December 9, 2023
Tesla CEO Elon Musk is seeking intervention from the U.S. Supreme Court to overturn a settlement agreement between himself, Tesla, and the Securities and Exchange Commission (SEC). The agreement mandates that a company lawyer, colloquially referred to as a “Twitter sitter,” reviews and approves Musk’s tweets related to Tesla.
Musk’s legal team filed a petition on December 7, asserting that the inclusion of the “Twitter sitter” provision infringes upon their client’s free speech rights. They argue that Musk was coerced into accepting what they deem “unconstitutional conditions.”
The SEC initially charged Musk with civil securities fraud following a series of tweets in 2018 where he claimed to have “funding secured” to privatize Tesla at $420 per share. Musk’s tweets caused a halt in Tesla trading and led to weeks of share price volatility. Subsequently, Musk and Tesla settled with the SEC, revising the agreement in April 2019. The SEC has since continued to monitor Musk and Tesla’s compliance with the terms of the settlement.
Musk’s lawyers contend that the settlement places restrictions on Musk’s speech, even when it is truthful and accurate, extending to speech beyond the scope of securities laws and unrelated to the SEC’s initial civil action. They argue that the perpetual threat of contempt, fines, or imprisonment for unapproved speech adds a chilling effect on Musk’s expression.
Having acquired Twitter in 2022 and rebranded it as X earlier this year, Musk now serves as the company’s chairman and chief technology officer.
Legal experts, such as Columbia Law School professor Eric Talley, characterize Musk’s Supreme Court petition as a bold move, describing it as a “swing for the fences.” A circuit court had previously rejected the appeal, and for the Supreme Court to consider the case, Musk would need support from at least four of the nine justices.
Talley explains that Musk’s argument hinges on the “unconstitutional conditions” doctrine, typically applied when the government provides general public benefits. However, in this case, it involves the government refraining from pursuing charges in exchange for compliance with settlement terms, a scenario Talley sees as distinct.
While awaiting a response from the SEC, Musk faces additional legal challenges, with Tesla investors pursuing lawsuits related to the impact of Musk’s “funding secured” tweets on the company’s stock price. Despite a jury finding Musk and Tesla not liable in a San Francisco federal court trial, shareholders have appealed to the 9th Circuit. The outcome of Musk’s Supreme Court petition may shape the future landscape of social media and corporate communication.