Elon Musk may want to be careful about his wishes

(Reuters) – If there’s one thing I’ve learned in journalism over the years, it’s this: A good editor is your best friend and can save you from all kinds of misfortune.

It’s also why Elon Musk might want to be careful about his wishes. Musk last week appealed a decision by a Manhattan federal judge that refused to terminate a 2018 agreement with the Securities and Exchange Commission that required Tesla Inc’s in-house lawyers to pre-approve some of Musk’s tweets .

Tesla’s CEO and “Technician” (yes, that’s his official title) and his lawyers at Quinn Emanuel Urquhart & Sullivan argue it violates Musk’s First Amendment rights — the world’s richest man People are being “Twitter nannies.”

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“It has nothing to do with who the SEC has delegated this responsibility to; Mr. Musk’s speech is limited due to the SEC indictment,” wrote Quinn partner Alex Spiro, who did not respond to him or his Customer’s request for comment. Tesla also did not respond to a request for comment.

An SEC spokesman declined to comment.

A little restraint isn’t always a bad thing, though. If you write something that might be inaccurate or misleading and then post it to your 99 million followers, calmly point out that it’s not a First Amendment violation — especially if doing so could generate significant financial impact.

If anything, Musk may consider expanding internal legal scrutiny of his tweet, rather than seeking to repeal it, given his past social media missteps.

For example, in July 2018, Musk called British cave explorer Vernon Unsworth a “pedophile” in a tweet after insulting Musk for building a mini-submarine A mini-submarine project to rescue 12 Thai elementary school students trapped in a cave.

Unsworth sued Musk in a $190 million defamation lawsuit, though he returned empty-handed after a jury rejected his claims in December 2019.

Still, Musk admitted from the stands that his tweet “grieved a lot of people and it must have been detrimental to my team,” he said, according to a trial transcript, adding that the sentence “wasn’t helpful. .”

“Not helpful” would also describe a tweet he posted less than a month after the “pedo guy” email.

On Aug. 7, 2018, Musk tweeted that he had “received funding” to take Tesla private at $420 a share, a premium to the electric car maker’s trading price at the time. big money.

Tesla’s stock price rose 6% in the next few hours, but according to the SEC’s subsequent securities fraud complaint, Musk “didn’t even discuss, let alone confirm, the inclusion of a price in any potential funding source. key transaction terms within the

The case was quickly resolved without admission or denial of wrongdoing. In those concessions, Musk and Tesla agreed that any written communications — including social media — containing “informational material to Tesla or its shareholders” would be approved before being released by internal legal counsel.

The ostensible point is not to stop Musk from being his eccentric online self (for example, his recent tweets include asking his followers to share their favorite cheese), but to stop him, as the SEC says , “Recklessly spreading false or inaccurate information about Tesla.”

It’s a good thing, right?

A few months later, Musk was in trouble again for failing to get pre-approval from the SEC, tweeting that “Tesla built 0 cars in 2011, but will make ~500,000 in 2019. car.”

No, not exactly.

According to the SEC, Tesla’s internal legal counsel “arranged a meeting with Musk immediately after first seeing this tweet with the public via Musk’s Twitter feed” (I’m imagining total panic? ) to draft a correction.

Musk then tweeted: “Meaning that the annualized production rate at the end of 2019 is likely to be around 500,000 vehicles, or 10,000 vehicles per week. Deliveries for the full year are still estimated to be around 400,000.”

A bit of a nitpick, yes — but then again, I expect this kind of information from a Fortune 500 CEO to be unequivocally accurate when it first comes up.

Lawyers (and editors) are allies in preventing such mistakes, not enemies, and Musk does himself no favors if he shuts them out.

It’s unclear if that’s what happened in November 2021, when Musk asked his Twitter followers in two tweets if they should sell 10% of Tesla stock. (7 million votes, 58% in favor.)

Musk’s lawyers for Quinn Emanuel argued in court filings that the inquiry was just a public poll, “a way to gather information.”

Maybe so, but the SEC responded by subpoenaing Musk and Tesla. U.S. District Judge Lewis Liman in Manhattan said it was “not surprising” that “the SEC will have some problems” following such tweets.

Where: Are the tweets pre-approved?

If so, Musk “may have strong defenses against at least some of the potential violations that the SEC is investigating,” Liman wrote. On the other hand, if he deliberately bypassed those procedures, that evidence would also suggest greater culpability.”

Musk’s lawyers countered that the SEC was harassing him “to further weaken Mr. Musk’s First Amendment rights by using its nearly limitless resources to conduct endless investigations outside the law.”

I suspect this will be a tough sell for the Second Circuit — Liman’s rejection of Musk’s claims is withering. But perhaps the Tesla CEO will realize that when tweeting about Tesla, it’s better to ask for permission than to forgive — at least when the SEC does.

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The views expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and impartiality in accordance with the principles of trust.

Jenna Green

Thomson Reuters

Jenna Greene writes about the business of law and culture, covering trends in the industry, the faces behind cases and eccentric courtroom drama. A longtime chronicler of the legal profession and high-profile litigation, she lives in Northern California.Contact Green at jenna.greene@thomsonreuters.com


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