Judge Orders Musk, Regulators to Meet on Tweets

Tesla Chief Executive Elon Musk and the Securities and Exchange Commission have been ordered by a judge to meet for at least an hour to try to settle the agency’s objections to Musk’s social media posts.

U.S. District Judge Alison Nathan said on Friday that both sides have until April 18 to reach a resolution. If they can’t work out an understanding, then the judge will decide if Musk should be held in contempt of court for violating an SEC agreement regarding his use of Twitter.

Musk agreed in October to settle an SEC fraud complaint related to tweets saying he had “funding secured” to take the automaker private. As part of the settlement, Musk agreed to have potentially market-moving tweets reviewed before hitting send.

In February, Musk tweeted “Tesla made 0 cars in 2011, but will make around 500k in 2019.” A follow-up tweet a few hours later updated the delivery number to 400,000 cars this year.

The SEC says those tweets weren’t approved, contained information material to Tesla, and thereby violated the agreement. The agency then asked a judge to hold Musk in contempt.

“I have great respect for Judge Nathan, and I’m pleased with her decision today.” Musk said in a statement released by Tesla. “The tweet in question was true, immaterial to shareholders, and in no way a violation of my agreement.”

 

[75Shappyt]

that the SEC, being as dumb as it can

 

[Cloxxki]

Note that the judge did not tell the SEC to stop bothering the perfect infallible CEO. Those fines did not come appreciation.

 

[Cloxxki]

that the SEC, being as dumb as it can

At least a handful of spelling errors in a short sentence, calling someone else dumb. Oh, irony.

 

[dauger]

I’ve read a more detailed transcript of the Apr 4 SEC v Musk hearing. The judge made it clear the root problem is a poorly-written September settlement, so defective the judge discovered a loophole Musk can drive a Tesla Semi through.

The judge asked excellent questions of the SEC, exposing that what the SEC lawyer thinks are the SEC’s strongest arguments are in fact on super-shaky ground. The ambiguities in the wording of the settlement make it impossible for the judge to actually find in contempt, because, as the judge said, “In the case of ambiguity, no contempt can be brought”. Basically the SEC has completely lost its contempt charge because the court cannot operate that way; these are reasons the judge says, not what Musk & Tesla say.

However, this SEC loss is no automatic win for Musk & Tesla. The judge, during the discussion with Musk’s lawyer, is far more concerned about a problem that neither the SEC nor Musk’s side stated: an outright dismissal could be construed as a precedent that threatens the judge’s power.

A top-notch trial lawyer told me that the goal of a good trial lawyer is to guide the judge to a favorable ruling that makes the judge feel comfortable with the ruling. Neither lawyer has made that possible here.

The briefs from Musk’s lawyer say, but does not emphasize, that it’s up to Tesla, Inc., to judge if Musk tweets are compliant with Tesla’s oversight. The goal of that argument was “Tesla, not the SEC, judges”, but it’s not clear if Musk’s lawyer knew how overpowered that argument could be: the judge sees that argument as a threat to the court’s authority, (SEC’s interests be damned). The judge’s dismissal now could then solidify that argument so powerfully it causes the court to abdicate its power to Tesla, Inc.: forevermore Tesla is the judge!

It’s a stain on the SEC to be so blinded by their own obsession they didn’t see that. If Musk’s lawyer saw that, he may have been trying to cleverly slip this past the judge and get a free pass for every future tweet.

But no the judge caught it, making her determined to create a third way out of this dilemma. She discovered the SEC and the court were both wrong (and Musk lucked out on SEC’s stupidity) to sign off on this poorly-written settlement in September because it is defective in two major ways: one so ambiguous no contempt claim about tweets can pass, and one so loose on Tesla’s authority to judge that Tesla replaces the judge.

Therefore a rewrite of the settlement is required. I don’t see how that’s possible in two weeks. At best the SEC and Musk may draft a letter-of-understanding in two weeks, and the judge will have no choice but to grant more time for a proper settlement, which then the judge will comb for any more ambiguities or abdication of power. This will take months.

 

[Cloxxki]

@dauger
Most useful post on here I ever read. Thanks for sharing.

 

[dauger]

@dauger
Most useful post on here I ever read. Thanks for sharing.

Thank you for the kind words and You're Welcome. I've argued for defendant or plaintiff in more court cases than I'd like to admit. The Apr 4 transcript is hard to find. Upon reading it's clear this Judge Nathan is damn smart! She saw more important problems in both sides that neither side saw. She deserves far more credit towards a real solution than the MSM is giving her.

Meanwhile the SEC lawyer is stuck in hate mode, and I can excuse Musk's lawyer for being in defense mode against the unbridled hate but still he wasn't nearly as bright as the judge, so I'm guessing he just stumbled upon an argument that was OP. In hindsight if he had moderated the OP argument to something that maintains the court's power (she chided him for not giving her that), he might've gotten a dismissal this week; but eventually some other incident would exposed these defects in the settlement anyway, so I think the way the judge is pointing is refreshing and for the best. It remains to be seen if both parties can follow through.