I'm reading through the SEC's response, and their First Amendment arguments seem particularly weak:
B.
The Pre-Approval Requirement Does Not Implicate the First Amendment.
Musk’s First Amendment argument also fails because it rests on the false premise that the pre-approval requirement imposes a prior restraint on his speech. Dkt. No. 27, at 20-22. Submitting his written statements for pre-approval does not, as Musk baldly asserts, mean that he is prohibited from speaking. Dkt. No. 27, at 23. As long as a statement submitted for pre-approval is not false or misleading, Tesla would presumably approve its publication without any restraint on Musk. And if the proposed statement is false or misleading, then any restraint on Musk’s speech would be constitutional even if it involved state action. See Romeo & Juliette Laser Hair Removal, Inc. v. Assara I LLC, 679 F. App’x 33, 36-37 (2d Cir. 2017) (prohibition of speech that is false, deceptive, or misleading does not violate First Amendment) (citing Safelite Grp., Inc. v. Jepsen, 764 F.3d 258, 261 (2d Cir. 2014); Democratic Nat’l Comm., 673 F.3d at 204-05).
The SEC's
own original contempt motion cites how that reading of the settlement with the SEC is interpreted by journalists:
"Lesley Stahl: Have you had any of your tweets censored since the settlement?
Elon Musk: No.
Lesley Stahl: None? Does someone have to read them before they go out?
Elon Musk: No.
Lesley Stahl: So your tweets are not supervised?"
The SEC effectively invites Elon's reply to quote those questions verbatim, and invites him to testify again that he is effectively applying self-censorship to preemptively avoid conflict with the SEC.
Does the SEC
really think that their additional demand to get ALL tweets about Tesla, even those which do not or could not contain material information, "supervised" and possibly "censored" through a court order imposed mechanism does not constitute "prior content-based restraint" on Elon's speech??
The SEC's filing is also entirely silent and keeps unchallenged much of the legal arguments Elon's team raised. Elon's team raised the legal argument that the SEC's interpretation is not just "prior restraint", but has "chilling effects" on Elon's speech as well. They cited relevant precedents that if there's a way to construe a court order to not have such restraint and chilling effects then a court must do so.
Here's the legal arguments Elon's team raised:
Prior restraints on speech “are the most serious and the least tolerable infringement on First Amendment rights.” Nebraska Press Ass’n v. Stuart, 427 U.S. 539, 559 (1976). “A prior restraint . . . has an immediate and irreversible sanction.” Id. “[While] a threat of criminal or civil sanctions after publication ‘chills’ speech, prior restraint ‘freezes’ it.” Id. Moreover, “[w]hen a prior restraint takes the form of a court-issued injunction, the risk of infringing on speech protected Notably, the SEC’s interpretation is not limited to Twitter. The SEC could apply its rule to statements made “in any written format,” including press releases, blogs, website postings, and, even more expansively, any written materials, notes, Q&A, and scripts used for preparation for public statements such as earnings calls.
In light of these concerns, “[a]ny imposition of a prior restraint . . . bears ‘a heavy presumption against its constitutional validity.’” Quattrone, 402 F.3d at 310 (quoting Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 70 (1963)). A content-based prior restraint, like the restraint urged by the SEC here, would be subject to review under strict scrutiny, “requiring a showing that the restriction is ‘narrowly tailored to promote a compelling Government interest.’” John Doe, Inc. v. Mukasey, 549 F.3d 861, 871 (2d Cir. 2008) (quoting United States v. Playboy Entm’t Grp., Inc., 529 U.S. 803, 813 (2000)); see also Carroll v. President & Comm’rs of Princess Anne, 393 U.S. 175, 183 (1968) (a prior restraint “must be couched in the narrowest terms that will accomplish the pin-pointed objective permitted by constitutional mandate and the essential needs of the public order”).
As the SEC interprets and seeks to enforce it, the Order’s injunction is a de facto gag on a broad spectrum of statements implicating Tesla. Were the Order interpreted in this fashion, it would plainly fail strict scrutiny review. The government’s legitimate interest (shared by Musk) in protecting shareholders can be and has been served through less-restrictive means. These means include allowing Musk the discretion to make good-faith determinations of materiality (which is what the Order actually says) or by having the SEC go through normal enforcement proceedings under Rule 10b-5 targeting specific communications that the SEC contends are actionable.
Even prior violations of Rule 10b-5 or other statutes or regulations cannot justify an otherwise unconstitutional prior restraint. An injunction against future expression issued because of prior acts is incompatible with the First Amendment. Gayety Theatres, Inc. v. City of Miami, 719 F.2d 1550, 1551-52 (11th Cir. 1983). Reno v. ACLU, 521 U.S. 844, 874 (1997) (finding unconstitutional a statute that threatened to censor speech because such a burden is “unacceptable if less restrictive alternatives would be at least as effective in achieving the legitimate purpose that the statute was enacted to serve”).
These are powerful arguments and the SEC's reply keeps that line of argument
entirely undefended. The phrase "chilling effect" is not mentioned even
once in the SEC's 60+ pages of reply...
The only response the SEC's filing seems to be offering is what appears to me is a willfully amateurish mis-reading of the powerful constitutional arguments Elon's lawyers have raised:
C.
Authority to Enforce Its Order Is Vested with the Court, Not the SEC.
Musk’s argument that enforcement of the terms of the Court’s order exceeds the SEC’s authority is equally flawed.
[... full paragraph omitted ...]
That SEC argument fails in the first sentence already, because the SEC is basically making a straw-man argument: Elon's lawyers did NOT argue that enforcement of the settlement rests with the SEC, and their constitutional arguments and precedents are all about cases where the Constitution puts limits on court orders ...
Again a big swing and miss by the SEC lawyers, effectively summed up and countered by Elon's
prior filing already:
The SEC’s desire for such a sweeping prior restraint on speech, effectuated not through some formal statutory authority granted to the SEC by Congress but through a contempt proceeding, must be rejected by the Court.
Anyone near the District Court, S.D. New York should consider showing up for the eventual hearing - I'd expect there to be some real fireworks, legally speaking ...
Also note that eyewitness description of the demeanor of SEC lawyers within court is not something usually captured in the court records or regular press reports, so if anyone attends and makes notes (audiovisual recordings will probably not be allowed), that could make for an interesting and exclusive reading.
But from what I've read from the SEC's reply motion so far the SEC is bringing a knife to a gunfight...
