Of course they said no. They'd never be able to get an attorney to come work for them again.

This Musk will ruin careers stuff is way, way overblown. If they lose his business, he wasn't worth working with in the first place.

So what? This is business as usual for law firms. They will lose clients every time they take a case due to conflicts of interest and so on, even if everyone has a happy outcome.

What Musk did was petty and questionable, but it didn't fundamentally change anything for Cooley.

It's not a big deal.

It's unlikely Musk expected Cooley to cave to his ridiculous demand. It's very likely the intended target for this action was every person who deals with Musk's future illegal actions.