Elon Musk, CEO of Tesla, has avoided a gag order in a shareholder lawsuit concerning his 2018 tweets about taking Tesla private. A California federal judge rejected the shareholders’ request to silence Musk on the matter, setting the stage for a potentially contentious trial scheduled for January 2023. This decision comes amidst Musk’s highly publicized bid to acquire Twitter, raising questions about the impact of his public statements on both legal proceedings.
Elon Musk speaking at the SATELLITE Conference and Exhibition in 2020. His legal battles continue, with a recent court decision denying a gag order related to his 2018 tweets about taking Tesla private. Image: AP Photo/Susan Walsh, File
The Shareholder Lawsuit and “Funding Secured”
The lawsuit stems from Musk’s August 2018 tweets claiming he had secured funding to take Tesla private at $420 per share. Shareholders allege these tweets were false and manipulative, causing significant financial losses. U.S. District Judge Edward Chen has already ruled that the tweets were indeed false. However, he denied the shareholders’ motion for a gag order, stating that the requesting shareholder had not sufficiently demonstrated the need for such a drastic measure.
Chen acknowledged concerns about pretrial publicity but noted the trial’s rescheduling to early 2023 and the large metropolitan area from which the jury will be selected. He also pointed out that Musk’s public statements align with his position in a separate related court case.
Free Speech vs. Potential Jury Influence
The shareholders argued that Musk’s continued public pronouncements on the 2018 tweets could influence potential jurors. They cited a recent interview at the TED 2022 conference where Musk reiterated his claim of secured funding and criticized the Securities and Exchange Commission (SEC) for the resulting settlement. He stated he only agreed to the $20 million fine and refraining from denying the securities fraud allegations to avoid Tesla’s potential bankruptcy. The shareholders characterized these comments as an attempt to sway public opinion and absolve himself of responsibility.
Musk’s lawyer, Alex Spiro, countered that a gag order would infringe on Musk’s free speech rights. He argued that the shareholders failed to demonstrate a “clear and discernable danger” of prejudicing the jury pool. Spiro emphasized the ongoing public discourse surrounding Musk’s Twitter takeover bid, highlighting the relevance of the 2018 Tesla situation to current debates about censorship and free speech. He maintained that Musk should be allowed to respond truthfully to questions about the matter.
The SEC Settlement and Twitter Takeover Bid
The 2018 tweets led to an SEC investigation and the subsequent settlement requiring Musk to pay a fine and avoid statements contradicting the fraud allegations. Musk is currently challenging the settlement, claiming it is unconstitutional.
Adding another layer of complexity is Musk’s recent $43 billion offer to take Twitter private, a move drawing parallels to the 2018 Tesla situation. Twitter’s board adopted a “poison pill” strategy to deter the takeover, further fueling public discussion and media scrutiny.
The Road Ahead
Judge Chen’s denial of the gag order allows Musk to continue speaking publicly about the 2018 tweets, despite the shareholders’ concerns. The trial, now scheduled for January 2023, will likely be closely watched, given the high-profile nature of the case and the parties involved. The outcome could have significant implications for Musk, Tesla, and the broader discussion about corporate governance and the role of social media in financial markets.
The intertwining of the Tesla shareholder lawsuit, the SEC settlement, and the Twitter takeover attempt creates a complex legal and public relations landscape for Elon Musk. As the trial date approaches, the spotlight will remain on his public pronouncements and their potential impact on the proceedings.
Conclusion: A Complex Legal Battle Unfolds
The denied gag order in the Tesla shareholder lawsuit underscores the intricate balance between free speech and the potential for influencing legal proceedings. Elon Musk’s 2018 tweets continue to be a source of contention, with the upcoming trial promising to provide further clarity on the matter. The intersection of this case with his ongoing pursuit of Twitter adds another dimension to the narrative, highlighting the multifaceted challenges Musk faces in navigating the legal and public relations arenas. The trial’s outcome will undoubtedly have significant ramifications for all involved, and its implications will extend far beyond the immediate parties.
