137 million. You need the right case, and you need an arrogant defendant.”

The Elon Angle

Tesla is currently represented by another superstar Quinn Emanuel partner, Alex Spiro, who is coming off a pretty big win for Musk in the “funding secured” shareholder trial. Musk is hardly his only client: Spiro is also representing Alec Baldwin next week in his preliminary hearing on two counts of involuntary manslaughter, after maneuvering the prosecutor to downgrade one of the charges. (I’ll have more on that next week.) But he’s mostly known these days as “Musk’s personal attorney.” 

Spiro, 40, has developed a reputation as a love-him-or-hate-him attorney—a former prosecutor who often rubs enemies and even some colleagues the wrong way. I won’t forget my own first experience with Spiro. The Harvard Law grad, who has aspirations to become the commissioner of the National Basketball Association, told me something about a court hearing only for me to later check the transcript and realize that he had been, at best, exaggerating his success.

But here’s the thing about Spiro. He’s actually pretty passionate about racial justice. His first big victory as a defense attorney was representing Thabo Sefolosha, an NBA player charged in 2015 with resisting arrest and disorderly conduct in New York. The same year that Diaz was enduring racial epithets at a Tesla factory, Spiro successfully convinced a jury that the NYPD had rushed to judgment based on the color of Sefolosha’s skin. A few years later, representing Jay Z, Spiro used the argument that the American Arbitration Association didn’t have enough diversity in its ranks to briefly halt an arbitration. And more recently, he’s been active challenging Trump’s immigration policies.

Over the weekend, Spiro admitted to me he’s only beginning to formulate his trial plan for Diaz, although I did detect a bit of admiration for the plaintiff’s decision to reject the $15 million offer and charge ahead at trial. I also got the sense that part of Spiro’s strategy will be to emphasize all the racial progress that Tesla has made since Diaz worked at the factory. “Tesla today and going forward is different,” Spiro told me. Indeed, Tesla’s evolving witness list includes Chris Winton, the head of human resources whose official title is “Champion of the People.” He’s to testify about Tesla’s current workplace, although both sides have been wrestling with the judge’s direction to keep the second trial within the scope of the first. So that could change.

As to the ironic possibility that Spiro will attempt to showcase how woke Elon’s car company has become, Organ isn’t buying it.“It’s bullshit,” he said. “I know they claim they are doing diversity training, but the n-word keeps happening. They need to have Elon go to the factory and say, ‘Look, we aren’t going to put up with this anymore.’ Unfortunately, that’s not happening, and that’s why we’re having this case.”