Musk finds favor in American court as jurists in Brazil block his companies

As his companies face mortal threats in Latin America's biggest market, Elon Musk has at least one bright spot in his Western Hemisphere legal affairs.

U.S. District Judge Reed O'Connor refused to dismiss Musk-owned social media platform X's lawsuit against Media Matters for America for "knowingly and maliciously fabricat[ing] side-by-side images" of major brands' ads "next to neo-Nazi or other extremist content," portraying them as "what the average user experiences on the X platform."

MMFA, President Angelo Carusone and senior investigative reporter Eric Hanonaki unsuccessfully argued that Texas-based O'Connor didn't have "personal jurisdiction" over them, the venue was "improper" and that X didn't sufficiently allege legal violations. Much of the ruling was based on the early stage of litigation favoring X's claims.

Texas Attorney General Ken Paxton opened an investigation of MMFA the same day as Musk's suit, followed by Missouri AG Andrew Bailey, both Republicans. D.C.-based MMFA responded by suing both in its own jurisdiction, and U.S. District Judge Amit Mehta approved injunctions against Paxton in April and Bailey last month.

Those victories may be Pyrrhic, as MMFA staff layoffs this spring suggest the legal blitz is draining its coffers. 

The World Federation of Advertisers recently shuttered its Global Alliance for Responsible Media, citing financial strain, following an antitrust lawsuit by X alleging GARM led an illegal boycott to deprive the platform of ad revenue. YouTube alternative Rumble is trying to do the same through a lawsuit against Check My Ads.

A panel of Brazil's Supreme Court upheld a ban on X in the country Monday imposed by Justice Alexandre de Moraes – who also blocked Musk's Starlink – after months of fights over the platform's refusal to ban accounts purportedly spreading misinformation. 

The ban is enforced by $9,000 daily fines against companies and users who access X through a virtual private network. It was purportedly based on X's refusal to name a new legal representative after de Moraes threatened to jail the previous rep.

A pair of MMFA reports by Hananoki 10 months ago claimed the liberal watchdog had "found ads for Apple, Bravo, Oracle, Xfinity, and IBM next to posts that tout Hitler and his Nazi Party on X," and Amazon, NBA Mexico and NBC Universal ads paired similarly. 

IBM, Apple, Disney, Comcast, Lionsgate, Paramount Global  and Apple responded by suspending advertising on X.

Mainstream media focused on Judge O'Connor's refusal to recuse himself from the case as an owner of "$15,001 to 50,000" of stock in Musk's company Tesla, according to the judge's 2022 financial disclosure. Judge Mark Pittman first recused himself without explanation.

George Washington University law professor and blogger Jonathan Turley, whom NewsGuard interrogated soon after Turley criticized it as a state-paid tool to "monitor and effectively blacklist media" that accuse mainstream media of bias, said the MMFA lawsuit "directly challenges the ability of media outlets to create false narratives to advance a political agenda."

He pointed out CNN is facing trial in a $1 billion defamation lawsuit for portraying Navy veteran Zachary Young as a war profiteer for his private security consulting in Afghanistan and that The New York Times faces a new trial in former GOP vice presidential candidate Sarah Palin's defamation lawsuit by order of a federal appeals court.

Musk's suit "may be the most defining for our age of advocacy journalism" but all three cases "can expose how the media first decides on a conclusion and then frames or even invents the facts to support it," Turley wrote, "rejecting the longstanding principles of journalism such as objectivity" while relying on hard-won legal precedents from the era of media objectivity.

Texas-based Judge O'Connor determined he had personal jurisdiction over Hanonaki, who wrote the reports, and Carusone, who went on TV to urge advertisers to stop doing business with X because of this "unmoderated right-wing hatred and misinformation."

The reports targeted Texas-based Oracle – including in the first article's headline – and MMFA's "crusade" allegedly targeted Texas-based AT&T as well, "describ[ing] a concerted effort by Carusone and the other Defendants to target Plaintiff’s blue-chip advertisers," O'Connor said. He noted AT&T is based in the judge's Northern Texas judicial district.

It's irrelevant that Hananoki and Carusone said in affidavits they didn't know the reports or their advocacy had any connection to Texas, both because of the stage of litigation and because they didn't deny knowing of the "alleged manipulation" of the platform to pair ads with incendiary content or trying to drive away "blue-chip advertisers," O'Connor said.

X has sufficiently alleged "tortious interference with existing contractual relations" because MMFA's own reporting acknowledges X "has named parties who contracted for paid ads" on its platform, and termination of an at-will contract doesn't depend on a breach of contract in Texas, he said. 

While MMFA and individual defendants "present a compelling alternative version of events" on what caused advertisers to flee X, the platform has "alleged sufficient facts" at this stage, including that Hananoki's original article named IBM and that company cited the arts "when it pulled its advertising," O'Connor said. 

The business-disparagement and tortious interference with economic advantage claims survive for the same reason, he said.