A federal judge has ruled that X (formerly Twitter) violated employee bonus contracts before and after Elon Musk’s takeover of the company last fall.

In a decision Friday, U.S. District Judge Vince Chhabria denied Twitter’s motion to dismiss a lawsuit filed (PDF version) by former senior executive Mark Schobinger. Schobinger alleges Twitter failed to pay out 2022 target bonuses equal to 50% of employees’ salaries, contradicting verbal promises made by the company.

“Once Schobinger did what Twitter asked, Twitter’s offer to pay him a bonus in return became a binding contract under California law. And by allegedly refusing to pay Schobinger his promised bonus, Twitter violated that contract,” Judge Chhabria wrote.

The lawsuit centers on bonus plans Twitter put in place to retain employees during a period of upheaval. Musk completed his $44 billion acquisition in late October and quickly laid off roughly half the company’s 7,500 employees.

The judge ruled that Schobinger, formerly Twitter’s senior director of compensation, has plausibly claimed breach of contract and that California law governs the dispute, rejecting arguments from Twitter’s attorneys.

The decision allows the lawsuit to move forward at a delicate time for Twitter, now called X Corp. Musk has ambitions to build “Twitter 2.0” into a super-app rivaling WeChat in China, but the company faces several ongoing legal battles on top of business challenges.